Business Law for Class

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    Offer & Acceptance

    Offer : As per the section 2(a) of the Contract Act

    When a person signifies to another his willingness todo or abstain from doing anything, with a view to

    obtain the consent of that other to such an act orabstinence, he is said to make an offer.

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    Two main aspects are:-

    The willingness to do or abstain from doinganything.

    With a view to obtain the consent of other person.

    Example:-A says to B, will you buy my motorcycle for 20000Rs?

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    Essentials of a Valid Offer:-

    1. It must be a willingness to do or not to do.2. Offer must be communicated to other.

    3. With an intention of having the consent.

    4. Must not be an answer to a question.5. Must not be an invitation to make an offer.

    6. Can be positive or negative

    7. Can be general or specific.

    8. It should be final willingness of the promisor.

    9. Can be expressed or implied.

    10. Silence is no offer.

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    Acceptance :-

    Section 2(b) of the contract act gives the definition :

    When a person to whom the offer has been made,gives his assent thereto, the offer is said to be

    accepted. An offer when accepted becomes apromise.

    Example :-

    A says to B will you buy my motorcycle for Rs.

    20000? and Subsequently B says Yes.

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    Essentials of a valid Acceptance:-

    1. Acceptance is following offer.

    2. Acceptance should be communicated.

    3. Only the promisee can accept an offer.

    4. It should be unconditional.5. Should be in the prescribed manner.

    6. Within a reasonable time.

    7. Silence is no acceptance.8. It can be expressed or implied.

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    Communication of an offer and acceptance

    Communication of offer is complete when it comesunder the knowledge of the promisee.

    Communication of acceptance is complete

    Against promisor when the acceptance letter is dispatched.

    Against promisee when the acceptance letter reaches the promisor.

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    Revocation of Offer and Acceptance

    Offer can be revoked before it comes under theknowledge of the promisee.

    Acceptance can be revoked when it comes under theknowledge of the promisor.

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    Lapse of an Offer

    By revocation

    By time

    By death of the promisor

    By impossibility By counter offer.

    Conditional acceptance

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    Consideration

    Promisor Promisee

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    Meaning :-

    Section 25 of ICA,1872 states that

    An agreement without consideration is void.

    The term consideration is used in the sense of :-quid pro quo which means something in return.

    OR

    Consideration is the price for which the promise ofother is bought.

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    Definition

    According to Section 2(d) of the ICA, 1872

    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, or promises to door abstain from doing something, such act orabstinence or promise is called consideration for the

    promise.

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    Example:-

    Kamal promises to sell his car to Vinod for Rs.140,000. In Return Vinod promises to pay Rs.140,000 to Kamal.

    Here Vinods promise to pay 140000 is considerationfor Kamals promise to sell the car.

    And Kamals promise to sell the car is the

    consideration for Vinods promise to pay the amount140000.

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    Characteristics :-

    May be an act or abstinence

    At the desire of the promisor.

    May be by the promisee or any other on his behalf.

    May be past, present and future.

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    Legal Rules for Valid Consideration:-

    It must be done at the desire of the promisor.

    The Consideration must be lawful, i.e. it should not

    be against public policy, or against the legalprovisions.

    Consideration must be real not illusory.

    It must be of some value in the eyes of the law.

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    Contd

    The consideration must not be the performance ofthe legal duty.

    Need not to be adequate.

    Can be done by the promisee or any other person.

    Forbearance to sue is also a consideration.

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    Legal agreements without consideration:

    Natural love and affection.

    Past voluntary services.

    Promise to pay time barred debt.

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    Privity of Contract or Stranger to Contract

    Stranger to a contract can not sue for carrying outany promise.

    But consideration by any stranger is valid.

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    Capacity of Contract

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    Statement

    Section 11, of ICA, 1872

    Every person is competent to contract who is of the

    age of majority according to the law to which he issubject, and who is of sound mind, and is notdisqualified from contracting by any law to whichhe is subject.

