2.

1 Syllabus
1. Indian Contract Act
2. Indian Sale of Goods Act
3. Salient features of Negotiable Instrument Act
 Legal and Tax Aspects of business
• Introduction to Law

• Law implies ‘Rules’ and as such

includes different sets of rules
which govern or regulate various
external human actions and
conduct of individuals, institutions
and the Government with each
other
 Characteristics of law
1. Law is related to external human
actions
2. Law is rule of conduct imposed and
enforced by the sovereign. Law is the
command of the sovereign and is
enforced by the state.
3. These rules of conduct are essential
for peaceful and prosperous living of
the people in the country.
4. Law is supreme and is applicable to
all.
 BUSINESS LAW
1 Business Law includes laws concerning industry, commerce and
trade.
2.Business Law and Mercantile Law are synonymous terms.
3. Business law can be defined as that branch of law which is
concerned with or applicable to industry, commerce, trade, or
business in connection with various business or mercantile
transactions.
4.Object of BL is to regulate and control increasing business or
commercial transactions and activities.
5. BL includes Laws relating to contracts, sale of goods, partnerships,
companies, negotiable instruments, patents, designs, TM, insurance,
contracts of guarantee & indemnity etc.
 The Indian Contract Act 1872
• INTRODUCTION
• Definition: Salmond “ An agreement creating and defining
obligations between the parties.
Sir Federic pollock “ Every agreement and promise
enforceable at law is a contract.”
S-2(h) of Indian contract Act “ An agreement enforceable by
law is a contract.
 Essential Requirements of a contract

1. An agreement
2. Two or more competent parties
3. There should be an intention to create a
legal relationship
4. There must be free consent of parties to the
agreement
5. Lawful consideration and object
6. Agreement not expressly declared void by law
7. Compliance with legal formalities
8. Certainty and possibility of performance
 AN AGREEMENT
• S-2(e) every promise and every set of promises, forming the
consideration for each other, is an agreement. And when, at the
desire of the promisor, the promisee or any other person has done
or abstained from doing, something, such act or abstinence or
promise is called consideration for the promise.
• Consensus ad idem
• Offer + Acceptance
• Suppose Mr. Saurabh tells Avanish that he is willing to sell his
shirt to him for Rs. 1,500/-. If Mr. Avanish agrees to that and
gives his assent to the offer made by Mr. Saurabh
(offerer/proposer/ promisor) it is said that Mr. Avanish
(offeree/promisee/acceptor) has accepted the offer and there is an
agreement between Saurabh and Avanish.
Point AGREEMENT
Agreement VS.Contract
CONTRACT
Meaning An agreement is any A contract is a specific type of
understanding or agreement that, by its terms and
arrangement reached bet’n elements, is legally binding and
two or more parties. enforceable in a court of law.
Definition An arrangement (usually A formal arrangement between two
informal) between two or or more party that, by its terms and
more parties that is not elements, is enforceable by law.
enforceable by law.
Validity Mutual acceptance by both Mutual acceptance by both (or all)
based on (or all) parties involved. parties involved.
Does it No No, except for some specific kinds
need to be of contracts, such as those involving
in writing? land or which cannot be completed
within one year.
Considerat No Yes
ion
Legal An agreement that lacks any A contract is legally binding and its
TWO COMPETENT PARTIES : PROMISOR
AND PROMISEE
• The person who makes the proposal is called the
promisor/proposer/offerer
• and the person to whom the proposal is made called the
promisee/ offeree/acceptor(2c).
• A proposal, when accepted, becomes a promise(2b)
• S-11- lays down that “Every person is competent to contract who
is of the age of majority according to the law to which he is
subject, and who is of sound mind, and is not disqualified from
contracting by any law to which he is subject.’
• S-11declares the foll. persons to be incompetent a) Minors b)
Persons of unsound mind c) persons disqualified from
contracting by The Law
• An agreement by a minor is absolutely void & inoperative as
against him
 Legal Obligation
1. For formation of any contract, an agreement should give rise to a
legal obligation and the obligation must be enforceable at law.
2. Legal obligation is distinct from that of a moral, religious or social
obligations.
3. The Law of contract is not the whole law of agreements nor it is the
whole law of obligations. It is the law of those agreements which
create obligations, and those obligations which have their sources in
agreements.
4. Mr. Avanish told his wife, if she sings a song, he will give her a
beautiful saree. Wife has sung a song, and then Avanish refused to
bring a beautiful saree for her. This agreement is not entered into to
create any legal relationship and hence, it is not a contract in the
eyes of the law.
 Free consent
• S-13 –defines the term ‘consent’ as “two or more persons
are said to consent when they agree upon the same thing in
the same sense’
• S-14 ‘Consent is said to be free’ when it is not caused by
1. coercion
2. undue influence
3. misrepresentation
4. fraud
5. mistake
An old woman executed a deed of gift in favour of her
nephew under the impression that she was executing a
deed authorizing her nephew to manage her lands. The
evidence showed that the woman never intended to
execute such deed of gift, nor was the deed ever read or
explained to her. The deed was void.
 Coercion
• Coercion S/15 “coercion’ is the committing, or threatening to
commit, any act forbidden by the 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 an agreement”
• The threat amounting to coercion may proceed from a party of the
contract or even from a stranger. Contracts under coercion are
voidableat option of victim party. For examples
• A is forced to sign a promissory note at the point of pistol. A knows
what he is signing but his consent is not free.
