basic law for engineers (1)

8/4/2019 Basic Law for Engineers (1)

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Basic Law For Engineers

INDIAN CONTRACT ACT 1872


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CONTRACT

An agreement between two or more persons(individuals, businesses, organizations or

government agencies)

Contracts generally can be written, using formal

or informal terms, or entirely verbal. If one side fails to live up to his/her/its part of the

bargain, there's a "breach" and certain remedies

for solving the differences are available.

The terms of the contract - the who, what, where,

when, and how of the agreement - define thebinding promises of each party to the contract.


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ESSENTIAL ELEMENTS OF A

VALID CONTRACTDifferent sections of the Indian Contract Act lay

down the essential elements of the contract. Theyare as under:

1. Proposal and acceptance2. Considerationlawful consideration with alawful object3. Capacity of parties to contractcompetentparties4. Free consent5. An agreement must not be expressly declared tobe void.6. Writing and Registration if so required by law7. Legal relationship8. Certainty9. Possibility of performance10. Enforceable by law.


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Proposal and Acceptance

The first step towards creating a contractis that one person shall signify or make a

proposal or offer to the other

A proposal when accepted becomes a

promise.

When the person to whom the proposal is

made signifies his assent thereof the

proposal is said to be accepted.


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Consideration:

Every contract consist of two parts(1)Promise and (2) Consideration for thepromise. A promise is often made inreturn for a promise for example a buyer

realizes the goods for the price. Price forgoods is therefore, consideration here.

Consideration is the cause of the promise.

It is the most essential element of the

contract. As a general rule, agreement without

consideration is void. The promise for apromise in return is consideration.


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Capacity of parties to contract

Competent parties Every person is competent to contract: who is of the age of majority according to the law to which

he is subject

who is of sound mind

and is not disqualified from contacting by any law towhich he is subject.

Free Consent: Parties to a contract must give their consent.

Both the parties must agree upon the same thing in thesame sense. Two or more persons are said to consentwhen they agree upon the same thing in the same

sense. Mere consent is not enough. Consent of partiesmust be free, for example it must not have beenobtained (1) coercion, (2) undue influence, (3) fraud, (4)misrepresentation, or (5) mistake.

An agreement must not be expressly declared to be void


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Writing and registration:

Oral contract is a valid contact.

No particular form of writing is required to

constitute a contract.

Intentions of the parties to enter into a

particular contract and to give effect to itmust be manifest in it, in order to constitute a

valid contract.


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Legal relationship

Agreements which create legal relations or arecapable of creating legal relations are contracts,for example, an invitation to a dinner does notcreate any legal relation and therefore is not acontract.

Certainty The terms of a contract should be clear. In other

words, the contract must not be vague. Contractswhich are vague cannot be enforced.

Possibility of performance: Contracts based on impossibility of performance

are not valid. The contracts must be capable ofbeing performed.


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Enforceable by Law

A contract in order to be valid must be enforceableby law which element distinguishes agreement

and contract.

If is enforceable by law then it is contract

otherwise it is an agreement. An agreement can also be inferred from

correspondence exchanged between the parties.


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TYPES OF CONTRACTS


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WAGERING CONTRACTS

Wagering means placing something of value atstake upon the result of some future uncertain

event

All contracts by way of wager are considered null

and void and hence no suit can be brought uponthe members of such a contract in any court of

law or equity.

The essentials of a wagering contract are:

Uncertainty in the event

Equal chances of gain or loss

Neither party must have control over the event

Neither party should have any other intrast other

than win or lose


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CONTINGENCY CONTRACTS

Contingency is defined as a future event orcircumstance that is possible but cannot bepredicted with certainty. Contingency contractsare based on the decisions of the members orparties involved in a contract and are solely

dependent on the factors that affect the respectiveparties, for eg. In LIC the persons death affects thecontract.

Contingency agreements are not void and theuncertain event is not the sole determination of

the contract In such contracts both the parties are interested

in the occurrence or the non occurrence of theevent.


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QUASI CONTRACTS

A quasi-contract (or implied-in-law contract) is africtional contract created by courts for equitable,

not contractual purposes.

A quasi-contract is not an actual contract, but is a

legal substitute for a contract formed to imposeequity between two parties.

The concept of a quasi-contract is that of a

contract that should have been formed, even

though in actuality it was not.

It is used when a court finds it appropriate tocreate an obligation upon a non-contracting party

to avoid injustice and to ensure fairness.


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Indemnity

The term "Indemnity" means to make good theloss or to compensate. It is an act of the party tocompensate the other party for the loss sufferedby him.

Indemnity

A contract by which one party promises toanotherr to save him from loss caused to him by

the conduct of the promisor himself , or by theconduct of any other person is called a contract ofindemnity


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The person who promises to make good the loss is

called the Indemnifier and the person whoseloss is made good is called the indemnified or

indemnity holder.

