Chapter 2&3 Contract: A contract is an exchange of promises between two or more parties to do or refrain from doing an act which

is enforceable in a court of law. A contract is an agreement which is enforced by law and there should be terms and conditions and a specified time period. Contract is a civil law, because it deals with the rights, duties, and obligations of both parties. According to legal scholar Sir John William Salmond, a contract is an agreement creating and defining the obligations between two or more parties. Agreement: every promise and every set of promises forming the consideration for each other is an agreement. But this agreement becomes a contract when it is enforceable by law. Agreements may be of two types: Agreements enforceable by law; Agreements not enforceable by law.

If you hire a rickshaw in order to go Kakoli, its not enforceable by law and as such it cant be a contract; but if you purchase a Car is enforceable by law and as such it can be a contract. So, we can say that- all contracts are agreements, but all agreements are not contracts. Types of contract: 1. Bilateral (two-sided), unilateral (one-sided) and Multilateral: Bilateral is an agreement in which each of the parties to the contract makes a promise or promises to the other party. There is a mutual understanding between the two parties. For example, in a contract for the sale of a home, the buyer promises to pay the seller $2000000 in exchange for the sellers promise to deliver title to the property. In a Unilateral contract, only one party to the contract makes a promise. For an example: A promises to pay a reward to B if B finds As dog. B is not obliged to find As dog, but A is obliged to pay the reward to B if B finds the dog. In Multilateral contract, there are more than 2 parties. 2. Valid, voidable and void contract: Valid contracts enforceable by both parties. Voidable contracts are enforceable by one party only. It is neither valid nor void. There are 5 elements- Fraud: If anyone intentionally tried to exploit someone, then the case will become voidable. - Misrepresentation: If anyone misrepresents the offer. - Coercion: when any agreement is signed under pressure.

Undue influence: if the superior authority gives extra favor to his sub-ordinates. For an example, teacher has authority over his students. So teacher gives extra marks to the student who gives some favor. Mistake: if it is proved that the agreement contains some mistakes, then it will be considered as voidable.

Void: void contracts are not enforced by law. There are five categories of agreements which are expressly declared to be void. They are: Agreement in restraint to marriage Agreement in restraint of legal proceedings Agreement in restraint of trade (you cant do business) Agreement with uncertainty (live forever, house on the moon) Wagering agreement (bating)

No law will be applicable over the fundamental rights. It will consider as void. 3. Contingent Contract: Contracts which are conditional on some future event happening or not happening. Contracts of insurance or of indemnity are contracts of this class. Such contracts are enforceable when the future event or loss occurs, eg. Insurance money on a policy of fire insurance is payable when the fire takes place. 4. Executed & Executory Contract: Executed contract refers to when the parties perform their obligation as per the contract. Executory contract refers to when the obligations to the parties are to be performed at a later time. Still there are some portion remaining to be performed or pending. 5. Implied & Expressed: When the contract to be understood from the acts, conduct of the parties and the course of dealing between them, it is called implied contract. When a contract is expressed in words spoken or written, it is called express contract. 6. Oral & Written: Oral contracts are not applicable now a days. Written contracts should be registered. 7. Quasi Contract: Quasi contracts are those dealings which are not contract strictly but the parties act as if there is a contract. Essential Elements of a Contract: The first step in a contract question is always to make sure that a contract actually exists. There are certain elements that must be present for a legally binding contract to be in place.

1. Offer & Acceptance: There must be at least two parties one making the offer and the other accepting it. Such offer and acceptance must be valid. An offer to be valid must fulfill certain conditions such as it must intend to create legal relations, its terms must be certain and unambiguous, it must be communicated to the person to whom it is made, etc. An acceptance to be valid must fulfill certain condition. There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or parties. The proposal should be making to a specific party. For an example, B is buying a land from A and B suppose to give tk 10 lac within 10th February to A. so here 10 lac is a consideration, 10th February is certainality and purchasing the land is a subject matter. So if B wants to accept this offer, he has to abide by these conditions. Unconditional offer: Counter offer: A type of offer made in response to another offer, which was seen as unacceptable. A counteroffer revises the initial offer, making it more appealing for the person making the new offer. Responding with a counteroffer allows a person to decline on a previous offer, while allowing negotiations to continue. Here new condition is applied unconditionally. When a person makes a counteroffer, he or she is rejecting the previous offer and rendering it void. Because the original offer is now void, the person who made that offer is no longer legally responsible for honoring it. For example, let's say you are selling a vehicle. A buyer arrives and offers you $10,000 for the car. In an attempt to get a higher price, you counteroffer, asking for $11,000. If the buyer declines, you cannot force them to buy the car at $10,000, even though they have already offered at that price. Promisor: person who is making offer. Promisee: person who accept the offer. Invitation to treat: An invitation for other people to submit offers. Some everyday situations which we might think are offers are in fact invitations to treat: Goods displayed in a shop window or on a shelf. When a book is placed in a shop window priced at 7.99, the bookshop owner has made an invitation to treat. When I pick up that book and take it to the till, I make the offer to buy the book for 7.99. When the person at the till takes my money, the shop accepts my offer, and a contract comes into being. For an auctions The original advertising of the auction is just an invitation to treat. When I make a bid, I am making an offer.

