Law for Engineers Course PDF

Society of St. Francis Xavier, Pilar’s Fr. Conceicao Rodrigues College of Engineering Fr. Agnel Technical Education Complex Bandstand Bandra (West) Mumbai -400 050 Dr. Surendra Singh Rathod Principal, Fr. Conceicao Rodrigues College of Engineering [email protected] 1 Moulding Engineers Who Can Build the Nation Course Code Course Name Teaching Scheme (Hrs/week) Credits Assigned L T P L T P Total 2 -- -- 2 -- -- 2 MDM01 Law for Engineers Examination Scheme ISE1 MSE ISE2 ESE Total Theory 50 -- 50 -- 100 Pre-requisite Course Codes -- After the successful completion students should be able to: CO1 To demonstrate awareness of basic structure of Indian Legal System CO2 To demonstrate awareness of principles of contract Course CO3 To demonstrate awareness of legal aspects related to establishment of factory and various legislations Outcomes related to employees, labours, and workmen’s welfare CO4 To demonstrate awareness about right to information, intellectual creations from infringement and laws related to energy, food and environment 2 Moulding Engineers Who Can Build the Nation Module Unit Topics Ref. Hrs. No. No. 1 Foundation of Legal System 1,2,3 4 1.1 Indian Legal System: An Introduction, Human Rights, Fundamental Rights, The Supreme Court of India, Statutory Commissions– NHRC, NCW, NCM, NC-SC/ST etc., 1.2 Representation of Peoples Act 1950, Prevention of Corruption Act, 1988, Understanding the Importance of Stamp Duty 1.3 Few Illustrated Cases of Supreme Court of India 2 General Principles of Contract: India Contract Act 1872 2,3 8 2.1 Contract Law: Agreement and Its Kinds, 2.2 Who Can Enter into a Contract, Contract and Its Enforceability, Offer and Acceptance in a Contract, 2.3 Essentials of Valid Contract- Lawful Consideration and Lawful Object, Essentials of Valid Contract- Free Consent, 2.4 Types of Contracts, Contract of Agency, Performance of Contracts, Government Contracts, Standard Form Contracts 3 Industrial and Labour Laws 2,3 8 3.1 Labour Laws in India: An Overview, Industrial Disputes Act, 1947, Industrial Employment (Standing Orders) Act, 1946 3.2 Factories Act, 1948, Industries (Development and Regulation) Act, 1951 3.3 Contract Labour (Regulation and Abolition) Act, 1970, Bonded Labour System (Abolition) Act, 1976, Child and Adolescent Labour (Prohibition and Regulation) Act, 1986 3.4 Workmen’s Compensation Act, 1923, Equal Remuneration Act, 1976, Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972, Employees' State Insurance Act, 1948, Employees' Provident Funds and [Miscellaneous Provisions] Act, 1952, Payment of Wages Act, 1936, Minimum Wages Act, 1948, Employees’ Pension Scheme 1995 3.5 Apprentices Act, 1961, Maternity Benefit Act, 1961, Fatal Accidents Act, 1855, Trade Unions Act, 1926, Sexual Harassment of Women at Workplace Act, 2013, Collective Bargaining 3 Moulding Engineers Who Can Build the Nation Module Unit Topics Ref. Hrs. No. No. 4 Right to Information 2,3 2 4.1 Official Secret Act, 1923, Indian Evidence Act, 1872 4.2 Right to Information Act, 2005, Impact of Right to Information Act 5 Intellectual Property Rights 2,3 2 5.1 Types of Intellectual Property, Indian Copyright Act 1957, Indian Trademark Act 1999, Indian Patent Act 1970 6 Other Important Laws 2,3 2 6.1 Electricity Act 2003, Atomic Energy Act 1962, Motors Vehicle Act 1988, Food Safety and Standards Act 2006, National Food Security Act 2013, Environment Protection Act 1986 Total 26 4 Moulding Engineers Who Can Build the Nation Recommended Books: 1. N. S. Nappinai, “Technology Laws Decoded,” LexisNexis, 2017 2. Vibha Arora and Kunwar Arora, “Law for Engineers” Central Law Publications, 2017 3. Vandana Bhatt and Pinky Vyas, “Laws for Engineers”, ProCare, 2015 5 Moulding Engineers Who Can Build the Nation Course Assessment: ISE-1: Quiz: 20 Marks Activity: Debating Session: 20 Marks Activity: Poster Making: 10 Marks ISE-2: Quiz: 20 Marks Activity: Client Counselling: 10 Marks Activity: Animation Making: 20 Marks 6 Moulding Engineers Who Can Build the Nation Technology and Indian Law Comprehensive Course for Engineering and Novice Law Students “Ignorance of the law is no good excuse, where every man is bound to take notice of the laws to which he is subject.” -------Thomas Hobbes, (17th century English philosopher and considered as one of the founders of modern political philosophy) Rights & Duties Factory Law Legal System Industry Law Constitutional Company Law Provisions Labour Law Informed Citizen Technology Responsible Workplace Citizen Intellectual Compliance Property What is IP What? Types of IP How? Protection Challenges Consequences Structure of Indian Legal Consumer, System Competition, Other Semiconductor Laws RTI Layout Design, Electricity, Motor, Food, BIS, Technology Emerging Law Contract Tech Laws Blockchain, UAV, 5G, Industrial AI, Cyber IPR & Labour crime, IoT Laws Company Laws Career / Job Prospects Projects Opportunity Execution for Higher Studies Benefit Start-up/ ? Independent Company/ Consultant Business Sensitivity Protection towards from others Infringement Welcome General Principles of Contract India Contract Act 1872 Learning Outcomes After successfully completing this chapter, learners will be able to describe: Contract, Agreement, offer and acceptance Who Can Enter into a Contract Enforceability of Contract Essentials of Valid Contract Types of Contract Performance of Contracts Government Contracts and Standard Form Contracts Web References  https://legislative.gov.in/constitution-of-india  https://www.un.org/en/about-us/universal-declaration-of-human-rights  https://main.sci.gov.in/  https://www.cci.gov.in/  https://www.un.org/en/  https://www.epfindia.gov.in/site_en/index.php  https://ipindia.gov.in/  https://thepractice.law.harvard.edu/  https://www.nishithdesai.com/  https://www.manupatrafast.com/  https://indiankanoon.org/  https://www.livelaw.in/  https://www.india.gov.in/official-website-india-code  https://www.lawstudies.com/ India Contract Act 1872 Contract Law: Agreement and Its Kinds Agreement Every promise and every set of promises forming the consideration for each other is an ‘agreement’. An agreement consists of an offer, an acceptance and a consideration. The offer when accepted becomes a promise. The promise when backed by a lawful consideration becomes an agreement. ‘A’ promises to deliver his car to ‘B’ and in turn ‘B’ promises to pay a sum of Rs. 89,000/- to ‘A’. This is a valid agreement between ‘A’ and ‘B’. Kinds of Agreement Valid Agreement: A set of promises giving rise to specified obligations which can be enforced by the law. ‘A’ promises to deliver his car to ‘B’ and in turn ‘B’ promises to pay a sum of Rs. 89,000/- to ‘A’. Both ‘A’ and ‘B’ can sue each other in case of infringement of their rights arising out of this agreement. Kinds of Agreement Void Agreement: An agreement which is not enforceable by law. ‘A’ promises to deliver his car to ‘B’. ‘B’ however doesn’t offer any consideration to ‘A’ for such delivery. The agreement is void as it lacks consideration from ‘B’. Agreements Expressly Declared Void Agreements of which the consideration or object is unlawful (Ss. 23, 24 ) Agreement without consideration (S. 25 ) Agreement in restraint of marriage (S. 26 ) Agreement in restraint of trade (S. 27 ) Agreement in restraint of legal proceedings (S. 28 ) Agreement which are uncertain and ambiguous (S. 29 ) Agreement by way of wager (S. 30 ) Agreement to do impossible acts (S. 56 ) Kinds of Agreement Illegal Agreement: An agreement to perform an obligation which is forbidden by law. ‘A’ promises to deliver his car to ‘B’ if ‘B’ kills ‘C’. The agreement is illegal as killing of any person is both forbidden and punishable by law. Kinds of Agreement Voidable Agreement: An agreement which is enforceable at the option of one or the other party but not at the option of other. 'A', by a misrepresentation, leads 'B' erroneously to believe that, his car is imported from Beijing and thereby induces 'B' to buy it. The contract is voidable at the option of 'B'. Illegal and Void Agreements: The Differences Illegal Agreements Void Agreements It may not be forbidden It is forbidden by law. by law. All illegal agreements are All void agreements are void. not illegal. These may be legal at the These are void ab initio. time of its formation. India Contract Act 1872 Who Can Enter into a Contract Capacity to Contract Section 11 of the Indian Contract Act, 1872 The following persons are not competent to contract: 1. Minors, 2. Persons of unsound mind, and 3. Persons disqualified from entering into contract by any law to which they are subject. Minors In general, a person below eighteen years of age is considered as a minor. In cases where a guardian of minor’s person or property is appointed by the Court, the age of majority is twenty one years. A minor is not competent to contract by virtue of S. 11 of the Indian Contract Act, 1872. A minor cannot ratify a contract on attaining the age of majority. A contract made during infancy is considered void ab initio. A contract by minor is valid only if it is a ‘contract for necessaries’. Persons of Unsound Mind A contract entered into with a person of unsound mind is absolutely void. As per S. 12 of the Act, a person is considered to be of sound mind if at the time of entering into a contract: 1. He is capable of understanding it, and 2. He is capable of forming a rational judgment as to its effect upon his interest. In general, a person of unsound mind may enter into a valid contract when he is of sound mind. A patient in a lunatic asylum, who is, at intervals, of sound mind, may contract during those intervals. A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. Elements that affect soundness of mind are: Insanity Intoxication / Drunkenness Mental Idiocy Old Age Disqualified by Law Some persons are specifically barred from contracting by some kind of law that governs them. Contracts entered into by persons disqualified by law from contracting are void. ‘ABC Corp.’ derives their power and authority from the Charters, Statutes, or Acts under which they are