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    Persons not competent to contract are:-

    Minors

    Persons of Unsound Mind

    Persons disqualified by law.

    Section 3, of Indian Majority Act 1875

    A minor is a person who has not completed eighteenyears of age.

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    Minors agreement are absolutely void ab initio

    Effect of Minor Agreement

    Void ab initio

    No Estoppels No Liability

    No ratification

    Doctrine of Restitution Minor Can be a Beneficiary

    Minors property is liable for necessities

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    Minor cant be partner.

    Minor as an agent

    Minor can execute a negotiable instrument

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    Free ConsentFree

    Consent

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    Consent :-

    Section 13 of Indian Contract Act defined

    Two or more persons are said to consent when they

    agree upon the same things in the same sense.

    It means the parties should have identity of mind.

    OR

    Consensus ad idem

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    Example :-

    A had two scooters, one of green color and other is

    of red color. A offered to sell his green scooter to Bfor Rs. 15000, B accepted the offer, thinking it to befor red scooter. In this case consensus ad idem is notpresent.

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    Free Consent :-

    Section 14 of the ICA,1872

    Consent is said to be free, when it is not caused by-

    1. Coercion (section 15)

    2. Undue Influence (section 16)3. Fraud (section 17)

    4. Misrepresentation (section 18)

    5. Mistake (Section 20,21,22 )

    Consent is said to be so caused when it would not havebeen given but for the existence of such coercion, undueinfluence, fraud, misrepresentation, or mistake

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    Effect :-

    When the consent is not free, then the contract isvoidable at the option of the aggrieved party.

    When there is no consent then the contract is void abinitio.

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    Section 15:- Coercion

    Coercion is the committing or threatening tocommit any act forbidden by the Indian Penal Code,or the unlawful detention or threatening to detain,any property to the prejudice of any person,

    whatever, with the intention of causing any person toenter into an agreement.

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    Legal Rules for Valid Coercion

    The consent must be obtained by committing any actforbidden by Indian Penal Code.

    Consent must have been taken by threatening to commitany act forbidden by IPC.

    Consent must be obtained by unlawful detaining orthreatening to detain any property.

    Intention must be to force other party to make anagreement.

    Act of coercion may be initiated by any person. Threatening to commit suicide is coercion.

    Threat to file a civil suit is not coercion.

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    Effect of Coercion.

    Section 19, of ICA, 1872

    Voidable at the option or aggrieved party.

    Burden of proof lies on the party which wants to set

    aside the contract on the basis of coercion. Aggrieved party can also ask for the refund of money.

    (Section 72)

    Duress Vs. Coercion.

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    Undue Influence

    Section 16(1) of Indian Contract Act,1872

    The term undue influence means the unfair use ofpower in order to obtain the consent of person who is

    in a weaker position.Definition

    A contract is said to be induced by undue influencewhere the relation between the parties is such that

    one of the parties is in a position to dominate thewill of other, and uses that position to obtain anunfair advantage over the other.

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    Three essential parts of undue influence

    1. One party is in a position to dominate the will ofother.

    2. The dominating party uses its superior position toobtain an unfair advantage over the other.

    3. The dominating party obtains the unfairadvantage over the other party.

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    Example

    A, an illiterate old lady was having some property.

    B, her nephew was looking after the property. B, bysaying few sweet words managed his aunt to giveher property to him. Here B, has used the undueinfluence.

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    Essentials for Undue Influence

    One party must be in a dominating position.

    a. When one party has real or apparent authority.

    b. Fiduciary relation to each other.c. In case of mental distress

    The dominating party must use his dominating

    position. Unfair advantage.

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    Effect of Undue Influence

    It makes the contract voidable at the option of theparty whose consent is obtained by undue influence.

