Description
This is presentation highlighting on indian contract act 1872.
INDIAN CONTRACT ACT 1872
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The Indian Contract Act is divided into 5 parts:
? Chapter I: ‘Of the Constitution, Acceptance and ? ? ? ?
revocation of Proposals’ Chapter II: ‘Of Contracts, Voidable contracts, and Void Agreements’ Chapter III: ‘Of the Performance of Contracts’ Chapter IV: ‘Of the Performance of Contracts’ Chapter V: ‘Of the Consequences of Breach of Contract’
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Voluntary action:
? A voluntary action is one that is produced
because of conscious choice of the organism
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Compulsory Action:
? A compulsory action is the one that is produced
due to the fear of law or under some pressure
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Example ? Piyush decides to go to office by car ? He drives on the left side of the road
? On the way, he gives a lift to his friend
? A traffic policeman asks for pollution certificate,
which he does not have. He is fined Rs 500
The first three actions are Voluntary while the last one is Compulsory
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Mohit booked a car with an agency The agency told that if it takes more than 2 weeks to deliver, Rs25000 more would have to be paid. ? The agency also said it would try to get the car in 2 weeks ? The car was delivered after 2 weeks, Mohit paid Rs 25000 more.
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Can Mohit refuse to pay Rs25000 ?
NO
A car agency promised to deliver a car in 5 days to Paul ? The company provided the car in 20 days ? Paul had to pay Rs45000 more
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Can Paul claim compensation from the company?
YES
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Agreement: It is said to happen when an offer is accepted Consideration: The material benefits that the two parties promise each other
Contract: A contract is a binding legal agreement that is enforceable in a court of law.
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Example:
Deepak gave a party to celebrate his birthday. Rahul, the caterer for the party, comes next day for payment. ? Deepak’s friend Mohit has fallen into bad times and Deepak decides to give him Rs25000 for his MBA. ? Next day, the share market falls drastically and Deepak loses a lot of money. ? Deepak is upset and refuses to give money to Mohit
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Questions:
? Was there any agreement between Deepak and
Rahul?
yes
yes NO
No Exchange of Benefits is taking place
? Was there any agreement between Deepak and
Mohit? Mohit?
? Should Deepak be required to pay Rs 5000 to
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Offer: An offer is an indication by one person (the "offeror") to another (the "offeree") of the offeror's willingness to enter into a contract on certain terms
Acceptance: It is one person’s compliance with the terms of an offer made by another
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Example: ? Paul wants to buy an AC. The Conversation? Paul: I want to buy a 1.5 ton AC ? Salesperson: It will be Rs25000, sir ? Paul: Ok, I will take it
? Questions: ?Who makes the offer? ?Who accepts the offer?
Salesperson
PAUL
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Expressed Offer:
? An express offer and acceptance is one in which
the terms are expressed verbally, either orally or in writing
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Implied Offer:
? An offer in which the offer and acceptance are
done through gestures, actions, commissions and omissions
Example:
Paul is going home for Diwali vacations He goes to a shop at the station and takes a packet of chips which he knows costs Rs 10 ? He takes out a Rs10 note and hands it to the shopkeeper ? The shopkeeper takes it and Paul leaves
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No word is spoken. the offer and acceptance take place.
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Another Example
? Paul goes to the Coffee Vending machine ? This is an Implied offer
? Paul puts Rs 5 in the vending machine.
? By doing this, Paul has accepted the offer.
Example: ? Paul offers to sell his laptop for Rs 25000 to Deepak
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Deepak says that he will pay only Rs 22000 Paul says that he will settle for Rs 21000
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Deepak nods his head
acceptance
COUNTER- OFFER OFFERCOUNTER- OFFER
Auction
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Who makes the Offer? Who accepts the Offer?
PARTICIPANTS AUCTIONEER
Tender
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Who makes the Offer? Who accepts the Offer?
PARTICIPANTS PERSON INVITING THE TENDER
“when one person signifies to another his 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 a proposal/offer”
For a valid offer, the party making it must express his willingness to do or not to do something. ? An offer should be made to obtain the assent of the other. ? The offer should be communicated to the offeree and it should not contain a term the non compliance of which would amount to acceptance. ? The offer must be distinguished from an invitation to offer.
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Provisional Acceptance
? An acceptance with qualifications, riders or
conditions is not an acceptance. An acceptance must be clear and definite.
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Direct Communication
? Acceptance should be communicated to the
person making the offer.
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Mode of Communication
? The contracting parties can specify the modality
of Communication. In the absence of this, acceptance should be communicated directly to the person making the offer. ? With mutual consent, the parties can waive the prescribed mode of communication ? Silence can imply only rejection, not acceptance
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Communicating Rejection
? Expressed Rejection ? Implied Rejection
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Time Constraint
? An offer can get extinguished by expiry of the
time ? A long silence implies rejection of an offer
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A proposal may be revoked at any time before the communication of its acceptance is complete as against the prosper, but not afterwards
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Methods of Revocation
? By issuing a notice ? By lapse of time of acceptance
? By failure of fulfilling a condition of acceptance
? By the death or insanity of the prosper
• Agreement : Every promise and every set of promises forming the consideration for each other
• Promise is an Accepted Proposal Accepted Proposal
Promise
Agreement
Contract
• Middha Corporation wrote (letter) to Piyush that it wanted to sell the house of which Piyush was a tenant, for Rs 30 lakhs • Piyush replied to the letter accepting the invitation • Corporation did not replied to that letter
DISPUTE
Piyush: Agreement has been reached Middha Corporation differed NO
Has the Agreement reached between 2 parties?
Agreement is reached when the offer is accepted from both sides Reference Case: Gibson vs Manchester City Council Case
Common practice for the seller or the Service provider to print conditions on the back of the ticket or receipt Example : ? Naveen along with his wife went to Juhu beach to relax ? He saw an offer at the nearby shop Relax at Juhu : Deck chair, 1 hour: 10 Rs ? Naveen took two chairs, collected two tickets, glanced at them ? When his wife sat down, canvas of the chair broke and she suffered injuries The ticket had the following printed on its back The shop will not be liable for any accident or damage arising from hire of chair
Is the Shop liable?
