The Indian contract Act.

1. Don’t think that ‘TIME’ will change our LIFE,Don’t think that ‘TIME’ will change our LIFE,
‘‘TIME’ only change The Expiry Dates of theTIME’ only change The Expiry Dates of the
‘OPPORTUNITIES’ !!‘OPPORTUNITIES’ !!

2. Outline of UNIT
 Definitions
 Nature and Essential of contract
 Classification of contract
 Offer and Acceptance - Legal rules & Special terms
 Consideration – definition & Legal Rules
 Capacity to contract
 Free consent
 Legality of object
 Void Agreement
 Contingent Contracts – Meaning and Types
 Performance of Contract
 Remedies for Breach of Contract
 Quasi Contract – Meaning and kinds

3. IntroductionIntroduction
• ‘Contract’ is the most usual method of
defining the ‘give and take’ rights and duties
in a business transaction.
• Section 2(h) of the Act defines the term
contract
“as an agreement enforceable by law”.

4. Cont...
• A contract is an agreement made between two or
more parties which the law will enforce
• “Every agreement and promise enforceable at
law is a contract”
• “A legally binding agreement between two or
more persons by which rights are acquired by
one or more to acts on the part of the other”
Agreement = Offer + Acceptance
Contract = Agreement + Enforceability at Law

5. Which statement is TRUE ???
• All agreements are contract but all contracts
are not agreements
• All contracts are agreements but all
agreements are not contract
• All agreements are not contract but all
contract are agreements

6. ESSENTIAL ELEMENTS OF A VALIDESSENTIAL ELEMENTS OF A VALID
CONTRACTCONTRACT
• Offer and acceptance
• Intention to create legal relationship
• Lawful consideration
• Capacity of parties- competency
• Free and genuine consent
• Lawful object
• Agreement not declared void
• Certainty and possibility of performance
• Legal Formalities

7. CLASSIFICATION OF CONTRACTSCLASSIFICATION OF CONTRACTS
• Classification according to validity
– Voidable contract
– Void Agreement
– Void Contract
– Unenforceable Contract
• Classification according to formation
– Express contract
– Implied contract
– Quasi contract
– E-commerce contract

8. Cont...
• Classification according to performance
– Executed contract
– Executory contract
– One-side Contract
• Classification of contracts in English Law
– Formal contract
• Contract of record
• Contract under seal
– Simple contract

9. OFFER & ACCEPTANCEOFFER & ACCEPTANCE
 An offer may be made by express words
spoken or written
 General Offer : An offer made to the public in
general and hence anyone can acceptant do
the desired act.
 Special Offer : When offer is made to a
definite person, it is known as specific offer
and such offer can be accepted only by that
specified person.

10. General OfferGeneral Offer

11. Special OfferSpecial Offer

12. Legal Rules as to OfferLegal Rules as to Offer
The offer must be capable of creating legal relation
The offer must be certain, definite and unambiguous
The offer may be expressed or implied
The offer must be distinguished from an invitation to
offer
An offer may be specific or general
The offer must be communicated
It must be made with a view to obtaining the assent of
the offeree
A statement of price is not an offer

13. Special terms of offerSpecial terms of offer
These must be brought to the notice of the
other party before the acceptance of the offer
otherwise the acceptor will not be bound by
such terms
The acceptor knows that there are some
special terms and his attention is drawn to
them, hi is bound by them

14. ACCEPTANCEACCEPTANCE
A proposal or offer is said to have been
accepted when the person to whom the
proposal is made signifies his agree to the
proposal to do or not to do something
[Section 2 (b)]
Acceptance may be express or implied

15. Legal rules as to AcceptanceLegal rules as to Acceptance
 It must be absolute and unqualified
 It must be communicated to the offeror
 It must be according to prescribed mode
 It must be given within the prescribed or
reasonable time
 It must show an intention to fulfil the promise
 It cannot precede an offer
 It must be given to specific person
 It must given before the offer lapse
 Mental acceptance is no acceptance

16. ConsiderationConsideration
 When a party to an agreement promises to
do something, he must get ‘something’ in
return
A valuable consideration in the sense of the
law may consist either in some right, interest,
profit or benefit accruing to one party or some
forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other

17. Legal Rules as to ConsiderationLegal Rules as to Consideration
 it must at the desire of the promisor
 it may move from the promisee or any other
person
 it may be an act, abstinence or forbearance or
a return promise
 it may be past, present or future
 it need not be adequate
 it must be real and not illusory

18. Capacity to contractCapacity to contract
 Minors
 Persons of unsound mind
 Person disqualified by any law to which they are
subject

19. Free ConsentFree Consent
o “All agreements are contracts if they are
made by the free consent of parties...”
Consent is said to be free when it is not caused by—
o Coercion as defined in sec.15
o Undue influence as defined in Sec.16
o Fraud as defined in Sec.17
o Misrepresentation as defined in Sec.18
o Mistake, Subject to the provision Sec.20,21,22

