1. Indian Contract Act – 1872 Part –I
• Contract – Definition of Contract and Agreement, Essentials of Valid Contract, Classification of Contracts.
• Offer and Acceptance – Rules of valid offer and acceptance, Counter offer, standing or open offer, distinguish between offer and invitation to offer. Concept of Communication and Revocation of offer and acceptance (sec. 3,5)
• Capacity to Contract (S. 10-12) – Minor, Unsound Mind, Disqualified Persons.
• Consideration (S. 2 & 25) – Concept and Importance of consideration, Legal rules of Consideration, Exceptions to the Rule, ‘No Consideration No Contract’(Ss. 25) Unlawful Consideration (S 23) 2
Contract
Definition of Contract and Agreement.
Definition of Contract : Section 2(h) - "An agreement enforceable by law is a contract."
Definition of Agreement : Section 2(e) - "Every promise and every set of promises forming consideration for each other."
• Contract – Definition of Contract and Agreement, Essentials of Valid Contract, Classification of Contracts.
• Offer and Acceptance – Rules of valid offer and acceptance, Counter offer, standing or open offer, distinguish between offer and invitation to offer. Concept of Communication and Revocation of offer and acceptance (sec. 3,5)
• Capacity to Contract (S. 10-12) – Minor, Unsound Mind, Disqualified Persons.
• Consideration (S. 2 & 25) – Concept and Importance of consideration, Legal rules of Consideration, Exceptions to the Rule, ‘No Consideration No Contract’(Ss. 25) Unlawful Consideration (S 23) 2
Contract
Definition of Contract and Agreement.
Definition of Contract : Section 2(h) - "An agreement enforceable by law is a contract."
Definition of Agreement : Section 2(e) - "Every promise and every set of promises forming consideration for each other."
Offer + Acceptance = Agreement
Agreement + Enforceability at Law = Contract
Essentials of Valid Contract
1. Lawful Offer/Proposal and Lawful Acceptance.
2. Intention to create a legal relationship.
3. lawful Consideration.
4. Lawful Object.
5. Capacity of the parties.
6. Free Consent of the parties to the agreement.
7. Agreement must not have been expressly declared to be void.
8. Observance of Legal formalities.
9. Certainty of terms.
9. Possibility of performance.
10. Form of contract.
Classification of Contracts
1. Voidable contract.
2. Void Contract.
3. Unenforceable Contract.
4. Express Contract.
5. Implied Contract.
6. Quasi Contract.
7. Executed Contract.
8. Executory Contract.
9. Unilateral Contract.
10. Bilateral Contract.
11. Simple Contract.
12. Contingent Contract.
13. Standard form Contract.
14. E-Contract
15. Contract of Record
An implied contract is one in which the terms of the contract are inferred from the dealing or conduct of both the parties to it.
An agreement is said to be unenforceable if it cannot be enforced in the court of law due to some technical defect.
A speciality contract is one which is in writing and is signed, sealed and delivered by the parties to it.
Information Technology Act. 2000 has given recognition to all electronic documents.
Rules of Valid Offer
1. Terms of offer must be definite.
Rules of Valid Offer
1. Terms of offer must be definite.
2. Offer must create legal relationship.
3. Offer and Invitation to Offer.
Harvey
vs
Facie
4. To whom an offer can be made.
5. Offer must be communicated.
5. Offer must be communicated.
Lalman
vs
Gauri Datt.
6. How long an offer remains open..
7. Offer may be express or implied.
7. Offer may be express or implied.
The person making the proposal is called the "promisor" or "proposer" and the person accepting the proposal is called the "promisee" or "proposee."
Rules of Valid Acceptance.
Rules of Valid Acceptance.
1. Who can accept an offer ?
2. Acceptance must be absolute and unconditional.
2. Acceptance must be absolute and unconditional.
Roultedge
vs
Grant
3. Qualified acceptance is counter offer.
4. Acceptance must be made within reasonable time.
5. Mode of Acceptance.
6. Mental acceptance is no acceptance at all in Law.
7. Acceptance must be communicated to the offeror.
7. Acceptance must be communicated to the offeror.
Brogden
vs
Metropolitan Railway Co.
8. Acceptance cannot be in ignorance of the offer.
8. Acceptance cannot be in ignorance of the offer.
Lalman
vs
Gauri Datt
Counter offer
Standing or Open Offer
Distinguish between Offer and Invitation to Offer
Concept of Communication and Revocation of offer and acceptance (sec. 3,5)
3. Communication, acceptance and revocation of proposals.—The communication of proposals the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
5. Revocation of proposals and acceptances.—A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.
Illustrations A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.
Communication of Offer and Acceptance
When is communication complete ?
Communication of Acceptance is complete :
1. As against proposer
2. As against acceptor.
Communication of Revocation
1. As against the person who makes it.
2. As against the person to whom it is made.
Time for revocation of offer and acceptance.
Capacity to Contract (S. 10-12) – Minor, Unsound Mind, Disqualified Persons.
10. What agreements are contracts.—All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.
11. Who are competent to contract.—Every person is competent to contract who is of the age of majority according to the law to which he is subject , and who is of sound mind and is not disqualified from contracting by any law to which he is subject.
12. What is a sound mind for the purposes of contracting.—A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
Illustrations
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.
(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.
