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CONTENTS What is a Contract? Valid Contract and its essential characteristics Classification for Contract Various forms of Quasi Contracts
AGREEMENT
The contract is formed only on the basis of agreement. It is a combined effect of offer and acceptance. AGREEMENT= OFFER+ ACCEPTANCE According to section 2(e), Agreement is a promise or set of promises forming consideration for each other.
CONTRACT
According to sec.2(h), CONTRACT may be defined as An Agreement enforceable by law . These agreements creates Rights and Obligations between the Parties which can be claimed in the Court of Law.(Legal Obligation)
Contract
Contract
CLASSIFICATION OF CONTRACTS
ON THE BASIS OF
CREATION (FORMATION)
- EXPRESS -IMPLIED - QUASI
EXECUTION (PERFORMANCE)
-EXECUTED
ENFOECEABILITY (VALIDITY)
-VALID
-EXECUTORY
-PARTLY
- VOID
- VOIDABLE - ILLEGAL
2. IMPLIED CONTRACT An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Example :
X, a coolie in uniform picks up the bag of Y to carry it from railway platform to the taxi stand, without being told by Y to do so and Y allows him. In this case there is an implied offer by the coolie and an implied acceptance by the passenger. Now, there is an
implied contract between the coolie and the passenger and he is is bound to pay for the services of
the coolie.
3. QUASI CONTRACTS
These contacts are based on the principles of Justice and Equity.
Quasi means as if or similar to Also called as Implied Contracts It is just like a Contract as it also creates legal obligations. But the legal obligation created by Quasi Contract do NOT rest on any Agreement, but are IMPOSED BY LAW.
Example:
Where certain books are delivered to a wrong address then they are under an obligation to either pay for them or return them.
2. EXECUTORY CONTRACTIt is a contract where both the parties to the contract have still to perform their respective
obligations.
Example: X offers to sell his car to y for Rs. 1 lakh. Y accepts Xs offer. If the car has not yet been
delivered by X and the price has not yet been paid by Y, it is an Executory contract
contract has fulfilled his obligation and the other party has still to perform his obligation.
Example: X offers to sell his car to y for Rs. 1 lakh on a credit of 1 month. Y accepts X offer. X sells the car to Y. Here the contract is executed as to X
and Executory as to Y.
2. VOID CONTRACT- [sec 2 (g)] A void contract is a contract which is valid when
entered into but which subsequently became void due to impossibility of performance, change
of law or some other reason. Eg. X offers to marry Y, Y accepts X offer. Later on Y dies. This contract was valid at the time of its formation but became void at the death of Y.
3. VOIDABLE CONTRACT:
An arrangement which is enforceable by law at the option of one or more of the parties thereon but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party.
Eg. X threatens to kill Y, if the does not sell his house for Rs. 1 lakh to X. Y sells his house to X and receives payment. Here, Y consent has been obtained by coercion and hence this contract is voidable at the option of Y, the aggrieved party. If Y decides to avoid the contract he will have to return Rs. 1 lakh which he had received from X. If Y does not exercise his option to repudiate the contract within a reasonable time and in the meantime Z purchases that house from X for 1 lakh in good faith, Y cannot repudiate the contract.
4. ILLEGAL CONTRACT: An illegal contract is unlawful. Such an agreement cannot be enforced by law.Thus, illegal agreements are always void -ab- initio (i.e. void from the very beginning) Eg. X agrees to Y Rs.1 lakh to kill Z. Y kills Z and claims Rs. 1 lakh. Y cannot recover the amount from X because the agreement between X and Y is illegal and also its object is unlawful.
QUASI CONTRACTS
Quasi means as if or similar to It is just like a Contract as it also creates legal obligations. But the legal obligation created by Quasi Contract do NOT rest on any Agreement, but are IMPOSED BY LAW. - Inspite of not having contract between parties , the rights and obligations are created by operation of law rather than offer and acceptance ie Agreement.
Illustrations: (a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from Bs property.
(b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from Bs property.
2. Reimbursement of money paid, in which he is interested A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.
Illustrations:
The house in which A lives as a tenant is declared to be sold by municipal corporation for non payment of tax by the owner of the house. A makes the payment in order to protect his interest. A is conferred a legal right to recover such payment from the owner of the house.
Illustrations:
A, a tradesman, leaves goods at Bs house by mistake. B treats the goods as his own. He is bound to pay A for them.
5. Liability of a person to whom money is paid or thing delivered by mistake or under coercion
A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it. Illustration: A and B jointly owe Rs. 100 to C. A alone pays the amount to C, and B not knowing this fact, pays Rs.100 over again to C. C is bound to repay the amount to B
Discharge of contract
Discharge of contract
Discharge of contract means termination of the contractual relationship between the parties. A contract is said to be discharged when it ceases to operate, i.e., when the rights and obligations created by it comes to an end.
1. By performance 2. By mutual agreement or consent 3. By impossibility of performance 4. By lapse of time 5. By operation of law 6. By Breach of contract
Discharge by performance
Performance means the doing of that, which is required by the contract. Discharge by performance takes place when the
parties of the contract perform within the time and in the manner prescribed. In such a case, the parties are discharged and the contract comes to an end. But if only one
party performs the promise, he alone is discharged. Such a party gets a right of action against the other party who is guilty of breach.
ACTUAL PERFORMANCE
When both the parties perform their promises, the contract is discharged. Performance should be complete, precise and according to the terms of the agreement. Most of the contract are discharged by performance in this manner.
parties or between different parties The consideration of new contract is the discharge of
the original contract.
