Types of Contract

Business Law
Chapter 1
Law:
 A rule of conduct imposed and enforced by the sovereign

 Law is the body of principles recognized and applied by the state in the administration of
justice.
 Conduct enforced by the state to maintain peace and order in society.
According to oxford English dictionary the word law means ‘rule made by authority for the proper
regulation of a community or society for correct conduct in life’.
Business law:
Meaning: Business law is the branch of civil law dealing with rights and obligations of mercantile
persons arising out of mercantile transactions in respect of business property.
Definition:
Business law is that portion of the legal system which guarantees an orderly conduct of business
affairs and the settlement of legitimate dispute in a just manner’
Business law establishes a set of rules and prescribes conduct that enables us to avoid
misunderstandings and injury in our business relationships.
Scope of Business law:
It is indeed vast. It deals with topics of licenses, large houses, monopolies, issues of securities,
contracts, property, agency, negotiable instruments, foreign exchange, partnerships, companies,
insurance, sales, bailment, guarantees, labour, surety ship, bankruptcy, consumer interest, business
crimes, raising loans from financial institutions, obtaining electricity, iron and steel, customs and
clearance, allotment of materials, import of capital goods, pollution control and the like.
These aspects are covered by legislations enacted by central, state or local bodies.
Archana S, Dept of Commerce and Management Page 1

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Branches of law:
Among branches of law, two major fields can be distinguished: private law and public law. The
difference between these two branches lies mainly in the parties of the legal relationship in
question.
Private law signifies rules that regulate the relationships between private individuals (subjects of
law who are, legally speaking, in an equal situation; for example, the legal relationship between a
buyer and a seller, where both parties have certain rights and obligations). Private law covers civil
law, commercial law, international private law as well as intellectual property (such as copyright,
patent law).
Public law, on the other hand, consists in rules where one party is the state, who participates in the
legal relationship from a position of strength – thereby effecting its power. Public law also signifies
principles that serve as a basis for the structure of the state and the relationships between the state
and the citizens. In addition to constitutional law, public law also covers administrative, financial,
criminal and procedural law as well as international law.
Constitutional law
The characterisation of branches of law traditionally begins with constitutional law, which serves
as a basis for other branches. Constitutional law regulates in general terms all legal relationships
concerned with the state and law (separation of powers, essential features of the state, legislation).
Constitutional law regulates the form of the public order and the administrative division of the
territory; the status and role of the holder of the highest public authority, human rights; the
primary elements of the public system (such as the parliament), their function, legal manner,
structure, competence, and the bases and procedure of their formation (for example election

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procedure), as well as relations with the other elements of the public system (like the local
government).
Due to its highest conclusive force, constitutional law also covers all constitutional legal
provisions. Hence, constitutional law encompasses principles regulated by the constitution that are
binding to each and every person. Constitutional rules also include all those legal provisions that
regulate the appointment or election of higher national officials. Legislative drafting and the
implementation of law are also subject to constitutional law. The number and nature of
constitutional rules differ by country and are largely dependent on the form of government of the
state.
Civil law
Civil law forms the bulk of private law. Estonia's system of civil law is built on the principle of
Pandects, which divides all provisions of the civil law into five parts: general part of civil law,
family law, property law, law of succession and law of obligations. The system of Pandects itself is
derived from the law of Ancient Rome.
The general part of civil law (General Part of the Civil Code Act) regulates the general principles of
civil law. The general part of civil law is applicable as the general part of family and property law,
law of succession, law of obligations, and the Commercial Code. The General Part of the Civil
Code Act regulates persons (legal and natural persons), objects, transactions, representation, terms
and due dates, enforcement and protection of civil rights.
Family law (Family Law Act) regulates all relationships concerned with family and marriage (such
as entering into a contract of marriage, the mutual obligations between spouses, obligations
toward one's children, etc.).
Law of succession (Law of Succession Act) covers all relationships that concern succession,
successors and bequeathals.

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Law of obligations (Law of Obligations Act) consists in the general part and the special part and
regulates everything related to obligations that result in the liability to an act or omission on the
part of one person (debtor) to another (creditor), as well as the right of the creditor to demand that
the debtor discharge the liability. The Law of Obligations Act that recently came into effect also
regulates non-contractual relationships (such as a public promise to pay).
Property law (Law of Property Act) regulates real rights, their content, creation and
extinguishment.
Administrative law
Administrative law regulates the activity of public authorities, the procedure of their formation,
their powers, and relationships with citizens, liability for violating administrative law, etc.
Administrative matters are to be resolved pursuant to administrative procedure in administrative
court. Complaints and protests concerning an order, directive, prescript or legislation issued under
public law by an institution, official or another person performing public administrative functions
in order to regulate an individual case are to be resolved in administrative court. Administrative
proceedings can also be commenced with regard to the activity, failure to act or delayed action of
an institution, official or another person performing public administrative functions under public
law (e.g. the failure to act by the police in a certain situation).
Procedural law
Procedural law determines the rules of court procedure. Procedural law ensures legal security and
precludes arbitrary acts by court. The rules of procedural law are generally quite complicated and
must be observed very carefully to protect administration of justice from arbitrary acts by court, as
well as to ensure that one of the litigating parties does not get an unfair advantage over the other
during the proceedings. A significant violation of procedural rules may for instance result in the
nullification of a court judgment.

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Criminal procedural law is related to penal law. Criminal procedural law regulates the activity of
investigation authorities, prosecuting authority and the court in legislative proceedings in criminal
matters. The aim of criminal proceedings is to guarantee that the offenders get an appropriate
punishment and no innocent person is convicted.
Civil procedural law is related to civil law and its sub-branches. Civil legal proceedings regulate the
rules of resolving civil matters, the activity of court and litigating parties that is necessary for
protecting the rights of citizens.
The rules of civil procedural law determine the rights and obligations of judicial bodies and
regulate the relationships between litigating parties during the proceedings, as well as the activity
of notaries and arbitration bodies (commercial courts that only deal with commercial matters).
Sources of Indian business law:
The Indian mercantile law is adapted from the English law. However there are reservations and
modifications are made to accommodate the peculiar conditions prevailing in India. The sources of
English mercantile law are as follows.
1. The common law:
Customs and usages which were evolved, recognized and adopted as rules of conduct by
the English community acquired the name common law, and when they became common
over a wide area, they became legal principles of law. It is traditional , unwritten law,
developed in English courts a span of about 500 years, between the period of thirteen and
the eighteenth century and brought to our country by the British rulers of India.
2. Equity:
When the common law became rigid, the suitors could not get adequate relief, since the
only remedy under the common law was money compensation. The dissatisfied suitors
began to present petitions to the king who passed them on to be heard by the chancellor,

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who was regarded as the keeper of the king’s conscience. The chancellor began to sit as a
separate court known as the court of chancery, and grants relief based on notions of justice,
equity and good conscience. The reliefs granted by the court of chancery came to be known
as equitable as contrasted with the common law remedy.
3. The law Merchant:

The law merchant was an independent body of customs and usages governing commercial
transactions of the merchants and traders of the middle ages, which have been ratified by
the decisions of the courts of law. The common law of England became fixed at a time when
little or no attentions was paid to trading. Hence among traders there sprung up a number
of customs and usages which were necessary for the conduct of business.
4. Statute law:
The statute law means acts of parliament. These are the most efficient and the most usual
way of bringing about changes in the law today also. The authority of the parliament is
supreme and subject to natural limitations and those laid down by the constitution. It can
pass any law it pleases, and is not bound by its previous act. It is also within the power of
the parliament t nullify the decisions of the courts of law, statute law, therefore ranks in
priority to common law and equity.
5. Case law:
Judicial decisions is a distinguishing feature of the English law, because a substantial
portion of the common law is the product of decided cases, built up on previous judicial
decisions, that is , on the principle that what has been decided in an earlier case is binding in
a similar future case also, unless there is a change in the circumstance.
Chapter 2
Indian Contract act 1872

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Sec 2(h) of Indian contract act 1872, “Contract is an agreement enforceable by law”.
Contact = Agreement +Enforceability
Essentials of valid contract
1. Consensus –ad-idem: In order to make a valid contract, the parties must have agreed on the
subject matter of the contract at he same time and same sense. Contracts have been of the
same mind, or existence of the consensus-ad-idem can be inferred from the fact that the
offer made by one party is accepted by the other. A proposal when accepted becomes a
promise.
2. Intention to create legal relation: it is necessary that the agreement to be enforced should
contemplate to dine at a friend’s place, to attend a social or religious function , to go for a
movie , pub, or to go a pleasure trip etc does not confer any right of action and as such they
do not rise to contract.
3. Lawful consideration: the third essential element of a valid contract is that an agreement
must be supported by consideration. In simple terms, consideration means “something in
return”. ie, an advantage or benefit moving from the one party to the other. Hence the
agreement is legally enforceable only when both the parties give something and get
something in return. Therefore, a promise to do something without getting anything in
return is not enforceable by law. It is not necessary that consideration must be cash or kind.
It may be an act or abstinence or promise to do or not to do something. It can be even past,
present or future. But it must be real and lawful.
4.
4. Lawful object
5. Writing and registration

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6. Certainty of meaning
7. Possibility of performance
8. Not expressly declared void
9. Capacity of parties
10. Free consent
TYPES OF CONTRACT
I . From the point of view of enforceability:
1. Valid contract: A valid contract is an agreement enforceable by law ie an agreement that fulfills
all the essential conditions required for a valid contact.
2. Voidable contact: A voidable contract is one which is enforceable by law at the option of one of
the parties. Usually a contract becomes voidable when the consent of one of the parties to the
contact is obtained by coercion, fraud, misrepresentation.

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Such a contract is voidable at the option of the aggrieved party ie the party whose consent was so
obtained.
Ex: if ram threatens to shoot Sham if he does not sell his house for 20 lakh. Sham agrees but the
contract where consent is obtained by coercion is voidable at the option of Sham.
3. Void contract: void means ‘not binding in law’. Void contract means a contract which has no
legal effect at all.
Ex: Contract by a minor, lunatic etc.
4. Illegal contract: These are agreements which are against law or in violation of law.
Ex: an agreement to commit a crime is illegal and therefore void.
5. Unenforceable contract: An unenforceable contract is one which is valid but is not capable of
being enforced in a court of law due to some technical defects such as absence of writing,
registration stamp etc.
Ex: An oral mortgage agreement is unenforceable because as per the law, a mortgage agreement
must be in writing.
II Form the point of view of mode of creation:
1. Express contracts: where the offer and acceptance of any agreement is made in words spoken or
written it is an express contract.
Ex: An agreement between A & B was made in writing to buy A’s house for 50 lakh.
2. Implied contract: An implied contact is where it is not expressed by written or spoken words,
but has to be inferred from the contract of parties.
Ex: the act of getting into the bus is an offer by the passenger to travel, subject to the company’s
rules regarding payment of fare. When the drivers stops the bus for the passenger and if the
conductor permits him to enter the bus that is the acceptance of the offer.