• A threatens to kill B if he does not lend Rs. 1000 to C. B agrees to
lend the amount to C.
• When consent to an agreement is caused by coercion, fraud/
mispresentation
 Undue Influence
• S-16 (1)A contract is said to be induced by ‘undue influence’ where
the relations subsisting between the parties are such that (i) one of the
parties is in a position to dominate the will of the other and (ii) uses
that position to obtain an unfair advantage over the other.
• In particular & without prejudice to the generality of the forgoing
principle a person is deemed to be a position to dominate the will of
another
a) Where he holds a real or apparent authority over the other or b)
where he stands in a fiduciary relation to the other ; or c) where he
makes a contract with a person whose mental capacity is temporarily
or permanently affected by reason of age, illness ,or mental or bodily
distress
Where a person who is in a position to dominate the will of another,
enters into contract with him, and the transaction appears, on the face
of it or on the evidence adduced to be unconscionable, the burden of
proving that such contract was not induced by undue influence shall lie
upon the person in a position to dominate the will of other.
 Fraud
• S-17 ‘Fraud’ means & includes any of the foll. acts committed by a
party to a contract, or with his connivance, or by his agent, with
intent to deceive another party thereto or his agent , or to induce him
to enter the contract
1. The suggestion, as a fact, of that which is not true, by one who does
not believe it to be true;
2. The active concealment of a fact by one having knowledge or belief
or the fact
3. A promise made without any intention of performing it ;
4. Any other act fitted to deceive
5. Any such act or omission as the law specially declares to be
fraudulent.
 Misrepresentation
• S-18 ‘MR means and includes:
1. The positive assertion, in a manner not warranted by
the information of the person making it, of that which
is not true, though he believes it to be true;
2. Any breach of duty which, without an intent to
deceive, gains an advantage to the person committing
it, or any one claiming under him, by misleading
another, to his prejudice, or to the prejudice of any
one claiming under him;
3. Causing, however innocently, a party to an
agreement, to make a mistake as to the substance of
the thing which is the subject of agreement.
 Legality of object & consideration
• S-23 ‘the consideration or an object of an agreement should be
lawful, Unlawful object are as following:
1. It is forbidden by law; or
2. It is of such nature that, if permitted, it would defeat the
provisions of any law,or
3. It is fraudulent or
4. It involves or implies injury to the person or property of another;
or
5. The court regards it as immoral; or
6. The court regards it as opposed to public policy
7. There should be a legal consideration.
A offered Rs.1 lakh to B, if he killed to C. Here, consideration on the
side of B is unlawful, to kill someone is prohibited by law
• Avanish promises to obtain for Fahim an employment in the
public service and Fahim promises to Pay Rs. 1000 to
Avanish –unlawful consideration
• Avanish, Bushara, Samiksha enter into an agreement for the
division among them gains acquired, or to be acquired, by
them by fraud –object unlawful
• Suhail borrowed Rs.100 from Fatima and executed a bond
promising to work for Fatima without pay for 2 yrs. In case
of default, Suhail was to pay interest and the principal sum
at once. –excessive returns
• A married woman was given money to enable her to obtain
divorce from her husband and then to marry the lender.-
against public policy
• A firm of coach-builders hired out a carriage to a prostitute
knowing that it was to be used by the prostitute to attract
men. –sextual immorality
• A let a flat to B, a woman he knew to be prostitute. -
immoral purpose
 Void Agreements:2(g)The
agrmt.,which is not enforceable by
Agreement:
law
1. By incompetent parties(s-11)
2. Made under mutual mistake of facts(s-20)
3. The consideration or object of which is unlawful(s-23)
4. The con. Or object of which is partly unlawful (s-24)
5. Entered into contract without any consideration(s-25)
6. Made in restraint of marriages(s-26)
7. Made in restraint of trade, Busi., Occupation(s-27)
8. In restraint of legal proceedings(s-28)
9. All agrmts., the meaning of which is not certain(s-29)
10. Wagering agrmts.(s-30)
11. Agrmts. Contingent on impossible events(s36)
12. Agrmts. To do an act impossible in itself. (s-56)
 Practical Problems
1.Anup, sells a horse to Devendra knowing fully well that the horse is
vicious. Anup does not disclose the nature of the horse to Devendra.
Is the sale valid?
2. Mazahar, who is trying to sell an unsound horse, forges a veterinary
surgeon’s certificate, stating that the horse is sound & pins it on the
stable door. Amin comes to examine the horse but the certificate
goes unnoticed by him. He buys the horse and finds later on the
horse to be unsound. He wants to avoid the agreement under the
plea that he has been defrauded. Will he succeed?
3.The prospectus of a company did not refer to the existence of a
documents disclosing liabilities. This gave the impression that the
co. was prosperous. If the existence of documents had been disclosed
the impression would have been quite different .Can share holder
take any action against co?
X, falsely representing herself as the wife of a millionaire takes a ring
from a jeweler's shop for the approval of her husband. She pledges it
with a pawn broker who in good faith & without notice of the fraud
pays her Rs. 10,000/- Can the jeweler recover the ring from the pawn
broker?
