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7/31/2019 Module 1 Part II Business Law
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Law of Contract
Prof. Gigimon V.S.
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Acceptance
When the person to whom theproposal is made signifies his assent it
is an acceptance of the proposal.
Expressed Acceptance made inwords spoken or written
Implied Acceptance by conduct
Can be made only by the person towhom its been made
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Rules Regarding
Valid AcceptanceAcceptance must be given by the person
to whom the offer is madeAcceptance must be absolute and
unqualifiedAcceptance must be in some usual and
reasonable manner, unless specified Communicated by the acceptorAcceptance must be given with a
reasonable time, before its lapseAcceptance must succeed the offer Rejected offer can be accepted only if
renewed
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Communication of Offer,
Acceptance and Revocation When the parties are physically
present and negotiate in person,
agreement comes into existence
Sections 4 and 5 of the Contract Actdeals with rules regarding acceptance
of offer through post and other
communication modes
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Rules of Communication
Communication of Offer complete when
its reaches the offeree
Communication of acceptance
As against the proposer, when it is put in
course of transmission to him, so as to be out
of the power of the acceptor to withdraw the
sameAs against the acceptor when it comes to the
knowledge of the proposer
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Rules of Communication
A proposes by letter to the sell the house to Bfor 10 lakh. B accepts As proposal sent byPost. The communication of the acceptance
is complete a against A, when the letter isposted, as against B when the letter isreceived by A.
Communication of Revocation
As against the person who makes it, when it is putinto a course of transmission
As against the person to whom it is made, when itcomes to his knowledge
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CONSIDERATION
Consideration is the price for which the promise ofother is brought and the promise thus given for valueis enforceable A agrees to sell his house to B for Rs.1 lakh. Here Bs
promise to pay the sum of Rs.1 Lakh is the consideration
for As promise to sell the house, and As promise to sell thehouse is the consideration for Bs promise to pay the sumof Rs.1 Lakh
Sec 2 (d) Indian Contract Act 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 do or abstain from doing
Such act or abstinence or promise is called a considerationfor the promise
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Essentials of a
Valid Consideration Consideration should move at the desire of the Promisor
A sees B drowning and saves his life. A cannot demand paymentfor his services as it is a voluntary act on his part and B neverasked his to do so
Consideration must move from the promisee or any other
person X, Y and Z enter into an agreement under which X pays Rs.1
Crore to Y and Y agreed to build a House for Z. Here Z is a partyto the contract but stranger to consideration and can enforce thecontract.
Consideration may be Past, Present or FuturePast Consideration - consideration for the promise is given before
Present Consideration - Consideration and Promise isSimultaneous
Future Consideration - Future or Executory Consideration
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Essentials of a
Valid Consideration Consideration need not be adequate
Consideration must be real
Consideration must be Lawful
Consideration must be something
which the promisor is not already
bound to do
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Exception to the Rule
No Consideration No Contract Agreement made on account of natural love and
affection A, for natural love and affection, promises to give his
son B Rs.1000. A puts his promise to B into writingand registers it. This is Contract
Agreement to compensate for past voluntaryservice A rescued B from drowning in the river, and B,
appreciating the service that had been rendered,promised to pay Rs.1000 to A. There is a contractbetween A and B.
Agreement to pay a time-barred debt.
Completed gift
Contract of Agency
Remission by promise, of performance of the
promise
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Capacity of Parties
Competent Persons to contract. (Sec. 10)
Every person is competent to contract who
is of the age of majority according t the
law to which he is subject, and who is of
sound mind, and is not disqualified form
contracting by any law to which he is
subject.
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Capacity of Parties Minor Sec 3. of Indian Majority Act 1875 A person
under 18 years of age. Absolutely - Void contracts because their mental faculties
are not mature
Beneficial agreements valid
No ratification at the age of majority
The rule of estoppel does not apply for minor Specific Performance
Minor Partner
Minor agent
Minor and insolvency
Contract by minor and adult jointly Surety for a minor
Position od minors parents
Minor shareholders
Minors liability in tort
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Capacity of Parties
Person of Unsound mind
Sec.12 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 judgement as to its effect upon
its interests.
Absolutely void and inoperative againsthim.
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Capacity of Parties
Disqualified personsAlien Enemies
Foreign Sovereign and Ambassadors
Convict
Insolvent
Married Women with regard to
husbands property
Joint Stock Company and corporation
incorporated under a specific Act
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Free Consent
Sec 13 Two or more persons are saidto consent when they agree upon thesame thing in the same sense.
