BUSINESS LAW

WHAT IS A CONTRACT?

 An agreement enforceable by law

 (Section 2 (h) contract act 1872.
ESSENTIAL ELEMENTS OF A
CONTRACT?
 Lawful consideration
 Free consent
 Lawful agreement
 Offer & acceptance
 Contractual Capacity
 Lawful Object
 Possibility of performance
 Certainty of Term
 Legal Formality
 VALID CONTRACT?
An contract which satisfies all the legal
requirement provided for under sec-10
VOID CONTRACT?
 An agreement which ceases to be enforceable
by law.
 An agreement which is valid in beginning but at
later stage it becomes void subsequently due to
impossibility of performance.
 An agreement void from the beginning is known
as ‘void ab in initio’. Then we can not use the
term void contract.
eg. An agreement with a minor.
 Section 2 (j)
WHICH ARE VOID CONTRACT?

 Mistake of facts – sec. 20

 Unlawful object sec 23
 Agreement without consideration sec. 25
 Agreement in restraint of marriage sec. 26
 Agreement in restraint of trade sec. 27
 Agreement against legal proceeding: sec 28.
VOIDABLE CONTRACT?

 An agreement which is enforceable at the

option of one or more parties but not at the
option of other party is called voidable
contract.
 The right of rescind has to be exercised
within the reasonable time and before the
third party acquire the rights under contract.
 Sec. 2 (i)
WHICH ARE VOIDABLE
CONTRACTS?

 CONTRACTS MADE UNDER COERCION,

UNDUE INFLUENCE, FRAUD,
MISREPRESENTATION ETC.
IS VOID CONTRACT SAME AS
ILLEGAL CONTRACT?
 NO
 ALL ILLEGAL CONTRACTS ARE VOID
CONTRACTS BUT ALL VOID CONTRACTS
ARE NOT ILLEGAL CONTRACTS.
ILLEGAL CONTRACT

 An agreement is illegal when it is against the

law of land.
 An agreement to commit the fraud & Crime.

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UNENFOCEABLE CONTRACT

 A contract which is valid but due to some

technical problem it becomes invalid.
 Technical problems are:
Absence of evidence
Expiry of period

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OFFER OR PROPOSAL

 When a person signifies to another his

willingness to do with a view to obtaining tha
assent of the other to do such act, he said to
make a proposal or offer.

 One who make an offer is called offeror , to

whom it is made is called oferee

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ESSENTIAL OF OFFER

 An offer may be general or specific

 It should have intention to create legal
obligation
 It should be definite and certain

 An invitation to offer is not offer

(advertisement for tender for sale of goods by

auction)

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 Acceptance must be provoked by offer.
 Acceptance must be given before stipulated
period of timer.
 Provisional acceptance is not acceptance
unless final order is not given.

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 An offer must be communicated.
 Term and Condition of offer must be
communicated.
 Two identical offer(cross offer) do not make a
contract.
 Acceptance should be communicated.
 Acceptance should be as per prescribed
form.

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HOW MANY TYPES OF OFFERS
CAN YOU MENTION?
 GENERAL OFFER
 SPECIAL OFFER
 CROSS OFFER
 COUNTER OFFER
 STANDING OFFER

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I MAKE AN OFFER TO RAM TO
BUY HIS HOUSE IN RS. 5 LAKH,
HE MAKES ANOTHER OFFER TO
SELL THE HOUSE AT RS. 6 LAKH.
WHAT IS HIS OFFER?
 IS IT CROSS OFFER = NO
 IT IS COUNTER OFFER

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I MAKE AN OFFER TO RAM TO
SELL MY HOUSE AT RS. 5 LAKH,
RAM ALSO MAKES AN OFFER TO
BUY MY HOUSE AT RS. 5 LAKH. I
SEND MY OFFER BY POST, HE
SENDS HIS OFFER BY EMAIL.
WHAT OFFERS ARE THESE?
 CROSS OFFER.

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I TELL RAM THAT HE MAY BUY
MY HOUSE AT ANY TIME IN
FUTURE AT RS. 5 LAKH. WHAT
TYPE OF OFFER IS IT?

 STANDING OFFER

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ESSENTIAL CHARACTERISTICS
OF AN OFFER?
 DEFINITE
 EXPRESSED OR IMPLIED
 OFFER IS NOT INVITATION TO OFFER
 CERTAIN
 INTENED TO CREATE LEGAL RELATIONSHIP
 OFFER MUST BE COMMUNICATED
 MUST NOT CONTAIN A TERM – THE NON
COMPLIANCE OF WHICH WILL AMOUNT TO
AGREEMENT

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I GIVE AN ADVERTISEMENT : “ I
HAVE A COMPUTER TO SELL” IS
IT AN OFFER?
 NO
 IT IS AN INVITATION TO OFFER

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I MAKE AN OFFER: “IF YOU
DON’T REPLY, I SHALL ASSUME
THAT YOU WILL BUY MY HOUSE
IN RS. 5 LAKH” IS IT AN OFFER?

 NO

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I MAKE AN ADVERTISEMENT
THAT I SHALL SELL MY HOUSE
FOR RS. 5 LAKH, TO THE PERSON
WHO HELPS ME IN MY LEGAL
DISPUTE. IS IT AN OFFER.
 YES – OFFER CAN BE CONDITIONAL
ALSO.

