Indian Contract act

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Legality of the Objective:

Legality of the Objective Forbidden by law It is of such a nature that if permitted it would defeat the provisions of law Is fraudulent Involves or implies injury to the person or property of another The court regards it an immoral or opposed to public policy.

Void and Illegal contracts.:

Void and Illegal contracts. Void ab -initio, i.e. void from the very begning . Punishable by the criminal law of the country or by any special legislation.

Consequences/Effects of Illegal Agreement.:

Consequences/Effects of Illegal Agreement. An illegal agreement is entirely void. No action can be brought by a party to an illegal agreement Money paid or property transferred under an illegal agreement cannot be recovered. The collateral transactions to an illegal agreement also become illegal and hence cannot be enforced.

Agreement Void as being opposed to Public Policy:

Agreement Void as being opposed to Public Policy Agreements in restrain of parental rights. Agreements in restrain of marriage. Marriage brokerage agreements. Agreements in restrain of personal freedom are void. Agreements in restraint of trade.

Agreements in Restraint of Trade Void[section 27]:

Agreements in Restraint of Trade Void[section 27] Section 27 of the Indian Contract Act states that every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kinds is, to that extent, void Exceptions:- sale of goodwill Partners agreements:- Restriction on existing partner Restriction on outgoing partner Restriction on partners upon or in anticipation of the dissolution of the firm. Restriction in case of sale of good will.

Wagering agreements [section 30]:

Wagering agreements [section 30] Essential of a Wagering Agreement Promise to pay money or money’s worth. Uncertain Event Mutual chances of gain or loss Neither party to have control over the event. No other interest in the event.

Contingent Contract (Rules):

Contingent Contract (Rules) Contracts contingent upon the happening of a future uncertain event cannot be enforced by law unless and until that event has happened. Contracts contingent upon the non-happening of an uncertain future event can be enforced when the happening of that event becomes impossible and not before. Contracts contingent on the happening of an event within a fixed time become void if, at the expiration of the time, such event has not happened, or if, before the time fixed, such event has not happened or before the time fixed has expired, if it becomes certain that such event will not happen.

Slide 9:

Contingent contracts to do or not to do anything if an impossible event happens are void whether the impossibility of the event is known or not known to the parties to the agreement at the time when it is made.

Quasi Contract (features):

Quasi Contract (features) It is imposed by law and does not arise from any agreement. The right is always against a specific person’s and not against the world. A suit for its breach may be field in the same way as in case of a complete contract.

Discharge or Termination of Contracts:

Discharge or Termination of Contracts Performance, i.e. by fulfillment of the duties undertaken b parties or by tender. Mutual consent or agreement. Novation Alteration Rescission Remission Waiver.

Slide 12:

Lapse of time Breach of Contract:- Anticipatory breach of contracts. Actual breach of contract. Impossibility of performance Effects of initial impossibility effects of supervening impossibility. Operation of law By merger By the unauthorized alteration of items of a written document By insolvency

Remedies for Breach:

Remedies for Breach Rescind the contract and refuse further performance of the contract. Sue for damage:- Ordinary damages Special damages Exemplary damages Nominal damages Liquidated damages and penalty.

Slide 14:

3. Sue for specific performance 4. Sue for injunction to restrain the breach of a negative term 5. Sue for quantum merit.

Rights of Indemnity Holder When Sued.:

Rights of Indemnity Holder When Sued. All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnity applies. All cost he may be compelledin any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as if it would have been prudent for him to act in the absence of any contract of indemnity or if the promisor authorized him to bring or defend the suit.


Cont’d All sums which he may have paid under the terms of any compromise of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promise to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.

Kinds of Gurantee:

Kinds of Gurantee Specific guarantee : which extend to a single debt or specific transaction is called a specific guarantee. The liability of the surety comes to an end when the guaranteed debt is duly discharged or the promise is duly performed. Continuing Guarantee: A guarantee which extends to a series of transactions is called a ‘continuing guarantee’. A surety’s liability continues guarantee is revoked of the guarantee. By notice of revocation by the surety [section 130] By the death of the surety.

Difference between contract of indemnity and guarantee.:

Difference between contract of indemnity and guarantee. Contract of Indemnity Contract of Guarantee There are two parties- indemnifier and the indemnity holder There are three parties- principal debtor, creditor and surety. The indemnifier undertakes to save the indemnity holder from any loss The surety undertakes for the payment of debts of principle debtor The liability arises only after the happening of a contingency The liability arises only on the non-performance of an existing promise or non-payment of an existing debt. The indemnifier need not act at the request of indemnity holder The surety acts at the request of the principle debtor

Right of Surety:

Right of Surety Surety’s rights against the creditor [section 141] Rights against the principle debtor[section 140 & 145] Surety’s rights gains co-sureties[sec 146 & 147]

Discharge of Surety:

Discharge of Surety By notice of revocation By death of surety By variation in terms of contracts By release or discharge of principle debtor By arrangement By creditors act or omission impairing surety’s eventual remedy Loss of security.

Duties of a Baillie:

Duties of a Baillie Duty to care of the goods bailed Duty not to make any unauthorized use of the goods. Duty not to mix bailer's goods with his own goods Duty to return the goods. Duty to return accretions to the goods.

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