Yes and No
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Tickets and Receipts are the Acknowledgement of a contract already formed
So two situation arise:
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If the conditions at the back are brought to the notice of the person before the agreement is formed
Both parties agreed, the Shop is not liable
2. If the conditions at the back are not brought to the notice of the person before the agreement is formed
The Shop is liable to pay the damages Reference Case: Chapelton vs Barry Urban District Council
Mohit wants to send a birthday gift (Costing Rs 3000) to Prahlad via Courier service (DHL) ? The gift did not reach Prahlad ? Before sending the gift to Prahlad, DHL made Mohit sign on a form which had the following clause: Any loss or damage to the Courier is limited to lesser of Rs 100 or the amount of loss actually sustained ? Since it a signed agreement (whether Mohit ignored the terms and conditions), the Court could not interfere in the terms between the parties
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DHL was liable for only Rs 100
If person can establish that the signature was obtained through:
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Coercion Fraud Misrepresentation
…….One can drag the other person to court
Reference Case: LIC Insurance Corporation vs Raja V Prasad
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27th December: Mr Prasad’s proposal for insurance of Rs 50,000 27th December: Medical examination, a requirement for LIC done Prasad issues two cheques of Rs 300 and Rs 220 in favor of LIC as first premium LIC encashed one cheque on 29th December and other on 11th January Mr Prasad died on 12th January
NO
Can his wife claim the Insurance Police?
An acceptance to be complete, must be communicated to the offerer
AUCTION - Seller have all potential buyers at one
place, competing with one another through bids
Auction With Reserve – Auctioneer is free to turn down the highest bid
Auction Without Reserve – Auctioneer is not reserving any discretion. Highest bidder will make the contract An Example: • Shalabh decided to auction his bat, which had `cost him Rs 20,000 • The sale was announced to be without reserve • Naveen made the bid of Rs 10,000 • Shalabh bid 11,000 and that was the Highest Bid Who gets the Bat? Naveen
Tender
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Prevalent form of getting into Contractual Relationship Bidding Process: ? Open to all qualified bidders ? No physical presence required Some Important questions frequently asked After putting in a bid to a tender, can the bidder withdraw or change the bid? Is the forfeiture on the Earnest Money Deposit in the case of withdrawal of tender lawful?
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To demonstrate that the bidder is serious about wanting to complete the purchase Reference Case: Aditya Mass communication Pvt Ltd Vs A.P. State Road Transport Corporation
Revocation is a State of being cancelled or annulled
Example:
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Dilpreet Bank sought applications from employees for voluntary retirement Varun Goel along with many other employees applied for the scheme Varun Goel withdrew the application
Question: Can the offer be revoked before the written Acceptance or Rejection by the authority? Yes in this case Agreement to be binding on the parties, it must have some Consideration
Any Material Benefits
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Why Time and Place of Formation of Contract are important:
Deciding the jurisdiction of court Taxation and Legality
A.
Time and Place are stated in Contract: The parties must perform accordingly
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Time is not stated: The promisor has undertaken to perform without a request from the promisee, it must be carried out within a reasonable time
C. Promise is to be performed on a certain day, and the promisor has not undertaken to perform without a request from the promisee, the promisee must make a request for the performance at a proper place and within the usual hours of business
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When a promise is to be performed without a request from the promisee, and no place is fixed for its performance, the promisor must request the promisee to fix a reasonable place for the performance and perform the promise at specified place
Section 4 of Contract Act says: The communication of a proposal is
complete when it comes to the knowledge of the person to whom it is made.
Illustration:
XYZ ltd is a Delhi based company. It placed an order of X no. of garments to ABC Ltd., a Chandigarh based company. In this case, XYZ had made the offer and ABC had accepted the offer. Thus a contract. A dispute arose between the parties. Now the question was whether the dispute should be taken for arbitration, in Delhi or Chandigarh
A contract in normal circumstances is made at a place where the acceptance is accepted i.e. in our case Delhi
M/s Girdharilal Parshottamdas and Company- hereinafter called “The Plaintiffs” commenced an action in the City Civil Court at Ahmedabad against the Kedia Ginning Factory and Oil Mills of Khamgaon- hereinafter called “The defendants” for a decree for Rs. 31,150 on the plea that the defendants had failed to supply cotton seed cake which they had agreed to supply under an oral contract, dated July 22, 1959 negotiated between the parties by conversation on long distance telephone. The plaintiffs submitted that the cause of action for the suit arose at Ahmedabad, because the defendants had offered to sell cotton seed cake which offer was accepted by the plaintiffs at Ahmedabed, and also because the defendants were under the contract bound to supply the goods at Ahmedabad, and the defendants were to receive payment for the goods through a Bank at Ahmedabad. The defendants contended that the plaintiffs had by a message communicated by telephone offered to purchase cotton seed cake, and they (the defendants) had made the acceptance at Khamgaon, that under the contract delivery of the goods contracted for was to be made at Khamgaon, price was also to be paid at Khamgaon and that no part of the cause of action for the suit had arisen within the territorial jurisdiction of the City Civil court, Ahmedabad
Unilateral Contract (promise) A unilateral contract is an agreement where one party promises to do something in return for an act e.g. If you will mow my lawn, I’ll pay you $10
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Bilateral Contract: A bilateral contract is an agreement where one party promises to do something in return for a promise (Results in two promises) e.g. “If you will mow my lawn, I’ll pay you $10. Ok, I’ll mow your lawn
A company offered by advertisement to pay $100 to anyone "who contracts the increasing epidemic influenza,colds or any disease caused by taking cold, after having used the ball according to printed directions". it was added that" $ 100 is deposited with the Alliance Bank showing our sincerety in the matter". The plaintiff used the smoke balls according to the directions but she nevertheless subsquently suffered from influenza
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Was the advertisement an offer? General Offer To whom the offer had been made?
Offer is made to the world at large
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Could the offer have been accepted so as to convert into an agreement?
Contract is made to that limited portion of the public who come forward and perform the condition on the faith of the advertisement
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Acceptance of an offer needs to be communicated to the person, making the offer. Is the acceptance being notified? Unilateral Contract
A valid bilateral contract between X and Y obligates X to: ? perform as and when promised; and ? refrain from repudiating prior to the time his performance is due
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Def: When, at the desire of the promisor, the promisee or any other person…
? Has done, or abstained from doing ? Does or abstains from doing ? Promises to do or to abstain from doing
Something – such an act, abstinence or promise to do something is called CONSDIERATION for the Promise. ? In simpler words, When a person makes a promise to another, intention is to derive some advantage. ? Famous Example: Atul signs a contract with a girl. He promises to pay the girl Rs. 50,000 for having dinner @ 5 star restaurant.
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Eg: Ankit agrees to sell a house to Varun for Rs. 10L. Varuns consideration – Rs. 10L. Ankits consideration – Sell the house. Consideration can be Past, Present and Future.
? Girls consideration = To have dinner with Atul in the five star restaurant ? Atul’s consideration = To pay the Gal Rs. 50,000.
