MODULE II LAW OF CONTRACT

I WHAT IS THE MEANING OF THE TERM CONTRACT 1. THE WORD CONTRACT IS DERIVED FROM LATIN WORD CONTRACTUMMEANING TOGETHER 2. A CONTRACT IS AN AGREEMENT ENFORCEMENT AT LAW MADE BETWEEN TWO OR MORE PERSONS BY WHICH RIGHTS ARE ACQUIRED BY ONE OR MORE TO ACT OR FOREBEARANCE ON THE PART OF OTHER OR OTHERS [SIR WILLIAM ANSON] 1 CONT.

3. EVERY AGREEMENT AND PROMISE ENFORCEABLE AT LAW IS A CONTRACT [SIR FEDRICK POLLOCK] 4. ACCORDING TO SECTION 2 (h) OF THE INDIAN CONTRACT ACT 1872 AN AGREEMENT ENFORCEABLE BY LAW IS A CONTRACT 5. AN ANALYSIS OF THESE DEFINITIONS SHOW THAT A CONTRACT MUST HAVE THE FOLLOWING TWO ELEMENTS: (a) AN AGREEMENT AND (b) IT MUST BE LEGALLY ENFORCEABLE CONTRACT=AN AGREEMENT +ITS 2 ENFORCEABILITY

II. 1.

2. 3.

WHAT IS MEANT BY THE TERM AGREEMENT? AS PER SECTION 2 (e): EVERY PROMISE AND EVERY SET OF PROMISES, FORMING CONSIDERATION FOR EACH OTHER IS AN AGREEMENT WHAT IS PROMISE-ACCORDING TO SECTION 2 (b) A PROPOSAL WHEN ACCEPTED BECOMES A PROMISE RAM OFFERS TO SELL HIS CAR TO SHYAM FOR RS. 2 LAKHS. SHYAM ACCEPTS THIS OFFER. THIS OFFER WHEN ACCEPTED BECOMES A PROMISE AND THIS PROMISE IS TREATED AS AN AGREEMENT BETWEEN THE TWO CONT. 3

4. AS PER SECTION 2 (c) THE PERSON MAKING THE PROPOSAL IS CALLED PROMISOR AND THE PERSON ACCEPTING THE PROPOSAL IS CALLED PROMISEE

III. WHEN DOES AN AGREEMENT BECOME A CONTRACT? 1. ACCORDING TO SECTION 2 (h) ONLY THOSE AGREEMENTS WHICH ARE ENFORCEABLE BY LAW IS A CONTRACT 2. AGREEMENTS INTENDED ONLY TO CREATE MORAL, RELIGIOUS OR SOCIAL OBLIGATION AND NOT INTENDED TO CREATE LEGAL OBLIGATIONS ARE NOT TREATED AS CONTRACTS 5 CONT.

[EX (i) A PROMISE TO HOST A LUNCH FOR A FRIEND ON HIS BIRTHDAY IS NOT LEGALLY ENFORCEABLE (AS IT IS ONLY A SOCIAL OBLIGATION) (ii) ANTONY PROMISES A PRIEST THAT HE WOULD DONATE RS. 10,000/- IF HE GETS A FIRST CLASS [ONLY A MORAL OBLIGATION] (iii) A HUSBAND PROMISED HIS WIFE TO PAY RS. 500 PM AS POCKET MONEY. HE LATER STOPPED PAYING IT. BOTH THESE AGREEMENTS ARE SOCIAL / RELIGIOUS / FAMILY OBLIGATIONS AND ARE NOT ENFORCEABLE IN LAW 3. THEREFORE IT IS SAID THAT ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS [BECAUSE SOME OF THEM ARE NOT LEGALLY 6 ENFORCEABLE]

IV. WHAT ARE THE INGREDIENTS OR ESSENTIAL REQUIREMENTS FOR AN AGREEMENT TO BECOME A CONTRACT 1. SECTION 10 PRESCRIBES TEN REQUIREMENTS FOR AN AGREEMENT TO BECOME A CONTRACT 2. IF ANY ONE OF THE REQUIREMENTS ARE NOT MET, THE AGREEMENT WOULD NOT BE ENFORCEABLE IN LAW AND HENCE WOULD NOT BECOME A CONTRACT 3. THE TEN REQUIREMENTS ARE: (i) THERE SHOULD BE A PROPER PROPOSAL (OFFER) AND ITS PROPER ACCEPTANCE (ii) THERE MUST BE AN INTENTION TO CREATE LEGAL RELATIONS (iii) THERE MUST BE A LAWFULL 7 CONSIDERATION CONT

