ASSIGNMMENT ON

CORPORATE LEGAL
ENVOIRNMENT

SUBMITTED TO:
U S WAHIE

SUBMITTED BY:
S
HRUTI KAUR
P
GPPE
(SE
M-3 )
1. “An agreement enforceable by law is a contract” Discuss the definition and
explain the essentials of a valid contract?

Ans) Section 2(h) of the Indian Contract Act provides that, “An Agreement enforceable by law is
a contract”. Therefore in a contract there must be (1) an agreement and (2) the agreement
must be enforceable by law.

An agreement comes into existence whenever one or more persons promise to one or
others, to do or not to do something, “Every promise and every set of promises, forming the
consideration for each other, is an agreement.

Following are essential requirements of a valid contract.

Offer and its acceptance

Free consent of both parties
Mutual and lawful consideration for agreement
It should be enforceable by law. Hence, intention should be to create legal relationship.
Agreements of social or domestic nature are not contracts
Parties should be competent to contract
Object should be lawful
Certainty and possibility of performance
Contract should not have been declared as void under Contract Act or any other law

2. Define and explain fully the term “consideration”, with suitable illustrations?

Ans) Section 2(D) of Indian Contract Act defines consideration as: - “When at the desire of the
promiser, the promisee or any other person has done or abstained from doing or does pr
abstains from doing, or promises to do or abstain from doing, something, such act or
abstinence or promise is called Consideration for the Promise.”

The definition can be explained point wise

1. At The Desire Of the Promiser – An act constituting consideration must have been done
at the desire of the promiser. If such act is done at the desire of the third party or without
the desire of the promiser it cannot constitute a valid consideration.

Illustration No 1 - A sees B drowning. A saves the life of B and asks B to give

remuneration for such act. B never asked A to save him. It was a voluntary act and has not
moved at the desire of B, the promiser.
 Illustration No 2- The collector of a town asked A to improve the market by spending
amount from his own pocket. At the time of improvement of the market the shop owners
promised to pay commission to A on their sale. The commission was not paid to A by the
shop owners later on. A cannot claim such commission as the improvement in the market
was done at the request of the collector.

2) The Promise Or Any Other Person - An act constituting may be done by the promisee
himself or by any other person (i.e. stranger to consideration), It is immaterial who has
furnished the consideration. Even a stranger to a consideration can sue on a contract. In
this context the case of Chinayya and Ramaiyya is important, the details of the case are as
under:-

In this case an old lady by a deed of gift granted an estate to her daughter (the defendant)
with a direction that the daughter should pay an annuity of Rs. 653 to A’s brother (the
Plaintiff). On the same date, the defendant made a promise with the plaintiff that she
would pay the annuity as directed by A. The defendant the stipulated sum. In an action
against her by the plaintiffs she contended that since the plaintiffs had furnished no
consideration, they had no right of action. It was held by the court that in this agreement,
the consideration has been furnished by the mother of the defendant and that is enough
consideration to enforce the promise between the plaintiff and the defendant.

In the above case you will observe that the brother of old lady was a stranger to a
consideration and even then the law permits consideration to him.

3) Has done or Abstained from Doing (Past): - It means that consideration for any promise
was given earlier and then promise is made. It is, of course necessary that at the time the
consideration be given that must have been done at the desire of the promiser.

Illustration - I request you to find my lost dog. After you have done the same if I promise
to pay you Rs. 100/- for that or past consideration. This constitutes valid “Past
Consideration under section 2(D) and therefore the promise is enforceable.

4) Does or Abstains from Doing (Present): - Consideration which moves simultaneously is

called Present Consideration. e.g. A makes an offer of reward of Rs. 100/- to anyone who
finds his lost Dog and brings the same to him. B finds the lost Dog and delivers the same
to A. When B does so that amounts to both the expectance of the offer which result in
binding contract under which A is bound to pay Rs. 100/- to B and also simultaneously
giving consideration for the contract.

5) Or Promises To Do Or Abstain From Doing (Future)- When one person makes a promise
to exchange for the promise by the other side. The performance of the obligation by each
side to be made subsequent to the making of contract, this consideration is known as
executor (future). e.g. A agrees to supply certain goods to B and B agrees to pay for them
on a future date, this is a case of future consideration.
 We have discussed the parts where the parties to the contract has agreed to enter into a
contract for the past consideration, present consideration and future consideration but the
part of abstained from doing, abstains from doing and abstain from doing has not been
discussed. By giving the following examples this part will become explained.

Example No 1: A owes B Rs. 5000/- the payment of which should be made by A within
stipulated period. A fails to make payment and request B not to take legal action on
certain terms as agreed upon between A and B.

Example No 2: A agrees to sell his house for Rs. 1 Lacks to B since A has to arrange
funds for the marriage of his daughter. C, the son of A requests him not to sell the house
and agrees to give Rs. 1 Lacks to his father. By this act A has been asked to abstain
himself to sell his house.

Example No 3: A is having a plan to sell his house for Rs. 1 Lakh at a future date. His
son has asked his father not to dispose of the property for which he has agreed to give Rs.
1 Lakh on a future date as agreed by A. This is an example of asking father to abstain
from making a contract in future.

