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UNIT - I
INTRODUCTION
The Indian Contract Act, 1872 came into force on 1 st September 1872. It
extends to the whole of India. The Act was mainly enacted with a view to
ensure reasonable fulfillment of expectation created by the promises of the
parties and also enforcement of obligation prescribed by an agreement
between the parties.
Whereas:
O = OFFER
A= ACCEPTANCE
C = CONTRACT
Definition Of Contract
According to Sec. 2(h) of the Act, The term Contract may be defined as,
Any agreement which is enforceable by law
There must be two parties to an agreement. One party making the offer and
the other party accepting it. The acceptance must be communicated to the
offerer. (O+A=C)
Example: Ram wants to sell his house to Raj and Raj is accepting the offer.
Hence Contract is made between these two parties.
Intention To Create Legal Relationship:
When two parties enter into an agreement, their intention must be to create
legal relationship between them. If there is no legal relationship then it is not
a contract.
Lawful Consideration:
Capacity of Parties:
The parties to the contract, should enter into a contract with a free and
genuine consent with same mind set on all the material terms of contract. That
is there should not be any undue influence, misrepresentation, fraud and
mistake by both the parties.
Lawful Object:
The object of the agreement must be lawful. That is the agreement must not
be illegal, immoral or opposed to public policy. That is the parties to the
contract must not involve in any kind of illegal activities.
Agreement Not Declared Void:
When the parties enter into an agreement, it must not have been declared
void by law. That is the agreement should not be declared as invalid.
Certainty and Possibility of Performance:
Legal Formalities:
Each and every contract should fulfill all the legal formalities before the
parties enter into contract. The following are the legal formalities.:
The contract should be in writing.
The document of the contract should be stamped.
Contract besides being written one, it should be registered.
These are the essential elements of a valid contract. The parties to the
contract should fulfill all the essential elements before entering into a
contract.
parties has been obtained by force. Example: Amar promises to sell his car
Bala for Rs. 2000/-. His consent was obtained by force. So this is voidable.
Express Contract: The terms of the contract may be stated in words. That is
unintentionally entered into by the parties. Example: Raju a fruit seller leaves
a basket of fruits by mistake in Ramus house. Ramu treats the fruits as his
own and consumed the fruits. Now Ramu is bound to pay for the fruits he
consumed. This is known as quasi contract.
party may sue to treat the contract as a rescinded and refuse further
performance. In such a case, he is absolved of all his obligations under the
contract. Example: A promises B to supply ten bags of Cement on a certain
day. B agrees to pay the price after the delivery of the goods. But A does not
supply goods. B is discharge from paying the price to A.
o Suit for Damages: Damages are the monitory compensation allowed to
injured party by the court for the loss suffered by him. The object of awarding
compensation is to put the injured person at the same position.
Rules Relating to Damages:
1. Damages arising naturally.
2. Damages in contemplation of parties.
3. Vindictive or exemplary damages.
4. Nominal Damages.
5. Damages for loss of Reputation.
6. Damages for inconvenience and discomfort.
7. Mitigation of Damages.
8. Difficulty of Assessment.
o Suit for Quantum Meruit: The term Quantum Meruit means, As much as
Earned. This damage claim arises when one party partly performs his
obligation, but he has been discharged. Example: Passenger travelling in
Flight from Chennai to Singapore. Flight Cancelled/Returned back to Chennai
due to Bad Weather.
contract, paying damages are not adequate remedy. In such cases, Specific
performance will be granted, where Court will order the party to continue the
contract. Example: Government Tender.
o Suit for Injunction: Injunction occurs when a party is in breach of negative
terms of contract, the court may issue the order restraining him/her from
doing what he/she is not supposed to do. Example: Neha a film actress,
agreed to act exclusively for Shankar for 1 year and not for anyone else.
During the year, she contracted to act for Vasu. Now she could be restrained
by Injunction from acting for Vasu.
