Sie sind auf Seite 1von 12

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.

3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

The Contract Act, 1871 1.1 Nature and classification of contracts - Essential elements of a valid contract 1.2 Offer and Acce tance - Consideration - Ca acities of !arties.. 1." !rovisions relatin# to free consent void a#reements. 1.$ !rovisions relatin# to erformance and dischar#e of contract 1.% &reach of contract - 'eanin# and remedies

IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871

Page 1

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

Nature and classification of contracts - Essential elements of a valid contract 1.1a Sections 1-10: Ingredients of a valid contract Contract: A contract is an agreement, enforceable by law, made between at least two parties by which rights are acquired by one and obligations are created on the part of another. If the party, which had agreed to do something, fails to do that, then the other party has a remedy. Section 2h defines a contract as an agreement enforceable by law. Thus, a contract essentially consists of two elements !i" An agreement and !ii" it#s enforceability by law. Agreement: Section 2e defines an agreement as e$ery promise and e$ery set of promises forming consideration for each other. Sec2b defines promise% A proposal, when accepted and adopted becomes a promise. Thus as per Sec 2c, the person ma&ing the proposal is called promiser and the person accepting the proposal is called promisee. Agreem ent
C O N T R A C T

Legal Obligati on

There are certain agreements which do not become contract, as enforceability by law is absent, e.g. two persons agree to go on a stroll does not become a contract. 1.1b Essentials of a Contract: Section '( pro$ides that all agreements are contracts, if they are made by free consent of parties competent to contract, for a lawful consideration and with lawful ob)ect and are not e*pressly declared by law to be $oid. The party ma&ing the offer !or proposal" is &nown as the offender or proposer; the party to whom the offer is made is &nown as the offeree. +hen the offeree gi$es his ascent to the offer, then he is &nown as acceptor. Consensus ad idem , At the time of entering into a contract, parties must be thin&ing the same thing. So a contract should ha$e '. -onsent of parties 2. -onsent must be free and genuine. .. /arties must be competent to contract. IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 2

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

0. Should be supported by -onsideration from both sides. 1. If there is no consideration, then the contract is nudum pactum or void contract. !rivit( to a contract) As a contract is entered into by two or more persons, thereby creating rights and obligations by them, it is a party to the contract only who can enforce his rights as against the other party, i.e., the promiser. The basic principle is that a stranger to a contract cannot maintain suit for a remedy. This rule can be traced to the fact the law of contracts creates 2)us in personam# as distinguished from 2)us in rem#. 1.1c Classification of contracts) -ontracts may be classified under, '. 3alidity or enforceability 2. 4ode of formation .. /erformance 1. Classification according to formation: A contract may be, a" 4ade in writing b" 5y word spo&en c" Inferred from the conduct of parties or circumstances of the cause. Thus Sec.6 pro$ides that, in so far as the proposal or acceptance of any promise made in words, the promise is said to be e*press. i) Contracts need not be in writing: The terms of contract may be stated in words !written or spo&en". This is &nown as an express contract. Thus there may be a $erbal or oral contract, and the terms and conditions may be inferred from the conduct of the parties or from the circumstances of the case. This is an implied contract. Contracts and documents to be in writing: There are certain contracts and documents which are required to be in writing and are to be signed by parties thereto. 5ill of 7*change, cheque, promissory note etc. under negotiable instruments act '68'. A 4emorandum of Association of a company registered under -ompanies Act, '619. Articles of association of a company registered under -ompany#s Act '619. Application for shares of a company. Contracts and documents to be registered: Transfer of immo$able property, i.e., lease, sale, mortgage. 4emorandum of Association of a company. :ocuments coming under the /re$iew of ;egistration Act, '6(8.

It is always safe to put the contracts in writing.


ii)

iii)

Quasi contacts: Though it is essential for a $alid contract to be based on agreement between parties, sometimes, howe$er, obligations are imposed by law !regardless of any agreement" and an action is allowed to be brought by another party. Such obligations are Quasi-contracts. ( s !"#$). Classification accordin# to validit() According to this concept, the different classifications are a" 3alid< b" 3oidable< c" 3oid< and d" =nenforceable. As per S2 !i", a $oidable contract is one which may be repudiated !a$oided" at the will of one or more of the parties, but not by others.

IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871

Page 3

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

Classification accordin# to erformance) The classifications are !i" 7*ecuted or e*ecutor< !ii" =nilateral and bilateral. An executed contract is one which has been wholly performed. A unilateral contract is one wherein at the time the contract is concluded, there is an obligation to perform on the part of one party only. A bilateral contract is one wherein there is an obligation on the part of both to do or refrain from doing a particular thing. 1.2a !ro osal *or Offer+ and Acce tance *,s "--+ The offerer or proposer e*presses his willingness 2to do# or 2not to do#!i.e. abstain from doing" something with a $iew to obtain acceptance of the other party to such act or abstinence >s2!a"?. Thus it may be positi$e or negati$e. 'odes of ma.in# an offer) %xpress &ffer: @ffer made by words 'mplied &ffer: @ffer made by conduct &ffer b( )bstinence: 5y omission to do something pecific or general offer: !i" Specific To a definite person !ii" Aeneral The public at large /ifference 0et1een an offer and 2invitation to offer3) An offer is complete with prospectus, price and $alidity. The price lists, catalogues, price tags and in$iting tenders are mere in$itations to offer. Essentials to a valid offer) !i" The terms of the offer must be definite, unambiguous and certain or capable of being made certain. !ii" An offeree must ha$e &nowledge of the offer before he can accept it. !iii" An offerer cannot contain the term non%compliance of which may be assumed to amount to acceptance. !i$" If a person ma&es a statement without any intention of creating a binding obligation, this does not result in an offer. !$" +here two parties ma&e identical offers to each other in ignorance of each other#s offer, this does not result in a contract. !$i" The offer must be made to obtain Acceptance thereto. !$ii" The offer must be made with the intention of creating legal relationship. !$iii" The offer must be communicated to the offeree before it is accepted. !i*" If no time is fi*ed by the offerer within whom the offer is to be accepted, the offer does not remain open for an indefinite period. !*" An offer must be distinguished from a mere in$itation to offer. 'rrevocable offer: An offer cannot be re$o&ed !stopped" before its e*piry date. Conditions under w*ic* revocation of offer can be done (s+): i" :eathB Insanity of proposer ii" :eathB Insanity of the offeree before acceptance. iii" ;e)ected by offerer i$" Cot accepted by offeree $" Cot accepted in the mode prescribed $i" +hen conditions not accepted by offeree $ii" -ounter%offer by offeree 1.2 0 Acce tance of an offer) IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 4

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

+hen the person to whom the offer is made signifies his assent thereto, the offer is accepted under >s.2 !b"?. Essentials of a valid acce tance) '. It must be absolute and unqualified and according to the e*act term of the offer sD. 2. It must be communicated to the offerer. .. It must be according to the mode, if any, prescribed by the offerer !sD". 0. It must be gi$en within the time specified, if any, otherwise it must be gi$en within a reasonable time. 1. It must be gi$en by the person to whom the offer is made. Eence, Acceptance must be absolute and unqualified Acceptance must be in the mode prescribed !sD" -ompletion of communication of offer and acceptance !s0" ;e$ocation of offer and acceptance !s1" 1.2c Consideration) In simple terms, it is, what the promiser demands as the price of his promise. -onsideration need not be in terms of money only. It may e$en be some benefit, right, interest or profit accruing to one party, or some forbearance, detriment, loss or responsibility gi$en, sufficient or underta&en by another party. Sec2d defines consideration as w*en at t*e desire of t*e promiser, t*e promisee or an( ot*er person *as done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing somet*ing, suc* act or abstinence or promise is called a consideration for t*e promise 7*ample ) agrees to sell *is motorc(cle to - for .s. $/,///. 0ere -1s promise to pa( t*e sum of .s.$/,/// is t*e consideration for )1s promise to deliver t*e motorc(cle, and )1s promise to deliver t*e motorc(cle is t*e consideration for -1s promise to pa( .s.$/,///. Essentials of consideration) '. -onsideration must mo$e at the desire of the promiser, and hence, an act done by the promise of the desire of the third party is not a consideration. 2. -onsideration may mo$e either from the promisee or any other person. %xample: ) lad(, b( t*e deed of a gift, transferred certain propert( to *er daug*ter wit* a direction t*at t*e daug*ter s*ould pa( an annuit( to )1s brot*er as *ad been done b( ). &n t*e same da(, t*e daug*ter executes a writing in favour of )1s brot*er agreeing to pa( t*e annuit(. )fterwards, s*e declines to fulfil *er promise sa(ing t*at no consideration *as moved from )1s brot*er to *er. )1s brot*er was *eld entitled to recover t*e mone(. .. -onsideration need not be adequate Eow much consideration or payment must there be for a contract to be $alid, is always the loo&out of the promiser. Thus, if A promises to sell his pen worth ;s.8( for ;s.2(, only the inadequacy of the price in itself shall not render the contract $oid. 5ut when A pleads coercion, undue influence or fraud, then the inadequacy of consideration will also be a piece of e$idence to be loo&ed into. 0. -onsideration must be real and competent -onsideration of contract must be real and not illusionary. Also, the consideration must be competent, i.e. it must be something to which law attaches some $alue. 1. -onsideration must be legal Illegal consideration renders a contract $oid. 9. -onsideration may be present, past or future A consideration which mo$es simultaneously with the promise is called present (or executed) consideration. 2-ash sales# pro$ides an e*cellent e*ample of the present consideration. IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 5