 Indian Contract Act 1972
• Test your knowledge – tick mark the right option
• Mr. Vinay agrees to sell his motor-cycle to Rajesh for Rs. 25000/-
(agreement/offer/contract)
• In above Case Vinay is - Proposer/offeree/Guranter
• Mr. Rizwan told to Farhan he is willing to sell his motorcycle to
Khedekar for Rs. 25000/-(Agreement/offer/contract/None of these)
• Mr. Rizwan agrees to sell his motorcycle to Khedekar for 25000/-
and Khedekar is ready to purchase it for Rs. 20000/-
(Contract/offer/acceptance/counter offer)
• Mr. Rizwan agrees to sell his motorcycle to Khedekar for 25000/-
and Khedekar is ready to purchase it for Rs. 25000/-
(Contract/offer/acceptance/Agreement)
• Mr. Kushal agrees to go to Mr. Sachin Chavan’s house for lunch on
Sachin Chavan’s request, but he could not go. Sachin Chavan wanted
to file suit against Kushal for recovery of the expenses made on the
lunch. Can he succeed? Justify your answer.
• Ms. Samiksha told Sayali, “ I will pay you Rs. 1,000/- if you provide
me your class notes. Sayali has given her class notes to Samiksha and
demanded Rs. 1000/- Samiksha denied to pay. Can Sayali file suit
against Samiksha for recovery of the amount? Justify your answer
• Ms. Nikhita who is of below 18, told to Madhuri who is above 18, I
will pay you Rs.1000/-if you provide me your class notes. Madhuri
has provided class notes to her, latter Nikhita denied to pay Rs. 1000/-
to her. Madhuri wanted to file suit against Nikhita. Can she succeed?
Justify your answer.
• Mr. X who is of unsound mind entered into contract with Mr. Saurabh
and promised him he will give his car to him for Rs. 5000/- Saurabh
Paid the amount and asked for car. Mr. X refused to transfer the car to
Saurabh. Can saurabh take any legal action for recovery of the
amount? Justify your answer.
• Fatima told Madhuri, “ I will pay you Rs. 1000/-” latter, Fatima
denied to pay Rs. 1,000/- to Madhuri. Can Madhri recover the amount
from Fatima? Justify your answer.
• Shashank told Amin “ I will pay you Rs. 1000/- if you show me your
paper during exam.” Is it valid contract? Justify your answer.
• Shardul said to Amin “ Give me your mobile for Rs. 1000/- otherwise
I will beat you terribly.” ( Is it valid contract? Justify your answer)
• Mr. Kiran agrees to sell one thousand tons of rice to vaibhav. (Is it
contract?) Justify your answer.
• Mr. Avanish promises to Mrudula, he will bring her stars from the
paradise. (Is it contract?) Justify your answer.
• Husband agreed to pay maintenance allowance Rs.5000/- per month
to his wife after divorce. Wife has accepted the proposal. Latter
Husband denied to pay the maintenance allowance.
• According Shams Pakistan will win the Match. According to
Pednekar India will win the match. They entered into betting, and
agreed that if India won the match Shams will pay Rs. 50000/- to
Pednekar. If Pakistan won the match Pednekar will pay Rs. 50,000/-
to Shams. India won the match and Shams denied to pay Rs. 50000/-
to Pednekar. Can Pednekar file a suit against Shams? Justify.
• Mr. Ankush agrees with Mr. Nikhil to put life into his dead dog for
Rs. 5000/-
 Classification of contracts
1. On the basis of mode of formation or creation
a. Express contracts – Ms. Sonal made a proposal to sell her
house to Ms.Bushara for Rs. 5 lakh and Ms. Bushara has
accepted the offer, the contract entered into between
Ms.Sonal and Bushara is called as express contract.
b. Implied contracts- If Mr. Milind gets into a bus and
occupies a seat, there is an implied contract that he will
pay for his ticket.
c. Quasi contracts- Mr. Sachin who is friend
of Mr. Rajesh left his costly pen in the house
of Mr. Rajesh has to return the pen to
Mr.Sachin.
2. On the basis of extent of execution/performance
d. Executed contracts –Mr. Farhan agrees to sell his
Motorcycle to Mr.Suhail for Rs. 5000 and Mr.Suhail
accepts the proposal and accordingly Suhail pays Rs 5000
to Mr. Farhan and purchases a Motorcycle
e. Executory contracts- Mr. Farhan agrees to sell his
Motorcycle to Mr.Suhail for Rs. 5000 and Mr.Suhail
accepts the proposal but Mr. Suhail has yet to pay the
price and Mr. Farhan has yet to handover the Motorcycle
to Suhail , the Contract is executory contracts
3. On the basis of parties to the contract
f. Unilateral contracts- If Mr. X a coolie, puts Mr.
Y’s hold-all in his vehicle, the contract comes
into existence on putting Y’s hold-all in his
vehicle by Mr. X.
g. Bilateral contracts- Mr. Sunil promises
Mr.Shashank that he will purchase his house
after 10 months and Mr. Sunil also promises to
pay the value of Shashank’s house at the time of
saledeed. Here, performance of both the parties
are outstanding at the time of formation of the
contract.
4. On the basis of validity of enforceability
h. Valid contracts –All contracts which satisfy all essential elements and
enforceable in a court of law are termed as valid contracts.
i. Void contract- A contract which ceases to be enforceable by law
becomes void. A contract may be valid at the time when it was
originally entered into but it may subsequently becomes void, b’coz
of either impossibility of its performance due to outbreak of war or
any natural calamity or due to any other reason or change of law or
any other reason.
Eg. E.g.Sayali agrees to supply 1 tonne of wheat to Samiksha at Rs. 25
per kg. in 6 months April to September. She has supplied 500Kg.
