Sie sind auf Seite 1von 35

MFM-1

Business Law
Session-2
1

CAPACITY OF PARTIES
Meaning:
Capacity
to
contract
means
competence of parties to enter into a valid
contract. Sec. 11
Sec.10 requires parties to be competent to
contract.
Sec.11 lays down that: every person is competent
to contract who is of:

Age of majority according to law to which he is subject.


Sound mind.
Not disqualified from contacting by any law to which
he is subject.
2

Reasons For Incapacity


Status
Mental Deficiency
Unsound Mind
Foreign
Sovereign
Person
Alien

Convict

Corporation

Insolvent

Enemy

Incapacity arising from status:


1.
2.
3.
4.
5.

Foreign Sovereigns and Ambassadors.


Alien Enemy
Convicts
Corporation
Insolvent person

Incapacity arising from unsound mind:


Person of unsound mind means who:

Lack capacity to understand the terms of the


contract.
Have inability to form rational judgement and
realise its effect.

A person who is usually of unsound mind but


occasionally of sound mind or vice versa may
make the contract when he is of sound mind.

Sr.
No.

Type of Unsoundness

1.

Lunatic:
person
who
is
mentally deranged due to
some mental strain or other
personal experience but who
has some lucid intervals of
sound mind.

2.

Effect on Contract

a) While he is of unsound mind

He can not enter into any


contract. Any agreement entered
into by him during this period is
altogether void and he can not be
held liable.

b) While he is of sound mind

He can enter into a valid contract


and he is liable for such contracts
.

Idiot:
a
person
who
is He can
permanently of unsound mind. contract

not

enter

into

any
7

Sr. No.
3.

Type of Unsoundness

Effect on Contract

Drunken person: a sane person He can not contract while


who is delirious from fever or such delirium or drunkenness
who is so drunk that he can not lasts.
understand the terms of
a
contract or form a rational
judgement as to its effect on his
interest.
Position of drunkard is the same as that of Lunatic.

CONTRACTS BY A MINOR
Who is minor?
Sec.3 of Indian Majority Act, 1875
deems person as Major
Category

Age of majority

Where a guardian of a minor On completion of 21 Years.


person is appointed under
Guardian and Wards Act,1890.
Where Minors property has On completion of 21 Years.
passed under superintendence
of the Court of Wards.
In others case.

On completion of 18 Years.

Two

fundamental Rules governing


minors contract.
The judges are his counselors, the jury are
his servants and the law is his guardian.
Law
should not cause unnecessary
hardship to person who deal with minors.

10

The

following govern agreements with a minor.


1. Void.
2. No ratification possible.
3. No estoppel against minor.
4. Restitution of goods and property acquired fraudulently.
5. Enforceability of contracts by a minor.
6. Minor and insolvency.
7. Minor and partnership.
8. Minor and agency.
9. Minor and negotiable instrument.
10. Minor as a member of a company.
11. Position of minors parents.
12. Minors liability for necessities.
13. Minor and guardian.
14. Minors liability for tort.
15. No specific performance.
11

FREE CONSENT

Consent means acquiescence or act of


assenting to an offer.
The essence of every agreement is that
there should be free consent on both sides
Two or more persons are said to consent
when they agree upon the same thing in the
same sense. In other words there should be
Consensus ad idem
i.e. understanding
same thing in same sense and same manner.

12

Undue
Influence

Coercion

No Free
Consent,
If caused by

Mistake

Fraud

Misrepresent
ation

13

COERCION

14

DEFINITION AND MEANING

Sec.15:

the committing or threatening to commit, any act


forbidden by Indian Penal Code, Or
The unlawful detaining or threatening to detain, any
property, to the prejudice of any person whatever, with
the intention of causing any person to enter into
contract

Coercion may proceed from any person and may


be directed against any person including stranger.
A threat to file suit does not amount coercion
unless suit is on false charge.

15

Threat to commit suicide amounts to coercion.


