PRESENTATION OF LEGAL ASPECTS OF BUSINESS

PRESENTED BY:-RIYA GIRDHAR(126)RUCHI BHAGI(128)SHIKHA KAUSHIK(144)MONIKA CHHILLAR(180)

Essential elements of a Valid Contract

1. Proposal and Acceptance: When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence he is said to make a proposal. The first step towards creating a contract is that one person shall signify or make a proposal or offer to the other, with a view to obtaining the acceptance of that another person to whom the offer is made. A proposal when accepted becomes a promise. When the person to whom the proposal is made signifies his assent thereof the proposal is said to be accepted. A proposal when accepted becomes a promise.

2. Consideration: When at the desire of the promisor the promisee or any other person has done or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing something such act or abstinence or promise is called a consideration for the promise.

3.Capacity of parties to contract – Competent parties:

Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contacting by any law to which he is subject.

4. Free Consent: Parties to a contract must give their consent. The parties must be ad idem, for example both the parties must agree upon the same thing in the same sense. Two or more persons are said to consent when they agree upon the same thing in the same sense. Mere consent is not enough. Consent of parties must be free, for example it must not have been obtained (1) coercion, (2) undue influence, (3) fraud, (4) misrepresentation, or (5) mistake.

5. An agreement must not be expressly declared to be void : A void agreement is not enforceable by law (Sec 2(g)). It has no legal sanctity. It does not give rise to any rights and obligations. Various agreements are expressly declared void under the Act.

6. Writing and registration: Oral contract is a valid contact. However the contract must be in writing and registered, if so required by any law, for example, gift, mortgage, sale, lease under the Transfer of Property Act 1882, Memorandum and Articles of Association of a Company under the Indian Companies Act, contracts under sub sections (10 and 3) of section 25 of the Indian Contract Act, etc. Documents specified under section 17 of the Indian Registration Act, 1908, are required to be registered. No particular form of writing is required to constitute a contract. Intentions of the parties to enter into a particular contract and to give effect to it must be manifest in it, in order to constitute a valid contract.

7. Legal relationship: Agreements which create legal relations or are capable of creating legal relations are contracts, for example, an invitation to a dinner does not create any legal relation and therefore is not a contract.

8. Certainty: The terms of a contract should be clear. In other words, the contract must not be vague. Contracts which are vague cannot be enforced.

9. Possibility of performance: Contracts based on impossibility of performance are not valid. The contracts must be capable of being performed.

10. Enforceable by Law: A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. It is enforceable by law it is contract otherwise it is an agreement. The aggrieved party should be able to obtain relief through law in the event of breach of contract. An agreement can also be inferred from correspondence exchanged between the parties.

ILLEGAL AGREEMENT

• MEANING:

An illegal agreement, is one that the court will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself

• EXAMPLE:

the sale of packs of cards to a known gambler, where gambling is illegal, will nonetheless be enforceable , such as paying off gambling debts, however, will not meet the legal standards of enforceability

VOID AGREEMENT

MEANING:

• A void agreement has no legal bearing, and is unforceable by law . parties to a voided agreement have no responsibility or legal requirement to act as far as carrying out the terms of the agreement.

EXAMPLE:

• contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract. A void contract is void ab initio, i e from the beginning while a voidable contract can be voidable by one or all of the parties.

DIFFERENCE

• Scope

Illegal agreements are narrower in scope. All illegal agreements are void. Void agreements are wider in scope. An agreement may be void because of a reason other than illegality.

• Punishment

Parties may be punished for making illegal agreement. Being void does not make a contract punishable.

CASE

• A engages B to Murder C and borrows Rs.5,000 from D to pay B. D is aware of the purpose of the loan. D is aware of the purpose of the loan. Here the agreement between A and B is illegal and the agreement between A and D is collateral to an illegal agreement. As such the loan transaction is illegal and void and D cannot recover the money. But the position will change if D is not aware of the purpose of the loan. In that case the loan transaction is not collateral to the illegal agreement and is a valid contract.

VOID AND VOIDABLE CONTRACTS

A void contract is no contract at all - in the eyes of the law it has never existed because of some fundamental problemwhere asA voidable contract is a contract which one side has the right to avoid at any time. However, until they exercise that right, the contract is valid and enforceable. In most legal systems the right to avoid a contract can be lost (eg. by delay, or by affirming the contract by performance).

CONTRACT AND AGREEMENT

A contract is an agreement between parties that is legally enforceable.

where as Agreement is an arrangement between the parties

which may or may not contain the necessary elements to be enforceable before a court of law. In Simple Words: A Contract is enforceable by law while an Agreement may not be enforceable by law. 

ILLEGAL AND UNENFORCEABLE CONTRACTS

An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end

where as

An unenforceable contract or transaction is one that is valid, but which the court will not enforce.

Unilateral and Bilateral contracts

In a unilateral contract, only one party promises something

where as

In a bilateral contract, both the parties promises something.

EXECUTED AND EXECUTORY CONTRACTS

An executed contract is one in which nothing

remains to be done by either party for future

where as

An executory contract is a contract to do some future act.

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 other or others, is a voidable contract.” Thus a voidable contract is one which is enforceable by law at the option of one of the parties.

Example- A threatens to shoot B if he does not sell his new Bajaj Scooter to A for Rs.2,000, B agrees. The contract has been brought about by coercion and is voidable at the option of B.

Intention To Create legal Relationship

There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreements of a social or domestic nature do not contemplate legal relations, and such they do not give rise to a contract.

Example- M promise his wife N to get her a saree if she will sing a song but M did not bring the saree for her. N cannot bring an action in a court to enforce the agreement as it lacked the intention to create legal relations.

Executory Contract

A contract is said to be executory when either both the parties to a contract have still to perform their share of obligation or there remains something to be done under the contract on both sides. It is also known as Bilateral contract.

Example- T agrees to coach R, a pre-medical student, from first day of the next month and R in consideration promises to pay T Rs. 500 per month, the contract is executory because it is yet to be carried out.

CASE

A invited B to dine with him on a special occasion. B accepted the invitation but failed to turn up. Can a sue B for the damages?