Upto June. Government put ban on wheat treading in June. Now
this contract became (subsequently) void because of impossibility
of performance.
Suppose this ban was in existence when Sayali and Samiksha
entered into contract, then it is called as ab-initio-void
j. voidable contract- A voidable contract which can be avoided or set
aside at the option of any party to the contract.
Suppose Shahid and Prathmesh entered into a contract
accordingly Prathmesh is to drive the car of Shahid for Rs. 200/-
per day. Prathmesh is ready to do so but Shahid prevents
Prathmesh to touch the keys. Here contract is voidable at the
option of Prathmesh. If Prathmesh decides to rescind the
contract, he is entitled to recover compensation from Shahid for
any losses caused to him because of non-performance of the
contract.
6. Enforceability- Enforceable by law
k. Unenforceable contract- Eg. Document required certain amount of
stamped and if it is understamped, contract is unenforceable.
l. Illegal or unlawful contract- Wagering contracts, betting, gambling
• A. Check Your Progress T/F
• Law of contracts is not the whole law of
agreements
• An agreement of social nature is not a
contract
• A void contract is one which is void ab –
initio
• All void agreements are not necessarily
illegal
• Collateral transactions to an illegal
agreement are not void
 Offers and Acceptance
• Offer or Proposal : S-2(a) defines a proposal as ‘When one person
signifies to another his willingness to do or to abstain from doing
anything with a view to obtaining the assent of that other to such an
act or abstinence , he is said to make a proposal. Offer /proposal
consist
• A promise by the promisor to do or abstain from doing something ,&
• A request to the promisee for giving his acceptance.
• Until and unless the promisee accepts the promise unconditionally,
the promisor is not bound by the promisee.
1. Mr. Amin who is sales representative has distributed printed price list
of equipments and tools to different shopkeepers. Mr. Avanish who
is shopkeepter go through that price list and placed order for drill
machine. Mr. Amin refuse to sell that machine to Mr.Avanish. Can
Mr.Avanish take any legal action against Mr. Amin?
2. Mr. Shoaib has three cars. He says to Mr. Rajesh “ I will sell you a
car for Rs. 1 lakh”. Is it valid offer?
3. Mr. Pednekar sent his servant Mr. L to trace his missing dog. He
then announced that anybody who traced his dog would be entitled to
a certain reward. Mr. L traced the boy in ignorance of this
announcement. When he came to know of the reward, he claimed it.
Can he succeed?
4. An auctioneer advertised in a newspaper that sale of office furniture
would be held. A broker came from a distant place to attend that
auction, but all the furniture was withdrawn. Can broker take any
action against auctioneer?
Lawfull offer/Valid offer:
1. An offer may be express or implied
2.An offer must contemplate to give rise to legal consequences
& be capable of creating legal relation
3. The terms of the offer must be certain & not loose or vague
4.An invitation to offer is not an offer
5. An offer may be specific or general
6. An offer must be communicated to the offeree
7. An offer should not contain term the non-compliance of
which would amount to acceptance
8. An offer can be made subject to any terms & conditions
9. Two identical cross-offers do not make a contract
 Acceptance
• S-2(b)When the person to whom the proposal is
made signifies his assent thereto, the proposal is said
to be accepted.
• Who can accept an offer? Person /(s) to whom it is
made
 Valid acceptance
• Acceptance must be given only by the person to whom the
offer is made
• Acceptance must be absolute & unqualified
• Acceptance may be express or implied
• Acceptance must be communicated to the offeror
• Acceptance may be given for the offer which has been
communicated
• Acceptance must be in the mode prescribed or usual &
reasonable mode
• Acceptance must be communicated within a reasonable time
• Silence is not considered as a mode of acceptance
• Rejected offers can be accepted only, if renewed
• Ms. Sayali sold her busi. to Ms. Madhuri without disclosing this to her
customers. Sonal, an old customer sent an order for goods to
Ms.Sayali by name. Ms. Maduri, the new owner, executed the order.
Is Sonal bound to accept the goods?
• Shardul offer to sell a piece of land to Saurabh at Rs. 1 lakh. Saurabh
accepted the offer and promise to pay Rs. 50000 immediately and
balance by month after.
• Javed offered to sell his car to Shahid for Rs 95000/- Shahid accepts
to purchase it for Rs. 94500/- Javed refused to sell the car for Rs.
94,500/- Subsequently Shahid agrees to Purchase the car for Rs.
95,000/- but Javed refused to sell the car. Shahid sues Javed for the
Specific performance of the contract. Will he succeed?
• A makes an offer to B and says “ if you accept the offer, reply by
post.” B reply by SMS on phone.
• Mr.Gaurav on June 8, 2011 offered to take shares in R co. He recd. a
letter of acceptance on May 5,2012. Mr. Gaurav refused to accept the
shares.
 Check Your Progress T/F
1. A proposal when accepted always becomes a contract.
2. A quotation of price is an offer or proposal
3. Acceptance can be made even without the knowledge of
the offer.
4. If the offeree does not accept the offer according to the
mode prescribed by offeror , the offer does not lapses
automatically.
5. An offer may be revoked by the offeror before the
posting of the letter of acceptance by the acceptor.
 CONSIDERATION
• Sir.Pollock ‘Consideration is the price for which the
promise of the other party is brought.
• S-2d ‘When, at the desire of the promisor, the
promisee or any other person has done or abstained
from doing or does or abstain from doing, or
promises to do or to abstain from doing something,
such act or promise is called a consideration for the
promise & (2f )‘promises which form the
consideration Or part of consideration for each
other, are called reciprocal promises.
