Overview of Law and Business Law

 
Contract Act
 
 
CHAPTER 1 : INTRODUCTION OF
CONTRACT AND KINDS OF CONTRACT
 
 
Law
 
The term ‘Law’ denotes set of rules and
regulations, which govern the social conduct and
which can be enforced through the courts. ‘Law’
has been one of the most effective instruments
for control of social relations and transactions
from the ancient times.
According to 
Salmond,
 “Law is the body of
principles recognized and applied by the state in
the administration of justice.”
 
essential characteristics
 of law
 
Law presupposes a state.
The state makes law as a rule relating to the actions of
human beings.
The law aims to regulate the external actions of human
beings
Law is enforced by the State.
Law is applied in administration of justice.
Law applies to all without discrimination, including the
state, which itself is regulated by law
Law is always supreme.
 
Sources of Law
 
Statutes having their source in legislation made by the
State;
Customs and precedents, which over a period of time
become as good as law;
Common law, which though originated in the Great
Britain, has now been well absorbed into the Indian
legal system;
International treaties and agreements;
Judicial decisions and precedents;
Miscellaneous e.g. juristic writings, literary works,
foreign decisions etc.
 
WHAT IS BUSINESS LAW?
 
According to 
S.R. Davar
, business law “means
that branch of law which is applicable to or
concerned with trade and commerce in
connection with various mercantile or business
transactions.”
As per 
Slater,
 “The phrase Mercantile Law or
Commercial Law is generally used to denote
those portions of the law which deal with the
rights and obligations arising out of transactions
between mercantile persons.”
 
Sources of Business Law
 
The 
Lex Mercantoria,
 i.e. the Law Merchant, which
emanated from the customs and usages, which are binding
on traders in their dealings with each other.
The Statute Law
, which is derived from the legislation or
enactments or the subordinate legislation made by the
legislative bodies.
The Common Law
, which include the principles of law
evolved by the judges in making decisions on cases that are
brought before them.
The Principles of Equity
, which are neither the customs nor
codified law, but are imperative dictates of conscience and
have been set forth and developed in the Court of
Chancery.
 
Contract
 
According to 
Salmond,
 “a contract is an agreement
creating and defining obligation between the parties.”
 
Sir William Anson
 says, "A contract is an agreement
enforceable by law, made between two or more
persons, by which right are acquired by one or more to
acts or forbearance on the part of other or others.“
According to 
section 2 (h)
 “An agreement enforceable
by law is a contract”. As per the above definition under
section 2 (h)
, the two important features of the
contract are:
(a)
 
An agreement
      
Contract
(b)
 
Its enforceability by law
 
An Agreement
 
According to 
section 2 (e),
 “every promise and
every set of promises, forming the
consideration for each other, is an
agreement”.
Thus, the agreement is an outcome of the
offer and acceptance between parties. i.e.
Offer  
+
 
acceptance =  Agreement.
 
ESSENTIAL ELEMENTS OF A VALID
CONTRACT (UNDER SECTION 10)
 
Agreement:  Republic Medico Surgical Co. vs. UOI.
Intention to create legal relationship : Balfor vs.
Balfor
Free Consent : 
Consent is said to be free when it is
not caused by Coercion, Undue influence, Fraud,
Misrepresentation and Mistake.
Contractual Capacity
Lawful Consideration
Lawful Object
Certainty of Terms
Agreement should not be Declared Void
Legal Formalities
 
 
 
 
KINDS OF CONTRACTS
 
(a) Contracts on basis of validity of a Contract
Valid Contract , Voidable Contract,   Void Contract, Illegal Agreement
Un- Enforceable Contract
 (b) Classification of contract on the basics of
mode of formation of contract
Express Contract , Implied Contracts, Quasi Contracts
 (c) Classification on the Basis of Performance of
Contract
Executed Contracts , Executory Contract , Partly
Executed and Partly Executory Contract,
Unilateral Contracts , Bilateral Contracts
 
 
 
 
Classification of Contracts on the Basis of the
Form of the Contracts
Formal Contracts
Simple Contracts
 
Difference between Illegal and Void
Agreements
 
(a)
 
All the illegal agreements are void but all void agreements are
not illegal.
(b)
 
Illegal agreements are void 
ab initio
 but a valid agreement may
become void subsequently.
(c)
 
There is no punishment to the parties for a void agreement
but parties to illegal agreements are punishable by law.
(d)
 
All the agreements, which are collateral to void agreements,
are valid but agreements, which are collateral to illegal agreements,
are void 
ab initio.
(e)
 
Void agreements are not illegal until they are proved to be so
but illegal agreement are illegal from the very begin.
(f)
 
Void agreements can be void for various reasons as provided
under the Contract Act but illegal agreement can be void due to
provisions of others Acts also.
 
Void Agreement vs Voidable Contracts
 
(1)
 
An agreement not enforceable by the law is known as void agreement 
(section 2 (g))
where as voidable contract is an agreement which is enforceable at the option of one or
more of the parties there to but not at the option of other or others. 
(Section 2 (i))
.
(2)
 
 Void agreement is not enforceable from the beginning itself and in no case it can be
made enforceable by the party. Whereas voidable contract are void only at the option of
aggrieved party and who can rescind it, however if aggrieved party does not want to
rescind it then it remains valid and enforceable by law.
(3)
 
An agreement can be void if any of the essential elements of the agreement, as specified
under 
section 10 
of the Act is missing. Whereas voidable agreement can be voidable only
due to absence of free consent of the parties.
(4)
 
In case of void agreement, no party to the contract can claim damages as law award
damages or compensation only when agreement is valid. So in case of void agreement
there is no question of damages being granted. Whereas in case of voidable agreement
the party, who rescind the contract can claim the compensation or damages for any loses
which is suffered by the party for such rescind of the contract.
(5)
 
In case of void agreement, restitution is not allowed if parties to the contract were aware
of the nature of contract. However, in case of the voidable contract, restitution is always
possible
(6)
 
Third party do not acquire any right under void agreement whereas in case of voidable
agreement third part always acquire the right provided the third party acquire the rights
in good faith
(7)
 
In case of void agreement, the lapse of reasonable time does not affect the validity of
contract. But in voidable contracts parties loses their right after the lapse of time.
 
Chapter 2 Offer and Acceptance
 
 
Offer
 
 
Section 2 (a)
 defines proposal or offer as "When
one person signifies to another his willingness to do or
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”.  An offer consists of two
elements that there is an expression of willingness by
the offeror to do or abstain from doing something.
Such expression of willingness is made to obtain the
assent of the other person to such act or abstinence.
The person making the offer is known as 
offeror
 and
the person to whom the offer is made is known as the
offeree
.
 
Essential of a valid offer
 
An offer must create legal relationship between the
parties
Terms of an offer must be clear, definite, certain and
capable of being made certain
An offer must be distinguished from a mere declaration
of intention
An offer is different from an invitation to an offer
(Harvey vs. Facie)
The offer should not include any term or terms, the
non-compliance of which may be assumed to lead
acceptance
The offer must be communicated to the person to
whom it is intended to be made
 
 
Kinds of offer
 
Express Offer
Implied Offer
Specific Offer  (Boulton vs. Jones )
General Offer  (Carllil vs. Carbolic Smoke Ball Co)
 
Acceptance
 
 
Acceptance of an offer is very important for
the formation of a contract, since acceptance of
an offer is a precondition for an agreement /
contract. Acceptance is the consent given by
promisee or offeree and it has the effect of
converting the offer into an agreement. An offer
does not create legal relationship unless the offer
is accepted.
Section 2 (b)
 explain that Acceptance is, “When
one person to whom the proposal is made
signifies his assent thereto, the proposal is said to
be accepted. A proposal when accepted becomes
a promise”.
 