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3. Quasi contract or constructive contact: It is a contract in which there is no intention on either

side to make a contact, but the law imposes a contract. In such a contract rights and obligations
arise not by any agreement between the parties but by operations of law.
Thus, a finder of lost goods is under an obligation to find out the true owner and return the goods.
Similarly where certain books are delivered to wrong addresses, the addressee is under an
obligation either to pay for them or return them.
4. E- Com Contracts/ Contracts over internet: These contracts are entered into between the parties
using internet. In electronic commerce, different parties/ persons create networks which are linked
to other networks through EDI (Electronic data Interchange) this helps in doing business
transactions using electronic mode.
III From the point view of the extent of execution
1. Executed contract: A contract is said to b executed when both the parties to a contract have
completely performed their share of obligation and noting remains to be done byu either party
under the contract. In other words, it is completed contract.
Ex: cash sales or A sells a TV set to B for rs 20k. B pays the price and A hands over TV to B.
2. Executory contract: where the contract is yet to be performed either wholly or partially or one or
both the parties have yet to perform their obligations, the contract is executory contract.
IV From the point of view of performance
1. Unilateral contract: (one sided contract): A unilateral contract is one in which a promise on one
side is exchanged for an act on the other side.
A contract is said to be unilateral where one party has discharged his obligation either
before or at time of entering into contract.
Ex: A agrees to make furniture for B for Rs 5k ‘A’ has made the furniture but B has yet to make
payment.

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2. Bilateral contracts: in a bilateral or two sided contract, at the time of its formation, these will be
two outstanding obligations, one on either party to the contract.
Ex: Shekar agrees to paint Arjun’s house after three months, for that arjun agrees to pay rs 5000 to
shekar. These contracts are also known as contracts with executory consideration.
AGREEMENT
Sec 2(e) of the Indian contract act 1872, defines an agreement is ‘every promise or set of promises
forming consideration for each other’.
Agreement = offer + acceptance
When a person (promisor) offers something to someone else (promise) and the concerned person
accepts the proposal with equivalent consideration, this commitment is known as the agreement.
When two or more than two persons agree upon the something in the same sense (ie consensus as
idem) this identifies of minds is agreement.
Difference between AGREEMENT and CONTRACT
Basis Agreement Contract

Definition An agreement is any A Contract is a specific type of
understanding or arrangement agreement that, by its terms &
reached between two or more elements is legally binding &
parties enforceability in a court of law.
Meaning When a proposal is accepted by When an agreement is enforceable
the person to whom it is made by law, it becomes a contract
with requisite consideration
Element Offer and Acceptance Agreement & enforceability
Defined in Sec 2 (e) Sec 2(h)
In writing Not necessarily Normally written & registered

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Legal Does not creates legal obligation Creates legal obligation

obligation
One in other Every agreement need not be a All contracts are agreement
contract
Scope Wide Narrow
TYPES OF AGREEMENT
1. Wagering agreement: wager means ‘a bit’, something to be lost or won on the result of a
doubtful issue and therefore wagering agreements are noting but ordinary betting agreements.
Ex: A & B mutually agree that if it rains today A will pay B rs 100 it does not B will pay A rs 100.
2. Void agreement: An agreement not enforceable by law is said to be Void sec2 (g). Thus a void
agreement does not give rise to any legal consequences and is void ab-initio. In the eyes of law
such an agreement is no agreement at all from its very inception.
3. Voidable agreement: Includes both the parties to disclose their obligation.
4. Illegal agreement: Agreement is made for an illegal purpose and consequently, violates the law.
5. Implied agreement: an implied agreement is created when two or more parties have no written
agreement but the law creates an obligation in the interest of fairness based on the parties conduct
or circumstances.
6. Conditional agreement: A legal agreement that requires the prior performance of another
agreement or clause in order to be enforceable.
Void Agreement and Voidable contract
Void Agreement: An agreement not enforceable by law is said to be void. A void agreement has
no legal effect such agreements do not create any legal relationship between the parties.

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Ex: an agreement with a minor
Voidable contract: an agreement, which is enforceable by law at the option of one or more of the
parties thereon, but not at the option of other or others ia a voidable contract.
Sec 2(i) of the act states that, a voidable contract is one of the parties whose consent is one, which is
enforceable by law at the option of one of the parties whose consent is not free, the consent is said
to be not free when it is affected by coercion, undue influence, fraud, mistake and
misrepresentation.
Void agreement Voidable contract

It is not enforceable at the desire of either It is enforceable at the option of the party
party who is entitled to avoid it
An agreement is void when it is immoral, A contract is voidable only when the
impossible and opposed to public policy consent of party to a contract is not free
A void agreement cannot be converted into A voidable contract can be converted into
valid contract valid contract at the option of the party
whose consent in not free
It is rigid in nature It is flexible in nature
It is void – ab-initio It is continues to be valid until it is

avoidable by the party to the contract
whose consent is not free.
There is no question of compensation The aggrieved party is entitled to
payable from one party to another because compensation for loss suffered on account
there is non performance of contract of conciliation of the contract.

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Chapter 3
OFFER
Word proposal and offer are synonymous in English Sec 2(a) when one person signifies to another
his willingness to do or to obtain from doing anything with view to obtaining the assent of that
other to such act to abstinence.
Ex: A offers to sell his Maruti car to B for rs 3lakhs. B accepts the offer.
Here A is offerer or promisor , B is offeree or promisee.
Essentials of valid offer
1. Offer must be certain, Definite and not vague:

No contract can come into existence if the terms of the offer are vague or loose and
indefinite both the parties should be clear about the legal consequences arising out of
contract.
Ex: Rishi tells Singh’ I want to sell you a car, if Rishi has 6 cars this offer is vague because it
doesnot specify which car rishi wants to sell.
2. An offer must intend to give rise to legal relationship:
An offer must be made with the intention of creating legal relationship otherwise it is not a
valid offer.
Ex: a mere social invitation to attend a wedding, to go for a movie , to go to a restaurant etc
are not valid offers because in contracts regulating social or domestic arrangements the
presumption is that parties do not intend legal consequences to follow from the breach of a
contract.
Case: Balfour v Balfour
3. An offer must be made with a view to obtain an acceptance.
The offer to do or not to do something must be made with a view to obtain the consent of
the other party and not merely with a view to disclose the intension of making an offer.

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4. An offer must be communicated to the offeree:

There can be no offer by a person to himself. It must always be communicated to the offeree.
If there is not communication of an offer, there is no acceptance resulting in the contract.
A writes a letter to B offering to sell his watch for rs 200 but never posts the letter and keeps
it in his pocket.
Lalman Shukla V Gouridutt 1913, D sent his servant P to trace his missing nephew. D in the
mean time announced traced the boy & informed D. P later on came to know of the reward
and he claimed it. His claim was dismissed on the ground that he was ignorant of the offer.
It was further held that it was the duty of the servant to search for the boy.
5. An offer may be express or implied:
Express offer is an offer expressed in words spoken or written, whereas implied offer is an
offer implied by the behavior or conduct of the parties.
6. An offer may be specific or general:
An offer is specific when it is made to a particular person and can be accepted only by him
and no one else. It is general when it is made to the world at large but the contract is made
only when one person who comes forward and performs the conditions of the proposal.
7. An offer should be distinguished from an invitation to receive offers:
In the case of an invitation to receive offer, the person sending out the invitation doesn’t
make an offer but only invites the other party to make an offer. His object is merely to
circulate information that he is willing to deal with anybody who on such information is
willing to open negotiations with him.
Ex: An advertisement for sale of goods by auction, quotations, catalogues of prices or
display of goods with prices marked thereon, a notice that goods will be sold by tender etc.
8. Communication of special terms:
Regarding the communication of the special terms of the contract as contained in a ticket or
standard form documents.

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9. An offer should not contain a term, the non compliance of which would amount to
acceptance.
An offer cannot say that if its rejection by the offeree is not communicated before a certain
date, the offer would be presumed to have been accepted. If the offeree doesn’t reply, there
is no contract, because no obligation to reply can be imposed on him on the grounds of
justice.
10. An offer can be made subject to certain terms and conditions:
An offer can attach certain terms and conditions, including its mode of acceptance. The
offeree will have to accept all the terms of the offer. There is no contract unless all the terms
of the offer are complied with and accepted in the mode prescribed.
11. Two identical cross offers do not make a contract.
When two parties make identical offers to each other, in ignorance of each others offer, the
offers are cross offers. Cross offers do not constitute acceptance of one’s offer by the other
and as such there is no acceptance agreement.
Ex: on Feb 5th 2001 , Sunitha wrote to Latha, offering to sell her Diamond set for rs 3 lakh.
On the same day Latha wrote to Sunitha offering to buy same diamond for rs 3lakh. The
letter crossed in the post, so that there is no concluded contract between Sunitha and Latha.
Because the offers were simultaneous each being made in ignorance of the other, and there
is no acceptance of each others offer.
Lapse of an offer
Offer becomes lapse in the following circumstances
 An offer may lapse after stipulated or reasonable time
 An offer may lapse by not being accepted in the prescribed mode
 By notice
 An offer lapses by rejection
 An offer lapses by revocation
 Revocation by non fulfillment of a condition precedent to acceptance
 An offer lapses by subsequent illegality, destruction of subject matter, change of law etc.
 An offer lapses by the death or insanity of the offeror or the offeree before acceptance.