QUASI CONTRACT
AGENCY
INTRODUCTION TO AGENCY
CREATION OF AGENCY
Concept:
An agent is appointed with some authority by which he can bind the
principal with third parties.
Various Types of Agents Authority:
Express Authority: An authority is said to be expressed, when it is given by
written.
Implied Authority: The implied authority is to be inferred from the
circumstances of business.
Ostensible or Apparent Authority: The apparent authority of an agent is
that, When an agent is employed for particular business, the third parties
dealing with him should presume that he has authority to do all acts that are
necessary to business.
Emergency Authority: An agent will be given an emergency authority for
Rights Of An Agent
An agent is having right to receive agreed remuneration.
Agent may retain certain sum of money which he received on behalf of
transit.
The principal must pay compensation to his agent in respect of injury caused
to agent.
Duties Of An Agent:
To follow the instructions of the principal.
To work with reasonable skill and diligence.
To render proper accounts.
To communicate with principal in difficult situations.
Not to act on his own account.
To pay all sums to his principal.
Not to set up adverse title.
Not to delegate his authority to someone else.
Not to use the agency information against principal.
Agent should terminate agency on the principals death.
Liabilities Of Agent:
Where the agent acts for a foreign principal.
Where an agent acts for the undisclosed principal.
Where an agent acts for the disclosed principal, who cannot be sued.
Where an agents authority is coupled with interest.
Where an agent receives or pays money by mistake or fraud.
Where the agent signs the Negotiable Instrument in his own name.
Where the agent exceeds his authority.
Where an agent acts for a non-existing principal.
TERMINATION OF AGENCY
An agency can be terminated in two cases:
INTRODUCTION
According to Sec.4 (1), A contract of sale of goods is a contract. Whereby
the seller transfers or agrees to transfer the goods to the buyer for price.
The term Contract of Sale includes both Sale and Agreement to Sell.
Sale: A contract of sale is a contract in which, the seller transfer the goods to
the buyer for price.
Definition of Goods
According to Sec.2 (7), Goods means every kind of movable property other
than actionable claims and money and includes stocks and shares, growing
crops, etc.
A. Transfer Of Title:
Concept:
A document of title to goods is one, which enables its possessor to deal with
the goods described in it. It is used in ordinary course of business as a proof
for possession or control of goods. It authorises its possessor to transfer or
receive the goods.
unconditional.
o The possessor of the document must be entitled to receive the goods
unconditionally.
B. TRANSFER OF PROPERTY:
(i) Concept:
Transfer of property in goods from seller to the buyer is the main object of
contract of sale. The term property in goods must be distinguished from
possession of goods. Property in goods means ownership of goods, Whereas
possession of goods refers to the custody and control of goods.
Concept:
What are the various conditions and warranties need to be fulfilled by both
the parties of sales contract.
Condition:
A condition is a stipulation which is essential to the main purpose of the
contract. It is the base of the contract. Example: Conditions imposed when
selling household goods on instalment Buyer should pay EMI every month.
Warranty:
A warranty is a stipulation which is collateral to the main purpose of the
contract. It is not of such vital importance like condition.
Example: Mobile Phone Manufacturers give warranty for Accessories like
battery, Ear phone, etc.
Right of Lien
Right of Re-Sale
INTRODUCTION
The term Negotiable means transferable from one person to another
person in return for consideration.
The term Instrument means any written document by which a right is
created in favor of some person.
Definition:
Promissory Note may be defined as, An instrument in writing containing an
unconditional order signed by the maker to pay a certain sum of money to
certain person or to the bearer of the instrument
(iii) CHEQUE:
DEFINITION OF CHEQUE:
A Cheque is a bill of exchange drawn upon a specified banker and payable
on demand
FEATURES OF CHEQUE:
It is payable on demand.
may apply to the drawer (maker) to give him another bill of the same amount.
The finder of the lost instrument gets no title.
liable on it and should also give public notice by advertisement in news paper.