Who can Accept an Offer?
 
Section 2 (b)
 makes it very clear that, “when the
person to whom the proposal is made signifies
his assent thereto, the proposal is said to be
accepted”. So a specific offer can be accepted
only by a person to whom it is made. But a
general offer, made to the world at large, can be
accepted by anyone having knowledge of the
offer. But, if the offer is not directed to a
particular person but to the world at large, any
member of the public who has knowledge about
the offer may accept it.
 
Modes of Acceptance
 
i)
 
Express Acceptance
 : An express acceptance is
one, which is given in words spoken or written.
ii)     
Implied
 
acceptance: 
It means
 
that an
acceptance, which is given by performance of
particular act, which is required to be done
according to the terms of an offer which is to be
gathered from the circumstances or the
conduct of parties. Compliance with terms of
offer may amount to acceptance.
 
Legal Rules Regarding Valid Acceptance Or The
Essentials of a Valid Acceptance
 
Acceptance must be absolute and unqualified
Acceptance must be in the mode prescribed or
some usual and reasonable mode
Acceptance must be communicated within the
time prescribed or within a reasonable time
Acceptance must be given before the offer lapses
or is revoked
In no case acceptance can be before the offer
Acceptance must be communicated to the offeror
Silence cannot be a mode of acceptance
 
Communication of offer
, 
acceptance
and revocation
 
Section 3
 of Act provide that communication
of proposal, the acceptance of proposal and
revocation of proposal and acceptance are
deemed to be made by any act or omission of
the party proposing, accepting or revoking by
which he intends to communicate such
proposal acceptance or revocation or which
has the effect of communicating it.
 
Termination or Lapse of an Offer
 
By notice of revocation
By lapse of time
By failure of the acceptor to fulfill a condition
precedent to acceptance
By death or insanity of the proposer
Counter-offer by the offeree
By not being accepted in the mode prescribed
Rejection of the offer by offeree
 
CHAPTER 3 : CONSIDERATION
 
 
Consideration
 
Section 2 (d)
 defines consideration as:“When at
the desire of the promisor the promisee or any
other person has done or abstained from doing,
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 (f)
 states that promises, which form the
consideration or part of consideration for each
other, are called reciprocal promises. Thus,
consideration implies some benefits to the
promisor and some inconvenience or forbearance
to the promisee.
 
Need for Consideration
 
The consideration provides some guarantee of
deliberation and a certain protection against
hasty and ill-considered contracts. It helps in
determining the enforceability of promises.
Consideration ensures reciprocity and
mutuality of promises. Hence consideration is
very important for a contract
 
KINDS OF CONSIDERATION
 
Present consideration
Past consideration
Future Consideration
 
Legal rules regarding consideration
 
There must be some consideration in every contract
Consideration should move at the desire of the promisor
(Kedar Nath vs. Gorie Mohamed)
Consideration may move from any other person
including the promisee (Chinnaya vs. Ramaya)
Consideration must have some value in the eyes of law
Consideration need not to be adequate
Consideration may be an act to do or abstinence or
forbearance of doing something
Consideration may be forbearance to sue
Consideration must be lawful
Consideration must be real and not illusory or impossible
 
An agreement without consideration is void
” or "
No
consideration no contract  (Section 25
 )
 
Consideration is one of the most important
conditions of a valid contract. Contract without
consideration is void. However, there are certain
exceptions:
 Promise made on account of natural love and
affection
Promise for compensation of voluntarily services
Promise to pay time-barred debt
Completed gift
For the contract of agency
 
Stranger to Contract and Stranger to Consideration
Or         “The Doctrine of Privity of Contract
 
However, the second doctrine of Privity of contract is applicable in
India also. Therefore a stranger to a contract cannot sue. A contract
is a contract between the partied only and no third person can sue
upon it even if it is avowedly made for his benefit. Following are
important exception to this rule
Trust (Rana Uma Nath Baksh Singh vs. Jang Bahadur)
Marriage settlement, partition or other family arrangement
(Daropati vs. Jaspati Rai)
Acknowledgement of payment or estoppels
An agreement creating a charge on immovable property  (Khwaja
Mohd Khan vs. Hussaini Begum)
Agreements relating to land
The principal can enforce contracts entered into through the
agents
 
CHAPTER – 3 : CAPACITY OF PARTIES
TO CONTRACT
 
 
Capacity of parties
 
S
ection 10 
of Contract Act provides that a contract
must have an agreement, capacity to contract, lawful
object, consideration for each other and the free
consent. Thus, capacity of parties to enter into contract
is very important to form a valid contract.
Section 11 
provides that “Every person is competent to
contract who is of the age of majority according to the
law to which he is subject, and who is of sound mind,
and is not disqualified from contracting by any law to
which he is subject”.
 
Minor
 
A person is said to be a minor, who has not attained
the age of majority. As per 
Section 3
 of the Indian
Majority Act, 1875, a person is said to have attained
the age of majority when he attains the age of 18
years.
Section 10
 only says that all agreements are contracts
if they are made by parties competent to contract and
Section 11 
says every person is competent if he is of
the age of majority. These provisions had therefore,
given rise to controversy about nature of minor’s
agreement.
 However, 
in case of Mohoribibi vs. Dharmodas
Ghose
,
 Calcutta Privy Council held that the agreement
by a minor is void. It is now an accepted rule.
 
Effects of Minor’s Agreement or
Position of minor
 
An agreement with a minor Is absolutely void and void ab initio
 .
(
Mohoribibi vs. Dharmodas Ghose
.
)
No rule of estoppel against minor
  (
Gadigeppa vs. Balangowda
)
Doctrine of restitution does not apply against a minor
 (
Khan Gul
vs. Lakha Singh
)
No ratification of the minor’s agreement
 (
Suraj Narain vs. Sukhu
Ahir
)
No liability in contract or tort arising out of contract
 (
Jennings vs.
Rundall 
)
Beneficial contract
 (
Raghava Chariar vs. Srinivasa
)
Minor cannot be insolvent
Liability for necessities
Positions of minor’s parents or guardian
Surety for a minor
Minor as an agent
 
Position of Minor Under Certain Other Laws
 
(1)
 
Minor as a Partner – 
Partnership is based on
agreement.  Minor being incompetent to enter into a
contract, cannot enter into a partnership agreement.
(2)
 
Minor under Companies Act –
 
A minor cannot
become shareholder in a company since he is
incompetent to enter into a contract. In case a minor
inherits certain shares, he may become a shareholder
acting through his lawful guardians. 
Nandita Jain vs.
Bennett, Coleman & Co.
 
Ltd.
(3)
 
Minor under Negotiable Instruments Act – 
The
negotiable instrument is an instrument in writing
containing a certain promise or order to one party to
pay certain sum of money to a named party. It includes
a Promissory Note, Bill of Exchange or Cheque.
 
Is minority a boon
?
 
