Law of Contract

Naiem Jalal Uddin Ahamed

Law Of Contract
Law Of Contract
According to Section 2 (h) of the Indian Contract Act 1872, An agreement enforceable by law is a contract Elements of Contract 1. An agreement : Every promise and every set of promises, forming the consideration for each other is an agreement S -2(e). A proposal when accepted becomes a promise.

2. Legal Obligation : It is duty enforceable by law . All contracts are agreement but all agreement are not contract.

Essential Elements of Valid Contract

1. Offer and Acceptance 2. Intention to create Legal Relation 3. Lawful Consideration :Price paid by one party for the promise of the other. It may be an act or forbearance or a promise to do or not to do something.

4. Capacities of parties : Parties must be of the age of minority and of sound mind and must not be disqualified from contracting by any law to which they are subject to compete (Sec 11) 5. Free consent : Consent means that the parties must be agreed upon the same thing in the same sense (Sec 13). If the agreement is induced by i) coercion ii) undue influence iii) fraud iv) mis representation v) mistake would be voidable. 6. Writing and registration : Contract may be oral or in writing. Example an agreement to pay a time barred debt must be in writing

7.Lawful Object : The object for which the agreement

has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property of another (Sec. 23). 8.Certainty : Sec. 29 of the contract Act provides that Agreements, the meaning of which is not certain or capable of being made certain, are void. 9. Possibility of Performance : Sec. 56 An agreement to do an act impossible in itself is void

10 . Not expressed declared void : an agreement In restraint of marriage, in restraint of trade. Legality or Validity of the Contract: 1. Valid contract : An agreement becomes enforceable by law when all the essential elements of a valid contract are present. 2. Voidable contract : Sec 2(i) , An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

. Void Contract : Sec 2(j), A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable. Supervening impossibility : Sec 56 Subsequent illegality : Sec 56 Repudiation of a voidable contract In the case of a contract contingent on the happening of an uncertain future event, if that event becomes impossible.

Legality or Validity of the Contract

Void agreement : A void agreement never amounts to a contract as it is void. A void contract is valid when it is enter into contract. When an agreement discovered to be void : A pays B 10000 TK agreeing to sell his horse, by that time horse was dead When a contracts become void : A agrees to sell wheat in advance of TK 1000 to B , by that time private sales of wheat are prohibited by an act of legislature. A must return the money.

Unenforceable contract : Bill of exchange or promissory note, though valid in itself, becomes unenforceable after three years from the date the bill or note falls due, being time barred under the limitation Act. 5. Illegal or unlawful contract : An agreement is illegal and void if its object i) is forbidden by law ii) would defeat the provision of any law iii) is fraudulent iv) involves injury to the person or property of another v) the court regards it as immoral or opposed to public policy. (Sec. 23)

 Illegal or void agreement distinguished : All illegal agreement are void but all void agreements are not necessarily illegal. Ex- A engages B to murder C and borrow 5000 TK from D to Pay B. D is aware of the purpose of the loan. Method of Formation: Express contract : An agreement enforceable at law are made in words spoken or written. Ex A tells B on telephone that he offers to sell his car for 20,000 in reply informs A that he accepts the offer.

 Implied contract : Ex Shoes shiner, coolie Contracts of mixed character A offers to buy Bs scooter for TK 4000 and B accepts the offer by sending the scooter itself. Constructive or quasi contract : It is based upon the equitable principle that a person shall not be allowed to retain unjust benefit at the expense of another (Sec 68-72 ) Ex Obligation of finder of lost goods to return them to the true owner

Time of Performance
Executed contract : Both the parties have completed their share of obligation. Ex Bookseller Unilateral contract One party has performed and other party is still perform his share of obligation. Ex M advertises a reward of TK 1000 to anyone who finds his missing son. Executory contact : Ex Teaching contract between teacher and student. Car deed between M and N

Parties of contract
1. Bilateral Contracts: There must be at least two parties to the contract. 2. Unilateral Contract: In certain contracts one party already fulfill his obligation where as the others hasto fulfill his.

Offer and Acceptance

when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.2(a)

The person making the proposal or offer is called promisor or offeror, the person to whom the offer is made is called the offeree and the person accepting the offer is called the promisee or acceptor.

