The Indian Contract Act, 1872 Unit 1: Nature of Contracts Paper 2 Mercantile Law Chapter 1 Mr. Varughese Thomas- Asstt. Secy.

Transcription

1 The Indian Contract Act, 1872 Unit 1: Nature of Contracts Paper 2 Mercantile Law Chapter 1 Mr. Varughese Thomas- Asstt. Secy. ICAI, Kanpur

2 Preface Laws: Citizens & States Laws for Business Govern/ Regulate Trade and Commerce Outcome of Trade/ Commerce in England Mainly of English Laws 2

3 Contents of Different Chapters The Indian Contract Act, 1872:- Principles of formation; Not to involve State or persons not parties; A contract is voluntary Sale of Goods Act, 1930-;Was Chapter VII of Indian Contract Act, 1872; Act Underwent amendments; Latest Multimodal Transportation of Goods Act, 1993 The Indian Partnership Act, 1932; Was in Chapter XI of ICA,

4 Objective of ML in syllabus To Test gen. comprehension of ele.of ML Contents: ICA, 1872 _ Sec 1 to 75; Gen nature;consideration, essntl. Elements, performance and breach. SGA, 1930: Formation sale; conditions & warranties, transfer & delivery of goods, Unpaid Seller IPA, 1932:- Nature, Right & Duties; Regn & Dissolution. 4

5 Contract Agreement Commitments should be fulfilled Legally binding to parties Remedy through court of law 5

6 Important Aspects Essential Elements of Contracts Types of Contracts Understand Importance of a) Offer b) Acceptance c) Communication d)revocation Distinction Between Agreement & Contract 6

7 The Law of Contract: Gen Principles Complexities of business environment Contract defines rights & duties Not exhaustive Parties to make rule legally not prohibited 7

8 Agreement Every promise & Every set of promises Forming consideration for each other 8

9 Promise When Proposer Proposes To Proposee & Proposee Signifies His Assent (I.E, Accepted) 9

10 Contract? Agreement Enforceable By Law Contract 10

11 Essentials Elements - Valid Contract Proper Offer Proper acceptance + to create legal relationship Capacity Lawful Object Lawful Consideration Free Consent 11

12 Types of contract 1. Void Contact 2. Voidable Contract 3. Illegal Contract 4.Unenforceable Contract 5. Express Contract 6. Implied Contract 7. Tacit Contract 8. Executed Contract 9. Executory Contract 10. Unilateral Contract 11. Bilateral Contract 12

13 Void & Illegal Agreements : Distinction Scope:- Effect on Collateral transactions:- terms of agreement void, is not illegal. Illegal agreement always illegal in case of illegal agreement, collateral also tainted illegal Punishment:- No Punishment in Void Agreement Void-ab-initio:- Illegal agreements are void from beginning. but sometime valid also become void 13

14 Formal Contracts Formal Contracts Contract of Record Contract Under Seal Judgment of court Recognisance Binds through form alone It is obligation imposed by court It is written acknowledgment of a debt due to the Sate It is written + signed + sealed + delivered 14

15 PROPOSAL/OFFER (INTERCHANGEABLE) 1. One person signifies 2. His willingness 3. To do or abstain 4. For assent of other 15

16 Classification of Offer Special Offer General Offer Cross Offer Counter Offer Standing Offer 16

17 Rules as to offer a) Legal Relation d) Not invitation g) To obtain consent b) Certain, definite e) Specific or general h) May be conditional c) Expressed or implied f) Communicated Not to construe acceptance 17

18 Offer and invitation to offer: distinguish: Offer Definite Capable to convert to contract Invitation to offer Circulation offer To induce Offer No contract 18

19 ACCEPTANCE 1. A proposal or offer made 2. to a person 3. & that latter person assents 4. to do or not to do something 19

20 Rules as to acceptance Absolute & unqualified:- Expressed in usual & Reasonable manner. No variation in acceptance Communicated to Offeree:- Offer of intended offeree without knowledge is not acceptance In prescribed Mode Time:- Silencebno acceptance By Conduct If proposer does not insist for mode, presume waived Reasonable time & before lapses Mere silence is not acceptance Either in writing or verbally or by performance of some act 20

21 Communication of offer and acceptance: 1. When parties are face to face Instantaneous offer & acceptance No revocation 2. When parties at distance No Instantaneous offer & acceptance Know time of offer & acceptance 21

22 Communication of Offer: Completes when it comes to knowledge of offeree by post completes when reaches offeree 22

23 Communication of Acceptance Completes against Proposer Acceptor When put to transmission to proposer When comes to proposer s knowledge Acceptor cannot withdraw 23

