Contractual Law Intro

8/6/2019 Contractual Law Intro

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Introduction to LawIntroduction to LawLaw of ContractsLaw of Contracts

What is a contract?What is a contract?


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Learning ObjectivesLearning Objectives

Quick ReviewQuick Review

Definition of a ContractDefinition of a Contract

Simple Contracts and Written ContractsSimple Contracts and Written Contracts

Legal Effect of ContractsLegal Effect of Contracts

Why we have a Law of ContractWhy we have a Law of Contract


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Important DefinitionsImportant Definitions

Legally bindingLegally binding

Legally enforceableLegally enforceable

RemediesRemedies

ParolParol (simple) contracts(simple) contracts

DeedDeed

Conveyances of landConveyances of land

Bill of exchangeBill of exchange

Valid, void, voidable and unenforceable contractsValid, void, voidable and unenforceable contracts


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Quick ReviewQuick Review

Earlier, we saw that you can divide law intoEarlier, we saw that you can divide law into

different categoriesdifferent categories

Evolving from the basic social contract, someEvolving from the basic social contract, someof those categories wereof those categories were

private law v. public lawprivate law v. public law

civil law v. criminal lawcivil law v. criminal law


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Quick Review (cont.)Quick Review (cont.)

Private LawPrivate Law deals with the relationshipsdeals with the relationshipsbetween ordinary people in everydaybetween ordinary people in everydaytransactionstransactions

That includes you and me, as well asThat includes you and me, as well asbusinesses and companiesbusinesses and companies

Private Law includes the law of contract andPrivate Law includes the law of contract andthe law of tortthe law of tort


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Quick Review (cont.)Quick Review (cont.)

In this category,In this category, civil lawcivil law deals with the relationshipsdeals with the relationshipsbetween individual citizensbetween individual citizens

Its purpose is to settle arguments between individualsIts purpose is to settle arguments between individuals

It helps people to find remediesIt helps people to find remedies

it doesnt really punish people unless specifically outlinedit doesnt really punish people unless specifically outlinedas per act or lawas per act or law

Civil Law includes all Private Law so it includes the LawCivil Law includes all Private Law so it includes the Lawof Contractof Contract


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Definition of a contractDefinition of a contract

A legally binding agreement;A legally binding agreement;

that means there must be some kind of agreementthat means there must be some kind of agreementbetween two partiesbetween two parties

However, not all agreements are contracts becauseHowever, not all agreements are contracts becausenot all agreements are legally enforceablenot all agreements are legally enforceable

It must be legally enforceable;It must be legally enforceable;

means that a court will say that an agreement is ameans that a court will say that an agreement is acontractcontract

See textbook (See textbook (BansalBansal) for complete definition) for complete definition


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Definition of a contract (cont.)Definition of a contract (cont.)

To decide if an agreement is legallyTo decide if an agreement is legallyenforceable as a contract, a court will applyenforceable as a contract, a court will applythe rules and principles of the law of contractthe rules and principles of the law of contract

Therefore, knowing a little about these rulesTherefore, knowing a little about these rulescan help businesspeople to create validcan help businesspeople to create validcontractscontracts


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Simple ContractsSimple Contracts

There isThere is nono general rule in English law that a contractgeneral rule in English law that a contractmust be in writingmust be in writing

In fact, as we saw from our examples at the beginningIn fact, as we saw from our examples at the beginningof the class, in many situations people do not realiseof the class, in many situations people do not realisethat they are making a contractthat they are making a contract

Some contract can be made verbally or by actionsSome contract can be made verbally or by actions

These are known asThese are known as parolparol oror simplesimple contractscontracts

But as per Indian law, a contract to be legal must be inBut as per Indian law, a contract to be legal must be inwriting amongst other requirements.writing amongst other requirements.


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Simple Contracts (cont.)Simple Contracts (cont.)

