CONTRACT

What is a contract?

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Definition of a contract

A legally binding agreement

that means there must be some kind of

agreement between two parties

However, not all agreements are contracts

because not all agreements are legally

enforceable

legally enforceable means that a court will

say that an agreement is a contract

AGREEMENT + NO ENFORCEABILITY

They have no legal effect

Example Agreement with minor

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Void Contracts

Teacher gives his students so

much homework that they

decide to kill him The

students pay a Russian hit

man 50,000 to kill teacher

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However, the Russian simply spends all the

money in bars and then goes home

He does not kill teacher

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The students cannot claim their money back

because it is illegal to hire a hit man to kill

someone. Their contract with him is void

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Voidable Contracts

This is an example of fraud

A voidable contract is an agreement entered

into by two or more parties that can be

declared invalid by one of the parties for a

legal reason. Usually, only one of the

parties has the right to cancel the contract.

Until that party voids the contract, it

remains valid and binding on all of the

parties.

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Voidable Contracts - Example

Mr. Aarav pays for a holiday in Shimla because the travel service shows him pictures of a lovely 5 star hotel

However, when he arrives, finds that the hotel certainly doesn’t look like the pictures

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Voidable Contracts – Example

(cont.)

If the travel company knew about the hotel, then they have made a misrepresentationto Aarav

Aarav has right to breach the contract

So the contract is not automatically void (like with the hitman), it is voidable at Aarav choice

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Unenforceable Contracts

An unenforceable contract is a legal

contract that a court cannot or will not

enforce due to a technical defect. An

unenforceable contract is valid, but gives

the court system reason to refuse to offer

remedy to either party..

For example, a time limit for enforcing the

contract may have expired

Bailment Definition

The transfer of possession of something (by

the bailor) to another person (called the

bailee) for some temporary purpose (eg.

repair or storage) after which the property is

either returned to the bailor or otherwise

disposed of in accordance with the contract

of bailment.

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PLEDGE

The act of delivering goods, property, etc.,

to another for security.

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• References

• www.google.com- ( images)

• Syllabus book

Indian Contract Act 1872

References

www.google.com- ( images)

Syllabus book

Essential Elements of a Valid

Contract

Offer and Acceptance- agreed on the same thing

Lawful Consideration – in the eyes of law

Capacity of the Parties

Free Consent

Lawful Object

Legal formalities

If any of the above is missing, the contract becomes void

3 C’s

Q A promises to B an employment in the

public service, and B promises to pay 1,000

rupees to A.

A The agreement is void, as the consideration

for it is unlawful.

Q if you shake hands and agree to purchase TV

for Rs 30,000??????

A you have a valid contract. The contract is

complete when you give them the money and

they give you the TV. Contracts can be as

informal or as formal

Q 'A' who owns2 cars x and y wishes to sell

car 'x' for Rs.30,000. 'B', an friend of 'A' does

not know that' A' owns car 'x' also. He thinks

that' A' owns only car 'y' and is offering to sell

the same for the stated price. He gives his

acceptance to buy the same.

A- Thereis no contract because the contracting

parties have not agreed on the same thing

Q- A storekeeper agrees to purchase stolen

goods.

A – purely void contract

Q I paid to a lawyer by cheque to process

my papers for Canadian immigration in

1996. As of today he has not done anything,

he does not reply to my registered letters

A- You can file suit for recovery and

damages against the said Lawyer

Offer and Acceptance

There must be minimum two parties to an

agreement.

one party making the offer (also called as

offerer/proposer/promisor) and the other

accepting it (also called as

offeree/proposee/promisee/acceptor)

The terms of offer must be definite

Acceptance must be unconditional.

Lawful Consideration

1.Consideration is the price of a contract.

2. A contract without consideration is void.

3. Consideration must be decided by the

parties themselves. Consideration can be

fulfilled by third parties.

4. Consideration must have some legal value

in the eyes of law.

Capacity of the Parties

A minor and an unsound person and an insolvent person cannot enter into contracts . It is void ab – initio.

Reason : The contract creates legally binding obligations on the parties and hence only those who have the capability (capacity) to do so should be allowed otherwise they(minor/unsound/insolvent) may harm themselves.

Free Consent Where a person who is in a

position to dominate

1. Consent must be free and true.

2. A consent is not free and true when it is induced by =

- forcefully

- undue influence

- fraud

- misrepresentation

- mistake

A applies to a banker for a loan at a time

when there is stringency in the money

market. The banker declines to make the

loan except at an unusually high rate of

interest. A accepts the loan on these terms.

This is a transaction in the ordinary course

of business, and the contract is not induced

by undue influence

Lawful Object

Every agreement of which the object or

consideration is unlawful is void.

A promises to obtain for B an employment

in the public service, and B promises to pay

1,000 rupees to A. The agreement is void,

as the consideration for it is unlawful.

WHAT IS CONTRACT?

The term `Contract` is defined in Section2(h) of the Indian

Contract Act, which reads-

An agreement enforceable by law is a contracts

Contract = An Agreement + Enforceability (by law)

References

www.google.com- ( images)

Syllabus book