A

Seminar Report
On
Funadamenatal of business law
Submitted to
Shivaji University Kolhapur
In partial fulfillment for degree of
Bachelor of Business Administration (Sem- V)
By
Roll No-34, 35.
Rayis, Ramiz.
Under the guidance of
Prof.
Through,

The Director,
Deccan Education Societys
Chintamanrao Institute of Management Development & Research
Sangli
In the year 2015-2016

Q.1 Contract Without Consideration is Void Subject to certain

Exceptions,

Q.2 Write short note on:

Caveat Emptor ( 2009 march 2011 oct )

Consideration
Consideration is an essential element of a valid contract. An agreement without consideration is a
bare promise and is not binding on the parties.
According to section 2(d) of the Indian contract act when at the desire of the promisor, the
promise 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. Consideration, therefore may be described as something accepted
or agreed upon as a return, or equivalent for the promise made.

Example:- (1) A agrees to sell his car to B for a sum of Rs 10,000. For As promise the
consideration is a sum of Rs 10,000 while for Bs promise consideration is the car.

Essential Elements Of Consideration

1.
2.
3.
4.

Consideration should be furnished at the desire of the promisor:

Consideration may move from the promisee or any other person :
Consideration may be a promise to do something or abstain from doing something
Consideration may be past, present or future

Contract with out consideration is void subject to certain Exception :

Contracts without consideration is void. According to Salmond and Winfield A promise without
consideration is a gift; one made for a consideration is a bargain. However in the following
circumstances a contract without consideration will be perfectly valid:
1) Promise made on account of natural love and affection :
No consideration is required when a contract is made 1) on account of natural love and affection
between the partes,2) standing in a near relation to each other 3) is in writing and 4) registered
under law for the time being in force for the registration of documents [sec.21(1). It is to be
noted that nearness of relationship does not necessarily impact natural love and affection.
EXAMLPE:- A out of his love and affection promises to give his wife , B Rs.1000 this promise
is put into writing and is registered it will be a valid contract without consideration.

2. Promise to compensate for voluntary service:

When a contract relates to a promise to compensate wholly or in part a person who had already
voluntarily done something for the promisor or something which the promisor could be legally
compelled to do {Sec. 25(2)}. The act must have been done voluntary and for the promisor, who
must have been in existence at the time when the act was done. The intention of the promisor
must have been to compensate the promise.
Example :- A finds Bs purse and gives it to him. B promises to give A Rs 100. This will be a
valid contract without any formal consideration.

3. Promise to pay a time-barred debt:

When a debtor makes a written promise under his signature or that of his agent to pay a timebarred debt no fresh consideration is required for this fresh promise [Sec.23(3)]. A mere
acknowledgement of a time-barred debt will not be sufficient. There should be a distinct, definite
or promise to pay the debt, which must be a liquidated or an ascertained sum of money.
Example :- A owes B Rs 1000 the debt is barred by The limitation Act. A signs a written promise
to pay B Rs 500 on account of the debt. This will be a valid contract.
In the case of a time barred debt the question of reviving the right does not arise for it was never
lost. It had always existed only the remedy had been destroyed by lapse of time which is being
now revived by new promise.

4. Contract of agency:
According to section 185 of the Indian contract Act consideration is not required to create an
agency.

5. Completed Gifts:
Absence of consideration shall also not affect the validity as between the donor and done of any
gift actually made.(Explanation (2) of section 25.) Thus, gifts once made cannot be recovered on
the ground of absence of consideration.

Doctrine of CAVEAT EMPTOR

The maxim Caveat Emptor (let the buyer beware) means that the buyer must take care of his own
interest while purchasing the goods. Buyer in a contract of sale of specific goods will purchase
them at his own risk as regards the quality or fitness of the goods except in case of fraud or
where a condition to that effect is laid down In the contract itself. Buyer cannot hold the seller
liable if the goods turn out to be defective or do not suit his purpose or if the buyer makes a
mistake in assessing the quality if the goods. If is for the buyer to ensure at the time of purchase
that the goods conform to his requirements.
Section 16 of the Indian sale of goods Act has enunciated this principle in the following words:
Subject to the provision of this Act and of any other law for the time being in force, there is no
implied warranty or condition as to the quality or fitness for any particular purpose of goods
supplied under contract of sale . When a person sells goods, he only warrants that they
shall be fit for some purpose but he does not warrant that they will be fit for any particular
purpose. The buyer, unless otherwise agreed upon, cannot reject the goods on the basis of latent
defect unless they render the goods unmerchantable or the seller had deliberately concealed such
defects.
Following are important exception to this general rule:
1. Implied condition as to quality or fitness :
Where the buyer has made known to the seller the purpose for which he requires the goods and
depends on the skill and judgement of the seller, there is an implied condition that the goods will
be fit for the purpose for which the buyer requires them. This condition is not applicable in those
cases where the goods have been sold under a patent mark or trade name.
Sec.19(a) amended by no. 6716 s.2(sch.1).
An implied warranty or condition as to quality or fitness for a particular purpose may be annexed
by the usage of trade.
An express warranty or condition does not negative a warranty or condition implied by this part
unless inconsistent therewith.
Where goods are bought by description fro seller who deals in goods of that description (whether
he be the manufacturer or not) there is an implied condition that the goods shall be of
merchantable quality. Provided that if the buyer has examined the goods there shall be no
implied condition as regards defects which such examination ought to have revealed.

2. Sale of goods by description :

Where the goods are purchased by description from a seller, who deals in such class of goods,
there will be an implied condition that the goods shall be as per description.
3. Usage of trade:
Proof of reasonable usage or custom of trade may also establish an implied condition as to
quality or fitness of goods for a particular purpose.
The concept of trade usage recognize that words and practice take on specialized meaning in
different areas of business.
Section 1-2.05 of the UCC (Uniform Commercial Code) adopts the principle of trade usage. In a
contractual dispute, the party who asserts a trade usage . if the trade usage is proved , a court may
use it to supplement or qualify terms of an agreement. The express term of an agreement and
trade usage must be constructed wherever reasonable as consistent with each other. If the
construction is unreasonable, however the court will ignore trade usage and apply the express
term of the agreement.
4. Consent by Fraud:
The Doctrine of Caveat Emptor shall not apply to all those purchase which have been made by a
buyer under a contract where his consent was obtained by the seller by fraud i.e., Where the
buyer relies on false representation of the seller and suffers damage . A seller , who is guilty of
fraud , shall have no protection of the doctrine of Caveat emptor.