• Def. consists- a) the act or abstinence or promise
which forms the consideration for the promise, must
be done at the desire of the promisor
b) it must be done by the promisee or any other
person
c) it may have been already executed or is in the
process of being done or may be still executory
d) It must be something to which the law attaches a
value
A agrees to sell his car to B for Rs. 10000. Car is the
consideration for B & price is the consideration for A.
• Ms. Mrudula lends her book to Ms. Pranita and promises to return it
after.
• Amin promises to Vaibhav to guarantee payment of price of the
goods which Vaibhav sells on credit to Anup.
• Mr. Nazim promises to Mr. Arai not to file a suit against him if he
(Mr.Arai) pays him Rs. 5000/-
• Mr. Pednekar agrees to sell his dog to Mr. Rajesh for Rs. 1000 and
Rajesh accepted the proposal.
• Need for consideration-The reason why the law enforces only those
promises which are made for consideration is the gratuitous or
voluntary promises are often made rashly and without due
deliberation. It supplies no means nor affords any remedy to compel
the performance of an agreement made without sufficient
consideration.
 Essentials of a Valid Consideration
a) Consideration may be an act to do something or abstinence or
forbearance of doing something
b) Consideration May be past, present or future
c) Consideration Must be real & not illusory
d) Consideration Should move at the desire of the promisor
e) Con. may move from the promisee or any other person
Chinyya V. Ramayya / A stranger to contract cannot sue
a) For supporting each independent promise, there must be an
independent consideration
b) Consideration need not be adequate
c) Consideration Must be something which the promisor is not already
bound to do
d) Consideration must be valuable in the eyes of law
• B spent some money on the improvement of Bhaji Market at the
desire of collector. In consideration of this D who is Bhaji Vikreta
using place in the market promised to pay some money to B.
• An old lady, by a deed of gift, made over certain property to her
daughter D, under the direction that she should pay her aunt, P(sister
of the old lady) a certain sum of money annually. After the death of
A, D refused to pay the amount that no consideration had moved
from P to D. Can P take any action against D? Can she succeed in this
• D wanted to sue her husband for maintenance allowance. Husband
agrees to pay her a monthly maintenance allowance, if she forbears to
sue.
• A saved the life of B from fire. B promised A whenever there is need
of money ask me I will pay you upto Rs. 10000/- After two years A
came into financial crisis and asked for Rs.5000/- to Mr. B. Mr. B
refused to give the amount. Can A recover the amount?
• Mr. Gaurav who is travel agent accepted the Amount of Rs. 25000/-
for Bangkok tour which is 15 days after.
• Ms. Sayali agrees to sell her mobile to Ms. Pratiksha for Rupee one.
• Mr. Mazahar engages Mr. Rizwan for doing a certain work and
promises to pay a ‘ reasonable sum’.
• Mrs. Marathe who is lecturer agrees to her student to guide for a
project at the cost of Rs. 2000/-
• Mr. Amin agrees to pay Rs. 10000/- to Mr. Vaibhav if he kill the
Anup.
• A promises to write 100 pages in one minute for B. in against B
should pay Rs. 500. A’ promise is illusory and impossible to perform.
• A owes Rs.100 to B. He promises to pay Rs. 20 to C, the servant of
B, who in return promises to discharge A from debts. This is legally
impossible because C is servant of B cannot give discharge for a debt
due to B.
• A who had received summons in one case, promises to B, that he will
appear at court, in return B have to pay Rs. 1000 to him. B could not
pay. Can A take any legal action against B for non-payment?
 Exception to the rule of ‘No
consideration No contract’
• Promise made on account of love & affection-
- F for natural love and affection, promises to give his son, S Rs
10000 for doing business. They entered into contract and registers it.
S-25(1)If it is(i) expressed in writing (ii) registered under the law for
the time being in force for the registration of documents,& is (iii)
made on a/c of natural love & affection
- A Hindu husband, after referring to quarrels and disagreement
between him and his wife, executed a registered document in favour
of his wife agreeing to pay her for maintenance, but no consideration
moved from the wife. Agreement is void for consideration.
• Promise for compensation of voluntarily services(S25-2)
Mr. Arun Deshmukh sees Mr. Jayesh Tanna’s house on fire and hence
does all the efforts to extinguish the fire though Mr. Tanna has not
request to do so. Mr. Tanna promised to Mr. Deshmukh , he will Pay
Rs. 10000/- to him. This is a contract.
• Time-barred debt (Sec. 25(3))
• The debt must be such which the creditor might have enforced in law for
recovery of the payment. A person under no obligation cannot, therefore,
promise to pay. An insolvent finally discharged is under no obligation to
pay any debt. So any promise to pay by him is not a debt as there is no
consideration for such a promise.
• Completed gifts
• Explanation 1 to Section 25 provides that the rule ‘no consideration, no
contract’ shall not affect validity of any gifts actually made between the
donor and the donee. Thus if a person gives certain properties to another
according to the provisions of the Transfer of Property Act, he cannot
subsequently demand the property back on the ground that there was no
consideration.
• Agency
• There is one more exception to the general rule. It is given in Section 185
which says that no consideration is needed to create an agency.
 Performance of contract
• Contract creates some sort of legal obligation which
continues till the contract is either performed or
discharged.
