fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration

8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration

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AMITY GLOBALBUSINESS SCHOOL Bangalore

CONTRACT

An agreement enforceable by law is a contract.

1. an agreement2. the agreement should be enforceable by law

3. An agreement is defined as every promise and

every set of promises forming the consideration

for each other and a promise is an accepted

proposal


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Agreement

Every set of promises forming consideration for each

other is agreement

It has proposal and acceptance


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Agreement essentials

Plurality of persons

Consensus ad- idem:

Agree on same thing in same sense

Viniculum juris

Relates to legal matters not social arrangements

Promise and reciprocal promises


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Kinds of agreement

agreementsSocial agreement

illegal

voidable

unenforceable

Valid

void


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FORMATION OF A CONTRACT

Plurality of persons

proposal or offer

acceptance

Legal relationship, legal consequence Lawful consideration

Lawful object

Contractual capacity

Free consent of parties Agreement not declared void

Certainity and possibility of performance

Legal and procedural formalities


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offer

When one person signifies to another his willingness to

do /or abstain from doing anything with a view to

obtaining the assent of the other to such act or

abstinence, he is said to make a proposal


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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of offer

Express/ implied

Positive/negative

Intent legal relationship

Terms certain Made to public or person

Communicated to offeree

Different from invitation to offer

View to get assent May be conditional

Standing offer and cross offer


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AMITY GLOBALBUSINESS SCHOOL BangaloreTermination of offer

Notice of revocation

Lapse of time

Failure to fulfill condition precedent to accp.

Not in mode prescribed

Death inanity of offeror

By rejection

Subsequent illegality/ destruction of subject

matter


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AMITY GLOBALBUSINESS SCHOOL Bangaloreacceptance

When the person to whom the proposal is made signifies

his assent thereto, the proposal is said to be accepted.

Proposal when accepted becomes a promise


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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of acceptance

Absolute unconditional

Usual mode

Cannot preceed offer

May be expressed/ implied Within reasonable time

By person to whom offer is made

Offer once rejected cannot be accepted till renewed

Before lapse or revocation of offer

Silence does not mean acceptance


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AMITY GLOBALBUSINESS SCHOOL BangaloreExceptions silence when taken

acceptance Previous dealings

Where all conditions of offer if performed

means acceptance: carlil case Offeree has reasonable time to reject but

accepts the benefit of offer


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Legalrelationship

Intention to create legal relationship

Balfour v. Balfour


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AMITY GLOBALBUSINESS SCHOOL BangaloreContractual capacity

Parties competant to contract

Mental deficiency Legal disability

Infancy

idiocy

Contractual capacity

Drunkness

luancy

Political

status

insolvency

Corporatestatus

Imprisonment

Married

status


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AMITY GLOBALBUSINESS SCHOOL BangaloreFreeconsentofparties

Coercion

Undueinfluence

Fraud

Misrepresentation

Mistake


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AMITY GLOBALBUSINESS SCHOOL BangaloreLawful object and consideration

Consideration or object is unlawful if

(1) It is forbidden by law,

(2) Is of such a nature if permitted it would defeat the provisions of any

law,

(3) It is fraudulent,

(4) The court regards it immoral,(5) The court regards it opposed to public policy. Every agreement of

which the consideration or object is unlawful is void.


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Agreementnotdeclared void

Agreement in restraint of trade

Agreement in restraint of legal

proceedings Wagering agreement


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AMITY GLOBALBUSINESS SCHOOL BangaloreConsideration

An agreement made without consideration is void, unless (1) Agreement without consideration void, unless it is in writing and regis-tered.It

is expressed in writing andregistered under the law for the time being in force for theregistration of documents, and is made on account of natural love and affectionbetween parties standing in a near relation to each other, or unless

(2) or is a promise to compensate for something done. It is a promise tocompensate, wholly or in part, a person who has already voluntarily done somethingfor the promisor, or something which the promisor was legally compellable to do,or

unless (3) or is a promise to pay a debt barred by limitation law. It is a promise, made in

writing and signed by the person to be charged therewith, or by his agent generally orspecially authorized in that behalf, to pay wholly or in part a debt of which the creditormight 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 donorand donee, of any gift actually made.

Explanation 2: An agreement to which the consent of the promisor is freely given isnot void merely because the consideration is inadequate ; but the inadequacy of theconsideration may be taken into account by the Court in determining the questionwhether the consent of the promisor was freely given.