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

+here the consideration is to mo$e at a future date, it is called, future or executor( consideration. 7*ample, ad$ance payment for a future deli$ery. 2ast consideration is something fully done, forborne or suffered the ma&ing the contract. 7*ample A sa$es 5#s life. 5 promises to pay ;s.'(, ((( out of gratitude. The consideration for 5#s promise is a past consideration, something done before ma&ing of the promise. E4ce tions to 5no consideration, no contract6 A promise without consideration is $alid under the following cases '. Fo$e and affection If it#s e*pressed in writing and is registered under the law relating to registration of documents and the transaction is being made between parties standing in a near relation to each other. 2. 3oluntary ser$ice A promise without consideration is $alid if it is a promise to compensate wholly or in part a person who has already $oluntarily done something for the promiser or something the promiser was legally compellable to do. .. A promise to pay wholly or in part a debt It is applicable, when the debt is barred by the Fimitation Act and can be enforced if it is in writing and is signed by the debtor or his authorised agent. 7*ample )n elder brot*er, on account of love and affection, promises to pa( t*e debts of *is (ounger brot*er. 3*e agreement was put to writing and was registered. 3*is was *eld to be a valid agreement, even t*oug* t*ere was no consideration for t*e promise. 0. Aifts -onsideration is not applicable for completed Aifts. 1. /rincipal and Agent Co consideration is required in the case of an agreement between principal and agent. 1." !rovisions related to free consent, void a#reements

1." Consent and 7ree Consent 1.3a eaning of Consent: +hen two or more parties agree upon the same thing in the same sense, they are said to consent. 1.3b !ree consent: Gor a contract to be $alid it is not only necessary that the parties consent, but also the parties consent freely. -onsent is supposed to be free when it is not caused by "i# coercion "ii# undue influence "iii# fraud "iv# misre$resentation "v# mista%e. eaning of coercion "Ss. 1% 8 72+) -oercion is !i" the committing or threatening to commit any act forbidden by Indian /enal -ode or !ii" the unlawful detaining or threatening to detain any property to the pre)udice of any person whatsoe$er with the intension of causing any person to enter into agreement >s'1?. &'reat to commit suicide( - is it coercion... Suicide, though forbidden by I/-, is for ob$ious reasons not punishable, since a deceased cannot be punished. 5ut since s'1 declares that committing or threatening to commit any act is forbidden by I/- is coercion, a threat to commit suicide should also be so regarded. Effect of coercion on validit) of a contract "s1*A#: +hen consent to an agreement is caused by coercion, the agreement is $oidable at the option of the party whose consent was so obtained. Eowe$er, a person to whom money has been paid or anything deli$ered under coercion must repay or return it to the other party !sD2". +resum$tion of undue influence as regards $ersons in $articular relations'i$s: Sec.'9 lays down the presumption li&e A person is deemed to be in a position to dominate the will of another i" +here he holds a real or apparent authority o$er the other. ii" +here he ma&es a contact with a person whose mental capacity is temporarily or permanently affected by reason of illness or mental or bodily stress. IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 6