(a)
 
A minor will be liable for necessaries (under 
section 68
)
(b)
 
Minor cannot be held responsible as an agent (under 
section
184
)
(c)
 
Minor can be a partner however he may be admitted to the
profits of the firms (under 
section 30
 of Indian Partnership Act,
1932).
(d)
 
A minor cannot bind himself under
 section 26
 of Negotiable
Instrument Act, 1881.
(e)
 
A minor can be held liable for the torts but cannot be held
liable if it results in the enforcement of the contract.
(f)
 
No specific relief can be given under
 section 64
 and 
65
 of the
Contract Act, whereas 
section 41
of Specific Relief Act can be
invoked in the protection of the minor
 
PERSONS OF UNSOUND MIND
 
Section 12
 provide that  A person is said to be of sound
mind for the purpose of making a contract if, at the time
when he makes it, he is capable of understanding it and
forming a rational judgment as to effects upon his interest.
A person, who is usually of unsound mind but occasionally
of sound mind, may make a contract when he is of a sound
mind. There are two types of unsoundness of mind:-
Persons of permanent unsoundness are :
(i)
 
Idiots
 (ii)
 
Lunatics
Persons of temporary unsoundness are
 
:
(i)
 
Drunkard or
(ii)
 
Intoxicated by any drug
 
OTHER DISQUALIFIED PERSONS
 
Alien enemy
Foreign sovereign and ambassador
Convicts
Insolvents
Company or statutory corporation
Married woman
 
CHAPTER 5 : FREE CONSENT
 
 
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e
i
n
f
l
u
e
n
c
e
 
1.
There are two persons
2.
The relations are satisfying between them
3.
One must dominate the other
4.
There must be unfair advantage
5.
It involves the moral pressure
 
There is an undue influence between the following
persons:
   -Principal and agent
   -Superior and and subordinate
   -                 Doctor and patient
   -                       Father and son
   -                       Teacher and student
   -                   Promoter and company
   -                          Master servant
   -                    Spiritual advisor and devotee
 
Among the following relations there is no undue
influence
1.wife and husband
2.landlord and tenant
3.debtor and creditor
CASE: 
Raniannapurna vs. Swaminathan
A poor Hindu widow was persuaded by a money lender to
agree to pay 100% rate of interest on money lent by him.
She needed the money to establish her right to
maintenance.it was a clear case of undue influence and
the court reduced the rate of interest to 24%
 
F
R
A
U
D
 
    
According to Sec 17 fraud means and includes any of those
acts committed by a party to contract or with his connivance
or by his agent with an intent to deceive or induce a person
to enter a contract:
   
1. The suggestion that a fact is true when it is not true
and the person making it does not believe in itto be true
   2. The active concealment of a fact by a person having
knowledge 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
 
The essentials of fraud are:
1. There must be a representation or assertion
and it must be false
2.The representation must relate to a fact
3.The representation must have been made
with  the intention of inducing the other party
to act upon it
4.the representation must have been made
with a knowledge of its falsity
5.the other party must have subsequently
suffered some loss
 
M
I
S
R
E
P
R
E
S
E
N
T
A
T
I
O
N
 
     According to Sec 18 there is misrepresentation:
1.
When a person positively asserts a fact is true when his
information does not warrant it to be so, though he
believes it to be true
2.
When there is any Breach of duty by a person which
brings an advantage to the person committing it by
misleading another to his prejudice
3.
When a party causes however innocently the other
party to the agreement to make a mistake as to the
substance of the thing which s the subject of the
agreement
 
 
MISTAKE
 
Mistake of fact
 
Of the
country
 
Of the foreign
country
 
Bilateral mistake
 
Unilateral mistake
 
Mistake as to subject matter
 
Mistake as to
possibility
 
As to
person
 
As to
nature
 
Physical impossibility
 
Legal impossibility
 
existence
 
identity
 
quality
 
quantity
 
title
 
price
 
Mistake of law
 
CHAPTER  6 : LAWFUL OBJECT
 
 
Legality of object
 
The object of a contract must be lawful for a
valid contract. The agreement will be void if its
object is unlawful.
 Section 10 
of the Indian
Contract Act says, “all agreements are
contracts if they are made for lawful
consideration and with lawful object.”
While consideration is an act, abstinence or
promise given in return for a promise, the
object is the purpose of the contract.
Unlawful agreements
 
illegal
 
immoral
 
Agreement opposing public policy
 
wager
 
An agreement which
interferes  with
administration of government
 
An agreement interfering
with the administration
of justice
 
An agreement interfering
with administration of
personal liberties
 
Restraint of
parental rights
 
Restraint of
profession
 
Restraint of
marriage
 
Restraint of
trade
 
Restraint of
martial duties
 
UNLAWFUL OBJECT
 
If the object of an agreement is the performance of
an unlawful act, the agreement is unenforceable.
For a contract to be valid only if the object and the
consideration should be legal.
The word object  means purpose or design.
 
Unlawful agreements
 
An agreement forbidden by law [Sec 23]
 
An agreement defecting any provisions of law [Sec 24]
 
Case: Alexander vs. Rayson
If it is fraudulent
 
 
If it is creating damage to person or property
Case: Ramswaroop vs. Bansimandir
B borrowed Rs. 100 from L and executed a bond promising
to work for L without pay for a period of two years.In
case of default B was to pay interest at a very exorbitant
rate and the principal sum of once. Held the contract
was void as it involved injury to the person of B.
 
 
E
S
S
E
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T
I
A
L
 
E
L
E
M
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N
T
S
 
O
F
W
A
G
E
R
 
There are two persons.
There must be an uncertain future event.
No control over the event by both the parties.
There must be a reciprocal promise.
Others are not interested in the contract.
 
Wager Contract (Sec 30)
 
A wager contract is a contract in which one
person promises to another to pay money or
money’s worth by the happening of an
uncertain future event in consideration for
other person’s promise to pay if the event
does not happen.
 
 
CHAPTER 7 :PERFORMANCE OF
CONTRACTS
 
 
Performance of contracts
 
Every contract creates some legal obligations for
the parties to the contract and they continue till
the contract is performed or discharged.
Performance of the contract is the natural way of
extinguishing contractual obligations. Performance
of a contract implies fulfillment of the terms,
conditions and the obligations of the contract by
the parties within specified time and in the manner
prescribed.
The performance of contract may be of two types:
(a)
 
Actual Performance
(b)
 
Attempted Performance
 
ESSENTIALS OF A VALID TENDER OF
PERFORMANCE    S
ection 38
 
The tender must be unconditional
Tender must be an offer to perform in full
Tender must be made at proper time and place
The promisee must give a reasonable
opportunity of inspecting goods
Tender of performance must be made to the
proper person
The tender must be made in the proper form
An offer of performance to one of the joint
promisee is a valid tender
 
Effect of Refusal of a Party to Perform
the Promise Fully
 
 
S
ection 39
, “When a party to the contract
has refused to perform or disabled himself
from performing his promise in its entirety,
the promisee may put an end to the contract
unless he had signified by words or conduct,
his acquiescence in its continuance.”
 