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NO CONSIDERATION – NO CONTRACT
? Famous Eg again: Atul signs a contract with a gal
to pay Rs. 50,000 and the gal has to do nothing
? Atuls consideration – Rs. 50,000 ? Gals consideration – NOTHING
? So is this agreement between Atul and the gal a
Valid Contract??? NO ? WHY??? NO CONSIDERATION BY GAL
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Wilkie was given a Free Pass to travel by Bus. Wilkie gets injured due to negligence of conductor. London Passenger board refuses to pay compensation. Wilkie was travelling in the bus, so there was a contract between Wilkie and London Passenger Transport Board. Contract of Conveyance. Since there was NO consideration from Wilkie’s side (since he was travelling for free). Contract for conveyance NOT VALID Judgment says: Pass was only a License from the Board to Wilkie to use the Bus Service.
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One must use the smoke ball 3 times daily as per instructions. As per company – Not a Contract Considerations:
? Company: No Influenza
? User: Increased Sales
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Nipun offers to Buy Rahul’s flat for Rs. 40L Nipun agrees to keep the offer open for 5 days. He should not withdraw the offer. Rahul agrees not to advertise the flat for sale or solicit offers from any person. Nipun revokes the offer on the 3rd day. Dispute has arisen between Rahul and Nipun Lets Decide?? Considerations:
? Nipun: To keep the offer open for 5 days ? Rahul: Not to advertise or sell the flat
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So the agreement is enforceable.
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A Promise, however Gratuitous, would be enforceable if, on the faith of the promise, the promisee suffers a detriment or undertakes a liability Eg: Shalabh promises Richy that he will donate Rs. 10L for temple in Orissa. On the faith of Shalabh’s promise, Richy releases the tender, entrusts work to the contractors and construction begins. Now Shalabh backs out saying that he cannot give Rs. 10L. Richy takes Shalabh to Court. Will the Court convict Shalabh?? WHY?? Considerations: ? Shalabh: Rs. 10L ? Richy: Charity (nothing return to Shalabh)
YES
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Any act done or loss suffered by the promisee must have been done or suffered at the desire or request of the promisor. The act done at the desire of a Third Party or without the desire of the promisor cannot be a good consideration. It doesn’t matter who gets the benefit. But the desire or request of the promisor is essential. Eg: Atul holds a charity function after his marriage. He invites the entire Division D. Tarun, a professional DJ also attends the function. He goes and sings on the stage and the show becomes a huge success. Next day, tarun comes and asks Atul to pay him remuneration for his service as he earned a lot of money. Will Atul Pay?? NO Because the service provided by Tarun was at his own will and not at the desire of Atul.
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As per the Indian Contract Act, consideration can be furnished by the promisee or any other person. Eg: Mridul (father) gifts a certain property to Shuchi (her daughter), with a direction that Shuchi should pay an annuity to Rahul (Shuchi’s brother). Shuchi signs the contract and executes a writing in favor of the brother, agreeing to pay the annuity. After some time Shuchi refuses to pay the annuity to Rahul and Rahul sues her under the agreement. Shuchi’s Argument: There is no consideration from Rahul, so it is not a valid contract. Judgement: “Promisee or other person”. Rahul can show consideration and even though he is a stranger to the contract can sue Shuchi as it is a valid contract.
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There are three main exceptions to the definition of consideration; i.e. an agreement made without consideration is void, unless –
? It is in writing and registered, and is made out of
natural love and affection by the person standing in the near relationship; ? 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; ? It is a promise made in writing and signed by the promisor (or his duly authorised agent) to pay (wholly or in part), a debt barred by the law of limitation
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If the agreement is expressed in writing and is registered, and is made on account of natural love and affection between parties standing in a near relation to each other, the contract is valid.
Eg: A promises, for no consideration, to give B, Rs. 10L. This is a void agreement. ? A, for natural love and affection, promises to give his son, B, Rs. 10L. A puts his promise into writing and registers it. This is a VALID contract.
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For this exception to be Valid it is necessary to fulfill the following four conditions:
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It must be in Writing It must be registered It must be made on account of Natural Love and Affection It must be between parties standing in near Relationship to each other
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An agreement without consideration is valid when it is a promise to compensate a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do: Eg: A finds B’s purse and gives it to him. B promises to give A Rs. 1000. This is a Contract. Another Eg: A supports B’s infant son. B promises to pay A’s expenses in doing so. This is a valid contract. The act done must be for the Promisor Promisor must be in existence Promisor must be competent to contract
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An agreement without consideration is valid when it is a promise made in writing and signed by the person to be charged therewith to pay a debt of which the creditor might have enforced payment. Eg: A, being heavily indebted applies a loan of Rs. 5000 from B. B agrees to lend provided A passed a promissory note for Rs. 3000 which was originally due by A but has become time barred now. A finally passes a promissory note of Rs. 8000 to B after receiving the loan of Rs. 5000. B sues A to recover his money. A claims that since there was no consideration and that the promissory note was taken by undue influence. Will A succeed? Judgement:
? Time barred debt is a good enough consideration ? The plea of undue influence cannot be successfully pleaded on the above
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facts.
The promise to pay cannot be inferred from the mere acknowledgment of the debt. ? The document must contain an express promise to pay a debt.
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A contract is
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between the parties only and
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no stranger to the contract can sue even if the contract is avowedly made for his benefit.
Thus a stranger to the consideration cannot sustain the action on the promise made between two persons unless he has in some way intervened in the agreement
A promise is ? a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. The person manifesting the intention is the promisor The person to whom the manifestation is addressed is the promisee
I will create the gadget but you`ve to pay my sister Rs.10000/- after I do so Promisee
Sure,Thanks
Promisor
In the case the plaintiff was to be married to the daughter of
one G and in consideration of this intended marriage G and the plaintiff’s father entered into a written agreement by which it was agreed that each would pay the plaintiff a sum of the money. G failed to do so and the plaintiff sued his
executors. Thus, although the sole object of the contract was to
secure a benefit to the plaintiff, he was not allowed to sue as the contract was made with his father and not with him
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Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres at a discounted price on condition that they would not resell the tyres at less than the listed price and that any reseller who wanted to buy them from Dew had to agree not to sell at the lower price either Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not to sell at a lower price either. However, Selfridge sold the tyres below the price he promised to sell them for
Dunlop then sued Selfridge for an injunction from selling tyres and damages At trial the judge found in favour of Dunlop. In appeal the damages and injunction were reversed, saying that Selfridge was not a principal or an agent and thus was not bound The issue put to the court was whether Dunlop could get damages from Selfridge without a contractual relationship
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Viscount Haldane based his argument on three fundamental principles in law. First, the doctrine of privity requires that only a party to a contract can sue. Second, the doctrine of consideration requires a person with whom a contract not under seal is made is only able to enforce it if there is consideration from the promisee to the promisor. Third, the doctrine of agency requires that the principal not named in the contract can only be sued if the promisee was contracted as an agent.
