law of contract from the book business law sen and mitra .pptx

Undergraduate business law lecture

1. Chapter 1: Law of Contract Commercial Law including Company Law and Industrial Law - By Sen & Mitra

2. 2 What is “The Law”? Rules of permissible conduct, limits on allowable conduct - Not the same as a moral limit or rule, but is supposed to be reflective of morals and ethics - But we all know there are many things that you can do, but should not do. The Law Ethics

3. An agreement enforceable by law is a contract. In a contract there must be a) an agreement and b) the agreement must be enforceable by law. An agreement which can be enforced through the courts of law, is called a contract. Definition of Contract

4. Offer and Acceptance : There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or parties. Lawful means the offer should be confirmed by law, by the court of the certain country. Intention to create Legal Relationship : There must be an intention (among parties) that the agreement shall result in or create legal relations. Lawful Consideration : Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something and gets something. An agreement to do something for nothing is usually not enforceable by law. The Essential Elements of Contract

5. "NO CONSIDERATION NO CONTRACT"- EXCEPTIONS TO THE RULE Consideration is essential for the validity of a contract. "A promise without consideration is a gift; one made for a consideration is a bargain”. A promise without consideration is a gratuitous undertaking and cannot create a legal obligation. Under Roman law an agreement without consideration was called a nudum pactum and was unenforceable. Under English law simple contracts must be supported by consideration but specially contracts require no consideration. Under Indian law the presence of consideration is, as a rule, essential to the validity of contracts .

6. “An agreement made without consideration is void. But there are a few exceptions to the rule, where an agreement without consideration will be perfectly valid and binding. These exceptions are as follows: Agreement made on account of natural love and affection – if following conditions met: Expressed in writing It is registered Is made on account of natural love and affection Between parties standing in near relation to each other.

7. Voluntary compensation: If a person has done a voluntary service in the past and the beneficiary promises to pay at a later date, then the contract is binding provided: The service was rendered voluntarily in the past It was rendered to the promisor The promisor was in existence when the voluntary service was done The promisor showed his willingness to compensate the voluntary service Example, Peter finds Johns wallet on the road and returns it to him. John is happy to find his lost wallet and promises to pay Peter Rs 2,000. In this case, too, the no consideration no contract rule does not apply. This contract is a valid contract.

8. 4. Capacity of Parties: The parties of an agreement must be legally capable of entering into an agreement. Want of capacity arises from minority, lunacy, drunkenness, and similar other factors. If any of the parties to the agreement suffers any such disability, the agreement is not enforceable by law, except in some special cases. 5. Free Consent: In order to be enforceable, an agreement must be based on the free consent of all parties. 6. Legality of the Object: The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy. The Essential Elements of Contract

9. 7. Certainty: The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for otherwise it cannot be enforced. 8. Possibility of Performance: The agreement must be capable of being performed. 9. Void agreements: An agreement so made must not have been expressly declared to be void. 10. Writing, Registration, and Legal Formalities: An oral contract is a perfectly good contract, except in those cases where writing or registration is required by some statute. The Essential Elements of Contract

10. Free Consent It is when two or more persons agree upon the same thing and in the same sense”. So the two people must agree to something in the same sense as well. A consent is considered free consent when it is not caused or effected by the following- Coercion Undue Influence Fraud Misrepresentation Mistake

11. Coercion Coercion means using force to compel a person to enter into a contract. So force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent. Section 15 of the Act describes coercion as- committing or threatening to commit any act forbidden by the law in the IPC unlawfully detaining or threatening to detain any property with the intention of causing any person to enter into a contract For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion.

12. Undue Influence Section 16 of the Act contains the definition of undue influence. It states that when the relations between the two parties are such that one party is in a position to dominate the other party, and uses such influence to obtain an unfair advantage of the other party it will be undue influence. The section also further describes how the person can abuse his authority in the following two ways, When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary relationship with the other person. He makes a contract with a person whose mental capacity is affected by age, illness or distress. The unsoundness of mind can be temporary or permanent.

13. Undue Influence Say for example A sold her gold watch for only tk. 500/- to her teacher B after her teacher promised her good grades. Here the consent of A (adult) is not freely given, she was under the influence of his teacher.

14. Fraud Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent. When a party convinces another to enter into an agreement by making statements that are- suggesting a fact that is not true, and he does not believe it to be true active concealment of facts a promise made without any intention of performing it any other such act fitted to deceive

15. Misrepresentation Misrepresentation is also when a party makes a representation which is false, inaccurate, incorrect etc. The difference here is the misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true. 

16. Contracts can be classified into four broad divisions. These are- 1. Method of formation of a contract 2. Time of its performance 3. It’s parties 4. it’s legality or validity Classification of Contract

17. Express contract: Express contract is one which is expressed in words spoken or written. When such a contract is formed, there is no difficulty in understanding the rights and obligations of the parties. Implied Contract: The conditions of an implied contract is to be understood from the acts, the conduct of the parties and the course of dealing between them. Quasi Contract: There are certain dealings which are not contracts strictly, though the parties act as if there is contract. The contract act specifies various situations which come within what is called Quasi Contract. Classification of Contract( Method of Formation)

18. Executed contract: parties perform their obligations immediately. Executory contract: parties perform their obligations at a later time. Classification of Contract( Time of performance)

19. Bilateral contracts: At least two parties to the contract. Unilateral contracts: In certain contracts, one party has to fulfill his obligations whereas the other party has already performed his obligations. Classification of Contract( Parties of the contract)

20. Valid Void Voidable Illegal Unenforceable Classification of Contract ( Legality or Validity of the Contract)

21. Thank You