CORPORATE LEGAL ENVIRONMENT

CORPORATE LEGAL ENVIRONMENT Law in simple terms means Rules With the growth of society and welfare state civilization has demanded a reformed set of rules time and again. Laws have been often being subject to change to meet the practical needs of society and attempting to achieve security and uniformity in its application. Law includes all the rules & principles which regulate our relations with other individuals and with the state. By Austin A law is a rule of conduct imposed and enforced by the Sovereign.

 The terms Business, Commercial and Mercantile are synonymous. Business law is a branch of General law (civil). It relates to industry, trade & commerce. It should be understood that Business law is not altogether distinct and separate form other branches of law. With the growth of trade and commerce, old acts were amended and other new Act were introduced to meet the requirement of time. Mercantile law deals with rights & obligations arising out of mercantile transactions or business transactions. A mercantile person ins one who enters into business transactions and may be an individual, an association of persons such as partnership or a company. Mercantile law is also called as Business law or Commercial law.

 For proper conduction of business, set of rules and regulations are essentially required in order to control and monitor the business activities. With the complexities of modern business world, the scope of business law had widened enormously. It includes : Contract Law Partnership law. Sales of Goods Negotiable Instrument Arbitration Company Law Out of all these law, contract law is applicable and basis of Mercantile law. All these laws are subject to amendments made by State or Central Govt. as per the needs and requirement at a given point of time, but since these are statutory laws, minimum changes are effected.

CONTRACT LAW, 1872 Law of Contract is mainly based on English Common law. It commenced from 1st Sept. 1872. Scheme of the Act : General principles of law of Contract (Sec. 1-75). Specific kind of contract : (Sales & Goods Repeated) Contract of Indemnity & Guarantee. (Sec. 124-147) Contract of Bailment and pledge. (Sec. 148-181). Contract of Agency (Sec . 182-238). General Interpretation & Def. : Sec 2 (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal.

(b)When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. (c)The person making the proposal is called the Promisor and the person accepting the proposal is called the Promisee. (d)When at the desire of the Promisor, the Promisee or any other person has done or abstained from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called as consideration for the promise. (e)Every promise and every set of promises forming the consideration for each other is an agreement. (f) Promises which form the consideration or part of the consideration for each other, are called Reciprocal promises. (g)An agreement not enforceable by law is said to be void. (h) An agreement enforceable by law is contract.

Essential of a Valid Contract As per Sec 2 (h) An agreement enforceable by law is a CONTRACT. For an agreement to become a contract following essential conditions or elements must be fulfilled 1. Offer & Acceptance It means there must be an offer by one party and its acceptance by the other. The offer when accepted becomes agreement. 2. Mutual Consent the parties to an agreement must have mutual consent. They must agree upon the same thing in same manner. Ex- W&V horse. 3. Legal Obligation An agreement must create legal obligation, which means obligation which is enforceable by law. 4. Ex : Invitation to dine, failing to serve, cannot sue (Social agreement).

4. Free consent - There must be free consent of the of the parties, a consent is not free, when it is obtained by coercion, undue influence, fraud or misrepresentation of facts etc. NO VALID CONTRACT IF NO FREE CONSENT. Ex : Signing of documents. 5. Parties must be competent to contract : Parties must be capable of entering into contract. Minor, persons of unsound mind are not competent to contract.
NO VALID CONTRACT IF PARTIES NOT COMPETENT. 6. Lawful Consideration : In a contract there must be a lawful consideration. Lawful consideration is that which is not fraudulent, forbidden by law, immoral or apposed to public policy.

 Consideration is the price of promise, or something in return. Ex: A agrees to sell his car to B for 1,00,000, now Bs promise to pay the 1,00,000, consideration for A . and Vice versa. 7. Lawful object : Object of the agreement must be lawful. Lawful object means which is not fraudulent, forbidden by law etc. IF THE OBJECT IS NOT LAWFUL THERE IS NO VALID CONTRACT. Ex: Agreement for distributing money gained from unlawful means. 8. The Agreement must be certain : Meaning of the agreement should be certain. An agreement whose meaning is not certain is not valid. Ex : A agreed to B to sell a hundred tones of oil. Her it is not clear what kind of oil it is. 9. The performance must not be impossible - The performance of an agreement must be possible. An agreement to do impossible act is not valid.

