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law > Indian contract act unit 1 > Flashcards

Indian contract act unit 1 Flashcards

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1
Q

On the contracts entered
on or after

A

1st September 1872 Extends whole of India

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2
Q

Before “Indian Contract Act, 1872”

A
  1. In the ancient and medieval time, there was no specific law for contracts.
  2. For this purpose, generally, different sources of Hindu law like; Vedas,
    Dhramshatras, Smritis, Shrutis etc. were referred.
  3. During the period of Mauryas, contracts were in the form of “bilateral transactions“.
  4. During the Mughal rule in India, contracts were governed by Mohammedan Law of
    Contract. Word ‘Ijab’ was used for proposal and ‘Qabul’ was used for acceptance.
  5. During british period; before the advent of the Indian Contract Act, the English Law
    was applied under the Charter of 1726 issued by king George to the East India
    Company.
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3
Q

Relevant Sections

A

Sec. 1 : Applicability of Act
Sec. 2(a): Offer
Sec. 2(b): Acceptance and Proposal
Sec. 2(c): Promisor & Promisee
Sec. 2(e): Agreement
Sec. 2(h): Contract
Sec. 2(i) : Voidable Contract
Sec. 2(j): Void Contract
Sec.3: Communication & Revocation
of Offer
Sec.4: Communication when
Complete
Sec.5: Communication & Revocation
Sec.6: Modes of Revocation
Sec.7: Acceptance must be Absolute
Sec.9: Express and Implied Promise
Sec.10: Essentials of Contract

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4
Q

What is “Contract”, “Agreement”, “Promise”?

A

Contract [Section 2(h)]: Contract is defined as
-an agreement,
-enforceability by law.
Agreement [Section 2(e)] “Every promise and every set of promises,
forming consideration for each other”.
Promise [Section 2(b)]
A Proposal when accepted, becomes a promise”.

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5
Q

Sec.2(b) = Sec.2(a) + Sec.2(b)
Sec.2(e) = Sec.2(b) + Sec.2(d)
Sec.2(h) = Sec.2(e) + enforceability by law.

A

Promise = Offer (Proposal) + Acceptance
Agreement = Promise + Consideration
Contract=Agreement+ enforceability by law

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6
Q

Essential Elements of A Valid Contract

A
  1. Offer and Acceptance : Sec.2(a) & (b):

2.. Intention to create legal relationship:

  1. Legal Formalities:

4.Certainty of meaning: Sec.29:

5.Possibility of performance: Sec.56

  1. Free Consent: Sec.13,14,15,16,17,18,19,19A, 20,21,22
  2. Competent parties: Sec. 11 & 12:
  3. Consideration:
  4. Lawful object: Sec.23
  5. The agreement not expressly declared void:
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7
Q

Offer and Acceptance

A

Sec.2(a) & (b): Two parties to an agreement, i.e. one party making the offer and the other party accepting it.
case law=
State of Gujarat vs. Ramanlal S & Co.

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8
Q

Intention to create legal relationship

A

Agreements of a social or domestic nature do not contemplate legal relationship.

case law=
Balfour v. Balfour

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9
Q

Legal Formalities

A

Wherever a particular type of contract requires by law to be in writing and registered, it must comply with the necessary formalities as to writing, attestation and registration otherwise unenforceable.

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10
Q

Certainty of meaning

A

Sec.29: The agreement must be certain and not vague or indefinite.

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11
Q

Possibility of performance

A

Sec.56: An agreement to do an act impossible in itself cannot be enforced.

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12
Q

Free Consent

A

Sec.13,14,15,16,17,18,19,19A, 20,21,22:
*The consent of the 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 consensus-ad-idem.

*Consent is said to be not free when it is vitiated by coercion, undue influence, fraud, misrepresentation or mistake

*In such cases, the contract becomes voidable at the option of the party whose consent is not free.

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13
Q

Competent parties

A

Sec. 11 & 12:
Every person is competent to contract provided,

(a) Is of the age of majority according to the law to which he is subject, and

(b) Who is of sound mind, and

(c) Is not disqualified from contracting by any law to which he is subject.