BY WHOM THE CONTRACT MUST BE
PERFORMED
 
As per 
section 40
 of the Act, unless it was the intention
of the parties to the contract that the promisor himself
should perform any promises contained therein,
otherwise the promisor or his representatives may
employ a competent person to perform it.
Promisor
Agent
Legal Representative
The Third Person
Joint Promisors
 
Time and Place of Performance
 
Time for performance of promise, where no
application is to be made and no time is specified
Time and place for performance of promise,
where time is specified but no application to be
made
Application of performance at proper place and
time
Place for performance where no application is
made, no place fixed
Manner or time by promisee to perform a
promise
 
APPROPRIATION OF PAYMENTS OF DEBTS
 
As per 
section 59 
to
 61
of Indian Contract Act,
following are the rules, for the payment of
debt and its apportionment:
Appropriation of debt as desired by the
debtor
Appropriation by the creditor where
indication were not made by the debtor
Appropriation in order of the debts due
Rules regarding the payment of interest and
principal when both are due
 
PERFORMANCE OF RECIPROCAL
PROMISES
 
Contracts requiring simultaneous
performance
When the order of performance expressly
fixed by the contract
One party preventing the other from
performing his reciprocal promise
Non-performance of a reciprocal promise by
the party who is to perform first
 
PERFORMANCE OF JOINT PROMISES
 
The joint promise must be fulfilled jointly
Any one of the joint promisors may be
compelled to perform
Each Promisor may compel contribution
Sharing of Loss by default in contribution
The contribution rule does not apply to principal
debtor and surety
The promisee may release any one joint
promisor
 
Contracts which need not be
performed
 
(a)
 
When performance of a contract becomes impossible. (
Section 56
)
(b)
 
When there is an agreement between the parties to substitute or
rescind or alter the original contract, (
Section 62
)
(c)
 
 When the promisee may dispense with or remit, wholly or in part,
(
Section 63
)
(d)
 
When a person at whose option a contract is voidable, rescind the
contract; 
Section 64
)
(e)
 
If any promisee neglects or refuses to afford the promisor
reasonable facilities for performance of his promise. (
Section 67
)
(f)
 
If it is an illegal agreement.
(g)
 
In case of reciprocal promises, which are to be performed
simultaneously, there is no need for promisor to perform his
promise unless the promisee is ready and willing to perform his
reciprocal promise. (
Section 54)
 
CHAPTER 8 : DISCHARGE OF
CONTRACT
 
 
D
I
S
C
H
A
R
G
E
 
O
F
 
 
A
 
C
O
N
T
R
A
C
T
 
D
I
S
C
H
A
R
G
E
 
B
Y
 
P
E
R
F
O
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A
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E
D
I
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C
H
A
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B
Y
 
A
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M
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O
R
 
C
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D
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A
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E
 
B
Y
 
I
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P
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I
B
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L
I
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Y
 
O
F
P
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R
F
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M
A
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D
I
S
C
H
A
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E
 
B
Y
 
L
A
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O
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A
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B
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O
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A
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B
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D
I
S
H
A
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E
 
B
Y
 
A
S
S
I
G
N
M
E
N
T
 
DISCHARGE  BY PERFORMANCE
 
 
 
A
C
T
U
A
L
 
P
E
R
F
O
R
M
A
N
C
E
             
When both parties perform their promises  &
there is nothing remaining to perform
 
 
 
 
 
 
A
T
T
E
M
P
T
E
D
 
P
E
R
F
O
R
M
A
N
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W
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n
 
 
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p
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o
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o
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t
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p
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f
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h
i
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o
b
l
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a
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,
b
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p
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r
e
f
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s
 
 
t
o
 
a
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p
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t
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p
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f
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m
a
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.
 
I
t
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a
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o
 
k
n
o
w
n
 
a
s
 
t
e
n
d
e
r
 
D
I
S
C
H
A
R
G
E
 
 
B
Y
A
G
R
E
E
M
E
N
T
 
O
R
 
C
O
N
S
E
N
T
 
NOVATION  (Sec 62):
 
New contract substituted for old
contract with the same or different  parties
RESCISSION (Sec 62) :
 
When some or all terms of a
contract are cancelled
ALTERATION (Sec 62):
When one or more terms of
 a contract is/are altered by the mutual consent of the
parties to the contract
REMISSION (Sec 63) :
Acceptance of a lesser fulfilment of
the promise made.
WAIVER 
:
Mutual abandonment of the right  by the
parties to contract
MERGER :
When an inferior  right accruing to a party to
contract  merges into a superior right accruing to the
same party
 
D
I
S
C
H
A
R
G
E
 
B
Y
 
I
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P
O
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S
I
B
I
L
I
T
Y
O
F
 
P
E
R
F
O
R
M
A
N
C
E
 
KNOWN TO PARTIES
UNKNOWN TO PARTIES
SUBSEQUENT IMPOSSIBILITY
SUPERVENNING IMPOSSIBILITY (Sec 56)
        Destruction of subject matter
 
 
    Non-existance of state of things
 
    Death or incapacity of personal services
 
    Change of law
 
    Outbreak of war
 
D
I
S
C
H
A
R
G
E
 
 
B
Y
 
L
A
P
S
E
 
O
F
 
T
I
M
E
 
THE LIMITATION ACT 1963, CLEARLY STATES THAT A
CONTRACT SHOULD BE PERFORMED WITHIN A
SPECIFIED TIME CALLED PERIOD OF LIMITATION
 
IF IT IS NOT PERFORMED AND IF THE PROMISEE
TAKES NO ACTION WITHIN THE LIMITATION TIME,
THEN HE IS DEPRIVED OF HIS REMEDY AT LAW
 
D
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C
H
A
R
G
E
 
 
B
Y
 
O
P
E
R
A
T
I
O
N
O
F
 
L
A
W
 
DEATH
MERGER
INSOLVENCY
UNAUTHORISED ALTERATION  OF THE TERMS OF  A
WRITTEN AGREEMENT
RIGHTS & LIABILITIES VESTING IN THE SAME PERSON
 
D
I
S
C
H
A
R
G
E
 
 
B
Y
 
B
R
E
A
C
H
 
O
F
C
O
N
T
R
A
C
T
 
ACTUAL BREACH :
      At the time of performance
      During the performance
 
ANTICIPATORY BREACH
      By the act of promisor
         (implied repudation)
      By renunciation of obligation
         (express repudation)
 
Chapter 9: Breach of contract
and remedies
 
 
R
E
M
E
D
I
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S
 
O
F
 
I
N
J
U
R
E
D
P
A
R
T
Y
 
A remedy is a means given by law for the
enforcement of a right. Following are the remedies
Rescission of contract
Damages.
Suit upon quantum meruit.
Suit for specific performance.
Suit for injunction.
 
R
E
S
C
I
S
S
I
O
N
 
When a contract is broken by one party,the other party
may sue to treat the contract as rescinded and refuse
further performance.In such a case, he is absolved of all
his obligations under the contract.
The court may give rescission due to
1)contract is voidable.2)contract is unlawful
The court may refuse to rescind if
1)Plaintiff has ratified the contract.2)Parties cannot be
restored to the original position.3)The third party has
acquired for value.4)When only a part is sought to be
rescinded.(sec 27 of specific relief act 1937)
 
D
A
M
A
G
E
S
 
        Damages are  a monetary compensation allowed
to the injured party by the court for the loss or injury
suffered by him by the breech of the contract.The
objective of awarding damages for the breech of
contract is to put the injured party in the same
position as if he had not been injured.This is called
the doctrine of restitution.The fundamental basis is
awarding damages for the pecuniary loss.
 
Q
U
A
N
T
U
M
 
M
E
R
U
I
T
 
   The phrase quantum meruit literally means ‘as
much as earned’. A right to sue on a quantum
meruit arises when a contract, partly performed
by one party,has been discharged by breach of
contract by the other party.This right is
performed not on original contract but on
implied promise by other party for what has
been done.
 
S
P
E
C
I
F
I
C
P
E
R
F
O
R
M
A
N
C
E
 
In certain cases of breach of contract damages are not an
adequate remedy.The court may,in such cases,direct the
party in breach to carry out his promise according to terms
of the contract.This is a direction by the court for specific
performance of the contract at the suit of the party not in
breach
Cases  for specific performance to be enforced
1)when the act agreed to be done is such that compensation
is not adequate relief.2)when there is no standard for
ascertaining the actual damage
3)when it is probable that compensation cannot
 be agreed to be done.
 