established or incorporated. ‘ABC Corp.’ enters into a contract beyond the permissible scope and extent to borrow a loan of Rs. 1,000 Crore. The contract is void. India Contract Act 1872 Contract and Its Enforceability Contract A contract is an agreement between two or more parties to perform an obligation and is enforceable by law. The Indian Contract Act, 1872 is the operating law in India that regulates the mercantile transactions. Section 2(h) of the Indian Contract Act, 1872 defines a ‘contract’ as ‘an agreement enforceable by law’. A ‘contract’ is an ‘agreement’, an ‘agreement’ is a ‘promise’ and a ‘promise’ is an ‘accepted proposal’. All contracts are agreements, but not all agreements are contracts. An agreement in order to qualify as a contract must meet certain criteria listed in the Act of 1872. Contents of India Contract Act 1872 S.N. Subject Section 1 General Principle of Contract 1-75 2 Sale of Goods Act 76-123 3 Indian and Wear 124-147 4 Bailment 148-181 5 Agency 182-238 6 Partnership Act 239-266 S.N. General Principle of the law of Contract Section 1 Fundamental Definition 1-2 2 Offer-Acceptance 3-9 3 Contract, Voidable Contract, Void Agreement 10-30 and 56 4 Contingent Contract 31-36 5 Performance of the Contract 37-67 6 Implied Contract 68-72 7 Breach of the Contract 73-75 Enforceability of Contract A contract is enforceable when: Both parties agree to something, Back the promise up with money or something of value, Both are in sound mind and Intend to carry out their promise and What they promise to do is within the law. Enforceability of Contract Contd.. Valid Contract Essential of a Offer and acceptance An intention between the parties to create binding relations Lawful consideration Lawful object Legal capacity of the parties to act Free consent Key Definitions Contract S. 2 (h) An agreement enforceable by law Every promise and every set of promises forming the Agreement S. 2 (e) consideration for each other. Agreement=Offer+Acceptance A statement of willingness to contract on specified Offer/ S. 2 (a) terms made with the intention that, if accepted, it will Proposal give rise to a binding contract. It is the expression of assent to the terms of the offer / Acceptance S. 2 (b) proposal. Promise S. 2 (b) A proposal when accepted becomes a promise. Promisor S. 2 (c) The person making the proposal. Promisee S. 2 (c) The person accepting the proposal. It refers to something of value that is being gained Consideration S. 2 (d) through the contract. Basis Contract Agreement Definition A contract is an agreement Every promise or every set of enforceable by law promises forming consideration for each other is an agreement Enforceability Every contract enforceable Every promise is not enforceable Interrelationship A contract includes as An agreement does not include agreement contract Scope The scope of contract is limited Its scope is relatively wider, as it as it includes only commercial includes both social agreements agreements Validity Only legal agreements are An agreement may be both legal called contracts and illegal Legal Obligation Every contract contains a legal It is not necessary for every obligation agreement to have legal obligation India Contract Act 1872 Offer and Acceptance in a Contract Offer/Proposal When one person signifies to another 1. his willingness to do or, 2. to abstain from doing anything, 3. with a view to obtaining the assent of that, 4. either to such act or abstinence, he is said to make a proposal. Offer/Proposal Mere expression of willingness does not constitute an offer. For example: If ‘A’ jokingly offers ‘B’ his scooter for Rs. 10/-- and ‘B’ knowingly that ‘A’ is not serious, says “I accept ‘A’s proposal’. This does not constitute an offer. Terms of offer must be definite, unambiguous, not loose and vague. For example: ‘A’ says to ‘B’, “I will sell you a car” ‘A’ owns three different cars. This offer is not a definite. Mere declaration of intention and announcement is not an offer and gives no right of action to another. An offer should be made to obtain the assent of the other and should be communicated to the offeree by the offeror. What is an Offer? It is an intimation of a willingness to enter into a legally binding contract. It may be expressed by words or by conduct. An offer must be definite and certain. It must be communicated to the other person in order for it to be valid. ‘A’ signifies his willingness to sell his watch to ‘B’ for Rs. 500. It is a valid offer, as it is made with the intention of entering into a legally binding contract to sell the watch. Classification of Offer General Offer: Which is made to public in general Special Offer: Which is made to a definite person Cross Offer: Exchange of identical offer in ignorance of each other Counter Offer: Modification and variation of original offer Standing, Open or Continuing Offer: Which is open for a specific period of time What is ‘Invitation to Offer’? When a person expresses 1. something to another person, 2. to invite him to make an offer, it is known as invitation to offer. An invitation to offer is inviting someone to make a proposal. It is an act which leads to the offer, which is made with an aim of inducing or negotiating the terms. In an invitation to offer, the offeror, does not make an offer, rather invites other parties to make an offer. An Invitation to offer becomes an offer when responded by the party to whom it is made. Fruits were displayed in a super mart with the prices attached. It is an invitation to offer or an invitation to treat and not an offer. When a buyer takes a fruit to the cash counter and offers cash with an intention of purchasing it, it becomes an offer. Communication of Offer Section 4 of the Indian Contract Act, 1872 An offer must be communicated to the other person in order for it to be valid. It is effective only when it is communicated to the ‘offeree’. The communication of an offer/proposal is complete when it comes to the knowledge of the person to whom it is made. ‘A’ proposes by letter to sell his watch to ‘B’ for Rs. 500. The letter was posted on September 01, 2017. The letter reaches ‘B’ on September 06, 2017. The communication of offer is complete when the letter reaches ‘B’ i.e., on September 06, 2017. Revocation of Offer Section 5 and 6 of the Indian Contract Act, 1872 An offer may be revoked at any time before the communication of its acceptance is complete as against the offeror and not afterwards. Modes of revocation: By the communication of notice of revocation by the proposer to the other party By the lapse of the time prescribed in such proposal for its acceptance If no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance By the failure of the acceptor to fulfill a condition precedent to acceptance By the death or insanity of the proposer. Essential of a Valid Contract Offer and acceptance An intention between the parties to create binding relations Lawful consideration Lawful object Legal capacity of the parties to act Free consent Acceptance It is the expression of assent to the terms of the offer in the manner prescribed or indicated by the offeror. It is a final and unqualified expression of assent to the terms of an offer. ‘A’ signifies his willingness to sell his watch to ‘B’ for Rs. 500. ‘B’ accepts the offer. It is a valid acceptance, as it is made with the intention of entering into a legally binding contract to buy the watch. Essential of a Valid Acceptance It should be communicated. It should be absolute and unqualified. It should be expressed in prescribed manner. It should be made while the offer is still subsisting. Essential of a Valid Acceptance Acceptance must be absolute and unqualified: For example ‘A’ says to ‘B’ “I offer to sell my car for Rs. 50000/--”. ‘B’ replies “I will purchase it for Rs. 45000/--”. This is not acceptance and amounts to a counter offer. Acceptance should be expressed in prescribed mode: For example ‘A’ makes an offer to ‘B’ says to ‘B’ that “if you accept the offer, reply by voice”. ‘B’ sends reply by post. It will be a valid acceptance unless ‘A’ informs ‘B’ that the acceptance is not according to the prescribed mode. Acceptance can not precede an offer: For example allotment of shares previous to the application is not valid. Acceptance by the way of conduct: Mere silence is no acceptance. Silence does not per-se amounts to communication. Communication of Acceptance Section 4 of the Indian Contract Act, 1872 An acceptance must be communicated to the person making the offer in order for it to be valid. The communication of an offer/proposal is complete: As against proposer: When the acceptance is put in a course of transmission to him, so as to be out of power of the acceptor. ‘A’ proposes by letter to sell his watch to ‘B’ for Rs. 500. ‘B’ accepts the proposal by a letter sent through post. The communication of acceptance is complete as against ‘A’ (the proposer), when the letter is posted. As against acceptor: When the acceptance comes to the knowledge of the proposer. ‘A’ proposes by letter to sell his watch to ‘B’ for Rs. 500. ‘B’ accepts the proposal by a letter sent through post. The communication of acceptance is complete as against ‘B’ (the acceptor), when the letter is received by ‘A’. Revocation of Acceptance Section 5 of the Indian Contract Act, 1872 An offer may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. An acceptor may revoke his assent to the offer of the offeror by a speedier mode of communication which will reach earlier than his acceptance itself. India Contract Act 1872 Essentials of a Valid Contract- Lawful Consideration and Lawful Object Lawful Consideration Legislative Definition: Section 2(d) of the Indian Contract Act, 1872 When, at the desire of the promisor, 1. the promisee or any other person 2. has done or abstained from doing, or 3. does or abstains from doing, or 4. promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. Consideration may be Past, Present (Executed) or Future (Executory). Consideration need not be adequate, or equal in value to the promise. The consideration should have some value in the eyes of the law. An agreement must be supported by lawful consideration on both sides. Lawful Consideration Consideration may be Past, Present (Executed) or Future (Executory). Past consideration is not consideration according to English law but it is consideration according to Indian law. Past consideration example: ‘A’ renders some service to ‘B’ at latter’s desire. After a month ‘B’ promises to compensate ‘A’ for service rendered to him earlier. Present consideration example: (Consideration is given simultaneously with promise) ‘A’ receives Rs. 50 in return for which he promises to deliver certain goods to ‘B’. Future consideration example: (When consideration to one party to another is to pass subsequently to the maker of the contract) ‘A’ promises to deliver certain goods to ‘B’ after a week. ‘B’ promises to pay the price after a fortnight. Lawful Consideration Contd… 1. The act or abstinence, which is to be consideration for the Valid Consideration promise, should be done at the desire of the promisor. Essentials of a 2. It should be done by promisee or any other person. 