• Performance of a contract implies fulfillment of the
terms and conditions or obligation of the contract by the
respective parties to the contract within the time and in
the manner prescribed
• S-37 ‘the parties to a contract must either perform, or
offer to perform their respective promises, unless such
performance is dispensed with or excused under the
provisions of this Act, or of any other law. Thus 1.
Actual performance 2. Attempted performance
 Performance of a contract
• Actual performance : A party to a contract is said to
have actually performed his promise when he has
done something that he has undertaken or promise to
do
• Attempted performance: the promisor offers to
perform his obligation under the contract as per terms
of the contract, but the performance is not complete
unless the offer of performance is accepted by the
promisee . Attempted performance is of two kinds
• Tender of goods
• Tender of money
 Contract which need not be performed
• When performance become impossible(s-56)
• When there is an agreement, between the parties to a contract to
substitute it by new contract /rescind the old/ alter it (s-62)
• When every promisee may dispense with or remit, wholly or in part,
the performance of the promise made to him, or may extend the time
for such performance, or may accept instead of it any satisfaction
which he thinks fit,
• When a person, at whose option a contract is voidable, rescinds it, the
other party thereto need not perform any promise contained therein in
which he is promisor. Such contract need not be performed(s-64)
• If any promisee neglects or refuses to afford the promisor reasonable
facilities for performance of his promise , the promisor is excused by
such neglect, or refusal as to nonperformance caused thereby.
 WHO CAN DEMAND
PERFORMANCE
• It is only the promisee who is entitled to demand
performance of the promise.
• When the promise is made with two or more
promisees jointly and unless a contrary intention
appears from the contract made ,the right of claiming
performance of the contract rests with all the joint
promises jointly.
• Legal representatives of such deceased persons
jointly
By Whom must contracts be performed
• Promisor
• Agent
• Legal Representation
• Third person
• Joint Promisor
• Shahid promises to pay Kailash a sum of money.
Shahid may perform this promise, either by
personally paying the money to Kailash or by
causing it to be paid to Kailash by another.
• Nama promises to deliver goods to Rajesh on
certain day on payment of Rs. 10,000. Nama dies
before that day. Nama’s representatives are bound
to delver the goods to Rajesh, and Rajesh is bound
to pay Rs. 10000 to Nama’s representative.
• Devendra promises to paint a picture for Anup by a
certain day, at a certain price. Devendra Ask
Virendra to paint a a picture for Anup.
 Time & Place of performance of a
contract
• Within reasonable time
• Where time and place is specified
• On certain day & place
• Promisor to apply to promisee to appoint a place for performance
of promise
• Manner or time by promisee to perform a promise
• Time of performance of contract
a) Where time is the essence of the contract- In a contract for the sale
or purchase of goods the prices of which fluctuate rapidly in the
market, the time of delivery and payment are considered to be the
essence of the contract
b) When time is not the essence of the contract- In a contract of sale
of immovable property time is not of the essence unless it is shown
that the intention of the parties was that time should be the essence
of the contract
 Discharge of contract
• By performance of the contract
• By agreement 1)By novation(s62)2) By recession (s-62) 3)
By alteration(s-62)
4) By remission(s-63) 5)By Waiver
6)By merger
 By Lapse of time
 By operation of law-death, insolvency
 By breach made by any party to contract
 By assignment
 By impossibility of performance
 By Material alteration w/o the consent of the concerned
party
• Ankita sells a car to Soni ‘on approval’ with the
condition that it should be returned within seven
days if it is found wanting in efficient functioning.
Soni may return the car within 7 days if it is found
wanting. Consent to return the car is given to Soni
at the time of the formation of a contract.
• Sayali owes money to Prajkta under a contract. It
is agreed between Sayali, Prajkta and Pratiksha
that Prajkta shall henceforth accept Pratiksha as
his debotr, instead of Sayali. The old debt of
Sayali to Prajkta is at an end, and a new debt from
Pratikshal to Prajkta has been contracted.
• Anup promises to supply certain goods to Gaurav
six months after the date. By that time the goods
go out of fashion. Anpu and Gaurave may
rescind the contract.
• Mrudula owes Komal Rs. 5000. Mrudula paid Rs. 2000 in
satisfaction of Rs. 5000/- and Komal accepted the amount
.(remission)
• Rizwan holds a property under a lease. He laters buys the
property. His rights as a lessee merge into his rights as an
owner.
• A owes money to B under a contract. It is agreed between
A, B and C that B shall the henceforth accept C as his
debtor, instead of A. C failed to pay can B recover the
amount from A? Justify your answer
• A contracts with B to deliver to him, at a specified price,
certain merchandise on board a ship which cannot arrive
for a month, and B engages to pay for the merchandise
within a week from the date of the contract. B does not pay
within the week. A's promise to deliver need not be
performed, Is B liable to make compensation? Why?
 Quasi contracts
• S-68-72 “Certain relations resembling those created
by contracts”or” quasi contracts”
• Kinds of quasi contracts
a) Supply of necessaries(s-68)
b) Reimbursement of payment by an interested person
(s-69)
c) Liabilities of payment for non-gratuitous act(s-70)
d) Responsibility of a finder of goods(s-71)
e) Payment of money by mistake or coercion(s-72)
 Check Your progress
1. A supplies the wife and children of B, a lunatic, with necessaries
suitable to their condition in life. Can A entitled to reimburse from
B's property?
