The Contract Act 1872 (2)

8/8/2019 The Contract Act 1872 (2)

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Submitted to:

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INTRODUCTION.

Indian contract act came into force on

1st September 1872.

The contract act was enacted with a view

to have uniform law on contract and to

have a law which will cover, all general

provisions in respect of contract.

The act though covers all the generalprovisions of contract, there are separate

independent act to govern different kinds

of special contracts.

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PREAMBLE OF THE ACT.

Preamble of the act states that the law

which was enforced prior to thecommencement of this act can be

applied even today, provided it is not

expressly repeated by the contract act

and it is not inconsistent with theprovision of this act.

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DEFINITIONS.

Proposal When one person signifies toanother his willingness to do or to abstainfrom doing anything, with a view to

obtaining the assent of that other person,to such act or abstain, he is said to havemade a proposal.

Promise - When the person to whom the

proposal is made signifies his assentthereto, the proposal is said to beaccepted. A proposal, when accepted,becomes a promise.

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Continued

The person making the proposal is called

the "promisor and the person accepting

the proposal is called the It promise.

Agreement - Every promise and every setof promises, forming the consideration for

each other, is an agreement.

Contract -An agreement enforceable by

law is a contract.

An agreement not enforceable by law is

said to be void.

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PROPOSALS

Proposal

When one person signifies to anotherhis willingness to do or to abstain from

doing anything, with a view to obtaining

the assent of that other to such act or

abstinence, he is said to make aproposal.

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ESSENTIALS OF A

VALID PROPOSAL1. Communication of intention orwillingness

to anotherperson is must.

2. The words used in proposal must apply to

a definite numberof persons.

3. A person making an offershould not

reserve any right with himself forany

fur

ther

act to alter

pr

oposal after

it isaccepted by the person to whom it is made.

4. An offermust not be vague orambiguous

but it must be certain.

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COMMUNICATION OF

PROPOSALS .

The communication of a proposal is

complete when it comes to the

knowledge of the person to whom it ismade.

Eg -A proposes, by letter, to sell a

house to B at a certain price.T

hecommunication of the proposal is

complete when B receives the letter.

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ACCEPTANCE

When one person to whom the proposal is

made signifies his assent thereto, the

proposal is said to be accepted the

proposal. Proposal when accepted becomes

promise.

T

he person making the proposal is calledthe Promisorand person accepting the

proposal becomesAcceptor.

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ESSENTIALS OF

ACCEPTANCE

1. Acceptance must be absolute and

unqualified.

2. It must be expressed in some usual &

reasonable manner.

3. Mental Acceptance is not sufficient in Law.

4. Acceptance must be communicated to the

proposer.

5. Acceptance must be by a certain person to

whom the proposal is made.

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6. Acceptance must be given within a

reasonable time.

7. Acceptance must be given before the

offer lapses or is revoked or is

withdrawn.

8.Acceptance of proposal is acceptance of

all terms.

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COMMUNICATION OF AN

ACCEPTANCEThe communication of an acceptance is

complete, -

as against the proposer, when it is put in a

course of transmission to him, so as to be outof the power of the acceptor; as against theacceptor, when it comes to the, knowledge,of the proposer.

Eg : B accepts A's proposal by a letter sent bypost. The communication of the acceptanceis complete, as against A when the letter isposted as against B, when the letter isreceived by A.

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AGREEMENT

Every promise & every set ofpromises forming consideration foreach other is called an agreement.

Thus offer and acceptance togetherconstitute an agreement.

An agreement is a wider concept ofoffer and acceptance.

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VALID, VOID & VOIDABLE

AGREEMENT. Valid:Avalid agreement is the one which is

enforceable by law.[fully operative]

Void:

Avoid agreement is one which has no legal

existence at all. It is an agreement which does

not create any enforceable right. Voidable :

Avoidable agreement is one which is a

valid agreement as long as it is not avoided.

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ESSENTIAL ELEMENTS OF A

VALID CONTRACT.

1. Proposal & Acceptance.

2. Intention to create legal relationship.3. Free consent .

4. Capacity to contract .

5. Agreement should not be expresslydeclared void.

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Continued

6. Lawful consideration .

7. Lawful object .8. Certainty of meaning .

9. Possibility ofPerformance.

10. Legal formalities.

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CAPACITY OFPARTIES TOCONTRACT :

An agreement becomes a contract if it isentered between the parties who arecompetent to Contract.

