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Act, 1872
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Indian Contract Act, 1872
Chapter – 1
Nature and Essential
of a Contract
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Business Law
Indian Contract Act, 1872
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Business Law
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Indian Contract Act, 1872
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3.Competentnce of Parties
Everybody is able to make contract except Minor,
Person of Unsounded mind,
Person who are disqualified by any other law.
4.Consideration
“Something in Return”
e.g. B promise to S that He will buy his bike for
Rs.35000.
5.Free Consent
If the parties make the agree. without any kind of
pressure or misguidance, then the agree. would be
the result of Free Consent.
“Consensus ad item” between parties, which means
that there must be complete understanding of each
other’s mind between them.
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Case Law
• A invite B to out for dinner together. B accepts the offer. A hires a
taxi but B does not turn up. A has to give the dinner some
compensation. Can A recover it from B?
• V offer to donate Rs. 11000 to hospital. The hospital accept the offer.
Can it recover the amount ?
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Chapter – 2
OFFER
AND
ACCEPTANCE
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The Acceptance
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4.Must be Communicated
Mental acceptance is no acceptance.
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2. By laps of time
- X offer Y to sell some goods on 1st May and agreed
to give him three days time to accept. Y accepted
offer on 5th May.
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Case Law
1. A garment store gave the following
advertisement in a newspaper: “Special sale for
tomorrow only. Men’s Suits reduced from Rs.
200 to Rs. 100.” Is it offer?
2. P says to Q, “I will sell you a camera.” Is it
offer?
3. A advertises in ToI that he would pay Rs. Rs.200
to anyone who finds and return his knowledge.
Is it offer?
4. A offer by a latter to sell his car to B for Rs.
15000. B, at the same time, offer by latter to
buy A’s car for Rs.15000. The two letters cross
each other in the post. Is there a contract
between A and B?
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Indian Contract Act, 1872
Consideration
-“Something in Return”
Sec. 2 (d) defines consideration as follow : “When at the
desire of the promisor, the promisee or any other person
has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing,
something, such act or abstinences or promise is
called a consideration for promise.”
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Capacity to Contract
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Minor
• According to Indian Minority Act,
1875., a person who has completed
his 18th year of age is considered too
be minor.
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• Law Relating to minor’s Agreements:
“NO LEGAL ACTION TAKEN AGAINST MINOR”
1.Absolutly Void
Agree. of minor is absolutely void and nullify.
e.g. A minor take loan of Rs. 20000 from moneylender and
put mortgage of his house in favor of moneylender. Later,
minor started an action to get the mortgage cancelled.
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Continued
• Contracts by person of unsound mind
– Contracts by lunatics
– Contracts by drunkards
• Contracts with Parda-Nishin women.
• Contracts by married women
• Contracts by corporation
• Contracts by insolvents
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Free Consent
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Undue Influence
• Undue influence is the improper use of any power
possessed over the mind of the contracting party.
• According to Sec. 16 a contract is said to be affected by
undue influence when:
-(a) the relation subsisting between the parties are such
that one of the parties is in a position to dominate the
will of the other, and
(b) Use that position to obtain an unfair advantages over
other.
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Burden of Proof
• The person who claim undue influence has to prove
that it was the cause of contract. He has to prove
that pre-existing relationship, the position of
domination, and the misuse of the position.
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Difference Between Coercion and Undue Influence
1.Mode of Obtaining Consent
- In Coercion ,Consent obtained by threatening to act.
- In U.I. , Consent obtained by using dominating power.
2. Type of Force
-In Coercion, physical force is exercised.
- In U.I. , Moral forced is used.
3. Existence of Relationship
-relationship between the promisor and the promisee is not
necessary.
-Some sort of relationship MUST exist between the two parties
to the contract.
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FRAUD
• Fraud means method of misleading a person deliberately
to cause in him a wrong understanding of so as to
obtaining that’s person’s consent for a contact.
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MISREPRESENTATION
• Misrepresentation is a false representation made
innocently without any intention of deceiving the other
party. It may include two things:
(a) Wrong statement of a material facts not known to be
false
(b) Non-disclosure of the facts where there is a large
duty to disclose without any intention to deceive.
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Diff. between Fraud and Misrepresentation
1. Intention:
- In fraud, there is intention to deceive (mislead to
somebody).
-In Mis. , there is no intention to deceive.
2. Consequence:
-In Fraud, damage can be available to the affected
party for the loss suffered .
-In Mis. , no such damage are available.
3. Defense:
-In Fraud, the guilty party does not have any defense
in its favor.
In Mis. , the guilty party have defense in its favor.
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Mistake
• A mistake means an error in understanding the
fact relevant for formation of a contract.
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Case law
- X , a poor widow, borrowed Rs. 3000 from a money-lender at
100% per annum rate of interest for the purpose of enabling her
to establish her right of maintenance. Is she liable to replay the
loan on these terms?
