Unit I BL

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Business Laws

Unit 1: Business Organization

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Types of Business Organization

1. Proprietorship

2. Partnership Make a partnership deed- Optional to register with the Registrar of

Firms Office which exist in each state

3. Company To register with the Registrar of

Companies which exist in each state (ROC)

governed by the Companies Act, 1956

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Various Registrations under different acts

a. If sell goods which are subject to VAT, get

registered with the state VAT governed by

the state VAT Act

b. If sell Services, get registered with the

Central Service Tax governed by the Service

Tax Act

c. If manufacturer of Goods, apply forregistration under The Central Excise Act,

1960

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Registration under Income Tax Act, 1961

d. Income Tax Act, 1961 applicable if in case of - proprietor, theincome of the proprietor exceeds the exemption limit of incomeliable for tax

- In case of partnership once the firm starts earning income

- In case of Company once the Co. starts earning income

- to register with Income Tax apply for PAN No.

e. Apply for TAN No. if liable to deduct tax at source (TDS) undersections 192 to 206 of Income Tax Act, 1961

- TDS applicable, if employees earn more than the exemptionlimit of income liable for tax

- If make payment to contractors exceeding Rs. 30,000 /aggregate of payments Rs. 75,000 in a financial year (F.Y.)

- If make payment of rent exceeding Rs. 1,80,000 in a F.Y.

- If make payment of fees for professional & technical servicesexceeding Rs.30,000 in a F.Y., etc.

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Registrations under various other acts

The Industries (Development and Regulations) Act,

1951; Factories Act, 1948; The Minimum Wages

Act, 1948; The Banking Regulation Act, 1949; The

Employees Provident Funds & MiscellaneousProvisions Act,1952; The Insurance Regulatory &

Development Authority Act, 1999; The Foreign

Exchange Management Act, 1999; The Shops &

Establishments Act; The Securities & ExchangeBoard of India Act, 1992; The Export-Import Bank of

India Act, 1981;

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The Indian Contract Act, 1872

Essentials of a Valid Contract u/s 2(h), 3 to 18, 29 and 56

u/s 2(h): An agreement enforceable by law is a contract

u/s 10: All agreements are contracts if they are made by thefree consent of parties competent to contract, for a lawful

consideration and with a lawful object, and are not herebyexpressly declared to be void.

1. Offer and Acceptance

- Lawful offer & lawful acceptance resulting into an agreement- Lawful means the offer & acceptance must satisfy therequirements of the Contract Act

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2. Intention to create legal relations

- Intention among the parties that the agreement

must be attached by legal consequences & create

legal obligations

- Agreements of social nature do not create legalrelations

- Case of Balfour vs. Balfour

- In commercial agreements an intention to create

legal relations is presumed unless parties to theagreement expressly resolve that the intention is not

to create legal obligations

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3. Lawful Consideration

- Presence of consideration

- Consideration is the price paid by one party for the promise ofthe other

- Each of the parties to it gives something and gets something

- Consideration may be an act (doing something) or forbearance(not doing something)

- u/s 23 Consideration is lawful if

a. it is not forbidden by law

b. does not defeat the provisions of any law

c. is not fraudulentd. does not involve/imply injury to the person/property of another

e. is not immoral

f. is not opposed to public policy

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4. Capacity of Parties

- The parties to an agreement must be

competent to contract otherwise it cannot be

enforced by a court of law

- u/s 11 Every person is competent to contract

who is: a. of the age of majority

b. of sound mind

c. not disqualified from contracting byany law to which he is subject.

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5. Free Consent

- U/S 13 Consent means that the parties must have agreedupon the same thing in the same sense

- u/s 14 There is absence of free consent if the agreement isinduced by

i) Coercion (u/s 15)

ii) Undue Influence (u/s 16)

iii) Fraud (u/s 17)

iv) Misrepresentation (u/s 18)

a statement of fact made innocently/ believing it to be true toinduce the other party to enter into contract