2. B holds land in Bengal, on a lease granted by A, the zamindar. The
revenue payable by A to the Government being in arrear, his land is
advertised for sale by the Government. Under the revenue law, the
consequence of such sale will be the annulment of B's lease. B, to
prevent the sale and the consequent annulment of his own lease, pays
to the Government the sum due from A. Is A bound to make good to
B the amount so paid? Justify your answer.
 SALE OF GOODS ACT 1930
• When under a contract of sale, the property in goods
is transferred from the seller to the buyer(at once)
the contract is called a sale
• But where the transfer of the property in the goods
takes place at a future time or subject to condition
thereafter to be fulfilled , the contract is called an
agreement to sell. An agreement to sell becomes
sale when the time elapses or the conditions are
fulfilled subject to which the property in goods is to
be transferred.
 Essentials of valid contract
1.Two parties 2.Goods 3.Transfer of property
4. Monetary consideration/ price 5.elements of valid contract
FORMALITIES OF A CONTRACT OF SALE
1.Goods –Existing –Specific ,ascertained and unascertained,
Future , contingent
2. Effects of destruction of goods or perishing of goods
3. Ascertainment at price
Stipulation as to time a) Stipulations relating to time of
payment & b) Stipulations not relating to time of payment
but to other things like delivery of goods etc.
 Difference between Sale and agreement to sell
• In a sale, the property in the
goods passes from the seller to
buyer immediately
• A sale can only be in case of
existing and specific goods
only.
• In a sale, if the goods are
destroyed, the loss falls on the
buyer even though the goods are
in the possession of sellers
• In a sale, if the buyer fails to
pay the price of the goods or if
there is a breach of contract by
the buyer, the seller can sue for
price even though the goods are
still in this possession.
• TOP in the goods is to take place
at a future time or subject to
certain conditions to be fulfilled.
• An agreement to sell is mostely
in case of future and contingent
goods
• In an ATS , if the goods are
destroyed, the loss falls on the
seller, even though the goods are
in possession of the buyer.
• In ATS if there is a breach of
contract by the buyer, the seller
can only sue for damages and
not for the price even though
goods in buyers possession
• In a sale, the seller cannot
resell the goods
• A sale is a contract plus
conveyance, and creates right
the buyer to enjoy the goods
against all over the world
• If the buyer becomes insolvent
before he pays for the goods,
the seller, in the absence of a
lien over the goods, must
return them to the official
receiver.
• IN ATS,in case of resale the buyer
, who takes the goods for
consideration and without notice
of the prior agreement, gets a good
title. In such a case, the original
buyer can only sue the seller for
damages.
• In ATS is merely contract, it
creates right to the buyer against
the seller to sue for damages
• In ATS , if the buyer becomes
insolvent and has not yet paid the
price , the seller is not bound to
part with the goods until he is paid
for.
 Conditions and warranties
• S-12-(1)A stipulation with reference to goods which are
subject there of may be a condition or warranty
• S12-(2) A condition is a stipulation essential to main
purpose of the contract, the breach of which gives rise to a
right the contract as repudiated
• S-12(3) A warranty is a stipulation collateral to the main
purpose of the contract, the breach of which gives right to a
claim for damages, but not a right to reject the goods & treat
the contract repudiated.
• S-12(4) Whether a stipulation in a contract of sale is a
condition or a warranty depends in each case on the
construction of the contract. A stipulation may be a
condition, though called a warranty in the contract.
 When a condition is treated as a
warranty
A) Voluntary waiver of condition
B) Acceptance of goods by buyer
Warranty Condition
1.Stipulation collateral stipulation essential to the
to the main purpose main purpose of COS
2. A breach of W-right A breach of C-right to sue
to sue for damages for Dam. & repudiate con.
3.BOW cannot be BOC may be treated as
treated as BOC BOW
4.IN BOW buyer cannot In BOC buyer can claim Dam.
repudiate the con. instead of repudiation of con.
 Express & Implied con.& warranties
• Implied conditions in a contract of sale
a)S-14a con. As to title
b) Con. to sale by description(S-15)
c) con. As to sale by description as well as by
sample(s-15)
d) Con as to sale by sample (s-17)
e) Con. As to quality or fitness( s-16(1)
f) Con. As to merchantability (s-16(2)
g) Con. As to wholesomeness
h) Con. Implied by custom (s-16(3)
• Amin bought a car from Devendra & used it for 4
months. Devendra had no title to the car and
consequently Amin had to hand it over to the true
owener.
• Kailash bought 3000 tins of condensed milk from
USA. The tins were labeled in such a way as to
infringe the Nestle’s trademark. As a result they were
detained by the custom authorities. To get the
clearance certificates from the custom authorities.
Kailash had to remove the labels and sell the tins at a
loss.
• Rizwan agreed to supply “basmati” rice to Nazim. He
could not arrange for Basmati and delivered “Kolam”.
Nazim refused to pay the amount.
• Prajkta bought a reaping machine which she had
never seen and which , Sayali, the seller, described
“ to have been new the previous year and used to
cut only 50 to 60 acres”. Prajkta found the
machine to be extremely old.
• Pratiksha agreed to sell to Shubhangi some oil
described as “ foreign refined groundnut oil,
warranted only equal to sample”. The goods
tendered were equal to sample, but contained a
admixture of Soyabin oil.
• A purchased heavy washing machine for laundry.
Letter, he comes to know that it is generic and not
suitable for his purpose.