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    Presumption of Domination

    Real or Apparent authority

    I. Master and Servant

    II. Income tax officer and Assesses

    III.Police and accused

    Fiduciary Relationship

    I. Solicitor and client

    II. Doctor and Patient

    III. Parents and child

    IV. Trustee and Beneficiary

    V. In case of mental distress, illiterate.

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    Presumption of Undue Influence

    Unconscionable Transactions

    Contract with pardanashin Women

    Burden of proof is on the person who wants to setaside the contract, but not always.

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    Fraud

    In general language fraud means :-

    a) Intentional, or

    b) Deliberate, or

    c) WillfulMisstatement about the facts which are material forthe contract, with an intention to deceive the otherparty.

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    Definition

    As per Section 17 of ICA, 1872Fraud means and includes any of the following actscommitted by a party to the contract or with his connivance or

    by his agent, with intention to deceive another party thereto,or his agent or to induce him to enter into the contract:

    1. The suggestion as to a fact, of that which is not true, by onewho does not believe it to be true;2. The active concealment of a fact by one having the

    knowledge or belief of fact;3. A promise made without intention of performing it;

    4. Any other fact fitted to deceive;5. Any such act or omission as the law declares to be

    fraudulent.

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    Essentials for Fraud

    Intention to deceive other party.

    Must be committed with the knowledge of its falsity.

    By a party to the contract, or by his connivance

    Other party must take it as true. Fraudulent act must have deceived the other party.

    Mere silence is not fraud.

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    Example

    A saw Bs horse in a field. And asked to purchase itfrom B if the horse if of Arabic Species. B, knowingly

    lied to A, that the horse is of Arabic species, despitethe fact that the horse was Italian.

    Here B is committing a Fraud.

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    Acts which constitute fraud

    False statement of a fact, made by a person who doesnot believe it to be true.

    About the material factor of the contract

    Active concealment of fact There is a concealment

    Every effort is made to conceal the fact

    The concealment is made by a person who knows it.

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    Silence as Fraud

    When there is duty to speak

    Where silence is equivalent to speech.

    Change of the circumstances.

    Half Truth

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    Effect of A Fraud

    Voidable at the option of the aggrieved party.

    He may

    a. Rescind the Contract

    b. Affirm the Contract

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    Losing the Right of Rescission

    By affirmation

    By lapse of time

    By third party acquiring the interest.

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    Misrepresentation

    Representation means the statement of facts madeby one party to the other with a view to induce theother party to enter into agreement.

    Misrepresentation means an innocentmisstatement about a fact material to the contract.

    Or misrepresentation is false statement madeinnocently.

    That is without any intention to deceive other party.

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    Definition

    Section 18 of the ICA, 1872Misrepresentation means and includes:

    i. The positive assertion; in a manner not warrantedby the information of person making it, of that whichis not true, though he believes to be true.

    ii. Any breach of duty which without an intent todeceive, gains an advantage to the person committingit, or any one claiming under him, by misleadinganother to his prejudice or to the prejudice of any oneclaiming under him.

    iii. Causing however innocently, a party to anagreement to make mistake as to the substance of thething which is the subject of the agreement.

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    Legal Rules for Misrepresentations

    Must be of material fact Misrepresentation must be false, but the person making

    it must believe it to be true. Must induce other party to enter into an agreement.

    Must be made to the party which has been mislead.ExampleB was a shareholder of a company. A bought shares ofthat company from B. Afterwards A found that somestatements in the prospectus were not followed by the

    company, so he sued the company formisrepresentation. Though he is not the party misled.Hence A has no right to sue.

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    Acts which constitutes Misrepresentation

    Positive unwarranted statement.

    Breach of duty (constructive Fraud).

    Inducing mistake about subject matter.

    Example

    A told B that C would be the director of the company,and made him to buy some shares of the samecompany. But A had obtained this information not

    from C but from D, and it proved to be false, itconstitutes fraud.

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    Effects of Misrepresentation

    It makes the contract voidable at the option of themisled party.

    but not in the following conditions

    Where the party has the means of discoveringthe truth with ordinary diligence.