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14
Q

Consideration

A

‘Consideration’ means ‘something in
return’ (quid pro quo) It may be past, present or future.

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15
Q

Lawful object

A

Sec.23 : Object of the agreement must be lawful. In other words, it means that object must not be
(a) illegal,
(b) immoral, or
(c) opposed to public policy

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16
Q

The agreement not expressly declared void

A

*The agreement must not be one, which the law declares to be either illegal or void.

*Illegal agreement is an agreement expressly or impliedly prohibited by law.

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17
Q

Classification of Contract On the basis of validity

A
  1. Valid Contract
  2. Void Contract: Sec. 2(j)
  3. Voidable Contract : Sec. 2(i)
  4. Illegal Contracts
  5. Unenforceable Contract
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18
Q

Valid Contract

A

Contains all the essential elements of a valid contract.

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19
Q

Void Contract

A

Sec. 2(j): A contract, which ceases to be enforceable by law

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20
Q

Voidable Contract

A

Sec. 2(i): An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others.

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21
Q

Illegal Contracts

A

A contract which is forbidden by law

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22
Q

Unenforceable Contract

A

Where a contract is good in substance but because of some technical defect i.e. absence in writing, barred by limitation etc. one or both the parties cannot sue upon it, it is described as an unenforceable contract.

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23
Q

A contract may be voidable in the following situations

A

i. When the consent of party is not free is caused by coercion, undue influence, misrepresentation or fraud.

ii. When a person promises to do something for another person but the other person prevents him from performing his promise, the contract becomes voidable at the option of first person.

iii. When a party to a contract promise to perform a work within a specified time, could not perform with in that time, the contract is voidable at the option of promisee.

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24
Q

Distinction b/w Void & Voidable Contracts

A

Basis= void contract and Voidable contract

Definition= Contract ceases to be enforceable by law.
&
Contract is enforceable at the option of the
aggrieved party.

Nature = Contract becomes void either because of sudden and
unexpected events or of law changes, before the
performance becomes due.
&
Contract becomes voidable when it is caused by
coercion, undue influence, fraud and
misrepresentation.

Rights= Does not provide any legal remedy for the parties to
the contract.
&
The aggrieved gets a right to rescind the contract and
to declare it void otherwise it remains valid.

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25
Q

Distinction b/w Void & Illegal Agreement

A

Basis= Void agreement and Illegal agreement

Scope= A void agreement is not necessarily illegal.
&
An illegal agreement is always void.

Nature= Not forbidden under law.
&
Are forbidden under law.

Punishment= Parties are not liable for any punishment under
the law.
&
Parties to illegal agreements are liable for
punishment.

Collateral agreement = It’s not necessary that agreements
collateral to void agreements may also
be void. It may be valid also.
&
Agreements collateral to illegal
agreements are always void.

Effects = Void agreement is not void-ab-initio but may
subsequently become void.
&
All illegal agreements are void from the very
beginning.

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26
Q

Classification of Contract On the basis of Formation

A

1.Express Contract
2.Implied Contract
3.Quasi Contract
4.E-Com. Contract

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27
Q

Express Contract

A

By words spoken or written

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28
Q

Implied Contract or tacit contract

A

Where the proposal or acceptance is otherwise than in words. (By action or conduct of parties)

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29
Q

Quasi-Contract

A

A quasi-contract is not created by words spoken or written or conduct of parties. It is created by law under certain circumstances.

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30
Q

E-Contract

A

Contract is entered into by two or more parties using electronics means, such as e-mails is known as e-commerce contracts. These are known as EDI contracts or Cyber contracts or mouse click contracts

31
Q

Contract On the basis of Performance

A

1.Executed Contracts
2.Executory Contracts
a)Unilateral Contracts
b)Bilateral Contracts

32
Q

Executed Contracts

A

Both the parties have performed their respective obligations.

33
Q

Executory Contract

A

Both the parties have yet to perform their obligations.

34
Q

Unilateral or one-sided contract

A

Only one party has fulfilled his obligation.