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ACCEPTANCE
When the person to whom the proposal is made signifies his assent, it is an acceptance of the
proposal.
An accepted proposal is a called a promise or an agreement Sec 2(b)
Ex: A offer to sell his dog to B for rs 700. B accepts the offer to purchase the dog for rs 700. This is
acceptance.
Essentials of Valid acceptance
1. Acceptance must be given only by the person to whom the offer is made:
An offer can be accepted only by the person or a person to whom it is made and with whom
it imports an intension to contract, that means it cannot be accepted by another person
without the consent of the offeror.
In general, an offer made to a particular person can be validly accepted by him alone and an
offer made to class of persons can be accepted by any member of that class and an offer
made to the world at large can be accepted by any person who has knowledge of the
existence of the offer.
Case: In Boulton Vs Jones (1857). A sold his business to his manager B without disclosing the fact
to his customers. C sent an order for the supply of goods to A by name B received the order and
executed the same. It was held that there was no contract between B & C because C never made
any offer to B.
2. Acceptance must be absolute and unqualified (Unconditional )

An acceptance to be legally effective must be an absolute and unqualified acceptance of all
the terms of the offer. Even terms of the offer makes the acceptance invalid, which is a
deviated acceptance is regarded as a counter offer in law.
Ex: Akilesh offered to shalu his TV set for rs 15000. Shalu in turn offered rs 12000 for the tv
set. Here there is no contract because the acceptance is not absolute and unqualified.

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3. Acceptance must be in the mode prescribed or some usual and reasonable mode:
Acceptance has to be made in the manner prescribed or indicated by the offeror.
Ex: If the offferor or prescribes that the acceptance must be communicated by e mail the
offeree must email his acceptance.
4. Acceptance must be communicated by the acceptor:
If the offeree remains silent and does nothing to show that he has accepted the offer, no
contract is formed. The acceptor should do something to signify his intention to accept.
Thus where a person accepts an offer but fails to post the letter of acceptance, it is no
acceptance.
5. Acceptance must be made within a reasonable time and before the offer lapses or is
revoked.
An acceptance to be legally effective must be given within the specified time limit if any and
if no time is stipulated, acceptance must be given within a reasonable time.
It means that acceptance must be made while the offer is in force ie, before the offer has
been revoked or offer has lapsed.
6. Acceptance cannot be implied from silence.
No contract is formed if the offeree remains silent and does nothing to show that he has
accepted the offer.
7. Acceptance must succeed the offer.
Acceptance must be given after receiving the offer,that is it should not precede the offer.
Ex: in a case decision, shares were allotted to a person in a company without applying for
them, it was held that the allotment of shares previous to the application was invalid.
8. Rejected offers can be accepted only if renewed.
Offer once rejected can be accepted again only if a fresh offer is made.
9. Acceptance may be expressed or implied:
Acceptance can be express or implied of the acceptance is given in words spoken or written
it is an express acceptance. But implied acceptance is implied from the circumstances or
from the conduct of parties.

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When a person enters a bus, train, airplane, restaurant etc are examples of implied
acceptance.
10. Acceptance of offer means acceptance of all terms attached to the offer.
Ex: where the attention of a passenger was not drawn to the clause, ‘luggage at owners risk’
meaning that the company is not liable for any loss of luggage in the airport.
CONSIDERAITON
Consideration is the foundation of every contract. The law enforces only those promises which are
made for consideration where one party promises to do something it must get something in
return. In the absence of consideration a promise or undertaking is purely gratuitous. This
something in return is called consideration.
According to Pollock’ consideration is the price for which the promise of other is bought and the
promise thus given for value is enforceable.
Ex: A promises to maintain Bs child and B promise to pay rs 20000 yearly for his purpose.
Here promise is the consideration for the promise of other party.
Essentials of valid consideration
1. Consideration must move at the desire of the promisor: it follows that any act performed
at the desire of a third party cannot be a consideration. The gratuitous service rendered by
the promise without any request of the promisor is not a consideration enforceable by law.
Ex: Shyam sees Lekha’s house on fire and helps in extinguishing it. Shyam cannot demand
payment for service in this case because lekha never asked him for help.
2. Consideration may move from the promise or any other person: as long as there is a
consideration for a promise, it is immaterial who has given it. It may move from the
promise, or if the promisor has no objection from any other person. Consideration move
from a stranger but, it must flow at the desire of the promisor.

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Case: Chinnayya Vs Ramayya
An old lady made a gift of her property to her daughter with a direction to pay a certain sum of
money to the maternal uncle by way of annuity. On the same day, the daughter executed
writing in favor of the brother agreeing to pay the annuity. The daughter did not, however pay
the annuity and the uncle sued to recover it. It was held that there was sufficient consideration
for the uncle to recover the money from the daughter.
Ex: X, Y & Z enter into an agreement under which X pays rs 400000 to Y & Y Agreed to build a
house to Z. Here Z is a party to the contract but stranger to consideration and can enforce the
contract.
3. Consideration must not be illusory, but should be real and specific.

Consideration must be real and should not be vague. Physical or legal impossibility of the
thing promised makes it unreal consideration.
It must be real and not illusory. Thus, a promise to do that which a person is by law bound
to do, doesn’t amount consideration.
Ex: A borrowed rs 50000 at 12% pa interest from B repayable on demand. B made the demand & on
failure of A to pay he was about to sue A to get back his money. A requested B to postpone the
filing of suit and agree to pay interest at the rate of 18% pa. On refusal to pay int at 18%. B filed a
suit and got decree against A. consideration here was real.
4. Consideration need not be adequate.

As long as the consideration is of some value it is necessary that it should be adequate. This
matters for the party themselves to decide while entering into a contract. The court will not
interfere on the ground of inadequacy of consideration.
Ex: If Karna agrees to sell his watch worth rs 50k to sanvi for rs 5k it is a valid contract provided
the consent is freely given.

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5. Consideration must be lawful.

According to Section 23 of Indian contract act, consideration or object of an agreement is
unlawful if,
a. It is forbidden by law (or)
b. It is of such a nature that if permitted it would defeat the provisions of any law (or)
c. It is fraudulent (or)
d. It involves or implies injury to the person or property of another (or)
e. The court regards it as immoral or opposed to public policy.
Ex: A promise to obtain fro B an employment in the public service and B promise to pay rs 1000 to
A. the agreement is void as the consideration for it is unlawful.
6. Consideration may be an act or abstinence or promise.

As per the definition, consideration need not always be doing some act. It can be not doing
an act also.
Ex: Divya promises her debtor Nisha that, she will not file a suit against Nisha for one year, on
Nisha’s acceptance to pay rs 100 more.
7. It must be something the promissor is not already bound to do:

A promise to do what one is already bound to do, either by general law or under an existing
contract; it’s not a good consideration for a new promise. There will be no determinant to
the promise or benefit to the promisor over and above their exiting rights or obligations.
Ex: A promised to pay money to a police officer to investigate into a police officer to investigate
into a crime. The agreement was held to be invalid because, the officer is already under the duty to
do so by law.
8. Consideration may be past, present or future:

The words, has done or abstained from doing or does or abstains from doing or promises to
do or to abstain from doing indicate that consideration may be past, present or future.

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Past consideration: When the consideration for a present promise was given before the date
of the promise it is said to be past consideration.
Ex: A paints B’s house as per B’s request. After a month B promises to compensate A for the service
rendered to him. It is a past consideration. A can recover the promised amount.
Present consideration: When consideration is given at the time of promise itself, it is called
a present consideration.
Ex: cash sales.
Future consideration: When consideration from one party to the other is to pass
subsequently to the making of the contract it is future or executor consideration.
D promises to deliver paper to A after a week and promises the payment after a month. The
promise of D is supported by the promise of A. Consideration in this case is future or executory.
No Consideration No contract- Exceptions / An agreement without

consideration is void
Every agreement to be enforceable at law must be supported by valid consideration.
AS per sec 25(1) of Indian contract act ‘an agreement without consideration is void’. In otherwords
as per this section consideration is a must in all cases. However this section also gives the
following exceptions to this general rule:
1. Natural love and affection sec25(1)
An agreement without consideration is void unless it is expressed in writing and registered
under the law for the time being in force, with the registration of documents and if made on
account of natural love and affection between parties standing in near relation to each other.
Ex: if Jay, out of natural love affection promises to give his son a house worth rs 5.00.000 it is valid
contract provided it is in writing and registered also.

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2. Compensation for services rendered sec25(2)

An agreement made without consideration may be valid if it is a promise to compensate
wholly or in part a person who has already voluntarily done something for the promise or
something which the promisor was legally compellable to do.
A promise to pay for past services voluntarily rendered would be enforceable under this
rule. If however, something has not been done voluntarily. This clause will not apply.
Ex: Swaroop finds Krishna’s purse and gives it to him. Krishna promises to give him rs 100 this is a
valid contract.
3. Time bared debt/promise to pay time barred debt sec25(3)

A promise to pay a time barred debt is also enforceable. But the promise must be in writing
and be signed by the promisor or his agent authorized in that behalf. An oral promise to pay
time barred debts is unenforceable.
A promise in writing signed by the person to be charged there with or by his agent, to pay a
debt barred by the law of limitation would constitute a valid contract, even though it is not
supported by any contribution.
4. Completed gift
Nothing in this section shall affect the validity as between the donor and done of any gift
actually made. So in case of a gift actually made no consideration is necessary. Moreover
there need not be nearness of relation also.
Ex: Deepthi receives a gift for her b’day from shivani. It is valid through it is without
consideration.
5. Consideration is not required for the creation of agency

Thus when a person is appointed as anagent, it is valid even if there is no consideration.
Although an agent gets the remuneration by way of commission or salary for the services
rendered, no consideration is immediately necessary at the time of appointment.

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6. Remission by the promise of performance of the promise.

As per the sec 63 of Indian contract act a creditor can agree to give up a part of his claim and
there need be no consideration for such an agreement.
Ex: Arpita has to pay rs 50000 to Raju, but he agreed to reduce it to rs 45000 towards complete
settlement.
7. Agreement to extend time:

As per sec 63 indian contract act an agreement to extend time for performance of a contract
need not be supported by consideration.
Bailment: a gratuitous bailment means giving an article to a person for a certain purpose
and it is to be returned after the purpose is fulfilled but no remuneration is charged for the
favor.
Ex: Using friend’s bike, car
Stranger to consideration and stranger to contract (privity of contract)
As per the law of contract, only parties to a contract may sue and be sued on that contract. This
rule is known as the doctrine of privity of contract which means relationship subsisting between
the parties who have entered into contractual obligations. It implies a mutuality of will and creates
a legal bond or tie between the parties to a contract.
If contribution is furnished not by the promise but a third person, the promise becomes a ‘stranger
to the consideration, S to C can sue the contract provided he is a party to the contract and the
consideration must flow from him at the desire of the promisor.
A person who is not a party to a contract, cannot even though the contract may be for his benefits
and such person is known as stranger to the contract.