    Where the misrepresentation does not inducethe other party to enter in to contract.

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    Remedies Available to the Aggrieved Party

    May Affirm the Contract

    May Rescind the Contract

    Loss of the right of rescission

    I. By lapse of timeII. By Affirmation

    III. By third party acquiring interest.

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    Mistake

    Mistake may be defined as the incorrect belief aboutsomething.

    It is erroneous belief, which leads one party tomisunderstand the other.

    It takes place where the concerned parties are notfully aware of the terms and conditions of thecontract.

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    Types of Mistake

    Mistake

    Mistake ofFact

    BilateralMistake

    Unilateral

    Mistake

    Mistake ofLaw

    Law of Land

    Foreign Law

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    Mistake of Fact

    Bilateral Mistake :Mistake in which both the parties to an agreement areconfused about the facts which are essentials to theagreement.

    Bilateral Mistake may bea. Common Mistake

    b. Mutual Mistake

    Unilateral Mistake :When only one party makes the mistake about thesubject matter.

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    Essentials of a Bilateral Mistake

    The mistake must be of both the parties.

    The mistake of fact must be about the essential factof the agreement.

    The mistake must be about existing facts.Example

    A agreed to sell a piece of land to B , actually theland had already been acquired by the government,

    but A and B were not aware of the fact, this is amistake made by both A and B about the existingfact.

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    Types of Bilateral Mistake

    a) Mistake about the subject matterb) Mistake about the possibility of performance.

    Mistake about the subject matter. about the existence of subject matter. about the title of the subject matter. about the substance of the subject matter. about the quality of matter about the quantity of subject matter.

    about the price of subject matter.

    When both the parties are under a mistake, the contract is void.

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    Essential of the Unilateral Mistake

    Must be about the necessary fact of the agreement.

    Must defeat the true consent of the parties.

    Agreements induced by unilateral mistakes are notvoid or voidable.

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    Void

    Agreements

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    Meaning

    Agreement which is without any legal effect.

    According to section 2(g) of Indian Contract Act

    An agreement not enforceable by law is said to bevoid.

    A void agreement does not create a legal obligation.It is void ab intio.

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    Agreements Expressly Declared to be Void

    Agreements in restraint of marriage. (sec 26) Agreements in restraint of trade. (sec 27)

    Agreements in restraint of legal proceedings. (sec 28)

    Agreements the meaning of which are uncertain. (sec29)

    Wagering Agreements (sec 30)

    Agreements to do impossible events. (sec 56)

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    Agreement in Restraint of Marriage

    Every agreement in restraint of marriage of anyperson other than a minor is void.

    The restraint may be complete or partial.

    But valid in case of minors.Example

    A agreed to marry B and none else, further he agreedto pay 1000 Rs. to B if he married someone else.

    Subsequently A married C. B brought an actionagainst A for 1000 Rs. But the court said the contract

    was void ab initio.

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    Agreements in Restraint of Trade

    Every person is free to do any kind of business, If it isnot against the law.

    An agreement in restraint of trade is the agreementwhich restrains a person from exercising a lawfultrade, occupation, profession in any kind.

    Definition :

    Every agreement by which anyone is restrained from

    exercising a lawful profession, trade or business ofany kind is to that extent void.

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    Exception in the Agreement of Trade

    In case of Goodwill.i. The restriction should specify the local limits

    ii. The restriction must be reasonable.

    iii. For reasonable time.iv. Restriction should be imposed on the similar kind

    of business.

    v. There should be reasonable goodwill.

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    Exception under partnership actI. Restraining a continuing partner from carrying on

    any business.

    II. Restraining outgoing partnerIII. Restraining in anticipation of the dissolution.

    i d j di i l d i i

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    Exception under judicial decisions

    Restraint on employees Restraint in trade combination.

    Restraint in sole or exclusive dealing agreements.

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    Agreements in Restraint of Legal Proceedings

    Every person has a freedom to enforce his legalrights.