 I.

Classification of Contracts : According to enforceability i.e. Legal validity. According to formation i.e. mode of creation. According to performance. According to enforceability Contract may be classified into the following types according to their enforceability or legal validity 1) Valid contract a contract enforceable under law is a valid contract (Sec. 10). 2) Void Contract a contract which is not enforce able by law. Ex: Car Destroyed - cannot be sold. 3) Voidable Contract Free Consent is an important aspect of a contract. Now if the consent of a party is taken by fraud or other illegal means then the contract is voidable at the instance of the party being defrauded. Ex : Factory production 200 units, where as in reality it produced 1000 units, the purchaser has an option to put an end to the contract.

4) Unenforceable Contracts are those which cannot be enforced in a court of law because of some technical defects, e.g. If there is a requirement that at contract must be in writing or it must be registered, or it be properly stamped, then if these requirement are not met then the contract becomes unenforceable, though it is a valid contract otherwise.

II. Classification of Contract according to their mode of creation or formation Express Contract : is that which is mode in writing or by the words and month. Ex : A wrote a letter to B, I am prepared to sell my car for Rs. 50,000,. B accepted the offer by letter. This is a Express contract. 2. Implied Contract is that which is not made in words. Such contracts come into existence on account of act or conduct of the parties. Ex: A went to a restaurant, and took a cup of tea. In this case, there is an implied contract that he will pay for the cup of tea. 3. Quasi Contract are not contracts as there is no intension of the parties to enter into a contract. It is an obligation which the law creates in the absence of any agreement. Ex : A, a tradesman, left certain goods of Bs house by mistake. B treated the goods as his own. B is bound to pay for the goods.

III.Classification of Contracts according to their performance 1. Unilateral contract is a one sided contract in which only one party has to perform his obligation while the other party has performed his obligation. Ex : A, advertise for his lost son, t hat the would pay 50,000 to any one who find him, B found the boy, in this case B has already performed his obligations and then the contract courses into being, whereas now it only remains that A pays Rs. 50,000 to B. 2. Bilateral Contract is one in which both obligation are outstanding, for the parties. Ex : Am agrees to coach B, a premedical student form the first day of the next month, and B in consideration promise to pay Rs. 1000 as per month such a contract is bilateral as both parties are required to discharge their obligation.

OFFER & ACCEPTANCE PROPOSAL OR OFFER : Essentials for an offer or proposal i) There must be an expression of the willingness. ii) The expression of willingness to do or to abstain from doing something must be to another person. iii) The expression of willingness to do or to abstain from doing something must be made with a view to obtaining the assent of the other person to such act or abstinance. Rules regarding a Valid Offer : 1) An offer may be expressed or implied. Ex : A say to B that he is willings to sell his mobike to him for Rs. 20,000 this is an expressed offer. Ex: A shoe shiners starts shining some ones shoes without being asked to, so in such case any reasonable man would guess that he expects to be paid for this.

2) An offer must give rise to legal consequences. Ex: Offer of dinner at friends place, or offer to ones wife to show her a movie are not valid offer. But in business transactions for any agreement it is taken for granted that parties intend legal consequences to follow. 3) The term of offer must be certain and not vague. 4) An invitation to offer is not an offer.
Ex: An advertisement for sale of goods by auction does not amount to an offer, it merely invites offer, actual bids are made at the auctions are offers. 5) An offer may be Specific or General. Ex: Made to definite persons, or general public or world at large.

6) An offer must be communicated to the offeree. Unless the offer is made known to the offeree there can be no acceptance and no contract. Ex: A, without knowing that a reward has been offered for arrest of a particular criminal, catches the criminal and gives the information to the police. A cannot recover the reward as he cannot be said to have accepted the offer when he was not aware of it. 7. An offer can be made subject to any terms and conditions. Lapse & Revocation of offer 1) An offer lapses after stipulated or reasonable time. An offer lapses if acceptance is not communicated within the time prescribed in the offer or within a reasonable time. Ex: An application for allotment was made on 8th June, the company notified its allotment on 23 November,. It was held that the offer has lapsed due to delay of the company in notifying their acceptance, so the person was not bound to accept the shares.

