Indian Contract Act 1872.pdf

INDIAN CONTRACT ACT PPT

1. Indian Contract
Act 1872
-ANIMESH KUMAR

2. Contract Defined
A contract is an agreement made between two parties which the law
will enforce.
Section 2 (h) of ICA 1872 defines contract as an agreement
enforceable by law
1.Offer and Acceptance
2.Intention to Create a Legal Relationship
3.Capacity to Contract
4.Genuine and free Consent
5.Lawful object
6.Lawful Consideration
7.Certainty and possibility of performance
8.Legal Formalities

3. FREE Consent DEFINED....
Section 13) Consent Defined-Two or More persons are said to consent
when they agree upon the same thing in the same sense.
Section 14) Free Consent Defined:-Consent is said to be free when it is not
caused by –
1.Coercion (Section 15)
2.Undue Influence (Section 16)
3.Fraud (Section 17)
4.Misrepresentation (Section 18)
5.Mistake, Subject to the provisions of Sections 20, 21 and 22

4. Pharmaceutical Society of Great
Britain vs. Boots Cash Chemists Ltd
Facts: The defendant ran a self-service shop in which non-prescription drugs and medicines,
many of which were listed in the Poisons List provided in thePharmacy and Poisons Act
1933,were sold. These items were displayed in open shelves from which they could be
selected by the customer, placed in a shopping basket, and taken to the till where they would
be paid for. The till was operated by a registered pharmacist. However, the claimant brought
proceedings against the defendant for breach of section 18(1) of thePharmacy and Poisons
Act 1933, which requires the supervision of a registered pharmacist for the sale of any item
in the Poisons List.
Issues: The question was whether the contract of sale was concluded when the customer
selected the product from the shelves (in which case the defendant was in breach of the Act
due to the lack of supervision at this point) or when the items were paid for (in which case
there was no breach due to the presence of the pharmacist at the till).
Held: The Court of Appeal held that the defendant was not in breach of the Act, as the
contract was completed on payment under the supervision of the pharmacist. The display of
the goods on the shelves were not an offer which was accepted when the customer selected
the item; rather, the proper construction was that the customer made an offer to the cashier
upon arriving at the till, which was accepted when payment was taken.

5. Balfour vs. Balfour
 FACTS:TheDefendanthusbandandthePlaintiffwifelivedinCeylonwheretheDefendantworked.In
1915,whiletheDefendantwasonleave,thecouplereturnedtoEngland.Whenitwastimetoreturnto
Ceylon,thePlaintiffwasadvisednottoreturnbecauseofherhealth.PriortotheDefendantreturning,he
promisedtosendthePlaintiff£30permonthassupport.
Theparties’relationshipdeterioratedandthepartiesbeganlivingapart.ThePlaintiffbringssuitto
enforcetheDefendant’spromisetopayher£30permonth.Thelowercourtfoundtheparties’
agreementconstitutedacontract.
ISSUE:Doesthehusbandspromisetopay£30permonthconstituteavalidcontractwhich
canbesuedupon?
HELD:Thecourtfirstrecognizedthatcertainformsofagreementsdonotreachthestatusofa
contract.Anagreementbetweenahusbandandwifeisoftentimessuchaformofagreement.Insuch
agreements,onepartyisgiveacertainsumofmoneyonadaily,weekly,monthly,etc..basis.

6. Contracts of
Indemnity & Guarantee
TheContractsofIndemnity(Reimbursementofaloss)Sec124:hasbeendefinedas:
"Acontractwherebyonepartypromisestosavetheotherfromlosscausedtohimbytheconductof
thepromisorhimselforbytheconductofanyotherperson,iscalledacontractofindemnity”.
IllustrationAcontractstoindemnifyBagainsttheconsequencesofanyproceedingswhichCmay
takeagainstBinrespectofacertainsumof200rupees.Thisisacontractofindemnity.Thisisa
contractofindemnity."
ContractofGuarantee(SuretytotheCreditor):Sec.126oftheIndianContractAct1872,whichdeals
withthecontractofguarantee,hasdefineditas“Acontracttoperformthepromise,ordischarge
theliabilityofathirdpersonincaseofhisdefaults”.
Example:AadvancesaloanofRs.10,000toB,andCpromisesAthatifBdoesnotrepaytheloan,I
willrepayit.Thisisacontractofguarantee.Itinvolvesthreepartiesnamely,
Surety,whogivestheguarantee.
PrincipalDebtor,inrespectofwhosedefaulttheguaranteeisgiven.
Creditor,towhomtheguaranteeisgiven.

7. Difference between Indemnity and
Guarantee
Indemnity
Mr. Joe is a shareholder of Alpha Ltd. lost his share certificate. Joe
applies for a duplicate one. The companyagrees, but on the
condition that Joe compensates for the loss or damage to the
company if a third person brings the original certificate.
Guarantee
Mr. Harry takes a loan from the bank for which Mr. Joesphhas given
the guarantee that if Harrydefault in the payment of the said amount
he will discharge the liability. Here Joseph plays the Role of Surety,
Harry is the principal debtor and Bank isthe creditor.