3. Such act or abstinence may have been already executed or is in the process of being done or is promised to be done. Something not done at the desire of the promisor, but voluntarily, will not amount to valid consideration. For example: ‘A’ saves ‘B’s goods from fire without being asked him to do so. ‘A’ cannot demand payment for his service. Lawful Consideration Illustration ‘A’ proposes to sell his house to ‘B’ for Rs. 50 lakhs. ‘B’ accepts the offer and transfers the sum into the bank account of ‘A’. ‘A’ delivers the house to ‘B’. This is a valid contract wherein, the house is consideration for ‘B’ and the sum of Rs. 50 lakhs is the consideration for ‘A’. Doctrine of Privity 1. A contract cannot confer rights or impose obligations under it on any person except the parties to it. 2. A third person, who is a stranger to contract, cannot be entitled to demand performance of the contract. The doctrine of privity prescribes that someone not a party to a contract cannot be liable under it nor benefit from it. Privity of Consideration A consideration can be given by the promisee or any other person. It says that only the parties in the contract who have offered consideration can benefit from the right. Following are the exceptions to rule of privity: 1. Beneficiaries under Trust or Charge or other Arrangements 2. Marriage Settlement, Partition or other Family Arrangements 3. Acknowledgement or Estoppel 4. Covenants running with Land Exception to General Rules of Consideration Agreements without consideration are void, unless: 1. It is in writing and registered 2. It is a promise to compensate for something done or is a promise to pay a debt barred by limitation law. 3. It is made on account of natural love and affection between parties standing in a near relation to each other. 4. It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do. Certain exceptions to consideration 1. Promise due to natural love and affection 2. Compensation for voluntary services 3. Promise to pay a time barred debt The doctrine of public policy is based on the maxim “ex turpi causa non oritur action”, which means, an agreement which opposes public policy would be void and no effect. Common examples of agreements opposed to public policy: Trading with an alien enemy Sale of public offices Stifling Prosecution Maintenance and Champerty Interference with Course of Justice Marriage Brokerage Contracts Interest against Duty Trade Ethics Lawful Object Legislative Provisions: Section 23 of the Indian Contract Act, 1872 Parties must contract for a lawful object. An agreement the object of which is opposed to the law of the land may be either unlawful or simply void. An illegal contract is per se unenforceable. What Consideration / Object Are Unlawful? The consideration or object of an agreement is lawful, unless— 1. It is forbidden by law; or 2. It is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; or 3. It involves or implies, injury to the person or property of another; or 4. The Court regards it as immoral, or 5. It is opposed to public policy. India Contract Act 1872 Essentials of a Valid Contract- Free Consent Essentials of a Valid Contract Free Consent Lawful Consideration Lawful Object Section 10 of the Indian Not specifically declared Contract Act, as void under any law 1872 Free Consent Two or more persons are said to consent when they both agree upon the same thing in the same sense. A contract entered into without free consent is voidable. Consent is deemed not to be a ‘free consent’ if it is caused by: 1. Coercion, 2. Undue Influence, 3. Fraud 4. Misrepresentation, or 5. Mistake If consent to an agreement is caused by coercion, undue influence, misrepresentation, or fraud then the contract is said to be voidable. [S. 19] If consent to an agreement is caused by mistake the contract is said to be void. [S. 20, 21] Coercion Legislative Definition: Section 15 of the Indian Contract Act, 1872 It is the committing of or threatening to commit: 1. Any act forbidden by the Indian Penal Code, 1860, 2. Unlawful detaining of or threat to detain any property, With the intention of compelling any person to enter into a contract. English law defines ‘coercion’ as ‘duress’ or ‘menace‘. If the consent has been induced by coercion, the contract is voidable at the option of the party whose consent has been so obtained. ‘A’ threatens to ‘B’ to kidnap his minor daughter, if ‘B’ does not agree to sell his villa to ‘A’ at a stated price. ‘B’ agrees to sell his villa to ‘A’. B‘s consent in this case has been obtained by coercion. Undue Influence Legislative Definition: Section 16 of the Indian Contract Act, 1872 In order to constitute undue influence, it is necessary to prove that: 1. The relation subsisting between the parties are such that one of the parties is in a position to dominate the will of other; and 2. Such a person uses his dominant position to obtain an unfair advantage over other. A person is deemed to be in a position to dominate the will of another: 1. Where he hold a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or 2. Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress. Undue Influence Contd. If the consent has been induced by undue influence, the contract is voidable at the option of the party whose consent has been so obtained. ‘A’, the office bearer of a temple trust, pressurizes ‘B’, a devotee, to make a donation of Rs. 5 lakh to the trust. ‘B’ accordingly agrees to make such donation. B‘s consent in this case has been obtained by undue influence. Fraud Legislative Definition: Section 17 of the Indian Contract Act, 1872 It means and includes certain acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive the other party or to induce him to enter into a contract. If the consent has been induced by fraud, the contract is voidable at the option of the party whose consent has been so obtained. Mere silence is not fraud. ‘A’, intending to deceive ‘B’, falsely represents that five hundred maunds of indigo are made annually at A's factory, and thereby induces ‘B’ to buy the factory. B‘s consent in this case has been obtained by fraud. According to Section 17 following are the essentials of fraud: False statement of Facts; and Wrongful Intention Acts That Constitutes Fraud 1. The suggestion as a fact, of that which is not true, by one who does not believe it to be true. 2. The active concealment of a fact by one 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. Misrepresentation Legislative Definition: Section 18 of the Indian Contract Act, 1872 It means and includes: 1. The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; 2. Any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him; by misleading another to his prejudice, or to the prejudice of any one claiming under him; 3. Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is subject of the agreement. If the consent has been induced by misrepresentation, the contract is voidable at the option of the party whose consent has been so obtained. ‘A’, a landlord, represents to ‘B’, a tenant, that a property has two bedrooms, a dining hall, a study area, a kitchen, a bathroom and three balconies and thereby induces ‘B’ to buy the property. A, however, does not know that the property has only two balconies. B‘s consent in this case has been obtained by misrepresentation. Mistake Legislative Provisions: Section 20, 21, 22 of the Indian Contract Act, 1872 Where the mistake does not defeat consent, but only misleads the parties, Section 20 shall apply. If the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement, the agreement is void. ‘A’ agrees to buy from ‘B’ a certain horse. It turns out that the horse was dead at the time of bargain, though neither party was aware of the fact. The agreement is void. If a party gives his consent under the mistake of any law for the time being in force, such a contract is not voidable. [S. 21] ‘A’ and ‘B’ make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation. The contract is not voidable. If one of the party consents to the terms of contract under any mistake of fact, the contract is not voidable. [S. 22] India Contract Act 1872 Types of Contract Types of Contract On the Basis of On the Basis of Nature On the Basis of Nature Nature of of Formation of Execution Consideration Unilateral Contract Express Contract Executed Contract Implied Contract Executory Contract Bilateral Contract Tacit Contract Partly Executed Quasi Contract Contract or Partly Executory Contract E Contract Types of Contract On the Basis of Nature of Validity Valid Contract Void Contract Voidable Contract Unenforceable Contract Illegal Contract Types of Contract On the Basis of Nature of Consideration Unilateral Contract Bilateral Contract A contract in which only one party A contract in which both the parties has to perform his promise or have to perform their promises or obligation. obligations. In this type of contract, In this type of contract, consideration is to be moved in one considerations are to be moved in direction. both