• A manufacturer supplied 600 horns under a
contract. The horns were found to be dented,
scratched and other wise of faulty manufacture.
• A radio set was sold to a layman. The set was
defective. It did not work inspite of repairs.
• P asked for a hot water bottle of L a retail
chemist. He was supplied one which burst after a
few days use and injured P’s wife.
• F bought milk from A . The milk contained germs
of typhoid fever. F’s wife took the milk and got
infection as result of which she died.
 Implied warranties in a con. Of sale
1. Implied warranty of quiet possession(s-14b)
2. Iw of freedom from encumbrance (s-14c)
3. IW as to quality or fitness by usage of trade(s16(3))
4. IW to disclose dangerous nature of goods
 Doctrine of ‘ caveat emptor’-
Exceptions
 Implied con. As to quality or fitness for buyers’
purpose(s-16(1)
 Merchantable quality or sale of goods by description(s-
16(2)
 Usage by trade(s-16(3)
 Consent by fraud
 Transfer of property or ownership
• Passing of property from seller to the buyer
• POP in a contract for sale of specific or Ascertained Goods
–i) intention of parties S-19
ii) POP at the time of contract---s-20
iii)POP in the case of specific goods where the goods are to
be put into deliverable state s-21
iv) POP In case of specific goods when the price is to be
ascertained by weighing (s-22
• POP in the con. Of sale of Unascertained goods(s-23)
• POP in Goods sent on Approval or “on sale or return(s-24)
• Reservation of Right of Disposal(S-25)
• Passing of Risk(S-26)
 Transfer of title by Non-owners
1. Sale by a person not the owner or title by estoppel
2. Sale by mercantile agent
3. Sale by one of joint owner
4. Sale by a person in possession under voidable contract
5. Sale by the buyer or the seller as possession after sale
6. Sale by unpaid seller
7. Exceptions in other acts
• Sale by official Assignee or Liquidator of theco.
• Sale by a person who finds the lost goods under certain
circumstances
• Sale by a pawnee of pledge under certain circum.
 Performance of the contract of sale
Delivery of goods- Voluntary transfer of possession of goods
from one person to another. Delivery of goods(DOG) sold
may be made by doing anything which the parties agree
shall be treated as delivery or which has the effect of putting
the goods in the possession of the buyer or his agent.
Actual—Where the goods are handed over by the seller to the
buyer or his duly authorised agent, the delivery is said to be
actual.
Symbolic– when it is very difficult to hand over the goods
physically to the buyer, the goods are delivered in a
symbolic manner.
Constructive/delivery by attornment -Delivery is said to be
constructive where the person, having the physical and
actual custody of the goods sold, acknowledges or agrees to
the buyer to hold the goods on behalf of the buyer
Rules regarding delivery of goods-
• Mode of delivery(s-33)-actual , symbolic, constructive
• DoG & Payment of price are concurrent conditions (s-32)
• Effect of part DoG (s-34)- has same effect, for the purpose of passing
the property in such goods as a delivery of the whole.
• Buyer to apply for delivery(s-35)-seller is not bound to deliver the
goods.
• Place of DoG(s-36)-as per specified in contract, during busi.hours
• Time of delivery (S-36(2) & (4)- on specified date & in reasonable
time
• Goods in possession of a third person or party-no delivery by the
seller to the buyer unless & until such person acknowledges to the
buyer that he holds them on his behalf. But where the gods have been
sold by the issue or transfer of any document of title to goods, eg. A
railway receipt or bill of lading, such third party’s consent is not reqd.
• Cost of DoG(S-36(5))- Unless otherwise agreed, all expenses
incidental to making DOG are borne by sellers, but all expenses of
and incidental to obtaining delivery are borne by the buyer.
 Delivery of wrong quantity(s-37)
• DOG less than contracted for/ In excess/ mixed–
may reject the whole or may accept
• Installment deliveries of goods-buyer not bound to
accept
• Delivery to carrier or wharfinger
• When an acceptance is complete on DoG-
intimation, does any act to delivered goods
• Buyer not bound to return rejected goods
• Liability of buyer for neglecting or refusing DoG
• Mazahar sells to Devendra 2000 of “200 meters reels of
sewing cotton. After taking delivery Devendra finds that
the length of the cotton per reel is less than 200 mts. The
average being shortage about 6%. Devendra may reject
the goods.
• Dipti places an order with Komal to supply 25 bottles of
orange syrup. Komal sends 30. Dipti is entitled to reject
the whole, or may accept 25 and reject the rest.
• Kailash contracts with Vaibhav to buy 100 tons of cane
sugar. Kailash delivers to Vaibhav 75 tons cane sugar
and 25 tons beat sugar.
• Amin inspected certain timber and branded by hammer
marks those which he accepted. When the timber arrived,
it contained a large quantity of unbranded timber
 Rights of unpaid seller & Remedial
measures
• A seller is deemed to be an unpaid seller –when (a) the whole of the
price has not been paid or tendered (b) the bill of exchange or other
negotiable instrument has been received as conditional payment, and
the condition on which it was received has not been fulfilled by reason
of the dishonour of the instrument or otherwise
• Rights- a) Against goods & b) Against the buyer Personally
RAG-i) Where property in goods has passed- Right of a) lien (b) stoppage
of goods in transit (c) Resale
ii)Where PiG has not passed (a) Withholding the delivery of goods (b)
Stoppage in Transit
RAB- 1)Suit for price 2)Suit for damages 3) Repudiation of contract
4) Suit for interest