2) An offer lapses by rejection made by the offeree, it can be by spoken words, writing or implied. 3) An offer lapses by the death or insanity of the offeror or the offeree before acceptance. 4) An offer lapses by revocation, at any time before acceptance, by communication of notice of revocation by the offeror to the other party. Ex : an Auction sale, A makes the highest bid, but withdraws before the fall of hammer, thus, the offer is revoked by of before its acceptance. 5) Revocation by non-fulfilment of a condition precedent to acceptance. Ex: A offers to sell his can to B if he joins his club, now Bs joining the club is a condition precedent in this case.

Acceptance When the person to whom the proposal is made signifies his assent, the proposal is said to be accepted Legal Rules for a valid Acceptance : 1. Acceptance must be given only by the person to whom the offer is made. If you propose to make a contract with A, then B cannot substitute himself for A without your consent. Ex : Class of people or world at large. 2. Acceptance must be absolute & unqualified (Counter offer) Even slight deviation from term of offer makes the acceptance invalid. 3. Acceptances must be expressed in some usual and reasonable manner, unless the proposal prescribed the manner in which it is to be accepted. Express & Implied.

 4. Acceptance must be communicated by the acceptor. 5. Acceptance must be given within a reasonable time and before the offer labses and/or is revoked. 6. Acceptance must succeed the offer. 7. Rejected offers can be accepted only if renewed. Communication of Offer, Acceptance & Revocation 1. Communication of an offer is complete when it comes to the knowledge of the person to whom it is made. 2. Communication of acceptance has two aspects as against the proposer and as against the acceptor. The communication of an acceptance is complete (a) as against the proposer, when it is put in a course of transmission to him, so as to be out of power of the acceptor and (b) as against the acceptor when it comes to the knowledge of the proposer i.e. when the letter of acceptance is received by t he proposes.

3. Communication of a revocation The communication of a revocation is complete (a) against the person who makes it when it is put into course of transmission to the person to whom it is made, so as to be out of the power of the person revoking. (b) as against the person to whom it is made, when it comes to his knowledge i.e. when the letter of revocation is received by him. CAPACITY OF PARTIES MINOR A person, domiciled in India, who is under 18 years of age is a minor. But in case where guardian is appointed by a court, and minors whose property superintendence has been assumed by a court of wards, in that case majority attainment is considered at the age of 21 years.

 Minors Agreements 1) An agreement by a minor is absolutely void and inoperative as against him, law acts as the guardian of minors and protect their right because their mental faculties are not mature. No Restitution except in certain cases A minor cannot be ordered to make compensation for a benefit obtained under a void agreement. Court may compel restitution by a minor when he is a plaintiff.
Ex- A minor sells a house for 5,00,000 and later files a suit to set aside the sale on the ground of minority, then he may be directed by the court to to refund purchase money received by him before the can recover possession of the property sold. (Jager Nath Singh V/s Lalta Prasad).

2. Beneficial agreement are valid contract. Court protects the right of minors. Thus any agreement which is of some benefit to the minor and under which he is required to bear no obligation is valid. A natural guardian is empowered to enter into a contract on behalf of the minor and the contract would be binding and enforceable if the contract is for the benefit of the minor. Ex : When a Minor purchase of property was, after his purchase, dispossessed by a third party, it was held that the minor could recover from his vendor the sum which he has paid as purchase party.
3) Contract of apprenticeship and Service by Minor : A Contract of apprenticeship is valid and binding upon a minor (not less than 14 years of age) because such a contract is protected by Apprentices Act 1961.

