INDIAN CONTRACT ACT

AGREEMENT Sec 2(e ) “Every set of promises, forming consideration for each other” Essentials: Two parties competent to contact Consideration Free consent Contract: Sec 2(b): enforceable by law Essentials of a valid contact: Agreement, Capacity of parties, Free Consent, Lawful Consideration, Lawful Object, Agreement not expressly declared as void, Legal formalities

Type of Contract: Void Voidable Illegal Un-enforceable Contract Unilateral Bilateral Express Implied Executed Offer: Signifies to another his willingness to do or to abstain from doing anything Acceptance: expression of consent to offer

Competence of Parties: Age of majority, Sound Mind, Not disqualified by any law Free Consent: Consent is free when it is not caused by the coercion, undue influence, Misrepresentation, Fraud and mistake Coercion: Use of Force or threat to enter an agreement Undue influence: One party is in a position to dominate the will of the other person Mis-representation: the person making the statement believes the same to be true, contract is voidable at the option of the party where consent has been to obtained but no such remedy is available if the party seeking to avoid the contract had the means of discovering the truth with ordinary diligence

Fraud: when a false statement is made with the knowledge that it is false, Mistake: If one or both of the contracting parties enter into a contract under some misunderstanding, Adequate Consideration: Only requirement of law is that there must be consideration, it is not necessary that it must be sufficient or adequate consideration, Lawful Considerations: for making agreement a valid agreement there must be lawful consideration.

CONTRACTS EXPRESSLY DECLARED AS VOID “Contracts obstructing the marriages, Contracts obstructing the trade, Contracts obstructing the legal Proceeding, Contracts of uncertainty, Contracts of wager, Contracts for getting the impossible acts done” Contingent Contract: Contracts under which, on the happening or non happening of any probable event, promise is made for doing or obtaining from doing any act, there lies a condition in these contracts, hence these are also known as contracts with condition Difference between wagering agreement & contingent Contract: A wagering agreement is void whereas a contingent contract is valid, wagering agreement consists of reciprocal promises whereas a contingent contract may not contain reciprocal promises

Agreement in Restraint of trade: Section 27 “every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void, Exceptions: Sale of Goodwill, Exceptions under the partnership act, restraint by a contact of service, trade combinations, Sole agreement Methods for discharge of contracts:  By Impossibility of performance  By operation of law  By performance

By mutual Agreement:-  by novation  by Rescission  by Alteration  by Remission  by Lapse of time  by breach of contract

Remedies available to the aggrieved party for breach of contract Right for damages, Injunction, Specific Performance, Declaratory Suit, Kinds of Damages: Nominal Damages,  General  Specific  Remote & indirect Loss Contract of Indemnity:“A contract by which one party promises to save the other from loss caused to him by the conduct of the promiser himself or by the conduct of any other person, is called a contract of indemnity”

Rights of Indemnity holder when he is compelled to pay: All damages which he may be compelled to pay, all costs which he may be compelled to pay, all sums which he may have paid in compromise of any such suit Contract of Guarantee: Sec 126: “A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default.” Kinds of Guarantee: Specific or simple guarantee, Continuity Guarantee :“A guarantee which extends to a series of transactions, is called a continuing Guarantee”

 Revocation of Continuing Guarantee: By notice of revocation, By death of surety, By discharge of surety in various circumstances Discharge of surety from Liability: By Revocation:  Notice by surety  Death of surety  Novation  By Conduct of the creditor:  Variance i.e.; charge in terms on the contract  Discharge of principal debtor  Loss of security

By Invalidation of contract of Guarantee:  Misrepresentation  Guarantee obtained by concealment  Failure Co-surety to join a surety  Rights of the Surety: Rights against the principal debtor:  Right of subrogation  Right of indemnity Right Against the creditor:  Right to securities  Right to claim set-off Right against the Co-sureties:  Equal Contribution  Liability of co-sureties bond in different sums  Right to share benefits of securities

BAILMENT “Delivering of goods by one person (bailer) to another (bailee) for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned on other wise disposed of, according to the direction of the person delivering them” Rights of the Bailer:  Receive the goods with profit  Demand the goods back  Revocation  Loss caused by bailee  Combining own goods  Duties of the Bailor:  Making payment of necessary expenses  Declare fault of goods  Giving delivery of the goods

