The Indian Contract Act,1872

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The Indian Contract Act,1872 :

The Indian Contract Act,1872 Definition (sec. 2) Essentials element of a valid contract Competency to enter in contracts sec 11 Consent – Free consent,coercion,undue influence,fraud,misrepresentation,mistake (sec 13-23). void agreement (sec 24-30) Consequences of breach of contract(sec73-75) SUBMITED BY SONIYA GAJBHIYE

INTRODUCTION:

The term ‘contract’ means,any agreement between any two persons.For business person making of contracts with others is very important process to put into effect their business plans.Those who enter into cotracts expect that the commitment made shall be fulfilled. The law relating to contract is contained in the Indian Contract Act,1872.The Act came into force on the first day of september 1872,and it applies to the whole of India except the state of Jammu n kashmir . Soniya INTRODUCTION

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Definition Sec 2(h) of the Act defines the term contract “as an agreement enforceable by law” Sec 2(e) defines agreement as “every promise and every set of promise forming the consideration for each other”. Again sec 2(b) defines promise “when the person to whom the praposal is made signifies his assent therto,the praposal is said to be accepted.Praposal when accepted,becomes a promise”. To make easier the word ‘contract” * All contracts are agreement but all agreement are not contracts * Contract = Agreement + enforceabilty by law * Thus for an contract there should be first an agreement soniya

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Essential Elements of a valid contract According to sec 10,” All agreements are contract if they are made with free consent of parties copetent to contract,for a lawful cosideration and with a lawful object,and are not hereby expressely declared to be void.” The following essentials must co exist in order to make a valid contract Proper offer and proper acceptance with intention to create legal relationship Lawful Cosideration Capacity Free consent Lawful agreement

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In the first instance ,the parties ought to have the intetion to create a legal obligation between them through the form of offer an acceptance.they should have intention to impose duty on the promisor to fulfill the promise and a right on the promisee to claim its fullfillment.it must be legal. The second aspect to look for is the presence of “lawful cosideration” which is an essential element of a valid contract.Cosideration is a technical word meaning thereby quid pro quo.It must result in benefit to one party and detriment to the other party or a detriment to both. Example: A agrees to sell his book for Rs 100,B’s promise to pay rs 100 is the cosideration for A’s promise to sell his books and A’s promise to sell the books is the cosideration for B’s promise to pay Rs 100. 3. Thirdly,the parties to a contract must have capacity (legal ability) to make valid contract.in every case there must be assent of parties.The assent presuppose a free,fair,and serious exercise of the reasoning faculty.if,therfore,either of the parties to an agreement is deprived of the use of his understanding or if he be deemed by law not to have attaind it,there can be no such agreement which shall bind him.sec.11 of indian contract Act specifies that evry person is competent to contract provided, Soniya

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a) He is the age of majority according to law to which he is subject b) He is of sound mind and c) He is not disqualified from cotracting by any law to which he is subject Example : Amir khan make a contract with D arshil safari for the movie “ taare zamin par” for 3 year.after blockbuster the movie,darshil break the cotract and Amir can not sui him under company act,1987 as it is not valid contract 4. The consent of parties must be genuine,The term ‘consent’ means parties to a contract must agree upon the same thing in the same sense,i.e . there should be consesus -ad- idem.consent is said to be not free when it is vitiated by coercion,undue influence,fraud,misrepresentation or mistake.In such case,the contract becomes voidable at the option of the party whose consent is not free Example : A threatened to shoot B if he (B) does not lend him rs 2000 and B agreed to it.here the agreement is entered into under coercion and hence voidable at the option of B. soniya

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5. The agreement must not be one,which the law declare to be either illegal or void .A void agreement is one,which is without any legal effects. Illegal agreement is an agreement expressly or impliedly prohibited by law. Example : if Daud Ibrahim threats to commit murder of monika Bedi for Salem as it is lawful agreement of daud to salem,but these type of agreement is prohibited by the Indian penal code so it is illegal in nature. Soniya

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Types of contract Valid contract Void contract Voidable contract Illegal contract Unenforceable contract Express contract Implied contract Tacit contract Executed contract Executory contract Unilateral contract Bilateral contract soniya

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Consent [Sec.13] a) Two or more person are said to consent when they agree upon the same thing in the same sense. b) Consent involves identity of mind in respect of the subject matter of the contract, i.e. consensus-ad-idem. Free consent [Sec.14] Free consent reffer to consent of both parties on their own account without use or influence of any external factors. Consent is said to be free when it is not caused by- Coersion,or Undue influence,or Fraude or Misrepresentation or Mistake Soniya

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Coercion [Sec.15] Coercion means forcibly compelling a person to enter into a contract.Consent of the party is obtained by use of force or under a threat.Coercion includes fear,physical compulsion and menace to goods. Definition “Coercion”is the commiting,or threatening to commit,any act forbidden by the Indian Penal Code (45 of 1860),or the unlawful detaining,or threatening to detain any person,to the prejudice of any person whatevr. For example : X says to Y:”I shall kill your Son,or I shall not return the document of title relatings to your wife’s property,unless you agree to sell your house to me for R s 5000”, Y says,”All right,I shall sell my house to you for rs.5000;do not kill my son or do not detain my wife document of title”. X has employed coercion;he can't therfore enforce the contract.But Y can enforce the contract if he finds the contract to his benefit.An agreement is induced by coercion is voidable and not void

