Business Contracts

Unit II
PUTTU GURU PRASAD
INC GUNTUR
 After reading this chapter you will
be conversant with the following:
 Legal Elements of Contracts
 Remedies of Contract
 Contracts of Agency
 Contracts of Indemnity
 Letter of Credit Contracts
 Employment Contracts
 Special Rights in Contracts
 Documentation of Commercial Contracts
 Legal elements of contracts
 An agreement enforceable by law is a contract
2(h)
 Intention to create legal relation/ bond between
the parties (vinculum juris)
 Balfour V Balfour ( £40 to be paid to wife for
staying back in England, due to ill health –Is the
agreement not enforceable ?) No
 Gould V Gould ( An agreement with the words
“As long as he can pay”– Is there an intention to
create a binding contract?)- No
 Agreement + Legal obligation = Contract

Agreement made with the intention of legal enforceability is a valid

contract
Legal enforceability:
Social or moral obligations are not considered to be valid contracts,
until they create a legal obligation to make the parties bind themselves
If they are legal
Agreement only -
it is a contract

Agreements can Legal

Agreements be obligations
Social or Legal
 Conditions of contracts
In order to be an agreement there must be:
●Plurality of persons ( Two or more
persons)
● Consensus ad idem
Parties must be thinking of the same thing in
the same sense ( this is with regard to
subject matter of the contract)
In other words it can be said that there must
be meeting of minds
 Scope
 Voluntary creation of legal obligations or civil
obligations
 Sec 10- All agreements are contracts if they are
made by the free consent of parties competent
to contract, for lawful consideration and with
lawful object and are not hereby expressly
declared to be void
 All contracts are agreements but all agreements
are not contracts
 Essential of a valid contract
 Offer and acceptance Other formalities to be
 Capacity to contract fulfilled are:
 Free Consent  Certainty and possibility
performance
 Consideration
 Lawful object
 Terms of contract to be
clear
 Agreement not be
declared void
 Other legal formalities to
be fulfilled like stamp
duty, registration
 Process of making a contract
 Proposaland Acceptance
Who makes it?
Promisor ( One who makes proposal or offerer)

willing to do something or abstain from doing

something
Offer made with the intention to obtain assent
Who accepts it?
Person who accepts the said proposal is called
promisee
 Communication of offer and
acceptance
 Itcan be communicated by an act or
omission
 Word of mouth- Expressed
 Writing- Expressed
 Made by conduct- Implied

(A bid to Auction)
Either it is express or implied, the liability
to perform arises as it is a legal obligation.
 Kinds of offer
 General and Specific offer
Offer to be made to a definite person
(Carlill V carbolic smoke ball company)
Offer and Invitation to offer *(Harvey V Facey)
(Tender is a standing offer)
Catalogue, display of goods, Auction
 Express and implied offer
 Positive and Negative offer
 Counter offer- (Hyde vs. Wrench)
(Not to be mistaken for mere information
being asked – Stevenson v Mc-Lean)
 Cross offer and Standard form Contracts
 Essential of Valid Acceptance
 To be made by the offeree or promisee
 It should be Absolute and unqualified
 Shall be in the prescribed form
 Within the specified time
 To be communicated- Either during the
negotiations or after (E.g. Letter of
acceptance typed but the author kept it inside
his draw)
 To be positive
 Revocation of Offer and
Acceptance
 Termination of Contract
Either from the offerer or offeree
 By Revocation –General or Unilateral
 Lapse of Time
 Counter offer or Rejection
 Effect of death or Insanity of either of the party
 Subsequent illegality
 Failure to fulfill condition precedent for
acceptance