Rules Regarding Offer

1. An offer may be express or implied 2. An offer must be certain 3. Legal relationship is required 4. A mere statement of intention is not an offer Advertisement Auction Timetable 5. An offer must be communicate to the offeree Ex Return boy, or dog.

6. An offer may be conditional Strict enforcement : LEstrange v. Graucob Ltd Unreasonable Ex Laundry 7. An offer may be specific 8. Two identical crossoffers do not take a contract Ex- both parties offer

Acceptance
A proposal when accepted becomes a promise and defines acceptance as when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted Sec 2(b)

Rules regarding acceptance

1. It must be an absolute and unqualified acceptance of all the terms of offerSec7(1) 2. Conditional Acceptance 3. Contracts subject to condition 4. Clarification 5. The acceptance must be expressed in usual or reasonable manner

6. Mental acceptance or un-communicated assent does not result in a contract 7. The mode of acceptance 8. Time of acceptance 9.When acceptance is complete 10.Before offer 11. The acceptance must be made while the offer is in force

Communication of Offer and Acceptance

How is an offer to be Communicated:
An offer may be communicated to the offeree or offerees By word of mouth , by writing or by conduct. How is an acceptance to be communicated: The acceptance must be expressed in some usual or reasonable manner Sec-7(2)

By underlying ways offer and acceptance could be communicated: 1. Offer and acceptance by post 2. Offer and acceptance through Telephone 3. Microphone

Revocation
Revocation of the offer means when the offer lapse. An offer comes to an end and is no longer open to acceptance under the following circumstances: 1. By Notice 2. By lapse of time 3. After expiry of reasonable time

4. By failure of a condition precedent 5. By death 6. Counter offer 7. By refusal

Revocation of Acceptance:
Section 5 of the contract act provides that an acceptance can be revoked any time before the acceptance comes to the knowledge of the proposer but not afterwards.
But according to the English law an acceptance is irrevocable once it is put in course of communication to the offeror.

Communication of the Revocation:

According to section 3 of the act , the revocation of a proposal or an acceptance is deemed to be made by any act or omission of party by which he intends to communicate such revocation, or which has the effect of communication it.

According to section 4 of the act , the communication of revocation is completeAs against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out Of the power of the person who made it. As against the person to whom it is made, when it comes to his acknowledge.

Consideration
When at the desire of the promisor, the promisee or any other person has done or abstained from doing , or does or abstains from doing, or promises to do or to abstain from doing, something , such act or abstinence or promise is called a consideration for the promise2(d) Ex selling property, maintaining child A promises his debtor B (Bankrupt) not to file a suit against him for one year on Bs agreeing to pay him 100 TK more. The promise to each other is the consideration for Bs promise to pay.

Types of consideration
1. Past Consideration 2. Present Consideration 3. Future Consideration

Rules Regarding Consideration

1. 2. 3. 4. 5. 6. Desire of the promisor is essential The consideration must be real Public duty Promise to a stranger Consideration need not to be adequate The consideration must not be illegel, immoral, or opposed to public policy 7. The consideration may be past , present or futute.

8. Consideration may move from the promisee or from any other person. 9. What is good consideration?

Differences between English and Indian Law Regarding Consideration

1. The Indian law of contract doesn't make any distinction between formal and simple contracts. 2. Under English law past consideration is no consideration. But according to Indian law past consideration is good consideration

3.Under English law , consideration must move from the promisee. Under Indian law, it may move from the promisee or any other person. 4. The rules regarding Devolution of Joint Rights and Liabilities are different.

Promise to Charities
A promise to make a contribution to charity is not enforceable because it is without consideration.

No Consideration No Contract
Exceptions to the Rule: 1.Natural love and affection: An agreement without consideration is valid under section25(1) only if the following requirements are complied with: a) The agreement is made by written b) The document is registered according to the law relating to registration in force at the time

c) The agreement is made on account of natural lover and affection. d)The parties to agreement stand in a near relation to each other

2. Voluntary consideration 3.Time-barred debt 4.Agency 5. Completed gift

Stranger to contract:
Exceptions: 1. Beneficiaries in the case of trust 2. Provision of marriage settlement of minor 3. Assignee of a contract 4. Family settlement 5. Acknowledgement or Estoppel

Rights and Liabilities of a Stranger

With the exception of some cases, a contract cannot confer rights upon a person who is not a party to it. Also, a contract cannot impose a liability upon a person who is not a party to it.