    Anybody can go to court for the enforcement of hislegal rights.

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    According to Indian Contract (Amendment) Act,1996Every Agreement:-

    a) By which any party thereto is restricted absolutelyfrom enforcing his rights under or in respect of any

    contract, by the usual legal proceedings in theordinary tribunals, or which limits the time in whichhe may thus enforce his rights; or

    b) Which extinguishes the rights of any person thereto, ordischarges any party thereto from any liability, underor in respect of any contract on the expiry of aspecified period so as to restrict any party fromenforcing his rights, is void to that extent.

    M i

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    Meaning

    All agreement are void whichI. Restricts absolutely the parties from enforcing

    their legal right.

    II. Cut short the time period , prescribed by the law oflimitations

    III. Extinguishes the rights of any party

    IV. Discharges a party from its liabilities.

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    Example 1A borrowed Rs.5000 from B, a money lender. It wasdecided that A would repay it in one year. And if A isnot able to pay, B will not take any legal action. Thisagreement is void as it prevents B from his rights.

    Example 2

    A sold his car to B, B agreed to pay the amount

    within 6 months. Further it was also decided that if Bfails to pay the amount, A will not sue B after two

    years. This agreement cut short the time period.

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    Example 3A sold his flat to B and received the payment. Thepossession was to be taken by B in two months. AndIf B failed to take the possession in this time, theright to take the possession will be lost. This is voidagreement.

    h f l d

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    Exception in the Agreement of Legal Proceedings

    Restraints for referring the future disputes toarbitration

    For existing disputes

    M V id A t

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    More Void Agreements

    Uncertain Agreement (section 29)Agreements, the meaning of which is not certain orcapable of being made certain are void.

    Wagering Agreements (Section 30)

    Agreements by way of wager are void.

    E ti l f W i A t

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    Essentials of Wagering Agreements

    Must depend upon uncertain events Mutual chance of gain and loss

    Parties must not have any other interest in the event.

    No control over the event Promise to pay money or moneys worth.

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    ContractsQuasi

    Q i C t t

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    Quasi Contracts

    Quasi Contracts are a kind of implied contracts. Sometimes the essentials of a valid contract are not

    present still the contract is valid.

    But there is no real contract in existence. Even the intention to create legal obligation is not

    present.

    Still the court may ask to enforce the obligations.

    B i f Q i C t t

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    Basis of Quasi Contracts

    nemo debet locuplatari ex liena justua.Or

    no man can grow rich out of another persons

    costs.

    Law as well as justice should try to prevent the unjustenrichment.

    Kinds of Quasi Contract

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    Kinds of Quasi Contract

    Supply of necessaries to the persons who areincompetent to contract. (sec 68)

    Payment by an interested person. (sec 69)

    Non gratuitous acts. (sec 70) Finder of Goods (sec 71)

    Payment of money or delivery of goods by mistake orunder coercion.(sec 72)

    S l f N i t I t t

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    Supply of Necessaries to an Incompetent person

    Section 68

    if a pers0n who is incapable of entering in to

    contract or any one whom he is legally bound tosupport, supplied by another person withnecessaries suited to his conditions in life, the

    person who has furnished such supplies is entitled to

    be reimbursed from the property of such incapableperson

    Payment by Interested person

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    Payment by Interested person

    A person who is interested in the payment of moneywhich another is bound to pay, and who thereforepays it, is entitled to be reimbursed by the other.

    Conditions for the recovery of the payment

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    Conditions for the recovery of the payment

    The person making the payment must be interested . The person must not be legally bound to pay the

    amount.

    The other person must be legally bound to pay theamount.

    Non Gratuitous Acts

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    Non Gratuitous Acts

    Section 70

    When a person lawfully does anything for another

    person, or delivers anything to him not intending todo so gratuitously and such other person enjoys thebenefits thereof, the latter is bound to makecompensation to the former in respect of , or to

    restore, the things so done or delivered.

