“General Principles of Law of Contract”“General Principles of Law of Contract”http://rehanaca.spaces.live.com

1. P1. PROPOSALROPOSAL::

ESSENTIALS OF PROPOSAL:DefiniteCertainUnequalClear intention to be boundCommunication.

KINDS OF PROPOSAL:

1. Express Proposal2. Implied Proposal3. Counter Proposal4. Cross Proposal5. Specific Proposal6. General Proposal.

TERMINATION OF PROPOSAL:

By revocation.By RejectionBy counter offerBy lapse of time-period.By failure of condition precedent.By death/ insanity of proposer.By mode of acceptance.By destruction of subject matter.By subsequent impossibility / illegality.

REVOCATION OF AN ACCEPTANCE:

At any time, before communication of acceptance is complete as against the acceptor but not afterwards.

2. A2. ACCEPTANCECCEPTANCE : :

ESSENTIALS OF ACCEPTANCE:

Mode of acceptance.Acceptance by performing conditions or

receiving considerations.

3. P3. PROMISEROMISE::

TYPES OF PROMISES:

Expressed Promise.Implied Promise.

PROMISOR

PROMISEE.

COMPLETION OF COMMUNICATION OF PROPOSAL:

When proposal comes to the knowledge of the person to whom it is made.

COMPLETION OF COMMUNICATION OF ACCEPTANCE:

1. POSTAL RULES:As against the proposer, when it is put in the course of transit to him(Proposer) so as o be out of the power of the acceptor.

2. As against the Acceptor when it comes to the knowledge of the proposer.

COMPLETION OF COMMUNICATION OF REVOCATION:

1. As against the person who makes it, when it is put into a course of transition to the person to whom it is made so as to be out of the power of the person who makes it.

2. As against the person to whom it is made, when it comes to his knowledge.

CCONSIDERATIONONSIDERATION::

Characteristics:

At the desire of the Promisor.Promissory Estoppel.Forms:

ActAbstinencePromise.

May from Promisee or any other person.Why consideration is necessary?Kinds:

PastPresent (Executed)Future (Executory).

Not one sided but Bilateral.

AAGREEMENTGREEMENT::

Proposal + Acceptance = Promise + Consideration =Agreement.

TYPES OF AGREEMENTS:

Void Agreements: Not enforceable by Law.

Contract: Enforceable by Law.

INVITATION TO TREAT:

Difference between Proposal & Invitation to Treat.

After Proposal, if a person is bound, = Proposal.

After Proposal, if a person is not bound, = Invitation to Treat.

Examples:

Shop Displays.AdvertisementsTender Notice.Auction.

AACCEPTANCECCEPTANCE & S & SILENCEILENCE:: A mental determination or mere resolve…

EXAMPLES:

Felt house Vs Nephew(Bindley).Telephone.

CCONSENTONSENT::

Based on consensus ad idem

FREE CONSENT:

Not obtained by means of Coersion, Undue Influence, Fraud, Misrepresentation or Mistake.

CCOERSIONOERSION::

CHARACTERISTICS:Physical Act.Type of physical pressure.May proceed from a third party.May employed against a 3rd person.Criminal Liability.

UUNDUENDUE I INFLUENCENFLUENCE::

Relation, Dominate the will.

SPECIFIC INSTANCES:Real and apparent authority.Fiduciary relationship.Affected mental capacity.Onus of proof.

CHARACTERISTICS:

Type of mental/physical pressure.May proceed only from contracting party.May employed only against contracting

party.Onus of proof is on defendant.

CCOERSIONOERSION V VSS U UNDUENDUE I INFLUENCENFLUENCE::

Nature.Unlawful/Unfair.Criminal Liability.Onus of Proof.By whom employed.On whom it may be employed.Relationship.

FFRAUDRAUD::

Deceive or induce other party to enter into a contract.

1. False statement.2. Concealment.3. Empty promise.4. Fitted Act.5. Declared Act.

FFRAUDRAUD ANDAND S SILENCEILENCE::

GENERAL PRINCIPLE:Duty to speak.Silence equivalent to speech.

