Contract Law

Prof. Manoj Nair

Definition A contract is an agreement that is enforceable at law Indian Contract Act

A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty US Restatement

Offer + Acceptance + Consideration

Acceptance

Offer

Consideration

Contract

Offer

the indication by one person to another of his or her willingness to enter into a contract with that person on certain terms Essential Features of an offer

Offer must be clear and definite Must be communicated to the offeree Minimum requirement offer should include:

Delivery date Price Terms of payment and description of the item of offer/ type of service

Invitation to treat

Also known as invitation to offer Invitation to treat is not an offer, but an indication of persons willingness to negotiate a contract. Examples

Display of goods for sale Auction Advertisements Invitation to bid (ITB)

An Offer Comes To An End

Revocation Rejection( explicitly or by counter-offer) Termination (lapse of Time) Death Condition bringing an offer to an end

Acceptance

All an offer needs is a yes to make a contract

Essentials of acceptance
Must respond to the offer Must be communicated Should be made before the offer lapses Must be absolute and unconditional

Silence ......................???????????

CONSIDERATION

Consideration is the price for which the promise of the other is bought .Consideration could be anything of value (such as an item or service) Example

A signs a contract to buy a car from B for Rs.50,000

As consideration is the Rs. 50,000 and Bs consideration is the car

CONSDIERATION

The British courts have come to define consideration as

rights, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given suffered or undertaken by the other

Exceptions to the Rule

Love and Affection .

Essentials Of A Valid Contract

Consensus ad idem- meeting of the minds Free consent Capacity to Contract Lawful consideration Legal and not against public policy

FREE CONSENT

Consent is said to be free and voluntary if it is not caused by;

Coercion Undue influence Fraud Misrepresentation Mistake

Lawful consideration and not against public policy

The consideration or object of contract is lawful unless and unless and until it is;

Forbidden by law Fraudulent Implied or involved injury to person or property Defeat any provisions of law Immoral

Opposed to public policy examples Agreement for restraint of Marriage Agreement in restraint of parental rights Agreements which interfere with Administration of justice Agreements for restraint of trade/ personal freedom

Types of Contracts

Executory and executed

A executory promise is a promise for future performance

If the contract has been executed, both parties have performed

Express and Implied

An express contract can be written or oral

In an express contract the duties of the parties are clearly elucidated

After receiving treatment from a doctor, you will be asked to make arrangements for payment

An implied contract is implied by conduct

Quasi Contracts

The plaintiff is suing for quantum merit (the fair market value of her services)

The plaintiff performed valuable services The defendant knowingly received these services The plaintiff expected to get paid if the services were used by the def. The def. was unjustly enriched

Example A plumber accidentally installs a sprinkler system in the lawn of the wrong house. The owner of the house had learned the previous day that his neighbour was getting new sprinklers. That morning, he sees the plumber begin installing them in his own lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumber hands him the bill, claiming that he never agreed to pay for the sprinklers

Writing requirements

Oral contracts in general are enforceable

For certain contracts, the contract must be in writing

. .. .

Performance of Contract

Performance in law means the act of doing that which is required by a contract. Each party to the contract is bound to perform promises according to the stipulated terms Most contractual obligations are discharged by performance

Breach of Contract

If performance fails in its essential purpose, it is material breach

A material breach relieves the non-breaching party from the obligation to pay the breaching party By inserting a time is of the essence clause, late performance becomes a breach

Remedies for breach of contract

Rescission Damages Quantum merit- as much as earned in proportion to the work done

Specific performance Injunction

Discharge of Contract

Discharge of contract means termination of the contractual relationship between the parties thereto

By Performance By agreement or consent By impossibility By lapse of time By operation of law By breach of contract

Discharge by Agreement or consent

Novation- substitution

Recession- cancellation
Alteration- by mutual consent Remission- acceptance of a lesser sum then what was contracted for Waiver

Discharge Due to Impossibility

Impossibility

If performance is objectively impossible due to war or embargoes, the promisor is discharged without liability If there is a subjective impossibility due to events that are foreseeable, the obligation to perform is not discharged

If the promisor made a bad bid, he cannot claim he cannot perform because he is not making any money

Discharge by impossibility of performance

Destruction of subject matter of the contract

Death or disablement of parties

Subsequent illegality Declaration of War

Doctrine of Privity of Contract

a contract is a contract between the parties only and no stranger to the contract can sue even if the contract is avowedly made for his benefit .
English law

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 Section 2(d) of
the Indian Contract Act

Contracts (Rights of Third Parties) Act 1999