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AMITY GLOBALBUSINESS SCHOOL BangaloreConsideration

The price at which the promise is bought

At the desire of the promisor

The promisee/ or any other person Has done/ abstained from doing

Promises to abstain from doing

Such act or promise

Is consideration for promise


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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of consideration

Required both for formation and discharge of contract

May be past present future

Positive/ negative

May be for Forbearance to sue

Must move at the desire of the promisor

May be furnished by promisee or any other person

Must be lawful

Must be real not illusory

Must be of some value Need not be adequate

Must not be for performing existing duties


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No consideration no contract

Quid pro quo:something in returnsomething is consideration

Nudum pactum:Nude contract

contractw

ithoutconsideration1 Agreement out of natural love and affection

2 Compensation for past voluntary services

3 Promise to pay time barred debt

4 Completed gifts

5 Agreements of agency6 Gratuitous bailment

7 Guarantee

8 Contribution to charity


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1. Agreement out of natural love and affection

it is in writing and regis-tered.It is expressed in

writing and registered under the law for the time

being in force for the registration of documents, andis made on account of natural love and affection

between parties standing in a near relation to each

other

Venkataswamy V. Rangaswamy


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AMITY GLOBALBUSINESS SCHOOL BangaloreNo consideration no contract

2 Compensation for past voluntary services

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


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AMITY GLOBALBUSINESS SCHOOL BangaloreNo consideration no contract

3 .Promise to pay time barred debt

It is a promise, made in writing and signed by the

person to be charged therewith, or by his agent

generally or specially authorized in that behalf,to pay wholly or in part a debt of which the

creditor might have enforced payment but for the

law for the limitation of suits.


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AMITY GLOBALBUSINESS SCHOOL BangaloreKedar Nath V. Gorie

Mohammad Promise to contribute to charity isenforceable ,if on the faith of the promise

the promisee takes definite steps in

furtherance of the object.


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AMITY GLOBALBUSINESS SCHOOL BangaloreStranger to contract stranger to

consideration When consideration paid by 3rd party pomisee isstranger to consideration

He cannot enforce the promise

But if he is party to contract he can sue thecontract

When he is stranger to contract he cannot sue

the contract Exceptions


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AMITY GLOBALBUSINESS SCHOOL BangaloreExceptions: Stranger to contract

can sue Provision is made in a marriage settlement

agreementcreatingchargeonland

Charge on property made in favor of the bride

Khwaja Mohammad Khan V Hussaini Begum

Provisionmadeinpartitionorfamilysettlement

female members can enforce arangements made by

male members

for their benefit even though not party to these

agreements.

( annuity for mother decided to be shared by the

brothers)


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AMITY GLOBALBUSINESS SCHOOL BangaloreExceptions: Stranger to contract

can sue Contracts entered through agentsWhen agent acts within scope of authority

Principal bound even though not party to the agreement

Beneficiaryinatrustorcharge

beneficiary though stranger to contract can sue to

enforce trust


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AMITY GLOBALBUSINESS SCHOOL BangaloreChinmaya V Ramayya

Stranger to consideration can sue:

Mother wills property to daughter, directs

certain annuity for her brother- aftermothers death daughter refuses to pay

Uncle can recover since party to contract


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AMITY GLOBALBUSINESS SCHOOL BangaloreStranger to contract

Dunlop pneumatic tyre co. Selfridge Co.

A- B not to sell below certain price

B-C not to sell below such priceC sells below price

A cannot sue C

A is not party between B and C


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AMITY GLOBALBUSINESS SCHOOL BangaloreDoctrine of privity of contract

It means that contract can only impose rightsand obligation on people who are party to thecontract

3rd

parties cannot sue for the performance ofcontract

Only when it says he can

where contract gives some benefit to him


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AMITY GLOBALBUSINESS SCHOOL BangaloreProvision is made in a marriage

settlement

Daropati V. Jaspati Rai

Provision made for the benefit of some

person, such person can sue for enforcingthe agreement even if not the party to to

the agreement


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AMITY GLOBALBUSINESS SCHOOL Bangaloreminor

Domiciled in India under 18 yrs is minor

Where person or property under

guardianship 21 yrs


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AMITY GLOBALBUSINESS SCHOOL BangaloreRules relating to minor

1. Agreement with minor void ab initio

2. No restitution against minor

3. Beneficial agreements are valid contracts

4. Contract of apprenticeship and service

5. no ratification of minors agreement6. Rule of estoppel does not apply

7. Minors liability for necessaries

8. Minor partner

9. Minor agent10. Position of minors parents

11. Minors liability in tort


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AMITY GLOBALBUSINESS SCHOOL BangaloreRestitution

To restore

Minor can be asked to restore the benefits

obtained by him by the court to the extentto which he or his estate has benefitted


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AMITY GLOBALBUSINESS SCHOOL Bangaloreratification

Means approval or confirmation

Minor cannot ratify made by him during

minority when he is a major


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AMITY GLOBALBUSINESS SCHOOL BangaloreLiability for necessity

If a minor is supplied with necessities, minors propertyis liable

Provided:

1. Contract is for goods necessary for minors support inlife

2. He should not have sufficient supply of thesenecessities


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AMITY GLOBALBUSINESS SCHOOL BangaloreNecessity:

1. Funds supplied for female member

2. Debt incurred for performing funeral rites

3. Expenses incurred for property litigation4. Expenses incurred in connection with

education and training expenses

Roberts v. Gray


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AMITY GLOBALBUSINESS SCHOOL BangaloreRule of estoppel

One cannot deny the truth of anything that

he has represented to be truth

If the minor represents to be a major andtakes a loan he cannot be compelled to

repay the money.


