1.Basics Of Contract Act

CONTRACT ACTCONTRACT ACT

Basics of Contract Act Basics of Contract Act

CONTRACTCONTRACT

Meaning and definition of Contract & other Meaning and definition of Contract & other relative terms such as Offer, Acceptance etc as per relative terms such as Offer, Acceptance etc as per Contract Act,1872. Contract Act,1872.

Elements and classification of ContractsElements and classification of Contracts Relevant provisions of the Act & casesRelevant provisions of the Act & cases Communication & Revocation Communication & Revocation Discharge of Contract Discharge of Contract Remedies for breach of ContractsRemedies for breach of Contracts PrecautionsPrecautions Special Contracts – agency; Special Contracts – agency; ContingentContingent, , minor, minor,

quasi,quasi, mortgage, mortgage,

CONTRACTCONTRACT

Agreement in daily lifeAgreement in daily life An Agreement is defined An Agreement is defined

in section 2 (e) of the Act in section 2 (e) of the Act is - a promise .is - a promise .

Promise – a proposal Promise – a proposal when accepted , becomes when accepted , becomes a promise. ( Sec 2 b).a promise. ( Sec 2 b).

Agreement = Offer + Agreement = Offer + AcceptanceAcceptance


Every Agreement is not a Contract.Every Agreement is not a Contract. AGREEMENT ENFORCEABLE IN LAW AGREEMENT ENFORCEABLE IN LAW

IS CONTRACT.IS CONTRACT. Contract : Agreement + enforceable by law. Contract : Agreement + enforceable by law.

i.e. i.e. legal obligationslegal obligations to do or abstaining to do or abstaining from doing anything. ( Social, illegal)from doing anything. ( Social, illegal)

All contracts are agreement but all All contracts are agreement but all agreements are not contractsagreements are not contracts


The Contract Act is the law of those The Contract Act is the law of those agreements which create obligation and agreements which create obligation and there is a legal remedy for the breach there is a legal remedy for the breach thereof.thereof.

Legal Contracts creates “Rights in Legal Contracts creates “Rights in Personam” as distinguished from Rights in Personam” as distinguished from Rights in Rem i.e. Rights against the whole world.Rem i.e. Rights against the whole world.

» Consensus-ad-idumConsensus-ad-idum


Essential of Contract:Essential of Contract: Agreement & Legal Obligation ;Agreement & Legal Obligation ; Section 10 : states elements of Contract which areSection 10 : states elements of Contract which are

– Agreement ( Offer+ Acceptance)Agreement ( Offer+ Acceptance)» Two parties ( Promisor & Promisee)Two parties ( Promisor & Promisee)

– Intention to create legal relationshipIntention to create legal relationship

– Free Consent ( Sec 13,14)Free Consent ( Sec 13,14)» Coercion(15), Undue Influence(16), Fraud(17), Coercion(15), Undue Influence(16), Fraud(17),

Misrepresentation (18) or Mistake ( 21-22)Misrepresentation (18) or Mistake ( 21-22)


Elements of Contract :Elements of Contract :– Parties competent to ContractsParties competent to Contracts

» Minor, unsound mind, disqualified by lawMinor, unsound mind, disqualified by law

– Lawful consideration Lawful consideration » ( Past , present, future, cash, kind, act, abstinence)( Past , present, future, cash, kind, act, abstinence)

– Lawful Object ( Not illegal/immoral)Lawful Object ( Not illegal/immoral)

– Agreements not declared void or illegal ( S 24-30)Agreements not declared void or illegal ( S 24-30)

– Certainty of Meaning (29)Certainty of Meaning (29)

– Possibility of performancePossibility of performance

– Necessary Legal FormalitiesNecessary Legal Formalities


Classification/Types of Contracts:Classification/Types of Contracts: Classification according to Enforceability :Classification according to Enforceability :

– Valid, Void & Voidable, Illegal, UnenforceableValid, Void & Voidable, Illegal, Unenforceable» Valid = section 10 elementsValid = section 10 elements» Enforceable at the option of one or more parties = VoidableEnforceable at the option of one or more parties = Voidable» Section 23-30 = VoidSection 23-30 = Void

Classification according to Formation Classification according to Formation – Express, Implied & Quasi JudicialExpress, Implied & Quasi Judicial