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    Discharge

    Of

    Contract

    Discharge of Contract

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    Discharge of Contract

    When the parties fulfill their legal obligation as perthe contract, the contract comes to an end, and it issaid to be discharged.

    After discharging the contract does not exist.

    And parties are no more liable under the contract.

    Termination of the contractual relationship betweenthe parties.

    Modes of Discharge of A contract

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    Modes of Discharge of A contract

    By performance By impossibility of performance

    By Agreement

    By operation of law By lapse of time

    By Breach of contract

    Discharge By performance

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    Discharge By performance

    Section 37 of Indian Contract Act,1872The parties to a contract must either perform oroffer to perform their respective promises unless the

    performance is dispensed with or excused under theprovisions of this act or any other law.

    Characteristics of the Performance

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    Characteristics of the Performance

    1. Performance of the promise 2. Offer to Perform the promise (Tender)

    Performance of a Contract

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    Performance of a Contract

    When the parties to the contract fulfill theirobligations respectively, the contract is said to beperformed.

    Nothing is left to be done after the performance has

    be done.

    Tender

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    Tender

    When the party has not actually performed his legalobligations but has made a serious effort to perform,than this offer is called the tender.

    A valid tender has the same effect as the actual

    performance.

    Refusal to accept the performance, discharge theliability of the party making the tender.

    Essential of a Valid Tender

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    Essential of a Valid Tender

    The tender must be unconditional Must be made at proper time and place

    The tender must provide a reasonable opportunity toother party.

    The tender must be of whole obligation

    Tender must be made to a proper person.

    The person making the tender must be able and

    willing to perform.

    The tender can be made by any one of the jointpromisee.

    Discharge by Impossibility of Performance

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    Discharge by Impossibility of Performance

    When the actual performance is impossible. The contract is itself taken to be discharged, the

    moment it is proved that the performance hasbecome impossible.

    Impossibility is of two types

    a. Initial Impossibility

    b. Subsequent Impossibility

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    Initial Impossibility : The impossibility which exist atthe time of making the contract. Is initialimpossibility.

    Example : A agreed with B to convert a piece of

    metal into gold by magic. And B agreed to pay Rs.500 to A for this act.

    Subsequent Impossibility : Sometimes the

    performance is possible when the contract is madebut become impossible afterwards due to somereasons.

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    Definition Section 56 para 2 A contract to do an act which after the contract is

    made, becomes impossible, or by reason of someevent which the promisor could not prevent,

    unlawful, becomes impossible or unlawful.

    Example :A agreed to export 100 quintal of basmatirice for B, and B agreed to pay 10,000 to A for this

    act. But afterwards the Government put a ban onexport of basmati rice. The performance becomeimpossible subsequently.

    Specific Grounds of Frustration or Subsequent Impossibility

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    Specific Grounds of Frustration or Subsequent Impossibility

    Destruction of subject matter Failure of object

    Death or incapacity of promisor

    Change of Law Outbreak of war

    Change of the circumstances

    Discharge by Agreement

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    Discharge by Agreement

    Section 62 and 63 of the Indian Contract Actif the parties to a contract agree to substitute a newcontract for it, or to rescind or alter it, the originalcontract need not be performed.

    Every promisee may dispense with or remit,wholly or in part the performances of the promisemade to him, or may extend the time, or may accept

    instead of it any satisfaction which he thinks fit.

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    Novation Rescission

    Alteration

    Remission Waiver

    Acceptance of any other satisfaction

    Discharge by Operation By Law

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    Discharge by Operation By Law

    Material Alteration Insolvency

    Death of the promisor

    Merger of rights

    Discharge by Breach of Contract

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    Discharge by Breach of Contract

    In case of valid contract the parties are bound toperform their legal obligations.

    If any party fails to perform his legal obligation,there occurs a breach of contract.

    The party which fails to perform its legal obligation issaid to committed the breach of contract.