Capacity of the parties
Section 11 : Every person is competent to contract who is :
a. of the age of majority.
b. of the sound mind.
c. not disqualified by law
Minor
Section 3 of the Indian Majority Act
Section 11 : Every person is competent to contract who is :
a. of the age of majority.
b. of the sound mind.
c. not disqualified by law
Minor
Section 3 of the Indian Majority Act
Nature of Minor's agrement
a. Minor's agreement is void ab initio.
a. Minor's agreement is void ab initio.
Mohori Bibee
vs
Dharmodas Ghose
b. Minor can be promisee or beneficiary.
b. Minor can be promisee or beneficiary.
c. Minor's property is liable for necessaries.
d. No estoppel against a minor.
e. No subsiquent ratification of Minor's Agreement.
f. No specific performance of Minor's agreement.
g. No insolvency for a Minor.
h. Partnership.
i. Registered Company
j. Can Minor be an agent.
j. Can Minor be an agent.
k. Contract by parent or guardian on behalf of Minor.
Raj Rani
vs
Prem Adib
l. Liability of person standing Surety for Minor.
l. Liability of person standing Surety for Minor.
Kashiba
vs
Shripat
Minor is not liable, the surety is held to be liable.
Manju Mahadeo
vs
Shivappa Manju
Liability of Surety is co-extensive with that of Principal Debtor. If the Principal Debtor is not liable, the surety is not liable.
m. Liability of a person making a promise with a minor.
Unsound Mind
12. What is a sound mind for the purposes of contracting.—A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
Illustrations
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.
(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.
12. What is a sound mind for the purposes of contracting.—A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
Illustrations
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.
(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.
Disqualified Persons
1. Alien Enemy
2. Foreign Sovereigns
3. Convicted Person.
4. Company or Statutory Corporation.
5. Insolvents.
1. Alien Enemy
2. Foreign Sovereigns
3. Convicted Person.
4. Company or Statutory Corporation.
5. Insolvents.
• Consideration (S. 2 & 25) – Concept and Importance of consideration, Legal rules of Consideration, Exceptions to the Rule, ‘No Consideration No Contract’(Ss. 25) Unlawful Consideration (S 23)
Concept and Importance of consideration
Section 2(d) :
When at the desire of the promisor,
the promisee or any other person,
has done or abstained from doing,
or
does or abstains from doing,
does or abstains from doing,
or
promises to do or abstain from doing,
something
such an act, abstinence or promise is called a consideration for the promise.
promises to do or abstain from doing,
something
such an act, abstinence or promise is called a consideration for the promise.
Consideration means "something in return".
Exceptions to the Rule, ‘No Consideration No Contract’(Ss. 25)
25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law -
An agreement made without consideration is void, unless -
(1) it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless.
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.
(3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.
Explanation 1 : Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2 : An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
1. Natural love and affection [S-25(1)]
Legal rules of Consideration
1. Consideration must move at
the desire of the promisor.
2. Consideration must move from
the promisee or any other person.
Chinnaya
v/s
Rammaya
3. A Stranger to a Contract cannot Sue upon it.
Dunlop Pneumatic Tyre Co. Ltd
v/s
Selfridge Co Ltd.
a. A Beneficiary under a Trust.
b. An
Assignee.
c.
Family
settlement
d. A
contract made through an agent.
e.
Third
party risk insurance contracts.
4. Consideration may be past,
present and future.
Sindha
vs
Abraham
5. Consideration need not be
adequate.
6. Consideration must be real
and not illusory.
Alliance Bank
v/s
Broom
7. Consideration must not be
illegal, immoral or opposed to public policy.
8. Performance of existing obligation is no consideration.
Exceptions to the Rule, ‘No Consideration No Contract’(Ss. 25)
25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law -
An agreement made without consideration is void, unless -
(1) it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless.
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.
(3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.
Explanation 1 : Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2 : An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
1. Natural love and affection [S-25(1)]
to a near and dear relative,
writing and registered.
Rajluckhy Dabee
vs
Bhoothnath (1900)
2. Compensation for past Voluntary Services [S-25(2)]
3. Promise to pay a time barred debt [S-25(3)]
4. Completed Gift [Explanation 1 to S-25]
5. Agency [S-185]
Unlawful Consideration (S 23)
23. What consideration and objects are lawful, and what not.
The consideration or object of an agreement is lawful, unless -
It is forbidden by law;
is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent;
involves or implies, injury to the person or property of another;
the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
24. Agreements void, if consideration are objects unlawful in part If any part of a single consideration for one or more objects, or any one or any part of any one of several consideration of a single object, is unlawful, the agreement is void.
a. It is forbidden by law;
b. is of such nature that, if permitted it would defeat the provisions of any law or
c. is fraudulent;
d. involves or implies, injury to the person or property of another;
e. the Court regards it as immoral, or opposed to public policy.
2. Compensation for past Voluntary Services [S-25(2)]
3. Promise to pay a time barred debt [S-25(3)]
4. Completed Gift [Explanation 1 to S-25]
5. Agency [S-185]
Unlawful Consideration (S 23)
23. What consideration and objects are lawful, and what not.
The consideration or object of an agreement is lawful, unless -
It is forbidden by law;
is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent;
involves or implies, injury to the person or property of another;
the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
24. Agreements void, if consideration are objects unlawful in part If any part of a single consideration for one or more objects, or any one or any part of any one of several consideration of a single object, is unlawful, the agreement is void.
a. It is forbidden by law;
b. is of such nature that, if permitted it would defeat the provisions of any law or
c. is fraudulent;
d. involves or implies, injury to the person or property of another;
e. the Court regards it as immoral, or opposed to public policy.
Agreement against public policy :
Agreement for stifling prosecution.
Agreement in restraint of trade.
