INDIAN CONTRACT ACT 1872ESSENTIAL ELEMENTS OF VALID CONTRAACT;1. Offer and acceptance: There must be two parties Terms of offer must be definite Acceptance must be absolute and un conditional It must be communicated to offerer2. Intention to create legal relationship3. Lawful consideration4. Capacity of parties - a) Competency b) Age of majority c) Sound mind d) Not disqualified by any law5. Free and genuine consent Same sense at the same time When induced by coercion Undue influence Fraud Mis-representation not free consent. Mistake6. Lawful object : Not illegal, immoral or opposed toPublic policy7. Agreement not declared void.8. Certainty and possibility of performance9. Legal formalities

OFFER AND ACCEPTANC E;

OFFER is defined under section 2(a)When one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal

What constitutes an offer?1. Offer must show an obvious intention2. It must be made with a view to obtaining assent of the offeree.3. The offer must be definite4. It must be communicated to offereeLALMANI VS GAURI DUTT (1913)11 All.L.J.489FITCH VS SNEDAKER (1868) 38 NY.288.

LEGAL RELATIONSHIP;

1.Offer must be such as in law is capable of being Accepted and giving rise to Legal relationship - a social invitation does not create legal relation. 2. Terms of offer must be definite, unambiguous and certain and not loose and vague

3. An offer may be distinguished from a declaration of intention and announcement (ii) an invitation to make an offer display of goods4. Offer must be communicated5. Offer must be made with a view to obtaining the Assent.6. Offer should not contain a term the non-complianceof which may be assumed to amount to acceptance7. A statement of price is not an offer.

The communication of acceptance is complete -as against proposer when it is put into course of transmission to him so as to be out of the power of acceptor as against acceptor when it comes to the knowledge of proposerCOMMUNICATION OF REVOCATION; Section 4(3)as against the person who makes it when it is put into course of transmission to the person to whom it is made, so as to be out of power of person who makes it as against the person to whom it is made when it comes to his knowledge.

TIME FOR REVOCATION OF OFFER AND ACCEPTANCETIME FOR REVOCATION OF OFFER AND ACCEPTANCETime for revocation of proposal:

Section 5,(I) A proposal may be revoked at any time beforethe communication of its acceptance is complete as against the proposer but not afterwards.Section 5(2) An acceptance may be revoked at any time beforethe communication of acceptance is complete as against the acceptor but not afterwards.

ACCEPTANCE - Section 2 (b)Legal Rules as to Acceptance - Section 7 (1 & 2)1) It must be absolute and unqualified - ad idem on all matter2) It must be communicated to offerer.

3. It must be according to mode prescribed or usual and reasonable mode.4. It must be given within reasonable time.5. It can not precede an offer.6. It must show an intention on the part of acceptor to fulfill terms of the promise.7. It must be given by the party to whom the offer is made.8. It must be given before the offer lapses or withdrawn9. It cannot be complied from silence. CONSIDERATION - Defined under Section 2 (d):When at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do so to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

A valuable consideration in the sense of the law may consist either in some right, interst, profit, or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given

CURIE VS MISA (1875)LR10Ex153.KEDAR NATH VS GAURI MOHAMED (1886)14 Cal.64.ABDUL AZIZ VS MASUM ALI (1914) 36 All.268.

LEGAL RULES AS TO CONSIDERATION;

1. It must move at the desire of the promisor. DURGA PRASAD VS BALDEO (1880) 2 All 2212. It may move from promisee or any other person. CHINNAYA VS RAMAYYA (1882) 4 Mad 1373. It may be an act, abstinence or forbearance or return promise. DEBI RADHA RANI VS RAM DAS AIR Patna 2824. It may be past, present or future5. It need not be adequate6. It must be real and not illusionary

7. It must be something which the promisor is not bound to do.8. It must not be illegal, immoral, or opposed to public policy (Section 23)

STRANGER TO CONTRACT;Exception to privity rules A person in whose favour a charge or other interest in some specific property has been created may enforce it though he is not a party to the contract. The decision of the Privy Council in KHWAJA MUHAMMAD KHAN VS HUSSAINI BEGUM (1910)VALID CONTRACT SECTION 10Under Section 10, ( what agreement are contract) - All agreements are contracts if they are made by Free consent (U/S 13,14) Of parties competent to contract For lawful consideration and lawful object and are not expressly declared to be voidCONSENT defined Two or more persons are

CONSENT defined Two or more persons are said to consent when they agree upon the same thing in the same sense. (Sec 13)

FREE CONSENT; (section 14) - Consent is free when it is not caused by

Coercion as defined u/s 15Undue influence u/s 16Fraud u/s 17Mis-representation u/s 18Mistake Sections 20-22.