35
Q

Bilateral contract

A

Both the parties have to perform

36
Q

PROPOSAL / OFFER: Sec. 2(a)

A

A person is said to made a proposal when he signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence.

Thus, for a valid offer, the party making it must express his willingness ‘to do’ or ‘not to do’ something. But mere expression of willingness does not constitute an offer.

37
Q

Parties to Contract

A

*‘Promisor’ or ‘offeror’: The person making the proposal or offer.
* ‘Offeree’ the person to whom the offer is made.
*‘Promisee’ or ‘acceptor’ the person accepting the offer .

38
Q

Types of Offer

A

1.General Offer

2.Specific Offer

  1. Cross Offer
  2. Counter Offer
  3. Standing or continue or open offer
39
Q

General Offer

A

Offer made to the world at large.

*It is an offer made to the public in general and hence anyone can accept and do the desired act.

*Section 8 of the Indian Contract Act, points out that performance of the conditions of a proposal is an acceptance of the proposal.

40
Q

Specific Offer

A

Offer made to a definite person.

*When offer is made to a definite person, it is known as specific offer and such offer can be accepted only by that specified person.

41
Q

Cross Offer

A

When two parties make identical offers to each other

*When two parties exchange identical offers in ignorance at the time of each other’s offer, the offers are called cross offers. There is not binding contract in such a case, as the court will not consider one offer as offer and the other as the acceptance and therefore there is no contract.

42
Q

Counter Offer

A

When offeree imposes conditions which have the
effect of modifying or varying the offer.

*When the offeree accepts the offer with modifications and variations in the terms of original offer, he is said to have made a counter offer. Counter-offer amounts to rejection of the original offer.

43
Q

Standing or continue or open offer

A

Offer to public at large for acceptance for certain period of time

*An offer is allowed to remain open for acceptance over a
period of time is known as a standing, open or continuing
offer

44
Q

Legal Rules of Offer

A

(1) The offer must be capable of creating legal relation:

(2) The offer must be certain, definite and not vague:

(3) The offer must be communicated:

(4) The offer must be made with a view to obtaining the consent/assent of the offeree.

(5) An offer may be conditional:

(6) The offer should not contain a term the non compliance of which would amount to acceptance.

(7) An offer may be specific or general:

(8) The offer may be expressed or implied

(9) Offer is Different from a mere statement of intention, an invitation to offer, a mere communication of information, A prospectus and Advertisement.

   a. A statement of intention and announcement
   b. Offer must be distinguished from an answer to a 
         question.
   c. The offer must be distinguished from an invitation to 
       offer
45
Q

The offer must be capable of creating legal relation

A

A social invitation, even if it is accepted, does not create legal relations.

46
Q

The offer must be certain, definite and not vague

A

If the terms of an offer are vague or indefinite, its acceptance cannot create any contractual relationship.

47
Q

The offer must be communicated

A

An offer, to be complete, must be communicated to the person to whom it is made. An acceptance of an offer, in ignorance of the offer, is not acceptance and does not create any right on the acceptor.

48
Q

the 4th point of legal rule of offer

A

The offer must be made with a view to obtaining the consent/assent of the offeree.

49
Q

An offer may be conditional

A

An offer can be made subject to any terms and conditions by the offeror. The offeree will have to accept all the terms of the offer, otherwise the contract will be treated as invalid.

50
Q

the 6th point of legal rule of offer

A

The offer should not contain a term the non compliance of which would amount to acceptance.

51
Q

An offer may be specific or general

A

Any offer can be made to either public at large or to the any specific person.

52
Q

The offer may be expressed or implied

A

An offer may be made either by words or by conduct.

53
Q

The offer must be distinguished from an invitation to offer

A

An invitation to offer is different from offer. Quotation catalogues, advertisements in newspaper for sale are not offer. These are invitations to public to make an offer. Bidding in an auction is also an invitation to offer.

Exception for Point No. (c) above: When advertisement in newspaper is made for reward, it is the general offer to public.

54
Q

ACCEPTANCE: Sec. 2(b)

A

A proposal or offer is said to have been accepted when the person to whom the proposal is made signifies his assent to the proposal to do or not to do something.