For e.g. A wants to sell land to B. A says that land is fertilebelieving it to be true but without verifying it. B purchases theland and the land turns out to be non-fertile

i) Mistake

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6. Lawful Object

- u/s 23 Object is lawful if

a. it is not forbidden by law

b. does not defeat the provisions of any law

c. is not fraudulentd. does not involve/imply injury to theperson/property of another

e. is not immoral

f. is not opposed to public policy- If a landlord knowingly lets a house to carry outillegal activities, the object is unlawful

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7. Writing & Registration

- A contract may be oral/in writing

- But, where under any other act, it is laid down

that for the agreement to be valid, it must be

in writing or/and registered it must be done so

- u/s 25 Agreement without consideration/

promise to compensate for something done

or promise to pay a debt barred by limitationlaw, must be in writing and registered

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8. Certainty

- The terms of the agreement must not be vague/uncertain

- It must be possible to ascertain the meaning of the agreement

- A agrees to sell B a hundred tons of oil, this is uncertain sincethe type of oil is not specified

9. Possibility of performance- Agreement must be capable of performance

- The act must not be impossible in itself, physically/legally

- A agrees with B to discover treasure by magic

10. Not expressly declared Void

- u/s 24-30

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Void and Voidable Contracts and Void

Agreements u/s 2(i), 19 to30

,3

2,3

6,5

6 Voidable Contract u/s 2(i)

- An agreement which is enforceable by law at theoption of one or more of the parties thereto, butnot at the option of the other or others, is a

voidable contract- A contract becomes voidable

i) * When the consent of one of the parties to thecontract is obtained by coercion, undue influence,misrepresentation or fraud* u/s 19 & 19A Such contract is voidable at the option of the

aggrieved party if

a. The option is exercised within a reasonable time and

b. Before the rights of third parties intervene

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Voidable Contract (Contd.)

ii) u/s 53 When a contract contains reciprocalpromises and one party to the contract preventsthe other from performing his promise

* A contracts with B to whitewash Bs house. A isready & willing to execute the work but Bprevents

iii) u/s 55 When a party to the contract promises todo a certain thing within a specified time, but

fails to do it, and the intention of the parties wasthat, time should be of the essence of thecontract

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Consequences of rescission ofVoidable

Contract- u/s 64

i) When a person at whose option a contractis voidable rescinds it, the other party need

not perform any promise therein containedin which he is a promisor

ii) If the party rescinding a voidable contracthas received any benefit from another party

to such contract, he must restore suchbenefit to the person from whom it wasreceived

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Void Contract

- Void means not binding in law

- u/s 2(j) A contract which ceases to be enforceable by lawbecomes void when it ceases to be enforceable

- A void contract is valid and binding on the parties, when

originally entered, but after its formation it becomes invalidbecause of:

a) Supervening impossibility (u/s 56)

* Performance is impossible after the formation of the contract

* A & B contract to marry, but before marriage, A goes mad

b) Subsequent illegality (u/s 56)A agrees to sell B 100 bags of wheat at Rs. 1,650 per bag.Before delivery, Govt. bans private trading in wheat

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Reasons ofValid Contract becomingVoid

(Contd.)c) Repudiation of a voidable contract

If the party at whose option the contract isvoidable exercises the option, the contract

becomes voidd) u/s 32 In the case of a contract contingent

on the happening of an uncertain futureevent, if that event becomes impossible

A contracts to give Rs. 1,000 as loan to B, ifB marries C. C dies without being married toB

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Void Agreement

- u/s 2(g) An agreement not enforceable by law issaid to be void

- It is void ab-initio i.e. such an agreement is no

agreement from the beginning- There is absence of one or more essential

elements of a valid contract except that of freeconsent

- Distinction between Void Agreement & VoidContract

i) Void agreement is void ab-initio while a voidcontract is valid when entered into

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Void Agreements

1. u/s 11 Agreements by a minor or a person of

unsound mind

2. u/s 20 Agreements made under a bilateral mistake

of fact material to the agreement3. u/s 23 Agreements of which the consideration/

object is unlawful

4. u/s 24 Agreements of which the consideration/

object is unlawful in part and the illegal part cannotbe separated from the legal part

5. u/s 25 agreements made without consideration

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Expressly declared Void Agreements