Absence of Consent void or voidable
Consent to be free and caused by Coercion threatening to commit voidable
contract
Undue influence (a) one party in a positionto dominate the will of the other (b) Uses theposition to obtain an unfair advantage overthe other voidable contract
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Free Consent
Misrepresentation wronglyrepresenting of fact by one party to theother either before or at the time of thecontract with the intention to induce the
other to enter into the contract voidablecontract Fraud intentionally deceive the other
person voidable contract or restitution
Mistake erroneous belief concerningsomething Mistake of law not an excuse
Mistake of fact bilateral mistake & unilateralmistake
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Legality of Object &
Consideration Object and Consideration of agreement
must be lawful Sec. 23 kinds of consideration and
objects are lawful
Forbidden by Law Defeat the provisions of Law Fraudulent Implies or involves injury to the person or
property Immoral Opposed to Public Policy
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Void Agreement Sec. 2. (g) An agreement not enforceable by
law is void. Minor
Unsound person
Unlawful Consideration
Unlawful object
With consideration
Impossible events or Acts
Restraint of marriage
Restraint of Trade
Restraint of Legal Proceedings Uncertain Meaning
Wager Agreement
Impossible Events
Impossible Acts
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Performance of Contract
A person cannot acquire rights undera contract to which he is not a party
Promisee can demand the
performance of Contract ExceptionLegal heirs
Competent person to perform a
contract Promisor
Agent of Promisor
Legal Representatives
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Quasi Contracts
Obligations resembling those created by acontract are imposed by law even though theparties have not entered into contract
Claims for necessaries supplied to a personincapable of contracting or on his account.
Reimbursement of person paying money dueby another, in payment of which he isinterested
Obligation of person enjoying benefit of non-
gratuitous act. Responsibility of finder of goods
Liability of person to whom money is paid, orthing delivered by mistake
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Breach of Contract &
Remedies Available Breach of Contract is another mode of
discharge
When one party fails to perform thecontract
Anticipatory before the time fixed forperformance Expressly by words spoken or written
Impliedly by conduct of parties Effects either sue for damages or make the
party responsible for consequences of nonperformance of contract
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Breach of Contract &
Remedies Available Actual Breach When one party fails to perform thecontract on the actual date of the performance of the
contract
Injured party is entitled to Rescission of the Contract cancel the contract file suit
for damages
Suit for damages Ordinary
Special
Exemplary
Nominal
Suit upon Quantum Meruit as much as he earned or inproportion to work done
Suit for Specific Performance
Suit for injunction
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Indemnity and Guarantee
Contract of Indemnity A contract bywhich one party promises to save the
other from loss caused to him by the
conduct of the promisor himself or bythe conduct of any other person
A person who promises to make good
the loss is called the indemnifierA person whom the loss is to be made
good is indemnified
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Indemnity and Guarantee
Contract of Guarantee A contract toperform the promise, or discharge theliability of a third person in case of hisdefault
A person who gives the guarantee iscalled a surety
A person in respect of whose default the
guarantee is given is called the principaldebtor
Consideration is important
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Nature and Extent of
Suretys Liability The liability of the surety is co-extensive
with that of the principal debtor unless itis otherwise provided by the contract.
Extent of Liability
Surety is liable only on the default of theprincipal debtor
Liability of surety arises immediately on thedefault of the principal debtor
Principal debtor need not resort to securitiesbefore suing the surety
Surety will not be liable for creditor guaranteeby misrepresentation
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Continuing Guarantee
When a guarantee is given for a singleor specific debt single or specific
guarantee
When a guarantee extends to seriesof distinct or separable transactions
continuing guarantee
Revocation of Continuing Guarantee Notice to Creditor by surety
Death of the surety
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Discharge of Surety
Notice of Revocation Death
Variance of Terms of Contract
Release by principal debtorArrangement by creditor with principal
debtor
Creditors Act or omission impairing
suretys remedy Loss of security
Invalidation of contract of Guarantee
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Problems
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Problems
A invites B for a Dinner. B accepts theinvitation. A makes an elaborate
arrangement but fails to turn up.
B sues for the loss sustained
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Answer
No , A cannot sue B for the loss hehas suffered, because the agreement
of a social nature and hence lacks the
intention to create legal relationship. Essentials of a valid contract
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Problem
N agrees to pay Rs.100, and inconsideration M agrees to write 100
pages of report form him in five
minutes. Is it a valid contract
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Answer
No, it is not a valid contract.
It is a void agreement because an
agreement to do an act impossible in
itself is void.
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Problem
A aged 15 yrs obtains a loan form B.Can A be asked to repay the money.
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Answer
No, A cannot be asked to repay themoney.
A minors agreement is void abnitio
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THANK YOU