directions. ‘A’ offers a reward of Rs. 1500 for ‘A’ promises to deliver ‘XYZ’ goods the safe return of his missing dog. to ‘B’. In turn, ‘B’ promises to pay The offeree has made no promise. an amount of Rs. 10,000 to ‘A’. It is It is a unilateral contract. a bilateral contract. Types of Contract On the Basis of Nature of Consideration Unilateral Contract Bilateral Contract ‘A’ wants to get his room ‘A’ offers to sell his fiat car to painted. He offers Rs. 500 to ‘B’ for Rs. 1,00,000/-- on ‘B’ this purpose. ‘B’ says to ‘A’ acceptance of ‘A’s offer by ‘B’, “if I have spare time on next there is a promise by ‘A’ to sell Sunday I will paint your the car and there is a promise house”. There is a promise by by ‘B’ to purchase the car. ‘A’ to pay Rs. 500 to ‘B’. There are two promise. However there is no promise by ‘B’ to paint the house. Types of Contract On the Basis of Nature of Formation Express Contract A contract is made by word spoken or written. According to Sec. 9 in so far as the proposal or acceptance is made in words, the promise is said to be express. Example: ‘A’ says to ‘B’ “will you purchase my bike for Rs. 20000/-- ‘B’ says to ‘A’ ‘Yes’. Implied Contract A contract is inferred by: The conduct of a person or circumstances of the case. Implied by law. Example: ‘A’ stops a taxi by waving his hand and takes his seat. There is an implied contract that ‘A’ will pay the prescribed fare. Tacit Contract A contract is said to be tacit when it has to be inferred from the conduct of the parties. Example: Obtaining cash through ATM, Sale by fall hammer of an auction sale E Contract Entered into two parties via internet. Types of Contract On the Basis of Nature of Formation Quasi Contract A contract which is created by virtue of law. There is no express offer and express acceptance in such contracts. A quasi-contract exists in the absence of a written contract. Section 68 to 72 of the Indian Contract Act, 1872 deals with provisions related to ‘quasi contracts’. A contract where there is expression. ‘A’ orders a pizza to be delivered at his address and made necessary payment. The pizza gets delivered to ‘B’ due to some confusion. ‘B’ didn’t correct the delivery boy and also accepts the pizza. ‘A’ may get a quasi contract enforced by law, which would require ‘B’ to pay back the amount of the pizza to ‘A’. Legislative Provisions Indian Contract Act, 1872 Quasi Contracts Sec. 68: When necessaries are supplied Sec. 69: When expenses of one person are paid by another person. Sec. 70: When one party is benefited by the activity of another party. Sec. 71: In case of finder of lost tools. Sec. 72: When payment is made by mistake or goods are delivered by mistake. A quasi contract is based on the principle of ‘unjust enrichment’ that was given by Lord Mansfield. According to this a person shall not enrich himself / herself unjustly at the cost of another person. Types of Contract On the Basis of Nature of Execution Executed Contract Executory Contract A contract wherein both the parties A contract wherein both the parties have performed their part of have still to perform their parts of obligations. obligations. A contract in which the promises are The promises of the contract are not made and completed immediately, fully performed immediately. An like in the purchase of a product or example of an executory contract service. would be an apartment lease. ‘A’ expresses his willingness to sell his ‘A’ expresses his willingness to sell his watch for Rs. 1,000. ‘B’ accepts the offer watch for Rs. 1,000. ‘B’ accepts the offer. If and pays Rs. 1000. ‘A’ delivers the watch. It the watch has not yet been delivered by ‘A’ is an executed contract. and the price has not yet been paid by ‘B’, its is an executory contract. Types of Contract On the Basis of Nature of Execution Executed Contract Executory Contract ‘A’ contracts to buy a car from ‘B’ by ‘D’ agrees to buy ‘E’s cycle by paying cash, ‘B’ instantly delivers his promising to pay cash on 15th July. car. ‘E’ agrees to deliver the cycle on 20th July. Types of Contract On the Basis of Nature of Execution Contd… Partly Executed Contract or Partly Executory Contract A contract wherein one of the parties to the contract has performed his part of obligations and the performance of obligations on the part of the other party is due. A contract in which the promises are made and part of it are completed immediately, while the other part of it are yet to be completed. In case of breach of quasi contract, the remedies available for the breach are the same as those available for contracts u/s 73 of the Indian Contract Act. ‘A’ expresses his willingness to sell his watch for Rs.1,000 on a credit of two months. ‘B’ accepts the offer and ‘A’ delivers the watch to ‘B’. Here, the contract is executed as to ‘A’ and executory as to ‘B’. ‘A’ sells his car to ‘B’ and ‘A’ delivered the car but ‘B’ is yet to pay the price. For ‘A’ it is executed contract whereas it is executory contract on the part of ‘B’ since the price is yet to be paid. Types of Contract On the Basis of Nature of Enforceability Valid Contract A contract which is enforceable in the Court of law. A contract which satisfies all the conditions prescribed by law. A valid contract is a written or expressed agreement between two parties for any specific purpose. ‘A’ a person of 18 years of age proposes to sell his car to ‘B’ a person of 19 years of age for Rs. 2 lakh. ‘B’ accepts the offer with his free consent and pays the said amount. ‘A’ then delivers his car to ‘B’. It is a valid contract. Types of Contract Contd… On the Basis of Nature of Enforceability Valid Contract: Determining the Validity ‘A’ a person of 17 years of age proposes to sell his car to ‘B’ a person of 18 years of age for Rs. 2 lakh. ‘B’ pays the said amount to ‘A’ but ‘A’ refuses to delivers his car. It is not a valid contract as ‘A’ did not had the capacity to enter into a contract. Remember This: A minor cannot enter into a valid contract. As a general rule, a person who has not attained the age of 18 years is considered as minor. Types of Contract Contd… On the Basis of Nature of Enforceability Valid Contract: Determining the Validity ‘A’ a person of 18 years of age proposes to sell his car to ‘B’ a person of 19 years of age for Rs. 2 lakh. ‘B’ under the state of intoxication accepts the offer. ‘A’ delivers his car but ‘B’ refuses to pay the specified amount. It is not a valid contract as ‘B’ consented to its terms under the state of intoxication. Remember This: For a valid contract, the party must give his ‘free consent’. A consent is deemed to be ‘free consent’ if it is free from coercion, fraud, misrepresentation, mistake and undue influence. Types of Contract Contd… On the Basis of Nature of Enforceability Valid Contract: Determining the Validity ‘A’ proposes to give his car to ‘B’, if ‘B’ agrees to kill ‘C’. ‘A’ delivers his car but ‘B’ refuses to kill. It is not a valid contract as the consideration is unlawful so much so, that the act asked to be performed is specifically forbidden by law. Remember This: For a valid contract, the consideration and the object must be lawful. A consideration or an object is unlawful, if it is forbidden by law; if it is of such a nature that if permitted, it would defeat the provisions of any other law; if it is fraudulent; if it involves or implies injury to the person or property of another, or if it is opposed to morality or public policy. Types of Contract Contd… On the Basis of Nature of Enforceability Void Contract A contract which is not enforceable in the Court of law. Section 2(j) of the Indian Contract Act, 1872 defines ‘void contract’. An agreement which lacks legal elements is void. ‘A’ a person of 17 years of age proposes to sell his car to ‘B’ a person of 19 years of age for Rs. 2 lakh. ‘B’ accepts the offer and pays the said amount. It is a void contract as ‘A’ lacks the capacity to enter into a contract. According to Indian Majority Act, 1875, every person domiciled in India shall be deemed to have attained his majority when he shall have completed his age of eighteen years and not before. In case, guardian has been appointed to the minor or where the minor is under the guardianship of the court of wards, the person shall become major on the completion of the age of 21 years. Types of Contract Contd… On the Basis of Nature of Enforceability Voidable Contract A contract is voidable if one of the parties has the option to abort the contract. Section 2(i) of the Indian Contract Act, 1872 defines ‘voidable contract’. An agreement which is enforceable at the option of one or more parties. ‘A’ proposes to sell his car to ‘B’ for Rs. 2 lakh. ‘A’ misrepresented the fact that his car was imported from America. ‘B’ accepts the offer and pays the said amount but came to know about misrepresentation thereafter. It is a voidable contract. A contract is treated as voidable at the option of the party whose consent has been obtained by ‘coercion’, ‘undue influence’, ‘fraud’ or ‘misrepresentation’. Matter Void Contract Voidable Contract Definition It means contract which cease It means an agreement to be enforceable enforceable by law by one or more parties Nature Valid when made subsequently It remains voidable until cancelled becomes unenforceable by party Rights or remedy No legal remedy Aggrieved party has remedy to cancel the contract Performance of Party can’t demand If aggrieved party does not cancel Contract performance of contract it within reasonable time, performance can be demanded Reason Due to change in law or If consent is not obtained freely circumstances Damages Not available Can demand in certain cases Types of Contract Contd… On the Basis of Nature of Enforceability Unenforceable Contract A contract which is usually valid but cannot be enforced because of some technical defects. Such defects, if removed, makes contract enforceable. A contract which has not properly fulfilled legal formalities is unenforceable. Example: An agreement which is required to be stamped will be unenforceable if the same is not stamped at all or is under stamped. ‘A’ proposes to