(iv) THE PARTIES SHOULD HAVE LEGAL CAPACITY OR COMPETENCY TO ENTER INTO A CONTRACT (v) THEIR CONSENT MUST BE FREE ([WITHOUT COERCION] (vi) THE OBJECT OF THE AGREEMENT SHOULD BE LAWFULL (vii) IF THE LAW REQUIRES IT TO BE IN WRITING OR REGISTERED IT SHOULD BE COMPLIED WITH (vii) THERE SHOULD BE CERTAINITY OF MEANING (ix) THERE SHOULD BE POSSIBILITY IF 8 PERFORMANCE CONT

(x) IT SHOULD NOT FALL UNDER CERTAIN CATEFORIES OF AGREEMENTS WHICH HAVE BEEN EXPRESSLY PROHIBITED OR DELCARED AS ILLEGAL [MS=2.4 PG = 30-33 SG = 38-42 CB=4-5 MK=8-13

V.

WHAT ARE THE CLASSIFICATION OF CONTRACTS? (1) ON THE BASIS OF ENFORCEABILITY: (a) VALID CONTRACTS [MA=2.4, MK-13 (b) VOID CONTRACTS [MS=2.9 MK-14 (c) VOIDABLE CONTRACTS [MS=2.9, MK=13 (d) ILLEGAL CONTRACTS [MS=2.9, MK=17 CONT..

10

(2) ON THE BASIS OF MODE OF CREATION/ FORMATION: (a) EXPRESS CONTRACT [MS=2.10, MK=18 (b) IMPLIED CONTRACT [MS=2.11, MK=18 (c) QUASI CONTRACT [NOT STRICTLY A CONTRACT] (3) ON THE BASIS OF EXTENT OF PERFORMANCE: (a) EXECUTED CONTRACT [MS=2.11 MK=19 (b) EXECUTORY CONTRACT [MS=2.11 MK=19 (4) ON THE BASIS OF OBLIGATIONS: (a) UNILATERAL (2) BILATERAL (3) MULTILATERAL [MS=2.9 to 2.12 PK=34, SG=42-43, CB=6-8 11 MK =13-20]

VI. WHAT IS MEANT BY VOID AGREEMENTS, VOID CONTRACTS, VOIDABLE CONTRACTS 1) VOID AGREMENT ACCORDING TO SECTION 2(g) AN AGREEMENT NOT ENFORCEABLE BY LAW IS VOID [ VOID MEANS EMPTY] AN AGREEMENT NOT SUPPORTED BY : (a) CONSIDERATION (b) FREE CONSENT (c) COMPETENT PARTIES (d) WHEN THE OBJECT IS UNLAWFULL [A VOID AGREEMENT IS AB-INIT10 VOID [MS=2.9 MK=15 SG=46]
12

2)

VOID CONTRACT ACCORDING TO SECTION 2 (j) A CONTRACT WHICH WAS INITIALLY VALID, BUT BECAME SUBSEQUENTLY INVALID IS A VOID CONTRACT FROM THE DATE IT BECOME INVALID. [MS=2.9, MK=14 S=46, ] [AN AGREEMENT WITH A FOREIGN NATIONAL BECOMES VOID WHEN WAR IS DECCARED BETWEEN THE TWO COUNTRIES] 3) VOIDABLE CONTRACT ACCORDING TO SECTION 2(i) AN AGREEMENT WHICH IS ENFORCEABLE BY LAW AT THE OPTION OF ONE OR MORE OF THE PARTIES THERETO, BUT NOT AT THE OPTION OF THE OHER OR 13 OTHERS CONT

[EX A PARTY WHO HAS GIVEN HIS CONSENT TO AN AGREEMENT BY MISTAKE, MISREPRESENTATION, FRAUD, COERCION OR UNDER UNDUE INFLUENCE HAS THE OPTION TO RESCIND OR CANCEL OR AVOID THE CONTRACT. ONLY HE HAS THE OPTION TO AVOID AND NOT THE OTHER PARTY IF THE WISHES, HE CAN PROCEED WITH THE CONTRACT] [MS=29 MK=14 ]
14