1. Agreement in restraint of Marriage u/s 26

Eg. A agrees with B that she will not marry C

2. Agreement in restraint of Trade u/s 27

Eg. A agrees to close his business

Exceptions:i) Sale of Goodwill

The seller of goodwill of a business can be restrained fromcarrying on a similar business within specified local limitsprovided the restraint is reasonable in point of time and space

e.g. A sells the goodwill of his business to B & promises not tocarry on similar business anywhere in the world. Restraint isunreasonable and so the agreement is void

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Exceptions to agreements in Restraint of

Trade (Contd.)ii) Partners agreementsPartners can be restrained if there is an agreement:

a. Among the partners that a partner shall not carry on anybusiness while he is a partner

b. By a partner with his other partners that on retiring from thepartnership he will not carry on any business similar to that ofthe firm within a specified period/within specified local limits, ifthe restrictions imposed are reasonable

c. Among the partners upon/in anticipation of the dissolution ofthe firm that some/ all of them will not carry on a businesssimilar to that of the firm within a specified period/within

specified local limits, if the restrictions imposed are reasonabled. Between any partner and the buyer of the firms goodwill that

such partner will not carry on any business similar to that ofthe firm within a specified period/within specified local limits, ifthe restrictions imposed are reasonable

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Trade (Contd.)iii) Trade Combinations

* An agreement, to regulate the business is

valid

* Agreements in the nature of a business

combination between traders/manufacturers

e.g. not to sell their goods below a certain

price (Fraser & Co. Vs Bombay Ice Co.)* But, if an agreement attempts to create a

monopoly, it is void

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Trade (Contd.)iv) Negative stipulations in service agreements

* An agreement of service by which a

person binds himself during the term of the

agreement, not to take service with anyone

else, is valid

* But, an agreement of service which

restricts occupation for some period, afterthe termination of service, is void

(Brahamputra Tea Co. Vs Scarth)

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(Contd.)3. Agreements in restraint of Legal Proceedings u/s 28Following agreements are void

i) An agreement by which a party is restricted from taking legalproceedings, in respect of any rights arising from a contract

Exceptions(a) Does not affect the law relating to arbitration

(b) Does not affect an agreement whereby parties agree not to filean appeal in a higher court

(c) Does not prevent the parties to a contract from selecting one of

the two courts which are equally competent to try the suit

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Agreements in restraint of Legal

Proceedings (Contd.)ii) An agreement which limits the time within which one may enforcehis contract rights, without regard to the time allowed by theLimitation Act

E.g. A & B contract that either party can sue for breach within ayear of breach. The clause is void because the time allowed by

the Limitation Act is three yearsiii) An agreement which provides for forfeiture of any rights arising

from a contract, if suit is not brought within a specified period,without regard to the time allowed by the Limitation Act.

E.g. Insurance companies cannot insist that suits for claims bebrought within a period of time shorter than the period provided

under the Limitation Act, otherwise all benefits under the policyshall be forfeited

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(Contd.)4. Uncertain Agreements u/s 29

An agreement to enter into an agreement in future

is void for uncertainty unless all the terms of the

proposed agreement are agreed clearly5. Wagering Agreements u/s 30

Wager means a bet, something stated to be

lost/won on the result of a doubtful issue

Exception

Prize amounting to >= Rs.500 to be awarded to

the winner of any horse race

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Special cases whether wager/not

a. Commercial transactions

* Agreements for sale & purchase of any commodity/sharemarket transactions, with a genuine intention to give & takedelivery of goods/shares are not wagering agreements

* If parties only want to gamble on the rise/fall of the market bypaying/receiving the difference in prices only, the transaction isa wager

b. Lotteries

* It is a wager

* Sometimes lottery is authorised by Govt. e.g Maharashtra &Gujarat, then the effect is that persons running the lottery arenot guilty of criminal offence but such agreements are voidbecause they are wager

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Special cases whether wager/not (Contd.)