When the hammer falls, the winning offer has been accepted. The seller now has a legally binding contract with the winning bidder (so long as there is no reserve price that hasnt been reached)

Revocation of offer and acceptance: A acceptance may be revoked at any time before the communication of its acceptance is complete as against the acceptor, but not afterwards. Revocation means "cancellation". Revocation of an offer means its withdrawal by the offeror. An offer may be revoked at any time before the offeree accepts it. Revocation of an offer means after acceptance will be ineffective. If it to be effective, it must be communicated before the dispatch of the letter of acceptance. A proposal is revoked 1. Notice: An offer may be revoked by the offeror by giving a notice of revocation to the other party before it is accepted. Notice of revocation will take effect only when it comes to the knowledge of the offeree. For example, A offers his house to B for Rs.100000. Before B accepted the offer, A withdrew his offer by informing B. There will be no contract as the offer has been revoked before its acceptance. 2. Lapses of time: If time is prescribed for acceptance, the offer gets revoked by nonacceptance within that time. If no time is fixed, the offer lapses by the expiry of a reasonable time. For an example, A applied for shares on 28th June. But shares were allotted on 23rd November. A, therefore, refused to take the shares. The Court held that A was entitled to refuse as the offer had lapsed by delay in acceptance. 3. Violation of a condition: An offer is revoked when the acceptor fails to fulfill a condition precedent to the acceptance of the offer. For example, A offers to sell certain goods to B on a condition that B pays a certain amount before a certain date. If B fails to pay the required amount within the given time, the offer stands revoked. 4. Death or insanity: An offer is revoked by the death or insanity of the offeror, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. 2. Intention to create legal relationship: There must be an intention (among parties) that the agreement shall result in or create legal relations. The Person must want to create legal relations. Therefore the parties signing a contract must know that they are entering a legal agreement that cannot be broken. 3. Lawful consideration: Every contract consists of two parts - (1) Promise and (2) Consideration for the promise. For example, a buyer realizes the goods for the price. Price for goods is therefore, consideration here. Consideration is the most essential element of the contract. As a general rule, agreement without consideration is void.

A agrees to sell his house to B for Rs 10,000. Here As promise to sell his house is for Bs consideration to pay Rs 10,000. Similarly Bs promise to pay Rs 10,000 is for As consideration to sell his house to B. An agreement is a contract, only if it is made for a lawful consideration and with a lawful object. The consideration may be an act (doing something), forbearance (not doing something) or may be an object. 4. Capacity of parties: You must be capable to enter into the contract. This is judge in two ways- (1) Age (2) mental soundness. 5. Free consent (permission/authority): Both the parties must agree upon the same thing in the same sense. Two or more persons are said to consent when they agree upon the same thing in the same sense. Mere consent is not enough. Consent of parties must be free, for example it must not have been obtained (1) coercion, (2) undue influence, (3) fraud, (4) misrepresentation, or (5) mistake. 6. Legality of the object: The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy. 7. Certainty: The terms of a contract should be clear. In other words, the contract must not be vague (unclear/hazy). Contracts which are vague cannot be enforced. 8. Possibility of performance: The agreement must be capable of being performed. A promise to do an impossible thing cannot be enforced. 9. Void agreements: The agreement must not be declared to be void. There are 5 categories of agreements which are expressly declared to be void. They are: Agreement in restraint to marriage Agreement in restraint of legal proceedings Agreement in restraint of trade (you cant do business) Agreement with uncertainty (live forever, house on the moon) Wagering agreement (bating)

10. Writing, registration and legal formalities: An oral contract is valid, except in those cases where writing and registration is required. Hand written documents, stamps or signatures etc are must for these contracts. If legal formalities are not fulfill it will not be considered as a valid contract. For movable objects oral contract may be suitable, but for immovable objects like building, land and so on, is required written agreement.

Performances of a contract:

Termination of a contract:

Distinction between indemnity and guarantee: Indemnity Party: two parties. Indemnifier, indemnity-holder Contract: one contract between indemnifier and indemnity-holder. Liability: liability of indemnifier is primary. When liabilities arise: liability by indemnifier arises only on the happening of a contingency. (after happening of an uncertain event) Sue: the indemnifier can sue only the indemnityholder for his loss Who liable for loss: the loss falls on the indemnifier except in certain special cases. Guarantee Three parties: creditor, principal debtor and surety Contracts between: creditor-debtor Between: creditor- surety and Between: debtor and surety Liability of surety is secondary It is only for existing debt/for duty performs.

The surety can proceed against principal debtor. The principal debtor is primarily liable.

Agency: A consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party. Its a contract, between the owners with his employee. Every corner of Bangladesh there are dealers. But they are not owner. But some cases they are owner. For an example imported goods whose manufacturer doesnt have office in Bangladesh, so importer is considered as owner in Bangladesh by the third party. But there is a huge difference between the manufacturer and distributer. Agent is he who deals with the third party. A co-agent is a person appointed by the agent according to the express or implied authority of the principal, to act on behalf of the principal in the business of agency. A subagent is an agent appointed by an agent. Ex: in every district in Bangladesh there are dealers selling GP phone, they are the agents. All the seller are the agents of manufacturer. Power of attorney: Bailment: Bailment is defined as a delivery of goods by one person to another for some purpose upon a contract that when the purpose is accomplished the goods are to be returned or disposed of according to the directions of the bailor.