INDIAN CONTRACT ACT 1872 ESSENTIAL ELEMENTS OF VALID CONTRAACT; 1.

Offer and acceptance: There must be two parties Terms of offer must be definite Acceptance must be absolute and un conditional It must be communicated to offerer 2. Intention to create legal relationship 3. Lawful consideration 4. Capacity of parties - a) Competency b) Age of majority c) Sound mind d) Not disqualified by any law 5. Free and genuine consent Same sense at the same time When induced by coercion Undue influence Fraud Mis-representation not free consent. Mistake 6. Lawful object : Not illegal, immoral or opposed to Public policy 7. Agreement not declared void. 8. Certainty and possibility of performance 9. Legal formalities

OFFER AND ACCEPTANC E;

OFFER is defined under section 2(a) 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

What constitutes an offer?

1. Offer must show an obvious intention 2. It must be made with a view to obtaining assent of the offeree. 3. The offer must be definite 4. It must be communicated to offeree LALMANI VS GAURI DUTT (1913)11 All.L.J.489 FITCH VS SNEDAKER (1868) 38 NY.288.

LEGAL RELATIONSHIP;
1.Offer must be such as in law is capable of being Accepted and giving rise to Legal relationship - a social invitation does not create legal relation. 2. Terms of offer must be definite, unambiguous and certain and not loose and vague

3. An offer may be distinguished from (i) a declaration of intention and announcement (ii) an invitation to make an offer display of goods 4. Offer must be communicated 5. Offer must be made with a view to obtaining the Assent. 6. Offer should not contain a term the non-complianceof which may be assumed to amount to acceptance 7. A statement of price is not an offer.

The communication of acceptance is complete as against proposer when it is put into course of transmission to him so as to be out of the power of acceptor as against acceptor when it comes to the knowledge of proposer COMMUNICATION OF REVOCATION; Section 4(3)

as against the person who makes it when it is put into course of transmission to the person to whom it is made, so as to be out of power of person who makes it as against the person to whom it is made when it comes to his knowledge.

TIME FOR REVOCATION OF OFFER AND ACCEPTANCE

TIME FOR REVOCATION OF OFFER AND ACCEPTANCE Time for revocation of proposal: Section 5,(I) A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards.

Section 5(2) An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor but not afterwards.
ACCEPTANCE - Section 2 (b) Legal Rules as to Acceptance - Section 7 (1 & 2) 1) It must be absolute and unqualified - ad idem on all matter 2) It must be communicated to offerer.

3. It must be according to mode prescribed or usual and reasonable mode. 4. It must be given within reasonable time. 5. It can not precede an offer. 6. It must show an intention on the part of acceptor to fulfill terms of the promise. 7. It must be given by the party to whom the offer is made. 8. It must be given before the offer lapses or withdrawn 9. It cannot be complied from silence. CONSIDERATION - Defined under Section 2 (d): 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 so to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

A valuable consideration in the sense of the law may consist either in some right, interst, profit, or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given CURIE VS MISA (1875)LR10Ex153. KEDAR NATH VS GAURI MOHAMED (1886)14 Cal.64. ABDUL AZIZ VS MASUM ALI (1914) 36 All.268.

LEGAL RULES AS TO CONSIDERATION;

1. It must move at the desire of the promisor. DURGA PRASAD VS BALDEO (1880) 2 All 221 2. It may move from promisee or any other person. CHINNAYA VS RAMAYYA (1882) 4 Mad 137 3. It may be an act, abstinence or forbearance or return promise. DEBI RADHA RANI VS RAM DAS AIR Patna 282 4. It may be past, present or future 5. It need not be adequate 6. It must be real and not illusionary

7. It must be something which the promisor is not bound to do. 8. It must not be illegal, immoral, or opposed to public policy (Section 23) STRANGER TO CONTRACT; Exception to privity rules A person in whose favour a charge or other interest in some specific property has been created may enforce it though he is not a party to the contract. The decision of the Privy Council in KHWAJA MUHAMMAD KHAN VS HUSSAINI BEGUM (1910) VALID CONTRACT SECTION 10 Under Section 10, ( what agreement are contract) All agreements are contracts if they are made by Free consent (U/S 13,14) Of parties competent to contract For lawful consideration and lawful object and are not expressly declared to be void CONSENT defined Two or more persons are