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

Some relations prescribed under presumption of undue influence are a" parent H child b" guardian H ward c" doctor H patient d" spiritual guru H disciple e" lawyer H client f" trustee H beneficiary. There is no presumption of undue influence in the relationships between a" husband and wife b" master and ser$ant c" creditor and debtor d" landlord and tenant. Conse,uences of undue influence "s1*A#: An agreement caused by undue influence is $oidable at the option of the party whose consent was obtained by undue influence. Eowe$er, any such contract may be set aside either absolutely or if the party who has entitled to a$oid it has recei$ed any benefit there under, % then, upon such terms and conditions as the court deems it. %xtra precaution to be ta4en w*ile entering into contract wit* a 2ardanas*in woman- she obser$es complete seclusion. The courts in India regard such women as being especially open to undue influence eaning of fraud "Ss.1- . 1*#: Graud means and includes any of the following acts committed by a party to a contact with intent to decei$e the other party thereto or to induce him to enter into a contract i" The suggestion as a fact of that which is not true by one who does not belie$e it to be true< ii" Acti$e concealment of a fact by one ha$ing &nowledge or belief of the fact iii" /romise made without intention of performing it i$" Any other act fitted to decei$e $" Any such act or omission as the law specifically declares to be fraudulent Essential elements or conditions for a fraud to e/ist: i" There must be a representation or assertion and it must be false. ii" The representation assertion alleged to be false must be a fact, not an opinion or otherwise. iii" The representation or statement must ha$e been made a" &nowingly or b" without belief in its truth c" rec&lessly, carelessly whether it to be true or false. i$" The representation, statement, or assertion must ha$e been made with the intention of including the other party to act upon it. $" The representation must in fact 2decei$e#. $i" The party sub)ected to fraud must ha$e suffered some loss eaning of misre$resentation "Ss 10-1*#: It can be classified under the following groups i" The positi$e assertion in a manner not warranted by the information of the person ma&ing it, of that which is not true though he belie$es it to be true. ii" Any breach of duty which without intent to decei$e gi$es an ad$antage to the person committing it. iii" -ausing howe$er innocently a party to an agreement to ma&e mista&e as to the substance of a thing which is the sub)ect of agreement. Conse,uences of fraud and misre$resentations "S1*#: i" The party can a$oid the performance of the contract. ii" Ee can insist that the contract shall be performed and that he shall be put in a position in which he would ha$e been, if the misrepresentation made had been true. iii" In case of fraud, he can sue for damages.

IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871

Page 7

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

1ifference in fraud and misre$resentation: 7raud 'isre resentation The party ma&ing false or untrue representation It is innocent, without any intention to decei$e or to ma&es it with intension to induce the other party gain any ad$antage. to enter into contract. The party defrauded gets additional remedy of The only remedies are rescission and restitution suing for damages caused by. % 2rescission# is 2act of repealing%stop# % 2;estitution# is act of restoring the lost. The defendant cannot ta&e plea that the plaintiff The defendant could ha$e good defence. had the means of disco$ering truth or could ha$e done so with ordinary diligence. Cases of fraud 2'ere contract is not voidable: i" The party whose consent was caused by fraud or misrepresentation had the means of disco$ering truth by ordinary diligence. ii" The party after becoming aware of the fraud or misrepresentation ta&es a benefit under the contract. eaning of mista%e 3Ss. 40-415 4ista&e is defined as an erroneous belief on the part of the parties to the contract concerning something pertaining to the contract. 1ifferent %ind of mista%e i" 4ista&e of fact , a" bilateral b" =nilateral ii" 4ista&e of law , a" mista&e of the land b" 4ista&e of foreign law. Conse,uences of mista%e on contracts 4ista&e ma&es a contract $oid. Gor a contract yet to be performed the party complaining the mista&e may repudiate it, i.e., need not perform it. If the contract is e*ecuted, the party who recei$ed any ad$antage must return it or ma&e compensation for it as soon as the contract is disco$ered to be $oid. 1.$ !rovisions relatin# to erformance and dischar#e of contract A contract may be discharged by !'" /erformance !2" Tender !." 4utual consent Subsequent Impossibility !1" @peration H Faw !9" 5reach !0"

1.6a 1isc'arge b) +erformance: +hen the parties ha$e done whate$er was contemplated under the contract, the contract automatically comes to an end. 1.6b 1isc'arge b) tender If the promiser tenders performance of his promise but the other party refuses to accept, the promiser stands discharged to his obligations. 1.6c 1isc'arge b) mutual consent 5eaning of mutual consent (under ec!$): If the parties to a contract agree to substitute a new contract for the original one, or to rescind it or alter it, the original contract stands discharged. IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 8

