INDIAN CONTRACT ACT

AGREEMENT Sec 2(e )

“Every set of promises, forming consideration for each other”

Essentials: Two parties competent to contact Consideration Free consent Contract: Sec 2(b): enforceable by law Essentials of a valid contact: Agreement, Capacity of parties, Free Consent, Lawful Consideration, Lawful Object, Agreement not expressly declared as void, Legal formalities

Type of Contract: Void Voidable Illegal Un-enforceable Contract Unilateral Bilateral Express Implied ExecutedOffer: Signifies to another his willingness to do or to

abstain from doing anything

Acceptance: expression of consent to offer

Competence of Parties: Age of majority, Sound Mind, Not disqualified by any law

Free Consent: Consent is free when it is not caused by the coercion, undue influence, Misrepresentation, Fraud and mistake

Coercion: Use of Force or threat to enter an agreement

Undue influence: One party is in a position to dominate the will of the other person

Mis-representation: the person making the statement believes the same to be true, contract is voidable at the option of the party where consent has been to obtained but no such remedy is available if the party seeking to avoid the contract had the means of discovering the truth with ordinary diligence

Fraud: when a false statement is made with the knowledge that it is false,

Mistake: If one or both of the contracting parties enter into a contract under some misunderstanding,

Adequate Consideration: Only requirement of law is that there must be consideration, it is not necessary that it must be sufficient or adequate consideration,

Lawful Considerations: for making agreement a valid agreement there must be lawful consideration.

CONTRACTS EXPRESSLY DECLARED AS VOID “Contracts obstructing the marriages, Contracts

obstructing the trade, Contracts obstructing the legal Proceeding, Contracts of uncertainty, Contracts of wager, Contracts for getting the impossible acts done”

Contingent Contract: Contracts under which, on the happening or non happening of any probable event, promise is made for doing or obtaining from doing any act, there lies a condition in these contracts, hence these are also known as contracts with condition

Difference between wagering agreement & contingent Contract: A wagering agreement is void whereas a contingent contract is valid, wagering agreement consists of reciprocal promises whereas a contingent contract may not contain reciprocal promises

Agreement in Restraint of trade: Section 27 “every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void,

Exceptions: Sale of Goodwill, Exceptions under the partnership act, restraint by a contact of service, trade combinations, Sole agreement

Methods for discharge of contracts: By Impossibility of performance By operation of law By performance

By mutual Agreement:- by novation by Rescission by Alteration by Remission by Lapse of time by breach of contract

Remedies available to the aggrieved party for breach of contract Right for damages, Injunction, Specific Performance, Declaratory Suit, Kinds of Damages: Nominal Damages, General Specific Remote & indirect Loss Contract of Indemnity:“A contract by which one

party promises to save the other from loss caused to him by the conduct of the promiser himself or by the conduct of any other person, is called a contract of indemnity”

Rights of Indemnity holder when he is compelled to pay: All damages which he may be compelled to pay, all costs which he may be compelled to pay, all sums which he may have paid in compromise of any such suit

Contract of Guarantee: Sec 126: “A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default.”

Kinds of Guarantee: Specific or simple guarantee, Continuity Guarantee :“A guarantee which extends to

a series of transactions, is called a continuing Guarantee”

Revocation of Continuing Guarantee: By notice of revocation, By death of surety, By discharge of surety in various circumstances

Discharge of surety from Liability: By Revocation: Notice by surety Death of surety Novation By Conduct of the creditor: Variance i.e.; charge in terms on the contract Discharge of principal debtor Loss of security

By Invalidation of contract of Guarantee: Misrepresentation Guarantee obtained by concealment Failure Co-surety to join a surety Rights of the Surety:Rights against the principal debtor: Right of subrogation Right of indemnity Right Against the creditor: Right to securities Right to claim set-offRight against the Co-sureties: Equal Contribution Liability of co-sureties bond in different sums Right to share benefits of securities

BAILMENT “Delivering of goods by one person (bailer) to another

(bailee) for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned on other wise disposed of, according to the direction of the person delivering them”

