CONTRACT ACT

MODULE 1

What is a Contract? (Sec 1-2)

The word contract is derived from the Latin Contractum meaning drawing together. An agreement which creates legal obligations is a contract. The obligation is an undertaking to do or abstain from doing some definite act or acts. Sec 2(h) of the Indian Contract Act defines a contract as An agreement enforceable by law is a Contract. A contract must have the following two elements: An agreement Its Enforceability (legal obligation)

NATURE OF CONTRACT

The law of contracts forms the oldest branch of the law relating to business transactions. A branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them.
Its rules define the remedies that are available in a court of law against a person who fails to perform his contract and the conditions under which the remedies are available.

What is AN AGREEMENT?
Agreement=Offer (Proposal) + Acceptance Every promise and every set of promises forming the consideration for each other is an agreement. A proposal when accepted becomes a promise. Agreement has 2 characteristics: Plurality- Two or more persons Consensus ad idem- same sense & at the same time.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

1. 2. 3. 4. 5.

6.
7. 8. 9. 10.

Offer (Proposal) & acceptance. Intention to create Legal Relations. Lawful Considerations. Capacity of Parties. Free Consent. Lawful Object. Writing & Registration Certainty. Possibility of Performance. Agreement not expressly declared Void.

CLASSIFICATION OF CONTRACTS
I. a)

b)
c) d) e)

II.
a) b) c)

III.
a) b) c)

ON THE BASIS OF ENFORCEABILITY: Valid Contracts Void Contracts Voidable Contract Illegal Contract-void ab initio Unenforceable Contract-technical defects ON THE BASIS OF FORMATION Express Contract Implied Contract Quasi Contract-lost goods has to be returned. ON THE BASIS OF EXTENT OF EXECUTION Executed Contract Executory Contract Contingent Contract-happening of some future uncertain event.

OFFER AND ACCEPTANCE( Sec 3-9)

OFFER According to Sec. 2(a) When any 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.

The person making the proposal or offer is called proposer/ offerer or promisor. The person to whom the offer is made is called the proposee or offeree. When the offeree accepts the offer , he is called a promisee or acceptor.

ESSENTIALS FOR A VALID OFFER :

The offer must be communicated to the other party. The terms of the offer must be definite and clear The offer must be capable of creating Legal Relationship. The offer must be made with a view to obtain Acceptance. An offer may be positive or negative The offer should not contain any terms the noncompliance of which amounts to acceptance. Special Terms and Conditions of the offer be communicated. Two identical cross offers do not result in a contract.

ACCEPTANCE

According to Sec 2(b) When one person to whom the proposal is made signifies his assent thereto , the proposal is said to be accepted. A Proposal when accepted becomes a Promise.

ESSENTIALS FOR A VALID ACCEPTANCE :It must be absolute & unqualified It must be communicated to the offeror It must be in the prescribed manner . It must be made with reasonable time. It must be by the offeree . It must be in response to the Offer. It must be made before the Offer lapses. It cannot be implied from silence.

Communication of Proposal, Acceptance, and Revocation :Communication of Proposal:The communication of proposal is complete when it comes to the knowledge of the person to whom it is made , i.e. when the letter containing the proposal reaches the proposee Communication of the Acceptance:1) Proposer when it is put in a course of transmission to him , so as to be put out of the power of the acceptor, i.e. when the letter of acceptance is duly posted. 2) Acceptor when it comes to the knowledge of the Proposer i.e. , when the letter of acceptance is received by the proposer.

Communication of Revocation
It means taking back OR withdrawal

By communication of notice of revocation by the offeror at any time before its acceptance is complete as against him. By lapse of time By non- fulfillment by the offeree of a condition precedent to acceptance. By death or insanity of the offeror If the law is changed