20. COERCIONCOERCION
• ‘’Coercion’’ is the committing or threatening
to commit any act forbidden(prohibited) by
the Indian Penal Code 1860
– A threat to commit suicide amounts to coercion
• There must be intention of causing any person
to enter into an agreement
• It involves a criminal act

21. Undue InfluenceUndue Influence
• Where relations subsisting between the
parties are such that one of the parities in a
position to dominate the will of the other.
– Parent and child
– Trustee and beneficiary
– Guardian and ward
– Doctor and patient

22. Misrepresentation & FraudMisrepresentation & Fraud
• Misrepresentation is a false statement which
the person making it honestly believes to be
true or which he dose not know to be false
– It must be a representation of a material fact
– It must be made before the conclusion of the
contract with a view to inducing the other party to
enter into the contract
– it must be made with any intention to
deceive(mislead) the other party

23. MistakeMistake
• Mistake is erroneous belief about something. It may be a
(1) mistake of law of the country (2) mistake of law of a
foreign country
• Mistake of fact may beMistake of fact may be
– Bilateral fact
• The mistake must be mutual
• The mistake must relate to a matter of fact essential to the
agreement
• Subject-matter, Price-matter, Quantity-matters, Identity of
subject-matter, Title to subject-matter
– Unilateral fact
• Identity of the person contract
• Nature of contract

24. LEGALITY OF OBJECTLEGALITY OF OBJECT
• When consideration or object is unlawful
– If it is forbidden by law
– If It defeat the provisions of any law
– If it is fraudulent
– If it involves or implies injury to the person or
property of another
– If the court regard it as immoral

25. Agreement Opposed to PublicAgreement Opposed to Public
PolicyPolicy
• Agreement of trading with enemy
• Agreement to commit a crime
• Agreements in restraint to legal proceedings
• Trafficking in public offices and titles
• Agreements tending to create interest
opposed to duty
• Agreements which interfere with
administration of justice

26. Cont...
• Agreements in restraint of parental rights
• Agreements restricting personal liberty
• Agreements in restraint of marriage
• Marriage brokerage agreement

27. Void AgreementVoid Agreement
• A void agreement is one which is not
enforceable by the law.
• Following agreements have been expressly
declared to be void.
Agreements by incompetent parties (Sec.11)
Agreements made under a mutual mistake of fact
(Sec. 20)
Agreements the consideration or object of which
is unlawful (Sec. 23)
Agreements the consideration or object of which
is unlawful in part (Sec.24)

28. Cont..
Agreements made without consideration (Sec. 25)
Agreements in restraint of marriage (Sec. 26)
Agreement in restraint of trade (Sec. 27)
Agreement in restraint of legal proceedings (Sec. 28)
Agreements the meaning of which is uncertain (Sec.
29)
Agreements by way of wager (Sec. 30)
Agreements contingent on impossible events (Sec. 36)
Agreements to do impossible acts (Sec. 56)

29. Cont...
• Agreement the meaning of which is uncertain
Existence
Quantity
Quality
Price
• Wagering agreements or wager (Sec. 30)
A wagering agreement is an agreement to pay
money on the happening or non-happening of a
specified uncertain event.

30. Cont...
• Essentials of a wagering agreement
Promise to pay money
Each party must stand to win or lose
No control over the event
No other interest in the event
• Void Contract
Contract to do or not to do something on the
happening of an event becomes void when event
becomes impossible
• Restitution

31. CONTINGENT CONTRACTCONTINGENT CONTRACT
• Contingent means that which is dependent on
something else
• Essentials of contingent contract
– Its performance depends upon the happening or
non-happening events
– The event must be uncertain
– The event must be deposited

32. Cont...
• Rules regarding contingent contract
– Its performed if an uncertain future event happens,
it cannot be enforced until the event has happened
– It a contingent contract depends for its
performance on doing of an act by the promisor,
the contract become void
– If a contingent contract contemplates to do
anything within time if an impossible event
happens it is void

33. PERFORMANCE OF CONTRACTPERFORMANCE OF CONTRACT
• Performance of contract takes place when the
parties to the contract fulfil their obligation
arising under the contract within time and in
the manner prescribed

34. Offer to Perform (Sec.38)
• It must be unconditional
• It must be mad to proper person
• it must be by a person who is in a position and
willing to perform the promise
• it may be made to one of the several joint
promises
– When a party to a contract refuses to perform or
disables himself from performing, his promise in its
entirety the promise may put an end of the contract
(Sec.39)

35. Contract which need NOT be
performed
• When its performance becomes impossible
• When the parties to it agree to substitute a new
contract for it or alter
• When the promisee dispenses with , wholly or in
part. The performance of the promisee made to
him
• When the person at whose option it is voidable
• When it is illegal

36. By whom must contracts be
performed ??
• Promisor himself
• Agent
• Legal representatives
• Third parties
• Joint Promisors

37. Devolution of Joint Liabilities &
Rights (Sec. 42 to 45)
“Devolution”- Passing over from one person to
another
Devolution of Joint Liabilities
any one of the joint promisors may be compelled to
perform
A joint promisor compelled to perform may claim
contribution
Sharing of loss arising from default
Release of Joint promisor