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In application to the facts, Haldane could not find any consideration between Dunlop and Selfridge, nor could he find any indication of an agency relationship between Dew and Selfridge. Consequently, Dunlop's action must fail.
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There has been a divergence of opinion in India as to whether the Doctrine of Privity of Contract, which prevails in the English Courts, is applicable to the Indian Courts Section 2(d) of the Act says that ” 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, something , such act or abstinence or promise is called a consideration for the promise”
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The facts of the case in brief are that
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A sold a house to B under a registered sale deed under the terms that a certain sum will be paid to A and the remaining to C, A’s creditor
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B subsequently made part- payments to C informing that the amount was in respect of the sale and that he would pay the remaining amount,
B failed to make the payment and C sued B for the same It was held that the suit was maintainable as B promised to pay the amount to C and hence C was entitled to bring a suit against B for recovery of the amount
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A "trust" is an ? obligation annexed to the ownership of property, and ? arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, ? for the benefit of another, or of another and the owner
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The person who reposes or declares the confidence is called the "author of the trust“
The person who accepts the confidence is called the "trustee" The person for whose benefit the confidence is accepted is called the "beneficiary“ The subject-matter of the trust is called "trust-property" or "trustmoney" The "beneficial interest" or "interest" of the beneficiary is his right against the trustee as owner of the trust-property
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The instrument, if any, by which the trust is declared is called the "instrument of trust“
Transfer of Ownership for C`s benefit
Author of the trust
Trustee
Beneficiary
Ankit and Piyush get into a contract to carry out a theft and share the loot. After the successful operation, they get into dispute among themselves on how to share the loot. Piyush claims that it was agreed that he would get 80% of the loot while Ankit is insisting that they would share it equally. Piyush is claiming his rights under the contract What is wrong with the contract What remedy should the court provide Piyush
• The objective of the contract is to do an act which is illegal.
• Leaving aside the implementing contracts tainted with illegality, the state would not respect the personal interests of the parties in such contracts and penalize the parties for infringing the law • Thus, Contracts which are tainted with illegality are not enforceable
• Contract that is illegal from the moment it is made • Legal but declared null by the courts (violating a fundamental principle such as fairness) • Becomes void due to changes in law or in government policy •Lack of capacity to contract
Void means nothing, vacuum or zero ? Also known as void agreement as in reality it is not a contract ? Not enforced by law ? An Oxymoron
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“Every agreement of which the object or consideration is unlawful is void” The considerations or object of an agreement is lawful unless :
? it is forbidden by law ? is of such a nature that, if permitted, it would defeat the provisions of any law ? is fraudulent ? involves or implies injury to the person or property of another ? the court regards it as immoral, or opposed to public policy
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Deepak entered into a contract with Naveen to buy stolen cars
? Consideration of the sale transaction is illegal
Piyush and Prahlad got into a contract to forge documents to evade taxes
? The object of the contract, evading taxes is illegal
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A government employee has agreed to obtain employment for Ankit in a public service, for a consideration of five lakhs. After getting the employment, the person refused to pay.
? The consideration, the act of getting employment is illegal
It is an agreement enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract
a) When consent is obtained by coercion, undue influence, misrepresentation or fraud is voidable at the option of aggrieved party
b) When a
contract contains reciprocal promises and one party to contract prevents the other from performing his promise, the contract becomes voidable at the option of the party to prevented When time is essence of contract and party fails to perform in time, it is voidable at the option of other party. A person who himself delayed the contract cannot avoid the contract on account of (his own) delay
c)
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A contract between a minor and another party is generally viewed as voidable by the minor
Contracts become voidable when the consent of the innocent party is obtained through ? Coercion ? Fraud ? Misrepresentation ? Undue influence
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Coercion is:
- committing, or threatening to commit,
- any act forbidden by the Indian Penal Code,
- or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
“Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent with intent to deceive another party thereto of his agent, or to induce him to enter into the contract :
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the suggestion, as a fact, of that which is not true, by one who does not believe it to be true the active concealment of a fact by one having knowledge or belief of the fact
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a promise made without any intention of performing it
any other act fitted to deceive Any such act which law specifically declares to be fraudulent
Reference Case - Mithoolal Nayak vs. Life Insurance Corporation of India
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Mithoolal took a policy with LIC After getting treated for serious ailments by a doctor, he made false statement in policy stating that he has not been treated Judgement – Supreme court held Mithoolal a fraud
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Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. Difference between fraud and misrepresentation is that fraud is intentional while misrepresentation can be innocent
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For example: under certain circumstances, false statements or promises made
by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation
A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other
For example: A, a man enfeebled by disease or age, is induced by B’s influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. Here B employs undue influence
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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 Cannot be enforced by law unless and until the event has happened
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Example – A contracts to pay B Rs. 10,000 if B’s house is burnt.
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Enforcement of contracts contingent on an event happening
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Enforcement of contracts contingent on an event not happening
When event on which contract is contingent to be deemed impossible, is the future conduct of a living person Contracts become void which are contingent on happening of specified event within fixed time
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When contracts may be enforced which are contingent on specified event not happening within fixed time
Quasi-contracts are defined to be "the lawful and purely voluntary
acts of a man, from which there results any obligation whatever to
a third person, and sometime a reciprocal obligation between the
parties." It is not legitimately done, but the terms are accepted and
followed as if there is a legitimate contract.
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It is not a contract It is an obligation which law created in absence of any agreement
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Also known as “as if” contract or “implied in law” contract
Five types of Quasi-Contracts are:
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Supply of necessaries (section 68) Payment of lawful dues by interested person (section 69) Person enjoying benefit of a gratuitous act (section 70) Finder of goods (section 71) Goods or anything delivered by mistake or coercion (section 72).
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Latin phrase meaning “as much as he has deserved”
Also referred as “unjust enrichment”
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One party should not get enriched at the cost of other
Example: a person is in a contract to work for another person or company for 7 days. But the person works for 5 days only. Then the person is entitled to be paid for the services that he rendered for 5 days but not for the remaining two days
A breach of contract is failure to perform as stated in the contract There are five different types of damages:
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Compensatory damages, which are given to the party which was detrimented by the breach of contract Exemplary damages, which are used to make an example of the party at fault to discourage similar crimes Liquidated damages are really a pre-estimate of loss agreed upon in the contract, so that the court is saved the process of calculating compensatory damages and the parties have greater certainty Nominal damages, which consist of a small cash amount where the court concludes that the defendant is in breach but the plaintiff has suffered no quantifiable pecuniary loss Punitive damages, which are used to punish the party at fault. These are not usually given regarding contracts but possible in a fraudulent situation
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Freedom of contract is the freedom of individuals to bargain
among themselves the terms of their own contracts, without
government interference
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Levison and another v. Patent Steam Carpet Cleaning co. case
doc_199836710.pptx
This is presentation highlighting on indian contract act 1872.