Essential elements of indemnity There are two persons , the indemnifier the

indemnified or the indemnity holder

There must be loss either by the promisors

conduct or by any other persons conduct It is a contingent contract by nature

It may be express or implied


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Guarantee

A contract of guarantee is a contract to performthe promise, or discharge the liability,of a third

person in case of his default. The person who

gives the guarantee is known as the surety, the

person in respect of whom the guarantee is given

is known as the principal debtor, and the person

to whom the guarantee is given is called the

creditor. A guarantee may be either oral or

written.


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Concurrence of three contracts

Primary liability is that of the principal debtor

In case the debtor is a minor , the suretys liability

becomes primary

All the essentials of a valid contract It may be in writing or oral

There need not be full disclosure of facts to the

surety before he gives the guarantee


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Bailment

The word Bailment is derived from the Frenchword ballier which means to deliver .

Bailment means delivery of goods by one person to

another for some purpose ,upon a contract ,that

they shall ,when the purpose is accomplished ,be

returned or otherwise disposed of according to the

instructions of the person delivering them. The

person delivering the goods is called the bailor

and the person to whom they are delivered is

called the bailee.


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Essentials of bailment

Essential elements There are two persons namely Bailor and

Bailee.

Bailor means the person delivering thegoods, Bailee means the person to whom thegoods are delivered.

Their must be delivery of goods .

The goods must be in deliverable condition.

Only the goods are delivered but not the

ownership of goods, their must be purpose. Bailey can use the goods.

Goods must be returned or disposed offafter the purpose is accomplished.


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Pledge

The bailment of goods as security for payment of a

debt or performance of a promise is called

Pledge.

The bailor in this case is called the pledger orpawnor and the bailee is called the pledgee or

pawnee


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Pledge is a special kind of bailment purpose : pledge is bailment of goods for special

purpose

As to right of sale : the pledgee has the right of

sale of goods pledged on default after giving noticeto pledgor but ther is no such right of sale in case

of bailment

As to right of using the goods : in case of pledge

the pledgee has no right of using the goods

pledged while no such restriction exists for abailee in case of bailment if nature of transaction

so requires


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PERFORMANCE OF

CONTRACT


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Contract creates obligations.

Performance of contract means carrying out these

obligations

The parties to a contract must either perform or offer to

perform their respective obligations.


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Who can demand

Only promisee can demand

Third party cannot demand even if the promise was made for his benefit


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Who must perform

Promisor himself

His agent

His legal representative


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Offer to perform

It has to be unconditional

it must be in a proper place and time


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Contracts which need not be

performed

Under novation of contract, the old contract need not

be performed

failure to provide reasonable facilities remission of contract

when a party rescinds a contract


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Time and place of performance

Where prescibed by the promisee

Where not prescribed by the promisee

When time is the essence of the contract


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Performance of joint promises

Devolution of joint liabilities

Devolution of joint rights


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Performance of reciprocalpromises

Promise in return for a promise

Mutual and dependentMutual and independent

Mutual and concurrent


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Assignment of contract

By the operation of lawAssignment by the act of parties

The obligations or liabilities under a contract cannot be assigned

Rights and benefits under a contract may be assigned.


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Discharge of contract


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Discharge of a contract

Discharge by performance Discharge by agreement or consent

Discharge by impossibility of performance

Discharge by lapse of time

Discharge by operation of law

Discharge by breach of contract


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DISCHARGE BY PERFORMANCE

Actual performance When both parties perform their promises & there is

nothing remaining to perform

Attempted performance

When the promisor offers to perform his obligation ,but

promisee refuses to accept the performance. It is also

known as tender


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Discharge by agreement or

consent

NOVATION (Sec 62): New contract substituted for oldcontract with the same or different parties

RESCISSION (Sec 62) : When some or all terms of acontract are cancelled

ALTERATION (Sec 62):When one or more terms of

a contract is/are altered by the mutual consent of theparties to the contract

REMISSION (Sec 63) :Acceptance of a lesser fulfilment ofthe promise made.

WAIVER :Mutual abandonment of the right by the

parties to contract


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Discharge by impossibility of

performance Known to parties Unknown to parties

Subsequent impossibility

Supervening impossibility (sec 56)

Destruction of subject matterNon-existance of state of things

Death or incapacity of personal services

Change of law

Outbreak of war


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Discharge by lapse of time

The limitation act 1963, clearly states that acontract should be performed within a specifiedtime called period of limitation

If it is not performed and if the promisee takes no

action within the limitation time, then he isdeprived of his remedy at law


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Discharge by operation of law

Death Merger

Insolvency

Unauthorized alteration of the terms of a written

agreement

Rights & liabilities vesting in the same person


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Discharge by breach of contract

Actual breach : at the time of performance

during the performance

Anticipatory breach:

By the act of promisor (implied repudation) By renunciation of obligation (express repudation)

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