CONSENT defined Two or more persons are said to consent when they agree upon the same thing in the same sense. (Sec 13)

FREE CONSENT; (section 14) - Consent is free when it is not caused by

Coercion as defined u/s 15 Undue influence u/s 16 Fraud u/s 17 Mis-representation u/s 18 Mistake Sections 20-22. COERCION Section 15 1. The committing of any act forbidden by IPC 2. Threatening to commit any act forbidden by IPC 3. The unlawful detailing of any property 4. The unlawful threatening to detain any property to prejudice of any person with the intension of causing any person to enter into an agreement.

UNDUE INFLUENCE Sec. 16 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. RELATIONSHIP WHICH RAISE PRESUMPTION OF UNDUE INFLUENCE; 1. Parent and child 2. Guardian and ward 3. Trustee and beneficiary 4. Religious advisor and disciple 5. Doctor and patient

6. Solicitor and client 7. Fiance and fiance FRAUD Sec.17

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 or his agent, or to induce his to enter into the contract 1. the suggestion, as a fact, of that which is not true, by one who does not believe it is true; 2. the active concealment of a fact by one having or belief of the fact 3. a promise made without any intention of performing it;

4. any other act fitted to deceive 5. any such act or omission as the law specially declares to be fraudulent.

Illustrations
a) A sells by auction to B a horse which A knows to be unsound . A says nothing to B about horses unsoundness. This is not fraud in A.
b) B is As daughter and has just come of age.Here the relation between the parties would make it As duty to tell B if the horse is unsound. c) B says to A If you do not deny it. I shall assume that the horse is sound A says nothing. Here As silence is equivalent to speech.

d) A and B being traders, enter upon a contract. A has private information of a change in prices which would affect Bs willingness to proceed with the contract. A is not bound to inform B. MIS REPRESENTATION Sec. 18 A representation when wrongly made either innocently or intentionally is mis-representation. Requirement of Mis-representation: 1. It must be a representation of material fact. Mere expression of opinion does not amount to mis representation even if it turns out to be wrong. 2. It must be made before conclusion of contract with a view to inducing other party.

3. It must be made with an intention that it should be acted upon by the concerned person. 4. It must have induced the contract. 5. It must be wrong but the person who made it honestly believed it to be true. 6. It must be made without any intention to deceive the other party. 7. It need not be made directly to the plaintiff. A wrong statement made to a third person with the intention of communicating to the plaintiff also amounts to mis-representation.

MISTAKE (1) Mistake of law (2) Mistake of fact Mistake of law may be (1) of his own country (2) of a foreign country Mistake of fact may be (1) Bi-lateral (2) unilateral Agreement void where both parties are under mistake as to take of fact. Various cases fall under bi-lateral agreement: 1. Mistake as to subject matter i) Mistake as to existence of subject matter. ii) Mistake as to the identity of subject matter

iii) Mistake as to the quality of subject matter iv) Mistake as to quantity of subject matter v) Mistake as to title of subject matter vi) Mistake as to price of subject matter 2. Mistake as to possibility of performing contract i) Physical impossibility ii) Legal impossibility UNILATERALMISTAKE; Sec. 22. Example: A offers to sell his house to B for an intended sum of rupees 44,000/-. By mistake he makes an offer for rupees 40,000/. He can not make defence of mistake. A buys an article thinking that it is worth rupees 1000/- when it is worth only rupees 50/-. A cannot avoid the contract.

COMPETENCY OF PARTIES TO CONTRACT: Section 11 declares the following persons to be incompetent to contract Minors
Persons of unsound mind Persons disqualified by any law
AN AGREEMENT WITH A MINOR IS VOID AND INOPERATIVE

GHOSE 1903 1) He can be promissee or beneficiary 2) His agreement cannot be ratified by him on attaining age of majority. 3) If he has received any benefit under void agreement, he cannot ask to compensate or pay for it. 4) He can always plead minority
MOHRI BIBI VS DHARMODAS

LESLI VS SHIELL There can be no specific performance of the

agreements entered into by him as they are void ab-initio. 5) He cannot enter into a contract of partnership 6) He cannot be adjusted insolvent 7) He is liable for necessaries. 8) He can be an agent PERSONS OF UNSOUND MIND: Lunatics - mentally deranged. He suffers from intermittent intervals of sanity and in-sanity

Idiots - completely lost mental powers. Drunken persons. Other persons: contract with an alien friends, corporations, insolvents and convicts.