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AMITY GLOBALBUSINESS SCHOOL BangaloreMinor and tort

Tort is a civil wrong

Only if tort is independent of contract will minorbe liable

Burnard V Haggis Minorborrows horse lends it to friend : friendmakes it jump horse dies: minor liable for tort

Jennings V Rundall

Minor hires the horse for short time, takes itfor long ride horse injured. Minor not liablesince it would have been a contract


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AMITY GLOBALBUSINESS SCHOOL BangaloreUnsound mind

Sound mind means:

understand the contract

Capable of forming rational judgement abouteffects of contract on his interest


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AMITY GLOBALBUSINESS SCHOOL Bangaloreunsoundness

Permanent unsoundness:

Idiots

Lunatics Temporary unsoundness

Intoxicated persons

drunkards


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AMITY GLOBALBUSINESS SCHOOL BangalorePolitical status

Alien enemy

Foreign diplomats:

Protocol

when himself carries on the trade or owns an

immovable property for which he is to be sued


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AMITY GLOBALBUSINESS SCHOOL BangaloreCoercion

Where person is compelled to enter into a

contract by use of force by the other party


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EssentialsofCoercion

1. Threat to commit act forbidden by IPC2. Committing an act forbidden by IPC

3. Unlawful detaining of property

4. Act of coercion may be directed at anyperson, not only toother party of contract

5. Threat to file suit on false charges

6. Threat to commit suicide7. Even if IPC is not in force, suit should filed

in India


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AMITY GLOBALBUSINESS SCHOOL BangaloreEffect of coercion

1. Voidable contract, onus of proving on the

party who wants to set aside the contract

2. Remedy U/S 64 aggrieved party torestore any benefit it recd.


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AMITY GLOBALBUSINESS SCHOOL BangaloreUndue Influence

Influence that prevents someone from excersing

an independent judgement with respect to any

transaction.

It is the relation as such to dominate the will ofanother, to obtain an unfair advantage

It is not necessary that the person in a position

to dominate the will of the other party must

himself benefit. It is sufficient that the third

person in whom he is interested benefitted.


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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of Undue Influence

Domination of the will

He holds real/apparent authority

Stands in the fiduciary relation Make a contract with a personwhose

mental capacity is temporarily or

permanently effected by reason of

age,illness,distress.


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AMITY GLOBALBUSINESS SCHOOL BangaloreUndue Influence

Presumptions

Unconscionable Transactions:

unreasonable bargains,exorbtant profitscharged

2. Pardanashhin Woman:

seculsion and isolated


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AMITY GLOBALBUSINESS SCHOOL BangaloreEffect of Undue Influence

1. Recession of contract

2. Sec 19a, courts discretion to give part,

whole or no restoration order or refundorder


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Difference between coercion Undue influence

Difference Coercion U. Influence

Nature of act Destrution of will Dominance of will

Rel. b/w parties Not necessary Must exist

Type of force Physical Mental

Third parties Can be directed

against 3rd party

Exc. On the other

party to the contract

Nature of liability Criminal Civil

Burden of proof To be proved Presumption

Relation with

consent

Destroyed Induced

Rights ava. Sec 64 Discretionary


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Fraud

All acts committed with intention todeceive

and includes wilful misrepresentation


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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of Fraud

1. False statement made knowingly, without

belief in its truth, carelessly

2. Concealment of fact

3. Promise made with no intention to fulfill

4. Any other acts to deceive

5. Ommission of material fact

6. Party must suffer loss


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AMITY GLOBALBUSINESS SCHOOL Bangaloresilence as fraud/ constructive fraud

1. Duty to speak2. Where silence = speech

3. Change of circumstances

4. Half truth


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AMITY GLOBALBUSINESS SCHOOL BangaloreDuty to speak/ Uberrimae fidei

Done in utmost good faith

Where one party has duty to disclose

material facts relevant to subject matter to

the other party


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AMITY GLOBALBUSINESS SCHOOL BangaloreDuty to speak