 This was to enable children learn trades, craft etc. so that when they are of full age they may gain a livelihood. Ex : An agreement of service by a minor is valid because a minors promise to service would no consideration for the promise of the other party to pay him salary.
4) No ratification on attaining the age of majority Ratification means subsequent acceptance of an agreement or act.. A minors agreement is nullity or void, it cannot be ratified on attaining majority age. Ex : If an advance is made to a minor during his minority, a promise to pay back after he attains age of majority is not enforceable. 5) Rule of estoppels does not apply to a minor. Estoppel has been defined u/s 115 of Evidence Act.

 Accordance of Lord Halsburg Estoppel arises when you are precluded or prevented from denying the truth of anything which you have represented as a fact although it is not a fact. A minor cannot cheat by representing in a contract as a major. 6) Minor Liability for necessaries Sec 68 of Contract act applied If a a person incapable of entering into a contract is supplied by another person with necessaries suited to his condition in life, the person, who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. Ex : A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from Bs property. 7) Specific Performance means actual carrying out of the contract as agreed. Court shall never direct specific perf. Of an agreement made by a minor, which is void.

 But a contract entered into on behalf of Minor by his guardian or manager of his estate is binding on the minor can be specifically enforced by as against the minor provided (a) the contract is within the authority of the guardian or manager (b). it is for the benefit of the minor. 8) Minor Partner A minor is incompetent to contract. But as per sec. 30 of Contract Act he can be admitted to the benefit of partnership with the consent of all the partners by an agreement executed through his lawful guardian with other partners. A minor cannot participate in the management of business. He shall not share losses except for 3rd party liabilities and that too upto his share in the partnership assets.

Free Consent Sec. 13 Contract Act defines the term Consent as Two or more person are said to consent when they agree upon the same thing in the same sense. See 14 lays down that Consent is said to be Free when it is not caused by Coercion Sec. 15 Undue influence -= Sec. 16 Misrepresentation Sec. 18 Fraud Sec. 17 Mistake Sec. 17
Coercion Coercion implies Committing or threatening to commit any act forbidden by IPC.

 Unlawful detaining of threatening to detain any property, with the intension of causing any person to enter into an agreement. Ex : A threatens to shoot B, if he does not let out his house to him B agrees to let out his house to A. The consent of B is induced by coercion. Threat to commit suicide Neither suicide nor threat to commit suicide is punishable under I.P.C. only an attempt to commit suicide is punishable under it. Duress - means either actual or threatened violence over the person (body) of another party or his wife or children with a view to obtain the consent of that party to the agreement. Effect of Coercion A contract brought about by coercion is voidable at the option of the party whose consent was taken by coercion (Sec. 19).

The burden of proof that coercion was used lies on the party who want to set aside the contract on the plea of coercion.

Undue Influence A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other, he uses the position to obtain an unfair advantage over the other.

Sec. 16(2) A person is deemed to be in a position to dominate the will of another

(a) Where the holds a real authority over the other, e.g. the relationship between master and servant, police officer and the accused or (b) Where he stands in a Fiduciary relation e.g. relation of mutual trust and confidence. Ex: Father and son, guardian, & ward, solicitor and client, doctor and patient, Guru & disciple.

(c) Where he makes a contract with a person whose mental capacity is affected by age, illness or bodily distress, e.g. old illiterate persons. Presumption of undue influence is taken merely by the status of the parties as in case of (a), (b), & (c). No presumption of undue influence taken in following cases : Husband & wife. Mother & daughter Grandson & Grand father Creditor & Debtor. In these cases the burden of proof lies with the person who alleges that undue influence exists.
Effect of Undue Influence The contract is voidable at the option of the party whose consent was so caused.

Misrepresentation A statement of fact made by one party to the other either before or at the time of making contract, relating to some matter essential to the formation of the contract, with an intension to induce the other party to enter into the contract. Misrepresentation can be innocently made or (b) Intentional For misrepresentation which is made intentionally, the term Fraud is used. Ex : A makes B to believe that his land produces 10 quintals of wheat per acre, B purchases that land taking the statement of A to be true, later on it transpires that land produces only 5 quintal of wheat. This is misrepresentation. Ex. Business Sales 50,000 per month Negotiations, Sales drops to 5,000/ month, the party did not disclose this facts contract of sale made. This is misrepresentation.