c. Crossword Puzzles

* When prizes depend upon a chance, it is a lottery and so a wager

* if prizes depend upon skill & intelligence, it is not a wager, but, ifsuch prizes exceed Rs. 1,000 they are wagers as per the provisionsof the Prize Competition Act, 1955

d. Insurance ContractsValid contracts because:

i) They are entered to protect the interest of the holder of the policy butin wagering there is no interest to protect but only a means to makesome easy money

ii) Insurance contracts are based on scientific calculation of riskswhereas wagering agreements are a gamble without any scientific

calculation of risksiii) Insurance contracts are beneficial to the public whereas wagering

agreements do not serve any useful purpose

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(Contd.)6. Agreements contingent on impossible

events u/s 36

Contingent agreements to do/ not to do, if

an impossible event happens are void

e.g. A agrees to pay B Rs. 1,000 as a loan if

B marries As daughter C. But, C was dead

at the time of agreement.7. Agreements to do Impossible Acts u/s 56

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Obligation of person receiving advantage

underV

oid Agreement/V

oid Contractu/s 65 the person is bound to restore the advantage received/makecompensation for it, to the person from whom he received it when

a) An agreement is discovered to be void

* But, if the agreement is known to be void when entered into, nosuch obligation arises

if A pays Rs. 10,000 to B to murder C, the money cannot berecovered

* Nothing can be recovered in the case of expressly declared voidagreements except for:

i) u/s 20 In the case of an agreement caused by bilateral mistake ofessential fact

restoration is allowed since agreement is not known to be void but is

discovered to be voidii) In the case of an agreement with a minor who commits fraud by

misrepresenting his age

restoration is allowed

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Performance of Contracts

It means fulfilling of their respective legal obligationscreated under the contract by both the promisor andthe promisee

Who can demand Performance

- Only the promisee can demand performance

- A third party cannot demand performance of thecontract even if it was made for his benefit

- In case of death of the promisee, his legalrepresentatives can enforce performance

- E.g. A promises B to pay C a sum of Rs. 1,000. Bcan demand performance and not C

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By whom Contracts must be Performed

1. By the promisor himself u/s 40

Contract involving personal skill, taste or credit, e.g. a contractto paint a picture, the promisor must himself perform

2. By the promisor/ his agent u/s 40(2)

In the case of impersonal contract, the promisor/his agent mayperform

3. By the legal representatives u/s 37(2)

In the case of death of the promisor before performance, theliability of performance falls on his legal representatives buttheir liability is limited to the estate of the deceased which hascome to their hands

4. By a third person u/s 41

If a promisee accepts performance of the promise from a thirdperson, promisee cannot then enforce it against the promisor

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Performance of Joint Promises

Who can demand Performance u/s 45

When a promise is made to several persons jointly, the right toclaim performance rests with all the promisees jointly & a singlepromisee cannot demand performance

By whom Joint Pomises must be performed u/s 42 to 44

Rules1. All promisors must jointly fulfill the promise

2. - Any one or more of joint promisors may be compelled toperform u/s 43 because the liability of the joint promisors isjoint and several.

- but the liability in case of Co-heirs is joint and not severalbecause they are not joint promisors

E.g. A, B and C jointly promise to pay D Rs. 3000. D maycompel either A/B/C/All/Any two to pay

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By whom Joint Pomises must beperformed u/s 42 to 44 (Contd.)

3. Right of contribution inter-se between joint promisors

If one of several joint promisors are made to perform, he mayrequire equal contribution from the other joint promisors

4. Sharing of loss by default in contribution

If any joint promisor makes default in making contribution, theremaining joint promisors must bear the loss arising from suchdefault in equal shares

5. Effect of release of one joint promisor u/s 44

If one of the joint promisors is released from his liability by the

promisee, his liability to the promisee ceases but does notdischarge the other joint promisors from their liability, neitherdoes it free the joint promisors so released from his liability tocontribute to the other joint promisors

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Assignment of contracts

Means transfer of contractual rights & liabilities to a third party

Rule

1. Contracts involving personal skill, taste or credit cannot beassigned

2. The obligations under a contract cannot be assigned exceptwith the consent of the promisee

3. Assignment of a claim to any debt/ beneficial interest inmovable property to be complete & effectual must be made byan instrument in writing

4. Assignment by operation of law takes place in case of deathupon his heirs and in case of insolvency upon the OfficialAssignee/Receiver

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Order of performance of ReciprocalPromises (u/s 51 to 54)

Promises which form the consideration for each other are reciprocalpromises

There is an obligation on each party to perform his own promise & toaccept performance of others promise

Three types of reciprocal promises & rules for order of performance:

1. Mutual & Independent- Where each party must perform his promise independently withoutwaiting for the performance of the other

- Promises must be performed in the order expressly fixed by thecontract & where it is not fixed, they must be performed in the order ofthe nature of the transaction u/s 52

- E.g. A promises to deliver goods to B on 10th April & B promises to

pay the price in advance on 1st April and on default to pay interest @15% p.a. from 1st April till the date of payment. So, B need to performfirst but even if B does not perform, A must perform & then claim forprice & damages

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Types of Reciprocal Promises (Contd.)

2. Mutual and Dependent

- Where the performance of the promise by one party dependson the prior performance of the promise by the other party

- u/s 54 if the promisor who is required to perform his promisefirst does not perform, such promisor cannot claim the

performance of the reciprocal promise3. Mutual & Concurrent

- Where the two promises are to be performed simultaneously

- u/s 51 the promisor need not perform unless the promisee isready & willing to perform his reciprocal promise

- E.g. A & B contract that A shall deliver goods to B to be paidfor by B on delivery

4. Consequences where a party prevents performance (u/s 53)

the contract becomes voidable at the option of the party soprevented

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Time & Place of Performance u/s 46 to 50& 55

Where prescribed by the promisee at the

specified time & place

Where not prescribed by the promisee then

the contract must be performed

a) Within a reasonable time on a working day

& within the usual hours of business

b) At proper place e.g. at godown/shop & notat a public meeting/ fair

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Efffect of failure to perform a contractwithin the stipulated time

Rules u/s 55

1. Where time is of the essence of the contract the contractbecomes voidable at the option of the promisee

The promisee may rescind the contract & sue for the breach

2. Where time is not the essence of the contract the promiseehas to accept the delayed performance, and can claimcompensation for loss caused by the delay

But if the delay is beyond a reasonable time the contract willbecome voidable by promisee

3. In case of a voidable contract if the promisee accepts thedelayed performance, he cannot later claim compensation forloss due to delay

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When time, is the essence of the contract

i) If the parties expressly agree

ii) If the nature of transaction and the intention of

parties was such

Normally in commercial contracts the time ofdelivery of goods is the essence of the contract

but not the time of payment of price

Mode of performance

The promisor must perform as per the terms of thecontract/ instructions from the promisee

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Appropriation of Payments

When a debtor owes several debts to the same creditor & if thecreditor accepts the payment, he must follow the rules forappropriation as follows, otherwise he must refuse to accept thepayment:

1. Debtors express instructions must be followed

2. Debtors implied intention must be followed

3. Appropriation by Creditor

If there is no express/implied directions by the debtor, creditor mayappropriate to any debt

4. Appropriation by Law

- Where debtor/creditor has not appropriated, order of time need to befollowed

- If debts are of equal standing, payment shall be appliedproportionately

5. When principal & interest both due

to be applied towards interest first

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Contracts which need not be performed

If parties to a contract agree to Novation, Rescission

or Alteration

* Original contract disappears & is substituted by a

new contract* Novation - Same contract, new parties

* Rescission Cancellation of old contract

* Alteration Same party, change of terms

u/s 64 When a person at whose option a contract is

voidable rescinds it, the other party need not

perform his promise

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Breach of a Contract

Breach of contract is a method of discharge

of a contract

The contract stands terminated

Breach brings an end to the obligations

created by a contract on the part of each of

the parties

The aggrieved party can sue for damagesfor breach of contract as per law

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Kinds of breach of contract

(1) Anticipatory Breach

Breach occurring before the time fixed forperformance taking place in two ways:

(i) Expressly by words spoken/written

- Promisor communicates intention not to performbefore the due date of performance

- Such declaration must be absolute &unconditional & not a probability to perform/not

(ii) Implied by the conduct of one of the parties- The promisor promises to sell a particular horse topromisee but before the due date of performancesells it to another person

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Effect of an Anticipatory Breach

When there is an anticipatory breach of contract the promiseeneed not perform

The promisee has the option:

i) to treat the contract as cancelled & sue the other party for

damages immediately without waiting till the due date ofperformance known as The Doctrine of Anticipatory Breach