Although there is no requirement for a simple contractAlthough there is no requirement for a simple contractto be in writing, sometimes the parties might record theto be in writing, sometimes the parties might record thecontract in writingcontract in writing

This can be useful later if there is disagreement aboutThis can be useful later if there is disagreement aboutthe contractthe contract

If the contract is important or involves a lot of money itIf the contract is important or involves a lot of money itmight be wise to put it in writingmight be wise to put it in writing


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DeedsDeeds

DeedsDeeds are kind of contract whichare kind of contract which must alwaysmust always be inbe inwritingwriting

Conveyancesof landConveyancesof land: this is the legal process of: this is the legal process oftransferring the ownership of land from one party totransferring the ownership of land from one party toanotheranother

This is different from the agreement to sell the landThis is different from the agreement to sell the land

The conveyance follows the agreement to sellThe conveyance follows the agreement to sell


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Contracts which must be inContracts which must be in

WritingWriting Some contracts must be in writing but theySome contracts must be in writing but they

dont have to be by deeddont have to be by deed

Most of these requirements come fromMost of these requirements come fromStatutory law or government circulars forStatutory law or government circulars forexample.example.

Some examples of written contracts;Some examples of written contracts;

bills of exchangebills of exchange

contracts for the sale of landcontracts for the sale of land


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Legal EffectLegal Effect

As we mentioned earlier, contracts areAs we mentioned earlier, contracts areagreements, but not all agreements are legallyagreements, but not all agreements are legallyenforceable contractsenforceable contracts

In fact, the legal effect of agreements fall intoIn fact, the legal effect of agreements fall into4 categories4 categories

Valid contractsValid contracts

Void contractsVoid contracts

Voidable contractsVoidable contracts

Unenforceable contractsUnenforceable contracts


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Valid ContractsValid Contracts

These are agreements which are completelyThese are agreements which are completelybinding and enforceablebinding and enforceable

Parties to valid contracts gain rights andParties to valid contracts gain rights andresponsibilitiesresponsibilities

The courts will make sure that the partiesThe courts will make sure that the partiesfollow these rights and responsibilities if therefollow these rights and responsibilities if thereis any argumentis any argument


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Essentials of a Valid ContractEssentials of a Valid Contract

Offer and acceptanceOffer and acceptance

Intention to create legal relationsIntention to create legal relations

Requirement of written formalities in some casesRequirement of written formalities in some cases

Parties must have capacity to contractParties must have capacity to contract

Actual consent by the parties to the terms of the contractActual consent by the parties to the terms of the contract

Contract must not be against public policyContract must not be against public policy


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Void ContractsVoid Contracts

In fact, these are not contracts at allIn fact, these are not contracts at all

They have no legal effectThey have no legal effect

As we will see in later classes, there are a number ofAs we will see in later classes, there are a number ofthings which can make a contract voidthings which can make a contract void

E.g. fraud, mistake, coercionE.g. fraud, mistake, coercion etcetc

The important thing to remember is that you cannotThe important thing to remember is that you cannotenforce a void contractenforce a void contract


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Void ContractsVoid Contracts -- ExampleExample

DG gives his students so much homework that theyDG gives his students so much homework that theydecide to kill himdecide to kill him

They pay aThey pay a mumbaimumbai hitmanhitman 5000 Rupees to kill DG5000 Rupees to kill DG

However, theHowever, the hitmanhitman simply spends all the money insimply spends all the money inbars in Guwahati and then goes home without killing DGbars in Guwahati and then goes home without killing DG

The students cannot claim their money back because itThe students cannot claim their money back because itis illegal to hire ais illegal to hire a hitmanhitman to kill someoneto kill someone


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Voidable ContractsVoidable Contracts

This kind of contract is valid unless oneThis kind of contract is valid unless oneof the parties has it set aside (i.e.of the parties has it set aside (i.e.

declared void)declared void)

This could happen where one party isThis could happen where one party istricked into entering a contract by thetricked into entering a contract by the

other partyother party


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Voidable ContractsVoidable Contracts -- ExampleExample

DG pays for a holiday in Tibet because theDG pays for a holiday in Tibet because thetravel service shows him pictures of a lovely 5travel service shows him pictures of a lovely 5star hotel instar hotel in LlahsaLlahsa

However, when he arrives, Daniel finds thatHowever, when he arrives, Daniel finds thatthe hotel is still being constructed.the hotel is still being constructed.