 Fraud Sec 17 State that Fraud means the following acts committed by a party to a contract, with connivance or by his agent, with intentions to deceive or to induce another party thereto or his agent, to enter into the contract The suggestion that a fact is true when it is not true by one who does not believe it to be true. (But if a representor honestly believes his statement to be true, he cannot be liable for deceit no matter how ill-advised, stupid or negligent he may have been. The active concealment of a fact by a person who has knowledge or belief of the fact. But mere non- disclosure is not fraud, where there is no duty to disclose. E.g. Caveat Emptor Buyer Beware . A seller is not bound to disclose to the buyer the faults in the goods he is selling.

3. A promise made without any intention of performing is a Fraud.

Ex : X purchase certain good from Y on credit without any intension of paying them as he was an insolvent. It is a clear case of fraud from Xs side. But mere failure to pay, where there was no original dishonest intention, is not fraud.
4. Any other act fitted to deceive All surprises, trick, cunning, and other unfair way that is used to cheat any once is considered fraud.

 Indemnity and Guarantee Indemnity A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person, is called a Contract of Indemnity. Contract of Indemnify is really a part of general class of Contingent Contract. The object is to protect the promisee from anticipated loss. Happening of loss is the contingency upon which the contract of Indemnity depends. The person who promises to make good the loss is called the Indemnifier (Promisor) and the person whose loss is to be made good is called the Indemnity-Holder (Promisee). Ex; A contracts to indemnify B against the consequences of any legal proceedings which C may take against B in respect of a certain sum of Rs. 1,00,000. This is a contract of indemnity A is Indemnifier B is the Indemnified.

 Guarantee A contract of Guarantee is a contract to perform the promise of discharging the liability of a third person in case of his default. (Sec. 126) A contract of Guarantee is entered in with the object of enabling a person to get a loan or goods on credit or an employment. The person who gives Guarantee is called the Surety the person in respect of whose default the guarantee is given is called the Principal Debtor, and the person whom guarantee is given is called the Creditor. A guarantee may be either Oral or Written. Ex : A, advances a loan of Rs. 5000 to B and C promises to A that if B does not repay the loan< C will do so. This is a contract of Guarantee. Distinction between a contract of Indemnity and a Contract of Guarantee.

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2. 3.

4.

Number of Parties In contract of Indemnity there are 2 parties the Indemnifier and the Indemnity Holder. In contract of Guarantee there are 3 parties the creditor, the principal debtor and the surety. A contractor of Indemnity is for the reimbursement of loss, where as a contract of Guarantee is for the security of a debt or good conduct of an employee. No. of Contract In indemnity there is only one contract between the Indemnifier and the Indemnified. In guarantee there are 3 contracts : Between Principal Debtor and Creditor Between Creditor & the Surety. Between Surety and the Principal Debtor. Nature of liability In indemnity the liability of indemnifier is Primary in nature. In Guarantee the liability of surety is secondary i.e. the surety is only liable in case of default by Principal Debtor.

5. Existing debtor duty In case of Indemnity in most cases there is no existing debt or duty, whereas in case of Guarantee there is an existing debt or duty, the performance of which is guaranteed by the surety. 6. Right to Sue In guarantee, the surety after the discharge of the debtor owing to the creditor, can proceed against the Principal debtor. In Indemnity, the indemnifier cannot sue the 3rd party for the loss in his own name, because there is no privities of contract. Ordinary Guarantee and Continuing Guarantees When guarantee is given for a single specific debt or transaction, is called ordinary Guarantee. It comes to an end as soon as the liability under the transaction end. When a guarantee extends to a series of distinct and separable transactions, it is called a Continuing Guarantee. The guarantee given here is intended to cover a number of transactions over a period of time. (Standing offer).