INDIAN CONTRACT ACT 1872
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The Indian Contract Act is divided into 5 parts:
? Chapter I: ‘Of the Constitution, Acceptance and ? ? ? ?
revocation of Proposals’ Chapter II: ‘Of Contracts, Voidable contracts, and Void Agreements’ Chapter III: ‘Of the Performance of Contracts’ Chapter IV: ‘Of the Performance of Contracts’ Chapter V: ‘Of the Consequences of Breach of Contract’
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Voluntary action:
? A voluntary action is one that is produced
because of conscious choice of the organism
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Compulsory Action:
? A compulsory action is the one that is produced
due to the fear of law or under some pressure
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Example ? Piyush decides to go to office by car ? He drives on the left side of the road
? On the way, he gives a lift to his friend
? A traffic policeman asks for pollution certificate,
which he does not have. He is fined Rs 500
The first three actions are Voluntary while the last one is Compulsory
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Mohit booked a car with an agency The agency told that if it takes more than 2 weeks to deliver, Rs25000 more would have to be paid. ? The agency also said it would try to get the car in 2 weeks ? The car was delivered after 2 weeks, Mohit paid Rs 25000 more.
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Can Mohit refuse to pay Rs25000 ?
NO
A car agency promised to deliver a car in 5 days to Paul ? The company provided the car in 20 days ? Paul had to pay Rs45000 more
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Can Paul claim compensation from the company?
YES
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Agreement: It is said to happen when an offer is accepted Consideration: The material benefits that the two parties promise each other
Contract: A contract is a binding legal agreement that is enforceable in a court of law.
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Example:
Deepak gave a party to celebrate his birthday. Rahul, the caterer for the party, comes next day for payment. ? Deepak’s friend Mohit has fallen into bad times and Deepak decides to give him Rs25000 for his MBA. ? Next day, the share market falls drastically and Deepak loses a lot of money. ? Deepak is upset and refuses to give money to Mohit
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Questions:
? Was there any agreement between Deepak and
Rahul?
yes
yes NO
No Exchange of Benefits is taking place
? Was there any agreement between Deepak and
Mohit? Mohit?
? Should Deepak be required to pay Rs 5000 to
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Offer: An offer is an indication by one person (the "offeror") to another (the "offeree") of the offeror's willingness to enter into a contract on certain terms
Acceptance: It is one person’s compliance with the terms of an offer made by another
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Example: ? Paul wants to buy an AC. The Conversation? Paul: I want to buy a 1.5 ton AC ? Salesperson: It will be Rs25000, sir ? Paul: Ok, I will take it
? Questions: ?Who makes the offer? ?Who accepts the offer?
Salesperson
PAUL
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Expressed Offer:
? An express offer and acceptance is one in which
the terms are expressed verbally, either orally or in writing
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Implied Offer:
? An offer in which the offer and acceptance are
done through gestures, actions, commissions and omissions
Example:
Paul is going home for Diwali vacations He goes to a shop at the station and takes a packet of chips which he knows costs Rs 10 ? He takes out a Rs10 note and hands it to the shopkeeper ? The shopkeeper takes it and Paul leaves
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No word is spoken. the offer and acceptance take place.
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Another Example
? Paul goes to the Coffee Vending machine ? This is an Implied offer
? Paul puts Rs 5 in the vending machine.
? By doing this, Paul has accepted the offer.
Example: ? Paul offers to sell his laptop for Rs 25000 to Deepak
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Deepak says that he will pay only Rs 22000 Paul says that he will settle for Rs 21000
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Deepak nods his head
acceptance
COUNTER- OFFER OFFERCOUNTER- OFFER
Auction
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Who makes the Offer? Who accepts the Offer?
PARTICIPANTS AUCTIONEER
Tender
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Who makes the Offer? Who accepts the Offer?
PARTICIPANTS PERSON INVITING THE TENDER
“when one person signifies to another his 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 a proposal/offer”
For a valid offer, the party making it must express his willingness to do or not to do something. ? An offer should be made to obtain the assent of the other. ? The offer should be communicated to the offeree and it should not contain a term the non compliance of which would amount to acceptance. ? The offer must be distinguished from an invitation to offer.
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Provisional Acceptance
? An acceptance with qualifications, riders or
conditions is not an acceptance. An acceptance must be clear and definite.
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Direct Communication
? Acceptance should be communicated to the
person making the offer.
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Mode of Communication
? The contracting parties can specify the modality
of Communication. In the absence of this, acceptance should be communicated directly to the person making the offer. ? With mutual consent, the parties can waive the prescribed mode of communication ? Silence can imply only rejection, not acceptance
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Communicating Rejection
? Expressed Rejection ? Implied Rejection
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Time Constraint
? An offer can get extinguished by expiry of the
time ? A long silence implies rejection of an offer
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A proposal may be revoked at any time before the communication of its acceptance is complete as against the prosper, but not afterwards
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Methods of Revocation
? By issuing a notice ? By lapse of time of acceptance
? By failure of fulfilling a condition of acceptance
? By the death or insanity of the prosper
• Agreement : Every promise and every set of promises forming the consideration for each other
• Promise is an Accepted Proposal Accepted Proposal
Promise
Agreement
Contract
• Middha Corporation wrote (letter) to Piyush that it wanted to sell the house of which Piyush was a tenant, for Rs 30 lakhs • Piyush replied to the letter accepting the invitation • Corporation did not replied to that letter
DISPUTE
Piyush: Agreement has been reached Middha Corporation differed NO
Has the Agreement reached between 2 parties?
Agreement is reached when the offer is accepted from both sides Reference Case: Gibson vs Manchester City Council Case
Common practice for the seller or the Service provider to print conditions on the back of the ticket or receipt Example : ? Naveen along with his wife went to Juhu beach to relax ? He saw an offer at the nearby shop Relax at Juhu : Deck chair, 1 hour: 10 Rs ? Naveen took two chairs, collected two tickets, glanced at them ? When his wife sat down, canvas of the chair broke and she suffered injuries The ticket had the following printed on its back The shop will not be liable for any accident or damage arising from hire of chair
Is the Shop liable?
Yes and No
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Tickets and Receipts are the Acknowledgement of a contract already formed
So two situation arise:
1.