1. Contract of insurance

2. Relating to family settlement

3. Allotment of shares

4. Contract of Guarantee

5. Contract of partnership

6. Contract of fiduciary relationship7. Contract for sale of immovable property


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AMITY GLOBALBUSINESS SCHOOL BangaloreEffects of fraud

1. Right of recession

2. Voidable contract within reasonable time

3. Right to affirm4. Claim for damages


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AMITY GLOBALBUSINESS SCHOOL BangaloreLoss of right of recession

in case of C, UI, F, Mis

Not rescinded:

Restitution not possible: matter alreadyconsumed

Lapse of time

Right to 3rd

parties Affirmation by aggrieved party


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AMITY GLOBALBUSINESS SCHOOL BangaloreAffirmation by aggrieved party

Shares alloted on misrepresentation in

prospectus, party accepts the dividend but

wants to later rescind the contract


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AMITY GLOBALBUSINESS SCHOOL BangaloreMisrepresentation

Representation is statement of fact by oneparty to the other either at/ before time ofcontract

expressed / implied Person making the false statement

believes it to be true and does not intend

to mislead the party is known asmisrepresentation


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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of Misrepresentation

1. Positive assertion of unwarrantedstatements believed to be true

2. Breach of duty bring advantage

3. Mistake about subject matter innocently4. Instrumental in inducing the party to

enter into contract

5. Must become untrue


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Misrepresentation

Innocent Mis.:Has reasonable ground to

believe in its truth

Negligent Mis.:Believes in the statement,

Has no grounds to believe so

Fraudulent Mis. :does not know its truthbut knows its not false


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AMITY GLOBALBUSINESS SCHOOL BangaloreEffects of Misrepresentation

1. Contract voidable

2. Right to recession

3. Right to insist on performance4. Right to claim refund not damage


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AMITY GLOBALBUSINESS SCHOOL BangaloreDifference between Fraud and

Misrepresentation

Difference Fraud misrepresentation

Intention Deliberate innocent

Recession Claim damage No claiming damages

Diligence in truth

finding

Voidable even if

truth found out

Cannot avoid if can find

out truth

Criminal act Yes civil

Silence Can be used to

induce fraud

no

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreMistake

It is erronous belief about something

AMITY GLOBAL


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Mistake

Foreign law

Indian law

factlaw

unilateral

Bilateral

AMITY GLOBAL


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Physical

M. Possibilty ofperformance

Mistake of subjectmatter

a. Existenceb. Identity

c. Titled.Pricee. Qualityf. quantity

Bilateral

legal

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreUnilateral mistake

Contract voidable:Fraud/ Misrep.

Agreement voidab-initio

Contract valid:Caveat emptor

M. Nature&Character of Doc.

M. Identity ofperson

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreMistake as to identity of person

If only the name is fictitious there is no

mistake of identity and contract voidable

Where the identity of the other party is

important to the offerror, contract void ab-

initio

Said V. Dutt

Mistake as to attributes & M to identity

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreNature of document

Where the mind of the signer is not with

the signature: i.e he did not intend to sign

it.

Even if caused by Mis representation

contract is void and 3rd party acquires no

rights

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreQuasi Contracts

Resembles a contract

As far as result or effect is concerned

Has little / no resemblance w.r.t. mode ofcreation

Special circumstances, obligationsresembling that created by contracts

Obligation imposed by law = Constructivecontracts

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreKinds of Quasi Contracts

1. Claim for necessities

2. Right to recover money paid for anotherperson, payment of which he is interested

3. Obligation of person enjoying benefit ofnon-gratuitous act

4. Responsibility of finders of goods

5. Liability of person to whom money is paid

or things delivered by mistake / coercionNo person is allowed to enrich himself at

the expense of another

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreLegalities of Object

Agreement with unlawful object is void

1. Forbidden by law

2. If agreement is permitted it would defeat the

purpose of law

3. Object is fraudulent

4. Involves injury to another person

5. Considered immoral by court6. Court considers as opposed to public policy

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreConsidered Immoral by Court

1. Sexual immorality

2. Interference with marital relations

3. Acts against public morality

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreCourt considers as opposed to

public policy1. Ag for stifling criminal prosecution

2. Ag interfering with course of justice

3. Ag with an alien enemy

4. Maintenance & Champerty5. Traffic in Public Offices

6. Ag and unduly restraining personal liberty

7. Ag interfering parental duties

8. Marriage brokerage agreement9. Miscellaneous: Money paid to witness

AMITY GLOBAL


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AMITY GLOBALBUSINESS SCHOOL BangaloreMaintenance & Champerty

1. Maintenance: An Ag by which a stranger

promises to help another person by

money or otherwise in litigation in which

the third person himself has no interest

2. Champerty: An Ag in which the person

agrees to assist another in litigation in

exchange of a promise to hand over aportion of the proceeds of action

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fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration