The Indian Contract Act 18721[1]

7/29/2019 The Indian Contract Act 18721[1]

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THE INDIAN CONTRACT ACT, 1872


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DEFINATION

Sec.2(h) An agreement enforceableby law.

Agreement + enforceability by law =contract.

Agreement must create a legal obligation

or duty.


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Agreement

Sec. 2(e), Every promise and everyset of promises, formingconsideration for each other


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promise

Sec.2(b), When a person to whomthe proposal is made signifies hisassent thereto, the proposal is saidto be accepted. A proposal whenaccepted, becomes a promise.

Agreement = Offer + Acceptance.


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Social agreements

Legal agreements

Legal agreements arecontracts.


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Essential elements of a valid contract

Offer and acceptance

Intention to create legal relationship

Lawful consideration.

Capacity of parties Competency Free and genuine consent

Lawful object

Agreement not expressly declared void

Certainty and possibility of performance

Legal formalities


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Classification of Contract

According to validity

Valid contract,

voidable contract,void contract,

Illegal contract,

unenforceable contract.


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o According to formation

Express contract,

Implied contract,Quasi contract.


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According to performance

Executed contract,

Executory contract,Unilateral and bilateral contracts.


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Offer and Acceptance

For an agreement

There has to be a clear and

definiteoffer by one person and,

Its unconditional acceptance

by the person to whom the offer ismade.


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Offer

An offer is a proposal by oneparty to another to enter in

to a legally bindingagreement with him.

Offer may be expressed(spoken

or written words) orimplied.(inferred from conduct)


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Constituents of an offer(essential elements)

The offer must show the obvious intentionon part of the offerer to be bound by it.

The offerer must make the offer with the

view to obtain the assent of the offeree.

It must be definite.

It must be communicated to the offeree.

Offer may be conditional


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Rules of legal offer

1. Offer must be such that as in law itis capable of being accepted andgiving rise to a legal relationship.

2. Terms of offer must be definite,clear and certain.

3. The offer must not thrust a burden

of acceptance on the offeree.


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Invitation to offer, a few possibilities

Display of goods for sale

Price lists, catalogues

Advertisements Declaration of intention

Auctions

Tenders Offer of public issue of shares


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Termination of offer

Sec.6 of the Act deals with terminationof offer.

1. Revocation-offer may be revoked at any

time before its acceptance is complete.

2. Lapse of time.(specified time orreasonable time.)

3. Failure of the acceptor to fulfill thecondition precedent to acceptance.

4. Death or insanity of proposer.


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Other instances of termination of offer

As per sec.6 of the Act.

Rejection

Counter offer Failure to accept according to the

mode prescribed.

Subsequent illegality or destructionof subject matter.


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Acceptance

Acceptance is the act of assenting by theofferee to an offer.

It indicates that the person making it is

willing to be bound by the terms of theoffer.

Acceptance may be express or implied.

Sec.2(b)when the person to whomproposal(offer) is made signifies hisassent thereto, the proposal is said to beaccepted. A proposal when acceptedbecomes a promise.(i.e.a contract)


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Legal rules as to acceptance

It must be absolute and unqualified. It must be made by the party to whom

the offer is made.

The acceptance must be expressed inusual or reasonable manner. It must be given in reasonable time. It cannot be made in ignorance of offer. It must be given before the offer lapses. It must be communicated to the offerer. Mere mental acceptance is no acceptance. (possible cases of acceptance by silence)


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Communication of offer, when

complete

(the spirit of the law is that themessage reaches the concerned party.)

Sec.4 provides that the communicationof proposal is complete when it comesto the knowledge of the person forwhom it is made.


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Communication of acceptance, when

complete

Sec.4 The communication ofacceptance is complete

as against proposer: when it is put in acourse of transmission to him, so as tobe out of power of the acceptor.

as against the acceptor: when it comers

to the knowledge of the proposer.


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Certain Examples of Offer and

Acceptance and its implication

Mr. X offers to sell his only house at Burdwan to Mr. Y

Mr. A rides a public bus.

Mr. A says to Mr. B, I will sell you a car. Mr. A ishaving 5 cars.

A husband on leaving his wife promised to pay Rs.10,000 per month,so long I can manage it.

An auctioneer advertised in the newspaper that a saleof office furniture would be held. A broker came from

a distant place to attend the auction, but all thefurniture was withdrawn. The broker thereupon suedthe auctioneer for his lass of time and expenses. Held,a declaration of intention to do a thing did not createa binding contract with those who acted upon it, so

the broker could not recover.


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Displays of goods by a shop-keeper with pricesmarked on them.

Newspaper advertisements are not offers. Arecognised exception to this is a general offer of

reward to the public. Mr. M sent his servant Mr. S to trace his missing dog.