8. Difference between Indemnity and
Guarantee
In a contract of Indemnity there are two parties i.e. indemnifier and indemnified. A contract of
Guarantee involves three parties i.e. creditor, principal debtor and surety.
An indemnity is for reimbursement of a loss, while a guarantee is for Security of the creditor.
In a contract of Indemnity the liability of the indemnifier is primary and arises when the
contingent event occurs. In case of a contract of guarantee the liability of surety is secondary
and arises when the principal debtor defaults.
The indemnifier after performing his part of the promise has no rights against the third party.
Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of
his liability, and may sue the principal debtor.

9. Contingent Contract
A "contingent contract" is a contract to do or not
to do something, if some event, collateral to such
contract, does or does not happen.
Illustration:
A contracts to pay to B Rs. 10,000 if B's house is burnt.
This is a contingent contract.

10. Quasi Contract (Section -68 to 72)
A contract created by the court in the absence of an official agreement between the
parties.
Let's say you pay for a pizza to be delivered. If that pizza is delivered to another
house, and someone else enjoys your three-topping special, a quasi contract could
be initiated. Now, the pizzeria could be court ordered to reimburse you for the
amount you paid for that pie.

11. Discharge of contract
Dischargeofacontractimpliesterminationofcontractual
obligations.Thisisbecausewhenthepartiesoriginallyenteredinto
thecontract,therightsanddutiesintermsofcontractual
obligationsweresetup.
Consequentlywhenthoserightsanddutiesareputoutthenthe
contractissaidtohavebeendischarged.Onceacontractstands
discharged,partiestoitarenomoreliableeventhoughthe
obligationsunderthecontractremainincomplete.

12. A Contract is deemed to be discharged, that is, concluded
and no longer binding, in the following circumstances
Discharge by Performance.
Discharge of Contract by Substituted Agreement.
Discharge by Lapse of time.
Discharge by Operation of law.
Discharge by Impossibility of Performance.
Discharge by Accord and Satisfaction.
Discharge by Breach.

13. Hart v O’Connor [1985] 1 AC 1000
Facts: Hart wished to purchase a farm, with very favourableterms to
himself, from O’Connor, the farm’s trustee
O’Connor agreed to the purchase
Unknown to both parties, O’Connor was suffering from senile
dementia
Issue: Could the contract be set aside due to unconscionable
conduct or mental incapacity
Decision: Yes, for mental incapacity, not unconscionable conduct
Reasoning: Unconscionable conduct was not present as Hart did
not know of the dementia and the terms were set out by Hart’s
solicitor and merely accepted by Hart, then in turn O’Connor

14. Breach of Contract
The Section 73 of theIndian Contract Act,1872deals with the
compensation for loss or damages caused by a party forbreach of
contract.
When acontracthas been broken the injured party can recover from
the other party such damages as naturally and directly arose in the
usual course of things from thebreach.
Remedies for the Breach of contract:
1.Recession of the contract
2.Sue for Damages
3.Sue for specific performance
4.Injunction
5.Quantum Meruit

15. Meaning & Remedies
Recession of Contract : When one of the parties to a contract does not fulfil his obligations, then the other
party can rescind the contract and refuse the performance of his obligations.
Sue for Damages :Section 73 clearly states that the party who has suffered, since the other party has
broken promises, can claim compensation for loss or damages caused to them in the normal course
ofbusiness.
Sue for Specific Performance: Specific performanceis a remedy developed by principle of equity. A party
to a contract who is damaged because the contract is breached by another party has the option to file a
suit forspecific performancecompelling to perform his part of contract
Injunction :A judicial order restraining a person from beginning or continuing an action threatening or
invading the legal right of another, or compelling a person to carry out a certain act, e.g. to make
restitution to an injured party.
Quantum Meriut: Payment for the value of goods or services as partial fulfillment of a contract, or when
there is no contract specifying a price in the transaction.

16. Agency -Creation of Agency
Creation of Agency: Agency is a relationship between a principal
and an agent in which the principal confers his or her rights on the
agent to act on principal's behalf. Such a relationship is based on
an agency contract.
Agency system is very popular in the current business scenario. There
are two parties in the agency system one is the principal and
another is the agent. An agent is a person acting on behalf of his
principal.
By Express or implied Contract
By Ratification
By Conduct of party or situation
By Necessity

17. Agent and Principal
(Relationship/rights)
Section 182: Agent and Principle Defined: -An
‘agent’ is a person employed to do so any act for
another or to represent another in dealings with the
third person.
The Person for whom the such act is done or who is
so represented, is called the ‘Principal’.

18. Types of Agency
Types of Agents
Special Agent-Agent appointed to do a singular specific act.
General Agent-Agent appointed to do all acts relating to a specific
job.
Sub-Agent-An agent appointed by an agent.
Co-Agent-Agents together appointed to do an act jointly.