I
I
N
N
J
J
U
U
N
N
C
C
T
T
I
I
O
O
N
N
 
When a party is in breech of a negative term of
contract the court may,by issuing an order,restrain
him by doing what he promised  him not to do. Such
an order of the court is called injunction
Court refuses grant of injunction
[1] whereby  a promisor undertakes not to do
something
[2] which is negative in substance though not in form
 
CHAPTER 10: VOID AGREEMENTS
 
 
Void agreements
 
Not all the agreements entered into are enforceable by law. The agreements, which are
not enforceable by law, are said to be void. The agreements, which have been declared
void by the Act, are :
(1)
 
Agreements by incompetent parties 
(Section 11)
(2)
 
Agreements under mutual mistake of fact material to the agreement. 
(Section 20)
(3)
 
Agreements with unlawful consideration or object 
(Section 23)
(4)
 
Agreements the consideration of which is unlawful in part 
(Section 24)
(5)
 
Agreements without consideration
 (Section 25)
(6)
 
Agreements in restraint of marriage 
(Section 26)
(7)
 
Agreements in restraint of trade 
(Section 27)
(8)
 
Agreements in restraint of legal proceedings 
(Section 28)
(9)
 
Agreement the meaning of which is uncertain
 (Section 29)
(10)
 
 Wagering agreement
 (Section 30)
(11)
 
Agreements contingents on impossible events. 
(Section 36)
(12)
Agreement to do impossible acts 
(Section 56)
The agreements given at S. No. 1 to 5 has been explained in the
earlier chapters namely, Capacity of parties, consideration,
Legality of object and free consent.
 
Agreement in restraint of marriage: section 26,
 every
agreement in restraint of marriage of any person, other
than a minor, is void. An agreement which restricts a
person’s freedom to marry, or to marry any person of his
choice is against public policy and is void.
 
Agreement in restraint of legal proceedings
 
According to 
section 28
, an agreement absolutely
restraining a party from enforcing his right through court, or
an agreement, which restrict this right fully or partly will be
void. 
Section 28
 of the Indian Contract Act (as amended in
1997), provides that every agreement which restrict any
party from enforcing his rights absolutely under any
contract, by the usual proceedings in the courts or which
limits the time within which one may enforce his right is
void to that extent.
 
Agreements in restraint of trade
 
S
ection 27
 provide that, every agreement by
which anyone is restrained from exercising a
lawful profession, trade or business of any kind,
is to that extent void.  The restraint of trade
may be partial or complete. Exceptions are:
Sale of Goodwill
Under Partnership Act
Restrictions imposed between Employer and
Employee
Restriction by Trade Combinations
Sole selling or solus agreement
 
Agreements with uncertain meaning
According to 
section 29 
of the Acts, "any
agreement, the meaning of which is not
certain or capable of being made certain, is
void.”  This means that any agreement whose
meaning is uncertain or unable of being
understood by the parties to contract is void
 
Wagering agreements (section 30)
 
agreement by the way of wager is void and no
suit shall be brought for recovering anything
alleged to be won on any wager or entrusted to
any person to abide by the result of any game or
other uncertain event on which any wager is
made.
Essentials of a Wagering Agreement
Opposite view regarding an uncertain event
Chances of gain or loss for both the parties
No party should have control over the event
No other interest in the event other then bet amount
 
 
Chapter 11 : Quasi contract and
Contingent Contract
 
 
Quasi contract
 
 
A contract is the result of an agreement,
which is enforceable by law and obligations
arising from the contracts are called
“contractual obligations”. However, under
certain special circumstances, it may come
into existence from the action of parties and
the law creates and enforces legal rights and
obligations. Such legal rights and obligations
imposed or created by law are known as
“quasi-contracts”.
 
T
Y
P
E
S
 
O
F
 
Q
U
A
S
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T
R
A
C
T
S
 
Supply of necessaries (Sec 68)
Payment by a interested person (Sec 69)
Obligation to pay for non gratuitous acts (Sec 70 )
Responsibility of finder of goods (Sec 71 )
Mistake or Coercion (Sec 72 )
 
S
U
P
P
L
Y
 
O
F
N
E
C
E
S
S
A
R
I
E
S
 
       According to sec 68 a minor is liable to pay out of his
property for ‘necessaries’ supplied to him or to anyone
whom he is legally bound to support.The significance
of this is  that it does not arise out of a contract as
much so as it arises out of a contract.the minor is not
personally liable and ‘necessaries’ include food,
clothing as well as education, They also include watch
bicycle etc.
 
O
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U
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A
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S
 
According to Sec 70 when a person lawfully does or
delivers anything for the other ,not intending to do so
gratuitously, and the person derives any benefit from it,
he is liable to compensate, or restore the thing so done
or delivered.
Here three conditions must satisfy
[1] The thing must have been done lawfully
[2] The person intending to do it must not have done it
gratuitously
[3] The person must have derived benefit from the act
 
P
A
Y
M
E
N
T
 
B
Y
 
A
 
I
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T
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R
E
S
T
E
D
P
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R
S
O
N
 
According to Sec 69 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.
The essential elements center around
[1] The payment made should be bona fide of ones
     interest
[2] The payment should not be a voluntary one
[3] The payment must be such that the other is
      bound by law to pay
 
R
E
S
P
O
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S
I
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Y
 
O
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F
I
N
D
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R
 
O
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G
O
O
D
S
 
According to Sec 71 a person who finds goods belonging to
another and takes them into his custody is subject to the
same responsibility as the bailee is bound to take as much
care of the goods as a man of ordinary prudence would,In
addition to that he must make efforts to trace the owner.If
he does not ,he will be guilty of wrong conversation,and till
the owner is found out the property will vest with the
finder,he can sell in case of
[1] goods are or perishable nature
[2] owner cannot be found out
[3] when owner refuses to pay for the lawful charges
[4] when the lawful charges amount to two thirds of thing
 
Contingent Contract(sec 31)
 
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. It is
also called a conditional contract.
 
Example: A  contracts to pay B Rs.10,000 if B’s
house is burnt. This is a contingent contract
 
Essential Elements of a Contingent
Contract
:
 
There are two persons.
There must be an uncertain future event.
Some control over the event but not absolute
control.
There is no reciprocal promise between the
persons.
Others may be interested in the contract.
It is a valid contract.
 
Rules Regarding Contingent Contracts
 
Contingent contracts dependent on happening of an
uncertain future event cannot be enforced until the event
has happened.( Sec 32 )
Where a contingent contracts is to be performed if a
particular event does not happen, its performance can be
enforced when the happening of that event becomes
impossible.( Sec 33 )
If a contract is contingent upon how a person will act at
an unspecified time, the event shall be considered to
become impossible when such person does anything
which renders it impossible that he should so act within
any definite time, or otherwise than under further
contingencies.( Sec 34)
 
Contingent contracts to do or not to do anything, if
a specified uncertain event does not happen
within a fixed time, may be enforced if the event
does not happen or its happening becomes
impossible before the expiry of that time.( Sec 35 )
 
Contingent agreements to do or not to do
anything, if an impossible event happens, are void,
whether or not the fact is known to the parties.
(Sec 36)
 
Differences Between a Wagering Agreement
and a Contingent Agreement:
 
  Wager    agreement
There is a reciprocal
promise.
It is a void contract.
Others are not
interested in the
contract.
It is contingent in
nature.
 
Contingent agreement
There is no reciprocal
promise.
It is a valid contract.
Others are interested in
the contract.
It may not be wagering
in nature.
 