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Exceptions to this rule:
1. Beneficiary in a trust or charge:

Sometimes a charge or other interest in some property is created in favour of some person
known as beneficiary, such beneficiary can enforce such right though he is not a party to the
contract.
2. Marriage settlement, partition or other family arrangement:
Family arrangements or compromises made among male members for the benefits of female
members of the family can be enforced by the female members, although the female
members, thus, where an agreement is made in connection with marriage.
Ex: Partition agreement.
3. Acknowledgment of payment or Estoppels:
Sometimes by the terms of a contract, a party is required to make payment to a third party
and he acknowledges it by conduct or other wise to the third party. In such case, the third
party can sue the promisor although there is no privity of the contract between the party
and third party.
Ex: the landlord was allowed to recover unpaid rent from the subtenant where ad under
agreement between a tenant and his sub tenant. The subtenant was paying the rent directly to the
landlord.
4. Contract entered into through agents:

Contracts which are entered into by the agent on behalf of the principal can be enforced by
the principal even though he is not a party to the contract.
5. Agreement of a contact:
A holder in due course of a negotiable instrument can realise the amount on it even though
there is no contract between him and the person liable to pay.
Ex: the father of bridegroom entered into an agreement with father of R the bride,in which he
agreed to pay rs 500 per month to S if she agreed to marry his son. He also charged certain
properties with the payment. The husband & wife separated. R filed a suit to recover the arrears of
payment. It was held that though she was stranger to contract but still she is entitled to enforce her claim.

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6. Agreement relating to land:

Where the ownership of the land is subject to certain rights and obligations and if the buyer
purchases the land with that notice affecting the land, though the buyer is not a party to the
agreement he could enforce the contract.
Capacity of the parties
For a valid contract, the parties to contract must have capacity ie competence to enter into a
contract.
Sec 11 of the contrct act deals with the competency of parties and provides that every person is
competent to contract who is of the age of majority according to the law to which he is subject and
who is of sound mind and is not disqualified from contracting by any law to which he is subject:
Incompetent person to contract-
a. A person who is a minor

b. A person of unsound mind
c. A person who is disqualified to make a contract
Minor :
An infant or a minor is person who is not a major.
A minor is one who has not completed his or her 18th year of age. A person attains majority on
completing his 18th year in India.
Rules regarding minor’s agreement
1. Agreement void ab initio:

Sec 11 says that a minor is not competent. The privy council made it perfectly clear that a
minor is not competent to contract and that a contract by minor is void ab initio.
Case: Mohori bibi vs Dharmo Das Ghose 1903

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A , a minor borrowed rs 20000 from B. and as a security for the same executed a mortgage in
his favor, he became a major a few months later and filed a suit for the declaration that the
mortgage executed by him during his minority was void and should be cancelled. It was
held that a mortgage by a minor was void and B was not entitled to repayment of money.
The earlier decisions have been modified and the position now is that if guardian , on behalf
of minor, enters into an agreement for the benefit of minor it is enforceable.
2. No ratification:
An agreement with minor is completely void. A minor cannot ratify the agreement even on
attaining majority, because a void agreement cannot be ratified.
But if on becoming major, minor makes a new promise for fresh consideration, then this
new promise will be binding.
3. Minor can be promise or beneficiary:
If a contract is beneficial to a minor it can be enforced by him. There is no restriction on a
minor from being a beneficiary.
Ex: being a payee or a promise in a contract.
Case: The General American Insurance Company Ltd vs Madan lal Sonu Lal 1935
X, a minor insured his goods with an insurance company. The goods were damaged. X filed a suit
for claim. The insurance company took the person on whose behalf the goods were insured was a
minor. The court rejected the plea and allowed the minor to recover the insurance money.
4. No estoppels against a minor.

Where a minor by misrepresenting his age has induced the other party to enter into a
contract with him, he cannot be made liable on the contract. There can be no estoppels
against a minor.
No doubt minor has got protection but he has no liberty to cheat others.
In sadiqui Alikhan vs Jai kishore it was held that a rule of estoppels cannot be applied against a
minor. This does not mean that the minor should be allowed to retain the benefit of his own fraud.

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But in India, it has been held that the court can direct the minor to pay back compensation to other
party in such cases.
5. No specific performance except in certain cases.

Because a minor’s contract being absolutely void. A guardian of a minor cannot bind the
minor by an agreement for the purchase of immovable property, so the minor cannot ask for
the specific performance of the contract which the guardian had no power to enter into.
6. Liability of torts:
A tort is civil wrong. A minor is liable in tort unless in reality is a breach of contract.
Thus, where a minor borrowed a horse for riding only he was held liable when he lent the
horse to one of his friends who jumped and killed the horse. Similarly a minor was held
liable for his failure to return certain instruments which he had hired and then passed on to
a friend.
But a minor cannot be made liable for a breach of contract by framing the action on tort. You
cannot convert a contract in to a tort to enable you to sue an infant.
7. No insolvency:
A minor cannot be declared insolvent as he is incapable of contracting debts and dues are
payable from the personal properties of minor and he is not personally liable.
8. Partnership:
A minor being incompetent to contract cannot be a partner in a partnership firm but under
sec 30 of the Indian partnership act he can be admitted to the benefits of partnership.
9. Minor can be an agent:
A minor can act as an agent. Nut he will not be liable to his principal for his acts. A minor
can draw, deliver and endorse negotiable instruments without himself being liable.
10. Minor cannot bind parent or guardian.
In the absence of authority, express or implied, an infant is not capable of binding his parent
or guardian even for necessaries. The parents will be held liable only when the child is
acting as an agent for parents.

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11. Joint contract by minor and adult:

In such a case, the adult will be liable on the contract and not the minor.
12. Surely for a minor:
In a contract of guarantee when an adult stands surely for a minor then adult is liable to
third party as there is direct contract between the surely and the third party.
13. Minor as shareholder:
A minor being incompetent to contract cannot be a shareholder of the company. If by
mistake he becomes a member, the company can rescind the transaction and remove his
name from register. But, a minor may acting through his lawful guardian become a
shareholder by transfer or transmission of fully paid shares to him.
14. Liability for necessaries:
A claim for necessaries supplied to a minor is enforceable by law. But a minor is not liable
for any price that he may promise and never for more than the value of the necessaries.
There is no personal liability of the minor, but only his property is liable.
Persons of Unsound mind
For a valid contract each party to the contract must have a sound mind. Contract made by persons
of unsound mind are void. The reason is that a contract requires assent of two minds but a person
of unsound mind has nothing which the law recognize as a mind.
Mental incompetents:
a. Idiots: Idiocy is a congenital (in born) defect caused by lack of development of the brain.
The agreement with an idiot is absolutely void.
b. Lunatics and insane (mad) persons: A lunatic is one whose mental power has been
damaged. Such persons may enter into contract during their lucid intervals ie, period in
which they are in senses.

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c. Drunkards: contract by a drunken person is absolutely void and cannot be ratified.

The drunken person’s property is liable for necessaries of life supplied to his or his
dependents during the periods of his drunkenness. That makes if he doesn’t have property
to pay for such necessaries the supplier has to lose the amount.
Legal disability- Incompetence arising out of status:
a. Foreign sovereigns, Ambassadors and Envoys (National status):

Foreign sovereigns and accredited representatives of a foreign state or ambassadors enjoy
special privilege that they cannot be sued in our courts and then enforce these contracts in
our courts. In India under section 86 of the civil procedure code, in order to sue rulers of
foreign states, ambassadors and envoys, previous sanction of the Central Government, duly
certified by the secretary to the government is mandatory.
b. Alien enemy: Is a person who is domiciled in a country which is at war with India. He
cannot enter into contracts with an Indian citizen nor can be file a suit in an Indian court.
c. Professionals: In England, Doctors (Physicians) are not permitted to enter into contracts
pertaining to their profession or to sue their fees or be sued.
d. Corporation: The contractual capacity of corporate bodies is restricted by the statutes
governing them. They cannot enter into contracts which are beginning their object and
powers.
e. Bankrupt: (Insolvent status) an undercharged insolvent (not able to pay one’s own debt)
cannot be appointed as a magistrate or director in a company or elector to any office of local
authority.
f. Felons and convicts (imprisonment status): persons undergoing sentences of life
imprisonment cannot enter into contracts, nor can they sue in courts, except when they have
a license called ticket of love.
g. Marriage (marital status): for the purpose of succession to the property of a male or female
Hindu, a daughter is placed in the same position as a son.

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Consent and Free consent
As per sec 10 of the contract act, free consent of all the parties to an agreement is one of the
essential elements of a valid contract. The term consent id defined by section 13 of the contract act
as’ two or more persons are said to consent when they agree upon the same thing in same sense’.
Thus consent involves identity of minds or consensus ad idem, which is agreeing upon the same
thing in the same sense.
Free consent means that parties must have given their consent on their own without any pressure
of any type.
According to section 14, consent is said to be free when it is not caused by,
1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake
1. Coercion: Sec 15 provides when a person is compelled to enter into a contract by the use of
force by the other party or under a threat, coercion is said to be employed.
Ex: Pratap threats to shoot Kiran, if he doesn’t let out his house to Pratap and Kiran agrees to
do so. The agreement has been brought about by coercion.
2. Undue influence: Sec 16 provides, A contract is said to be undue influence

i. One of the parties involved is in a position to dominate the will of the other &
ii. He has been in a position to obtain an unfair advantage over the other.
A person is deemed to be in a position to dominate the will of another:
a. Where he holds a real or apparent authority over the others
Ex: master & servant, police officer & accused.

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b. Where he stands in fiduciary relation to the other

Ex: father & son, guardian & ward, doctor & patient, Trustee & beneficiary, spiritual
guru & disciple, teacher & student.
c. 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.
Eg: an old illiterate person
Effect of undue influence:
When consent to an agreement is caused by undue influence, the agreement is a contract voidable
at the option of the party whose consent was so caused.
Ex: A, a money lender, advances rs 100 to B, an agriculturist & by undue influence induces B to
execute a bond for rs 200 with interest at 6% per month. The court may set the bond aside ordering
B to repay rs 100 with such interest as may seen just.
3. Fraud: sec 17 , the term fraud includes all acts committed by a person with an intension to
deceive another person.
Fraud is the willful representation made by a party to a contract with the intent to deceive the
other party or to induce such party to enter into a contract. It means a false statement made
knowingly or without belief in its truth or recklessly without caring whether it is true or false.
4. Misrepresentation: sec 18, it arises when the representation or statement made is inaccurate
but the inaccuracy is not due to any desire to defraud the other party is there is no intention
to deceive.
Ex: A intends to sell his horse to B & says ‘my horse is perfectly sound’. A genuinely believes
the horse to be sound, although he doesn’t know that horse fallen ill yesterday. B there upon
buys the horse; there is misrepresentation on the part of A.
5. Mistake: it may be defined as an erroneous belief concerning something.
It means that parties intending to do one thing have by intentional error done
something else.
An agreement is valid as a contract only when the parties agree upon the same thing
in the same sense.

