law unit 1.pdf

# Business Law Unit - 01 ## The Indian Contract Act 1872 The Indian Contract Act 1872 is a key piece of legislation in India that governs contracts. It establishes the framework for forming, executing and validating contract elements required for a valid contract. It is foundational for Contract la...

# Business Law Unit - 01 ## The Indian Contract Act 1872 The Indian Contract Act 1872 is a key piece of legislation in India that governs contracts. It establishes the framework for forming, executing and validating contract elements required for a valid contract. It is foundational for Contract law in India and plays a crucial role in commercial transactions. ## Section 2(h) "An agreement enforceable by law is a contract". - **Agreement** = offer + Acceptance - **Contract** = Agreement + Legal obligation All contracts are agreements but all agreements are not contracts. ## Characteristics of Contract 1. There must be offer and acceptance 2. Consideration 3. The Capacity to contract 4. There must be no force, misrepresentation or fraud 5. There must be an obvious intention to create legal relations 6. A Contract must be legal. ## Essentials of offers 1. should be Expressed or Implied 2. can be general or specific 3. Must create legal relationship between the party 4. It should be clear 5. Offers must be communicated to the offerer 6. Cannot contain negative conditions 7. A mue sentence is not a offer 8. It is different from invitation offer ## Essentials of Acceptances 1. Must be Absolute and unqualified 2. It should be communicated 3. Must be in prescribed or reasonable mode 4. Must be given in a reasonable time before Contract collapse 5. Cannot be accepted before the offer 6. Rejected offer can only be accepted when renewed ## Act or Absolence It should be done by promise or any other person, such act on absolence may already be executed on the process of being. ## Free Consent (Under Section 13) Two or more person are set to consent when they agree on the same thing ## Exuption of Consideration 1. Promise made by an allount of natural love and affection 2. Promise to compensate for voluntary Service 3. Promise to pay time barred deed. 4. Contract of guarntee ## Quasi Contract [Section 68 to 72] It is also known as Constructive Contract. It is a contract in which there is no intention on either side to make a contract, but law imposes a contract. **Example:** - A a merchant leaves goods at B at his own house by mistake. B treats the goods used. Here B is bound to pay A for the goods. ## Section 68 Section 68 of the Act states that when a person who is not capable to form contract is delivered with a supply than the owner of the supply can demand compensation from the person legally supporting such a person. ## Section 69 Section 69 states that when a person pays on behave of someone the other party is bound to pay back the person who initally did the payment. ## Section 70 Section 70 states that when delverries by mistake or a services is done and the receving party enjoys the benefits of such a delivery the letter is bound to compensate the nightful owner of provider of such services. ## For the formation of a Contract there must be 1. An agreement 2. The agreement should be enforceable by law ## Agreement [Section 2(c)] "Every promise and every set of promises forming the consideration for each other" ## Section 2(b) "A proposal, when accepted becomes a promise" **Contract** → **agreement** ← **promise** → **acapted proposal** ## All agreements are contracts if they are - Made by the free consent of parties competent to Contract - For a lawful consideration - With a lawful object - And are not hereby expressly declared to be void. ## Conditions are: 1. There is some consideration for it (Sub Section 2(d) and 25) 2. The parties are competent to contract (Sub section 11 and 12) 3. Their Consent is free (Sub section 13-22) 4. Their object is lawful (Sub Section 23-30) ## Proposal on Offer [ Section 2(a)] "When one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence he is said to make a proposal." - The person who makes the proposal is called the promisor or offeror. - The person to whom the proposal is made is called the proposee or offere and when he accepts it, he is called a promisee. ## Letters of intent A letter of intent merely indicates a party's intention to enter into a contract on the lines suggested in the letter. It may become a prelude to a Contract. In old case of Weeks v/s Tybald that an offer must be made to a definite person. ## Acceptance [Section 2(b)] When the person to whom the proposal is made signifies his assent than the proposal is said to be accepted. A proposal, when accepted becomes a promise. Acceptance must be absolute : In order to convert a proposal into a promise the acceptance must - 1. be absolute and unqualified 2. be expressed in some usual and reasonable manner. ## Consideration [ Section 25] It is the price for which the promise of the other is bought and the promise thus given for value is enforceable ## Essential of a Valid Contract 1. Offer: - One party proposes terms to another, expussing a willingness to enter into a contract. 