Chapter 12 : Contracts of indemnity
and guarantee
 
 
I
N
D
E
M
N
I
T
Y
 
(
S
e
c
 
1
2
4
)
 
 
          
A CONTRACT BY WHICH ONE PARTY
PROMISES TO ANOTHERR TO SAVE HIM FROM
LOSS CAUSED TO HIM BY THE CONDUCT OF
THE PROMISOR HIMSELF , OR BY THE
CONDUCT OF ANY OTHER PERSON IS CALLED
A CONTRACT OF INDEMNITY
 
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There are two persons , the indemnifier  the
indemnified or the indemnity holder
There must be loss either by the promisor’s
conduct or by any other person’s conduct
It is a contingent contract by nature
It may be express or implied
 
       Sec125 deals with the commencement of the
indemnifier’s liability. His liability commences
when the event causing the loss occurs or when
the event saving the indemnified from the loss
becomes impossible
 
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A CONTRACT OF GUARANTEE IS A CONTRACT TO PERFORM THE
PROMISE, OR DISCHARGE THE LIABILITY,OF A THIRD PERSON
IN CASE OF HIS DEFAULT. THE PERSON WHO GIVES THE
GUARANTEE IS KNOWN AS THE ‘SURETY’, THE PERSON IN
RESPECT OF WHOM THE GUARANTEE IS GIVEN IS KNOWN AS
THE ‘PRINCIPAL DEBTOR’, AND THE PERSON TO WHOM THE
GUARANTEE IS GIVEN IS CALLED THE ‘CREDITOR’. A
GUARANTEE MAY BE EITHER ORAL OR WRITTEN.
 
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Concurrence of three contracts
Primary liability is that of the principal debtor
In case the debtor is a minor , the surety’s
liability becomes primary
All the essentials of a valid contract
It may be in writing or oral
There need not be full disclosure of facts to the
surety before he gives the guarantee
 
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SPECIFIC GUARANTEE :
         When a guarantee extends to a single
transaction or debt it is known as a specific or
simple guarantee
CONTINUING GUARANTEE :
When a guarantee extends to a series of
transactions
It is called continuing guarantee
 
CHAPTER 13 : BAILMENT AND
PLEDGE
 
 
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The word Bailment is derived from the French word
“ballier” which means “to deliver” .
Bailment means delivery of goods by one person to
another for some purpose ,upon a contract ,that
they shall ,when the purpose is accomplished ,be
returned or otherwise disposed of according to the
instructions of the person delivering them. The
person delivering the goods is called the 
‘bailor’
 and
the person to whom they are delivered is called the
bailee’.
 
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There are two persons namely Bailor and
Bailee.
Bailor means the person delivering the goods,
Bailee means the person to whom the goods
are delivered.
Their must be delivery of goods .
The goods must be in deliverable condition.
 
 
 
 
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Duties of bailor.
To disclose known faults.
To bear extraordinary expenses of bailment.
To indemnify bailee for loss in case of pre
mature termination of gratuitous bailment.
To receive back the goods.
To indemnify the bailee.
 
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Enforcement of rights.
Avoidance of contract. 
(Sec153)
Return of goods lent gratuitously. 
(Sec 159)
Compensation from a wrong –doer. 
(Sec 180)
 
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The bailment of goods as security for payment
of a  debt or performance of a promise is
called “Pledge”.
The bailor in this case is called the “pledger” or
“pawnor” and the bailee is called the
“pledgee” or “pawnee”
 
RIGHTS AND DUTIES OF PAWNOR AND
PAWNEE
 
Rights of Pawnee.
Right of retainer.
Right of retainer for subsequent advances.
Right to extraordinary expenses.
Right against true owner, when the Pawnor’s
title is defective.
Pawnee’s rights where pawnor makes default
.
 
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Right to get back goods.
Right to redeem debt.
Presentation and maintenance of the goods.
Rights of an ordinary debtor.
 
CHAPTER 14 : CONTRACT OF
AGENCY
 
 
AGENT
 
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Agreement between principal & agent
Intention of agent to act on behalf of the
principal
Anyone can be  an agent
Anyone can employ an agent
 
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BY EXPRESS AGREEMENT
BY IMPLIED AGREEMENT
     Agency by estoppel
 
 Agency by holding out
     Agency by neccesity
AGENCY BY RATIFICATION
AGENCY BY OPERATION OF LAW
 
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Agent must act  as an agent for his principal
Principal must be in existance at the time of contract
Ratification must be with full knowledge of facts
Ratification should be done within a reasonable  time of the
performance of the act
The act to be ratified should be of lawful nature
The ratification can be done only to the whole transaction &
not any part of it (Sec 199)
Ratification should be communicated with the party to
contract
Ratification should not cause any damages to a third party
Ratification can only be of acts which principal had the right
to do
 
 
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A  sub agent is  aperson employed & acting
under the control of the agent in the
business of the agency (Sec 191)
 
A substituted agent is a person named by
the agent, on an express  or implied
authority from the principal, to act for the
principal (Sec 194)
 
DIFFERENCES BETWEEN  SUB- AGENT &
SUBSTITUTE-AGENT
 
       
SUB-AGENT
1.
He works under the
agent
2.
There is no contact
between the agent &
the principal
3.
Agent is wholly &
solely responsible for
the acts of the sub-
agent
 
SUBSTITUTE AGENT
1.
He works under the
pprincipal
2.
There is a contract
between him & the
principal
3.
Agent is in no way
responsible for the
acts of the
substituted agent
 
Termination of agency
 
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Agreement
         Revocation by the  principal
 
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Insanity of either party
  
Insolvency of either party
  
Destruction of the subject matter
  
Principal becoming an alien enemy
  
Dissolution of a company
  
Termination of sub-agents authority
 
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The content discusses the fundamental concepts of law, including its essential characteristics and sources, followed by an explanation of business law focusing on trade, commerce, and mercantile transactions. It emphasizes the importance of laws in regulating social conduct, transactions, and business activities, highlighting the different sources that contribute to the legal framework.


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  1. Contract Act

  2. CHAPTER 1 : INTRODUCTION OF CONTRACT AND KINDS OF CONTRACT

  3. Law The term Law denotes set of rules and regulations, which govern the social conduct and which can be enforced through the courts. Law has been one of the most effective instruments for control of social relations and transactions from the ancient times. According to Salmond, Law is the body of principles recognized and applied by the state in the administration of justice.

  4. essential characteristics of law Law presupposes a state. The state makes law as a rule relating to the actions of human beings. The law aims to regulate the external actions of human beings Law is enforced by the State. Law is applied in administration of justice. Law applies to all without discrimination, including the state, which itself is regulated by law Law is always supreme.

  5. Sources of Law Statutes having their source in legislation made by the State; Customs and precedents, which over a period of time become as good as law; Common law, which though originated in the Great Britain, has now been well absorbed into the Indian legal system; International treaties and agreements; Judicial decisions and precedents; Miscellaneous e.g. juristic writings, literary works, foreign decisions etc.

  6. WHAT IS BUSINESS LAW? According to S.R. Davar, business law means that branch of law which is applicable to or concerned with trade and commerce in connection with various mercantile or business transactions. As per Slater, The phrase Mercantile Law or Commercial Law is generally used to denote those portions of the law which deal with the rights and obligations arising out of transactions between mercantile persons.

  7. Sources of Business Law The Lex Mercantoria, i.e. the Law Merchant, which emanated from the customs and usages, which are binding on traders in their dealings with each other. The Statute Law, which is derived from the legislation or enactments or the subordinate legislation made by the legislative bodies. The Common Law, which include the principles of law evolved by the judges in making decisions on cases that are brought before them. The Principles of Equity, which are neither the customs nor codified law, but are imperative dictates of conscience and have been set forth and developed in the Court of Chancery.

