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The Indian Contract Act 1872:

Nature and Kind of Contracts

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Chapter 1

A and B of Srinagar entered into a contract on 1


September 2006 as per the provisions of the
Indian Contract Act. Can they enforce the
contract?

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

No they cannot enforce contract

Indian Contract Act is applicable to whole of


India except to the state of Jammu & Kashmir.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

A promises to deliver his watch to B and, in


return, B promises to pay a sum of Rs. 2,000. Is
it an agreement or a contract?

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

It is a contract.

A offers while B accepts offer by agreeing to


deliver his watch. Rs. 2,000 and watch are
consideration. Thus, all elements of valid
contracts are present.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

A promised to pay his son B a sum of Rs. 1


lakh if B passed C.A. exams in the first
attempt. B passed the examination at first
attempt but A failed to pay the amount as
promised. B files a suit for recovery of the
amount. State whether B can recover the
amount under the Indian Contract Act, 1872.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

B cannot recover anything from A.

Promise by A is not with an intention to create


legal relation. Social agreement is created.
Social agreement is not enforceable.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

Salman promises to Katrina to give real pearl


necklace at the time of his marriage. Salman fails
to give it at the time of marriage. Can Katrina
complain about non-fulfillment of promise against
Salman at any court?

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

Katrina cannot complain in any court.

Promise by Salman is not with an intention to


create legal relation. Social agreement is
created but is not enforceable.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

State with reason in brief, whether any contract is made


in following cases:

You have invited your business partner for launch.


When you eat meals at restaurant.
When you board a public bus.
When you call a taxi on telephone.
When you put an coin in the slot of weighing
machine.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

No contract made: Invitation for launch is social


agreement. Intention to create legal relation is
missing.
Yes contract is made: Order for meal is offer
while serving meal is an acceptance. It
is
agreement with all elements of contract.
Yes contract is made: You agree to pay to bus
company for taking you at the agreed stop or place.
It is enforceable agreement.
Yes contract is made: You agree to hire service
from taxi company. It is acceptance to your offer to
pay money to taxi company. It is enforceable
agreement.
Yes contract is made: It is enforceable
agreement with all essential of valid contract is
presence.
Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

A, a tradesman, left certain goods at Bs


house by mistake B treated and used the
goods as his own. Can trade men recover
money of goods used by B?

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

Yes trade man can recover money of goods from B.

When B treated and used the goods of his own in


spite of having knowledge that it does not belong
to him, he has given acceptance. Thereby valid
contract is made.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

Mohan agrees to pay Sohandada Rs. 50,000


to kill business competitor. Mohan has
borrowed this money from his friend but now
refuse to pay back. Can his friend claim it by
approaching court? Would your answer be
different in any manner if his friend do not
have knowledge about purpose of borrowing?

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

His friend cannot recover the money provided if


he has knowledge about purpose of use of fund.
Contract to be valid must have lawful object.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

A agrees to sell his DVD player to B promising to


deliver it on the date of payment. B promises to pay
the amount with one month. What kind of contract
it is?

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

The Indian Contract Act


1872: Nature and Kind of
Contracts

It is bilateral contract.

In bilateral contract, both the parties


exchange a promise to each other to be
performed within a stipulated time.

Legal Aspects of Business (GTU) by Tejpal Sheth

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.

Case Analysis

Legal Aspects of Business (GTU) by Tejpal Sheth


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Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.