indian-contract-act-1872- km.ppt

7/29/2019 indian-contract-act-1872- km.ppt

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THE INDIANCONTRACT ACT (ICA),

1872

Kailash MenariaMBA in Agribusiness

Part 1st Sem.- II


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What is a contract?

Section 2(h)

An agreement enforceable by law is a

contract.

Thus,

Contract = Agreement + Enforceability at

Law


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Agreement?

Section 2(e)

Promise/(s) Promise/(s)

= Agreement(in exchange for)


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Promise?

Section 2(b)

Promise = Proposal/Offer + Acceptance

Proposal?Section 2(a)

Expression of willingness

With a view to seek the assent of the otherThus, mere expression of willingness doesntconstitute offer/proposal.


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Acceptance

Section 2(b)

Giving of assent to the proposal.

Enforceability by LawAgreements which are not enforceable

Illegal/unlawful agreements, e.g., to

smuggle/to killSocial Agreements (Balfourvs. Balfour)


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Agreements Declared Void

under ICA

e.g.

Agreement with or by a minor

Agreement in restraint of trade

Marriage brokerage contract

Wagering/Betting Agreements


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Kinds of Contracts

From the point of view of

Enforceability

Void

Voidable

Valid


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Void Agreement vs. Void Contract

Void Agreement

i.e., void-ab-initio i.e. unenforceable from thevery beginning

Becomes void (Void Contract) Voidable

i.e., void + able

i.e., capable of being declared void

(unenforceable) at the option of one of theparties to the contract but not at the option ofthe other.


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Valid Contract

Section 10

To be a valid contract, it must satisfy thefollowing:

1. Offer and Acceptance2. Consensus-ad-idem(Meeting of minds)

i.e., persons must agree to the same thing inthe same sense and at the same time.

3. Intention to create legal relationship asagainst social relationship or illegal/unlawfulrelationship.


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4. Free and Genuine Consent, i.e., free from

coercion

undue influence

fraud misrepresentation

mistake

5. Parties competent to contract6. Lawful consideration and object, i.e.,

something in return and that must be

lawful.


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Valid Contract

(Object and Consideration usually overlap.However, there may be difference at timese.g., object may be to kill competition and forthat purpose in view, a senior manager of thecompetitor may be paid a certain amount togive unrealistically high quotation.)

Here: Objectis to kill competition.

Consideration is :(i) payment of money

(ii) giving high quotations


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Valid Contract

7. Agreement not declared void.

8. Certainty of Meaning: e.g. sale and

purchase of 100 tonnes of oil. But

which oil? Thus, agreement being

uncertain not valid.

But, if the seller deals only in one kind

of oil and one variety, then it shall be

valid since it is capable of being made

certain.


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Valid Contract

9. Possibility of performance:

Impossibility whether known to the

parties or not, renders a contract

invalid.

10.Necessary legal formalities: e.g.

sale-deed of immovable property.


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Voidvs.Illegal Agreements

Void Agreement Illegal Agreement

1. Unenforceable

2. Not Punishable3. Collateral

transactions

unaffected.

1. Unenforceable

2. Punishable (fine orimprisonment orboth)

3. Collateraltransactions arealso void.


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Specific and General Offer

Specific Offer:

made to a specified person or a group of

persons.

can be accepted only by the person to

whom made.

Thus, if offer is addressed to A, B

cannot accept it.

Case Law: Boulton vs. Jones


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Specific and General Offer

General Offer:

which is not a specific offer.

made to the world at large. can be accepted by anyone by

complying with the terms of the offer.

Case Law: Carlillvs. Carbolic Smoke

Ball Co.


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Offervs. Invitation to offer

Illustrations of Invitation to Offer:

Prospectus issued by a college.

Prospectus issued by a company. Invitation of bids in an auction.

Price-catalogues, price lists, quotations

Display of goods with a price-tag in ashop window.


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Special Terms in a Contract

Examples: Dry cleaners receipt, couriers

receipt, shipment receipt, insurance policy,

etc.

Binding if communicated or attention drawn tothe fact that there are certain special terms

and conditions.

Not binding if attention is not drawn and the

other party not aware of.


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Cross Offers & Counter Offers

Cross Offers

Identical offers cross each other and none of

the parties is aware of the same. Doesnt

result in a contract unless one of them isaccepted.

Counter Offer

Instead of accepting an offer, the offereemakes a counter offer, i.e., accepts the same

subject to certain conditions or qualification.


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Contracts through Post

Communication of Offer

is complete when the offeree has the

knowledge of the same.

Communication of Acceptance

It has two aspects, viz.,

As against the proposerAs against the acceptor


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As against the proposer

Communication is complete as soon as a

duly addressed letter of acceptance is put

into the course of transmission.

Whether the same reaches the proposer ornot.

As against the acceptor Communication is complete only when the

proposer has received the letter and learnt

the contents thereof.


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Communication of Revocation

Communication of revocation (of offer

oracceptance) is complete:

As against the person who makes it

when it is put into the course of

transmission.

As against the person to whom it is

made, when it comes to his knowledge.


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Comparing offer to a train of

gunpowder and acceptance to a

lighted match stick How far

correct?

William Ansons observation though

valid in the English context doesnt hold

good in India since in India acceptanceis revocable.


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Claim for Damages

Damages

U/S Section 73

Damages

U/S Section 74

Only damages

naturally flowing

From breach

(Ordinary

Damages)

Special Damages

(No claim for

consequential loss

unless in the

Contemplation

of the parties

(Hedleyv. Baxendale

Exemplary

Damages

Nominal

Damages

Pre-fixed Damages

Penalty

Liquidated Damages

(What can be recovered is

actual loss or

amount prefixed,

whichever is less)


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thanks

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