There is a room where he can stay, but not allThere is a room where he can stay, but not allthe facilities are available and the hotelthe facilities are available and the hotelcertainly doesnt look like the picturescertainly doesnt look like the pictures


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Voidable ContractsVoidable Contracts ExampleExample

(cont.)(cont.) Assuming that the travel company knew about theAssuming that the travel company knew about the

hotel, then they have made a misrepresentation to DGhotel, then they have made a misrepresentation to DGwhich made him enter into the contract for the holidaywhich made him enter into the contract for the holiday

DG could now choose to set aside the contract and goDG could now choose to set aside the contract and goafter the travel companyafter the travel company

However, he could decide that things are not to bad andHowever, he could decide that things are not to bad andthat he can still have a good holidaythat he can still have a good holiday

So the contract is not automatically void (like with theSo the contract is not automatically void (like with thehit man), it is voidable at DGs choicehit man), it is voidable at DGs choice


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Unenforceable ContractsUnenforceable Contracts

These are agreements which are legal butThese are agreements which are legal butwhich cannot be enforced in court for somewhich cannot be enforced in court for somereasonreason

For example, a time limit for enforcing theFor example, a time limit for enforcing thecontract may have expiredcontract may have expired

Examples would include FMCGs,Examples would include FMCGs,pharmaceutical OTIs and almost any retailpharmaceutical OTIs and almost any retailproduct on the market.product on the market.


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Whyhave a Law of Contract?Whyhave a Law of Contract?

As we saw from the examples at the beginningAs we saw from the examples at the beginningof the class, contracts arise in simple,of the class, contracts arise in simple,everyday situationseveryday situations

Modern society operates by people andModern society operates by people andcompanies exchanging goods and servicescompanies exchanging goods and services

The Law of Contract helps to give a structureThe Law of Contract helps to give a structureto thisto this


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Whyhave a Law of Contract?Whyhave a Law of Contract?

The Law of Contract is part of Private Law so it isThe Law of Contract is part of Private Law so it isconcerned with relationships between partiesconcerned with relationships between parties

It helps us to decide what is a valid contractIt helps us to decide what is a valid contract

The Law of Contract is also part of Civil Law so it is alsoThe Law of Contract is also part of Civil Law so it is alsoconcerned with remediesconcerned with remedies

It helps us the other party to a contract does not keepIt helps us the other party to a contract does not keepto the agreementto the agreement


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SummarySummary

A contract isA contract is a legally binding agreementa legally binding agreement

Simple contractsSimple contracts do not have to be in writing but thendo not have to be in writing but then

they cannot be enforced and hence cannot be calledthey cannot be enforced and hence cannot be calledcontractscontractsper seper se

the legal effect of contracts fall into 4 categories:the legal effect of contracts fall into 4 categories: Valid contractsValid contracts

Void contractsVoid contracts

Voidable contractsVoidable contracts Unenforceable contractsUnenforceable contracts


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Summary (cont.)Summary (cont.)

Business is an important part of modern societyBusiness is an important part of modern society

The Law of Contract tells us what is necessary to makeThe Law of Contract tells us what is necessary to makea valid contracta valid contract

It also gives us remedies where another person doesIt also gives us remedies where another person doesnot follow the terms of the contractnot follow the terms of the contract


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ReadingReading

Business & Corporate Laws by C LBusiness & Corporate Laws by C LBansalBansal

Chapters 1Chapters 1--14 (14 (PgsPgs 33--145)145)

Refer to the case studies mentionedRefer to the case studies mentionedand try to find similar case studiesand try to find similar case studiesonline.online.

Contractual Law Intro

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Transcript of Contractual Law Intro