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

A contract may terminate by dint of mutual consent in any of the following si* ways 6ovation: Substitution of a new contract for the original one .escission: -ancellation of part or whole of the contract. .emission (s!7): Acceptance of lesser sum for lesser fulfilment of promise made. )lteration: -hanging a part conte*t of the contract 8aiver: Abandonment of rights 5erger: +hen inferior right coincides with a superior right. 1.6d 1isc'arge b) subse,uent Im$ossibilit) A contract may be discharged due to impossibility of performances for It may be inherent in the transaction It may emerge later by the change of certain circumstances material to the contract Circumstances of supervening impossibilit( (s+!) i" :estruction of the sub)ect matter of the contract ii" 5y death or disablement of the parties iii" Subsequent illegality i$" :eclaration of war $" Con e*istence or non occurrence of a particular state of things Circumstances in w*ic* a contract is not disc*arged on ground of impossibilit( i" :ifficulty of performance ii" -ommercial impossibility iii" /romiser fails to perform through third party i$" Stri&es, loc&%outs and ci$il disturbances $" Gailure of one of the ob)ect 1.6e 1isc'arge b) 7$eration of 8a2 i" 5y death of promiser ii" 5y insol$ency of indi$idual of company iii" 5y merger i$" 5y un%authorised alteration of terms of a written document 1.6f 1isc'arge b) 2a) of 9reac' A breach of a contract is one party#s failure, without an illegal e*cuse, to li$e up to any of its promises under a contract. A contract terminates on breach. There are two types of breach )nticipator( -reac*: It occurs when one party repudiates the contract before the time fi*ed for performance has arri$ed or when party, by his own act, disables himself from the contract. o Conse9uences: a" ;escind and sue for damages b" 7*tend consideration and the hold the other party for non%compliance. )ctual breac* of contract: It may occur by a" Gailure to perform as promised b" ma&ing it impossible for the other party to perform. o 3*us, if a person does not perform *is part of t*e contract at t*e stipulated time, *e will be liable to breac*.

IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871

Page 9

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

9uestions and Ans1ers) '" +hat is a contractI +hat are the essentials of a $alid contractI Ans1er) :efer ,ections 1.1a and 1.10 ; !a#e 2. 2" 7laborate on the classification of the contracts Ans1er) :efer ,ection 1.1c ; !a#e" 8 !a#e$ *1st ara#ra h+. ." a" +hat is a $oid agreementI b" :istinguish between $oid agreement and $oidable contractI c" :istinguish between $oid agreement and $oid contractI Ans2er: a# :oid Agreement: <iterall() 3oid means ha$ing no legal $alue and agreement means Arrangement, promise or contract made with somebody. So a $oid agreement means an agreement that has no legal $alue. Traditionall() An agreement not enforceable by law is said to be $oid. >Sec 2!g"? A $oid agreement has no legal effect. An agreement which does not satisfy the essential elements of contract is $oid. 3oid contract confers no rights on any person and creates no obligation. E4am le of void a#reement) An agreement made by a minor, agreement without consideration, certain agreements against public policy etc. 7eatures of =oid a#reements) i. An agreement made by incompetent parties !4inorBIncapacitated /erson" is $oid. ii. Any agreement with a bilateral mista&e is $oid. iii. Agreements which ha$e unlawful consideration is $oid. i$. Agreement with a unlawful ob)ect is $oid. $. Agreements made without consideration is $oid. $i. Agreement in restraint of marriage of any ma)or person is $oid !absolute restriction". $ii. Agreement in restraint of trade is $oid.!reasonable reason" $iii. Agreement in restraint of legal proceedings is $oid. i*. An agreement the terms of which are uncertain is $oid. *. An agreement by way of wager !bettingBgambling" is $oid. *i. An agreement contingent upon the happening of an impossible e$ent is $oid. *ii. Agreement to do impossible acts is $oid. 0+ A voida0le contract, unli&e a $oid contract, is a $alid contract. At most, one party to the contract is bound. The unbound party may repudiate the contract, at which time the contract is $oid. A formal agreement between two parties may be rendered unenforceable for a number of legal reasons. ;easons that can ma&e a contract $oidable include failure by one or both parties to disclose a material fact< a mista&e, misrepresentation or fraud< undue influence or duress< one partyJs legal incapacity to enter a contract< one or more terms that are unconscionable< or a breach of contract. c+ The difference 0et1een void a#reement and void contract are as under) =oid A#reement) '. A $oid agreement is unenforceable from the beginning. 2. A $oid agreement can ne$er be enforced. .. In a $oid agreement the parties are not entitled for restoration of benefits which they ha$e e*change during the contract. IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 10