MMISREPRESENTATIONISREPRESENTATION::

False statement but true in the eyes of the provider.

Unwarranted statements.Breach of Duty.Mistake about the subject matter.

VVOIDABILITYOIDABILITY OFOF A AGREEMENTGREEMENT WITHOUTWITHOUT F FREEREE C CONSENTONSENT::

EXCEPTION:1. Discovery of truth.2. Consent unaffected.

CCONSEQUENCESONSEQUENCES OFOF R RECISSIONECISSION OFOF VVOIDABLEOIDABLE CONTRACTSCONTRACTS::

1. No liability on Promisor to perform after recission.

2. Restitution. (Return the benefits)

LLOSSOSS OFOF R RIGHTIGHT OFOF R RECISSIONECISSION OFOF VVOIDABLEOIDABLE C CONTRACTONTRACT::

1. Affirmation.2. Lapse of time period.3. Rights of 3rd party.4. Restitution impossible (e.g. Subject

matter is destroyed).

“V“VOIDOID A AGREEMENTSGREEMENTS””

IINCOMPETENCYNCOMPETENCY:: II). A M). A MINORINOR::

1. Age of minority.2. Doctrine of equitable restitution.3. No estoppels against minor.4. No liability under either law of

contract or law of tort.5. Ratification.6. Beneficial Contract.

II). PERSON OF UNSOUND MIND. EFFECT.

III). DISQUALIFIED PERSONS:

An insolvent.An alien enemy.A Convict.

2. 2. MMISTAKEISTAKE OFOF F FACTACT..

Error in consensus (Bilateral).Unilateral Mistakes.Mistake as to the identity of the party.

3. 3. MMISTAKEISTAKE OFOF L LAWAW::

Mistake of foreign Law.Mistake of law of land.

4. 4. UUNLAWFULNLAWFUL A AGREEMENTSGREEMENTS::

Consideration and object unlawfulConsideration and object unlawful in

part.

5. 5. AAGREEMENTGREEMENT WITHOUTWITHOUT CCONSIDERATIONONSIDERATION..

EEXCEPTIONXCEPTION::

1. Natural Love & Affection.2. Past voluntary services.3. Time barred debt.

- - XX - A - ADEQUACYDEQUACY OFOF CONSIDERATIONCONSIDERATION – – XX - -

6. 6. RRESTRAINTESTRAINT OFOF M MARRIAGEARRIAGE.. EXCEPTION: Minor.

7. 7. RRESTRAINTESTRAINT OFOF T TRADERADE.. EXCEPTION: Sale of Goodwill.

8. 8. RRESTRAINTESTRAINT OFOF L LEGALEGAL PPROCEEDINGSROCEEDINGS::

EXCEPTION: Arbitration.

9. 9. UUNCERTAINNCERTAIN A AGREEMENTSGREEMENTS..

WAGERING AGREEMENTS & COLLATERAL TRANSACTIONS:

1. Definition.2. Uncertain events.3. Mutual chances of gain or loss.4. Control over event.5. No other interest.

10. 10. IIMPOSSIBLEMPOSSIBLE A ACTCT..

11. 11. AAGREEMENTGREEMENT CONTINGENTCONTINGENT ONON IMPOSSIBLEIMPOSSIBLE EVENTEVENT..

CCONTINGENTONTINGENT C CONTRACTSONTRACTS

DEFINITION:

RULES:

1. Happening of an event. Uncertain future event. Specified event within fixed

time.

2. Non happening of an event: Uncertain future Event. Specified event within fixed

time.

3. Agreement contingent on impossible event.

4. Conduct of Person.

PPERFORMANCEERFORMANCE OFOF AA C CONTRACTONTRACT::

Demand by Promisee only.i. Personal Nature.ii. General Nature.

Performed by:i. Personal Nature: Promisor only.ii. General Nature:

PromisorA person employed by promisor.Death – Legal Representatives.Person employed by legal

representatives.