Example:
A owes money to B under a contract. It is agreed between A,B and C that B shall henceforth accept C as his debtor, instead of A. The old debt of A and B no longer exists and a new debt from C to B has been contracted.
forget the contract and will not bring a new contract into existence to replace it.
Cancellation of contract by any party or all the parties.
Example:
X promises Y to deliver goods on 1st Oct at his godown. And Y promises to pay for it on 1st Nov. X does not supply the goods. Y may rescind the contract.
Alteration
Alteration means a change in the terms of a
X promises to sell and deliver 100 bags on 1st Oct. And Y promises to pay on 1st Nov. Afterwards X and Y mutually decide that the goods shall be delivered in 5 equal installments at Zs godown.
Remission (sec.63)
Remission means acceptance by the promisee of a lesser fulfillment of the promise made. In other words it may be defined as acceptance of a less than what was contracted.
Example A owes to B Rs 5000. A pays to B Rs 2000. B accepts it in full satisfaction. The old debt is discharged.
Waiver
A waiver is the voluntary relinquishment or surrender of some known right or privilege. A contractual party might waive the performance of a contractual duty by another party. A waiver doesn't have to be written or even spoken -- a party may waive a contractual duty by conduct. Example
A landlord fails to object to a tenant paying rent 10 days late every month, he may be considered to have voluntarily waived on-time payment by the tenant.
Secondly, a contract which is possible of performance and lawful when made, but the same becomes impossible or
unlawful thereafter.
1. INITIAL IMPOSSIBILITY
An agreement to do an act impossible in itself is void. The object of making any contract is that the parties to it would perform their respective promises. If a contract is impossible of being performed, the parties to it will never be able to fulfil their object, and hence such an agreement is void. Example,
A agrees with B to discover treasure by magic. The performance of the agreement being impossible, the agreement is void. Similarly, an agreement to bring a dead man to life is also void.
2. SUBSEQUENT IMPOSSIBILITY
The performance of the contract may be possible when the contract is entered into but because of some event, which the promisor could not prevent, the performance may become impossible or unlawful. Section 56 makes the following provision regarding the validity of such contracts : A contract to do an act which after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, becomes void when the act, becomes impossible or unlawful.
making the breach of contract for damages for the loss occasioned to him due to the breach of contract.
The breach of contract may be either ACTUAL, i.e., non-performance of the contract on the due date of performance, or ANTICIPATORY, i.e., before the due date of performance has come.
For example
A is to supply certain goods to B on 1st January. On 1st January A does not supply the goods. He has made actual breach of contract. On the other hand, if A informs B on 1st
December that he will not perform the contract on 1st January next, A has made anticipatory breach of contract
Remedies for breach of contract Cancellation or Rescission Specific performance Injunction Quantum Meruit Damages
Cancellation or Rescission
When the contract is broken by one party, the other party is free to rescind
and refuse further performance. In such a case aggrieved party is discharged from all the obligation under the contract and is entitled to claim compensation sustained because
of the non-performance of the contract.
theatre, to sing at his theatre every night in every week during the next two months. B promises to pay her Rs. 1K for each night performance. On the sixth night A willfully remains absent from the theatre B in consequence rescinds the contract. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.
Damages are of four kinds General or ordinary damages Special damages Vindictive or exemplary damages Nominal damages
difference between contract price and the market price of such goods on the date of breach
Example: On 1st Dec, X contracted to sell and deliver 50 tons of wheat @ Rs 8000 per ton to Y on 1st Jan. On 20th Dec, Y afterwards, contracted to sell those goods to Z @ Rs 10000 per ton. X failed to deliver on 1st Jan, when price of wheat was 9500 per ton. Y is entitled to recover Rs 75000 and not the profit as it is the indirect consequence of the breach of contract.
Special damages
It would be the compensation for the special losses caused to the aggrieved party by the special circumstances attached to the contract. The phrase special damages is often used interchangeably with the term consequential damages. This is to indicate that the damages are the
consequence of a contractual breach, though they might not have been directly caused by the breach of contract.
Example:
A, a builder, contracts to erect and finish a house by 1st Jan, in order that B may give possession of it at that time to C. A is informed of the contract between B and C. A builds the house so badly that before 1st Jan it falls down, and has to be rebuilt by B, who, in consequence, loses the rent which he was to have received from C, and is obliged to make compensation to C for the breach of his contract.
A must make compensation to B for the cost of rebuilding, for the rent lost and for the compensation made to C.
punish the wrongdoer in a breach of contract lawsuit. They aren't based on actual economic loss like compensatory
damages.
Example:
i) Breach of promise to marry (damages are calculated on mental injury sustained) ii) wrongful dishonour of cheque by a banker
Nominal damages
Nominal damages are awarded where aggrieved party has been injured but did not incur any financial losses. They are not intended to compensate the victim but rather are awarded to vindicate aggrieved partys rights. These are called nominal damages, because they are very small, say one rupee or one dollar.
Example: An injured, who proves that a defendant's actions caused the injury but fails to submit
medical records to show the extent of the injury may be awarded only nominal
damages. The amount awarded is generally a small, symbolic sum, such as one dollar
Example:
W agreed to sing at Ls theatre only
during the contract. But he makes contract with Z to sing at another theatre and refused to perform the contract with L. W could be restrained by injunction from singing for Z.
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