Classification according to Performance :Classification according to Performance :– Executed, Executory, Unilateral, BilateralExecuted, Executory, Unilateral, Bilateral


Precautions : Precautions : Elements of valid contractElements of valid contract DATE & PlaceDATE & Place Name of the Parties & status thereofName of the Parties & status thereof Signed by the Same Person or POA = Free Signed by the Same Person or POA = Free

consent. Sign on each page.consent. Sign on each page. Terms and consideration to be clearly definedTerms and consideration to be clearly defined All column to be filled upAll column to be filled up Modification or Over-writing to be initialedModification or Over-writing to be initialed


OFFER & ACCEPTACE :OFFER & ACCEPTACE : Offer – Section 2 (a) : Proposal ;Offer – Section 2 (a) : Proposal ; How an offer is made : Express =spoken, written How an offer is made : Express =spoken, written

Implied/by way of Conduct – Act or Omission Implied/by way of Conduct – Act or Omission General and Specific OfferGeneral and Specific Offer Essential of Valid Offer :Essential of Valid Offer :

– Must be made with a view to obtain acceptanceMust be made with a view to obtain acceptance– Must be made with the intention of creating legal Must be made with the intention of creating legal

relationrelation– Terms of offer must be definite, unambiguous & certain Terms of offer must be definite, unambiguous & certain

of capable of being made certain of capable of being made certain


Elements of OFFER: Elements of OFFER: – It must be distinguished from mere declaration It must be distinguished from mere declaration

of intention or invitation of offer. ( A Tender is of intention or invitation of offer. ( A Tender is an offer)an offer)

– It must be communicated to offereeIt must be communicated to offeree– The offer must not be contain a term the non-The offer must not be contain a term the non-

compliance of which may be assume to amount compliance of which may be assume to amount to acceptanceto acceptance

– Special TermsSpecial Terms– Cross offersCross offers


Termination/Lapse of OfferTermination/Lapse of Offer The offer lapses after stipulated or reasonable timeThe offer lapses after stipulated or reasonable time Death or insanity of the offeror or the offereeDeath or insanity of the offeror or the offeree Rejected by offereeRejected by offeree Revoked by OfferorRevoked by Offeror Not being accepted in the specified mode or Not being accepted in the specified mode or

reasonable manner.reasonable manner. Counter offerCounter offer


ACCEPTACE :ACCEPTACE : MeaningMeaning Acceptance how made and by whomAcceptance how made and by whom Elements of ACCEPTANCE :Elements of ACCEPTANCE :

– It must be absolute & UnqualifiedIt must be absolute & Unqualified– It must be communicated to the OfferorIt must be communicated to the Offeror– It must be according to the mode prescribedIt must be according to the mode prescribed– It must be given in specified timeIt must be given in specified time


ELEMENTS OF ACCEPTANCE:ELEMENTS OF ACCEPTANCE:– It must be in response to the OfferIt must be in response to the Offer– It must be made before the offer is lapses, It must be made before the offer is lapses,

terminated, withdrawn or revokedterminated, withdrawn or revoked– It must be given to the Offeror or its Authorized It must be given to the Offeror or its Authorized

Agents.Agents.


COMMUNICATION of Offer, Acceptance & COMMUNICATION of Offer, Acceptance & Revocation thereof.Revocation thereof.

Offer :The communication of offer is complete Offer :The communication of offer is complete when it comes to the knowledge of the person to when it comes to the knowledge of the person to whom it is made.whom it is made.

Acceptance : The communication of Acceptance is Acceptance : The communication of Acceptance is complete :complete :– Against the proposer – when it is put into a course of Against the proposer – when it is put into a course of

transmission so as to be out of power of the acceptortransmission so as to be out of power of the acceptor– Against the Acceptor – when it comes to the knowledge Against the Acceptor – when it comes to the knowledge

of the Proposer.of the Proposer.


Communication of Revocation : Communication of Revocation : The communication of revocation is The communication of revocation is

complete :complete :– Against the person who makes it – when it is Against the person who makes it – when it is

put into a course of transmission so as to be out put into a course of transmission so as to be out of power of the person who makes it.of power of the person who makes it.

– Against the person to whom it is made – when Against the person to whom it is made – when it comes to his knowledge.it comes to his knowledge.