Rights of the Bailer: Receive the goods with profit Demand the goods back Revocation Loss caused by bailee Combining own goods Duties of the Bailor: Making payment of necessary expenses Declare fault of goods Giving delivery of the goods

Damages to the bailee Payment of extraordinary expenses Paying remuneration to the bailee Rights of Bailee: Realizing necessary expenses Realizing the damages Damages on the non dis-closure of the fault in good Taking delivery of goods Receiving payment of extra ordinary expenses Receiving remuneration from the bailor Duties: Not mix goods Returning the goods Bailed Giving the goods with profit

Not making unauthorized goods, Not working against the condition, Supervising the goodsPledge: A bailment of goods as a security for payment

of a debt of performance of a promise is called Pledge. The Bailor in this case is known as ‘pawnor’ and the bailee is called ’pawnee’

Right to use: Pawnee does not have any right to use the goods

Rights of Pawnee: Right of Retainer Retainer for subsequent advances Extraordinary Expenses

Duties: Reasonable Case No Unauthorized used Not to mix Not to do any act in violation of the terms of the

contract Return the goods PledgeRight of Pawnor: Enfacement of pawnees duties Defaulting Pawnor’s right to redeemDuties: To compensate Pawnee for extra ordinary expenses To meet his obligation

Agency: An ‘agent’ is that person who is employed another, to do or to represent another in dealings with the third person”

Creation of agency: By need, Clear cut contract Implied contract ConfirmationCondition when agency is terminated: Termination of agency by law: Expiry of the period Destruction of the subject matter Death of party Becoming insolvent Becoming insane

Completion of target Principal declared foreign enemy Termination by conduct of parties Termination by principal By agent Mutual

CONTRACT OF SALE “A contract of sale is a contract where by the seller

transfer or agrees to transfer the property in goods to the buyer, for a price”

Essentials: Buyer and seller Goods Price Transfer of property Element of a valid contract Meaning of ‘agreement to sale’: “A contract of sale, the property in goods is to take

place at a future time or subject to certain condition, it is called to be an ‘agreement to sell”

Meaning of condition warranties: “The stipulations which are quite significant to the

contract of sale and the breach of which is taken as breach of the contract are known as condition and the stipulation which are not so vital and breach of which known as warranties”

Doctrine of ‘caveat emptor’: “The buyer must be caution us in buying the goods,

should examine the goods as to their fitness to the purpose before he actually buy them”

Exception to the rule: Sale by description Implied condition on warrants Sale under a trade name Merchantable quality Usage of trade

Meaning of unpaid seller: “When the whole of the price has not been paid or

tendered, When a bill of exchange or any other negotiable instrument has been received as a conditional payment and the condition on which it was received has not been fulfilled by reason of dishonor of the instrument or otherwise”

Rights of an unpaid seller: Right of lien Stoppage of goods in transit Right of re sale Detain the delivery of goods Unpaid seller’s right against the buyer- Suit for the price Suit for damages Suit for interest

Implied conditions- Condition as to title Sale by description Sale by sample Samples as well as description Fitness of goods and quality Usage of trade Condition as to wholesomeness Implied warranties: Warranty by quick possession Goods being free from encumbrance

Meaning of transfer of ownership: “When the buyer becomes the owner of the goods only

there the transfer of the ownership of goods considered to have been established”

Significance: Transfer of risk Right to file suit Accruing of goods by the liquidation Meaning of sale by auction: “A sale by auction is a sale among the public, inviting

the price proposal and selling the goods to the person bidding the highest amount for purchasing”

Rules: Treating the different contracts separately Right to withdraw the bid bidding by the seller Craving no recognition Declaring the prescribed price for sale Use of pretended bidsMeaning of goods: “Means every kind of movable property other than

actionable claim and money and includes stock and shares growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”

Classification of goods: Existing goods: Specified or ascertained goods Unascertained good Future goods Contingent goodsThe price of the goods:“ Price means the money consideration for a sale of

goods” Determination of price: “By the contract of sale, By the manner agreed between

the parties, Course of dealings Reasonable price Government”

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