EESSENTIALSSSENTIALS OFOF AA C CONTRACTONTRACT::

1. Agreement.2. Lawful consideration with lawful

object.3. Competency of parties.4. Free consent of parties.5. Enforceability.

JJOINTOINT P PROMISESROMISES

1. Performance of Joint Promises.

2. Any one of the Joint promisors may be compelled to perform.

3. Each promisor may compel contribution.

4. Sharing of loss by default in contribution.

5. Effect of release of any of the Joint Promisors.

6. Devolution of Joint Rights.

TTIMEIME & P & PLACELACE OFOF P PERFORMANCEERFORMANCE::

Time for performance of promise where:

No application is to be made.No time is specified.

Time & place for performance of promise:

No application is to be made. Time is specified.

Application for performance on certain day

At proper time and proper place.

Place for performance of promise where:

No application is to be made. No place is fixed.

“P“PERFORMANCEERFORMANCE OFOF R RECIPROCALECIPROCAL PPROMISESROMISES””

DEFINITION:

TYPES:Independent reciprocal promises.Dependent reciprocal promises:

Order of performance of RPs

Expressly fixedNature of transaction requires.

Concurrent reciprocal promises.Subsequent voidability of RPs.Effect of default in contract consisting

of RPs.

VVOIDABILITYOIDABILITY: T: TIMEIME::

TIME: ESSENCE OF CONTRACT (Voidable at the option of promisee).

TIME: NOT ESSENCE OF CONTRACT (Not Voidable).

AAPPROPRIATIONPPROPRIATION OFOF P PAYMENTSAYMENTS

Appropriation by:

Debtor.Creditor.Operation of Law.

“D“DOCTRINEOCTRINE OFOF F FRUSTRATIONRUSTRATION””

Definition:

Unlawful, illegal afterwards.

MAJOR INSTANCES:Destruction of subject matter.Non-occurrence of an agreed event.Incapacity/Death of Party.Government / Legislative Intervention.Out break of War.

EFFECT OF DOCTRINE OF FRUSTRATION:

Automatic Termination.Restitution.

LIMITATIONS TO DOCTRINE OF FRUSTRATION:

Knowledge of Party.Self-induced frustration.

GGENERALENERAL P PRINCIPLESRINCIPLES OFOF CCOMMUNICATIONOMMUNICATION OFOF ACCEPTANCEACCEPTANCE::

Principle:

Exception:

Postal rule.Unilateral Mistake.Waiver of Communication.

“C“CONTRACTONTRACT – A – ANN OVERVIEWOVERVIEW””

FORMATION OF CONTRACT:

1. Express Contract.2. Implied Contract.3. Quasi Contract (Unjust Enrichment)

ENFORCEABILITY OF CONTRACT:

1. Valid Contract.

2. Voidable Contract:

Time essence of contract Right from the inception, on

the ground of non-free consent. Voidable by subsequent default

of one party.

3. Unenforceable Contract:

Absence of writing. Registration. Time barred by law of

limitation. Requisite stamp.

4. Void Contract:

Instances:

i. Uncertain future event.ii. Specified event with in fixed

time.iii. Recission of voidable contract.iv. Frustration.

PERFORMANCE OF CONTRACT:

Executed Contract.(e.g. sale) Executory Contract(e.g. agreement

to sale) Bilateral Contract (e.g. Contract of

sale) Unilateral Contract (e.g. ) Collateral Contract (e.g. Carlill vs.

Smoke ball Co.)

“T“TENDERENDER””

(Offer of performance)

ESSENTIALS FOR TENDER:

1. Unconditional.2. Time and place of performance.3. Proper person.4. Reasonable opportunity.5. Inspection.6. Whole obligation.7. Joint Promises.

EFFECT OF NON-PERFORMANCE OF TENDER:

Promisor is not responsible Entitled to compensation.

