INTRODUCTION

LAW OF

CONTRACT

What is a Contract ?

• A legally binding agreement. In other words…

“A promise or set of promises which the law will enforce”.

• The agreement will create rights and obligations that may be enforced in the courts.

• The normal method of enforcement is an action for damages for breach of contract.

Steps involved in 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

Steps involved in Contract

• Parties should be competent to contract

• Object should be lawful

•  Contract should not have been declared as void under Contract Act or any other law.

Jus in Personam and Jus in rem

Consensus ad idem

obligation

Form of Contracts

1) Written

2) Oral

3) Partly oral and written

2 classes of Contract

Contracts by Deed• A deed is a formal legal document signed, witnessed and

delivered to effect a conveyance or transfer of property or to create a legal obligation.

Simple contracts• Simple contracts are informal contracts and may be made

in any way – in writing, orally or they may be implied from conduct

Bilateral & Unilateral

Bilateral contracts• A promise by one party in exchanged for a promise by another

party• A one to one contract

Example : Sale of goods contract• The Buyer promises to pay the price• The Seller promises to deliver the goods

Offeror or Promisor

The person who make the offer

Offeree or PromiseeThe person to whom the contract was made

Unilateral contracts

• A promise by one party in exchanged for an action by another party

• A one to all contract

Example :X promises a reward to anyone who will find his lost wallet. X bound himself to the promise, but no one is bound to search for the lost wallet. But if Y, having seen the offer, recovers the wallet and returns it, he is entitled to the reward.

1 Offeror Many Offerees

Essential elements of a Contract

1) AgreementOne party make the offer, another party accepts the offer and both achieve consensus ad idem (meeting of the minds)

2) ConsiderationBoth parties must have provided consideration, ie, each side must promise to give or do something for the other.

3) Intention to create legal relationsThe parties must have intended their agreement to have legal consequences. The law will not concern itself with purely domestic or social agreements.

4) CapacityThe parties must be legally capable of entering into a contract.

5) Absence of Vitiating factors

Absence of factors that are going to invalidate a contract, ie : duress or undue influence, mistake, misrepresentation, illegality

Enforceability

Void contracts

• the whole transaction is regarded as a nullity, as though as there has been no contract between the parties.

• Any goods or money obtained under the agreement must be returned.

• Where items have been resold to a 3rd party, they may be recovered by the original owner.

Features of Void agreements

• An agreement made by incompetent parties (Minor/Lunatic Person) is void.

• Agreements which have unlawful consideration is void.

• Agreement with a unlawful object is void.

• Agreements made without consideration is void.

Features of Void agreements

• An agreement the terms of which are uncertain is void.

• An agreement by way of wager (betting/gambling) is void.

Features of Void agreements

• An agreement contingent upon the happening of an impossible event is void.

• Agreement to do impossible acts is void.

• Agreement in restraint of legal proceedings is void.

Voidable contracts 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

• A voidable contract will operates as a valid contract unless and until one of the parties takes steps to avoid it.

• Anything obtained under the contract must be returned, insofar as this is possible.

• If goods have been resold before the contract was avoided, the original owner will not be able to reclaim them.

Classification of Contracts

Classification according to validity

Voidable contracts

Void contracts

Illegal contracts

Unenforceable contracts

Classification according to formation

Express contracts

Implied contracts

Quasi contracts

E-commerce contracts

Classification of Contracts…..

Classification according to Performance

Executed contracts

Executory contracts

Unilateral or one-sided contracts

Bilateral Contracts

Classification according to formation

Formal Contracts (a) Contracts of Record: is either a judgment of a court or recognisance (b) Contracts under seal: A contract under seal is one which derives its binding force from its form alone.

Simple contracts:

Unilateral Contracts or one-sided contracts …..

A contract in which only one party has to fulfill his obligation at the time of the formation of the contract, the other party has fulfilled his obligation at the time of the contract or before the contract comes into existence.

(Contracts with the executed consideration)

Bilateral contracts:

In which obligations on the part of both of the parties to the contract are outstanding at the time of the formation of the contract.

(Contracts with the executory consideration)

End