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Lawful Objects:
Object of an agreement should be legal and at the same time the consideration for both the parties
should also be legal
According to Sec 23 of Indian contract act, an agreement of which the object or consideration is
unlawful is void.
Object means purpose or design of the contract. It implies the manifestation of intention. Thus, if a
person while in insolvent(one who is not able to pay one’s own debt) circumstances transfers to
another for consideration some property with the object of defrauding his creditors, the
consideration of the contract is lawful but the object is unlawful.
Public Policy:
Public policy is that principle of law which holds that no citizen can lawfully do that which has a
tendency to be injurious to public.
Any agreement which tends to promote corruption or injustice or is against the interests of the
public is considered to be opposed to public policy.
The courts in India have declared certain agreements as opposed to public policy and hence
unenforceable or void.
Agreement opposed to public policy:
1. Trading with enemy: Trading with enemy is clearly against public policy, it is against
national honor to indulge in such acts in times of national emergency.
But where a contract is made during peace times and then war breaks out, one of the
two things may result. Either the contract is suspended or it stands dissolved depending
upon the intention of the parties.

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2. Stifling prosecutions: it is public interest that criminals should be prosecuted and

published. An agreement to stifle a prosecution ie to compromise a prosecution is illegal
and void.
3. Maintenance and champerty: an agreement whereby a person promises to maintain a suit
in which he has no interest.
Champerty, is an agreement whereby a person agrees to assist another in litigation in
exchange of a promise to hand over a position of the proceeds of the action.
An agreement by a chartered accountant with his client to charge fees on the basis of
percentage of the benefit received by the client in income tax proceedings is void.
4. Transfer relating to public offices: agreements concerning the sale of public officers are bas
as they promote corruption.
Sec 6 (f) of the transfer of property act provides that a public office cannot be transferred nor
can the salary of a public officer.
Ex: A paid B a public servant a certain amount inducing him to retire from service, thus
paving the way for A to be appointed in his place. The agreement was held to be void.
5. Agreement tending to create interest opposed to duty: an agreement which tends to create
an interest in favour of a person which would conflict with his duty is illegal on the ground
that it is opposed to public policy.
Thus agreement by a person in government service for the purchase of land situated within
his circle is illegal as opposed to public policy.
6. Marriage brocage agreements: a marriage brocage is an agreement whereby a person
promises for reward to procure the marriage of another. Such agreements are void being
against public policy.
Thus, if A pays B, a stranger a certain sum of money to procure a wife for him, he cannot
enforce the agreement as it is clearly against public policy.
7. Agreements tending to create monopolies: it is void as opposed to public policy. There can
be monopoly rights given to one person to the exclusion of others in matters like selling of
vegetables.

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8. Agreements to influence elections to public officers: any agreement with voters tending to
influence them by improper means and agreement with third person to influence voters by
indirect means are all invalid.
Ex: A promises B, the owner of newspaper rs 500 in consideration of the publication by B, in
his newspaper of false statements in regards to a candidate for election. B published them.
The agreement is void as opposed to public policy.
9. Agreement in restraint of personal liberty: A contract which restricts the liberty of an
individual is illegal.
10. Agreements interfering with marital duties: are void. Thus an agreement to lend money to
a woman in consideration of her getting a divorce and marrying the lender is void.
Various modes of Discharging of Contract
A contract is said to be discharged or terminated when rights and obligations created by it is

extinguished.
Discharge means release of the parties to an agreement. It is also treated as finishing of agreement
between the parties. Agreement may be finished by completion or by breach of promise.
The following are the various modes in which a contract may be discharged.
1. Discharge by performance
2. Discharge by Agreement
3. Discharge by impossibility
4. Discharge by lapse of time
5. Discharge by operation of law
6. Discharge by breach of contract.

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1. Discharge by performance ( sec 37): the parties to a contract must either perform or offer to
perform their respective promises, unless such performance is dispenses with or excused
under the provisions of this act or of any other law.
Ex: A promises to deliver goods to B on a certain day on payment of rs 1000. A died before that
day. A’s representative are bound to deliver the goods to B and B is bound to pay rs 1000 to A’s
representative.
2. Discharge by agreement: as, a contract is created by means of an agreement, it may be

discharged by another agreement between the same parties nullifying the previous contract.
This may happen in any of the following ways:
a. Novation: When the parties to a contract agree to substitute the existing contract with a new
one it is called novation.
With novation the old agreement is discharged and in this place a new one comes into
effect. The new agreement must be enforceable.
Ex: Nirmal owes money to Karan under a contract, agreed between Nirmal, Karan and
Singh that Karan shall hence forth accept Singh as his debtor instead of Nirmal. The consent
of Nirmal, Karan and Singh is a must to constitute this as a valid contract.
b. Remission: the acceptance of lesser sum than what was contracted for the fulfillment of
promise made.
Ex: Alice owes Sandy, the printer rs 52000. Alice pays rs 45000 and Sandy accepts it as the
full payment.
c. Waiver: it means deliberate abandonment (rejection) or giving up of a right which a party is
entitled to under a contract, where other parties are relived form his obligation.
Ex: Varun promised to paint of sheeja. Afterwards sheeja forbade varun to do so. In this
case, sheeja has waived her right to claim performance.
d. Rescission: rescission of an agreement takes place when all or some of the terms of the
contract are cancelled.
It may occur
a) by mutual consent of the parties

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b) Where one party fails in performing his obligation, the other party mau rescind
(cancel) the contract without prejudice to his right to claim compensation for the
breach of contract.
Ex: Mani promises to deliver one thousand tons of sugar to Raju. On Nov 2016 before that
date they mutually agree that the contract will not be performed. This ia a case rescission by
agreement.
e. Merger: it takes place when an inferior right occurring to a party under a contract merges
into a superior right occurring to the same party under the same or some other contract.
3. Discharge by impossibilities: Sec 56 an agreement to do an act impossible itself is void.
Ex: A agrees with B to discover a treasure by magic. The agreement is void. Even
subsequent impossibility renders a contract void, sometimes the performance of a contract
is quite possible when it is made by the parties. But some event subsequently happens
which renders its performance impossible or unlawful. In either case, the contract becomes
void.
Ex: after making a contract of marriage one of the parties goes mad or
Where a contact is made for import of goods and the import is thereafter forbidden by a
government order.
4. Discharge by lapse of time/ limitation:
a contract is discharged by lapse of time. The limitation act 1963 lays down that a contract
must be performed within a specified period. The specified period is called period of
limitation. Now, if the contract is not performed within the period of limitation, it stands
terminated.
Ex: The price of goods sold without any stipulation as to credit must be paid within 3 years.
If the debtor fails to pay within 3 years and if the creditor doesnot sue the debtor for the
recovery, the debt shall become time barred and irrecoverable.
5. Discharge by operation of law:
a. Death: death of the promisor results in termination of the contract. Inother contract the
rights and liabilities of a deceased person pass to his legal representatives.

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b. Insolvency: upon insolvency, the right and liabilities of the insolvent are with certain
exceptions transferred to an officer of the court, known as official assignee in presidency
towns and an official receiver in other areas.
c. Unauthorized alteration: where one of the parties to a contract alters any of its terms
without seeking the consent of the other party to it, the contract stands discharged.
d. Merger: it occurs when there is acceptance of a higher security in the place of the lower.
It is an operation of law which extinguishes a right by virtue of its coinciding with
another and greater right in the same person.
Ex: a holds certain property under a lease subsequently he buys the property. His rights
as a lessee is merged into his tight of ownership now acquired.
6. Discharge by breach of contract: Parties to a contract are expected to perform their
respective obligations. If any party fails to perform his obligations there takes place a breach
of contract. It operates as a discharge of the contract.
It may be actual / anticipatory breach.
a. Actual breach: it takes place in the following ways when performance is actually due or
when actually performing or during the contract.
b. Anticipatory breach: it occurs, prior to the promised date of performance. It is an
announcement by the contracting party of his intention not to fulfill the contract and that
he will no longer be bound by it.

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Remedies for breach of contract
It occurs when one party refuses or fails to perform his/her part of the contract by his/her act
makes of it impossible to perform.
Ways to breach contract
1. Anticipatory breach of contract:

According to sec 39, anticipatory breach of contract occurs when the party declares his
intention of not performing the contract before the performance is due. Therefore when a
party refuses to perform a contract even before it is sue for performance it is called as
anticipatory breach.
Modes of declaring an intention not performing the contract - sec 39
a. When a party to a contract has refused to perform his promise
Ex: a poultry farm owner agrees to sell to B his entire batch of 1000 hens at rs 25000 to be
delivered on 31st July on 15th July. A inform to B that we are not going to supply the hens.
Here A is committed anticipatory breach of contract by express repudiation.
b. When a party to a contract has disable himself from performing his promise in its entreats.
Ex: take above example instead of delivering for rs 25000 he has sold at ts 30000. Here he has
committed anticipatory breach of contract by implied repudiation.
Note: when one party to a contract announces in advance that the contract will not be
performed an anticipatory repudiation results.
2. Actual breach of contract: it may takes place in any one of the following two ways:
a. On due date of performance: a party to a contract refuses or fails to perform his part of
the contract at the time fixed for performance.
Ex: in the above example assume that A agrees to deliver 1000 hens in 2 installments on
29th July & 31st July. But he refused to deliver on 31st July.
b. During the course of performance: A party has performed a part of the contract and the
refuses or fails to perform the remaining part of the contract.

