REVISION OF BUSINESS LAW SERIES LAW OF CONTRACTS FOR 2019 1

• REVISION OF BUSINESS LAW SERIES 1(2019)
  SHORT QUESTIONS
  LAW OF CONTRACT

• DR. SHASHI AGGARWAL
• MEANING OF CONTRACT
• A CONTRACT IS AN AGREEMENT TO DO OR NOT TO DO AN ACT. IT IS LEGALLY BINDING AGREEMENT
• SALMOND SAYS ,” CONTRACT IS AN AGREEMENT CREATING AND DEFINING OBLIGATIONS BETWEEN THE PARTIES.
• FREDREICK POLLOCK SAYS,” EVERY AGREEMENT AND PROMISE ENFORCEABLE AT LAW IS A CONTRACT
• TWO ELEMENTS :

1. AN AGREEMENT : SEC 2(e) EVERY PROMISE OR EVERY SET OF PROMISES FORMING THE CONSIDERATION FOR EACH OTHER. AGREEMENT INVOLVES OFFER AND ACCEPTANCE OF THE SAME BY THE OTHER PARTY.
2. AN ENFORCEABILITY OF LAW :MUST GIVE RISE TO LEGAL OBLIGATION.

• DIFFERENCE BETWEEN ILLEGAL AND VOID AGREEMENTS
• VOID AGREEMENT

1. ARE BROADER IN SCOPE
2. PARTIES TO A VOID AGREEMENT MAY NOT BE PUNISHED
3. TRANSACTIONS COLLATERAL TO VOID AGREEMENTS ARE ENFORCEABLE LAW

• ILLEGAL AGREEMENT

1.     WHICH IS EITHER PROHIBITED BY LAW OR OTHERWISE AGAINST THE POLICY

2.     VOID AND PARTIES TO AN ILLEGAL AGREEMENT MAY BE LIABLE FOR PUNISHMENT

3.     TRANSACTIONS COLLATERAL MAY BE TAINTED WITH ILLEGALITY

• MEANING OF VOIDABLE CONTRACT

1. ACCORDING TO SEC 2(I) AN AGREEMENT WHICH IS ENFORCEABLE BY LAW AT THE OPTION OF ONE OR MORE PARTIES BUT NOT AT THE OPTION OF THE OTHER OR OTHER’S A VOIDABLE CONTRACT. MISSING OF THE FREE CONSENT.
2. CONTRACT IS VALID UNTIL AT THE OPTION TO AVOID IS EXERCISED BY THE PERSON TO WHOSE CONSENT TO THE AGREEMENT WAS NOT FREE. THE OTHER PARTY WHO INDUCED THE ONE TO ENTER CAN NOT TAKE BENEFIT OF HIS OWN  FRAUD.
3. EXAMPLE:- A PERSON OF WEAK INTELLIGENCE MAKE A GIFT OF HIS ENTIRE PROPERTY TO B WHO WAS IN DOMINANT POSITION. IT IS VOIDABLE AT THE OPTION OF A

• DIFFERENCE BETWEEN OFFER AND INVITATION TO OFFER
• SECTION 2(a) DEFINES OFFER WHEN ONE PARTY SIGNIFIES TO ANOTHER HIS WILLINGNESS TO DO OR ABSTAIN FROM DOING ANYTHING WITH A VIEW TO OBTAINING THE ASSENT OF THAT OTHER TO SUCH ACT OR ABSTINENCE
• DIFFERENT FROM

1. A MERE STATEMENT OF INTENTION LIKE ANNOUNCEMENT OF AUCTION SALE
2. AN INVITATION TO OFFER: AN ADD IN THE NEWSPAPER,DISPLAY OF THE GOODS
3. A MERE COMMUNICATION OF INFORMATION
4. A CATALOGUE OF GOODS WITH PRICE
5. A CASUAL INQUIRY
6. ADVERTISEMENT BY TENDERS