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I MAKE AN OFFER – “I WANT TO
SELL MY HOUSE AT RS. 5 LAKH.
IN CASE ANY PERSON IS
INTERESTED, HE SHOULD SEND
THE REPLY BY EMAIL.” MOHAN
REPLIES BY POST. IS IT VALID
ACCEPTANCE?
 NO – THE ACCEPTANCE HAD TO BE
THROUGH EMAIL ONLY (IT WAS
CONDITIONAL OFFER).
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WHAT IS ACCEPTANCE?

 WHEN A PERSON CONVEYS HIS

WILLINGNESS / ASSENT TO OTHER
PERSONS’S OFFER (SEC. 2 (B))

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ELEMENTS OF ACCEPTANCE?

 MUST BE ABSOLUTE AND UNQUALIFIED

 MUST BE COMMUNICATED
 MUST BE MADE IN PRESCRIBED
MANNER
 MUST BE WITHIN TIME
 MAY BE DONE BY CONDUCT ALSO

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RAM SENDS ME AN OFFER
REQUESTING TO SELL GOODS
OF RS. 5000. I DON’T SEND
ACCEPTANCE. I SEND THE
GOODS. IS IT VALID
ACCEPTANCE?
 YES – ACCEPTANCE CAN BE BY
CONDUCT ALSO.

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I SEND AN OFFER TO JITENDRA
BY POST. I SEND IT ON 1 JULY
BUT JITENDRA RECEIVES IT ON
10 JULY. WHEN DID I MAKE AN
OFFER?

 10 JULY

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IN THE PREVIOUS QUESTION,
WHEN CAN I WITHDRAW MY
OFFER AND HOW?
 BEFORE 10 JULY – MY WIDHDRAWAL
MUST REACH BEFORE MY OFFER – BY
ANY MEANS

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Contract by Post

 Under English law proposer is legally bound by the

acceptance effected through postal medium when the
letter is prepared, addressed, stamped and mailed even
though it is delayed or lost in transit.

 Indian Law lays down that the communication of an

acceptance is complete as against the proposer when it
is put in the course of transmission to him so as to be out
of power of the acceptor; as against the acceptor when it
comes to the knowledge of the proposer.

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Termination of Offer

 Lapse
a passage of time/reasonable time
death of the proposer

 Failure to fulfill a condition

 Rejection(from offeror, may be expressed or implied)
 Destruction of subject matter
 Revocation(Withdrawal at any time before the letter is
communicated, not in England)

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WHAT IS CONSIDERATION?

 AT THE DESIRE OF PROMISOR, THE

PROMISEE OR ANY OTHER PERSON HAS
DONE SOMETHING OR ABSTAIN FROM
DOING OR DOES OR ABSTAINS FROM
DOING OR PROMISES TO DO OR
ABSTAIN FROM DOING SOMETHING –
SUCH ACT / ABSTINANCE IS CALLED
CONSIDERATION FOR PROMISE
 SEC. 2 (D)

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ELEMENTS OF CONSIDERATION?

 Must be at the desire of promisor

 May be present future or past
 Need not be adequate.
 Must be real
 May be for doing something or for not doing something
 Should be valuable
 It should be certain and lawful

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Exception to the rule ‘no consideration, no contract’

 Agreement made an account of natural love

and affection
 Promise to compensate voluntary services
 A completed gift
 Agency
 Remission
 Contribution to charity

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Privity of contract

 A person who is not a party to a contract can

not claim any rights under the contract even
though contract may be for his benefit. Such
person is known as a stranger to the contract.

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If I tell a police officer to protect me
and in exchange to that I offer to pay
him Rs. 5000. Is it valid consideration?
 It is the duty of police officer to protect.
Therefore such consideration is not valid.

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I tell Jitendra to give me his house and
in return I promise to show him an
elephant with horns. Is it a valid
consideration?
 No – we know that elephent with horn is not
possible – so this is not a valid consideration.

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Which are the agreements, which are
valid without consideration?
 Based on natural love
 Based on past voluntary services
 Time barred debt
 Gifts
 (In other cases, agreement without
consideration is void as per section 25).

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A husband promises to give his car to
his wife without consideration. Is this
agreement valid?
 Yes – based on natural love

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There was an agreement between Ram
and Shyam, can Hari go to court to
enforce this agreement?
 In some cases third party can also go to the
court to enforce the agreement. These are
the matters where third party is involved in
the matter as beneficiary.

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When can third party sue for
agrement?

 Beneficiary in the case of trust

 A female member in the case of HUF
agremeents for provision of marriange
expenses
 In cse of estoppel by acknowledgement
 Where benefit from contract have been
assigned to some other person

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Contractual Capacity

 Age of maturity
 Sound mind
 Not disqualified by law to which they are
subject

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 A Minors

 Indian Majority Act 1875-the age of majority

is18 yrs
 If a guardian appointed by a court then the
age of majority is 21 yrs

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Effect of minors agreement

 No estoppels against minor

 No liability in contract
 Doctrine of restitution
 Beneficial contract
 Ratification(can’t be made valid by subsequent
ratification)
 Liability for necessaries
 Person of unsound mind
 Liabilities for necessary
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THANKS

Sachin Raj Singh Chauhan

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