VOID AGREEMENTS; (1)Agreements by incompetent parties Sec.11 (2) Agreements made under mutual mistake Sec.20 (3) Agreements the consideration or object of which is unlawful Sec.23, 24, (part consideration) (4)Agreements made without consideration (5) Agreements in restraint of marriage Sec. 26 (6) Agreements in restraint of trade Sec.27 (7) Agreements in restraint of legal proceedings Sec 28. (8)Agreements the meaning of which is uncertain Sec.29 (9) Agreement by way of wager - one way to pay upon determination of uncertain events. (10)Agreements contingent on impossible events Sec.36 (11) Agreement to do impossible acts Sec36 (12) In case of reciprocal promises to do things legal and also other things illegal, the second set of illegal promises is void Sec 57.

PERFORMANCE OF CONTRACT Sec. 37 (1) - The parties to contract must either perform or offer to perform their respective promises. (2) Requisites of valid tender - offer to perform Sec. 38 (3) It must be unconditional (4) It must be whole quantity contracted for (5) It must be by a person who is in a a position and is wiling to perform the promise (6) It must be made at the proper time and place, (7) must be made to proper person (8) It may be made to one of the several promisees (9) In case of tender of goods, it must give a reasonable opportunity to the promisee for inspection of goods. (10) In case of tender of money, the debtor must make a valid tender in the legal tender money

EFFECT OF REFUSAL OF PARTY TO PERFORM PROMISE WHOLLY Sec. 39 When a party refuses to perform, his promise in its entirety, the promise may put an end to contract. CONTRACT WHICH NEED NOT BE PERFORMED; When performance becomes impossible Sec.56 Parties agree to substitute new contract Sec 62 When the promise dispenses with or remits Sec. 63 STRANGER TO CONTRACT; Privity of contract - only parties to a contract may sue and to be sued. EXCEPTIONS; A trust or charge marriage settlement, partition or other family arrangement acknowledgement or estoppel assignment of contract contrtact entered into through an agent covenants running with the land

CONTRACT WITHOUT CONSIDERATION IS VOID EXCEPTIONS Love and affection Sec. 25(1) (a)Agreement in writing (b) Registered Compensation for voluntary services 25(2) Promise to pay a time barred debt Sec 25(3)(4) Completed gift Agency Charitable subscription

2. 3. 4. 5. 6.

CLASSIFICATION OF CONTRACT; 1. Classification according to validity: A contract is based on agreement. An agreement becomes a contract when all essential elements are present. In such case contract is valid contract. If one or more element is missing the contract is either VOIDABLE, VOID, ILLEGAL OR UN - ENFORCEABLE Voidable contract Sec. 2(i) An agreement which is 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.
Void contract Sec. 2 (g) An agreement not enforceable by law is said to be void Illegal agreement is one which transgresses some rule of basic public policy Unenforceable because of technical defect. CLASSIFICATION ACCORDING TO FORMATION EXPRESS CONTRACT Sec.9 expressly agreed terms IMPLIED CONTRACT eg. To get into public bus Takes tea in restraurant Pick-up news paper from vendor Lifts luggage by coolie. CLASSIFICATION ACCORDING TO PERFORMANCE EXECUTED CONTRACT; When both the parties have performed their respective obligation. EXECUTORY CONTRACT; When both the parties have yet to perform their obligation.

