Law

-Definition of Law
‘a set of rules’
‘a code of conduct’
‘rules and principles which regulate our relations with
other individuals and with the state’
 Definitions by various legal jurists

• Holland: ‘rules of external human action enforced

by the sovereign political authority i.e the State.’
• Salmond: ‘Law s the body of principles
recognised and applied by the State in the
administation of Justice.’
• Two fold purpose:Body of rules as well as a social
machinery for securing order in the community.
• Law is not static.
 The object of law

• To maintain order.
• To establish socio economic justice and
remove the existing imbalances in the socio
economic structure.’
• For the moral, spiritual and material welfare
of the individuals.
 Need for knowledge of law

• Ignorant juris not excusat.Latin Maxim

meaning ignorance of law is no excuse
 Nature
of Mercantile Law
• Mercantile law deals with contractual
situations and the rights and obligations
arising out of mercantile transactions
between mercantile (business) persons.
• A mercantile person may be a sinlge indivual,a
joint stock company etc.
 Sources of Mercantile Law
• Shariah
• English law: a)Common law.Unwritten.Precedence.b)
Equity which is based on principles of justice.
Supplements common law. Merged by the Judicature
Acts of 1873 and 1875. C) Statue Law d) English
Mercantile Law which is that branch of law that is
based on customs and usages prevalent amongst
merchants and traders eventually recognised by the
Common Law Courts.
• Statute Law e.g. Partnership Act 1932
• Precedence
• Customs and Usages.
 Questions
• What is the need for the knowledge of law?
• What is the scope of mercantile law?

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 Law of Contract

• The law of contract is that branch of law which

determines the circumstances in which promises made
by the parties to a contract shall be legally binding on
them,
• It defines the remedies available and the conditions
they are available in against a person who fails to
perform his contract.
• It brings a kind of certainty in business transactions.
• Sir William Anson state that the purpose of law of
contract is to ensure the realisation of reasonable
expectation of the parties who enter into a contract.
 Definition of a Contract

• A contract is an agreement made between

two or more parties which the law will
enforce.
• Salmon defined it as an agreements creating
and defining obligations between the parties.
Essential Elements of a Valid Contract
• Agreement i.e. Offer and Acceptance. There must be two parties
to the contract, one making the offer and the other accepting it.
The acceptance must be unconditional and absolute. The
acceptance must be according to the mode prescribed and must
be communicated to the offeror.( the person making the offer).
• Intentions to create legal a relationship. Agreements of a social
or domestic nature do not contemplate a legal relationship.
• E.g Balfour v Balfour where a husband promised to pay his wife a
household allowance of 3o pounds every month.Later the
parties separated and the husband failed to pay the amount.The
wife sued for the allowance.Held:agreements such as these
were outside the realm of contract.
• Lawful consideration. Consideration means an
advantage or benefit moving from ne party to
the other. It essentially ‘means something in
return.’ A promise to do something getting
nothing in return is not enforceable by law.
Consideration need not necessarily be in cash
or kind. It may be an act or abstinence or
promise to do or not to do something.
• Capacity of parties-competency: a) of sound
mind. b) age of majority c) not disqualified from
contracting by any law to which he is subject.
• Free and Genuine Consent: parties must agree
about the subject matter of the contract in the
same sense and at the same time. There is
absence of free consent if the agreement is
induced by coercion, undue influence
,fraud,misreprentation etc.
• Lawful object: The object of the agreement must
be ;lawful i.e. is must not be a) illegal b) immoral
or c) opposed to public policy.
• Agreement not declared void: The agreement
must not have been expressly declared void by
any law in force in the country.
• Certainty and possibility of performance: The
agreement must be certain and not vague.E.g A
agrees to sell to B ‘a hundred tons of oil.’ There is
nothing to show the kind of oil in intended. The
agreement is void for uncertainty.
• Agreement to do the impossible cannot be enforced so
the terms must be capable of performance.
• Legal Formalities: A contract could be made by words
spoken or written. There are certain legal formalities
depending upon the type of contract. In some cases
the document in which the contract is incorporated is
to be stamped e.g. deeds for property etc. In others
besides being a written one a contract has to be
registered. Other requirements like witnesses etc and
other statutory formalities etc have to be complied
with.
 Classification of Contracts