COERCION Section 15 1. The committing of any act forbidden by IPC2. Threatening to commit any act forbidden by IPC3. The unlawful detailing of any property4. The unlawful threatening to detain any property to prejudice of any person with the intension of causing any person to enter into an agreement.

UNDUE INFLUENCE Sec. 16A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.RELATIONSHIP WHICH RAISE PRESUMPTION OF UNDUE INFLUENCE;1. Parent and child 2. Guardian and ward3. Trustee and beneficiary4. Religious advisor and disciple5. Doctor and patient

6. Solicitor and client 7. Fiance and fianceFRAUD Sec.17

Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce his to enter into the contract the suggestion, as a fact, of that which is not true, by one who does not believe it is true;the active concealment of a fact by one having or belief of the facta promise made without any intention of performing it;

4. any other act fitted to deceive5. any such act or omission as the law specially declares to be fraudulent.

Illustrations

A sells by auction to B a horse which A knows to be unsound . A says nothing to B about horses unsoundness. This is not fraud in A.

b) B is As daughter and has just come of age.Here the relation between the parties would make it As duty to tell B if the horse is unsound.

c) B says to A If you do not deny it. I shall assume that the horse is sound A says nothing. Here As silence is equivalent to speech.

d) A and B being traders, enter upon a contract. A has private information of a change in prices which would affect Bs willingness to proceed with the contract. A is not bound to inform B. MIS REPRESENTATION Sec. 18A representation when wrongly made either innocently or intentionally is mis-representation. Requirement of Mis-representation:It must be a representation of material fact. Mere expression of opinion does not amount to mis representation even if it turns out to be wrong.2. It must be made before conclusion of contract with a view to inducing other party.

3. It must be made with an intention that it should be acted upon by the concerned person.4. It must have induced the contract.5. It must be wrong but the person who made it honestly believed it to be true.6. It must be made without any intention to deceive the other party.7. It need not be made directly to the plaintiff. A wrong statement made to a third person with the intention of communicating to the plaintiff also amounts to mis-representation.

MISTAKE - Mistake of law Mistake of fact

Mistake of law may be(1) of his own country(2) of a foreign country

Mistake of fact may be (1) Bi-lateral (2) unilateral

Agreement void where both parties are under mistake as to take of fact.Various cases fall under bi-lateral agreement:1. Mistake as to subject matteri) Mistake as to existence of subject matter.ii) Mistake as to the identity of subject matter

iii) Mistake as to the quality of subject matteriv) Mistake as to quantity of subject matterv) Mistake as to title of subject mattervi) Mistake as to price of subject matter 2. Mistake as to possibility of performing contractPhysical impossibilityii) Legal impossibility

UNILATERALMISTAKE; Sec. 22.Example: A offers to sell his house to B for an intended sum of rupees 44,000/-. By mistake he makes an offer for rupees 40,000/. He can not make defence of mistake.A buys an article thinking that it is worth rupees 1000/- when it is worth onlyrupees 50/-. A cannot avoid the contract.

COMPETENCY OF PARTIES TO CONTRACT:Section 11 declares the following persons to be incompetent to contractMinorsPersons of unsound mindPersons disqualified by any lawAN AGREEMENT WITH A MINOR IS VOID AND INOPERATIVE MOHRI BIBI VS DHARMODAS GHOSE 19031) He can be promissee or beneficiary 2) His agreement cannot be ratified by him on attaining age of majority.3) If he has received any benefit under void agreement, he cannot ask to compensate or pay for it.4) He can always plead minority LESLI VS SHIELLThere can be no specific performance of the

agreements entered into by him as they are void ab-initio.5) He cannot enter into a contract of partnership6) He cannot be adjusted insolvent7) He is liable for necessaries.8) He can be an agentPERSONS OF UNSOUND MIND:Lunatics - mentally deranged. He suffers from intermittent intervals of sanity and in-sanityIdiots - completely lost mental powers.Drunken persons.Other persons: contract with an alien friends, corporations, insolvents and convicts.