Acceptance is the signification of the assent to the offer by the offeree

55
Q

Legal Rules of Acceptance

A
  1. Acceptance must be absolute and unqualified
  2. Acceptance Must be Communicated to Offeror
  3. Acceptance must be in the mode prescribed
  4. Time Limit
  5. Mere silence is not acceptance
  6. Express Acceptance
  7. Implied acceptance or acceptance by conduct
56
Q

Acceptance must be absolute and unqualified

A

All the terms and conditions must be accepted otherwise there is no acceptance. It is called as counter offer.

57
Q

Acceptance Must be Communicated to Offeror

A

An acceptance must be communicated to the person who made the offer.

58
Q

Acceptance must be in the mode prescribed

A

If the acceptance is not according to the mode prescribed, or some usual and reasonable mode (where no mode is prescribed) the offeror may intimate to the offeree within a reasonable time that the acceptance is not according to the mode prescribed and may insist that the offer must be accepted in the prescribed mode only. If he does not inform the offeree, he is deemed to have accepted the acceptance.

59
Q

Time Limit

A

Acceptance must be given within the specified time limit, if any, and if no time is stipulated, acceptance must be given within the reasonable time and before the offer lapses.

60
Q

Mere silence is not acceptance

A

The acceptance of an offer cannot be implied from the silence of the offeree or his failure to answer, unless the offeree has in any previous conduct indicated that his silence is the evidence of acceptance.

61
Q

Express Acceptance

A

Either in writing or by word of mouth

62
Q

Implied acceptance or acceptance by conduct

A

By performance or some act.

63
Q

Communication of Offer (Sec. 4)

A

*The communication of offer is completed when it comes to the knowledge of person to whom it is made.

*When an offer is made by post its communication will be complete when the letter containing the proposal reaches the persons to whom it is made.

64
Q

Communication of Acceptance (Sec. 4)

A

Communication of an acceptance is complete:

(i) as against the proposer,
when it is put in course of transmission to him so as to be out of the power of the acceptor to withdraw the same;

(ii) as against the acceptor,
when it comes to the knowledge of the proposer.

65
Q

Communication of acceptance by Post

A

*When a proposal is accepted by a letter sent by the post the communication of acceptance will be complete as against the proposer when the letter of acceptance is posted and as against the acceptor when the letter reaches the proposer.

66
Q

Acceptance over Telephone or Telex or Fax

A

When an offer is made of instantaneous communication like telex, telephone, fax or through e-mail, the contract is only complete when the acceptance is received by the offeree, and the contract is made at the place where the acceptance is received.

67
Q

Communication of Special Conditions

A

Special conditions printed on the back of ticket, receipts etc. whether in the knowledge of passenger or not will be treated as accepted by passenger.

68
Q

Exceptions for special condition

A

In the following cases acceptor will not be liable:

(a) Conditions are contained in document which is delivered after the contract is complete.

(b) Conditions limiting the rights of acceptor are not brought to the notice of acceptor.

(c) Document does not give reasonable notice on its face that it contains certain special conditions.

69
Q

Revocation of Offer and Acceptance

A

1.Time for revocation of proposal.

2.Time for revocation of acceptance.

70
Q

Time for revocation of proposal

A

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

71
Q

Time for revocation of acceptance

A

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

72
Q

Mode of Revocation or lapse of offer (Sec. 6)

A
  1. By communication of notice of revocation by the offeror at any time before its acceptance is complete as against him.
  2. By lapse of time if it is not accepted within the prescribed time. If however, no time is prescribed, it lapses by the expiry of a reasonable time.
  3. By non-fulfillment by the offeree of a condition precedent to acceptance
  4. By death or insanity of the offeror provided the offeree comes to know of it before acceptance.
  5. If a counter-offer is made to it.
  6. If an offer is not accepted according to the prescribed or usual mode,
  7. If the law is changed.
73
Q

If the law is changed

A

An offer comes to an end if the law is changed so as to make the contract contemplated by the offer illegal or incapable of performance.

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