If the conditions at the back are brought to the notice of the person before the agreement is formed
Both parties agreed, the Shop is not liable
2. If the conditions at the back are not brought to the notice of the person before the agreement is formed
The Shop is liable to pay the damages Reference Case: Chapelton vs Barry Urban District Council
Mohit wants to send a birthday gift (Costing Rs 3000) to Prahlad via Courier service (DHL) ? The gift did not reach Prahlad ? Before sending the gift to Prahlad, DHL made Mohit sign on a form which had the following clause: Any loss or damage to the Courier is limited to lesser of Rs 100 or the amount of loss actually sustained ? Since it a signed agreement (whether Mohit ignored the terms and conditions), the Court could not interfere in the terms between the parties
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DHL was liable for only Rs 100
If person can establish that the signature was obtained through:
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Coercion Fraud Misrepresentation
…….One can drag the other person to court
Reference Case: LIC Insurance Corporation vs Raja V Prasad
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27th December: Mr Prasad’s proposal for insurance of Rs 50,000 27th December: Medical examination, a requirement for LIC done Prasad issues two cheques of Rs 300 and Rs 220 in favor of LIC as first premium LIC encashed one cheque on 29th December and other on 11th January Mr Prasad died on 12th January
NO
Can his wife claim the Insurance Police?
An acceptance to be complete, must be communicated to the offerer
AUCTION - Seller have all potential buyers at one
place, competing with one another through bids
Auction With Reserve – Auctioneer is free to turn down the highest bid
Auction Without Reserve – Auctioneer is not reserving any discretion. Highest bidder will make the contract An Example: • Shalabh decided to auction his bat, which had `cost him Rs 20,000 • The sale was announced to be without reserve • Naveen made the bid of Rs 10,000 • Shalabh bid 11,000 and that was the Highest Bid Who gets the Bat? Naveen
Tender
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Prevalent form of getting into Contractual Relationship Bidding Process: ? Open to all qualified bidders ? No physical presence required Some Important questions frequently asked After putting in a bid to a tender, can the bidder withdraw or change the bid? Is the forfeiture on the Earnest Money Deposit in the case of withdrawal of tender lawful?
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To demonstrate that the bidder is serious about wanting to complete the purchase Reference Case: Aditya Mass communication Pvt Ltd Vs A.P. State Road Transport Corporation
Revocation is a State of being cancelled or annulled
Example:
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Dilpreet Bank sought applications from employees for voluntary retirement Varun Goel along with many other employees applied for the scheme Varun Goel withdrew the application
Question: Can the offer be revoked before the written Acceptance or Rejection by the authority? Yes in this case Agreement to be binding on the parties, it must have some Consideration
Any Material Benefits
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Why Time and Place of Formation of Contract are important:
Deciding the jurisdiction of court Taxation and Legality
A.
Time and Place are stated in Contract: The parties must perform accordingly
B.
Time is not stated: The promisor has undertaken to perform without a request from the promisee, it must be carried out within a reasonable time
C. Promise is to be performed on a certain day, and the promisor has not undertaken to perform without a request from the promisee, the promisee must make a request for the performance at a proper place and within the usual hours of business
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When a promise is to be performed without a request from the promisee, and no place is fixed for its performance, the promisor must request the promisee to fix a reasonable place for the performance and perform the promise at specified place
Section 4 of Contract Act says: The communication of a proposal is
complete when it comes to the knowledge of the person to whom it is made.
Illustration:
XYZ ltd is a Delhi based company. It placed an order of X no. of garments to ABC Ltd., a Chandigarh based company. In this case, XYZ had made the offer and ABC had accepted the offer. Thus a contract. A dispute arose between the parties. Now the question was whether the dispute should be taken for arbitration, in Delhi or Chandigarh
A contract in normal circumstances is made at a place where the acceptance is accepted i.e. in our case Delhi
M/s Girdharilal Parshottamdas and Company- hereinafter called “The Plaintiffs” commenced an action in the City Civil Court at Ahmedabad against the Kedia Ginning Factory and Oil Mills of Khamgaon- hereinafter called “The defendants” for a decree for Rs. 31,150 on the plea that the defendants had failed to supply cotton seed cake which they had agreed to supply under an oral contract, dated July 22, 1959 negotiated between the parties by conversation on long distance telephone. The plaintiffs submitted that the cause of action for the suit arose at Ahmedabad, because the defendants had offered to sell cotton seed cake which offer was accepted by the plaintiffs at Ahmedabed, and also because the defendants were under the contract bound to supply the goods at Ahmedabad, and the defendants were to receive payment for the goods through a Bank at Ahmedabad. The defendants contended that the plaintiffs had by a message communicated by telephone offered to purchase cotton seed cake, and they (the defendants) had made the acceptance at Khamgaon, that under the contract delivery of the goods contracted for was to be made at Khamgaon, price was also to be paid at Khamgaon and that no part of the cause of action for the suit had arisen within the territorial jurisdiction of the City Civil court, Ahmedabad
Unilateral Contract (promise) A unilateral contract is an agreement where one party promises to do something in return for an act e.g. If you will mow my lawn, I’ll pay you $10
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Bilateral Contract: A bilateral contract is an agreement where one party promises to do something in return for a promise (Results in two promises) e.g. “If you will mow my lawn, I’ll pay you $10. Ok, I’ll mow your lawn
A company offered by advertisement to pay $100 to anyone "who contracts the increasing epidemic influenza,colds or any disease caused by taking cold, after having used the ball according to printed directions". it was added that" $ 100 is deposited with the Alliance Bank showing our sincerety in the matter". The plaintiff used the smoke balls according to the directions but she nevertheless subsquently suffered from influenza
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Was the advertisement an offer? General Offer To whom the offer had been made?
Offer is made to the world at large
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Could the offer have been accepted so as to convert into an agreement?
Contract is made to that limited portion of the public who come forward and perform the condition on the faith of the advertisement
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Acceptance of an offer needs to be communicated to the person, making the offer. Is the acceptance being notified? Unilateral Contract
A valid bilateral contract between X and Y obligates X to: ? perform as and when promised; and ? refrain from repudiating prior to the time his performance is due
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Def: When, at the desire of the promisor, the promisee or any other person…
? Has done, or abstained from doing ? Does or abstains from doing ? Promises to do or to abstain from doing
Something – such an act, abstinence or promise to do something is called CONSDIERATION for the Promise. ? In simpler words, When a person makes a promise to another, intention is to derive some advantage. ? Famous Example: Atul signs a contract with a girl. He promises to pay the girl Rs. 50,000 for having dinner @ 5 star restaurant.
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Eg: Ankit agrees to sell a house to Varun for Rs. 10L. Varuns consideration – Rs. 10L. Ankits consideration – Sell the house. Consideration can be Past, Present and Future.
? Girls consideration = To have dinner with Atul in the five star restaurant ? Atul’s consideration = To pay the Gal Rs. 50,000.
