Business Law Contracts 3

CLDP
Commercial Law Development Program Office of General Counsel United States Department of Commerce
TEXT
Business Law Contracts
IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP of Contracts Law
In India, the Law of Contracts is contained in the Indian Contract Act,1872. The Act lays down the general principles relating to formation, performance enforceability of contracts and the rules relating to certain special types of contracts like,
Indemnity and Guarantee; Bailment and Pledge, and Agency.
CLDP
CLDP Contract
As per the Indian Contract Act,1872, a "contract" is an agreement enforceable by law. Made between at least two parties by which rights are acquired by one and obligations are created on the part of another If the party, which had agreed to do something, fails to do that then the other party has a remedy
CLDP Section 2(h)
An agreement enforceable by law Thus, a contract essentially consist of two elements An agreement and Its enforceability by law The agreements not enforceable by law are not contracts.
CLDPAgreement
An "agreement" means 'a promise or a set of promises' forming consideration for each other. An agreement consists of an 'offer' and its 'acceptance'.
Section 2(e) defines:

every promise and every set of promises forming consideration for each other.
CLDP Promise
A promise arises when a proposal is accepted. By implication, an agreement is an accepted proposal. The person making the proposal is called promisor The person accepting the proposal is called the promisee
CLDP
All agreements are not contracts but all contracts are agreements
CLDP
All legal obligations are not contractual
CLDP
Only those obligations which have their source in an agreement are contractual
CLDP
Commercial Law Development Program Office of General Counsel United States Department of Commerce CONTRACT
Contract = Agreement + Legal Obligation

CLDP
A invites B for dinner in a restaurant. B accepts the invitation. On the appointment day, B goes to the restaurant.

A is not there or A refuses to entertain B B shall have no remedy against A A is present in the restaurant but B fails to turn up A shall have no remedy against B
CLDP

A gives a promise to his son to give a pocket allowance of Rs. 150 every week. In case A fails or refuses to give the promised amount
Son shall have no remedy against A
CLDP
In the above two cases the promises are not enforceable law Such agreements are social agreements which do not give rise to legal consequences.
CLDP

A agrees to sell his motorcycle to B for Rs. 10000. If A does not deliver the motorcycle

B can go to a court of law and file a suit against A for non-performance of the promise
If A already given delivery of the motorcycle and B refuse to pay the price

A can go to a court of law and file a suit against B for non-performance of IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE the
CLDP
In the above case the agreement gives rise to a legal obligation on the part of A to deliver the motorcycle to B and on the part of B to pay Rs.10000 to A. Therefore the agreement is a contract.
CLDP Essentials of Contract

Section 10 Made by Free consent of the parties Parties must be competent to the contract Must be supported by consideration on both sides Must be lawful
CLDP
The meaning of the agreement must be certain or capable of being made certain
CLDP
A agrees to buy 10 metres of cloth from a shopkeeper. The agreement would not be enforceable because ambiguity in meaning. A agrees to buy 10 metres of terrycot (80:20) cloth from a shopkeeper. The agreement would not be enforceable as there is no ambiguity.
CLDP
The terms of the agreement should be capable of performance
CLDP
An agreement to make two parallel line meet cannot be enforced.
CLDP Classification of Contracts

Contracts may be classified in terms of their Mode of formation Validity or enforceability Performance
according to mode of formation

A contract may be Express Contracts
Made in writing By words spoken and
Classification of contracts CLDP

Implied Contracts
Inferred from the conduct of the parties or the circumstances
CLDP Implied Contracts Example..

A enters into a public transport, for going his destination. The law will imply a contract from the circumstances, and he will be obliged to pay for the journey. A tourist asks a garage owner to repair his car. The law will imply that the tourist agreed to pay a reasonable amount, although neither party says anything about it.
CLDP
An implied contract may be - implied in fact - implied in law
CLDP implied in fact Example..

A tourist asks a garage owner to repair his car. The law will imply that the tourist agreed to pay a reasonable amount, although neither party says anything about it.
CLDP implied in law Example..