• MEANING OF COUNTER OFFER,CROSS OFFER
• COUNTER OFFER
• WHEN AN OFFER IS ACCEPTED WITH SOME MODIFICATION IN TERMS OF THE OFFER OR WITH SOME OTHER CONDITIONS NOT FORMING PART OF THE OFFER SUCH QUALIFIED ACCEPTANCE AMOUNT TO  A COUNTER OFFER.
• A OFFERS TO SELL HIS BY CYCLE FOR 1000 TO B BUT REPLIES OFFERING TO PAY 900.
• CROSS OFFER

·         WHEN TWO PARTIES MAKE IDENTICAL OFFERS TO EACH OTHER  IN IGNORANCE OF OTHER’S OFFER SUCH OFFERS ARE KNOWN AS CROSS OFFER.

• COMPETENCY OF THE PA RITES
• SECTION 11 OF THE CONTRACT ACT DEALS WITH THE COMPETENCY OF PARTIES AND PROVIDES THAT EVERY PERSON IS COMPETENT TO ENTER INTO CONTRACT WHO IS THE AGE OF MAJORITY ACCORDING TO THE LAW TO WHICH HE IS SUBJECT AND WHO IS OF SOUND MIND AND IS NOT DISQUALIFIED FROM CONTRACTING BY ANY LAW TO WHICH HE IS SUBJECT.
• FOLLOWING PERSONS ARE THE INCOMPETENT TO ENTER INTO CONTRACT:-

1. MINOR
2. PERSON OF UNSOUND MIND
3. PERSON DISQUALIFIED BY ANY LAW TO WHICH THEY ARE SUBJECT.

• DIFFERENCE BETWEEN
• VOID CONTRACT

1. IT WAS VALID BUT SUBSEQUENTLY IT BECOMES VOID
2. AN AGREEMENT WHICH BECOMES ILLEGAL IN THE COURSE OF PERFORMANCE IS A CASE OF VOID CONTRACT.

• VOID AGREEMENT

1. NOT ENFORCEABLE AT LAW
2. NO CONTRACT COMES INTO EXISTENCE
3. AN AGREEMENT WITH MINOR  IS VOID
4. FROM THE VERY BEGINNING IT  HAS NO LEGAL EFFECT
5. IT IS VOID AB INITIO AND DEFECTS ARE INCURABLE
6.  

• VOIDABLE CONTRACT
• ONE OF THE PARTIES MAY AFFIRM OR REJECT
• IT IS VALID AND ENFORCEABLE TILL IT IS CANCELLED AND IT IS CURABLE
• THIRD PARTY CAN ACQUIRE A VALID TITLE
• ELIGIBLE FOR COMPENSATION IN CASE OF NON PERFORMANCE

• FREE CONSENT
• FREE CONSENT OF ALL THE PARTIES TO A CONTRACT IS ONE OF THE ESSENTIAL ELEMENTS OF CONTRACT AS PER SECTION 10
• THE PARTIES TO CONTRACT SHOULD HAVE IDENTITY OF MIND
• TWO OR MORE PERSON ARE SAID TO CONSENT WHEN THEY AGREE UPON THE SAME THING IN THE SAME SENSE ( SECTION 13)
• NOT ONLY THE PARTIES TO CONTRACT SHOULD HAVE IDENTITY OF MIND BUT THE CONSENT OF THE PARTIES MUST BE REAL AND FREE
• FREE CONSENT IS THE CONSENT WHICH IS HAS BEEN OBTAINED BY THE FREE WILL OF THE PARTIES OUT OF THEIR OWN ACCORD
• ACCORDING TO SECTION 14, CONSENT IS SAID TO BE FREE WHEN IT IS NOT CAUSED BY :

1. COERCION OR
2. UNDUE INFLUENCE
3. OR FRAUD
4. OR MISREPRESENTATION
5. OR MISTAKE

• FREE CONSENT

1. WHEN CONSENT TO AGREEMENT IS CAUSED BY COERCION,UNDUE INFLUENCE,MISREPRESENTATION OR FRAUD,THE CONTRACT IS VOIDABLE AT THE OPTION OF THE PARTY WHOSE CONSENT IS NOT FREE
2. WHEN CONSENT IS CAUSED BY MISTAKE,THE AGREEMENT IS VOID