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Ex: take above examples 500 hens delivered on 28th July & the remaining 500 hens
refused to deliver.
Remedies for breach of contract
In case of breach of contract, the law provides the following remedies to an injured party.
1. Sue for rescission of contract:

Rescission means a right not to perform or to cancel obligation.
In case of breach of contract, the promisee may put an end to the contract, the
aggrieved/Injured party is entitled to claim compensation for the damage which he has
sustained because of the no performance of the contract.
Ex: X agrees to supply 10 tons of wheat to Y on 20th October, Y promises to pay for the
goods on its receipt. X did not supply the goods on the due date. Here, Y is discharged from
the liability of paying the price. Y is entitled to rescind the contract and to claim
compensation for the damage which he has sustained because of non supply of goods on
the due date.
2. Sue for damages:
Damages mean compensation in money which the party who suffers by a breach of contract
is entitled to receive from the party who has broken the contract.
Damage is not punishment but compensation.
Kinds of damages
a. Ordinary / General damages: are those which flow as a natural consequence is the usual
course of things from the breach.
Ex: A agreed to sell B two bales of cotton at rs 1000 per bale. The delivery to be given on 15 th
January, A failed to give delivery. The remedy for B would be to claim the difference between

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the market price and the contract price for the same quality of cotton in case of market price is
higher than the contract.
b. Special damages: are those resulting from a breach of contract under some special
circumstances it must be known to both parties they ought to have known the loss that is
likely to result from out of breach of the contract.
Ex: Pinnock brothers V/s Lewis & Peat Ltd (1923)
P bought from L some copra cake. P sold the cake to B, who sold it to various dealers who in
turn sold to farmers, who used it for feeding cattle. The copra cake was poisonous and the
cattle died. The various buyers filed suit against P and obtained damages. P claimed from L,
damages and costs he had to pay so L was liable topay damages.
c. Exemplary damages: damages for breach are given by way of compensation for the loss
suffered by the plaintiff and not for the purpose of punishing the defendant for his breach.
Punitive damages have no place in contract law and are not recoverable.
In the case of dishonor of a cheque by a banker wrongfully and the issue of a cheque by a
customer when he has no adequate balance to his credit in the bank the court may award
penal damages.
d. Nominal damages: where the plaintiff suffers no loss the court may still award him nominal
damages in recognitions of his right.
e. Remote damages: the injured party is not entitled to any remote or indirect loss.
Ex: Hobbs v/s London & SW railways Co (1875)
Mr Hobbs and family travelled from Hampden to Wimbledon. But the train went in wrong
direction and the family had to get down at a place, where there was no conveyance and no
place to stay. The result that they had to walk home several miles at midnight on drizzling
night. Mrs Hobbs got ill. Mr Hobbs filed a suit
i. for damages for inconvenience and
ii.also damages for wife’s illness

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The court awarded damages in respect of the first claim, but the second claim did nor arises
in the usual course of things and was to remote a consequence.
f. Mitigation of loss: the injured party has to take all reasonable steps to minimize the loss
caused by the breach.
The loss caused by the breach must be kept to the minimum. The damages which results
due to the negligence of the aggrieved party are not recoverable.
Neki V/s Prabhu:
The plaintiff took a shop on lease and paid advance. The defendant could not give
possession and the plaintiff chose to do no business for 8 moths though there were other
shops available in the vicinity. Held he was entitled only to a refund of his advance and
nothing more as he had failed in his duty to minimse the loss by not taking another shop in
the neighborhood.
g. Liquidated and unliquidated damages:
It means the sum which has been fixed by the parties as a genuine pre estimate of the
damage likely to be caused by the breach of contract.
The parties may try to avoid the delay and the expense involved in litigation and hence
decided that amount to be paid as damages also where such a sum is fixed by the parties,
the court never tries to interface with it, provided it is reasonable.
Ex: A contacted with B to pay B rs 1000 if he failed to pay B rs 500 on a given day. A fails to
pay B rs 500 on that day. B is entitled to recover from A such compensation not exceeding rs
1000 as the court considers reasonable.
3. Sue for injunction: injunction is preventive relief it is usually granted to enforce negative
stipulations in cases where damages are not adequate relief. It is appropriate in case of
anticipatory breach of contract.
Ex: N, a film actress agrred to act exclusively for Warner Bros for one year. During the year
she contracted to act for X. it was held that she could be restrained by an injunction from
acting for X
Case: Warner Bros V/s Nelson (1937)

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4. Sue upon quantum meruit: Right to quantum meruit means a right to claim the
compensation for the work already done.
Ex: C a owner of a magazine engaged P to write a book to be published by installments in
his magazines. After few installments were published the publication of the magazine was
stopped. It was held that P could claim payment for the part already published- Planche v/s
Calburn.
5. Sue for performance: it is last remedy available to the aggrieved party. When damage is not
an adequate remedy, the court may at its discretion grant the specific performance of the
contract, compel the party in breach to do what he promised to do.
Difference between Quantum meruit and damages
Sl no Quantum meruit Damages

1 This right doesn’t arise out of any This right arise out of a contract(
contract but it is of quasi contractual when it is broken)
nature
2 This right arise out of some past This right arises when there is non-
performance performance ie breach of contract
a. Some work is done
b. Some service rendered
3 It is by nature restituted (void) It is by nature compensatory
4 It arises when a quasi contract is in It arise only when a contract is
existence broken

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Chapter 4
Consumer Protection Act 1986
Definitions of –
1. Consumer- A consumer means any person who

a. BUYS any goods for a consideration:
i. Which has been paid or promised or partly paid and partly promised
Or
ii. Under any system of deferred payment
Consumer also includes any user of such goods other than the buyer himself. The use of such
goods must however be for consideration paid or promised or partly or partly promised or under
any system of deferred payment. The use of such goods must be made with the approval of the
buyer.
A consumer doesn’t include a person who obtains goods for resale or for any commercial purpose.
b. HIRES, any services for a consideration which has been paid or promised or partly paid
and partly promised or under nay system of deferred payment.
Consumer also includes any beneficiary of such services other than the person who hires or avails
of such services.
Thus definition of consumer covers,
A. One who buys or agrees to buy goods for a consideration for personal use.
B. One who uses such goods with permission of buyer of goods
C. One who obtains goods on hire purchases or lease.
D. One who hires or avails of any services foe a consideration
E. One who uses the services with permission of person who has hired the servies.
F. One who obtains services on deferred payment basis ie hire purchase or lease.

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G. One who buys goods or hires services exclusively for purpose of earning his livelihood as
self employment. Thus, a person buying one truck or sewing machine or one computer will
be a consumer under this section.
2. Consumer dispute: Sec 2(1)(e) it means a dispute where the person against whom a
complaint has been made, denies or disputes the allegations continued in the complaint.
3. Complaint: sec 2(1)(c) it means any allegation in writing made by a complainant that is,
 An unfair trade practice or restrictive trade practice has been adopted by any trader.
 The goods bought by him or agreed to be bought by him suffers from one or more
defects
 The goods bought by him or agreed to be hired by him suffer from deficiency in any
respect.
 A trader has charged for the goods mentioned in the complaint a price in excess of
the price fixed by or under any law for the time being in force or displayed on the
goods or any package containing such goods with a view to obtaining any relief
provided by or under this act.
 Goods which will be hazardous to life and safety when used are being offered for
sale to the public.
4. Deficiency: sec 2(1)(g) it means any fault, imperfection, shortcoming or inadequacy in the
quantity, nature and manner of performance which (i) is required to be maintained by or
under any law for the time being in force (ii) has been undertaken to be performed by a
person in pursuance of a contract or otherwise in relation to any service.
5. Service sec2(1)(o) it means services of any description which is made available to potential
users. It includes the provisions of facilities in connection with a. banking b. financing c.
insurance d. transport e. processing f. supply of electrical or other energy g. boarding or
lodging or both h. house construction i. entertainment, amusement or other purveying news
or other information
It excludes any service done free of charge or personal service.

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Objectives of COPRA:
1. To protect the interest of the consumer

2. To promote and protect the rights of the consumer
a. The right to be protected against marketing of goods which are hazardous to life and
property.
b. The right to be informed about the quality, quantity, potency, purity, standard and price
of goods to protect the consumer against unfair trade practice.
c. The right to be assured wherever possible, access to an authority of goods at competitive
price.
d. The right to be heard and to be assured that consumers interests will receive due
consideration at appropriate forums.
e. The right to seek redressal against unfair trade practices or unscrupulous exploitation of
consumers
f. The right to consumer education.
3. To protect the consumer against unfair trade practice
4. To setup consumer protection council at the central and state level.
5. To provide speedy and simple redressal to consumer dispute by
a. Giving reliefs
b. Compensation to consumers.
Rights of consumers:
The COPRA 1986 seeks to provide for protection of the interests of the consumers in general. The
act has recognized the following 6 rights of the consumers:
1. Rights to consumer education: it is an important right available to the consumers.

Information about consumer products in the market and for the proper functioning of the

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legal system and the availability of a legal remedy should be so widely explained,
advertised and circulated. So that people as a whole become conscious of their rights.
2. Right to safety: the consumer has a right to be protected against marketing of goods which
are hazardous to life and property of the consumers.
For ex: adulterated food is dangerous to life and week cement is dangerous to life as well as
property.
3. Right to seek redressal: the consumer has been given the right to seek redressal against
unfair trade practices or their unscrupulous (corrupt) exploitation. The consumer should
have some means of redress when goods fail to live up to their promise or indeed cause
injury.
4. Right to be heard: it also includes the right to be assured that the consumer interest will
receive due consideration at appropriate forums the consumer disputes should be resolved
in a fair and expeditions manner.
5. Right to choose: it means right to be assured wherever possible, access to a variety of goods
and services at competitive prices. Fair and effective must be encouraged in order to
provide consumers with the greatest range of choice among products and services at the
lowest price.
6. Right to information: the right to obtain adequate information is an important right which
enables the consumer to take intelligent decision at the time of purchasing any goods or
hiring any services.
Consumer forum redressal agencies: section 9:
1. Dispute forum: setup by the state government in each district by notification

2. A state commission: setup by the state government
3. A national commission: set up by central government by notification

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Consumer district redressal forum: (the district forum Sec 10-15)
1. Constitution: it is set up by the state government one at each district

2. Composition: it shall have a president and 2 members, one of whom must be a woman.
3. Appointment: they are appointed by state government on the recommendation of a
selection committee of 3 persons.
I. Chairman – is the president of the state commission
II. 2 members – one member is the secretary in the law department of the state
- Another is the secretary of consumer affairs.
4. Qualification: The president of a district forum must be qualified district judge. Another 2
members must have the ability & integrity and have enough knowledge and experience in
economics, commerce, accountancy, law, industry and public affairs.
5. Period of office: Every member of the district forum shall hold office for a period of 5 years
and there shall be no re appointment.
6. Terms of services: the salary and terms and conditions of the members may be prescribed
by the state government.
7. Jurisdiction: Sec (11) its jurisdiction is based on the amount of compensation. This forum
will have jurisdiction when the amount of compensation claimed is up to rs 20 lac.
The complaint must be given to that district forum in the district in which opposite
party (the person answering the complaint) has the business or the branch office or works
for gain.
8. Who shall give complaint Sec (12): A complaint may be filed with a district forum by:
a. The consumer to whom such goods are sold or services rendered
b. Any recognized consumer association ie registered under companies act 1956.
c. The central and state government
9. Powers: the order given by the district forum shall be the final. It shall have the power of a
civil court under the code of civil procedure 1908. The proceedings of the district court
forum are equal to judicial proceedings under sec 193 and 228 of IPC.

