Legal Environment of Business - Module 2 – Part 1

MBA - MG University

Prepared By

Manu Melwin Joy

Assistant ProfessorIlahia School of Management Studies

Kerala, India.

Phone – 9744551114Mail – manu_melwinjoy@yahoo.com

Kindly restrict the use of slides for personal purpose.Please seek permission to reproduce the same in public forms and presentations.

1. Definition of contract.2. Elements of contract.3. Types of contract.4. Definition of offer.5. Essentials of valid offer.6. Types of offer.7. Definition of Acceptance.8. Essentials of valid acceptance.9. Definition of Consideration.10.Essentials of valid Consideration.11.Types of Consideration.

Contents

Contract - Definition

Section 2 (h) of the

Indian Contract Act

defines the term

contract as follows: “

An agreement which

is enforceable at law

is contract”.

Definition

• Contract = Agreement + Enforceability at Law

Elements of a contract

1. Agreement.2. Consensus of Idem.3. Capacity of parties.4. Free consent.5. Consideration.6. Lawful Object.7. Not declared to be void.8. Certainty and possibility of

performance.9. An intention to create legal

relationship.

Classification of contracts

Legal Effects Performance Formation

1. Valid Contract2. Void Contract3. Voidable contract4. Unenforceable

contract5. Illegal contract

1. Unilateral Contract2. Bilateral contract3. Executed contract4. Executory contract

1. Express Contract2. Implied contract3. Quasi contract

Offer - Definition

• As per Section 2 (a) of thecontract Act, “When oneperson signifies toanother his willingness todo or abstain from doinganything, with a view toobtaining the assent ofthat other to such act orabstinence, he is said tomake an offer”.

Essential Characteristics of a valid offer

1. The terms of an offer must beclear and certain.

2. Offer must be communicatedto the offeree.

3. Invitation to an offer is not anoffer.

4. Special terms attached to anoffer must be communicated.

5. An offer may be to anindividual or to the public atlarge.

Kinds of offers

• General offer.

• Special offer.

• Standing offer.

• Counter offer.

• Cross offer.

Lapses of offer

• Revocation by communicationof notice.

• By lapse of prescribed time.

• Death of the offeror.

• Insanity of the offeror.

• Non- Fulfillment of conditions.

• Offer not accepted accordingto the mode prescribed.

• Rejection by a counter offer.

Acceptance - Definition

Section 2 (b) of thecontract Act defines‘Acceptance’ as follows:“When the person towhom the offer is madesignifies his assentthereto, the offer is saidto be accepted.”

Essentials of a valid acceptance

1. Acceptance must be absoluteand unqualified.

2. Acceptance must becommunicated to the offeror.

3. Acceptance must be madewithin a reasonable time.

4. Acceptance must becommunicated in some usualand reasonable manner.

5. Acceptance may be expressedor implied.

Consideration - Definition

The term consideration isdefined in Sec. 2 (d) of theIndian contract Act as “Whenat the desire of the promisor,the promise or any otherperson has done orabstained from doing, orpromises to do or to abstainfrom doing something, suchact, abstinence or promise iscalled a consideration for thepromise.”

Essentials of consideration

1. Consideration must move atthe desire of the promisor.

2. Consideration may be past,present or future.

3. Consideration must be realand not illusory.

4. Consideration must belawful.

5. Consideration must besomething which thepromisor is not alreadybound to.

Different Kinds of consideration

• Present consideration.

• Past Consideration.

• Future consideration.

1. Definition of contract.2. Elements of contract.3. Types of contract.4. Definition of offer.5. Essentials of valid offer.6. Types of offer.7. Definition of Acceptance.8. Essentials of valid acceptance.9. Definition of Consideration.10. Essentials of valid Consideration.11. Types of Consideration.