- No, this is an unconscionable transaction and thus
amount to a contract caused by undue influence.
• A woman went to a jeweller, falsely represented herself to be a
wife of Sachin Tendulkar and took with her a ring on the
pretext of getting the approval of her husband . She deposit the
ring with Mr. Kambli. Can the jeweller recover the ring from Mr.
Kambli?
- Yes, because , there was a mistake of identity on the part
of the jeweller, Thus the agreement was void.
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Void Agreement
1. Agreement made by incompetent parties (Sec. 11)
Everybody is able to make contract except
Minor,
Person of Unsounded mind,
Person who are disqualified by any other law.
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• . Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here
B's promise to pay the sum of 10,000 rupees is the
consideration for A's promise to sell the house, and A's
promise to sell the house is the consideration for B's
promise to pay the 10,000 rupees.
(b) A promises to pay B 1,000 rupees at the end of six
months, if C, who owes that sum to B, fails to pay it. B
promises to grant time to C accordingly. Here the
promise-of each party is the consideration for the
promise of the other party and they are lawful
considerations.
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CONTINGENT CONTRACTS
• "Contingent contract" defined.-A "
contingent contract " is a contract to do or
not to do something, if some event,
collateral to such contract, does or does
not happen. Illustration A contracts to pay
B Rs. 10,000 if B's house is burnt. This is
a contingent contract.
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Enforcement of contracts
contingent on an event happening
• Contingent contracts to do or not to do anything if an
uncertain future event happens cannot be enforced by
law unless and until that event has happened. If the
event becomes impossible, such contracts become void.
Illustrations
• (a) A contracts to pay B a sum of money when B marries
C. C dies without being married to B. The contract
becomes void.
• (b) A makes a contract with B to sell a horse to B at a
specified price, if C, to whom the horse has been
offered, refuses to buy him. The contract cannot be
enforced by law unless and until C refuses to buy the
horse.
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Expiry of time
• Illustrations
• (a) A promises to pay B a sum of money if a
certain ship returns within a year. The contract
may be enforced if the ship returns within the
year, 'and becomes void if the ship is burnt
within the year.
• (b) A promises to pay B a sum of money if a
certain ship does not return within a year. The
contract may be enforced if the ship does not
return within the year, or is burnt within the year.
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Agreement contingent on
impossible events void.-
• Contingent agreements to do or not to do
anything, if an impossible event happens, are
void, whether the impossibility of the event is
known or not to the parties to the agreement at
the time when it is made.
• Illustrations
• (a) A agrees to pay B 1,000 rupees if two
parallel lines should meet. The agreement is
void.
• (b) A agrees to pay B 1,000 rupees if B will
marry A's daughter C. C was dead at the time of
the agreement
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Cases
• In carew Co. Ltd v North Bengal, where two sugar
manufactures had entered into an agreement allocating
zones to procure sugar for meeting the needs of their
respective factories and each undertook not to draw any
cane from the zones alloted to the other factory, it was
held that the agreement was in restraint of trade and
therefore void.
• Similarly where four ginning factories entered into an
agreement fixing uniform rate for ginning cotton and
pooling their earnings to be divided between them in
certain proportions, it was held that such an agreement
was valid and enforceable.
• A combination which tends to create monopoly and
which is against the public interest is void.
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Quasi Contract
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1. Supply of necessaries
2. Payment by an interested person
3. Obligation to pay for non-gratuitous acts
e.g. Mr. X , a trader, leaves goods at Y’s house by
mistake. Y treats the goods as his own. He is bound to
pay for them to X.
4. Responsibility of Finder of Goods
Mr. X picks up a diamond on the floor of Y’s shop. He
hands it over to Y to keep it till true owner is found out.
No one appears to claim it for quite some weeks inspite
of the wide advertisement in the newspapers. X claims
the diamond from Y who refuse to return. Y is bound to
return the diamond to X who is entitled to retain the
diamond against the whole world except true owner.
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5. Mistake or coercion
e.g. A and B jointly owe Rs. 100 to C. A alone pays the
amount to C. and B not knowing this fact, and pays Rs.
100 to C again. C is bound to pay the amount to B.
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Quantum Meruit
• Quantum Meruit means “as much as earned”.
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Classification of Contract
Executed Executory
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1. Classification of Contract on the basis of Enforceability:
a. Valid Contract:
Contract which satisfy all the essential elements of a
valid contract as laid down be Section 10.
b. Void Contract:
An agreement may be enforceable at the time when it
was made but later on, due to certain reason, it become void
and unenforceable.
c. Illegal Contract:
All illegal agreement are void but all void agreement are
not necessarily illegal.
e.g. An agreement with minor is void but not
illegal.
d. Unenforceable Contract:
Certain contract become void because the law court will
not enforce them due to not fulfillment of certain formalities.
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Thank You
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