Contract Act(3)

8/4/2019 Contract Act(3)

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Business Law

Introduction


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Meaning Business Law

Business law may be defined as that branch of

law which comprises laws concerning trade, industry and

commerce. It is an ever growing branch of law with the

changing circumstances of trade and commerce. Business

law is the general field of law relating to business

organizations, business structures, and business

transactions. In the business law field issues related to realestate, tax, and the environment are also included.


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Scope of Business Law

Business law, also known as commercial law, is a general

term that contains a large number of topics within it. Broadly, it is

the body of laws that regulate commercial and business actions,

but there are more specific areas of influence. Business law can beconsidered to contain the following areas:

Corporate contracts

Hiring regulations

Manufacture and sale of consumer goods

Protecting customers and business

It also deals with such fields as guarantees, various types of

insurance (including fire, life, accident, and business), and the like.


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Contract Act (1872)The act provides a framework of rules and regulations

which govern formation and performance of a contract.The rights and duties of parties and the terms of an

agreement are decided by all the parties.Contract

A contract is an agreement, enforceable by law, madebetween two or more parties. Eg. When we go torestaurant and take snacks then you have to pay theamount to enter into a contract.

(contract= agreement+ enforceability by law)


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Essential Ingredients of a Contract

Agreement: Every promise and every set of promises,forming the consideration for each other, is anagreement. [section 2(e)]. - - A person makes a

proposal (offer). When it is accepted by other, itbecomes a promise.

(agreement= offer/proposal+ acceptance)

It should be noted that the term agreement as definedin Contract Act requires mutual consideration. Thus, ifA invites B to dinner and B agrees to come, it is not anagreement as defined in Contract Act.


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Types of Agreement

A.) Uncertain Agreement: Agreements, which are not certain.

Eg. A agree to sell to B his maruti car for Rs. 1.35 lakh to 1.50lakh.

B.) Wagering Agreement: It is a promise to give money ormoneys worth upon the determination of an uncertain event.Exp. A & B bet as to whether it would rain on a particular dayor not. A promise to pay rs. 100 to b if it rained& B promisingan equal amount to A if it did not. This agreement is wager.


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Meaning of Proposal- It is a plan/an offer made bya person to another.

Promise: A proposal, when accepted, becomes apromise.

Promisor and Promisee - The person making theproposal is called the promisor, and the personaccepting the proposal is called the promisee.


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Steps involved in Contract

1. Proposal and its communication

2. Acceptance of proposal and its communication

3. Agreement by mutual promises

4. Performance of Contract


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Types of Contract

Valid Contract

A contract which have all the essential elements discussed below:

Offer and its acceptance

Free consent of both parties

Mutual and lawful consideration for agreement

It should be enforceable by law. Hence, intention should beto create legal relationship.

Parties should be competent to contract Object should be lawful

Certainty and possibility of performance

Contract should not have been declared as void under

Contract Act or any other law Writin & Re istered


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A void contract, also known as a void agreement,

is not actually a contract. A void contract cannot be

enforced by law.An agreement to carry out an illegal act is

an example of a void contract or void agreement. For

example, a contract between drug dealers and buyers is a

void contract simply because the terms of the contract are

illegal. In such a case, neither party can go to court to

enforce the contract.

Void Contract
http://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Enforcedhttp://en.wikipedia.org/wiki/Enforcedhttp://en.wikipedia.org/wiki/Contract


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Voidable Contract

A void able contract is that which may be refuse to

accept at the will of one or more of the parties. Until it

is go to refuse, it remains valid & binding.At most,

one party to the contract is bound. The unbound party

may refuse to fulfill the contract.
http://en.wikipedia.org/wiki/Boundhttp://en.wikipedia.org/wiki/Bound


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Circumstances or features that make a contract

voidable

(1) Non-disclosure of one or more material facts

(2) Misrepresentation

(3) Mutual mistake

(4) lack of free will of a contracting party.