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NO CONSIDERATION – NO CONTRACT
? Famous Eg again: Atul signs a contract with a gal
to pay Rs. 50,000 and the gal has to do nothing
? Atuls consideration – Rs. 50,000 ? Gals consideration – NOTHING
? So is this agreement between Atul and the gal a
Valid Contract??? NO ? WHY??? NO CONSIDERATION BY GAL
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Wilkie was given a Free Pass to travel by Bus. Wilkie gets injured due to negligence of conductor. London Passenger board refuses to pay compensation. Wilkie was travelling in the bus, so there was a contract between Wilkie and London Passenger Transport Board. Contract of Conveyance. Since there was NO consideration from Wilkie’s side (since he was travelling for free). Contract for conveyance NOT VALID Judgment says: Pass was only a License from the Board to Wilkie to use the Bus Service.
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One must use the smoke ball 3 times daily as per instructions. As per company – Not a Contract Considerations:
? Company: No Influenza
? User: Increased Sales
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Nipun offers to Buy Rahul’s flat for Rs. 40L Nipun agrees to keep the offer open for 5 days. He should not withdraw the offer. Rahul agrees not to advertise the flat for sale or solicit offers from any person. Nipun revokes the offer on the 3rd day. Dispute has arisen between Rahul and Nipun Lets Decide?? Considerations:
? Nipun: To keep the offer open for 5 days ? Rahul: Not to advertise or sell the flat
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So the agreement is enforceable.
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A Promise, however Gratuitous, would be enforceable if, on the faith of the promise, the promisee suffers a detriment or undertakes a liability Eg: Shalabh promises Richy that he will donate Rs. 10L for temple in Orissa. On the faith of Shalabh’s promise, Richy releases the tender, entrusts work to the contractors and construction begins. Now Shalabh backs out saying that he cannot give Rs. 10L. Richy takes Shalabh to Court. Will the Court convict Shalabh?? WHY?? Considerations: ? Shalabh: Rs. 10L ? Richy: Charity (nothing return to Shalabh)
YES
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Any act done or loss suffered by the promisee must have been done or suffered at the desire or request of the promisor. The act done at the desire of a Third Party or without the desire of the promisor cannot be a good consideration. It doesn’t matter who gets the benefit. But the desire or request of the promisor is essential. Eg: Atul holds a charity function after his marriage. He invites the entire Division D. Tarun, a professional DJ also attends the function. He goes and sings on the stage and the show becomes a huge success. Next day, tarun comes and asks Atul to pay him remuneration for his service as he earned a lot of money. Will Atul Pay?? NO Because the service provided by Tarun was at his own will and not at the desire of Atul.
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As per the Indian Contract Act, consideration can be furnished by the promisee or any other person. Eg: Mridul (father) gifts a certain property to Shuchi (her daughter), with a direction that Shuchi should pay an annuity to Rahul (Shuchi’s brother). Shuchi signs the contract and executes a writing in favor of the brother, agreeing to pay the annuity. After some time Shuchi refuses to pay the annuity to Rahul and Rahul sues her under the agreement. Shuchi’s Argument: There is no consideration from Rahul, so it is not a valid contract. Judgement: “Promisee or other person”. Rahul can show consideration and even though he is a stranger to the contract can sue Shuchi as it is a valid contract.
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There are three main exceptions to the definition of consideration; i.e. an agreement made without consideration is void, unless –
? It is in writing and registered, and is made out of
natural love and affection by the person standing in the near relationship; ? 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; ? It is a promise made in writing and signed by the promisor (or his duly authorised agent) to pay (wholly or in part), a debt barred by the law of limitation
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If the agreement is expressed in writing and is registered, and is made on account of natural love and affection between parties standing in a near relation to each other, the contract is valid.
Eg: A promises, for no consideration, to give B, Rs. 10L. This is a void agreement. ? A, for natural love and affection, promises to give his son, B, Rs. 10L. A puts his promise into writing and registers it. This is a VALID contract.
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For this exception to be Valid it is necessary to fulfill the following four conditions:
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It must be in Writing It must be registered It must be made on account of Natural Love and Affection It must be between parties standing in near Relationship to each other
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An agreement without consideration is valid when it is a promise to compensate a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do: Eg: A finds B’s purse and gives it to him. B promises to give A Rs. 1000. This is a Contract. Another Eg: A supports B’s infant son. B promises to pay A’s expenses in doing so. This is a valid contract. The act done must be for the Promisor Promisor must be in existence Promisor must be competent to contract
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An agreement without consideration is valid when it is a promise made in writing and signed by the person to be charged therewith to pay a debt of which the creditor might have enforced payment. Eg: A, being heavily indebted applies a loan of Rs. 5000 from B. B agrees to lend provided A passed a promissory note for Rs. 3000 which was originally due by A but has become time barred now. A finally passes a promissory note of Rs. 8000 to B after receiving the loan of Rs. 5000. B sues A to recover his money. A claims that since there was no consideration and that the promissory note was taken by undue influence. Will A succeed? Judgement:
? Time barred debt is a good enough consideration ? The plea of undue influence cannot be successfully pleaded on the above
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facts.
The promise to pay cannot be inferred from the mere acknowledgment of the debt. ? The document must contain an express promise to pay a debt.
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A contract is
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between the parties only and
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no stranger to the contract can sue even if the contract is avowedly made for his benefit.
Thus a stranger to the consideration cannot sustain the action on the promise made between two persons unless he has in some way intervened in the agreement
A promise is ? a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. The person manifesting the intention is the promisor The person to whom the manifestation is addressed is the promisee
I will create the gadget but you`ve to pay my sister Rs.10000/- after I do so Promisee
Sure,Thanks
Promisor
In the case the plaintiff was to be married to the daughter of
one G and in consideration of this intended marriage G and the plaintiff’s father entered into a written agreement by which it was agreed that each would pay the plaintiff a sum of the money. G failed to do so and the plaintiff sued his
executors. Thus, although the sole object of the contract was to
secure a benefit to the plaintiff, he was not allowed to sue as the contract was made with his father and not with him
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Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres at a discounted price on condition that they would not resell the tyres at less than the listed price and that any reseller who wanted to buy them from Dew had to agree not to sell at the lower price either Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not to sell at a lower price either. However, Selfridge sold the tyres below the price he promised to sell them for
Dunlop then sued Selfridge for an injunction from selling tyres and damages At trial the judge found in favour of Dunlop. In appeal the damages and injunction were reversed, saying that Selfridge was not a principal or an agent and thus was not bound The issue put to the court was whether Dunlop could get damages from Selfridge without a contractual relationship
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Viscount Haldane based his argument on three fundamental principles in law. First, the doctrine of privity requires that only a party to a contract can sue. Second, the doctrine of consideration requires a person with whom a contract not under seal is made is only able to enforce it if there is consideration from the promisee to the promisor. Third, the doctrine of agency requires that the principal not named in the contract can only be sued if the promisee was contracted as an agent.