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Sec 14: It can issue an order to the opposite party on one or more of the following steps:
1. To replace the goods with new goods
2. To remove the defect in the goods or services pointed by the lab report.
3. To repay the price to the complainant.
4. To pay compensation to the consumer for any loss suffered due to the negligence of the
opposite party.
5. To discontinue unfair trade practices
6. To stop the sale of hazardous goods
This order of the district forum shall be signed by its president and the members who
conducted the proceedings
10. Appeal (sec 15): Any person aggrieved by the order of district forum can go for an appeal,
against such order in the state commission with 30 days from the date of the order.
Consumer Dispute Redressal commission (the state commission Sec 16-19)
1. Constitution: It is set up by the state government by notification.

2. Composition (sec 16): it shall have a president and 2 members, one of whom must be a
woman.
3. Appointment: the president is appointed in consultation with the chief justice of the high
court.
They a appointed by the state government on the recommendation of a selection committee
of 3 persons (composition of the selection committee is the same as referred under district
forum)
4. Qualification: The president of a state commission must be a judge of a high court, and he is
appointed by the state government. The qualification of the 2 members is same as district
forum)

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6. Terms of services: the salary and terms and conditions of the members may be prescribed
by the state government.
7. Jurisdiction: Sec (17) the jurisdiction of the state commission is limited to the extent of
compensation value of above Rs 5 lakh and up to rs 1 crore and appeals against the orders
of any district forum in the state.
d. Treatment of complaint: the rule of section 12, 13, 14 and procedure explained under
District forum may be applicable to the state committee also.
8. Powers: it has powers of a civil court. It can call for the records and issue an appropriate
order in any consumer dispute pending before it and also the dispute decided by any
district forum within the state. It can issue an order to the opposite party directly to do one
or more thing referred under sec 14.
9. Appeal (sec 19): Any person aggrieved by the order of state commission within 30 days
from the date of the order in the national commission.
National Consumer Dispute redressal Commission (National Commission Sec

20-23)
1. Constitution: It is set up by the Central government by notification.

2. Composition (sec 20): it shall have a president and 4 members, one of whom must be a
woman.
3. Appointment: the president is appointed in consultation with the chief justice of India and
other members are appointed by the recommendation of selection committee.
This selection committee has
a. One chairman – is a judge of the supreme court (nominated by the chief justice of India)
b. One member is the secretary in the department of law in the government of India.
c. Another members the secretary of the department of consumer affairs in the GOI.
4. Qualification: The president of the national commission is the judge of the supreme court
and he is appointed by the central government and the other 4 memebrs must have the

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ability and integrity & have enough knowledge and experience in economics, commerce ,
accountancy, law, industry and public affairs.
6. Terms of services: the salary and terms and conditions of the service of the members of
National commission is prescribed by the Central government.
7. Place of office: the office of this commission must be in the state of Delhi.
8. Jurisdiction: Sec (21) the jurisdiction is limited to the extent of compensation value of above
rs 1 crore and appeals against the orders of any state commission.
9. Treatment of complaint: same as district forum
10. Powers (in form of procedure sec 22): it has powers of a civil court. It can call for the records
and issue an appropriate order in any consumer dispute pending before it and also the
dispute decided by any district forum within the country. It can issue an order to the
opposite party directly to do one or more thing referred under sec 14.
11. Appeal (sec 19): Any person aggrieved by the order of national, may appeal against such
order in the Supreme Court within 30days from the date of the order.

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Chapter 5
The Environment Protection Act 1986
The environment protection act 1986 is a new piece of legislation enacted by the GOI agter the
Bhopal tragedy article 253 of the constitution.
The purpose of the act is to protect and improve the human environment and to prevent hazards
to human beings, animals, plants and property.
Definitions:
1. Environment: it includes water air& land and the inter relationship which exists between
water, air, & land & human being. Other living creatures, plants, micro organisms and
property.
2. Environmental pollutant: it means any solid, liquid or gaseous substance present in such
concentration as may be, or tend to be injurious to environment.
3. Environmental pollution means the presence in the environment of any environmental
pollutants.
4. Hazardous substance means any substance or preparation which, by reason of its chemicals
or physic- chemical properties or handling is liable to cause harm to human being other
living creatures, plants, micro organisms, property or the environment.
5. Occupier in relation to any factory or premises menas a person who has control over the
affairs of the factory or the premises and includes in relation to any substance, the person in
possession of substance.

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Powers of central Governement Sec 3-6
The central government ha the power under the act to take necessary steps or measures to
protect and improve the quality of the environment and prevent and control environmental
pollution.
I Measures to protect and improve environment Sec 03
The central government has the power in all or any of the following:
1. To co ordinate the actions by the state government

2. To plan and control a nationwide programme for the prevention, control and abatement of
environmental pollution.
3. To prescribe standards for the quality of environment
4. To prescribe different standards for emission (or discharge of environmental pollution) from
different sources as to the quality and composition of emission.
5. To restrict areas in which any industries shall not be carried out.
6. To lay down procedure and safeguards for handling of hazardous substances.
7. Examine of such manufacturing processes, materials and substances as are likely to cause
8. To conduct investigation and research on the environmental pollution problems.
9. To inspect the factories, plants, machinery equipments, materials and manufacturing
process so as to give directions to the officers to take necessary step to prevent and control
10. To establish or recognize environmental laboratories and institutions.
11. To collect and distribute information on environmental pollution. For the purpose of
performing the above said powers and functions the central government may setup an
authority by an order, published in the official gazette.

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II appointment of officers and their powers functions sec 4
The central government may also appoint officers and give powers and functions under this act.
Such officers shall work under the direction of the central government and the other authorities set
up under the act
III Power to give direction sec 5
Under the act the central government may gives directions in writing to the officers and authorities
on
1. Closing or regulation of any industry operations or process.

2. Stopping or regulating of the supply of electricity and water.
IV Rules to regulate pollution Sec 6
The central government may make rules (through notification in the official gazette on all or any of
the matters mentioned in sec 3 such rules are:
1. Fixing the standard of quality of air, water and soil.

2. Fixing maximum limit for notice and environmental pollution.
3. Farming procedure for the handling of hazardous substances and also restriction on
handling of such substances in different areas.
4. Prohibiting and restricting the location of industries in different areas.
5. Laying procedures and safeguards for preventing a accidents that any cause environmental
pollution.

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Prevention Control and abatement of environmental pollution Sec 7-15
1. Preventing emission in excess of standards (sec7)

Any person carrying on any industry or process shall not discharge/ emit any
environmental pollution over and above the standard prescribed.
2. Procedure for handling hazardous substances (sec 08)
A person shall handle any hazardous substances only according to the prescribed
procedures and after satisfying the safety measures prescribed under the act.
3. Duties of persons creating environmental pollution (sec 9)
The duties of the persons causing environmental pollution under act are given below:
a) He must mitigate (lessen the seriousness) environmental pollution
b) He must inform the prescribed authorities about the occurrence of environmental
pollution
c) He must help these authorities in preventing or reducing the environmental pollution
d) He must bear the expenses incurred on the remedial measures.
4. Power of entry and inspection (sec 10)
Under the act the person empowered by the central government can enter into any
premises
a. For performing the functions of central government given to him
b. For examining and testing any equipment industrial plant, record, register and
document.
c. To seize any such equipment if can be used as evidence in the court of law for punishing
the person responsible for environmental pollution
If any person carrying on any industry or process
1. Fails to help these authority or

2. Intentionally prevents him from doing their functions will be punished under code of
criminal procedures of 1973.

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5. Power to make samples and procedure sec 11

The central government or the person empowered by it can take the samples of air, water,
soil or other substances for the purpose of analysis from any factory. The sample so taken to
be put in a container and shall be marked and sealed and also shall be signed by the persons
taking the sample and the occupier.
Then the sealed containers with samples shall be sent to the laboratory established or
recognized under sec 12 for analysis by the person taking the sample.
6. Establishment of environmental laboratories sec 12
Under the act, the central government through notification in the official gazette may
established or recognizes one more environmental laboratories and lay down the functions to
be performed by them.
7. Appointment of government analyst sec 13

Central government may appoint any qualified persons as government analysts for the
purpose of analysis of sample of air, water, soil etc the appointment may be notified in the
official gazette.
8. Report of analysis sec 14
The government analyst may prepare a report of the analysis such report prepared and duly
signed by the government analyst may be used as evidence in the court of law.
9. Penalty sec 15
Any person who fails to implement or violates any provisions o f this act shall be punished,
with imprisonment of up to 5 years or a fine of rs 100000 or both. And of the failure
continues the defaulter shall have to pay additional fine of up to rs 5000 for everyday
during which failure continues.

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Chapter 6
I. FEMA – Foreign Exchange Management Act 1999
FROM FERA TO FEMA :- As a part of the on-going process as economic liberalization

relating to foreign investments and foreign trade a review of the foreign exchange regulation
Act,1973 was made in the year 1993, and several amendment were enacted. Subsequently it was
felt that FERA 1973 must be repealed.
GOI was constituted a task force to box an overall look on the subject and suggest the
required changes. On the recommendations of the Task Force (Reported in 1994) and keeping in
view the significance development on August 4th 1994. The FEMA Bill was introduced by Finance
Minister in Loksabha the Bill having passed by both the Houses of Parliament. It came into force
on 1st of June 2000 as FEMA.
Objectives of FEMA:
The main objective of FEMA is to consolidate and amend the law relating to foreign exchange
with a view to facilitate external trade.
In simple the Objectives are:
1) To facilitate external trade and payment

2) To promote of an orderly maintenance of foreign exchange market in India.
Definitions:
1). Authorised Person: mean an authorised dealer, money changer off-shore banking unit or any
other person for the time being authorised deal in foreign exchange or foreign securities.
2). Currency: includes all currency notes, postal notes, postal order, money orders, cheques, drafts,
travellers cheque, letter of credit, bills of exchange and promissory notes, credit cards or such other
similar instruments as may be notified by the reserve bank.
3). Foreign Exchange: mean foreign currency and includes, a). Deposits, credits and balances
payable in any foreign currency b). Drafts, travelers’ cheques, letters of credit and bill of exchange,
expressed or drawn in Indian currency but payable in any foreign currency. c). Drafts, travellers
cheques, letters of credit or bills exchange drawn by banks, institutions or persons outside India,
but payable in Indian currency

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4). Foreign Security: means any security in the form of shares, stocks, bonds, debentures or any
other instrument expressed in foreign currency and include securities expressed in foreign
currency, but where redemption or any form of return such as interest or dividends is payable in
Indian currency.
Concepts of RTI (Right to Information) Act
RTI, 2005 empowers a citizen to access the information for disclosure from the public author and
bring transparency.
The nation campaign for people’s RTI Was initiated by social activists, journalists, lawyers’
professionals, retired civil servants and academics in 1996 with the objectives of a national law
facilitating the exercise of the fundamental RTI.
*RIT 2005, Is act to provide for setter out the practical regime of RIT for citizens to secure access to
information under the control of public authorities, in order to promote transparency and
accountability in the working of every public authority.
As per the Act, information means
 -Material in the form of documents

 Memos, e-mails, press release,
 Circulars, orders, contracts, reports
 Data materials.
The Act covers
 Central, State and Local Government.