Exception to the doctrine:

- Does not apply to contracts for the payment of debt

- Suppose the payment of debt is 2 months & the promisorconveys that he is not able to make the payment, the promiseecannot sue immediately but need to wait for the due period

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Option to promisee (Contd.)

ii) Not to treat the contract as cancelled & wait for the due date ofperformance and then sue

- In this case the contract shall be kept alive for the benefit of thepromisor & the promisee

- The guilty party may reconsider & perform & take the advantageof any supervening imposibility which may discharge the contract

- A agrees to sell his house to B for Rs. 8,50,000 on 1st of March.But on 10th February informs B that he will not sell his house.There is an anticipatory breach. Later on the house is destroyedby fire. If B would have exercised the option to cancel the

contract after 10th february but before the house is destroyed byfire, B could claim damages but after the house is destroyed byfire & the contract gets cancelled due to this superveningimpossibility, there can be no damages

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Actual Breach

When a party fails to perform his obligation

upon the date fixed for performance by the

contract

Entitles the aggrieved party to cancel the

contract & sue for damages for breach of

contract

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Remedies for Breach of Contract

1.The injured party may cancel the contract, not

perform his part of obligation & may sit

quiet/ sue the party for damages

2. Suit for Damages

Damages are monetary compensation

allowed to the injured party for the injury

suffered

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Assessment of damages

Kinds of damages

i) Ordinary damages are damages arising normallyfrom the breach

ii) Special damages are decided at the time of

contract by the partiesiii) Exemplary damages are awarded to punish the

guilty party for the breach & not by way ofcompensation for the loss suffered by theaggrieved party

- Exemplary damages have no place in the law ofcontract & are not recoverable for a breach ofcontract

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Exemption : Exemplary Damages can beclaimed

a) Breach of a contract to marry

b) Dishonour of a cheque by a banker when there are

sufficient funds to the credit of the customer

The rule of ascertaining damages is smaller thecheque, greater the damage according to the status

of the party

c) When any person gives any bond for the

performance of any public dutyiv) Nominal damages

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Rules regarding the Measure of Damages

1. Damages are awarded as compensation for the loss sufferedby the aggrieved party & not for punishing the guilty party forthe breach

2. The aggrieved party can recover only the actual loss sufferedarising naturally in the usual course known as ordinarydamages

- Case of Hadley vs. Baxendale

3. In the case of contract for sale & purchase damages wouldbe assessed on the difference between the contract price & themkt. price at the date of breach

4. Special damages are not allowed until they are in theknowledge of both the parties at the time of entering into thecontract

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Rules of measure of damage

5. Even if the parties fix up in advance the sum payable asdamages , the court will allow only reasonable compensation tocover the actual loss, it should not exceed the amountmentioned in the contract

6. It is the duty of the injured party to use all reasonable means ofavoiding the damage

7. The injured is entitled to get the costs of filing suit and order fordamages from the defaulter

8. Stipulation regarding payment of interest

A stipulation of increased interest from the date of default may

be a stipulation by way of penalty and so disallowed if the rateis very high

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Payment of interest

Rules:

1. Unless specifically mentioned for the payment of interest ,interest cannot be recovered as damages

2. If mentioned, only reasonable interest is allowed

3. Payment of compound interest on default is allowed only if it isreasonable

Earnest Money Deposit (EMD)

Money deposited as security for the due performance of acontract

- Cancellation of EMD is allowed if the amount is reasonable- Reasonable means, proportion of the EMD which bears to the

total sale price, the nature of the contract and othercircumstances

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3. Suit upon Quantum Meruit u/s 65 & 70

Quantum Meruit means as much as is

earned / in proportion to the work done

A right to sue upon quantum meruit arises

where after part performance of the contract

by one party, there is a breach of contract,

or the contract is discovered void or

becomes void

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Quantum Meruit (Contd.)