Bailment & Pledge Sec 148 Contract Act - A bailment is the delivery of goods, by one person to another for some purposes, upon a contract that they shall when the purpose is accomplished, be returned or disposed it according to the directions of the person delivering them. The person delivering the goods is called Bailor and the person to whom they are delivered is called the Bailee and the transaction is called the Bailment. Kind of Bailment 1) Bailment for the exclusive benefit of the bailor bailor leaves goods in the safe custody of the bailee without any compensation to be paid. 2) Bailment for the exclusive benefit of the bailee e.g. a loan of some article. 3) Contract for repair, hire etc call in this close, wherein the bailor receives the benefit of service and the bailee benefits by the receipt agreed charges. Difference between sale and bailment Different between Bailment & License

 Duties of Bailee Duty to take reasonable care of goods delivered to him. Duty not make unauthorized use of goods entrusted to him. Duty not to mix goods bailed with his own goods. Duty to return the goods. Duties of Bailor Duty to disclose faults in goods bailed Duty to repay necessary expenses in case of gratuitous bailment. Pledge or Pawn The bailment of goods as security for payment of a debt or performance of a promise is called Pledge. Bailor in his case is Pawaer and bail is Pawaee. Distinction between bailment and pledge As to purpose AS to right of sale. As to right of using the goods.

 Discharge of Contract When the right and obligations arising out of a contract are extinguished the contract is said to be discharged or terminated. A contract may be discharged in the following ways 1. By Performance Actual or attempted Actual Performance Each party fulfills its obligation within time and in required manner as per contract and the contract come to an end or stands discharged. But if one party performs its promise he alone is discharged, and such a party gets a right of action against the other party who is guilty of Breach of contract. Attempted Performance When the promisor offers to perform his obligation under the contract, but is unable to do so because the promise does not accept the performance, it is called attempted performance or Tender This tender is only an offer to perform

2. Discharge by Mutual Consent or Agreement A contract is created by means of an agreement it may also be discharged by another agreement between the same parties. Sec. 62 & 63 provides for the following methods discharge. 1) Novation means substitution of a new contract in place of old contract, the consideration being the discharge of the old contract. The parties to contract and their obligations may change in Novation. Ex. A is indebted to B & B to C. By mutual agreement Bs debt to C & Bs loan to A are cancelled and C accepts A as his debtor. Thus there is novation involving change of parties. 2) Alteration Alteration means change in one or more of the material terms of a contract. A material alteration is one which alters the legal effect of the contract e.g. Change in amount of money to be paid or a change in the rate of interest etc.

3) Rescission - A contract may be discharged before the date of performance by agreement between the parties to the effect that is shall no longer bind them. Such an agreement is called Rescission or Cancellation of contract. And the consideration being abandonment of their right by the parties. Ex : A promises to deliver certain goods to B an a certain date before the date of performance, A & B mutually agree that the contract will not be performed. The contract stands discharged by rescission. Non-performance by the parties for a long period without complaint, it amounts to an implied rescission. 4).Remission may be defined as the acceptance of a lesser sum or a lessor fulfillment of the promise made. Ex : If the promise agrees to accept Rs. 2000 in full satisfaction of a claim of Rs. 5,000 the promise is enforceable and the promise cannot bring a suit of recovery in future.

5).Waiver means the deliberate abandonment or giving up of a right which a party is entitled to under a contract, where upon the other party to the contract is released from his obligations. 6) Discharge by subsequent or Super viewing Impossibility or Illegality :Sec. 56 An agreement to do an act impossible in itself is void. A contract to do an act which after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, becomes void when the act becomes impossible or unlawful. Ex; A contracts to marry B being already married to C (which is illegal). A. must make compensation to B for non- performance of his promise. Ex : A music hall was agreed to be let out, for a series of concerts. The hall was destroyed by fire before the date of first concert. The plaintiff sued the defended for damages for beach of contract. It was held by the court that the contract has become void and the defendant was not liable.

 Ex: Similarly, if a factory premises on which a machinery is to be installed are destroyed by fire, or a ship under a charter party is seized by a foreign government, the contract is discharged. Cases not covered by supervising Impossibility. 1) Difficulty of Performance cannot be excused from performance. Ex- X contracted with y to send certain goods from Bombay to Delhi in September, in August transport companies went on a strike and transport was available at very high rates. It was held, that the increase in freight rates did not excuse performance. 2) Impossibility due to the default of a third person. Ex: A, a wholesaler, enter into a contract with B for the sale of certain goods to be produced by Z a manufacturers of those goods. Z fails to manufacturers those goods. A in liable to B for damages. 3) Strikes & Lock-out A strike by the workman or a lock-out by the employer also does not excuse performance because the former is manageable and the latter is selfinduced.