VOID AGREEMENTS;(1)Agreements by incompetent parties Sec.11(2) Agreements made under mutual mistake Sec.20(3) Agreements the consideration or object of which is unlawful Sec.23, 24, (part consideration)(4)Agreements made without consideration(5) Agreements in restraint of marriage Sec. 26(6) Agreements in restraint of trade Sec.27(7) Agreements in restraint of legal proceedings Sec 28.(8)Agreements the meaning of which is uncertain Sec.29(9) Agreement by way of wager - one way to pay upon determination of uncertain events.(10)Agreements contingent on impossible events Sec.36(11) Agreement to do impossible acts Sec36(12) In case of reciprocal promises to do things legal and also other things illegal, the second set of illegal promises is void Sec 57.

PERFORMANCE OF CONTRACTSec. 37 (1) - The parties to contract must either perform oroffer to perform their respective promises.(2) Requisites of valid tender - offer to perform Sec. 38(3) It must be unconditional (4) It must be whole quantity contracted for(5) It must be by a person who is in a a position and is wiling to perform the promise(6) It must be made at the proper time and place,(7) must be made to proper person (8) It may be made to one of the several promisees(9) In case of tender of goods, it must give a reasonable opportunity to the promisee for inspection of goods.(10) In case of tender of money, the debtor must make a valid tender in the legal tender money

EFFECT OF REFUSAL OF PARTY TO PERFORMPROMISE WHOLLY Sec. 39When a party refuses to perform, his promise in its entirety, the promise may put an end to contract.CONTRACT WHICH NEED NOT BE PERFORMED;When performance becomes impossible Sec.56Parties agree to substitute new contract Sec 62When the promise dispenses with or remits Sec. 63STRANGER TO CONTRACT;Privity of contract - only parties to a contract may sue and to be sued.EXCEPTIONS;A trust or chargemarriage settlement, partition or other family arrangementacknowledgement or estoppelassignment of contractcontrtact entered into through an agentcovenants running with the land

CONTRACT WITHOUT CONSIDERATION IS VOID - EXCEPTIONSLove and affection Sec. 25(1) (a)Agreement in writing (b) Registered2.Compensation for voluntary services 25(2)3.Promise to pay a time barred debt Sec 25(3)(4)4.Completed gift5.Agency6.Charitable subscription

CLASSIFICATION OF CONTRACT;1.Classification according to validity:A contract is based on agreement. An agreement becomes a contract when all essential elements are present. In such case contract is valid contract.If one or more element is missing the contract is eitherVOIDABLE, VOID, ILLEGAL OR UN -ENFORCEABLEVoidable contract Sec. 2(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.Void contract Sec. 2 (g) An agreement not enforceable by law is said to be voidIllegal agreement is one which transgresses some rule of basic public policyUnenforceable because of technical defect.CLASSIFICATION ACCORDING TO FORMATION EXPRESS CONTRACT Sec.9 expressly agreed termsIMPLIED CONTRACT eg. To get into public busTakes tea in restraurant Pick-up news paper from vendorLifts luggage by coolie. CLASSIFICATION ACCORDING TO PERFORMANCEEXECUTED CONTRACT; When both the parties have performed their respective obligation.EXECUTORY CONTRACT; When both the parties have yet to perform their obligation.