2. Acceptance: - The other party must accept the offer in its exact terms. 3. Consideration: - There must be something of value exchanged between the parties, which can be money, services or goods. 4. Mutal Assent: - Both parties must agree to the terms and intend to Create a binding agreement, often demonstrated through their conduct. 5. Capacity: - The parties must have the legal ability to enter into a contract. meaning they are of legal age and mentally competent. 6. Legality: - The Contract's purpose and terms must be legal and not against public policy. ## Void Agreements Section 2(g) says that an agreement not enforceable by law is said to be void. Agreements are declared to be void when- 1. Agreements unlawful in part (Section 24) 2. Agreement without consideration (Section 25) 3. Agreements in restraint of marriage (Section 26) 4. Agreements in restraint of trade. (Section 27) 5. Agreements in rustraint of legal proceedings (Section 28) 6. Un meaning agreements. ( section 29) 7. Wagering agreements. (section 30) ## Agreement without Consideration Section 25 declares that an agreement without consideration is void. ## Performance of Contract It refers to the fullfillment of the obligations. and duties outlined in the agreement by the parties involved. This can involve delivering goods, providing Survices, or making payments as specified. Duties are 1. Perform 2. Offer to perform ## Key aspects include: 1. Completi Performance - All terms of the Contract are fullfilled 2. Substantial Performance - Most terms are mit allowing the other party to seek damages for any minor breaches. 3. Partial Performance - Only some obligations are met which can bad to disputes or claims for breach ## As per Section 38 of the Indian Contract Act 1872 if one party [A] offers to perform their part but the other party [B] does not perform their part than the B cannot blame A for their performance. ## Various Types of offers 1. Express offer : When an offer is communicated by words, spoken or written, then it is termed express offer. It can also be communicated through advertisement telephone. messenger on telegram. 2. Implied offer : An offer communicated by conduct or act is an implied offer. When a person goes to a consultant for an advice his conduct implies an offer to pay the usual fer to the consultant. 3. Specific Offer: An offer made to a specific or definite person or class of person is Known as specific offer. 4. General offer: An offer made to the world or "Public at large" is known as general offer. It can be accepted by any member of the public 5. Counter Offer: A response to an initial offer than alters terms, often used in negotiations. ## Voidable Agreements When Consent to an agreement is caused by coercion (Section 515), fraud (Section 511), or misrepresentation (Section 518) the agreement is voidable at the option of the party whose Consent was so Caused ## Breach of Contract (Section 13-75] It may occur when a party to a valid Contract has to failed to fullfill their side of the agreement. The contract Act provides various rights and Obligations blw the parties to form a Contract. ## Remedies for breach of Contract 1. Filing a Suit for damages 2. Suit for Cancellation or Recission 3. suit for specific performance 4. Suit upon Quantum Meruit 5. suit for Injunction ## Contract of Indemnity [Section 124] A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself.or by the conduct of any other person. ## Guarantee of Contract [Section 126] It says that a Contract of guarantee is a contract to perform the promise or discharge the liability or a third person in case of his difault ## Bailment [Section 148] Contract defines bailment as the delivery of goods by one person to another person for some purpose, upon a contract that they will either return those goods or dispose of the goods **Example** - A delivers a rough diamond to jeweller to be cut and polished which is accordingly done B is entitled to retain the stone till he is paid for the services he has rendered. ## Pledge [Section 172] When goods are bailed as security for the payment of a debt or performance of a promise, the bailment is pledge. According to section 172 the bail ment of goods as security for payment of a debt on performance of a promise is called pledge The bailor is called the 'pawnor' or 'pledgur. The bailer is called the 'pawnee' or 'pledge" **Example** - A borrows 200 rupees by depositing his watch with B as a security for repayment of the debt. ## Contract of Agency It is a legal document agreement between a principal and an agent, where the principle gives the agent the authority to act on their behalf