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In application to the facts, Haldane could not find any consideration between Dunlop and Selfridge, nor could he find any indication of an agency relationship between Dew and Selfridge. Consequently, Dunlop's action must fail.
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There has been a divergence of opinion in India as to whether the Doctrine of Privity of Contract, which prevails in the English Courts, is applicable to the Indian Courts Section 2(d) of the Act says that ” 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, something , such act or abstinence or promise is called a consideration for the promise”
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The facts of the case in brief are that
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A sold a house to B under a registered sale deed under the terms that a certain sum will be paid to A and the remaining to C, A’s creditor
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B subsequently made part- payments to C informing that the amount was in respect of the sale and that he would pay the remaining amount,
B failed to make the payment and C sued B for the same It was held that the suit was maintainable as B promised to pay the amount to C and hence C was entitled to bring a suit against B for recovery of the amount
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A "trust" is an ? obligation annexed to the ownership of property, and ? arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, ? for the benefit of another, or of another and the owner
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The person who reposes or declares the confidence is called the "author of the trust“
The person who accepts the confidence is called the "trustee" The person for whose benefit the confidence is accepted is called the "beneficiary“ The subject-matter of the trust is called "trust-property" or "trustmoney" The "beneficial interest" or "interest" of the beneficiary is his right against the trustee as owner of the trust-property
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The instrument, if any, by which the trust is declared is called the "instrument of trust“
Transfer of Ownership for C`s benefit
Author of the trust
Trustee
Beneficiary
Ankit and Piyush get into a contract to carry out a theft and share the loot. After the successful operation, they get into dispute among themselves on how to share the loot. Piyush claims that it was agreed that he would get 80% of the loot while Ankit is insisting that they would share it equally. Piyush is claiming his rights under the contract What is wrong with the contract What remedy should the court provide Piyush
• The objective of the contract is to do an act which is illegal.
• Leaving aside the implementing contracts tainted with illegality, the state would not respect the personal interests of the parties in such contracts and penalize the parties for infringing the law • Thus, Contracts which are tainted with illegality are not enforceable
• Contract that is illegal from the moment it is made • Legal but declared null by the courts (violating a fundamental principle such as fairness) • Becomes void due to changes in law or in government policy •Lack of capacity to contract
Void means nothing, vacuum or zero ? Also known as void agreement as in reality it is not a contract ? Not enforced by law ? An Oxymoron
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“Every agreement of which the object or consideration is unlawful is void” The considerations or object of an agreement is lawful unless :
? it is forbidden by law ? is of such a nature that, if permitted, it would defeat the provisions of any law ? is fraudulent ? involves or implies injury to the person or property of another ? the court regards it as immoral, or opposed to public policy
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Deepak entered into a contract with Naveen to buy stolen cars
? Consideration of the sale transaction is illegal
Piyush and Prahlad got into a contract to forge documents to evade taxes
? The object of the contract, evading taxes is illegal
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A government employee has agreed to obtain employment for Ankit in a public service, for a consideration of five lakhs. After getting the employment, the person refused to pay.
? The consideration, the act of getting employment is illegal
It is an agreement enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract
a) When consent is obtained by coercion, undue influence, misrepresentation or fraud is voidable at the option of aggrieved party
b) When a
contract contains reciprocal promises and one party to contract prevents the other from performing his promise, the contract becomes voidable at the option of the party to prevented When time is essence of contract and party fails to perform in time, it is voidable at the option of other party. A person who himself delayed the contract cannot avoid the contract on account of (his own) delay
c)
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A contract between a minor and another party is generally viewed as voidable by the minor
Contracts become voidable when the consent of the innocent party is obtained through ? Coercion ? Fraud ? Misrepresentation ? Undue influence
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Coercion is:
- committing, or threatening to commit,
- any act forbidden by the Indian Penal Code,
- or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
“Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent with intent to deceive another party thereto of his agent, or to induce him to enter into the contract :
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the suggestion, as a fact, of that which is not true, by one who does not believe it to be true the active concealment of a fact by one having knowledge or belief of the fact
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a promise made without any intention of performing it
any other act fitted to deceive Any such act which law specifically declares to be fraudulent
Reference Case - Mithoolal Nayak vs. Life Insurance Corporation of India
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Mithoolal took a policy with LIC After getting treated for serious ailments by a doctor, he made false statement in policy stating that he has not been treated Judgement – Supreme court held Mithoolal a fraud
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Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. Difference between fraud and misrepresentation is that fraud is intentional while misrepresentation can be innocent
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For example: under certain circumstances, false statements or promises made
by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation
A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other
For example: A, a man enfeebled by disease or age, is induced by B’s influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. Here B employs undue influence
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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 Cannot be enforced by law unless and until the event has happened
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Example – A contracts to pay B Rs. 10,000 if B’s house is burnt.
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Enforcement of contracts contingent on an event happening
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Enforcement of contracts contingent on an event not happening
When event on which contract is contingent to be deemed impossible, is the future conduct of a living person Contracts become void which are contingent on happening of specified event within fixed time
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When contracts may be enforced which are contingent on specified event not happening within fixed time
Quasi-contracts are defined to be "the lawful and purely voluntary
acts of a man, from which there results any obligation whatever to
a third person, and sometime a reciprocal obligation between the
parties." It is not legitimately done, but the terms are accepted and
followed as if there is a legitimate contract.
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It is not a contract It is an obligation which law created in absence of any agreement
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Also known as “as if” contract or “implied in law” contract
Five types of Quasi-Contracts are:
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Supply of necessaries (section 68) Payment of lawful dues by interested person (section 69) Person enjoying benefit of a gratuitous act (section 70) Finder of goods (section 71) Goods or anything delivered by mistake or coercion (section 72).
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Latin phrase meaning “as much as he has deserved”
Also referred as “unjust enrichment”
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One party should not get enriched at the cost of other
Example: a person is in a contract to work for another person or company for 7 days. But the person works for 5 days only. Then the person is entitled to be paid for the services that he rendered for 5 days but not for the remaining two days
A breach of contract is failure to perform as stated in the contract There are five different types of damages:
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Compensatory damages, which are given to the party which was detrimented by the breach of contract Exemplary damages, which are used to make an example of the party at fault to discourage similar crimes Liquidated damages are really a pre-estimate of loss agreed upon in the contract, so that the court is saved the process of calculating compensatory damages and the parties have greater certainty Nominal damages, which consist of a small cash amount where the court concludes that the defendant is in breach but the plaintiff has suffered no quantifiable pecuniary loss Punitive damages, which are used to punish the party at fault. These are not usually given regarding contracts but possible in a fraudulent situation
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Freedom of contract is the freedom of individuals to bargain
among themselves the terms of their own contracts, without
government interference
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Levison and another v. Patent Steam Carpet Cleaning co. case
doc_199836710.pptx