 Damages to the bailee  Payment of extraordinary expenses  Paying remuneration to the bailee  Rights of Bailee:  Realizing necessary expenses  Realizing the damages  Damages on the non dis-closure of the fault in good  Taking delivery of goods  Receiving payment of extra ordinary expenses  Receiving remuneration from the bailor  Duties:  Not mix goods  Returning the goods Bailed  Giving the goods with profit

 Not making unauthorized goods,  Not working against the condition,  Supervising the goods Pledge: A bailment of goods as a security for payment of a debt of performance of a promise is called Pledge. The Bailor in this case is known as ‘pawnor’ and the bailee is called ’pawnee’ Right to use: Pawnee does not have any right to use the goods Rights of Pawnee:  Right of Retainer  Retainer for subsequent advances  Extraordinary Expenses

Duties:  Reasonable Case  No Unauthorized used  Not to mix  Not to do any act in violation of the terms of the contract  Return the goods Pledge Right of Pawnor:  Enfacement of pawnees duties  Defaulting Pawnor’s right to redeem Duties:  To compensate Pawnee for extra ordinary expenses  To meet his obligation

Agency: An ‘agent’ is that person who is employed another, to do or to represent another in dealings with the third person” Creation of agency:  By need, Clear cut contract  Implied contract  Confirmation Condition when agency is terminated:  Termination of agency by law:  Expiry of the period  Destruction of the subject matter  Death of party  Becoming insolvent  Becoming insane

 Completion of target  Principal declared foreign enemy  Termination by conduct of parties  Termination by principal  By agent  Mutual

CONTRACT OF SALE “A contract of sale is a contract where by the seller transfer or agrees to transfer the property in goods to the buyer, for a price”  Essentials:  Buyer and seller  Goods  Price  Transfer of property  Element of a valid contract Meaning of ‘agreement to sale’: “A contract of sale, the property in goods is to take place at a future time or subject to certain condition, it is called to be an ‘agreement to sell”

Meaning of condition warranties: “The stipulations which are quite significant to the contract of sale and the breach of which is taken as breach of the contract are known as condition and the stipulation which are not so vital and breach of which known as warranties” Doctrine of ‘caveat emptor’: “The buyer must be caution us in buying the goods, should examine the goods as to their fitness to the purpose before he actually buy them” Exception to the rule: Sale by description Implied condition on warrants Sale under a trade name Merchantable quality Usage of trade

Meaning of unpaid seller: “When the whole of the price has not been paid or tendered, When a bill of exchange or any other negotiable instrument has been received as a conditional payment and the condition on which it was received has not been fulfilled by reason of dishonor of the instrument or otherwise” Rights of an unpaid seller: Right of lien Stoppage of goods in transit Right of re sale Detain the delivery of goods Unpaid seller’s right against the buyer- Suit for the price Suit for damages Suit for interest

Implied conditions- Condition as to title Sale by description Sale by sample Samples as well as description Fitness of goods and quality Usage of trade Condition as to wholesomeness Implied warranties: Warranty by quick possession Goods being free from encumbrance

Meaning of transfer of ownership: “When the buyer becomes the owner of the goods only there the transfer of the ownership of goods considered to have been established” Significance: Transfer of risk Right to file suit Accruing of goods by the liquidation Meaning of sale by auction: “A sale by auction is a sale among the public, inviting the price proposal and selling the goods to the person bidding the highest amount for purchasing”

Rules: Treating the different contracts separately Right to withdraw the bid bidding by the seller Craving no recognition Declaring the prescribed price for sale Use of pretended bids Meaning of goods: “Means every kind of movable property other than actionable claim and money and includes stock and shares growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”

Classification of goods:  Existing goods:  Specified or ascertained goods  Unascertained good  Future goods  Contingent goods The price of the goods: “ Price means the money consideration for a sale of goods” Determination of price: “By the contract of sale, By the manner agreed between the parties, Course of dealings Reasonable price Government”

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