6) Something (Of Some Value): The consideration need not be adequate to the promise but
it must be of some value. But it must be of some value in the eyes of law. According to
explanation 2 of Section 25, an agreement to which the consent of the promiser is freely
given is not void merely because the consideration is inadequate; but the inadequacy of
the consideration may be taken into account by the court in determining the question
whether the consent of the promiser was freely given e.g. A agrees to sell his car worth
Rs. 50,000/- for Rs. 5000/- to be. A’s consent was given freely. This agreement is a
contract not withstanding the inadequacy of consideration but in case A says that the free
consent was not given. In such position the question of inadequacy shall be decided by
the court.

We have discussed the above elements of consideration. Beside what have been discusses
there are other essential elements of a valid consideration which are discussed as under: -

Real and not Illusory- Although it is not necessary that the consideration should be
adequate, it is however, necessary that it should be real and not unsubstantial. But there
are certain circumstances where there considerations are not real such as:-

1. Physically Impossible
2. Legally Impossible
3. Uncertain Considerations
4. Illusory Considerations

The above conditions can be explained by giving the following examples:-

1. To make a dead person alive or run at a speed of 100 Km/ hr is physically impossible
2. A promise for illegal cohabitation does not amount to good consideration
 3. A promise to pay such remuneration “As shall be deemed right” is uncertain
consideration.
4. A magicians offer to create a certain thing by magic is illusory consideration

3. “Parties to the contract must be competent to the contract” Explain?

All the parties doing the agreement must be competent to contract. Section 11 determines
who are competent to contract. As per this section, person who has attained the age of
majority according to the law to which is subject,  who is of sound mind, and who is not
prohibited/disqualified from contracting by law  to which he is subject. Majority is 18 years
except when a guardian is appointed by the court in which case it is 21 yrs. 

In the case of Mohoribibee vs. Dharmodas Ghosh in 1903, a minor had taken a loan and
then he sued to avoid the contract. Privy Council held that any contract with a minor is void
and so the loaner cannot get any money that he gave as advance back. This rule is adopted all
over India whether or not it benefits the minor. 

5. Discuss the term ‘undue influence’ and ‘coercion’ as understood in the law of
contract?

Coercion (Sec 15): Coercion is committing or threatening to commit any act forbidden

by the Indian Penal Code, or unlawful detaining or threatening to detain the property, to the
prejudice of any other person, with an intention to cause that other person to enter into an
agreement. It is immaterial whether IPC is or is not in force where coercion is applied. Thus,
an act that is unlawful as per IPC but not as per England law and that has been used to induce
the consent will be considered coercion. 
A clear example would be force someone to consent on gun point or by hurting or
threatening to hurt. In Chikham Amiraju vs Chikham Seshamma Madras HC 1912 held
that threatening to commit suicide is coercion.

Undue Influence (Sec 16): Undue influence occurs when because of the nature of the
relationship that exists between the parties, one party is able to dominate the will of the other
and uses this dominance to obtain unfair advantage over the other. A person is in a dominant
position when he holds a real or apparent position of authority for example manager
employee, or stands in a fiduciary relationship with the other for example money lender and
loanee. A person could also be in a dominant position if the mental capacity of other party is
temporarily or permanently effected due or illness, age, or distress.
The burden of proof that undue influence has not occurred is on the person who is in the
dominant position, if the agreement is unconscionable otherwise it is on the party that alleges
undue influence.
Examples: 
    Father (A) give some money to son (B) when B was a minor. Upon majority, A makes B
execute a bond for a much larger amount. 
    A person (A) who is old and sick is induced into paying an unreasonably large amount of
sum to his doctor (B).
     A village moneylender (A) lends money to a villager (B), who is already in debt, at a very
high interest. It lies on A to prove that he has not used undue influence to induce the contract.
    At a time of financial crises, a bank manager gives loan to a person at a substantially
higher rate. This is not considered to be undue influence but a simple business transaction.
In Mannu singh vs Umadat Pandey Allahbad HC 1890, a guru induced his devotee into
giving all the devotee's property to himself. This was considered undue influence.

6. B holds factory in West Bengal, on a lease granted by A, the factory owner.. The
revenue payable by A to the Government being in arrear, his factory is
advertised for sale by the government. Under the Revenue law, the consequence
of such sale will be annulment of B’s lease. B, to prevent the sale and consequent
annulment of his own lease, pays the Government, the sum due from A.
Is A bound to make good to B the amount so paid under the provisions of Indian
Contract Act, 1872?

Ans:- A is bound to make good to B the amount (A pay the amount OF B)

According to Indian contract act 1872 under section (69) of contract act Reimbursement to a
person paying money due by another in payment of which he is interested

1. The person making payment is interested in the payment of money for the protection of
his own interest

2. The payment should not be a voluntary payment .it should be such that there is some
legal or other coercion process compelling the payment.

3. The payment must be to another person.

4. The payment must be on which the other party was bound by law to pay.