“R“REPUDIATORYEPUDIATORY B BREACHREACH OFOF C CONTRACTONTRACT””

A. A. AANTICIPATORYNTICIPATORY B BREACHREACH OFOF CCONTRACTONTRACT::

(Before the time fixed for performance)

RREMEDIESEMEDIES AVAILABLEAVAILABLE TOTO INNOCENTINNOCENT PARTYPARTY ININ CASECASE OFOF A ANTICIPATORYNTICIPATORY BREACHBREACH OFOF CONTRACTCONTRACT::

A. ACCEPTANCE OF BREACH (Immediate Legal Actions)

Effect of acceptance of breach.

B. AFFIRMATION OF CONTRACT (Wait & See)

Effects of Affirmation.

EFFECTS OF ANTICIPATORY BREACH OF CONTRACT

Voidable at the option of innocent party.

B. B. AACTUALCTUAL B BREACHREACH OFOF C CONTRACTONTRACT::

Exactly on the day of performance; orDuring the performance.

RREMEDIESEMEDIES AVAILABLEAVAILABLE T TOO I INNOCENTNNOCENT PPARTYARTY ININ C CASEASE OFOF A ACTUALCTUAL B BREACHREACH OFOF C CONTRACTONTRACT::

(Suit for) Damages:

KINDS OF DAMAGES:

Nominal (small)-nothing happened

Ordinary (Usually happened)Special (Time)Liquidated (Agreed)RemotePenaltyDuty to mitigate(to lessen) i.e.

mitigation of lossesPunitive / Exemplary

(Punishment)

(Suit for) Specific Performance.

(Suit upon) Quantum Meruit.

(Suit for) Injunction.

TTERMINATIONERMINATION / D / DISCHARGEISCHARGE OFOF C CONTRACTONTRACT””

A.A. BBYY P PERFORMANCEERFORMANCE1. Actual Performance 2. Attempted Performance.

B. BY AGREEMENT:

i. Novation – New contract is substituted, parties may change.

ii. Alteration – change in material terms of contract, same parties.

iii. Remission – Acceptance of lesser sum/fulfillment than actually contracted

iv. Satisfaction – fit in exchange of original consideration.

C. REFUSAL TO PROVIDE REASONABLE FACILITIES.

D. RESCISSION OF VOIDABLE CONTRACT.

E. BY FRUSTRATIONS (AUTOMATIC TERMINATION)

F. BY OPERATION OF LAW.

G. BY BREACH OF CONTRACT (MOST BITTER WAY OF DISCHARGE).

Anticipatory Breach of Contract.Actual Breach of Contract.

RRESTITUTIONESTITUTION::Restoring benefits or compensate otherwise.

WHEN RESTITUTION IS POSSIBLE:

1. Rescission of voidable contract.2. Discovered to be void agreement.3. Frustration.

ESSENTIALS OF COERSION, UNDUE INFLUENCE, MISREPRESENTATION, FRAUD:-------X-------X-------X------

CCONTRACTSONTRACTS WHICHWHICH NEEDNEED NOTNOT TOTO BEBE PERFORMEDPERFORMED::

1. Rescission.2. Novation.3. Alteration.4. Remission.5. Satisfaction.6. Refusal to provide reasonable

facilities.7. Rescission of voidable contracts.

QQUASIUASI C CONTRACTSONTRACTS::(Unjust enrichment)

Introduction.

Supply of necessities (incapable person)

Payment by interested persons.Non-gratuitous Acts.Finder of Goods.Payment under mistake or Coersion.

“B“BAILMENTAILMENT””

Parties of Bailment:

BailorBailee

Essentials of Bailment:

Delivery of Goods (Transfer of possession)

Actual Delivery.Constructive/Symbolic Delivery.

Purpose.Condition.

Kinds of Bailment:

Gratuitous Bailment. – No consideration, No responsibility.

Non- Gratuitous Bailment. Consideration + Responsibility. (Bailment for Hire).

Duties of Bailee:

Duty of Care.Duty not to make unauthorized use.Duty not to mix.