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Unforceable Contractis a contract which is valid in itself, but is

not capable of being enforced in a court of

law because of some technical defect such as

absence in writing, registration, requisite

stamp.

Illegal Contract


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A contingent contract is a contract to do or not to do

something, if some event, collateral to such contract, does or does

not happen. Illustration - A contracts to pay B Rs. 10,000 if B sell

his house. This is a contingent contract.

RULES REGARDING CONTIGENT CONTRACT

1. contracts contingent upon the happening of an uncertain event.

2. contracts contingent upon the non happening of a certain event.

3. Contracts contingent upon the happening of an uncertainspecified event with in a fixed period.

4. contracts contingent upon the non happening of an uncertain

specified event with in a fixed time.

CONTINGENT CONTRACT


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QUASI CONTRACT: Some times , obligations are imposed on aparty by law (regardless of any agreement) & an action is allowedto be brought by another party. Such obligations are known as quasi

contract eg. A, a tradesman, leaves goods at Bs warehouse bymistake. B treats the goods as his own. B isbound to pay A forthem.Kinds of Quasi Contract

Right to recover the price of necessaries supplied.

Right to recover money paid for another person.

Right to recover for non-gratuitous act.

Responsibility of finder of goods.

Right to recover from a person to whom money is paid or thing is

delivered, by mistake or under coercion.WHAT AGREEMENTS ARE CONTRACTS - All agreements arecontracts if they are made by the free consent of parties competentto contract, for a lawful consideration and with a lawful object, andare not.


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BREACH OF CONTRACT: a breach of contract occurs if party

fails to perform his part of the contract. Compensation is payable forbreach of contract. Penalty is also payable if provided in contract.

Ways of Breach of Contract

Anticipatory breach of contractActual breach of contract

Remedies of Breach of Contract

. Rescission of contract

. Suit for damage

. Suit for specific performance

. Suit for injunction

. Suit for quantum meruit


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Types of Damages

1. ORDINARY DAMAGES: (difference between

market price & contract price)

2. SPECIAL DAMAGES: (Loss of profit)

3. Punitive damage

4. Nominal damage

5. Liquidated damage and penalty


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CONTRACT OF GUARANTEE

A contract of guarantee is a contract toperform the promise, or discharge the liability, of athird person in case of his default. The person who

gives the guarantee is called the surety; the personin respect of whose default the guarantee is given iscalled the principal debtor, and the person towhom the guarantee is given is called the creditor.


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Kinds of Guarantee

Oral/writing

Specific/continuing

Whole debt/part of debt


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Rights and obligation of the creditors

Rights: Demand the payment from surety in case of default.

Claim from suretys insolvency.

Obligations:

Not to change any term of the original contract.

Not to release or discharge the principal debtor.

Not to compound, or give time to, or agree not to sue

the principal debtor.

Not to do any act inconsistent with the rights of the

surety.


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Rights of surety

Rights against creditors.

Rights against the principal debtor.

Rights against co-sureties.


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Liability of Surety

Discharge of surety

By notice of revocation

By death of surety

By variance in terms of contract

By release or discharge of principal debtor

By compounding with, or giving time to, or agreeing notto sue, principal debtor

By creditors act or omission impairing suretys eventualremedy

Loss of security


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Bailment is another type of special contract. Bailment

means act of delivering goods for a specified purpose on

trust. The goods are to be returned after the purpose is

over. In bailment, possession of goods is transferred, but

ownership is not transferred. The person delivering the

goods is called the bailor. The person to whom they

are delivered is called the bailee.

BAILMENT


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BAILMENT OF PLEDGES

Pledge is special kind of bailment, where delivery of

goods is for purpose of security for payment of a debt or

performance of a promise. Common example is keepinggold with bank/money lender to obtain loan. The bailor is

in this case called the pawnor or pledgor. The bailee is

Called the pawnee/ pledgee.

Documents

Contract Act(3)