24 Revocation of Offer & Acceptance Completes against Revocator Intended person When put to transmission to intended person Revocator cannot withdraw When comes to intended person s knowledge 24

25 Modes of Revocation 1. By Notice 2. By time lapse 3. Death/ insanity 4. Conditions non-fulfilled 5. Counter Offer 25

26 SUMMARY Contract Agreement enforceable by law Free consent Competent Lawful object Lawful consideration Enforceable by law Not declared void 26

27 Summary contd Offer & Acceptance 1. Offeror commits to do or abstain If properly accepted Offer expressed Implied Certain/ capable of certain Capable of creating legal relation 27

28 Summary contd Acceptance of offer Acceptance must be Absolute & unqualified Prescribed / Usual mode Accepted specifically, if not offered generally 28

29 Summary contd Communication of offer & acceptanc, & revocation thereof:- 1. Offer is complete When offeree gets knowledge of it Against offeror When put in transmission 2. Acceptance is complete Against Acceptor When Offeror gets knowledge of it 29

30 Summary contd. Communication of revocation of an offer or acceptance is complete Against maker, when put in transmission transmission has put out of power of maker Revocation of offer or Acceptance is complete Against intended person When transmission come to intended person 30

31 Question Time 31

32 Q 1. A general offer may be accepted by:- (a) Any person (b) Promisee only (c) Legal representative (d) Any of these Answer: a) Any person: (As it is an offer made to the public in general so anyone can accept) 32

33 Q 2. Communication of acceptance, as against the proposer, is complete:- (a) When the letter of acceptance is put into a course of transmission (b)when the letter of acceptance reaches the proposer (c) When the proposer has actually learnt the contents of the letter of acceptance (d) None of the above Answer(a) Q2. (a) When the letter of acceptance is put into a course of transmission ( Here the acceptance letter is put in course of transmission to proposer, and the acceptor is also not in power to withdraw his acceptance.) 33

34 Q 3. Which of the following is correct? (a) a promise is a contract. (b) a set of promise is a contract (c) a proposal is a contract (d) agreements enforceable by law is a contract Answer (d) agreements enforceable by law is a contract (an agreement is enforceable by law, if it has free consent of the parties who are also competent to contract, for a lawful object, and for lawful consideration, and not expressly declared to be void) 34

35 Q 4. Void agreements are (a) Forbidden under law (b) Not forbidden under law (c) Punishable (d) Legal agreements Answer (b) Not forbidden under law. (void agreement are not necessarily illegal. It void due to some other deficiency, e.g. an agreement caused by mistake or the terms of which are not certain or occurrence of an event becomes impossible, hence, not forbidden under law.) 35

36 Q5. A voidable agreement is enforceable by (a) None of the parties (b) Only one of the parties (c) All the parties to the contract (d) One or more but not by the other or others Answer (d) One or more but not by the other or others (voidable agreement is enforceable at the option of the aggrieved party and remains valid until rescinded by him) 36

37 Q.6. An illegal agreement (a) is void ab initia (b) becomes void (c) void ab initio as well as punishable (d) Voidable Answer (c) void ab initio as well as punishable ( ab intio means from the beginning. Illegal agreements are void from the very beginning and punishable.) 37

38 Q7. In which of the following cases, there is no communication of acceptance? (a) Fall of hammer in auction sale (b) Keeping agreement in a drawer (c) Cashing of a cheque (d) All of the above Answer (b) Keeping agreement in a drawer (the communication of acceptance has not been put in course of transmission to the offeror. Here by puting in drawer, the acceptor has still power to change his mind) 38

39 Q8: When the acceptance is by a letter, a contract is deemed to be made at the place (a) Where the letter of acceptance is transmitted (b) Where the letter of acceptance is received (c)where the proposer resides (d) Where the acceptor resides. Answer (a) Where the letter of acceptance is transmitted (Communication of acceptance will be complete against the proposer when the letter of acceptance is posted, hence the place from where it is transmitted) 39

40 Q 9: Contract in which only one party has to perform his promise is known as (a) Executed Contract (b) Executory Contract (c) Unilateral Contract (d) Bilateral Contract Answer (c) Unilateral Contract (e.g. Upon an advertisement from M, B finds M s Son on a reward of Rs.500/-. Now B has executed his side performance. M has yet to reward which is called Unilateral contract) 40

41 Q 10: Standing offer means (a) Offer allowed to remain open for acceptance over a period of time. (b) Offer made to the public in general. (c) When the offeree offers to qualified acceptance of the offer (d) Offer made to a definite person. Answer (a) Offer allowed to remain open for acceptance over a period of time. (it is also called as open or continuing offer, eg. Tender for supply of goods). 41

42 Lesson Summary 42

43 Thank You 43