Aggrieved party may file a suit upon quantummeruit:

a. Where contract is discharged by the default of guilty

A engages B to build a three storied house. After apart is constructed A prevents B from working

b. Where work has been done in pursuance of acontract which is discovered void provided thecontract is divisible

A contracts with B to repair his house at a piecerate. After part of repairs, the house is destroyed.But if the payment is lumpsum then no quantummeruit

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c. When a person enjoys benefit of non-gratuitous act

A, a trader leaves certain goods at Bs house by

mistake. B treats the goods as his own. He is

bound to pay A for them.d. A party who is guilty of breach of contract may sue

on a quantum meruit if

(a) The contract is divisible

(b) The other party must have enjoyed the benefit ofthe part which has been performed

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A carrier fails to take the complete consignment tothe agreed destination, he may recover pro-ratafreight

4. Suit for Specific Performance

- means the actual carrying out of the contract

- granted only where just & equitable

- Usually granted in contracts connected with land,buildings, rare articles & unique goods having

special value

- In such a case money is not an adequate reliefbecause there is no substitute

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Suit for Specific Performance (Contd.)

- not granted where

a. Monetary compensation is an adequate

relief

b. Where the court cannot supervise the actual

execution of the contract e.g. a building

construction contract

c. Where the contract is for personal servicee.g. a contract to marry

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5. Suit for an injunction

Injunction is an order of a court restraining a

person from doing a particular act

Order not to do what he promised not to do

A agreed to sing at Bs theatre and sing for

no one else. But A contracted to sing at

somebody elses (Lumley vs, Wagner)

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Quasi-Contracts u/s 68 to 72

Contracts where there is no offer, noacceptance, no consent & no intention of theparties to enter into a contract but from the

conduct & relationship of the parties, impliesa promise imposing obligation on the oneparty & conferring a right in favour of theother

Such obligation imposed by law are Quasi-Contracts

Based on the doctrine of unjust enrichment

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Doctrine of Unjust Enrichment

A person shall not be allowed to enrich

unjustly at the expense of others

Duty & not a promise or agreement is the

basis of such contracts

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Quasi-contractual obligations:

1. Claim for necessaries supplied to an

incapable person or on his account u/s 68

- If a person incapable of entering into a

contract/ anyone whom he is legally bound tosupport, is supplied by another person with

necessaries suited to his condition, the

person who has furnished such supplies isentitled to be reimbursed from the property of

such incapable person

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Claim for necessaries by incompetent

person (Contd.)- Only the estate is liable- The things supplied must be necessaries

- Necessaries must be supplied only to

incompetent person/ one whom he is legally

bound to support

- Liable to pay a reasonable price

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2. Reimbursement of person paying money due byanother in payment of which he is interested u/s 69

Conditions:

i) The plaintiff should be interested in making thepayment to protect his own interest & thepayment should not be voluntary

ii) The payment must be such as the other party wasbound by law to pay

iii) The payment must not be such as the plaintiffhimself was bound to pay

A sub-tenant pays the arrears of rent due by thetenant to the landlord to save the tenancy fromforfeiture

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3. Obligation of person enjoying

benefit of non-gratuitous act u/s 70

Where a person lawfully does anything for anotherperson, or delivers anything to him, not intendingto do so gratuitously and such other person enjoysthe benefit thereof, the latter is bound to make

compensation to the former Conditions:

a. The thing must have been done lawfully in goodfaith

b. The thing must have been done by a person notintending to act gratuitously

c. The person for whom the act is done must haveenjoyed the benefit of it

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4. Responsibility of finder of goods

u/s 71 Duties of finder of goods:

a. Must try to find the real owner & hand over

b. Must not appropriate the property to his own

use

c. Till the goods are in possession of the

finder, he must take due care as if they

were his own

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Rights of finder of goods:

a. Till the true owner is found he can retain thegoods

b. Entitled to receive from the owner all expensesincurred for preserving the goods & finding the

true owner

c. Entitled to sell the goods if the owner is not found/if he refuses to pay the lawful charges of thefinder when:

i) The goods are perishing orii) When the lawful charges of the finder amount to at

least 2/3rd of the value of goods found

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Responsibility of finder of goods

(Contd.) The true owner is entitled to get the balance

of sale proceeds if there is surplus after

meeting the lawful charges

5. Liability of person to whom money is paid orthing delivered by mistake/ under coercion

u/s 72

- person must repay/return it

Unit I BL

Documents

Transcript of Unit I BL