Business Legislation PPT - UNIT 1 jimllpkggg

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1. Topic : MBA
Subject Code: MMBA22004
Subject Name: Business Legislation
Delivered by : Dr. C.Balakrishnan

2. UNIT-1, CONTRACT
What is Contract?
•The contract act determines the circumstancescircumstances in which
promisespromises made by the partiesparties to the contract shall be legally legally
bindingbinding on them.
•It also determines the remedies against the breach of
contract.

3. Definition of Contract
•According to Indian Contract Act,1872
“A Contract is an agreement enforceable by law”
•A Contract is an agreement made between two or more parties which
the law will enforce.
•A contract is an agreement creating an defining the obligations
between the parties.

4. Two Main Aspects of the definition
1.An Agreement:
Offer + Acceptance
•There must be a proposal by one party and it must accepted by the
another party.
•Sec 2(e) “Every promise or set of promises forming consideration
for each other”

5. Example 1:
•If Ramesh promises to sell a bag of rice to Ravi for Rs.1000/- and Ravi
agrees to pay Rs.1000/- Is it a valid agreement?
•Yes, because both the parties are agreed upon same thing in same
manner.
•Here, Ramesh is a promisor and Ravi is a promisee.

6. 2. Legal Obligation:
•An agreement to become a contract, must give rise to a legal
obligation or duty.
•An agreement which creates social or moral obligation is not a
contract.
•An obligation is a legal duty to do or to abstain from doing something

7. Example1:
•A promises to sell his car to B for Rs.1,00,000/- and B agrees to pay
Rs.1,00,000/-
•Here, the agreement gives rise to create legal obligation on a part of
A to sell his car and on the part of B to pay Rs.1,00,000/-. Thus, this
agreement is a contract.

8. Example2:
•A father promises his son to pay Rs.5,000/- per month as a pocket
money.
•Later, father refuses to pay money to his son.
•Son can neither recover money nor imposed any penalty on his
father.
•As there was no intension to create any legal obligations

9. Essentials of Valid Contract
1.Offer and Acceptance:
•Offer by one party and acceptance by other party
•Offer must be definite and clear
•Acceptance to the offer should be unconditional

10. 2.Intension to create legal relationship:
•Every agreement should aim at creating legal obligation to be a valid
contract
•Agreements creating social obligations is not considered as a valid
contract.
•An agreement between to friends to have lunch together or to go for
a movie can not be a valid contract as their intension is not create any
legal relationship.

11. 3. Lawful Consideration:
•An agreement to be a valid contract, must be supported by a lawful
consideration.
•Consideration may not be always in money terms, it may be like to do
something or abstain from doing something.
•As consideration is a advantage or benefit moving from one party to
another

12. 4. Capacity of Parties:
•The parties to a contract must competent to enter into a valid
contract:
•Who is a competent person?
•Who is a age of majority.
•Must be of sound mind.
•Must not be disqualified from contracting by any law to which he is subject.

13. 5. Free Consent:
•There must a free consent in order to establish a valid contract.
•consent is a free consent when all the parties to the contract are
agreed on the same thing in same manner.
•And it is not influenced by:
•Coercion
•Undue influence
•Fraud
•Mispresentation

14. 6. Lawful Object:
•The object of a contract must be lawful
•It must not be :
• Immoral
•Ilegal
•Opposed to public policy

15. 7. Agreement not declared as ‘Void’:
•The agreement must not be expressly declared as void by law in force
in the country.
•Child Marriage is expressly declared void agreements.

16. 8. Certainty and Possibility to Perform:
•Conditions to the contract must be:
•Definite
•Clear
•Able to perform
•If A agrees to put life into B’s dead wife, will it be a valid contract?
•No, as action in the agreement is impossible to perform

17. 9. Legal Formalities
•A valid contract may written or verbal
•Some agreements need to comply with certain legal formalities to
establish a valid contract.
•Partnership Deed
•Renting house

18. Classification of Contracts
•Valid Contract:
•An agreement becomes contract when it is enforceable by law.
•It has all essentials of valid agreements
•If any one or more of these essentials is missing
•Contract becomes either void, voidable or unenforceable.

19. Voidable Contract
•An agreement which is enforceable by law at the option of one or
more of the parties thereto, but not at the option of other party
•Generally contracts become voidable in case where consent to the
contract is not free consent.
•Consent is not free consent when it is induced by coercion, influence
or misrepresentation.

20. On the basis of Formation
•Express Contract:
•Terms and conditions to the contract are expressly agreed at the time of
formation.
•Contract may be written or verbal
•A landlord presented a preprinted a lease contract of renting out his house
and Mr.B agrees to terms and conditions to the lease and signs the
agreement, this is express written contract.

