contract act i

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BMS SEM I

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Introduction to Law

Need for Law

Introduction to Business Law

Meaning of Agreement

Meaning of Contract

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Introduction to Law

Regulatory rules and principles

Followed by all individual/s and state Definition a rule of Civil Conduct, prescribed by

supreme power of a state, commanding what is rightand prohibiting what is wrong.

Not rigid. Social condition vary.

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Branches of Law

Some famous branches of Law:

1. Constitutional Law

2. Administrative Law

3. Criminal Law

4. Civil Law

5. Commercial Law

6. Family Law7. Land Law

8. Labour Law

9. Company Law etc.

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Need for Law Essential for up keeping of peace in the society

Man comes into contract with people in various

capacities. Potential tool of social change.

Law and society are complementary.

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Business Law Body of Laws which regulate the business relations

and commercial activities of persons.

Subject matter of Business Law is very wide.

Some principles of law are well established .

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8 Commercial Acts1. The Contract Act, 1872

2. The Sale of Goods Act, 1930

3. The Partnership Act, 19324. The Negotiable Instruments Act, 1881

5. The Companies Act, 1956

6. The Consumer Protection Act, 1986

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AGREEMENT&CONTRACTS

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X and Y agree to go for dinner

A offers to sell his car forRs.50,000. B agrees to buy forthis price.

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AGREEMENT Meaning :

- To agree

- One person offers or proposes to another and the latteragrees to the offer made.

- Set of promises

- Offer + Acceptance = Agreement

- Section 2(e) of the Indian Contract Act, 1872 defines anagreement as Every promise and every set of promises,forming the consideration for each other is anAgreement.

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Eg. A offers to take B for a movie and B agrees to

go with A. Agreement A Offeror / Proposer / Promisor

B Offeree/ Acceptor / Promisee

All agreements may not be enforceable in the court ifany party does not fulfill his obligations.

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CONTRACT Section 2(h)of the Contract Act, 1872

An Agreement enforceable by Law is a Contract

Contract = Offer + Acceptance + EnforceabilityAn agreement which is enforceable at Law is a contract

, which is not enforceable at law .

EVERY CONTRACT IS AN AGREEMENT BUT EVERY

AGREEMENT IS NOT A CONTRACT.

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Difference betweenAGREEMENT CONTRACT

Every promise, set of promisesforming consideration

Offer + Acceptance

May not create legal obligation

Wider concept

All agreements are notcontracts

It is not final and binding on theparties

An agreement enforceable atlaw

Offer + Acceptance +Enforceability

Creates legal obligations

Narrower concept

All contracts are agreements

It is final, binding on parties

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ESSENTIALS OF A CONTRACT

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A wants to sell his flat at Cuff Parade to B for Rs.39,00,00,000/-.

What factors both have to take care to make it a contract

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ESSENTIALS OF A CONTRACT1. Offer2. Acceptance

3. Legal Relationship

4. Capacity5. Free consent

6. Object Lawful

7. Consideration

8. Not Void9. Capable of Performance

10. Legal Formalities

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1. Offer There must be a Lawful Offer, i.e. proposal by one

party or parties and a lawful acceptance of the offerunconditionally and absolutely by one party or parties.

Eg. A writes a letter to B offering to sell his house forRs. 75,00,000/- . This offer is express.

Offer can be made to one individual or to a group or to

the public at large.Eg. The teacher offer a prize to the student who stands 1st

in the class. (offer is to a group)

Eg. Sale at Shoppers Stop (offer to the public)

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2. Acceptance Section 2(b) defines when the person to whom the

proposal is made signifies his assent thereto, theproposal is said to be accepted. A proposal, whenaccepted becomes a promise.

Acceptance can only be by the person to whom an offerhas been made.

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3. Legal RelationAny party breaks his promise, the innocent party can

go to the court of law for enforcement of the promiseor for damages as the case may be.

Eg. A agrees to sell his house to B for Rs. 75,00,000which was accepted by B. If A subsequently sells toC, B can enforce the contract through the court oflaw, as it was a legal obligations.

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4. CAPACITY Section 11 defines, Every person is competent to

contract who is of the age of majority according to thelaw to which he is subject, and who is of sound mind,and is not disqualified from contracting by any law towhich he is subject.

In short,

a) A person should be major(above 18)b) He should be sound mind

c) He should not be disqualified by law

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5. FREE CONSENT

SECTION 14 defines, consent is said to be free whenit is not caused by

1. Coercion

2. Undue influence3. Fraud

4. Misrepresentation

5. MistakeConsent is not free when it would not have been givenbut for the existence of such coercion, undueinfluence, fraud, misrepresentation or mistake.

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6. OBJECT MUST BE LAWFUL Refers to the purpose of a contract

Object is lawful only; if it does not violate general orindividual laws of the country, does not harm anotheror property and the act is legal or moral.

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7.CONSIDERATION Something in return

The consideration can be in the form of cash or kind

Eg. A agrees to sell his watch to B for Rs.200/-. Herefor A the consideration for the watch is the moneyand for B consideration is watch.

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8. AGREEMENTS MUST NOT BE VOIDVoid = nullify

Contract Act list out void agreements on account ofbeing illegal, immoral or is against the public policy.

Sections 24 30 of the Indian Contract Act,1872defines agreement broadly.

A agrees to pay a sum of Rs. 10,000/- to B to get a

tender passed. This agreement is void as the object isunlawful.

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9. THE AGREEMENT MUST BE CAPABLE OF

PERFORMANCE SECTION 56, defines, An agreement to do an act

impossible in itself is void.

The agreement should be predictable and have futurevalue.

Eg. A agrees to bring Taj Mahal from Agra to Mumbaifor B for 100 crores.

Here the agreement is void, even though both may behaving the capacity to enter into a contract.

It is impossible to perform.

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10. LEGAL FORMALITIES Buying a car/ mobile the sale must be in writing

whereas, while buying a flat, it must not only be inwriting but must also be registered, only then the

agreement is valid.

Depending upon the nature of the agreementformalities to be complied with vary.

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CONCLUSIONAgreement = Offer + Acceptance Contract = Agreement + Enforceability

Agreement & Contract have the common elements ofoffer & acceptance, there is a vast difference betweenthe two.

Any offer and acceptance can become an agreement as

they are the only pre-requisites. Contract is a specialized agreement .

All contracts are agreements but all agreements arenot contracts.

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PRACTICAL PROBLEMS/ ASSIGNMENT

A invites B to dinner at his house on 1st January. Breaches the house of A at the specified time, but A failsto carry out his promise. Can B recover any damages

from A?

X forced Y to enter into a contract at the point of apistol. What remedy is available to Y?

A offers to sell his watch to B for a certain price. Bagree to buy the same. Both happen orally. Does acontract come into existence?

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PRACTICAL PROBLEMSA who owns two estates, one at Bombay and another at

Delhi. Offers B to sell one estate. A intends the one atBombay while B accepts the offer, thinking that it is

the estate at Delhi. Is this contract valid? Explain withreason.

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ASSINGMENT Distinguish between Agreement and Contract

Define contract and explain essentials of a contract.

All agreements are not contract but all contracts areagreements.

contract act i

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