Chartered Accountancy

CPT Course

Session 1, Section B
Mercantile Law

Lecture 1 Nature of Contract

1

What is Contract ?

Quick Revision Notes

An Agreement enforceable by Law [Section 2(h)]

Agreement:
Every promise and every set of promises, forming the consideration
for each other [Section 2(e)]
When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted. Proposal when accepted,
becomes a promise [Section 2(b)]
Enforceable by Law:
nt of
All agreements are contracts if they are made by the free consent
parties competent to contract, for a lawful consideration and with a
lawful object, and are not hereby expressly declared to be void
[Section 10]

Void Contract

Voidable Contract

Definition

A contract which ceases to be enforceable by law

becomes VOID when it ceases to be enforceable

Enforceable by law at the option of one or more

parties, but nor at the option of other

Nature

Valid when it is made but subsequently

becomes unenforceable

Voidable at the option of the aggrieved party and

remains valid until rescinded by him

Rights

Does not provide any legal remedy for the

parties to the contract

Aggrieved party gets a right to rescind the contract

Void Contract

Illegal Contract

Scope

It may not be illegal

Its is always Void

Effect on
collateral
transaction
Punishment

Collateral transactions to
the agreement may be
enforced for execution
No punishment for
entering

Collateral transactions to the

agreement also become illegal
and cannot be enforced
Punishment for entering

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