Coercion may be extra-territorial: it is immaterial
whether Indian Penal Code 1860 is in force in the
place where coercion is employed, provided the
act has been planned in India.
Duress is the word used in English Law instead
of coercion.
Burden of Proof: Aggrieved Party must prove
that his consent was caused by coercion.

16

UNDUE INFLUENCE

17

DEFINITION AND MEANING


Sec.16:
The following are essentials of Undue
Influence:

The relation subsisting between the parties


should be such that one of them is in a
position to dominate the will of the other,
and
The dominant party should have used that
position to obtain an unfair advantage over
the other.

18

The following relationships are said to


raise a presumption of Undue
Influence:
1.
2.
3.
4.
5.
6.

Parent and Child


Doctor and Patient
Lawyer and Client
Guardian and Ward
Religious Advisor and Disciple
Trusty and Beneficiary
19

In
following
relationship
Undue
Influence is not presumed.
1. Land lord and Tenant
2. Creditor and Debtor
3. Husband and Wife
. Burden of Proof: the burden of proof
that the contract was not induced by
Undue Influence lies on party who was
in dominant position.

20

Consequences: in both coercion and


undue influence it gives aggrieved
party right to avoid contract.

21

FRAUD

22

DEFINITION AND MEANING


Sec.17:
Fraud means and includes any of the following act committed
by a party to a contract with intent to deceive another party
to induce him to enter into contract. It includes1. The active concealment of a fact by one having knowledge
or belief of the fact.
2. A promise made without any intention of performing it.
3. The suggestion as to a fact, of that which is not true, by one
who does not believe it to be true.
4. Any other act fitted to deceive.
5. Any such act or omission as the law specially declares to be
fraudulent.

23

For fraud to exist, there must be1. A representation, and it must be false.
2. The representation must relate to fact.
3. The representation must have deceived
the other party.
4. The other party who has been deceived
must suffer some loss. As such fraud
without damage or damage without
fraud does not give rise to an action.

24

Consequences: the party defrauded can:


1. Avoid the contract.
2. Insist that contract shall be performed.
3. Sue for damages.
. Loss of right to avoid contract.
a) Ability to discover by ordinary diligence.
b) Contract in ignorance.
c) The party after becoming aware, takes benefit.
d) An innocent third party acquires title.
e) The parties can not be restored to original position.

25

SILENCE- AMOUNTS TO FRAUD?


Mere silence as to fact likely to affect
the willingness of a person to enter into
a contract is not fraud.
Exceptions:
1. Where
parties stand in fiduciary
relationship.
2. Where silence itself is equivalent to
speech.

26

MISREPRESENTATION

27

DEFINITION AND MEANING


Sec. 18:
It means misstatement of fact material
to the contract. It is false
representation made innocently,
without any intention of deceiving the
other party.

28

Consequences: the party misrepresented can:


1. Avoid the contract.
2. Insist that contract shall be performed.
. Loss of right to avoid contract.
a) Ability to discover by ordinary diligence.
b) Contract in ignorance.
c) The party after becoming aware, takes benefit.
d) An innocent third party acquires title.
e) The parties can not be restored to original
position.

29

A statement of fact which one party makes it to another in the


course of negotiation with a view to inducing other party to
enter into contract
is known as representation. Such
representation when made innocently/intentionally amounts
to misrepresentation/fraud.

There is thin line of distinction between Fraud and


Misrepresentation.

30

MISTAKE

31

Mistake may be defined as erroneous


belief about something.
Mistake

Mistake of Law
Mistake of Fact

Indian Law
Valid

Foreign Law
Unilateral
Void

Bilateral
Void

Valid

32

Types of Bilateral Mistake:


1. Mistake as to existence of subject matter.
2. Mistake as to identity of subject matter.
3. Mistake as to title of subject matter.
4. Mistake as to quantity of subject matter.
5. Mistake as to quality of subject matter.
6. Mistake as to price of subject matter.
7. Mistake as to possibility of performance.
33

In case of Unilateral Mistake, contract


remains valid but if it is committed by
fraud of other party then contract can
be avoided.

34

Thank You.

35

Das könnte Ihnen auch gefallen