sell his property to ‘B’. The parties drafted their agreement on stamp paper worth Rs. 10, where it is to be written actually on stamp paper worth Rs. 100. It is an unenforceable contract. Types of Contract Contd… On the Basis of Nature of Enforceability Illegal Contract A contract which has unlawful object is called illegal contract. Such a contract cannot be enforced by law. It is a contract which the law forbids to be made. All illegal agreements are void but all void agreements are not necessary illegal. These contracts are void-ab-initio. A contract is illegal if it involves doing something that is a criminal act or a civil wrong, or against the public good. Contracts for the sale or distribution of controlled substances such as drugs or narcotic substances. Contracts for illegal activities including prostitution or gambling. Employment contracts for the hiring of underage workers Example: ‘A’ agrees to pay ‘B’ Rs. 10,000 if ‘B’ kills ‘C’. ‘B’ kills ‘C’ and claims the said amount. ‘B’ cannot recover from ‘A’ because the agreement is illegal as its object is unlawful. The phrase ab initio comes from the Latin and literally means "from the start" or "from the beginning ". If a contract is declared void ab initio, it effectively means that the contract essentially never existed and therefore had no binding power over any parties to the contract. Some Other Types of Contracts Contingent Contract (Section 31 to 36) Section 31 of the Indian Contract Act, 1872 It is a contract whose performance is uncertain. A contract which has unlawful object is called illegal contract. Such a contract cannot be enforced by law. The performance of such contracts depends on the happening or non- happening of an uncertain-events. Simply stated, it is contract to perform or not to perform an obligation, if some event, collateral to such contract, does or does not happen. ‘A’ promises to pay Rs. 1,00,000 if ‘B’s’ house is destroyed by fire. This is a contingent contract as the performance depends on the happening of an event. Contingent Contract Contd… Section 31 of the Indian Contract Act, 1872 Characteristics of a Contingent Contract The performance of the contract depends on the happening or non- happening of a certain event in future. This event must be uncertain. The event must be collateral or incident to the contract. If the event becomes impossible, such contracts become void. Examples: ‘A’ makes a contract with ‘B’ to buy ‘B’s horse if ‘A’ survives ‘C’. This contract can not be enforced by law unless and until ‘C’ dies in ‘A’s lifetime. ‘A’ makes a contract with ‘B’ to sell a horse to ‘B’ at a specified price, if ‘C’, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until ‘C’ refuses to buy the horse. ‘A’ contracts to pay ‘B’ a sum of money when ‘B’ marries ‘C’, ‘C’ dies without being married to ‘B’. The contract becomes void. Contingent Contract Contd… Section 32 & 33 of the Indian Contract Act, 1872 Section 32 When any contract to do (or not to do) anything if an uncertain future event happens, cannot be enforced by law, unless and until that event has happened. Contract becomes void if the event becomes impossible. Example: ‘A’ agrees to pay ‘B’ a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks. Section 33 Contingent contract to do (or not to do) anything if an uncertain future event does not happen, can not be enforced when the happening of that event becomes impossible and not before. Contingent Contract Contd… Section 34, 35 & 36 of the Indian Contract Act, 1872 Section 34 When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person Example: ‘A’ agrees to pay ‘B’ a sum of money if ‘B’ marries to ‘C’, ‘C’ married ‘D’. The marriage of ‘B’ to ‘C’ must now be considered impossible, although it is possible that ‘D’ may die and that ‘C’ may afterwards marry ‘B’ Section 35 When contracts become void (or may be enforced) which are contingent on happening or specified event within fixed time. Example: ‘A’ promises to pay ‘B’, a sum of money if certain ship return within a year. The contract be enforced if the ship return within a year and becomes void if ship is burnt within a year. Section 36 Agreements contingent on impossible event void. Example: 1. ‘A’ agrees to pay ‘B’, Rs. 1000/-- if two straight lines should enclose a space. The agreement is void. 2. ‘A’ agrees to pay ‘B’ Rs. 1000/-- if ‘B’ will marry A’s daughter C, C was dead at the time of the agreement. The agreement is void. Indemnity Contract Section 124 of the Indian Contract Act, 1872 It is a contract wherein: 1. one party promises to save the other from loss; 2. caused to him by the conduct of the promisor himself, 3. or by the conduct of any other person. Simply said, in a contract of indemnity one party i.e., the ‘indemnifier’ promise to compensate the other party i.e., the ‘indemnified ‘against the loss suffered by him. Every contract of insurance, other than life insurance, is a contract of indemnity. ‘A’ promises to indemnify B against the consequences of any proceedings which ‘C’ may take against ‘B’ in respect of a certain sum of Rs. 5000. This is a contract of indemnity. Contract of Guarantee Section 126 of the Indian Contract Act, 1872 It is a contract to perform the promise or discharge the liability, of a third person in case of his default. There are three parties in this contract. The person who gives the guarantee is called the ‘surety’, person in respect of whose default the guarantee is given is called ‘principal debtor’ and person to whom the guarantee is given is called the ‘creditor’. The liability of the surety is secondary i.e., the surety’s is liable only if the principal debtor fails. The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable for the amount of the bill. This is a contract of guarantee. In every contract of guarantee, there are three contracts: One, between the ‘creditor’ and ‘principal debtor’; Second, between the ‘surety’ and the ‘creditor’, and; Third, between the ‘surety’ and the ‘principal debtor’. Principal Debtor Creditor Surety Contract of Bailment Section 148 of the Indian Contract Act, 1872 It is a contract where one party delivers goods to the other upon return basis to fulfil a specific purpose. A bailment is the delivery of goods from one person to another for some purpose. Such delivery is made, upon a contract that such goods shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom the goods are delivered is the ‘bailee’. ‘A’ sends his car to the garage for repair. In this case ‘A’ is the bailor and the garage owner is the bailee. The garage owner has to repair the car and then hand it over to ‘A’ for a specified consideration. Contract of Pledge Section 172 of the Indian Contract Act, 1872 It is a special kind of bailment in which a person transfers the possession of his property to another for securing the loan taken from the other. When the purpose of the bailment is to secure a loan or a promise, it is called a pledge. The bailor is in this case called the ‘Pawnor’. The Bailee is called the ‘Pawnee’. In case the pawnor fails to repay the debt, the Pawnee has the right to sell the goods pledged with him/her. A pawnee gets a right of retainer and a special interest in the goods, which is more that just the lien. ‘A’ delivers his car to ‘B’ for securing a loan of Rs. 1,00,000. ‘B’ promises to deliver the car back to ‘A’ once he repay the loan amount. This is a contract of pledge. Option Contract It allows a buyer and seller to enter into a contract for the sale of goods or real property, but the sale is contingent upon certain terms, like a timeframe or an action. It gives the purchaser the option of the right to buy or sell a particular asset at a later date at an agreed upon price. These are often used in securities, commodities, and real estate transactions. For example, if the buyer does not fulfill his promise to secure the financing by the date specified in the contract, the dealer may keep his deposit. Accessory Contract It is a contract entered into primarily for the purpose of carrying out a principal contract. Simply stated, it is a contract made for assuring the performance of a prior contract. It is a contract which is incident or auxiliary to another or principal contract. Examples of such contracts are 1. Surety, 2. Mortgage, 3. Pledge etc., Adhesion Contract It is otherwise known as ‘standard form contract’ or ‘boilerplate contracts’. This contracts are prepared by the more powerful party and submitted to the weaker on a take it or leave it basis. The terms are these contracts are imposed by one party on the other. That is to say, the terms of such contracts are not reached as a result of any bargaining process. By nature, these contracts are unilateral and non-negotiable. Examples of such contracts are 1. Property leases, 2. Deeds, 3. Mortgages, 4. Insurance etc., Aleatory Contract A contract in which the obligation of performance does not arise until a specific event occurs. Such events are those which cannot be controlled by either party. Aleatory contracts are commonly used in insurance policies. Simply stated, an aleatory contract is the one where one party makes the conditional promise to provide something of greater value to another party than that party gave, on the happening of the specified event and if the event does not occur, the promise will not be performed. ‘A’ purchases a life insurance policy from an insurer which promises to insure his life for a monthly premium of Rs. 7000. The sum insured was Rs. 1 Crore and the policy was issued after the payment of first premium. It is an aleatory contract which binds the insurer to pay the sum of Rs. 1 Crore in case of death of the insured person. Blanket Contract It is a contract to spend a predetermined amount with a specified vendor over a period of time. Simply stated, a blanket contract is one which covers a whole year’s supply, leaving quantities and times of delivery to be fixed as and when material needed. An example of such contracts can be ‘health insurance contract’ affording benefits like accidental death benefit. An advertising contract that is not restricted