THE INDIANTHE INDIAN

CONTRACT ACTCONTRACT ACT

18721872

BY:BY:

PROF NEHA SAJNANIPROF NEHA SAJNANI

Law is the rule of conduct imposed by the State Law is the rule of conduct imposed by the State on its citizens which can be enforced eitheron its citizens which can be enforced either

By the State against individuals or, By individuals against individuals.

Law of contracts is the law of merchants and Law of contracts is the law of merchants and law for merchants. It consists of set of basic law for merchants. It consists of set of basic principles of business transaction between principles of business transaction between

parties in a civilized society.parties in a civilized society. ..

When there is a dispute in relation to a When there is a dispute in relation to a business transaction, a commercial suit is business transaction, a commercial suit is

filed. This is solved and decided by filed. This is solved and decided by referring to principles provided in a referring to principles provided in a

codifiedcodified form in the law of contract. form in the law of contract. ..

CONTRACTCONTRACT

DEFINITION &DEFINITION &FORMATIONFORMATION

• S.2 (h) states “A contract is an S.2 (h) states “A contract is an

agreement enforceable by law.” agreement enforceable by law.” A contract is formed if:A contract is formed if:

– There is an agreement and,There is an agreement and,– The agreement is enforceable by The agreement is enforceable by

law.law.

• Contract = Agreement + EnforceabilityContract = Agreement + Enforceability..

“S.2(e) – An agreement is every promise & every set of promises forming the consideration for each other.

AGREEMENT = PROMISE + CONSIDERATION

“S.2(b) – Proposal when accepted becomes a promise

PROMISE = OFFER + ACCEPTANCE

RULES OF OFFER:-

• Must be capable of creating legal relations• Must be certain, definite & not vague• May be express or implied• May be specific or general • Must be communicated• Must be with a view to obtaining the consent of

the offeree• May be conditional• Should not contain a term, the non-compliance

of which would amount to acceptance

RULES OF ACCEPTANCE:-

• Must be absolute & unqualified• Must be communicated to offeror• Must be in the mode prescribed• Must be given before the offer lapses or within

a reasonable time• Mere silence is not acceptance• Acceptance by conduct

Enforceability – S.10Enforceability – S.10

““All agreements are contracts if All agreements are contracts if they are made by free consent they are made by free consent of parties competent to of parties competent to contract for a lawful contract for a lawful consideration and with a lawful consideration and with a lawful object and are not hereby object and are not hereby expressly declared to be void.expressly declared to be void.””

CONDITIONS:

1) There should be lawful offer and lawful acceptance.

2) There must be lawful consideration.

3) The parties should be competent to contract.

4) There must be free consent of the parties to the contract.

5) Their object should be lawful.

6) Agreement should not be expressly declared to be void by any other law in force.

7) To create a legal relationship.

DEFINITION – S.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 or promises to do or to abstain from doing, such an act or abstinence or promise is called consideration for the promise .”

RULES OF CONSIDERATION:1) Move at the desire of the promisor.

2) Move from promisee or any other person.

3) Executed & executory

4) Abstinence is valid consideration.

5) Adequacy of consideration.

6) May be past, present or future

7) Performance of what one is legally bound to perform

8) Must not be unlawful, immoral or opposed to public policy

EXCEPTIONS TO THE RULE OF CONSIDERATION:

1) Natural love & affection.

2) Compensation for past voluntary services.

3) Time-barred Debt

4) Agency

5) Promise to charities

SUIT BY THIRD PARTY ON

AN AGREEMENT:

1) Trust

2) Family Settlement

3) Certain Marriage Contracts

4) Assignment

5) Estoppel by Acknowledgment

6) Covenant by Running with Land

POSITION OF MINOR’S AGREEMENT:-

An agreement entered into by a minor is altogether void

Minor can be a beneficiary

Minor can always plead minority

Ratification on attaining majority is not allowed

Contract by guardian – how far enforceable

Liability for necessaries

S.13 – Consensus ad idem

S.14 – Consent is said to be free when it is not caused by:

• S.15 Coercion• S.16 Undue Influence• S.17 Fraud• S.18 Misrepresentation• S.20 Mistake

Void agreements are those entered into:

• Due to mistake of fact• By minor • Without lawful consideration• In restraint of trade• In restraint of judicial proceedings• Based on uncertainty• By way of wager• Impossibility of performance

DEFINITION - DEFINITION -

Discharge of contract means termination of the Discharge of contract means termination of the contractual relationship between the parties. contractual relationship between the parties. The rights and obligations created by the The rights and obligations created by the contract come to an end, the parties to the contract come to an end, the parties to the contract are said to be discharged.contract are said to be discharged.

A contract is said to be discharged –A contract is said to be discharged –

By performance.By performance. By impossibility of performance.By impossibility of performance. By agreement or mutual consent.By agreement or mutual consent. By lapse of time.By lapse of time. By operation of Law.By operation of Law. By breach of contract.By breach of contract.

Breach of contract means Breach of contract means breaking of the obligation which breaking of the obligation which the contract imposes. These are of the contract imposes. These are of two types:-two types:-

Actual Breach of ContractActual Breach of Contract Anticipatory Breach of ContractAnticipatory Breach of Contract

EXPLANATION - EXPLANATION -

When one of the parties fails to perform When one of the parties fails to perform his part of the contract, we say that he his part of the contract, we say that he commits a breach.commits a breach.

When a contract is broken i.e. breached by When a contract is broken i.e. breached by one party, the other party i.e. the one party, the other party i.e. the aggrieved (injured) party has one or more aggrieved (injured) party has one or more of the following remedies:-of the following remedies:-

Rescission of the contract.Rescission of the contract. Suit for damages.Suit for damages. Suit upon ‘Quantum Meruit’Suit upon ‘Quantum Meruit’ Suit for specific performance.Suit for specific performance. Injunction.Injunction.

THE END !!!