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Reference Text : 1. Business Law N. D. Kapoor 2. Business Law Buichandani 3. Company Law Aviar Singi 4. Income Tax Dr. Singhania 5. Indian Taxes V.S.Datey 6. S. S. Gulshan. Mercantile Law (Excel Rooks) 7. A. K. Majumdar & G.K. Kapoor: Students guide to Company Law (Taxmann)
Definition
A rule of conduct imposed and enforced by the sovereign (Austin) Law is a body of principles recognized and applied by the state in the administration of justice(Salmond)
Classificati on of laws
Public Law Private Law Personal Law Procedural Law Substantive Law Statute Law Common Law Civil Law Criminal Law Municipal Law International Law
Prof. Mayur Malviya
Classification of Laws
Laws
Law which prohibits the commission, guides the investigation and provides for punishment
Law aims at compensating the injured for the loss suffered by him.
Statue Laws Laws laid down by acts of parliament or legislative assembles of various states
What is a contract?
Section 2(h) An agreement enforceable by law is a contract. Thus,
Agreement
Sec 2 (e) Every promise and every set of promises, forming the consideration for each other, is an agreement; Section 2(b) Promise = Proposal/Offer + Acceptance (Agreement)
Contract
Enforceability by Law Agreements which are not enforceable Illegal/unlawful agreements, e.g., to smuggle/to kill Social Agreements (Balfour vs. Balfour)
Problem -1
Abhinav have agreed to sell his house to Bachan for 10 Lakh and received an advance amount of 2 lakh.But he failed to hand over the possession as he had another offer of Rs 12 lakh for the same. What would be the legal position in the present situation. Whether Bachan will be able to get the possession or not? Problem -2 Rohit had promised his wife Roshini ,that he would pay her a sum of Rs 10,000 every month during the entire period of his posting outside the country. He continued to remit the promised amount to his wife for around a year, and there after he refused to keep his promise. Roshini filed a case against Rohut for recovery of the amount from him. Do you think Roshini will win the case . Give reasons
Kinds of Contracts
From the point of view of Enforceability Valid
Void
Voidable
Valid contract
PROPOSAL/ OFFER
Section 2(a) Expression of willingness With a view to seek the assent of the other. Thus, mere expression of willingness doesnt constitute offer/proposal.
Prof. Mayur Malviya
Eg ;1 Ashok offers to sell his computer to Akash. Here Ashok is making an offer to do something. It is a positive act on the part of Ashok. Eg 11 A banker offers not to file a civil case against Vivek ,it he would repay the amount of Rs 10,000 outstanding on his loan amount.
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There must be communication between the parties . The persons who initiate the communication or the offer or must have expressed his willingness. The communication should be made with an intention of obtaining the assent of the other to such act.
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Kinds of offer
Counter offer Auction sales open offer Special offer General offer Cross offer
Offer
Specific General
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Thus, if offer is addressed to A, B cannot accept it. Case Law: Boulton vs. Jones
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General offer It can be accepted by any of the person by complying its terms and conditions. Carbill v Carbolic Smoke ball Co
Offer
Cross Counter
Offer
Offer Invitation to offer
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Lapse of Offer
Wrong mode of acceptance Lapse of time Rejection Counter offer Death or Insanity Subsequent illegality, destruction or impossibility Revocation before acceptance
Acceptance
Section 2(b) Giving of assent to the proposal. Sec 2(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when a accepted, becomes a promise;
DEFINITION OF CONSIDERATION
. section 2(d). When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consid-eration for the promise
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Cases on Consideration
Durga prasad vs Baldev
Chinnaya vs Ramayya
Bolton vs Maden
Consideration
Past
Consideration Future
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Present
FREE CONSENT
Fraud
Misrepresentation
Mistake
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FREE CONSENT ;
it means an act of assenting to an offer. According to section 13, "Tow or more persons are said to consent when they agree upon the same thing in the same thing in same sense." Thus, consent involves identity of minds in respect of the subject matter of the contract. In English Law, this is called 'consensus-ad-idem Effect of Absence of consent When there is no consent at all, the agreement is void abinitio, i.e. it is not enforceable at the option of either party.
Prof. Mayur Malviya
Free consent
when consent is caused by coercion or undue influence or fraud or misrepresentation or mistake
contract is usually voidable at the option of the party whose consent was so caused.
COERCION
Meaning of coercion[section 15]:
It means compelling a person to enter into a contract, by use of physical force/activities forbidden by Indian penal code. Effect of coercion: Voidable and can be canceled at the option of aggrieved party X threatens to kill Y if he does not sell his house for Rs. 1,00,000 to X. Y sells his house to X and receives the payments. Here, Ys consent has been obtained by coercion. This contract is voidable at the option of Y.