to a particular agency but covers a number of agencies. Bonus-Penalty Contract It is a contract which offers a bonus for timely completion of a project without cost overruns, and prescribes an equal amount as penalty for any violation. Simply stated, a contract under which the contractor is guaranteed a bonus for each day the project he has undertaken to construct is completed ahead of a specified date of completion. Such contracts also provides for an equal amount of penalty for each day of delay in completing the works after the specified date. It is a 'carrot and stick' approach to keeping a project within budget and schedule. India Contract Act 1872 Contract of Agency Contract of Agency Legislative Provisions: Ss. 182-238 of the Indian Contract Act, 1872 It is an agreement between a ‘principal’ and a ‘agent’. An ‘agent’ is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the ‘principal”. The principal is a person who would be held liable to the third party for the acts of the agent. Agency creates a legal relationship between the principal and the third party. Agent is not under direct supervision and control of the principal. He / she can exercise discretion to a large extent. Agent cannot be considered a servant. The Principal and The Agent Who can be a Principal? The principal should have contractual capacity. The person should be of the age of majority according to the law to which he/she is subject. The person should be of sound mind. Who can be an Agent? One cannot become an agent without having contractual capacity. A minor or a person of unsound mind cannot become an agent. Creation of Agency Express Authority An authority is said to be express when it is given by words spoken or written. A written contract of agency is a power of attorney wherein one person empowers the other to represent him/her, or act on his/her behalf for certain purposes. Implied Authority An implied authority arises from the conduct, situation or relationship of the parties. The agency arises when the principal conducts himself / herself towards the person alleged to be the agent to the third parties in such a manner as if the principal had conceded to the appointment of that person as agent. Agency in Emergency Express Authority Section 189 of the Indian Contract Act An agent has authority in an emergency, To do all such acts For the purpose of protecting his / her principal From loss. Agency by Necessity Sometimes in certain urgent circumstances the law confers an authority on a person to act as an agent for the benefit of another. Such agency is called agency of necessity. When a person is entrusted with some property of another, which he/she has to protect or preserve, an agency of necessity may be created for preservation of property. A wife is considered to be the agent of her husband. Agency by Estoppel At times the principal by his / her conduct creates an impression in the mind of a third person that the agent has an authority to act on his/her behalf. In such a case the principal is liable towards the third person for the acts done by the agent. This situation arise because of application of the law of estoppel. Estoppel may be defined as disability whereby a party is precluded from alleging or proving in legal proceedings, that a fact is otherwise than it has been made to appear by the matter giving rise to that disability. Agency by Holding Out It is based on the “doctrine of holding out”. Holding out is merely application of the principle of estoppel which is a rule of evidence wherein a person is prevented or estopped from denying a statement he made or existence of facts that he makes another person believe. As per the rule of agency by holding out, the principal is bound by the acts of the supposed agent, if he / she has induced third persons to believe that they are done with his/her authority. 'B' is A`s servant and 'A' has made 'B' accustomed to bring good on credit from 'C'. On one occasion 'A' has given amount to 'B' to bring goods from 'C' on cash basis. 'B' has misappropriated that amount and has brought goods on credit. 'A' is liable to pay the balance amount as there is formation of an agency by holding out. India Contract Act 1872 Performance of Contracts Performance of Contracts (Section 37 to 67) Performance of contract means fulfilling of their respective legal obligation created under the contract by both parties. When a contract duly performed by both parties, the contract come in end. Performance of Contracts Obligation of parties to contract (Sec. 37) Example: A promises to deliver goods to B on a certain day on payment of Rs. 1000, A dies before that day. A’s representatives are bound to deliver the goods to B and B is bound to pay the Rs. 1000 to A’s representatives Effect of refusal to accept offer of performance (Sec. 38) An offer to one of several joint promises has the same legal consequences as an offer to all of them. Effect of refusal of party to perform promise wholly (Sec. 39) Example: A singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her Rs. 100 for each night performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract. Performance of Contracts Person by whom promise is to be performed (Sec. 40) Effect of accepting performance from third person (Sec. 41) Devolution of joint liabilities (Sec. 42) Anyone of the joint promisors may be compelled to perform (Sec. 43): Each promisor may compel contribution. Sharing of loss by default in contribution. Example: 1. A, B and C jointly promise to pay D, Rs. 3000. D may compel either A or B or C to pay him Rs. 3000. 2. A, B and C jointly promise to pay D the sum of Rs. 3000. C is compelled to pay the whole. A is insolvent, but his assets are sufficient to pay one half of his debts. C is entitled to receive Rs. 500 from A’s estate and Rs. 1250 from B. Performance of Contracts Effect of release of one joint promisor (Sec. 44) Devolution of joint rights (Sec. 45) Example: A, in consideration of Rs. 5000 lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B’s representative jointly with C during C’s life and after the death of C, with the representatives of B and C jointly. Time for performance of promise, where no application is to be made and no time is specified (Sec. 46) Time and place for performance of promise, where time is specified and no application to be made (Sec. 47) Example: A promises to deliver goods at B’s warehouse on the first Jan. On that day A brings the goods to B’s warehouse, but after the usual hours for closing it. And they are not received. A has not performed the promise. Performance of Contracts Application for performance on certain day to be at proper time and place (Sec. 48) Place for the performance of promise, where no application to be made and no place fixed for performance (Sec. 49) Example: A undertakes to deliver a thousand mounds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it and must deliver it to him at such place. Performance in manner or at time prescribed or sanctioned by promise (Sec. 50) Examples: B owes A Rs. 2000. A desires B to pay the amount to A’s account with C, a banker B, who also banks with C, orders the amount to be transferred from his account to A’s credit, and this is done by C. Afterwards, and before A knows of the transfer, C fails. There has been a good payment by B. Performance of Contracts Promisor not bound to perform unless reciprocal promise ready and willing to perform (Sec. 51) Examples: 1. A and B contract that A shall deliver goods to B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for the goods, unless A is ready and willing to deliver them on payment. 2. A and B contract that A shall deliver goods to B at a price to be paid by instalment, the first instalment to be paid on delivery. A need not deliver, unless B is ready and willing to pay the first instalment on delivery. B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment. Order of performance of reciprocal promises (Sec. 52) Example: A and B contact that A shall build a house for B at a fixed price. A’s promise to build the house must be performed before B’s promise to pay for it. Performance of Contracts Liability or party preventing event on which contract is to take effect (Sec. 53) Example: A and B contract that B shall execute some work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B and if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance. Effect of default as to that promise which should be performed. In contract consisting of reciprocal promises (Sec. 54) Example: A hires B’s ship to take in and convey, from Calcutta to Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B’s promise, and must take compensation to B for the loss which B sustains by the non-performance of the contract. Performance of Contracts Effect of failure to perform at a fixed time. In contract in which time is essential (Sec. 55) Effect of such failure when time is not essential. Effect of acceptance of performance at time other than agreed upon. Agreement to do impossible act (Sec. 56) Contract to do act afterwards becoming impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful. Reciprocal promise to do things legal, and also other things illegal (Sec. 57) Alternative promise, one branch being illegal (Sec.58) Application of payment where debt to be discharged is indicated (Sec. 59) Application of payment where debt to be discharged NOT indicated (Sec. 60) Application of payment where neither party appropriates (Sec. 61) Performance of Contracts Contracts which need not be performed Effect of novation, rescission and alteration of contract (Sec. 62) Promisee may dispense with or remit performance of promise (Sec. 63) Consequences of rescission of voidable contract (Sec. 64) Obligation of person who has received advantage under void agreement or contract that becomes void (Se. 65) Mode of communicating or revoking rescission of voidable contract (Sec. 66) Effect of neglect of promise to afford promisor reasonable facilities for performance (Sec. 67) Breach of Contracts (Section 73 to 75) Breach of contract is a legal cause of