38. Time and Place of Performance
(Sec. 46 to 50)
Where no application is to be made and not time
specified
Where time is specified and no application is to be
made
Application for performance on a certain day and
place
Application by the promisor to the promisee to
appoint place
Performance in manner or at time prescribed or
sanctioned by the promisee

39. Reciprocal Promises
Mutual and independent
Conditional and dependent
Mutual and concurrent

40. Rules regarding reciprocal
Promises
 Real-time performance of reciprocal promises
 Order of performance of reciprocal promises
 Effect of one party preventing another from
performing promise
 Effect of default as to promise to be
performed first

41. DISCHARGE OF CONTRACTDISCHARGE OF CONTRACT
Discharge of contract means termination of
the contractual relationship between parties
 A contract may be discharged-
By performance
By agreement or consent
By impossibility of performance
By lapse of time
By operation of law
By breach of contract

42. DISHCHARGE BY PERFORMANCE
Discharge by performance takes place when
the parties to the contract fulfil their
obligations arising under the contract within
the time and the manner prescribed
It may be
 ACTUAL PERFORMANCE
 ATTEMPTED PERFORMANCE

43. DISCHARGE BY AGREEMENT OR
CONSENT
• A contract rests on the agreement of the parties.
As its is agreement with binds them, so by their
agreement or consent they may be discharged
– Novation
• When a new contract is substituted for existing one
– Alteration
• When one or more of the terms of the contract is/are
altered by the mutual consent of the parties
– Rescission (cancellations)
• When all or some of the terms of the contract are cancelled

44. Cont..
– Remission
• Acceptance of lesser fulfilment of the promise made by
parties
– Waiver
• Intentional giving up of a rights by a parties entitled
thereto under a contract
– Merger
• When inferior right accruing to a party under a contract
merges into a superior rights accruing to the same
party under new contract

45. DISCHARGE BY IMPOSSIBLITY OF
PERFORMANCE
• Impossibility existing at the time of agreement
– Know to the parties
– Unknown to the parties
• Impossibility arising subsequent to the
formation of contract

46. Cont..
 Discharge by supervening impossibility
 Destruction of subject-matter of contract
 Non-existence or non-occurrence of particular
state of things
 Death or incapacity for personal service
 Change of law
 Outbreak of war

47. Cont..
 Impossibility of performance-not an excuse
 Difficulty of performance
 Commercial impossibility
 Impossibility due to failure of a third person
 Strike and lock out
 Failure of one the objective

48. DISCHARGE BY LAPES OF TIME
 A contract should be performed within a
specified period, called period of limitation.
DISCHARGE BY OPERATION OF LAW
o By Death
o By merger
o By insolvency
o By unauthorized alteration of the terms
o By rights and liabilities becoming vested in the same person

49. DISCHARGE BY BREACH OF
CONTRACT
• Breach of contract means a breaking of the
obligation which a contract executes
• Actual breach of contract
– At the time when the performance is due
– During the performance of the contract
• Anticipatory breach of contract
– By expressly renouncing his obligation
– By doing of some act so that the performance of
his promise become impossible

50. Remedies for Breach of ContractRemedies for Breach of Contract
When the contract broken, the injured party
(the party who is not in breach) has one or
more following remedies
Rescission (Cancellation) of the contract
Suit for damages
Suit upon quantum meruit
Suit for specific performance of the contract
Suit for injuction

51. Cont...
• RescissionRescission
– When there is breach of a contract by a party, the
injured party may sue to treat the contract as
cancel. He is also absolved of all his obligation
under the contract.
• Mr. A promise B to supply 10 Parker pens on a certain
day. B agree to pay the price after the receipt of the
goods. A does not supply the goods. B is discharged from
liability to pay money

52. Cont...
• DamagesDamages
– Damages are monetary compensation awarded to the
injured party by court for the loss or injury suffered
by him
– Ordinary damages
• Damages which actually arise in the usual course of things
from breach of contract.
– Special damages
• Damages which may reasonably be supposed to have been
in the contemplation of the both parties when they made
contract.

53. Cont...
• Vindictive or Exemplary Damages
– These damages are allowed in case of breach of a
contract to marry or dishonour of a cheque by a
banker wrongfully.
• Nominal Damages
– Where the injured party has not suffered any loss by
reason of the breach of contract, court may award a
very nominal sum of damages.
• Damage of loss of reputation
– If the banker wrongly refuse to honour customer’s
cheque

54. Cont...
• Damage for inconvenience and discomfort
– Damage can be recovered for physical
inconvenience and discomfort. The general rule
for damage is that measure of damages is not
affected by the motive.
Suit upon quantum meruit
Suit for specific performance of the contract
Suit for injuction

55. QUASI CONTRACTQUASI CONTRACT
When ‘’Creation relations resembling those
created by contract’’ in English Law, such
relations are called quasi-contract
Supply necessaries (Sec.68)
Payment by an interested person (Sec.69)
Obligation to pay for non-gratuitous (Sec.70)
Responsibility of finder of goods (Sec. 71)
Mistake or coercion (Sec. 72)