It is also called quasi-contract It is an obligation to do justice between the parties even though they never exchanged or intended to exchange promises. Ex: A, a tradesman, leaves goods at Bs warehouse by mistake. B treats the goods as his own. B is bound to pay A for the goods IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP
Is it safe to go in for oral contracts?
It would be advisable and safe t o put t he cont ract in writ ing
CLDP
Certain Contracts and documents required to be in writing
A bill of exchange, cheque, promissory note etc. under the Negotiable Instrument Act, 1881. A memorandum of association of company registered under the Companies Act, 1956. An articles of association of a company registered under the Companies Act, 1956. An application for shares in a company An application for transfer of share in a company IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP
A lease, gift, mortgage, or sale of immovable property under the Transfer of Property Act, 1882. An agreement to refer a dispute to arbitration under Arbitration and Conciliation Act, 1996.
CLDP
CLDP
Certain Contracts and documents required to be in writing & registered
Transfer of immovable property Lease Sale Mortgage or gift A memorandum of association of a company An articles of association of a company Mortgage and charges of properties by a company Documents coming in the preview of the Registration Act, 1908. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP
CLDP Contracts Formal
Law gives special attention because of the formalities or the special language used in creating it. Ex: Negotiable Instruments such as cheques.
CLDP Informal Contracts
Law does not gives a particular set of formalities or special language. The parties may use any style or language These are simple contracts.
Classification according to CLDP validity/Enforceability

Valid Voidable Void Unenforceable
CLDP Contract Valid
Contracts which satisfy all the essential elements of a valid contract as laid by Section 10. If one or more of these elements are missing , the contract is either voidable, void, illegal or unenforceable.
CLDP Voidable Contract

A contract which may be avoided at the will of one or more of the parties, but not by others. Until it is so avoided it remains valid and binding It shows that the consent of the party, who has the discretion to repudiated was not free
CLDP Ex.. Voidable Contract

A weaken by disease or age, is induced by Bs influence over him, as his medical attendant to agree to pay B an unreasonable sum for his professional services. A can avoid the contract. As consent was not free; it is affected by undue influence employed by B.
CLDP Ex.. Voidable Contract

A by giving false description persuades B to purchase certain goods. B on discovering the misrepresentation can avoid the contract .
CLDP Characteristics of voidable contracts

It is valid and binding on both the parties till it is avoided by the aggravated party It can be avoided only by one party, and not by the other. The party at whose option the contract is voidable, is not bound to repudiated it.
CLDP Characteristics of voidable contracts

The party avoiding the contract is entitled to get damages for any loss that he may have restore it to the person from whom it was received. The aggravated party has twofold rights To repudiated the contract and not to bound thereafter To carryout the transaction as stipulated inspite of the flaw therein. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP Contract Void
An agreement which is not enforceable by either of the parties to it is void. An agreement with a minor is void Sometimes, a contract is valid at the time of formation, but may become void afterwards. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDPVoid Contract Ex..

A contracts to take indigo for B to a foreign port. As government afterwards declares war against the country in which the port is situated. The contract becomes void when war is declared.
CLDPVoid Contract Ex..

A,B and C enter into an agreement for the division among them gains acquired or to be acquired by them by fraud. The agreement is illegal and therefore void.
CLDP
All illegal agreements are void but all void agreements are not necessarily illegal
CLDP Unenforceable Contract

It is neither void nor voidable, but it cannot enforced in the court because it lacks some item of evidence such as writing Registration or stamping or Where the remedy has been barred by lapse of time.
CLDP Ex.. Unenforceable Contract

An agreement which is required to be stamped will be unenforceable if the same is not stamped at all or is under stamped. An unstamped bill of exchange or promissory note. In the event of breach of such a contract, the aggrieved party shall not be entitled to the legal remedies.
CLDP Agreement Void
An agreement that is not enforceable by law is a void agreement. Such agreements do not create any legal rights and are void from the beginning. Ex: An Agreement with a minor
CLDP Agreement Illegal
It is an agreement which goes against some rule of basic public policy or criminal or immoral in nature. Such agreements do not create any legal rights and are void. It has further effect on collateral transactions.
CLDPAgreement Ex: Illegal

A rents Bs house to store some smuggled goods. B is aware of As purpose.