He then announced that anybody who traced his dogwould be entitled Rs. 1,000. Mr. S traced the dog andclaimed the reward after knowing that it was

announced later after his departure. Mr. A writes to Mr. B, I will sell my motor car to you

at Rs. 1,00,000 and if you dont reply within 30 dayssince today, I shall assume that you have accepted

the offer. Tender


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Mr. M. made an offer to Mr. B to purchase his house withthe possession from 25th July. The offer was followed byan acceptance suggesting procession from 1st August.

A hotel put a notice in a bed room, exempting theproprietor from liability for loss ofclients goods.

MR. P agreed to purchase a machine and signed acontract to the effect. The contract contained a severalclauses in small print which P did not read.

Mrs. T. who could not read, took a ticket from a railwaycompany. On the face of the ticket it was written Forconditions see back. One of the conditions absolved therailway company form liability for personal injuries to

passengers. Mrs. T was injured by a railway accident.


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A draft relating to the supply of coal was sent tothe manager of a railways company for hisacceptance. The manager wrote the wordapprovedand put the draft in the drawer of his

table, intending to send it to the companyssolicitor for a formal contract to be drawn up. Bysome oversight the document remained in thedrawer.

Mr. A makes an offer to Mr. B saying If youaccept the offer, reply by e-mail. Mr. B sendsthe reply by post.

Mr. M offered to sell his land to Mr. B at Rs.

5,00,000 on or before 31

st

June, 2009. Mr. Bcommunicates to accept it on 7th July, 2009.


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An actress was engaged by a theatrical companyfor a certain period. One of the terms of theagreement was that if the play was shown inLondon, she would be engaged at a salary to be

mutually agreed upon.

Certain Examples of Consideration and


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its implication

Consideration is: an act, i.e. doing something; or

an abstinence or forbearance

return promise

A promise without consideration is purelygratuitous and cannot create any legal obligation.It is often said thatno consideration no contract

Case: Kedarnath v. Gori Mohamed (1886) 14 Cal.

64.

In this case the defendant had agreed to subscribe acertain amount towards the construction of aTown Hall at Howrah. The Secretary, on the faith



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its implication

of the promise, called for plans and entrusted thework to contractors and undertook liability to paythem. Held that the agreement is not enforceable bylaw as it is not supported by consideration.

Rules as to consideration:1. Consideration must move at the desire of the

promisor

2. Consideration may move from the promisee or any

other personCase: The case of Chinnaaya v. Ramayya

In this case, A, a lady, by a deed of gift transferredto her daughter, with a direction that the daughter

should pay an annuity to As brother, as had been



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its implication

Case: The case of Chinnaaya v. Ramayyadone by A. On the same day the daughter executea writing in favour of the brother of A, agreeing topay the annuity. Afterwards, she declined to fulfill

her promise saying that no consideration hadmoved from her uncle (As brother).

3. Consideration need not to be adequate

4. It must be something which the promisor is not

already bound to do.(There was a promise to pay to the Lawyer an additional sum

if the suit was successful. Held that the promise is void forwant of consideration. The lawyer is under a pre-existingcontractual obligation to render the best of his services under

the original contract.)



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its implication

5. It may be act, abstinence or forbearance or areturn promise. (e.g. promise to pay higher interest fornot filing a case; higher maintenance allowance)

6. Consideration must be real and competent to beperformed

7. It must not be illegal, immoral or opposed to public

policy.7. It may be past, present or future.



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its implication

No consideration, no contract: certainexceptions:-

Love and affection

Compensation for voluntary services

Completed gifts

Agency

Promise to pay a time-barred debt.

Modes of Discharge of Contract:


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Modes of Discharge of Contract:

By performance (Actual or attempted)

By agreement or consent (Novation, Rescission,Alteration, Remission, Waiver, Merger)

By impossibility of performance (known, not known,supervening impossibility)

By lapse of time

By operation of law (ex. Insolvency)

By breach of contract


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Cases where doctrine of supervening

impossibility applies---

Destruction of subject matter

Failure of ultimate purpose

Death or personal incapacity of the Promisor

Change of law

Outbreak of war

Remedies for breach of Contract:


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Remedies for breach of Contract:

When the contract is broken, the injured party (i.e.the party who is not in breach) has one or more ofthe following remedies:

a) Rescission of the contract

b) Suit for damages

c) Suit for quantum meruit(i.e. as much as earned)

d) Suit for specific performance of the contract

e) Suit for injunction (in case of breach of negative termsof a contract)


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Remedies for Breach of contract:

Quantum Meruit arises when:

A contract is subsequently discovered to be void for

some technical reasons

a person rendering goods or services has not done sogratuitously

when there is no contract as to remuneration for workrendered, a reasonable amount is to be paid


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Damages

are decided based on remoteness ofconsequences

only for loss actually suffered

Also for inconvenience suffered or loss of

reputation

aggrieved party should try to mitigate loss


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Different kinds of damages:

Ordinary or general or compensatory damages

Special damages (i.e. damages in contemplation of the parties at the

time of the contract)

Exemplary, punitive or vindictive damages

Nominal damages

Liquidated

Penalty

The Indian Contract Act 18721[1]

Documents

Transcript of The Indian Contract Act 18721[1]