Separable Mixing.Inseparable mixing

Duty not to setup adverse title.Duty to return.Duty to return increase.

Rights of Bailee:

1. Right to necessary expenses.2. Right to compensation.3. Right to sue wrong-doer.4. Right to Lien.

Particular Lien (Skills)General Lien:

o Bankers.o Factors.o Wharfingers.o Attorneys of High Court.o Policy Brokerso Any other person by making

special contract.

Duties of Bailor:

Duty to disclose:o Bailment for hire (Non-gratuitous)o Gratuitous Bailment.

Duty to repay necessary expenses in case of gratuitous bailment.

Duty to repay extraordinary damages in case of non-gratuitous bailment.

Duty to Indemnify Bailee (due to defective title)

Duty to receive back the goods.

Termination of Bailment:

1. By notice (in gratuitous bailment)2. By death (in gratuitous bailment)3. By inconsistent use.4. Automatic Termination.

Finder of Goods:

Right of retainer.Right to sue.Right to sell.

“P“PLEDGELEDGE””

Parties:

1. Pawnor2. Pawnee

Rights of Pawnee:

Right to retainRight to extraordinary expensesRights in case of Pawner’s default;

Right to sueRight to sell

Subsequent advances

Right of defaulting Pawner:

1. Right to redeem

Pledge by Non-Owner:

Mercantile agentPerson in possession under voidable

contractPerson having limited interest

“I“INDEMNITYNDEMNITY””

Parties:

i. Indemnifierii. Indemnified

Rights of Indemnified when sued:

Right to damagesRight to costsRight to sums

Rights of Indemnifier:

Right of subrogation

Doctrine of Privity of Contract:

(Only parties to a contract can sue & can be sued on that contract)

‘Privity of Contract’ means relationship subsisting b/w the parties who have entered into contractual obligations.

It implies a mutuality of will and creates legal bond or tie b/w the parties to a contract

“G“GUARANTEEUARANTEE””

Parties:

SuretyCreditorPrincipal debtor

Consideration of Guarantee: Nature and extent of Guarantee:

Limited: Unlimited: Coextensive with debtor.

Kinds of Guarantee:

Specific GuaranteeContinuing Guarantee

Termination/Revocation of Guarantee:

By noticeBy death of surety

Invalid Guarantee:

By misrepresentationBy concealmentFailure of co-surety to join

Rights of Surety:

Against Creditor:

Right to securitiesRight to set-offRight to Quia-Timet action

Against principal debtor

i. Right to indemnifyii. Right of subrogation

Against co-sureties

Right to contributions

Discharge of Surety:

By Performance.By Revocation.

By Notice.By death of surety.

By variance.By release (of principal debtor)By Act or omission.By composition.By Extension of time period.By promise not to sue.By loss of security. By impairing surety remedy.By Novation.

When surety is discharged due to Acts of Creditors:

By variance.By release(of principal debtor)By act or omission (of creditors)By composition.By extension of time.By promise not to sue.By loss of security.By impairing surety remedy.

When a surety is not discharged due to acts of creditor:

Extension of time (with 3rd P)Forbearance to sue (other than CG)Release of co-surety

Difference between Indemnity and Guarantee:

No of Parties.No. of contracts.Formation of contracts.Object of contract.At the request.Nature of liability.Commencement of liability.Right to sue.

“A“AGENCYGENCY””

PARTIES:

1. Principal2. Agent

AUTHORITY OF AN AGENT:

Actual authority (Express + Implied + Extent of actual authority)

Ostensible Authority/ Apparent Authority.Authority in emergency.

WHERE AGENT EXCEEDS HIS AUTHORITY:

Separable transaction.Inseparable transactions.

CHARACTERISTICS OF AGENTS:

Representative character.Delegated Authority.

IRREVOCABLE AGENCY [SEC-202]

1. Agency coupled with interest.2. Authority partly exercised.3. Personal liability incurred by Agent.

TERMINATION OF AGENCY:

By acts of Parties:

By mutual agreement.Revocation by Principal. Renunciation by Agent.