The agreement between A and B is collateral to the agreement of buying smuggled goods. However, this agreement is illegal since main agreement is illegal
CLDP Classification according to Performance

Executed and executory, or Unilateral and Bilateral
CLDP
Executed Contract
It is one which has been wholly performed. Nothing remains to be done in terms of the contract. A buys a bicycle from a dealer. A pays cash. The dealer delivers the bicycle.
CLDP
Executory Contract
It is one which remains wholly unperformed, or in which there remains something further to be done. On June 1, A enters into a contract with a dealer to buy a bicycle. The contract is to be performed on June 15.

CLDP
An executory contract becomes an executed one when it is completely performed.
CLDP
Unilateral Contract
It is one in which one of the parties is yet to perform its obligations. A makes payment for bus fare for his journey from Mumbai to Pune. He has performed his promise. It is now for the transport company to perform its promise.
CLDP
Bilateral Contract
It is one which both the parties are yet to perform their obligations. agrees to sell his car to B for Ex: A Rs.200000. A is yet to transfer his car to B and B is yet to make the payment to A
CLDP
CLDP
CLDP
CLDP
CLDP or False True
A contract to contract is a contract False A void agreement is void from the beginning True Collateral agreements are also void in case of illegal agreements True IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
1. A contract is made where: 2. a) X agrees with Y to discover a treasure by magic b) X bids at a public auction c) A takes a sit in a public Omni bus d) X promises in writing to give Rs. 500 to Y e) f)
CLDP
2. Which of the following constitute valid contract: 1. a) When you board a bus b) When you enroll for a correspondence course c) When you call a taxi d) When you eat a meal at a restaurant e) f) All of the above
CLDP
CLDP
PROPOSAL OR OFFER
CLDP defines. Se. 2(a)

When one signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such an act or abstinence. Then he is said to make a proposal. The offeror or proposer expresses his willingness to do or not to do
CLDP Offer consists of two parts

A promise by the offeror to do or abstain from doing something and A request for the offeree for giving his acceptance
CLDP Essentials of valid offer

The terms of the offer must be definite, unambiguous and certain or capable of being made certain. An offeree must have knowledge of the offer before he can accept it. If a person makes a statement without any intention of creating a binding obligation this does amount to an offer

Where two parties make identical offers to each other in ignorance of each others offer this does not result in a contract. The offer must be made with a view to obtain acceptance thereto. The offer must be communicated to the offeree before it can be accepted IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

The offer must be made with the intention of creating legal relationship. If no time is fixed by the offeror within the offer is to accepted, the offer does not remain open for an indefinite period. An offer must be distinguished from a mere invitation to offer. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP mere invitation to offer

Catalogue of goods Advertisement for tenders Inviting applications for a job Prospectus of a company An auctioneers request for bids Display of goods in the show case with prices marked upon them
CLDP
An auctioneer, L, advertised that a sale of office furniture would take place at a particular place on a stated day. H travelled down about 100 km. to attend the sale but found the furniture was withdrawn from the sale. He claimed the compensation from the auctioneer. The auctioneer was not legally responsible
CLDP of an offer Types

Express offer Implied offer General offer Special offer Cross offers Counter offer
CLDP Express offer
It means an offer made by words whether written or oral The written offers can be made by letters, telegrams, telex messages, advertisements etc. The oral offer can be made either in person or over phone. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP Implied Offer
It is an offer made by conduct It is made by positive acts or signs so that the person acting or making signs means to say or convey something. However, silence of a party cannot an offer.
CLDP General offer
The offer made to the public at large is a general offer. It can accepted by any one by complying with the terms of the offer.
CLDPpecific offer S
An offer made either to a definite person or a group of persons is a specific offer. The specific offer can only be accepted by that person to whom it has been made.
CLDP Case
A patent Medicine company advertised that it would give a reward of Rs.1000000 to anyone who contacted influenza after using smoke balls of the company for a certain period according to the printed directions. Mrs X purchased the advertised smoke ball and contacted inlfuenza inspite of using the same according to the printed directions. She claimed the reward. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP Case
The company resisted the claim on the ground that advertisement was only an invitation to offer. They argued further that no offer was made to her and that in any case she has not communicated her acceptance assuming the advertisement was an offer She filed a suit for the recovery of the reward.
CLDP result
The advertisement in such type of cases amounted to general offers. She could recover the reward as she had accepted the offer by complying with the terms of the offer.
CLDP Cross offer
Two offers similar in all respects made by one party to the other, in ignorance of each others offer
CLDP Counter offer
When in place of accepting the terms of an offer as they are, the offeree accepts the same subject to certain conditions or qualifications.