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Undue Influence[sec.16] Undue influence means improper or unfair use of one’s superior power in order to obtain the consent of a person who is in a weaker position. Definition[sec.16] A coercion is said to be induced by undue influence where the relation subsisting between the parties are such that – One of the party is in position to dominate the will of the other and Uses that position to obtain that unfair advantage over the other. Example : A father by reson of his authority over the son can dominate the will of son ,Again by reson of fiduciary relationship,a solicator can dominate the will of his client,and,A trustee can dominate the will of beneficiary

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Fraud [Sec.17] Definition [sec.17] : Fraud means and includes- Suggestion as fact,of something which is not true,by aperson who does not believe it to be true Active concealment of a fact by one having knowledge or belief of this fact; Promise made without any intention of performing it Any other act to fit deceive The fraude which results into contract is only covered by this section.Any fraud commited by a party which does not lead to the other party to enter into the contract is not covered by this sec. Silence not fraud A mere silence as to fact,likely to affect the willigness of a person to enter into a contract is not Fraud Exception i.e. Silence= Fraud,in the following condition Having regards to the circumstances,if it is the duty of person to speak Silence is itself is equivalent to speech. Consequence of fraud Sec.19: Acontract induced by fraude is voidable contract at the option of party defrauded,till the exercise of such option,the contract is valid The defraude ed party has the following remedies * he can rescind the contract within a reasonable time * He can sue for damage

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Misrepresentation [Sec18] Representation is a statement of fact which one party make in the course of negotiation with a view to inducing the other party to enter into a contract. Misrepresentation is a representation wrongly made,either innocently or intentionally. Definition [sec.18] Misrepresentation means includes – Positive assertion Of such fact,which is not true through he believes it to be true; Made in manner not warranted by the information of the person making it Any breach of the duty Made without an intent to dedeive ; But bringing gains and advantages to the person commiting it or to any one claiming under him By misleading another to his prejudice of anyone claiming under him Causing other party to make mistake As to substance of subject matter of agreement. Soniya

Distinguish between ‘Fraud & ‘Misrepresentation’:

Distinguish between ‘Fraud & ‘Misrepresentation ’ Fraud Misrepresentation Wrong statement is made intentionally with a view to deceive The person making the wrong statement does not believe it to be true. Beside rescind the contract,the aggrieved party can also claim damages. Wrong statement is made innocently The person making the wrong statement believes it to be true. The aggrieved party can rescind the contract but can not claim damage

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Mistake [sec. 20] When both the parties to an agreement are under a mistake to a matter of act essential to the agreement the agreement is altogether is void.The court will enforce a voidable contract if not avoided,but will not recognise an agreement that is void.for instance,A agrees to sell to a B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that before the day of the bargain,the ship conveying the cargo had been cast away and the goods lost.neither of the parties was aware of these facts.The agreement was Void .Both the parties must be under mistake .A unilateral mistake,that is to say,mistake of one party, does not render the agreement void.A agrees to purchase from B 18 carat gold thinking to be pure gold;B has not been instrumental to the creation of such an impression.It is a valid contract between A and B The mistake must be an essential fact,whether the fact is essential or not depends on whether a reasonable man would regard the fact as an essential in the circumstances.for instance, A and b both believes that a particular kind of rice is being sold in the market at rs.1789 per quintal and A sells rice of that kind to B at Rs.1780 per quintal.but in fact the market price was Rs.1900.the contract is valid Mistake renders the agreement void; neither party can enforce the contract against the other. Soniya

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Void Agreement Defination A void agreement is one which is without any legal effects.The term ‘void agreement’ is defined in sec. 2(g) of the indian contract act,which is as under “An agreement not enforceable by law is said to be void” Intoduction An agreement which the court of law will not enforce is a void agreement.A void agreemnt does not create any any legal rights and obligations. It is void ab initio and without any laegal effect.It is therefore,clear that all agreement arenot enforceable by the court of law.The court will enforce only those agreement which fulfil the conditions of enforceability as laid down in sec 10 of the Indian contract Act.If the condition laid dpow in sec 10 are not satisfied,the agreement will be void Certain types of agreement have been specifcally declared to be void by the indian Contract Act Itself. Soniya

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Types of Agreement Agreement by person who are competent to contract. 2. Agreement under a mutual mistake of fact material to the agreement. 3. Agreement with unlawful consideration or object. 4. Agreement, the consideration or object of which is unlawful in part. 5. Agreement without consideration 6. Agreement in restraint of marriage 7. Agreement in restraint of trade. 8. Agreement in restraint of legal proceedings. 9. Agreement the meaning of which is uncertain. 10.Wagering Agreement 11.Agreement to do impossible acts

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Consequence of breach of contract (sec.73-75) Introduction The parties to a contract are bound to perform their respective obligations. If a party refuses to perform his respective obligations,the breach of contract take place. And the other party (i.e. arrrieved or injured partyt ) can enforce his rights in the courts of law.The process of enforcing the right is known as remedies for breach of contract,The rights can be enforce in various in ways. Nature of breach of contract A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his obligations under the contract. This can take various forms for example, the failure to supply goods or perform a service as agreed. Breach of contract may be either actual or anticipatory. Actual breach occurs where one party refuses to form his side of bargain on the due date or perform incompletely Anticipary brech occure where one party announces,in advance og the due for performance that he intends not to perform his side of bargain.The innocent party may sue for damages immediately the breach is announced

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Consequence or Remedies of breach of contract Rescission of contract Suit for specific performance Suit for injuction Suit upon Quantum meruit Suit for damages

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