  8. Contract According to Salmond, a contract is an agreement creating and defining obligation between the parties. Sir William Anson says, "A contract is an agreement enforceable by law, made between two or more persons, by which right are acquired by one or more to acts or forbearance on the part of other or others. According to section 2 (h) An agreement enforceable by law is a contract . As per the above definition under section 2 (h), the two important features of the contract are: (a) An agreement Contract (b) Its enforceability by law

  9. An Agreement According to section 2 (e), every promise and every set of promises, consideration for agreement . Thus, the agreement is an outcome of the offer and acceptance between parties. i.e. Offer + acceptance = Agreement. forming other, the an each is

  10. ESSENTIAL ELEMENTS OF A VALID CONTRACT (UNDER SECTION 10) Agreement: Republic Medico Surgical Co. vs. UOI. Intention to create legal relationship : Balfor vs. Balfor Free Consent : Consent is said to be free when it is not caused by Coercion, Undue influence, Fraud, Misrepresentation and Mistake. Contractual Capacity Lawful Consideration Lawful Object Certainty of Terms Agreement should not be Declared Void Legal Formalities

  11. KINDS OF CONTRACTS (a) Contracts on basis of validity of a Contract Valid Contract , Voidable Contract, Void Contract, Illegal Agreement Un- Enforceable Contract (b) Classification of contract on the basics of mode of formation of contract Express Contract , Implied Contracts, Quasi Contracts (c) Classification on the Basis of Performance of Contract Executed Contracts , Executory Contract , Partly Executed and Partly Executory Contract, Unilateral Contracts , Bilateral Contracts

  12. Classification of Contracts on the Basis of the Form of the Contracts Formal Contracts Simple Contracts

  13. Difference between Illegal and Void Agreements (a) All the illegal agreements are void but all void agreements are not illegal. (b) Illegal agreements are void ab initio but a valid agreement may become void subsequently. (c) There is no punishment to the parties for a void agreement but parties to illegal agreements are punishable by law. (d) All the agreements, which are collateral to void agreements, are valid but agreements, which are collateral to illegal agreements, are void ab initio. (e) Void agreements are not illegal until they are proved to be so but illegal agreement are illegal from the very begin. (f) Void agreements can be void for various reasons as provided under the Contract Act but illegal agreement can be void due to provisions of others Acts also.

  14. Void Agreement vs Voidable Contracts (1) An agreement not enforceable by the law is known as void agreement (section 2 (g)) where as voidable contract is an agreement which is enforceable at the option of one or more of the parties there to but not at the option of other or others. (Section 2 (i)). (2) Void agreement is not enforceable from the beginning itself and in no case it can be made enforceable by the party. Whereas voidable contract are void only at the option of aggrieved party and who can rescind it, however if aggrieved party does not want to rescind it then it remains valid and enforceable by law. (3) An agreement can be void if any of the essential elements of the agreement, as specified under section 10 of the Act is missing. Whereas voidable agreement can be voidable only due to absence of free consent of the parties. (4) In case of void agreement, no party to the contract can claim damages as law award damages or compensation only when agreement is valid. So in case of void agreement there is no question of damages being granted. Whereas in case of voidable agreement the party, who rescind the contract can claim the compensation or damages for any loses which is suffered by the party for such rescind of the contract. (5) In case of void agreement, restitution is not allowed if parties to the contract were aware of the nature of contract. However, in case of the voidable contract, restitution is always possible (6) Third party do not acquire any right under void agreement whereas in case of voidable agreement third part always acquire the right provided the third party acquire the rights in good faith (7) In case of void agreement, the lapse of reasonable time does not affect the validity of contract. But in voidable contracts parties loses their right after the lapse of time.

  15. Chapter 2 Offer and Acceptance

  16. Offer Section 2 (a) defines proposal or offer as "When one person signifies to another his willingness to do or 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 . An offer consists of two elements that there is an expression of willingness by the offeror to do or abstain from doing something. Such expression of willingness is made to obtain the assent of the other person to such act or abstinence. The person making the offer is known as offeror and the person to whom the offer is made is known as the offeree.

  17. Essential of a valid offer An offer must create legal relationship between the parties Terms of an offer must be clear, definite, certain and capable of being made certain An offer must be distinguished from a mere declaration of intention An offer is different from an invitation to an offer (Harvey vs. Facie) The offer should not include any term or terms, the non-compliance of which may be assumed to lead acceptance The offer must be communicated to the person to whom it is intended to be made

  18. Kinds of offer Express Offer Implied Offer Specific Offer (Boulton vs. Jones ) General Offer (Carllil vs. Carbolic Smoke Ball Co)

  19. Acceptance Acceptance of an offer is very important for the formation of a contract, since acceptance of an offer is a precondition for an agreement / contract. Acceptance is the consent given by promisee or offeree and it has the effect of converting the offer into an agreement. An offer does not create legal relationship unless the offer is accepted. Section 2 (b) explain that Acceptance is, When one person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise .

  20. Who can Accept an Offer? Section 2 (b) makes it very clear that, when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted . So a specific offer can be accepted only by a person to whom it is made. But a general offer, made to the world at large, can be accepted by anyone having knowledge of the offer. But, if the offer is not directed to a particular person but to the world at large, any member of the public who has knowledge about the offer may accept it.

  21. Modes of Acceptance i) Express Acceptance : An express acceptance is one, which is given in words spoken or written. ii) Implied acceptance: It means that an acceptance, which is given by performance of particular act, which is required to be done according to the terms of an offer which is to be gathered from the circumstances or the conduct of parties. Compliance with terms of offer may amount to acceptance.

  22. Legal Rules Regarding Valid Acceptance Or The Essentials of a Valid Acceptance Acceptance must be absolute and unqualified Acceptance must be in the mode prescribed or some usual and reasonable mode Acceptance must be communicated within the time prescribed or within a reasonable time Acceptance must be given before the offer lapses or is revoked In no case acceptance can be before the offer Acceptance must be communicated to the offeror Silence cannot be a mode of acceptance

  23. Communication of offer, acceptance and revocation Section 3 of Act provide that communication of proposal, the acceptance of proposal and revocation of proposal and acceptance are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal acceptance or revocation or which has the effect of communicating it.

  24. Termination or Lapse of an Offer By notice of revocation By lapse of time By failure of the acceptor to fulfill a condition precedent to acceptance By death or insanity of the proposer Counter-offer by the offeree By not being accepted in the mode prescribed Rejection of the offer by offeree

  25. CHAPTER 3 : CONSIDERATION

  26. Consideration Section 2 (d) defines consideration as: When at the desire of the promisor the promisee or any other person has done or abstained from doing, 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 (f) states that promises, which form the consideration or part of consideration for each other, are called reciprocal promises. Thus, consideration implies some benefits to the promisor and some inconvenience or forbearance to the promisee.

