Nature of contract

Voluntary agreement
+Consideration
+Legal enforceability
= contract

essentials

Offer and acceptance

Competent parties
Free consent
Not opposed to law/ public policy
Consideration
Legal obligation
Certainty of terms
Possible to perform

types

Valid
Void
Voidable
Implied and express
Quasi
Contingent
Executed and executory

Express void contracts

(i) in restraint of marriage
(ii) in restraint of trade
(iii) in restraint of Legal Proceedings
(iv) Uncertain Agreements
(v) Wagering Agreements
(vi) Agreements contingent on impossible
Acts
(vii) Agreements to do impossible acts

valid contracts transforming into

void contract
Subsequent illegality
Performance becoming impossible
due change in situation
contract was made with coercion/
undue influence.
In case on contingent contract, when
the event on which the subject
mater of the contract depends has
become virtually impossible.

Making of contract: offer and

acceptance
Promisor: promisee
Offer: offeree
Offererer: acceptor

offer

Clear, definite and final

essentials of a contract
Communication
Oral/ written
Implied/ express
Specific/general
Offer and invitation to make an offer
Offer to make an offer is not an offer.
Validity time or open
Revocation of an offer

Revocation and end of an offer.

Before acceptance
Counter/ qualified offer
Lapse of time
Impossiblity
Death/ incapacity of either of the
parties.

Commercial offers

Bogus offers
Acceptable/ competitive offer
Earnest money with offer
Prequalification bid
Technical bid
Price bid
Notice inviting tender (NIT) is an
invitation to make an offer

Acceptance and rules governing an

acceptance
Oral/ written
as required in the offer
Unqualified/ counter offer: rejection
By the offeree or his legal rep.
Within the time: options and problems if
not accepted in time
No deemed acceptance, unless specific
conduct of the acceptor proves acceptance
silence

consideration
Real, not vague
May be inadequate; revenue to
consider market value
Past/future
Payable as per contract: normally by
the part benefited
Must be lawful and not opposed to
public policy.

Valid without consideration

Gift
Donation
Agency
Bailment
Guarantee

flaws of contract : no free

consent

(i) Incapacity,
(ii) Misrepresentation,
(iii) Fraud,
iv) Undue influence,
(v) Coercion,
(vi) Mistake,
(vii) Illegality,
(viii) Impossibility.

Who cannot contract

Only between inter vivos
Individual/ juristic person
barred by any law/ order of court to
enter into contracts.
foreign sovereigns and ambassadors,
alien enemies, convict, etc.
insolvent
Married women- not for husbands
properties, but for own properties.

contract with minor

Cannot contract, other than through
natural/ administrative guardian
Voidable at the option of the major
Not liable
On attaining majority, liable for acts
done after majority
May choose to exit the contract
Estate of the minor liable

performance of a contract

Legal performance, not emotional

By the person who is party; specific person
Can be substituted if agreed by other party
Inheritance
Amalgamation/ merger
Role of custom in outsourcing
Single contract- multiple performance
Reciprocal and order of performance
Independent and non ind. performance.

..performance
Time
Place
abandoned if parties dont perform or
claim breach.
Concept of reasonibility

Non performance

Breach
Damages
Compensation
Liquidated Damages clause
Claim of loss
Willful non performance/ defaulter
Void contract: party getting benefit to
restore

Non performance not leading to

compensation
Waiver of performance by parties
waiver by law
Impossibility
Not given adequate chance to
perform
Force majeure; circumstances beyond
control.

remedies

Claim compensation
Specific performance of contract
Doctrine of part performance
Specific relief for non performance
Anticipatory breach

End of a contract

Voluntary or deliberate termination by either of the

parties.
By the lapse of time.
By the end / impossibility of the event or subject
matter.
By the change of law / public policy, making the
subject matter illegal/ public policy.
By performance.
By breach of contract.
On death of either of the parties and rights/
liabilities not transferred/ transferable.
By change of situation making the contract
impossible to perform

SPECIAL CONTRACTS

contract
contract
contract
contract
contract

of
of
of
of
of

guarantee
indemnity
bailment
agency
pledge

contract of guarantee
3 parties: creditor(exposed to
risk)/debtor(beneficiary)/surety(guaranter)
Guarantees performance of the debtor: liable in
case of default
3 agreements :debtor-creditor/debtorsurety/surety-creditor :Performance guarantee
bond
Gratuitous guarantee and commercial guarantee
One time guarantee and revolving(continious)
Terminates on performance/ breach of trust/
release

contract of indemnity
Self guarantee
Liability not existing: may exist in
future: contingent
Indemnifier and indemnified
Indemnifier is solely and primarily
liable

contract of bailment

Transfer of goods with an intention to return

Bailer and bailee (custodian)
Gratuitous bailment and commercial bailment
Express and implied bailment
Party benefitted shall pay the other party
Finder of lost goods is a bailee

contract of agency
Created with an agreement between principal
and agent
Agents function is to bring in third parties to
make contract with the principal
Agent and broker
Disclosed principal/undisclosed
principal( principal liable): agent hides that he
is an agent(personally liable)
Supposed to get remuneration, protect
principals business and indemnify any loss

contract of pledge
Security mechanism: asset transferred
to lender till repayment of loan
Pawner and pawnee
Return the goods without damage to
pawnee
Goods to be forfeited in case of default;
balance, if any, to be returned to
pawnee