    The breach of contract discharges the aggrieved

    party from his obligations.

    Types of Breach of Contract

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    Types of Breach of Contract

    Actual BreachWhen at the due date of performance or during theperformance, a party fails to perform his legalobligations.

    Anticipatory Breach

    When prior to the due date of performance thepromisor absolutely refuses or disables himself form

    the performance of his obligation.

    Actual Breach of Contract

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    Actual Breach of Contract

    Actual Breach of contract on the due date ofperformance.

    Example

    A agreed to sell his car to B on 1st June, But on 1stJune A refused to sell the car to B. On As refusalthere occurred a breach of contract.

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    Actual breach of contract during its performance

    Example

    A contracted to sell B certain goods of particulardescriptions to be delivered on 15th march. On thedue date A delivered the goods to B, but the goodsdid not conform with the description. In this case A

    committed a breach of contract during itsperformance.

    Anticipatory Breach of Contract

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    p o y o Co

    ExampleA contracted to supply B 100 pieces of spark plugs on15th December 1997. But before 15th December A toldB that he will not supply the plugs.

    In case of anticipatory breach of contract theaggrieved party has two options

    1. He may treat the contract as discharged.2. He may wait for the performances.

    Remedies for Breach of Contract

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    Suit for rescission Suit for damages

    Suit for quantum meruit

    Suit for performances Suit for injuction.

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    Sales

    Of Goods Act

    1930

    Contract of Sale

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    According to Section 4(1) of SOGAA contract of sales of goods is a contract wherebythe seller transfers of agrees to transfer the

    property in goods to the buyer for a price.

    A person who sells or agrees to sell the goods isknown as seller. (Section 2(13))

    A person who buys or agrees to buy the goods isknown as buyer.(section 2(1))

    Essentials of a Valid Contract of Sale

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    All the requirements of a valid contract must befulfilled.

    There must be two parties to the contract of sale.

    There must be some movable goods for sale.

    The property in goods must be transferred to thebuyer.

    There must be some price for the goods.

    Classification of Contract of Sale

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    Contractof Sale

    Sale

    Agreement

    to Sell

    Sale

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    Section 4(3) of SOGA

    Where under the contract of sale the property inthe goods is immediately transferred from the sellerto the buyer, the contract is called a sale.

    Example :

    A agreed to buy a hay stake lying on Bs land. A wasgiven the liberty to come and take the hay stake forsome price. This is a sale.

    Agreement to Sell

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    g

    Section 4(3) of SOGA

    Where under a contract of sale the transfer of theproperty in goods is to take place at a future time orsubject to some condition thereafter to be fulfilledthe contract is called an agreement to sell.

    Example:A agreed to buy some chairs from B. The shipcarrying chairs was yet to arrive. This is anagreement to sell.

    Conversion of Agreement to Sell into Sale

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    g

    When the ownership is to be transferred at a date,then the agreement becomes sale at the arrival ofthe date.

    When the ownership is to be transferred subject to

    some condition, the agreement becomes the sale atthe fulfillment of the condition.

    Difference between Agreement to Sell and Sale

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    g

    Sale

    The ownership is transferredimmediately.

    Executed contract The buyer is responsible for any

    loss and destruction of the goods,even if the possession is with theseller.

    If Seller refuses to deliver thegoods buyer may recover the same.

    If the buyer refuses to pay the pricethe seller may recover the price.

    Seller can not resell even if he ishaving the possession.

    Insolvency of buyer and seller.

    Agreement to Sell

    The ownership is transferred at afuture time.

    Executory contract. The seller is responsible for any

    loss and destruction. If the seller refuses to deliver the

    goods the buyer can not recoverthe goods, but can claim damages.

    If the buyer fails to pay the price,seller can not recover it.

    The seller can not resell. Insolvency of buyer and seller.

    Classification of Goods

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    Existing Goods Specific goods

    Unascertained Goods

    Ascertained Goods

    Future Goods Contingent Goods