LEGALITY OF OBJECT Section 23,What considerations and objects are lawful, and what not the consideration or object of an agreement is lawful, unless(1) it is forbidden by law if it is punishable under criminal law (2) if it is of such a nature that if permitted it would defeat the provision of law (3) if it is fraudulent (4) if it involves or implies injury to person or property of another (5) if the courts regard it as immoral (6) where the court regards it as opposed to public policy i

AGREEMENT OPPOSED TO PUBLIC POLICY: 1) Agreements trading with enemy 2) Agreement to commit a crime 4) Agreement which interfere with administration of justice 4) Agreement in restraint of legal proceedings Sec. 28 5) Trafficking in public offices and titles 6) Agreements tending to create interest opposed to duty 7) Agreements in restraint of parents rights 8) Agreements restricting personal liberty 9) Agreement in restraint of marriage Sec. 26 10) Marriage brokerage 11) Agreements interfering with marital duties 12) Agreements to defraud creditors or revenue authorities 13)Agreements in restraint of trade.

WHO CAN DEMAND PERFORMANCE; IT IS ONLY PROMISEE WHO CAN DEMAND

Eg. A promises B to pay C a sum of rupees 500/- . A does n TIME AND PLACE OF Where no application i specified - wit Where time is prescribed and no application is to be made Application for performance

Application by promisor t

Performance in a manne

RECIPROCAL PROMISES; 1. Mutual and independent Eg. B agrees to pay price of goods on 10th . S promises to supply on 20th . Promises are independent and mutual. BY WHOM MUST CONTRACT BE PERFORMED 1.Promisor himself 2. agent Sec.3(3) 3. Legal representative 4. third person 5. Joint promisor

DEVOLUTION OF JOINT LIABILITIES Section 42-44 Any one of joint promisor may be compelled to Perform ( Sec.43) A joint promisor compelled to perform may claim contribution (Sec.43(2)) Sharing of loss arising from default Sec. 4

DISCHARGE OF CONTRACT:
A contract may be discharged (1) By performance (Sec. 37, 63) (2) By agreement or consent (3) By impossibility (4) By lapse of time (5) By operation of law (6) By breach of contract By performance - 1. Actual 2. Attempted By agreement - 1. by express consent 2. by Implied consent (Sec. 62) a. novation b. rescission c. alteration d. remission e. waiver f. merger.

By impossibility of performance known to the parties unknown to the parties

(3) SUPERVENING IMPOSSIBILITY:

1) destruction of subject matter 2) non existence of a state of things 3)death for personal services 4) change of law 5) outbreak of war (4) By lapse of time (5) By operation of law a. death b. merger c. insolvency d. unauthorized alteration of terms e. rights of liability vesting in the same person 6. By breach of contract: 1. Actual (a) at time of performance (b) during performance 2. Anticipatory(1) by an act of promissor making Performance impossible i.e. implied repudiation by renunciation of the obligation i.e. express repudiation.

REMEDIES FOR BREACH OF CONTRACT: Rescission of contract Suit for damages Suit upon quantum of meruit Suit for specific performance Suit for injunction RESCISSION: When a contract is broken by one party, the other Party may sue to treat the contract as rescined and Refuse further performance. He is absolved all his Obligation. DAMAGES: Monetary compensation allowed to injured party. HADLEY VS BOXENDALE. Sec. 73.Compensation for loss or damage by breach of Contract. - the injured party is entitled to (a)such damages which naturally arose in the usual course of things (b) such damages which the party knew

 such compensation is not to be given for any remote or indirect loss (d) such compensation arising from breach of quasi-contract shall be same as in any other contract. FORMS OF DAMAGES: Ordinary damages Special damages Exemplary damages Nominal damages Damages for loss of reputation Damages for inconvenience and discomfort Mitigation of damages Difficulty of assessment Cost of decree Damages agreed upon in advance in case of breach

LIQUIDATED DAMAGES AND PENALTY: QUASI-CONTRACT - Sec. 68 to 72 Supply of necessaries Sec. 68 Payment by an interested person Sec 69 Obligation to pay for non-gratuitous act Sec 70 Responsibility of finder of goods act. Sec. 71 Mistake or coercion Sec.72 QUANTUM MERUIT: Claims arises in following cases: where an agreement is discovered to be void Sec.65 when something is done without any intention to do so gratuitously Sec.70 when there is express or implied contract to render services but there is no agreement to remuneration 4. when completion of contract is prevented by act of other party to contract 5. when contract is divisible