Every person is Competent to contract

1. Who is of the age of majority according tothe law.

2. Who is of sound mind.

3. Who is not disqualified by any law.

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Minors Agreement

According to Indian majority act,1875 a minor

is the one who is below the age of 18 years.

According to Indian Contract Act a minor is not

a competent person to enter into contract.

The Indian Contract Act prohibits a valid

person from entering into a valid agreement

with the minor.

An agreement with a minor is void ab-

initio.[means right from the inception.]

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EXCEPTION TO THE RULE THAT

MINORS AGREEMENT IS VOID

Agreement with a minor is only a promisee or

transferee or beneficiary.

Agency agreement : A minor can act as an agent but

cannot be held personally liable to principal or to thirdperson.

Partnership agreement : A minor cannot become a full

fledged partner but can be admitted to the benefits of

existing partnership firm

Minors contract of necessaries : A supplier to a minor

when he is under no obligation to supply, that person

can recover the amount spent for providing the

necessaries to the minor from the property of the minor.

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CONSIDERATION

Definition :

When, at desire of the promiser the

promisee or any other person, (i)has

done or abstained from doing (ii)does or

abstain from doing or (iii)promise to do

or abstain from doing something, such

act or abstinence or promise is calledconsideration of promise.

A promise or an agreement without

consideration is null & void.25


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ESSENTIALS FOR A VALID

CONSIDERATION Consideration must move only at the desire ofthe promiser.

Consideration may move from the promisee or

form any other person. It may be a positive or a negative act or a

promise given to the effect.

Consideration must not be unlawful and illegal.

EX NUDO PACTO NON ORITUR ACTIO:It means from mere promise no right of action

arises. In order to be enforceable must have

consideration.

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PUBLIC POLICY AND AGREEMENT

AGAINSTPUBLIC POLICY

Public policy cannot be precisely defined because

public policy cannot be considered to be always

the same, it is a vague term.

An agreement which harmful to public interest orthe welfare of the public it is void.

Following agreement treated as against public

policy and therefore void, not enforceable bylaw :

1. All agreement with alien country & alien enemy.

2. Marriage brokerage agreement

3. Agreement to bribe a magistrate or a public officer.

4. Agreement for stifling prosecution. 27


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Free Consent :

"Free consent" - Consent is said to be freewhen it is not caused by

1) coercion,

2) undue influence3) fraud,

4) misrepresentation,

5) mistake.

Consent is said to be so caused when itwould not have been given but for theexistence of such coercion, undue influence,fraud, misrepresentation or mistake.

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Coercion :

Coercion is the committing, or threatening tocommit, any act forbidden by the IndianPenal Code, or the unlawful detaining, or

threatening to detain, any property, to theprejudice of any person whatever, with theintention of causing any person to enter intoan agreement.

Eg -A, on board an English ship on the highseas, causes B to enter into an agreementby an act amounting to criminalintimidation under the Indian Penal Code.

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Continued

2) The active concealment of a fact by one

having knowledge or belief of the fact.

3) A promise made without any intention ofperforming.

4) Any other act fitted to deceive;

5) Any such act or omission as the law

specially declares to be fraudulent.

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Continued

3) causing, however innocently, a party to

an agreement to make a mistake as to

the substance of the thing which is the

subject of the agreement.

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Mistake

Mistake could be of fact or of law.

When both parties are under mistake as

to the essential facts of the agreement,

the agreement is void.

Mistake of facts can be of two types :

1. Bilateral or mutual mistakes.

2. Unilateral mistakes.

Mistake of law not in force in India will

have the same effect as mistake affect.

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AGREEMENT IN RESTRAINT OF LAWFUL

TRADE BUSINESS ORPROFESSION

Every person is entitled to carry on any

lawful trade business.

Any agreement which interferes with

right to carry on lawful trade business is

called agreement in restraint of lawful

trade business or profession.

As a general rule our agreement isrestraint of lawful trade etc. Is void and

treated as against public policy.

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WAGERING AGREEMENTS:

It is agreement by mutual promises, each of

them conditional on the happening or not

happening of an unknown event.

Features of wagering agreement :1. A promise must be conditional.

2. Parties to the agreement should have no control

upon happening or non happening of future

event.

3. There must be mutual chance of gain and loss.

4. Promise must be to pay or pay moneys worth.

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THANK YOU !!!

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Documents

The Contract Act 1872 (2)