4) Discharge by Lapse of Time ; Law of Limitation lays down that in case of breach of a contract legal action should be taken within a specified period, called the period of limitation, otherwise the promisee is debarred from instituting a suit in a court of law and contract stands discharged. 5) Discharge by operation law A contract terminates by operations of law in the following cases : (a) By death of the promisor. (b) Insolvency by court order for liabilities prior to his adjudication. (c) Merger an inferior right contract merges. Into a super right contract. Ex : Contract of tenency - purchase Ownership rights. 6) Discharge by Breach of Contract.

 Breach of contract by a party is also a method of discharge of a contract, because breach also brings to an end the obligations created by a contract on the part of each of the parties. i.e. party at fault can sue the other party for damages, but the contract or such stands terminated. Express Implied. Fails to perform on the day fixed.
Various remedies for breach of Contract Where there is breach of contract, the injured party becomes entitled to the following remedies : Rescission of the contract Suit for Damages Suit uon quantum uncirt Suit for specific performance of contract. Suit for injuction

1) Rescission Where thee is breach of contract by one party, the other party may rescinded the contract and need not perform his part of obligations under the contract if he decides not to take any legal action against the guilty party. (But if the aggrieved party wants to sue the guilty party for damages, then he has to file suit for rescission of contract and side by side claim damages before the court. 2) Suit for Damages Damages are moetary compensation allowed to the injured party for the loss suffered by him as a result of breach of contract. Damages are categories according to their applicability in a particular case1) Ordinary damages when a contract has been broken the injured party as a rule, can always recover from the guilty party ordinary damages. These damages arise naturally and directly in the usual course of things, it means these damages are direct result of breach of contract.

 Ex :? Money to be delivered on a specified date, not delivered, resulted in loss to the other party for non payment of his debt. 2) Special Damages are those which arise on account of special or unusual circumstances affecting the plaintiff (aggrieved party). These damages are remote, special damages cannot be claimed as a matter of right, these can only be allowed by the court in case of special circumstances. Ex : A contract with B to supply 100 tons of iron, A was supposed to get this iron from C, C was specifically told by A that he is entering into a contract with B for supply of iron. C fails to provides A with the iron, C is bund to pay special damages for the loss of profit which could have been earned by A. 3) Exemplary or Vindictive Damages These damaged are awarded by the court with a view to punish the guilty party for the breach and not by way of compensation for the loss suffered by the aggrieved party.

 Ex. (a) Breach of Contract to marry. (b) Dishonour of cheque by a Baker when there are sufficient funds to the credit of the customer. 4) Nominal Damages are those which are awarded only for name sake. They are neither awarded as compensation not as a punishment. (small amount). Ex : In a sale of goods, if the contract price and the market price is almost the same at the date of breach of contract. 5) Suit for Quantum Merit This remedy is available to the injured party against the guilty by filing a suit of Quantum Mercuit, which means as much as in earned. Ex: A engages B (a contractor), to build a 2 storied house, after a part is constructed, A prevents B from working any more, B the contractor is entitled to get reasonable compensation for the work done in addition to the damages for breach of Contract.

6) Suit for Specific Performance Specific performance means actual carrying out of the contract as agreed. The aggrieved party may file a suit for specific performance, for getting a decree by the court whereby directing the defendant to actually perform the promise that has been made under the contract. * (Such a suit may be filed either or in addition to a suit for damages). 7) Suit for Injunction- Injunction is an order of a court restraining a perform form doing a particular act. It is a mode of securing the sp. Performance of the negative terms of the contract i.e. where he is doing something which he promised not to do. Ex : A agreed to take the whole supply of some goods from a particular supplier and no one else (negative promise). He was therefore restrained by an injunction from buying the supply of goods from any other suppliers.