• Classification according to validity. An

agreement becomes a contract when all the
essential elements discussed above are
present. If one or more of these elements is
missing the contract is either voidable, void
illegal or unenforceable.
 Voidable Contract
• When the essential element of free consent in a contract is missing i.e.
it is caused by co coercion ,undue influence ,misrepresentation etc the
contract is voidable at that party’s option.
• When a person promises to do something for another person for a
consideration but the other person prevents him from performing his
promises the contract becomes voidable at his option and he has
recover compensation for any loss incurred due to non performance.
• When a party to a contract promises to perform an obligation within a
specified time any failure on his party to perform his obligation within
the fixed time makes the contract voidable at the option of the
promisee.
• If the party rescinding the contract has received any benefit under the
contract from another party to such contract he shall restore such
benefit so far as it may be to the person from whom it was received.
• Void Agreement: A void agreement is an agreement
not enforceable by law e.g. an agreement with a minor
or an agreement without consideration. It is ab initio
i.e. void form the very beginning and has no legal
effect.
• Void contract: A contract which ceases to be
enforceable by law becomes void when it ceases to be
enforceable. A contract when originally entered into
maybe binding on the parties e.g. a contract to import
goods from a foreign country but when war breaks out
between the two countries it becomes void.
• Illegal Agreement: An illegal agreement is one which transgresses some
rule of basic public policy or which is criminal in nature or which is
immoral.
• All illegal agreements are void but all void agreements or contracts are
not necessarily illegal.
• An illegal agreement is not only void as between the immediate parties
but has this further effect that even the collateral transactions to it
become tined with illegality.
• Example : B borrows 5000 from A and enters into a contract with an alien
to import prohibited goods. A knows of the purpose of the loan. The
transaction between A and A is collateral to the main agreement and is
illegal since the main agreement is illegal.
• I f the main agreement is void though the collateral transactions are not
affected. So if in the above case B had entered into an agreement with a
minor with contract between A and B would remain unaffected.
 Classification according to Formation
• Express contract: A contract where the terms are
stated in words (written or spoken) b the parties.
• Implied Contract: A contract which is inferred
from the circumstances of the case or implied
from the conduct of the parties. Examples include
when A gets into a public bus, orders food in a
restaurant ,lifts B’s luggage out of the station etc.
• Quasi Contract: an obligation created by law. It
rests on the ground of equity.e.g a tradesmen
leaves goods at C’s house by mistake treats them
as his own. C is bound to pay for the goods.
 Classification according to
Performance
• Executed Contracts: one in which both the parties have
performed their respective obligation. In some cases
even though a contract may appear to be completed
its effect still continue.e.g a person buys a bun with a
stone that breaks his tooth. He has a right to recover
damages from the seller.(Chaproniere v Mason).
• Executory Contract: one which remains to be carried
into effect. An executory contract is one where both
the parties are yet to perform their obligations. A
contract can be partly executed and partly executory.
• Unilateral: Made to the world at large.
• Bilateral Contracts: in which both the parties
are yet to perform their obligations and so are
similar to executory contract and are known
as contracts with executory considerations.
 Classification under English Law
• Formal Contracts : a) contracts of record
which is either a judgement of a court. B )
contracts under seal which are written, signed
,sealed and delivered by the parties also
known as as deeds and do not needs
considerations.
• Simple Contracts: All contracts not made
under seal.
 Assignment
• Describe the essentials of a valid contract.
When does an agreement become void?
• Illustrate the distinction between void,
voidable and illegal agreements. Discuss the
validity of agreements collateral to such
agreements.
 Class Discussion
• Over a cup of coffee in a restaurant A invites B to dinner at
his house on a Sunday hires a taxi and reaches A’s house at
the appointed time but A fails to perform his promise. Can
B recover any damages from A? (Balfour v Balfour)
• A is forced to enter into a contract at the point of a pistol.
What remedy is available to B if he does not want to be
bound by the contract?
• A promises to pay B 500 if he beats up C.B beats up C but A
refuses to be pay. Can B recover the amount?
• M mows L’s lawn without being asked to do do.L watches
M do the work but does not attempt to stop him. Is L
bound to pay any charges to M?