By Operation of Law:

By completion of business.By expiry of time period.By death of Principal or Debtor.By insanity of Principal or Debtor.By insolvency of Principal.By destruction of subject matter.By subsequent impossibility / illegality.

DUTIES OF AGENT:

Duty to execute mandate.Duty to follow instructions/customs.Duty to communicate.Duty of care and skill.Duty to avoid conflict of interest.Duty not to make secret profits.Duty to remit sums.Duty to maintain accounts.Duty not to delegate.

Delegatus non-potest delegare(A delegate cannot delegate)

Duty in selecting substituted Agent.Duty in case of Death of Principal.

RIGHTS OF AGENTS:

1. Right to remuneration.2. Right to retain.3. Right of particular Lien.4. Right to indemnity(Lawful acts)5. Right to indemnity (Acts in good faith)6. Right to compensation.

DUTIES OF PRINCIPAL:

1. Duty to pay.2. Duty to indemnity (lawful act)3. Duty to indemnity (Acts in good faith)4. Duty to compensate.

RIGHTS OF PRINCIPAL:

Right to revoke.Right in case of departure.Right in case of misconduct.Right to refuse remunerations.Right to accounts.Right to repudiateRight to claim benefits.

RATIFICATION:(Doctrine of Relating Back)

Ex Pos Facto Agency(Agency arising after the events)

REQUIREMENTS:

On behalf of another.Competency of principal.What acts may be ratified? (Lawful acts)Knowledge of facts.Whole transaction.Time period.Damage to 3rd party.

EFFECTS:

1. Agency.2. Contract with 3rd party.

LIMITATIONS:

1. Principal not existent2. Incompetent principal3. Void Contract.4. Half term actions.5. Damage to 3rd party.

CREATION OF AGENCY:

Agency by:

Express Agreement (Power of Attorney)Special PoAGeneral PoA

Implied Agreement.Agency by estoppel.Agency by holding out.Agency by necessity(3

Requirements)Ratification – without notice to the

principalOperation of Law. (All partners are

agents)

SUB AGENT:

APPOINTMENT OF SUB AGENT:

Principal’s consent.Nature of work.Trade custom.

EFFECT OF IMPROPER APPOINTMENT OF SUB-AGENT:

1. Principal is not bounded by such appointment.

2. Principal is not bounded by the acts of Sub-Agent.

3. Sub Agent is responsible to Principal for any act of such person.

EFFECTS OF PROPER APPOINTMENT:

1. Principal represented by Sub-Agent.2. Prievity of contracts (So can’t except

fraud and willful wrong)3. Agent’s responsibility.4. Sub-Agent’s liability (Not directly

liable to principal except fraud and willful wrong)

PERSONAL LIABILITY OF AGENT:

General Principal:

(Not liable to 3rd party for contract on behalf of principal)

Exceptions of General Principals:

1. Foreign Principal.2. Undisclosed Principal (Definitely liable

to 3rd person as being Principal in case of undisclosed principal)

3. Incompetent or non-existent principal.

WHERE AGENT EXCEEDS HIS AUTHORITY?

(Personally liable to 3P for excess part of it in case of separable)

Agency coupled with interest (interest in subject matter, liable to 3rd P to the extent of interest )

Customs or usage of trade (Indicates the A should be liable, he must)

Pretended Agent( misrepresentation as Agent of other, other not rescinded, A liable for loss to 3rd Party)

Improperly appointed Sub-Agent (liable to 3rd P for acts of improper SA)

[SEC-194]SUBSTITUTED AGENT

[SEC-195]DUTY IN SELECTING SUBSTITUTED AGENT

“Revocation of Agency”“Revocation of Agency”[Sec-203][Sec-203]

Compensation for revocation by principal or Renunciation.[sec-205]

Notice of Revocation.[sec-206]Revocation : Either Expressed or

Implied.[sec-207]When revocation becomes effective.

[sec-208]