 All bodies owned, controlled or substantially financed by the government.
 Any non- government organization substantially finance directly or indirectly by the
appropriate government.
The information which affect the sovereignty and integrity of India are not to be disclosed
information, which relates to personal information the disclosure of which has on relationship to
an public activity or interest or which would cause unwarranted invasion of the privacy of the
individual is also not supposed to be disclosed.

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Objectives of the RTI Act:
1. Evidently, the major objectives of the act are:-
a. Greater transparency in functioning of public authorities

b. Improvement in accountability and performance of the government.
c. Promotion of partnership between citizen and the government in decision making process
and
d. Reduction in corruption in the government departments.
2. Specifically, the main objectives of the law on RTI:-
 To operationalise the fundamental RTI.

 To set up systems and mechanisms that facilitates people’s easy access to information.
 To promote transparency and accountability in governance.
 To minimize corruption and inefficiency in public offices and to ensure people’s
participation in governance and decision making.
Need for RTI
1. Translating right in to Reality: The RTI has already received judicial recognition as a part
of fundamental right to free speech and expression. This law will lay down the procedure
for translating this right into reality.
2. People kept informed about current affairs and broad issues: Information is indispensable
for the functioning of a trade democracy. People have to be kept informed about current
affairs and broad issues- political, social and economic. Free exchange of ideas and free
debate are essentially desirable for the government of a free country.
3. Information and economic development: In this age of information, its value as a critical
factor in socio- cultural, economic and political department is being increasing felt. In a fast
developing country like India availability of information needs to be assured in the fastest
and simplest form possible.
4. Right to know relations with other basic rights: Right to know is also closely linked with
other basic rights such as freedom of speech and expression and right to education. Its
independent existence as an attribute of liberty cannot be disputed viewed from this angle,
information or knowledge becomes an important resource.
5. Transparency: Soli Sorabjee stressing on the need of RTI aims at bringing transparency in
admiration and public life, says, “Lack of transparency was one of the main causes for all
pervading corruption and RTI would lead to openness, accountability and integrity.
According to Mr P.B.Sawant, “The barrier to information is the single most cause
responsible for corruption in society”.

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6. Checking corrupt practices in government :- In a large number of cases, the commission

has ordered for providing the details of the decision making processes, which include file
noting, cabinet papers, records, of recruiter selection and promotion of staff, documents
pertaining to tender processes and procurement procedure, the lists of beneficiaries of the
government subsidized schemes, such as food grains supplied through ration shops, water
and electricity, domestic educational and health facilities, shelter for poor, muster rolls
under employment guarantee schemes etc., The disclosure vital information such as above,
has thus resulted in checking corrupt practices in delivery of services and ensuring the
reach of entitlements to the poor. The disclosure of information relating to use of funds
allocated to rural employment guarantee scheme, MLA/MP Local area funds etc., have
contorted to advocacy in favour or against the policies and …………… leaderships.
Intellectual property Act (1993)
It is the creation of human intellect. It is created by incorporating information in tangible objects

capable of multiplying in an unlimited number of times at different location anywhere in the
world. The property basically lies in the concept, idea, thought and later in the actual product,
work or process.
IP is usually divided into 2 branches viz.,
1. Patents, designs and trademarks these popularly called Industrial property’.

2. Copyright which a right is given to an author of a book.
Though, patents, designs, trademarks and copyrights are the popular intellectual properties.
According to the world intellectual property organisation (WIPO) IP includes rights relating
to:-
i. Inventions in all fields of human Endeavour

ii. Scientific discoveries
iii. Industrial designs
iv. Trademarks, service marks, and commercial names and designations
v. Literacy, artistic and scientific works
vi. Performances of artists, programmers
vii. Protection against unfair competition

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Patents:
A patent conveys to its owner (inventors) the right to prevent others from making, using, selling,
offering for sale or importing the patented invention. Patents are national in nature, having effect
only within the territory of the issuing country.
Kinds:
1. Utility paten t: legal protection granted for inventions or discoveries that a categorized as
machine, processes, composition, articles of manufacture or new uses of any of these.
2. Design patent: Protects new, original and ornamental designs for useful objects, the design
patent protects only the appearance of an article, not its structure or utilitarian features.
Design patents have been granted for stained glass windows, Adidas shoes, and the shape
of an electric guitar.
3. Plant patent : it have been granted for new variations of tulips, roses and tomatoes protects
distinctive plants reproduced asexual (ie., by means other than seeds)
4. Copyright: the legal right to exclude others for a limited time, from copying, selling,
performing, displaying or making derivative version of a work of authorship.
Copyright protects only the expression of an idea, not the idea being expressed.
It is associated with.
- Literature-,movie scripts-,music- song lyrics
- Product manuals- instruction booklets
- Training materials- marketing and sales publication- computer software.
Last for the life of the author + 70 years
Trademark: It is any word, symbol, design, logo or slogan that identifies and distinguishes one
product or service from another.
 Eg: Kodak trademark distinguishes Kodak film from other brands.

 Patent on – Mysore silk sarees
 Byadagi chillies
 Conversion of milk into words
 Basmati rice
 Turmeric
 Pharma products.

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Invention sec 2(j)- patent is granted to an invention. It means any new and a set of useful
(a). art, process method of manufacture
(b). a machine, instruments or other articles.
(c). substance produced by manufacture.
It also includes new improvements in any of the above items. Hence the 3 basic requirements of an
invention are:-
1. Method of manufactures
2. Novelty
3. Utility
Cyber laws 1999
Meaning: Cyber law is the field of law dealing with computers and the internet including such
issues as intellectual property right, freedom of expression and free access to information India is
one of the very few countries in the world to have legislated cyber laws.
Objectives of the Act are:
1) To grant legal recognition to transactions carried out by means of electronic data

interchange and other means of electronic communication commonly referred to as
electronic commerce in place of paper based methods of communication.
2) To give legal recognition to digital signature for authentication of any information or matter
this requires authentication under any law.
3) To facilitate electronic filing of documents with government departments.
4) To facilitate electronic storage of data.
5) To set up licensing, monitoring and certifying authorities to oversee issues like jurisdiction,
origin, authentication, privacy protection and computer crimes.
6) To facilitate and give legal sanction to electronic and transfers between banks and financial
institutions.
7) To give legal recognition for keeping books of account by bankers in electronic firm.
8) To make amendments in the Indian penal card Indian evidence Act and RBI Act, 80 that the
offences relating to made equal to the offences in respect of transactions carried out through
the electronic media.

Business Law
In its present form, the Act not only recognizes the usefulness of e-commerce but also provides the
necessary safeguards for the transactions by creation a necessary legal framework.
Competition law 2003
Introduction: in the process of LPG- Liberalisation, Privatisation and Globalisation, India has
opened up its economy and controls removed. As a consequence of this (LPG) Indian market has
to be geared to face competition from within the country and outside the country.
The MRTP Act 1969 was in curbing monopoly restrictive and unfair trade practices now the more
is from controlling monopolies to promoting competition.
A high level committee on competition policy law, appointed by GOI, the committee recommence,
that new competition (law) Act may be enacted MRTP Act may be repeated, GOI decided to
enhance the law on competition after consulting all concerned including trade and industry
associations and general public accordingly by the competition bill was introduced in the
parliament in 2001.
The preamble to the competition Act 2002 states that is an “an Act to provide keeping in view of
the economic development of the country for the establishment of a commission to prevent
practices have adverse effect as competition, to promote and sustain competition in markets, to
protect the interests of consumers and to ensure freedom of trade carried on by other participants
in markets”.
The objectives of the Act are:
1. To prevent practices having adverse effect of competition in markets within

India.
2. To promote and sustain competition in markets
3. To protect interests of consumers.
4. To ensure freedom of trade carried on by other participants in markets.
5. To aim at curbing negative aspects of competition through the establishment of
competition commission of India (CCI).

Types of Contract

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Business Law

 A rule of conduct imposed and enforced by the sovereign

Scope of Business law:

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Sources of Indian business law:

1. The common law:

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3. The law Merchant:

Indian Contract act 1872

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Contact = Agreement +Enforceability

Essentials of valid contract

5. Writing and registration

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8. Not expressly declared void

10. Free consent

I . From the point of view of enforceability:

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Ex: Contract by a minor, lunatic etc.

Ex: an agreement to commit a crime is illegal and therefore void.

II Form the point of view of mode of creation:

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3. Quasi contract or constructive contact: It is a contract in which there is no intention on either

III From the point view of the extent of execution

IV From the point of view of performance

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Agreement = offer + acceptance

Difference between AGREEMENT and CONTRACT

Basis Agreement Contract

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Legal Does not creates legal obligation Creates legal obligation

3. Voidable agreement: Includes both the parties to disclose their obligation.

Void Agreement and Voidable contract

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Ex: an agreement with a minor

Void agreement Voidable contract

It is void – ab-initio It is continues to be valid until it is

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Here A is offerer or promisor , B is offeree or promisee.

Essentials of valid offer

1. Offer must be certain, Definite and not vague:

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4. An offer must be communicated to the offeree:

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An accepted proposal is a called a promise or an agreement Sec 2(b)

Essentials of Valid acceptance

2. Acceptance must be absolute and unqualified (Unconditional )

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Here promise is the consideration for the promise of other party.

Essentials of valid consideration

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Case: Chinnayya Vs Ramayya

3. Consideration must not be illusory, but should be real and specific.

4. Consideration need not be adequate.

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5. Consideration must be lawful.

6. Consideration may be an act or abstinence or promise.