LEGALITY OF OBJECTSection 23,What considerations and objects are lawful, and what not the consideration or object of an agreement is lawful, unless-

(1) it is forbidden by law if it is punishable under criminal law(2) if it is of such a nature that if permitted it would defeat the provision of law(3) if it is fraudulent(4) if it involves or implies injury to person or property of another(5) if the courts regard it as immoral (6) where the court regards it as opposed to public policy i

AGREEMENT OPPOSED TO PUBLIC POLICY:1) Agreements trading with enemy2) Agreement to commit a crime4) Agreement which interfere with administration of justice4) Agreement in restraint of legal proceedings Sec. 285) Trafficking in public offices and titles6) Agreements tending to create interest opposed to duty7) Agreements in restraint of parents rights 8) Agreements restricting personal liberty 9) Agreement in restraint of marriage Sec. 2610) Marriage brokerage11) Agreements interfering with marital duties12) Agreements to defraud creditors or revenue authorities13)Agreements in restraint of trade.

WHO CAN DEMAND PERFORMANCE;IT IS ONLY PROMISEE WHO CAN DEMAND PERFORMANCEEg. A promises B to pay C a sum of rupees 500/- . A does not pay the amount to C?TIME AND PLACE OF PERFORMANCE Sec. 46, 50Where no application is to be made and no time is specified - within reasonable timeWhere time is prescribed and no application is to be made Sec.47Application for performance on a certain day and placeApplication by promisor to appoint place Sec.48, Performance in a manner or at time prescribed

RECIPROCAL PROMISES;1. Mutual and independentEg. B agrees to pay price of goods on 10th . S promises to supply on 20th . Promises are independent and mutual.BY WHOM MUST CONTRACT BE PERFORMED 1.Promisor himself2.agent Sec.3(3)3.Legal representative4.third person5.Joint promisor

DEVOLUTION OF JOINT LIABILITIES - Section 42-44Any one of joint promisor may be compelled to Perform ( Sec.43) A joint promisor compelled to perform may claim contribution (Sec.43(2))Sharing of loss arising from default Sec. 4DISCHARGE OF CONTRACT:A contract may be discharged (1) By performance (Sec. 37, 63)(2) By agreement or consent(3) By impossibility(4) By lapse of time(5) By operation of law(6) By breach of contractBy performance - 1. Actual 2. AttemptedBy agreement - 1. by express consent 2. byImplied consent (Sec. 62)a. novation b. rescission c. alterationd. remission e. waiver f. merger.

By impossibility of performance - known to the partiesunknown to the parties(3) SUPERVENING IMPOSSIBILITY:1) destruction of subject matter2) non existence of a state of things3)death for personal services4) change of law5) outbreak of war(4) By lapse of time (5) By operation of lawa. death b. merger c. insolvency d. unauthorized alteration of termse. rights of liability vesting in the same person 6.By breach of contract:1. Actual (a) at time of performance(b) during performance2.Anticipatory(1) by an act of promissor making Performance impossible i.e. implied repudiation by renunciation of the obligation i.e. expressrepudiation.

REMEDIES FOR BREACH OF CONTRACT:Rescission of contractSuit for damagesSuit upon quantum of meruitSuit for specific performance Suit for injunctionRESCISSION:When a contract is broken by one party, the otherParty may sue to treat the contract as rescined and Refuse further performance. He is absolved all hisObligation.DAMAGES:Monetary compensation allowed to injured party.HADLEY VS BOXENDALE.Sec. 73.Compensation for loss or damage by breach ofContract. - the injured party is entitled to (a)such damages which naturally arose in the usualcourse of things (b) such damages which the party knew

such compensation is not to be given for any remote or indirect loss (d) such compensation arising from breach of quasi-contract shall be same as in any other contract.FORMS OF DAMAGES:Ordinary damagesSpecial damagesExemplary damagesNominal damagesDamages for loss of reputation Damages for inconvenience and discomfortMitigation of damagesDifficulty of assessmentCost of decreeDamages agreed upon in advance in case of breach

LIQUIDATED DAMAGES AND PENALTY:QUASI-CONTRACT - Sec. 68 to 72Supply of necessaries Sec. 68Payment by an interested person Sec 69Obligation to pay for non-gratuitous act Sec 70Responsibility of finder of goods act. Sec. 71Mistake or coercion Sec.72QUANTUM MERUIT:Claims arises in following cases:where an agreement is discovered to be void Sec.65when something is done without any intentionto do so gratuitously Sec.70when there is express or implied contract to render services but there is no agreementto remuneration4.when completion of contract is prevented by act of other party to contract 5.when contract is divisible