Section 5 : Revocation of Offer & Section 5 : Revocation of Offer & Acceptance :Acceptance :

Offer : An offer may be revoked at any time Offer : An offer may be revoked at any time before the communication of its acceptance before the communication of its acceptance is complete as against the Proposer. is complete as against the Proposer.

Acceptance : An Acceptance may be Acceptance : An Acceptance may be revoked at any time before the revoked at any time before the communication the acceptance is complete communication the acceptance is complete as against the Acceptor.as against the Acceptor.


Contract with MINOR :Contract with MINOR : A Minor is not competent to contract, hence A Minor is not competent to contract, hence

a contract with Minor is Void. a contract with Minor is Void. The agreement cannot be ratified by the The agreement cannot be ratified by the

Minor on attaining majority.Minor on attaining majority. Minor can be beneficiaryMinor can be beneficiary Minor can not be asked to refund the Minor can not be asked to refund the

benefit, profit enjoyed by him. (s65)benefit, profit enjoyed by him. (s65)

CONTRACT ACTCONTRACT ACT A Minor can always plead minority.A Minor can always plead minority. A Minor cannot be a partner in any A Minor cannot be a partner in any

Partnership FirmPartnership Firm A Minor can act as Agent.A Minor can act as Agent. Minor’s parent cannot be liable to Minor’s Minor’s parent cannot be liable to Minor’s

creditor for the breach of contract.creditor for the breach of contract. A Minor’s estate is liable to a person who A Minor’s estate is liable to a person who

supplies necessaries of life to a Minor.supplies necessaries of life to a Minor.


Discharge of Contract :Discharge of Contract : By PerformanceBy Performance By Mutual Consent :By Mutual Consent :

– NovationNovation– RescissionRescission– AlterationAlteration– RemissionRemission– WaverWaver– MergerMerger


By Subsequent Impossibility i.e. Doctrine By Subsequent Impossibility i.e. Doctrine of Frustration:of Frustration:– Destruction of subject matterDestruction of subject matter– By Death or disablement of the partiesBy Death or disablement of the parties– Subsequent illegalitySubsequent illegality– Declaration of warDeclaration of war– Non existence or non occurrence of a particular Non existence or non occurrence of a particular

state of thingsstate of things


Exception to the Doctrine of Frustration :Exception to the Doctrine of Frustration :– Difficulty of PerformanceDifficulty of Performance– Commercial ImpossibilityCommercial Impossibility– Dependency on Third party ( Job Work)Dependency on Third party ( Job Work)– Strikes, lock out and civil disturbance, unless Strikes, lock out and civil disturbance, unless

there a force majure clause.there a force majure clause.– Failure of one of the objects.Failure of one of the objects.


Discharge by Operation of Law:Discharge by Operation of Law:– By Death : ( Personnel skill)By Death : ( Personnel skill)– By InsolvencyBy Insolvency– By mergerBy merger

By Breach of Contract By Breach of Contract – Anticipatory Breach – repudiates before timeAnticipatory Breach – repudiates before time– Actual Breach – repudiates at or during the timeActual Breach – repudiates at or during the time


Remedy for Anticipatory breachRemedy for Anticipatory breach– Rescind and damagesRescind and damages– Specific performance & Specific performance & – InjunctionsInjunctions

Remedy for Actual breachRemedy for Actual breach– DamagesDamages– Time is the essenceTime is the essence


Remedies for Breach of Contract :Remedies for Breach of Contract :– Recession of the ContractRecession of the Contract– DamagesDamages

» Ordinary Damages – Usual course of business; Diff. Ordinary Damages – Usual course of business; Diff. bet. contract price and market pricebet. contract price and market price

» Special Damages-Loss of profitSpecial Damages-Loss of profit

» Vindictive Damages – to punish the defaulter. Vindictive Damages – to punish the defaulter. ( Marriage and S138 of NIA)( Marriage and S138 of NIA)

» Nominal Damages – only technical violation but no Nominal Damages – only technical violation but no lossloss


» Liquidated Damages – predetermined amountLiquidated Damages – predetermined amount

» InterestInterest

– Specific performanceSpecific performance– InjunctionsInjunctions– Quantun MeruitQuantun Meruit


Quasi ContractQuasi Contract

1.Basics Of Contract Act

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contract act elements

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