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

=oid Contract) '. A $oid contract is enforceable when it is made. It becomes unenforceable later on. 2. A $oid contract can be enforced before it becomes unenforceable. .. In a $oid contract the parties are entitled for restoration of benefits which they e*change during the contract. 0" +hat is a proposalI +hat are the essentials of a $alid offerI Ans1er) :efer ,ection 1.2a ; !a#e$. 1" 7*plain the criteria for Acceptance of an @ffer. Ans1er) :efer ,ection 1.20 ; !a#e$ 8 !a#e%. 9" 7*plain Gree consent and factors affecting Gree consent. Ans1er) :efer ,ection 1." ; !a#e >-8. D" +hat are the elements of -onsiderationI 7laborate on the same. Ans1er) :efer ,ection 1.2c onl( !a#e%. 8" A contract without consideration is $oid% -omment and gi$e e*ceptions to the rule. Ans1er) :efer ,ection 1.2c onl( !a#e>. 6" Eow is contract terminatedI +hat are the remedies for 5reach of -ontractI Ans1er) :efer ,ection 1.$, ,ections 1.$a ? 1.$f ; !a#e8 ? -. '(" +rite Short Cotes on a. 7ssentials of -onsideration :efer ,ec1.2c ; !a#e% b. =ndue Influence :efer ,ec1."a ; !a#e> *<ast !ara#ra h+ ? !a#e7 *1st !ara+ c. Graud and 4isrepresentation :efer 1."a ; !a#e7 *2nd !ara on1ards+ ? !a#e8 *7irst 2 !ara#ra hs+ d. :ischarge of -ontract by subsequent impossibility :efer ,ection 1.$d ; !a#ee. :ischarge of -ontract by 4utual -onsent :efer ,ection 1.$c ; !a#e8 f. 5reach of contract. &reach of Contract) A breach of contract occurs where a party to a contract fails to perform, precisely and e*actly, his obligations under the contract. This can ta&e $arious forms for e*ample, the failure to supply goods or perform a ser$ice as agreed. 5reach of contract may be either actual or antici ator(. Actual breach occurs where one party refuses to form his side of the bargain on the due date or performs incompletely. Anticipatory breach occurs where one party announces, in ad$ance of the due date for performance, that he intends not to perform his side of the bargain. The innocent party may sue for damages immediately the breach is announced. Effects of 0reach) A breach of contract, no matter what form it may ta&e, always entitles the innocent party to maintain an action for damages, but the rule established by a long line of authorities is that the right of a party to treat a contract as discharged arises only in three situations. The breaches which gi$e the innocent party the option of terminating the contract are *a+ :enunciation) ;enunciation occurs where a party refuses to perform his obligations under the contract. It may be either e*press or implied. ;enunciation is implied where the reasonable inference from the defendant#s conduct is that he no longer intends to perform his side of the contract. IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871 Page 11

1.1 Nature and classification of contracts - Essential elements of a valid contract1.2 Offer and Acceptance - Consideration - Capacities of Parties1.3 Provisions relating to free consent, void agreements1.4 Provisions relating to performance and disc arge of contract1.! "reac of contract - #eaning and remedies

*0+ &reach of condition) The second repudiatory breach occurs where the party in default has committed a breach of condition. *c+ 7undamental 0reach) The third repudiatory breach is where the party in breach has committed a serious !or fundamental" breach of an innominate term or totally fails to perform the contract. A repudiatory breach does not automatically bring the contract to an end. The innocent party has two options a" Ee may treat the contract as discharged and bring an action for damages for breach of contract immediately b" Ee may elect to treat the contract as still $alid, complete his side of the bargain and then sue for payment by the other side :emed( of &reach) :amages is the basic remedy a$ailable for a breach of contract. It is a common law remedy that can be claimed as of right by the innocent party. &'e ob;ect of damages is usuall) to $ut t'e in;ured $art) into t'e same financial $osition 'e 2ould 'ave been in 'ad t'e contract been $ro$erl) $erformed. Sometimes damages are not an adequate remedy and this is where the equitable remedies !such as specific performance and in)unction" may be awarded.

IBMR/RKG/LAB-LRM/MBA SEM1-MMM SEM3/ICA-1871

Page 12