The Basic of Indian Contract Act 1872
The Basic of Indian Contract Act 1872
The Basic of Indian Contract Act 1872
1. Indian Contract Act, 1872 came into force on 1st September, 1872.
2. It applies to whole of India except the state of J & K.
3. The provisions related to contract are contained in Indian Contract Act, 1972.
4. The provisions related to sale of goods were originally contained in Indian Contract Act,
1872.
5. The provisions related to sale of goods are contained in the Sale of Goods Act, 1930.
6. The Sale of Goods Act came into force on 1st July, 1930.
7. Indian Partnership Act came into force on 1st oct, 1932.
8. The provisions related to partnership are contained in Indian partnership Act, 1932.
9. Contract [Sec. 2(h)] An agreement enforceable by law.
10. Agreement [sec 2(e)] Every promise & e very set of promises forming consideration for
each other.
11. Promise [sec 2 (b)] A proposal when accepted becomes a promise.
12. An agreement is an accepted proposal.
13. Consideration Quid pro quo i.e., something in return.
14. Enforceability by law Agreement which creates legal obligation on the part of parties.
(Balfour Vs. Balfour)
ESSENTIAL ELEMENTS OF A VALID CONTRACT [SECTION 10]
All agreements are contracts if they are made by the:(i)
Free consent of the parties
(ii)
Competent to the contract.
(iii)
For a lawful consideration &
(iv)
With a lawful object &
(v)
Are not hereby expressly declared to be void.
(vi)
Intention to create legal relationship
(vii) Certainty of meaning
(viii) Possibility of performance
(ix)
Legal formalities.
TYPES OF CONTRACTS
(i)
(ii)
(iii)
(iv)
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Proposal [sec 2(a)]/Offer Where one person signifies to another his willingness to do or to
abstain from doing anything with a view to obtaining the consent of that either to such act
or abstinence, he is said to make a proposal.
Acceptance [sec 2 (b)] Where the person to whom proposal is made signifies his assent
thereto, the proposal is said to be accepted.
Legal rules regarding offer
(i)
Offer must be capable of creating the legal relationship. (ii) Offer must be
certain, definite and not vague.
(ii)
Offer may be express or implied. (iv) Offer must be distinguish from an invitation
to offer.
(iii)
Offer may be conditional.
(iv)
Offer may be specific or general.
(v)
Offer must be made with a view to obtaining the assent of the offeree.
RAJNISH PANDEY [ CS-EXECUTIVE]
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An offer should not contain a term of non compliance which may amount to
acceptance.
Offer must be communicated to the person to whom it is made.
Special terms to an offer must be communicated.
TYPES OF OFFER
(i) General Offer An offer made to the public at large. Anyone having knowledge
knowledge of the
offer can accept this offer by complying with the terms of offer.
(ii) Specific Offer An offer made to a specified person. This offer can be accepted only by
the person to whom it is made
(iii) Cross Offers When two persons exchange identical offer in ignorance of each others
offer. Two cross offers cannot made a contact.
(iv) Counter Offer Qualified acceptance to the offer & counter offer amounts to rejection
of the original offer.
(v) Standing /open/continuing
/continuing offer An offer which is allowed to remain open over a
period of time.
Tender for supply of goods is an example of General offer & standing offer.
(i)
(ii)
(iii)
Mode Of
Acceptance
Mode prescribed
in praposal
No mode
prescribed in
praposal
According to mode
prescribed
According to some
reasonable and
usual mode
Consideration [Sec 2(d)] When at the desire of the promisor, the promisee or any
other person has been done or abstained from doing or, does or abstains from doing or
promise to do or to abstain from doing something. Such an act or abstinence or promise is
called consideration for the promise. Technical word Quid pro Quo i.e., something in
return.
Legal rules regarding consideration
1. Consideration must move at the desire of the promisor.
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UNILATERAL
One party
under mistake valid
BILATERAL
Both parties
under mistake
- void
MISTAKE OF LAW
INDIAN LAW
VALID
FORIEGN LAW
VOID
SOME OTHER IMPORTANT POINTS:1. Moral pressure is involved in case of undue influence.
2. Ignorance of law is of no excuse.
3. A contract is not voidable if fraud or misrepresentation does not induce the other party to
enter into contract.
4. A party cannot complain of fraudulent silence if he has the means of discovering the truth
with ordinary means.
5. Coercion must be exercised against promisor or any other person.
RAJNISH PANDEY [ CS-EXECUTIVE]
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CONTRACT IS INSEPARABLE
CONTRACT IS ALTOGETHER
VOID
CONTRACT IS SEPARABLE
LEGAL PART
VALID
ILLEGAL PART
VOID
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LATE PERFORMANCE
7.
TIME IS NOT ISSENTIAL
LATE PERFORMANCE
8. If debt to be discharged is not indicated by the Debtor, then creditor may apply it, if
creditor does not appropriate it, it will be applied in discharge of debt in order of time,
whether time barred or not.
9. Novation Old contract is cancelled & new contract is formed. Parties may or may not
change.
10. Recession Old contract is cancelled, no new contract is formed.
11. Alternation Changing in the terms of original contract, parties must remain same
12. Remission To remit or waive off the performance by promise.
13. In case of voidable contract, if aggrieved party rescinds the contact, it must return the
benefit received there under.
14. Void Contract/Agreement Either restore back the advantage received or pay
compensation for it.
15. Discharge of contract by
RAJNISH PANDEY [ CS-EXECUTIVE]
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16. Where the performance of promise by one party depends upon the prior performance
of promise by the other party, such promises are mutual & dependent.
BREACH OF CONTRACT
Actual Breach Breach of contract on the due date of performance or during the
performance.
Anticipatory Breach Breach of contract before time of performance has arrived i.e.,
before due date of performance.
DAMAGES IN CASE OF BREACH
1. Ordinary damages Compensation for any loss or damage which arise naturally in
the normal course of event of Breach.
2. Special Damages It cannot be recovered as a matter of right. These can be
recovered only if the notice of special circumstances is given.
3. Vindictive damages/Exemplary Damages For Breach of promise to marry or for
wrongful dishonor by banker of his customer cheque.
4. Nominal Damages Where plaintiff proved that there is breach of contract but he
has not suffered any real damage. These may be a single rupee or even 10 paisa.
These are awarded to maintain the right to decree in the court.
5. Remote Damage Indirect loss from breach of contract. Remote Damages are not
recoverable.
6. Damages for deterioration coursed due to delay Deterioration
Not only implies physical damages to goods but also loss of special opportunity for
sale damages can be recovered from carrier even without notice.
7. Calculation of Damage
Breach by buyer Damage = Contact Price Market price on date of Breach.
Breach by seller Damage = Market price on date of Breach Contract price.
8. Remedies for Breach of Contact
Right to rescind the contract
Right to claim damages
Right to continue the contract
Suit upon Quantum Meruit (as much as is earned or according to the quality
of work done)
Suit for specific performance
Suit for injunction
RAJNISH PANDEY [ CS-EXECUTIVE]
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EVENT HAPPENS
HAPPENING OF EVENT
BECOMES INPOSSIBLE
VALID
VOID
AN EVENT
HAPPENS
VOID
HAPPENING OF EVENT
BECOMES INPOSSIBLE
VALID
The basis of Quasi contractual relations is the prevention of unjust enrichment at the
expense of others.
CONTACT CONTINGENT
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QUASI CONTRACT
Right in rem Right against the entire world.
Right in personam Right against a particular person.
1. Quasi contractual right is a right in personam.
2. Quasi contracts are implied by law.
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