21. Implied Contract
•A contract which inferred from the acts or conduct of the parties
•Implied contract is a contract where the offer and acceptance to the
proposal is made otherwise than in words
•Eg – Mr.Ankit gets into a bus. Where, passenger never expressly
makes an offer to the conductor for getting into the bus

22. On the basis of Performance
•Executed Contract:
•An executed contract is one in which both the parties have performed their
respective obligations.
•Eg- A agrees to paint a picture for B for Rs.1000/-. When A paints a picture
and B pays Rs.1000/- to B then the contract is said to be executed.

23. Executory Contract
•An executory contract is a contract in which both the parties or one
of the parties to the contract yet have to perform their obligations.
• Eg- If Mr.B has paid to Mr.A and Mr.A has not painted the picture
yet. The contract is executed on the part of Mr.B but it is an
executory contract on the part of Mr.A

24. Discharge of contract
Meaning:
•Discharge of contract means termination of the contractual
relationship between the parties
•Contract is said to be discharged when the rights and
obligations created by it come to an end
•A contract may be discharged-
•By performance
•By consent
•By impossibility of performance
•By lapse of time
•By operation of law
•By breach of contract

25. By Performance:
•It takes place when the parties to the contract fulfil their obligations
arising under the contract within the time and in the manner
prescribed
•If only one party performs the promise, he alone is discharged, such a
party gets a right of against the other party who is guilty of breach

26. Performance of contract may be
•Actual performance: Actual parties perform their obligations, the
contract is said discharged
•Both the parties should follow all the terms and conditions of the
contract

27. Attempted performance
•When the promisor offers to perform his obligation under the
contract but is unable to do because the promisee does not accept
the performance, it is called attempted performance
• thus, tender is only an offer to perform

28. Discharge by Consent:
•It is an agreement of parties which binds them, by their further
agreement or consent the contract may be terminated
•If a contract is discharged with the mutual consent, it is legally
discharged.

29. Subsequent Impossibility/illegality
•In this case, the impossibility supervenes after the contract has been
made, the contract is said to be discharged
•A contract to do an act which, after contract is made, becomes
impossible or unlawful, the agreement is said to be discharged

30. Cases of subsequent impossibility:
•Change of law
•Death or personal incapacity of promisor
•Outbreak of war

31. Lapse of Time:
•The party suffered due to breach of contract can take legal action
against the other party within a specified time period.
•If that period is over, the right to sue lapses and contract stands
discharged

32. Operation of law:
1.Death:
•In contracts of personal nature, the death of promisor discharges the
contract
•In other contract, the rights and liabilities of deceased person pass on to
the legal representative
2.Insolvency:
•A contract is discharged by the insolvency of one the parties to it after
‘order of discharge’ is passed by the court

33. 3. Merger:
•A inferior contract merges into superior right contract, the contract
get discharged automatically
•A part time service converted into full time job
4. Unauthorized Material Alteration:
•A material alteration made in a written document or contract by
one party without the consent of other, will make the contract
void

34. Discharge by breach of contract:
•When one party to a contract has refused to perform, or disabled
himself from performing his promise in its entirely
•The party has right to rescind it
•Breach may be:
•Anticipatory Breach
•Actual Breach

35. Anticipatory Breach
•It occurs before the time fixed for performance has arrived
•It may take place by two ways:
•Express by spoken or written words
•Anticipatory breach of contract by implication by the conduct of the one of
the parties

36. Express by spoken or written words:
•Here, one party to the contract communicates to the other to the
contract, before due date of performance, his intension not to
perform it
•A had greed to sale 100 bags of wheat to B for Rs.60,000/- on 1
st

march and on 15
th
Feb, A informs B that he will not be able to supply
the wheat.

37. Anticipatory breach of contract by implication
by the conduct of the one of the parties
•Here, party by his own voluntary act disables himself from
performing the contract
•A greed to marry B, but before that A married to C

38. Effects of Anticipatory Breach:
1.Promisee is excused from performance
2.Promisee (aggrieved party) can treat the contract as rescinded
(cancelled) and sue the other party for damages
3.Promisee may decide not to cancel but to treat the contract as still
operative and wait for the time of performance and then hold the
other party responsible for the consequences of nonperformance

39. Actual Breach:
•It occurs when a party fails to perform his obligation on the date and
time fixed for performance of the contract
•Here, the affected party can sue the party in default for damages for
breach of contract
•A agrees to deliver B, 5 bags of wheat on 1
st
Jan. He fails to do so on
1
st
Jan. There is a breach of contract

40. Quasi Contracts