  27. Need for Consideration The consideration provides some guarantee of deliberation and a certain protection against hasty and ill-considered contracts. It helps in determining the enforceability of promises. Consideration ensures reciprocity and mutuality of promises. Hence consideration is very important for a contract

  28. KINDS OF CONSIDERATION Present consideration Past consideration Future Consideration

  29. Legal rules regarding consideration There must be some consideration in every contract Consideration should move at the desire of the promisor (Kedar Nath vs. Gorie Mohamed) Consideration may move from any other person including the promisee (Chinnaya vs. Ramaya) Consideration must have some value in the eyes of law Consideration need not to be adequate Consideration may be an act to do or abstinence or forbearance of doing something Consideration may be forbearance to sue Consideration must be lawful Consideration must be real and not illusory or impossible

  30. An agreement without consideration is void OR "No consideration no contract (Section 25 ) Consideration is one of the most important conditions of a valid contract. Contract without consideration is void. However, there are certain exceptions: Promise made on account of natural love and affection Promise for compensation of voluntarily services Promise to pay time-barred debt Completed gift For the contract of agency

  31. Stranger to Contract and Stranger to Consideration Or The Doctrine of Privity of Contract However, the second doctrine of Privity of contract is applicable in India also. Therefore a stranger to a contract cannot sue. A contract is a contract between the partied only and no third person can sue upon it even if it is avowedly made for his benefit. Following are important exception to this rule Trust (Rana Uma Nath Baksh Singh vs. Jang Bahadur) Marriage settlement, partition or other family arrangement (Daropati vs. Jaspati Rai) Acknowledgement of payment or estoppels An agreement creating a charge on immovable property (Khwaja Mohd Khan vs. Hussaini Begum) Agreements relating to land The principal can enforce contracts entered into through the agents

  32. CHAPTER 3 : CAPACITY OF PARTIES TO CONTRACT

  33. Capacity of parties Section 10 of Contract Act provides that a contract must have an agreement, capacity to contract, lawful object, consideration for each other and the free consent. Thus, capacity of parties to enter into contract is very important to form a valid contract. Section 11 provides that Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject .

  34. Minor A person is said to be a minor, who has not attained the age of majority. As per Section 3 of the Indian Majority Act, 1875, a person is said to have attained the age of majority when he attains the age of 18 years. Section 10 only says that all agreements are contracts if they are made by parties competent to contract and Section 11 says every person is competent if he is of the age of majority. These provisions had therefore, given rise to controversy about nature of minor s agreement. However, in case of Mohoribibi vs. Dharmodas Ghose, Calcutta Privy Council held that the agreement by a minor is void. It is now an accepted rule.

  35. Effects of Minors Agreement or Position of minor An agreement with a minor Is absolutely void and void ab initio . (Mohoribibi vs. Dharmodas Ghose.) No rule of estoppel against minor (Gadigeppa vs. Balangowda) Doctrine of restitution does not apply against a minor (Khan Gul vs. Lakha Singh) No ratification of the minor s agreement (Suraj Narain vs. Sukhu Ahir) No liability in contract or tort arising out of contract (Jennings vs. Rundall ) Beneficial contract (Raghava Chariar vs. Srinivasa) Minor cannot be insolvent Liability for necessities Positions of minor s parents or guardian Surety for a minor Minor as an agent

  36. Position of Minor Under Certain Other Laws (1) Minor as a Partner Partnership is based on agreement. Minor being incompetent to enter into a contract, cannot enter into a partnership agreement. (2) Minor under Companies Act A minor cannot become shareholder in a company since he is incompetent to enter into a contract. In case a minor inherits certain shares, he may become a shareholder acting through his lawful guardians. Nandita Jain vs. Bennett, Coleman & Co. Ltd. (3) Minor under Negotiable Instruments Act The negotiable instrument is an instrument in writing containing a certain promise or order to one party to pay certain sum of money to a named party. It includes a Promissory Note, Bill of Exchange or Cheque.

  37. Is minority a boon? (a) (b) A minor will be liable for necessaries (under section 68) Minor cannot be held responsible as an agent (under section 184) (c) Minor can be a partner however he may be admitted to the profits of the firms (under section 30 of Indian Partnership Act, 1932). (d) A minor cannot bind himself under section 26 of Negotiable Instrument Act, 1881. (e) A minor can be held liable for the torts but cannot be held liable if it results in the enforcement of the contract. (f) No specific relief can be given under section 64 and 65 of the Contract Act, whereas section 41of Specific Relief Act can be invoked in the protection of the minor

  38. PERSONS OF UNSOUND MIND Section 12 provide that A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and forming a rational judgment as to effects upon his interest. A person, who is usually of unsound mind but occasionally of sound mind, may make a contract when he is of a sound mind. There are two types of unsoundness of mind:- Persons of permanent unsoundness are : (i) Idiots (ii) Lunatics Persons of temporary unsoundness are : (i) Drunkard or (ii) Intoxicated by any drug

  39. OTHER DISQUALIFIED PERSONS Alien enemy Foreign sovereign and ambassador Convicts Insolvents Company or statutory corporation Married woman

  40. CHAPTER 5 : FREE CONSENT

  41. FREE CONSENT FREE CONSENT According to Sec 10 of the Indian Contract Act one of the essentials of a valid contract is Free Consent Sec 13 defines consent as Two or more persons are said to consent when they agree upon the same thing in the same sense . According to Sec 14, consent is said to be free when it is not caused by: 1.Coercion 2.Undue influence 3.Fraud 4.Misrepresentation 5.Mistake

  42. COERCION COERCION According to Committing or threaten to commit any act forbidden by Indian unlawful detaining or threating to detaining any other persons property with a view to enter into an agreement. It is immaterial whether the IPC is or is not in force where the coercion is employed Sec 15 coercion means Penal Code 1860 or The threat amounting to coercion need not necessarily be from a party to contract , it may also proceed from a stranger to the contract.

  43. UNDUE INFLUENCE UNDUE INFLUENCE Sometimes a party is compelled to enter into a contract against his will as a result of unfair persuasion by the other party. Section 16 defines undue influence as follows 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

  44. Essentials of undue Essentials of undue influence influence 1. There are two persons 2. The relations are satisfying between them 3. One must dominate the other 4. There must be unfair advantage 5. It involves the moral pressure

  45. There is an undue influence between the following persons: -Principal and agent -Superior and and subordinate - Doctor and patient - Father and son - Teacher and student - Promoter and company - Master servant - Spiritual advisor and devotee

  46. Among the following relations there is no undue influence 1.wife and husband 2.landlord and tenant 3.debtor and creditor CASE: Raniannapurna vs. Swaminathan A poor Hindu widow was persuaded by a money lender to agree to pay 100% rate of interest on money lent by him. She needed the money to establish her right to maintenance.it was a clear case of undue influence and the court reduced the rate of interest to 24%

  47. FRAUD FRAUD According to Sec 17 fraud means and includes any of those acts committed by a party to contract or with his connivance or by his agent with an intent to deceive or induce a person to enter a contract: 1. The suggestion that a fact is true when it is not true and the person making it does not believe in itto be true 2. The active concealment of a fact by a person having knowledge 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

  48. The essentials of fraud are: 1. There must be a representation or assertion and it must be false 2.The representation must relate to a fact 3.The representation must have been made with the intention of inducing the other party to act upon it 4.the representation must have been made with a knowledge of its falsity 5.the other party must have subsequently suffered some loss

  49. MISREPRESENTATION MISREPRESENTATION According to Sec 18 there is misrepresentation: When a person positively asserts a fact is true when his information does not warrant it to be so, though he believes it to be true When there is any Breach of duty by a person which brings an advantage to the person committing it by misleading another to his prejudice When a party causes however innocently the other party to the agreement to make a mistake as to the substance of the thing which s the subject of the agreement 1. 2. 3.

  50. MISTAKE Mistake of law Mistake of fact Of the country Of the foreign country Bilateral mistake Unilateral mistake Mistake as to subject matterMistake as to As to person As to nature possibility Physical impossibility Legal impossibility existence identity quality quantity title price

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