CLDP Revocation of offer

The proposer may revokes an offer before its acceptance offeree and the offeree has no remedy If A makes an offer to B on 1st June, Valid up to 6th June, but revokes it on % June, before its acceptance by B the revocation is effective


There may be many reasons due to which the offer lapses or is revoked


An offer is revoked by the death or mental illness of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. Therefore, if the acceptance is made in ignorance of the death, or mental illness of the offeror, there would be a valid contract

An offer lapses by the death or insanity of the offeree before acceptance An offer terminates when rejected be the offeror An offer terminates when revoked by the offeror before acceptance by the offeree An offer terminates not being accepted in the mode prescribed.

If no mode prescribed, in some usual and reasonable mode.
A conditional offer terminates when the condition is not accepted by the offeree. An offer terminates by the counter-offer by the offeree.
CLDP Irrevocable offer
If A makes an offer to B on 1st June, Valid up to 6th June, but revokes it on 5th June, before its acceptance by B the revocation is effective. If B had given some consideration to A to keep the offer open, the A could not revoke the same before the specified time. Such contracts are called option contracts
CLDP or False True
A standing offer cannot be revoked False The offer lapses by the death of offeree before acceptance True An agreement to settle terms of agreement in future makes a valid contract False IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP
Acceptance
CLDP Acceptance S.2(b)

When the person to whom the offer is made signifies his assent thereto, the offer is said to be accepted. The acceptance of an offer may be express or implied.
CLDP Communication of an
Acceptance
Communication of an acceptance is complete: As against the proposer when it is put into a course of transmission to him As against the acceptor when it comes to the knowledge of the proposer. IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
Acceptance
When communication of acceptance is made by post, it is complete when a letter of acceptance is posted. Where a letter of acceptance was duly posted but was delayed in post and offerer wanted to avoid the contract It was held that the posting of the letter was an acceptance of the offer IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
Acceptance
If the letter of acceptance is misdirected through the fault of the acceptor There would be no communication of the acceptance but if the wrong address is furnished by the offerer himself. He will be bound.
Acceptance Ex.
A proposes by a letter to sell a house to B at a certain price. B accepts As proposal by the letter sent by post. The communication of acceptance is complete when the letter is posted, as against B and when the letter is received by A IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE
CLDP Essentials of a valid

Acceptance S(7)
It must be absolute and unqualified and according to the exact terms of the offer S(7). It must be communicated to the offeror It must be according to the mode, if any, prescribed by the offeror It must be given within the time specified, if any otherwise it must be given within in IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE reasonable time
CLDP Essentials of a valid

Acceptance S(7)
It must be made before the offer lapses or is terminated, revoked or withdrawn. It must be given by the person to whom the offer is made. In case of general offer, acceptance can be given by any member of the public.

Business Law Contracts 3

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Business Law Contracts 3

Загружено:

Авторское право:

Доступные форматы

CLDP

Business Law Contracts

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP of Contracts Law

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Section 2(h)

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

Section 2(e) defines:

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

All legal obligations are not contractual

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

Contract = Agreement + Legal Obligation

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

Son shall have no remedy against A

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Essentials of Contract

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

The terms of the agreement should be capable of performance

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

An agreement to make two parallel line meet cannot be enforced.

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Classification of Contracts

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

according to mode of formation

Classification of contracts CLDP

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Implied Contracts Example..

An implied contract may be - implied in fact - implied in law

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP implied in fact Example..

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP implied in law Example..

Is it safe to go in for oral contracts?

It would be advisable and safe t o put t he cont ract in writ ing

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

Certain Contracts and documents required to be in writing

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

Certain Contracts and documents required to be in writing & registered

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Contracts Formal

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Informal Contracts

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

Classification according to CLDP validity/Enforceability

Valid Voidable Void Unenforceable

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Contract Valid

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Voidable Contract

CLDP Ex.. Voidable Contract

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Ex.. Voidable Contract

IMPROVING THE LEGAL ENVIRONMENT FOR BUSINESS WORLDWIDE

CLDP Characteristics of voidable contracts

CLDP Characteristics of voidable contracts