[Link] IS MEANT BY ILLEGAL AGREEMENTS, UNLAWFULL AGREEMENTS, UN-ENFORCEABLE CONTRACTS? (1) ILLEGALAGREEMENT AN AGREEMENT IS SAID TO BE ILLEGAL WHEN THE PURPOSE OR OBJECT FOR WHICH IT HAS BEEN FORMED IS BASED ON COMMITTING A CRIME [MS=2.10 MK=17]
15

(2) UNLAWFULL AGREEMENT AN AGREEMENT IS SAID TO BE UNLAWFULL, WHEN IT HAS BEEN ENTERED INTO AMONG PARTIES CONTRARY TO THE PROVISIONS OF LAW. SUCH AN AGREEMENT IS ONLY UNLAWFULL AMONG THE PARTIES TO THE AGREEMENT AND NOT AGAINST A STRANGER [MS=2.10 MK=17]
16

(3) WHAT I MEANT BY UNENFORCEABLE CONTRACT AN AGREEMENT WHICH IS OTHERWISE VALID BUT CANNOT BE ENFORCED FOR WANT OF PROCEDURAL FORMALITIES OR TECHNICAL FAULTS LIKE WRITTEN ON INSUFFICIENT STAMP PAPER. [MS=2.10 MK=17]

17

[Link] IS MEANT BY EXPRESS CONTRACT OR IMPLIED CONTRACT? (1) CONTRACTS WHICH ARE EXPRESSED ORALLY OR IN WRITING ARE CALLED EXPRESS CONTRACTS (2) WHERE THE OFFER AND ACCEPTANCE ARE MADE OTHERWISE THAN IN WORDS IT IS CALLED IMPLIED CONTRACTS IT IS IMPLIED FROM THE BEHAVIOUR OR BODY LANGUAGE OF THE PARTIES [MS 2.10 & 2.11 , MK = 18-19 ] 18

IX. WHAT IS MEANT BY QUASI CONTRACT OR CONSTRUCTIVE CONTRACTS (1) SUCH CONTRACTS DO NOT EMENATE OUT OF ANY AGREEMENTS AND HENCE ARE NOT CONTRACTS IN THE STRICT SENSE OF THE TERM CONTRACT (2) THE REALITY IS, IN CERTAIN SPECIAL CIRCUMSTANCES COURTS INTERPRET IT AS IF THERE WAS AN AGREEMENT (3) IT IS BASED ON THE PRINCIPAL OF EQUITY
19

(2) (4) SECTION 68-72 OF THE ICA DESCRIBES THE CASES WHICH WILL BE DEEMED AS QUASI- CONTRACTS (5) EX. (i) LIABILITY OF A FINDER OF LOST GOODS TO RETURN IT TO THE OWNER (ii) IF MONEY IS PAID BY MISTAKE TO THE WRONG PERSON HE IS OBLIGATED TO RETURN IT [MK-19 ]
20

X. 1.

2.

3.

WHAT IS MEANT BY EXECUTED, EXECUTORY CONTRACTS EXECUTED CONTRACT WHEN THE OBLIGATIONS UNDER THE CONTRACT HAVE BEEN DISCHARGED IT BECOMES AN EXECUTED CONTRACT EXECUTORY CONTRACT A CONTRACT IN WHICH THE OBLIGATIONS BY EITHER PARTY ARE TO BE PERPORMED AT A FUTURE DATE EX. A AGREES TO SELL HIS CAR TO B FOR RS 1LAKH AND RECIEVES AN ADVANCE OF RS.1,000/- AND GIVE DELIVERY WHEN THE BALANCE IS PAID
21

XI. WHAT IS MEANT BY THE TERMS OFFER (OR PROPOSAL) AND ACCEPTANCE UNDER ICA 1872 ? 1. SECTION 2(a) DEFINES OFFER OR PROPOSAL AS FOLLOWS: (i) WHEN A PERSON SIGNIFIES HIS WILLINGNESS TO ANOTHER PERSON (ii) IN RESPECT OF DOING OR ABSTAINNG FROM DOING SOMETHING (iii) WITH A VIEW TO OBTAINING THE ASSENT OF THE OTHER HE IS SAID TO BE MAKING A PROPOSAL
22