action. Breach of contract if: Party does not fulfil his contractual promise or Given information to that he will not perform his duty as mentioned in the contract or if his action and conduct seems to be unable to perform the contract Compensation of loss or damage caused by breach of contract (Sec. 73) Compensation of breach of contract where penalty stipulated for (Sec. 74) Party rightfully rescinding contract, entitled to compensation (Sec. 75) India Contract Act 1872 Government Contracts A contract in which the central or state government act as contracting party. Types of Government Contracts A contract in which the central or state government act as contracting party A. Fixed Price Contracts B. Cost Reimbursement and Cost Plus Contracts Types of Government Contracts A. Fixed Price Contracts: Under to deliver the product or service required at a price not in excess of the agreed to maximum. Firm Fixed Price Contract: Prices not subject to adjustment on the basis of contractors cost in performing the contract Firm Fixed Price Level of Effort Form Contracts: Used in R&D area to study specific research with a report as the final product Firm Fixed Price Materials Reimbursement Type Contracts: used in purchase of repair and overhaul services with reimbursement Fixed Price Contract with Award Fees: To motivate a contractor and other incentives can not be used because contractor performance can not be measured Types of Government Contracts Fixed Price Contract with Economic Price Adjustment: Provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Adjustments based on established prices Adjustments based on actual costs of labour or materials Adjustments based on costs indexes of labour or materials Fixed Price Incentive Contracts: Provides provisions for adjustment of profit and establishing a final contract price which is based on comparison between final negotiated total cost and total cost. Fixed Price with Prospective Price Redetermination: A firm fixed price for initial period of deliveries and prospective redetermination as a stated period Fixed Ceiling Price with Retroactive Price Redetermination Contract: Provides ceiling price and retroactive price redetermination after the completion of the contract. Types of Government Contracts B. Cost Reimbursement and Cost Plus Contracts: Contractor is paid for all of its allowed expenses up to a limit plus additional payment to allow the company to make a profit. Cost Contracts: Only cost for performance are paid e.g. R&D in non-profit organization. Contractor receives no fee. Cost Plus Fixed Fee: Provides payment of allowable cost plus fixed fees. Cost Plus Incentive Contracts: Following two types Cost Plus Incentive Fee Contract: Adjusted fees Cost Plus Award Fee Contract: To motivate contractor Cost Sharing Contracts: Reimburse only for an agreed portion of allowable cost and contractor receives no fees. Private Companies R&D. Time and Material Contracts: Hybrid of fixed price and cost reimbursement contracts. Highest risk to government and lowest risk to contractor. India Contract Act 1872 Standard Form Contracts (SFC) Standard Form Contracts (SFC) SFC is a contract between two parties where the terms and conditions of the contract are set by one of the parties and the other parties has little or no ability to negotiate more favourable terms. It is placed in a take it or leave it position. SFC are agreements that employ standardized, non-negotiated provisions, usually in pre-printed forms. Kills bargaining power of weaker party. Mostly done at national or international level. Examples: insurance company contract, purchasing a washing machine, signing up for e-mail social networking sites etc. SFC is a kind of contract which is govern by the laws provided for general contracts in Indian Contract Act 1872. Standard Form Contracts (SFC) Need of SFC People do not read the clauses thoroughly Generally party is focussed on price mentioned in the contract. Creates a pressure on party after all negotiation and terms had been discussed orally and explained to. Take it or leave it basis contract. Tips for SFC Read every word before sign Cross out any blank spaces Negotiate Principles of protection against possibility of exploitation from SFC Reasonable Notice: Reasonable notice must be given to the person delivering the document to give accurate information about the term and condition laid down in the contract. Person can not agree to a term if he had not seen it or is not told of it. Example: A person buy ship ticket on face of it only boarding and arriving place was written but on its other side there were certain terms and conditions which party did not see nor anything was written on face of it to turn and look. Contractual Document: Contractual document signed by both parties in order to make it enforceable in court. Identify contract document or receipt. If the document clearly explains the express and implied a condition in the document then it’s a contractual document. If not then it is receipt. Principles of protection against possibility of exploitation from SFC Unreasonable or unfair terms: These are the terms in the contract which contradicts the very purpose of the contract or are against the public policy. Example: Laundry receipt contained a condition that in case of loss or destruction of cloth only 15% money of the market price of cloth will be returned. This is unreasonable term and is against public interest. Clauses violating public policy that contract is void: Terms and conditions included will be suitable for all day-to-day contractual transactions. Advantages of SFC The organization saves money by not having to employ the services of a lawyer every time a contract is entered into. The task of contracting with other parties can be delegated to junior members of staff, as there are no complex negotiations to take place. Time is saved as once the contract has been drawn up it can be used time and time again. Modern technology enables terms in a SFC to be amended or updated, quickly and cheaply. Senior members of the business are free to attend to other issues and bigger, more important contracts that need to be freely negotiated between the parties Terms can be inserted into the contract which are more favourable to the business. Disadvantages of SFC Problems may occur during the formation of a contract, if negotiating the contract for the business fails to deal with correspondence from the other contracting party correctly. Initial expenditure will be incurred in drafting the contract. The other contracting party may also have SFC on which they wish to deal. Stalemate situation may occur. Most of the difficulties with SFC can be overcome by careful drafting and a good quality assurance procedure being in place. If: 1. The initial drafting accurately reflects the requirements of the business and 2. All staff are adequately trained and 3. Quality procedures are devised and followed Exemption Clauses in SFC Exemption clauses are commonly found in SFC. Stipulates that a party is limited or excluded from liability. Take it or leave it contract and there is no negotiation of terms. Usually written down that say one party to the contract will not be responsible for certain happenings. Example: If a person join a gym, it is common for the contract to say that person is injured while exercising. Types of clauses: 1. Limitation Clause: A party is limited from liability. Restrict the damages payable if there is ever to be a breach of contract. 2. Exclusion Clause: Completely exclude party from any form of liability. Exclusion and Limiting Clauses The party may only rely on such a clause if: 1. It has been incorporated into the contract 2. As a matter of interpretation, it extends to the loss in question. 3. The unfair contract terms act 1977 4. The unfair consumer contracts regulations 1999 Incorporation: 1. Signed documents: Bound by terms if signed by plaintiff even if he has not read the document and regardless of whether he understands it or not. 2. Unsigned documents: The exclusion clause may be contained in an unsigned document such as a ticket or a notice. 3. Previous dealings: Exclusion clause may nevertheless be incorporated where there has been a previous consistent dealing between the parties on the same terms. 4. Privity of contract: A person who is not part of contract (third party) was not protected by an exclusion clause even if clause purported to extend him. Employees are regarded in this context as third parties. 5. Collateral contract: May not be incorporated in collateral contracts 6. Battle of the forms: Contract will be made on last set of terms sent. Standard Form Contracts (SFC) Interpretation: Contra Proferentem: If there is ambiguity in the contract then court will consider it Contra Proferentem i.e. against the party who inserted in the contract The main purpose rule: Court can strike out an exemption clause which is inconsistent with the main purpose of the contract. The doctrine of fundamental breach: Fundamental breach could not be excluded or restricted in any circumstances. The unfair contract terms act 1977: To restrict the extent to which liability in a contract can be extended for breach of conduct and negligence. The unfair terms in consumer contracts regulations 1999: Unfair term is one which has not been individually negotiated. Intellectual Property Rights Learning Outcomes After successfully completing this chapter, learners will be able to explain: Types of Intellectual Property Provisions of Indian Copyright Act Provisions of Indian Trademark Act Provisions of Indian Patent Act Web References  https://legislative.gov.in/constitution-of-india  https://www.un.org/en/about-us/universal-declaration-of-human-rights  https://main.sci.gov.in/  https://www.cci.gov.in/  https://www.un.org/en/  https://www.epfindia.gov.in/site_en/index.php  https://ipindia.gov.in/  https://thepractice.law.harvard.edu/  https://www.nishithdesai.com/  https://www.manupatrafast.com/  https://indiankanoon.org/  https://www.livelaw.in/  https://www.india.gov.in/official-website-india-code  https://www.lawstudies.com/ Intellectual Property Rights Types of Intellectual Property Intellectual Property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. Intellectual property (IP)? Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. The main purpose of intellectual property law is to encourage the creation of a wide variety of intellectual goods. The law gives people and businesses property rights to the information and intellectual goods they create, usually for a limited period of time. This gives economic incentive for their creation, because it allows people to benefit from the information and intellectual goods they create, and allows them to protect their ideas and prevent copying Unlike traditional property, intellectual property is “intangible”, and also "indivisible", since an unlimited number of people can "consume" an intellectual good without it being depleted. According to Article 27 of the Universal Declaration of Human Rights, "everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author". Although the relationship between intellectual property and human rights is a complex one, there are moral arguments for intellectual property. Laws to Protect Intellectual property (IP)? International Convention: Trade-Related Aspects of Intellectual Property Rights (TRIPS) Indian Copyright Act, 1957 Indian Patent Act 1970 Indian Trademarks Act, 1999 Other acts -Designs Act 2000 -Semiconductor Integrated Circuits Layout-Design Act 2000 International Convention: Trade-Related Aspects of Intellectual Property Rights (TRIPS) ❖ The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO). ❖ The TRIPS Agreement established a minimum level of protection that WTO Members were required to provide to the intellectual property of other Members. ❖ It covers such areas as copyrights, trademarks, patents, geographical indications (GI), industrial and layout designs, and undisclosed information (trade secrets). ❖ The TRIPS Agreement is a minimum standards agreement, which allows Members to provide more extensive protection of intellectual property if they so wish. Members are left free to determine the appropriate method of implementing the provisions of the Agreement within their own legal system and practice. TYPES OF INTELLECTUAL PROPERTY Traditional Traditional Non IP IP Trade secrets Patent Circuit layouts Domain names Trademark Designs Plant varieties Confidential Copyright information Trade Secret Trade secret, also called intellectual property or proprietary information, is the term used for any method, formula, device, process, or any information that gives the business a unique competitive advantage over its competition. Anything that gives you an advantage against a competitor is highly valuable and worth protecting. Trade secrets come in an endless array of types, for example: ✓ R&D information ✓ Software algorithms ✓ Inventions ✓ Designs ✓ Formulas ✓ Ingredients ✓ Devices ✓ Methods Trade Secret A trade secret is information that ❖ is not generally known to the public; ❖ confers economic benefit on its holder because the information is not publicly known; and ❖ where the holder makes reasonable efforts to maintain its secrecy. Examples of trade secrets include: KFC's secret blend of 11 herbs and spices. Coca-Cola's recipe for their signature drink. Google's search algorithm. McDonald's Big Mac “special sauce.” Secret client lists at any company. Criticism for allowing the trade secret holders to hide the presence of potentially harmful and toxic substances and a clear picture of such products' safety is being denied to public Coca-Cola made a choice to brand the recipe a trade secret instead of patenting it, which would have lead to the disclosure of the ingredients. Since one of those ingredients may have been cocaine, Coca-Cola decided to keep the recipe as confidential information. Copyright protects your art and writings. Trademark protects your names, symbols, or slogans for products or services. Patents protects your inventions or designs. Intellectual Property Rights Indian Copyright Act 1957 COPYRIGHT FOR ORIGINAL WORKS To claim copyright, ‘work’ must be A ‘copyright’ is a form of Original protection given to the Reduced to creators of ‘original tangible medium works’. of expression Idea There can be no copyright on an idea. It means there must be a sufficient degree of skill, labor, Originality expertise used in the creation of the work. To claim copyright protection, work must be reduced to Expression tangible medium of expression. SCOPE OF COPYRIGHT PROTECTION MUSIC Literary Sound recordings Artistic ART Musical Painting Cinematograph films Dramatic ALL ABOUT COPYRIGHT Governing Laws Indian Copyright Act, 1957 International Trade-Related Aspects of Intellectual Property Conventions Rights (TRIPS) & the Berne Convention Original works of authorship viz., books, story, Protectable Subject article, papers, photographs, music, Matter cinematographic films, recordings, software, etc. Time Duration of Life of the author plus sixty (60) years or sixty Protection (60) years from the date of publication. Exclusive right to prevent others from− Reproducing or distributing copies of work. Rights of Copyright Preparing derivative works. Holder Performing or displaying work publicly. Transmitting sound recordings. OWNER OF COPYRIGHT Generally, the author of ‘original work’ is Author the owner of copyright. If ‘work’ is created in accordance with the terms of employment of the Employer employer where the author is employed, then the owner is employer. If ‘work’ is created by more than one Joint author, then the joint owners will share Owner the copyright equally. REGISTRATION OF COPYRIGHT Not mandatory to register original work to Not Mandatory claim copyright protection. Certificate of registration of copyright and the entries made therein serve as a prima Why Register? facie evidence in the Court of law with reference to dispute relating to ownership of copyright. The general rule is that copyright subsists Copyright Since over a piece of original work, when it is Creation created. To claim copyright protection it is utmost essential that the work must have been Expression reduced in a tangible medium of expression. COPYRIGHT REGISTRATION PROCESS RIGHTS OF COPYRIGHT HOLDER In relation to original protected work, the owner has right to− Monopoly Rights Publish the work. (Literary, Dramatic, Perform the work in public. Musical Work) Communicate the work to the public. Reproduce the work in any material form. Make an adaptation of the work. In relation to original protected work, the owner has right to− Monopoly Rights Publish the work. (Artistic Work) Communicate the work to the public. Reproduce the work in any material form. Right to be attributed as author of work. Right to restrain or claim damages in respect of any distortion, mutilation, modification or other Moral Rights act done to his work which (i) would prejudice honour or reputation, and (ii) is done before the expiration of the term of copyright in the work. Intellectual Property Rights Indian Trademark Act 1999 TRADEMARKS FOR GOODWILL A ‘trademark’ is a To obtain sign capable of trademark, the distinguishing the mark must be goods or services of Graphically one enterprise from represented those of other Distinctive enterprises. Graphical It must be capable of being represented graphically. Representation It must be capable of distinguishing the goods or Distinctiveness services of one enterprise from those of other enterprises. TYPES OF TRADEMARK Product Service Trademarks Trademarks Affixed to identify Affixed to identify services. goods. Certification Trademarks Collective Trademarks Certified by proprietor with regard to their Marks registered in origin, material, method name of groups, of manufacture, quality associations or other or other specific organizations. features. ALL ABOUT TRADEMARK Governing Laws Indian Trademarks Act, 1999 International Trade-Related Aspects of Intellectual Conventions Property Rights (TRIPS) Protectable Words, letters, numerals, names, shapes, Subject Matter colors, combination of colors, symbols. Time Duration of Ten (10) years from the date of Protection registration. Exclusive right to use trademark in respect of goods/services. Rights of Patent Exclusive right to exclude others from Holders using the mark. Exclude others from diluting the mark. REGISTRATION OF TRADEMARK Graphical It should be capable of being represented Representation graphically. It should be capable of distinguishing the Distinctiveness goods of one person from that of another. It is not capable of being represented graphically. Mark is devoid of any distinctive character. Prohibited from Mark is scandalous or its use is contrary Registration to law. It is likely to deceive or cause confusion. It is identical to any prior registered mark. TRADEMARK REGISTRATION PROCESS Intellectual Property Rights Indian Patent Act 1970 PATENTS FOR INVENTION To obtain patent, A ‘patent’ is a right an invention must granted to an be individual who has Novel invented something Useful to public new. Non-obvious NOVELTY It means that it has not been invented before. USEFUL TO PUBLIC It means that it should be of some use & help the public. It means that it is not obvious to the person who is skilled NONOBVIOUSNESS in the subject matter of the invention. TYPES OF PATENTS Utility Design Patent Patent Protects a new Protection granted to invention or ornamental appearance of improvements on an article, and not its existing inventions structure or utilitarian which are functional. features. Issued for the invention Issued for the distinct of a new and useful configuration, distinct process, machine, surface ornamentation or manufacture, or both of an article or composition of matter. invention. ALL ABOUT PATENT Governing Laws Indian Patent Act, 1970 International Trade-Related Aspects of Intellectual Property Conventions Rights (TRIPS) Patentable Subject Inventions (both products & services) having Matter novelty, usefulness to public & nonobviousness. Twenty (20

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