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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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• 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 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)