If Y decides to avoid the contract, he will have to return Rs 1,00,000 which he had received from X.
2. UNDUE INFLUENCE
Meaning of Undue influence [section 16(1)
The term 'undue influence' means dominating the will of the other person to obtain an unfair advantage over the other.
A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of them is in a position to dominate the will of the other, and the dominant party uses that position to obtain an unfair advantage over the other.
3. FRAUD
[section 17]
The term 'fraud' means a false representation of fact made willfully with a view to deceive the other party. Fraud includes following: Wrong suggestion about a fact, knowing that it is nottrue; E.g. X sells to Y locally manufactured goods as imported goods charging a higher price, it amounts to fraud. A seller claimed that his projector is made in Singapore, and sold it for Rs. 100,000/- However the fact is that "Projector was made in south India". Active concealment (Hide) of defect in goods:
4. Misrepresentation
The term "misrepresentation" means a false representation of fact made innocently or nondisclosure of a material fact without any intention to deceive the other party. (Section 18 )
Essential elements of misrepresentation: By a party to a contract: The representation must be made by a party to a contract or by anyone with his connivance or by his agent. Thus, the misrepresentation by a stranger to the contract does not affect the validity of the contract.
False representation: There must be a false representation and it must be made without the knowledge of its falsehood i.e. the person making it must honestly even it is to be true.
Representation as to fact: The representation must relate to a fact. In other words, a mere opinion, a statement of expression or intention does not amount to misrepresentation.
Prof. Mayur Malviya
Misrepresentation
Eg. A farmer says that his land is very productive and produces 100 quintal per acre. This is misrepresentation and buyer can cancel the contract. Eg. An owner of factory, while selling his factory, express his opinion as my factory produces 1000 kg per ann-um and requested the buyer to find out exact production by checking "production-record". If the buyer fails to check the production record then buyer cannot blame seller. "Innocent misstatement made into good faith OR without any intention to cause loss
Mistake
Mistake of Law:
Mistake of Indian Law. Mistake of Foreign Law.
Mistake of fact
Unilateral mistake Bilateral mistake
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5. Mistake
A mistake is said to have occurred where the parties intending to do one thing by error do something else. Mistake is "erroneous belief" concerning something. [section 20] Classification of Mistake of Law: (a) Mistake of Indian Law(In sense of penalty): The contract is not voidable because everyone is supposed to know the law of his country. e.g. disobeying traffic rules (b) Mistake of Foreign Law(void-ab-initio): A mistake of foreign law is treated as mistake of fact, i.e. the contract is void if both the parties are under a mistake as to a foreign law because one cannot be expected to know the law of other country.
Mistake of fact
Mistake of fact be either Unilateral mistake or Bilateral mistake.
Unilateral mistake [section 22]: The term 'unilateral mistake' means where only one party to the agreement is under a mistake. According to section 22, "A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact. Bilateral mistake [section 22]: The term 'bilateral mistake' means where both the parties to the agreement are under a mistake. According to section 20, "where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void." thus, the following three conditions must be satisfied before declaring a contract void under this section: Both the parties must be under a mistake Mistake must be of fact but not of law. Note: Mistake about price is valid
Capacity to contract(s.10,s.11)
Minors
In competent to contract
Capacity to contract
Minor Unsound mind
Idiocy Minors agreement is void ab initio Lunacy Foreign sovereigns Minor as; Share holder Partner Agent Hypnotism Convicts Drunkenness Alien enemies
Disqualification by Law
Performance of Contract
Offer to perform Unconditional Proper time and place Time for verification of quality Who must perform The promisor The Agent of the promisor The legal representative o f the promisor Other rules Reciprocal promises Assignment of contracts Appropriation of payment
Discharge of Contract
By Performance By Mutual consent By Subsequent impossibility By operation of law By Breach of contract
Breach of contract
Recession of contract Claim damages
Contingent Contract
A contracts to pay B Rs. 10,000 if Bs house is burnt. This is a contingent contract. [section 31]. A makes a contract with B to buy Bs horse if A survives C. the contract cannot be enforced by law unless and until c dies in As life time. Contingent contract - A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
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Contract of Agency
AGENT AND PRINCIPAL DEFINED - 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 [section 182]. WHO MAY EMPLOY AGENT - Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent. [section 183]. - - Thus, any person competent to contract can appoint an agent.
Contract of Guarantee
A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default
Principle debtor The person in The person who respect of whose default gives the guarantee the guarantee is given
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Surety
Bailment
Bailment means act of delivering goods for a specified purpose on trust. The goods are to be returned after the purpose is over. In bailment, possession of goods is transferred, but property i.e. ownership is not transferred.
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Bailment
A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the bailor. The person to whom they are delivered is called the bailee. Prof. Mayur Malviya