• DIFFERENCE BETWEEN COERCION AND UNDUE INFLUENCE

1. COERCION IS THREAT OR FORCE USED BY ONE PARTY AGAINST ANOTHER FOR COMPELLING HIM TO ENTER INTO AGREEMENT
2. SECTION 16 OF THE INDIAN CONTRACT ACT DEFINES COERCION AS THE
3. AS THE COMMITTING OR THREATENING TO COMMIT ANY ACT AS FORBIDDEN BY THE INDIAN PENAL CODE
4. OR UNLAWFUL DETAINING OR THREATENING TO COMMIT ANY ACT FORBIDDEN BY THE INDIAN PENAL CODE OR
5. AN UNLAWFUL DETAINING TO DETAIN,ANY PROPERTY TO THE PREJUDICE OF ANY PERSON WITH THE INTENTION OF INDUCING ANY PERSON TO ENTER INTO AN AGREEMENT.
6. IT IS IMMATERIAL WHETHER THE INDIAN PENAL CODE  IS NOT FORCE IN THE PLACE WHERE THE COERCION IS EMPLOYED.

• UNDUE INFLUENCE

1. IS MORAL COERCION AS OPPOSED TO PHYSICAL COERCION (15)
2. DOMINATION OF WEAK MIND BY A STRONG MIND TO AN EXTENT WHICH CAUSES THE BEHAVIOR OF WEAKER PERSON TO ASSUME AN UNNATURAL CHARACTER
3. SECTION 16 OF THE INDIAN CONTRACT ACT :
4. A CONTRACT IS SAID TO BE INDUCED BY UNDUE INFLUENCE
5. WHERE THE RELATION SUBSISTING BETWEEN THE PARTIES ARE SUCH THAT ONE OF THE PARTIES IS IN A POSITION TO DOMINATE THE WILL OF OTHER AND USES THE POSITION TO OBTAIN AN UNFAIR ADVANTAGE OVER THE OTHER.

• DIFFERENCE BETWEEN UNDUE INFLUENCE AND COERCION
• COERCION

1. USE OF PHYSICAL FORCE
2. NEED NOT PROCEED FROM THE PROMISEE NOR NEED IT BE DIRECTED AGAINST THE PROMISOR.
3. MAY PROCEED FROM A STRANGER TO CONTRACT AND MAY BE DIRECTED AGAINST STRANGER

• VOIDABLE CONTRACT

1. INVOLVES CRIMINAL ACT
2. UNDUE INFLUENCE
3. USE OF MORAL PRESSURE
4. MUST BE SOME RELATION BETWEEN THE PARTIES WHICH PLACES ONE PARTY IN A POSITION TO DOMINATE THE WILL OF OTHER
5. EITHER VOIDABLE OR THE COURT MAY SET ASIDE OR ENFORCE IT MODIFIED FORM
6. NO CRIMINAL ACT

• UNCERTAIN AGREEMENT
• SECTION 29 PROVIDES THAT AN AGREEMENT THE MEANING OF WHICH IS NOT CERTAIN OR CAPABLE OF BEING MADE CERTAIN IS VOID
• IF THERE IS AMBIGUITY IN THE WORDING OF THE CONTRACT,NOT POSSIBLE TO READ THE EXACT INTENTION OF THE PARTIES TO CONTRACT
• AN AGREEMENT TO SELL AT A CONCESSIONAL RATE IS VOID FOR UNCERTAINTY
• AGREEMENT IN WHICH PRICE IS TO BE BASED ON LUCK OR AN UNCERTAIN EVENT ARE VOID FOR UNCERTAINTY
• AGREEMENT OT AGREE IS FUTURE
• GUTHING V LYNN:
• THE BUYER OF A HORSE AGREED TO PAY FIVE POUND MORE IF THE HORSE PROVED TO BE LUCKY.