Business Regulatory

Framework
FIRST MODULE
CONTRACT (definition)

A contract is an agreement enforceable by law.

-Mercantile law/Business laws
-Nature and Scope of Contract
-History of Contract law
AGREEMENT (definition)

Every promise and every set of promises that forms the

consideration for each other is an agreement.
Differences
Agreement Contract
Not enforceable by law Enforceable by law
All agreements are not contract All contracts are agreement
Does not create legal rights and Creates legal rights and duties
duties
Agreement means offer and Contract means agreement and
acceptance legal validity
Wide scope Narrower concept
Classification/Types of Contracts

1. Formation/Creation : Express/Implied(tacit)/Quasi Contracts

2. Performance/execution: Executed/Executory Contracts
3. Parties: Bilateral / Unilateral contracts
4. Validity/legality/enforceability: Valid / Void/ Voidable/ Illegal/
Unenforceable Contracts
Express Contract
written or orally expressly agreed contract
Implied Contract(tacit)
contracts implied from circumstances or act of parties
Quasi Contracts
implied by law
 Valid Contract
Enforceable by law
 Void Contract
Not enforceable by law
 Voidable Contract
Enforceable by law at the option of one party but not at the option
of other party
 Illegal Contract
Not enforceable by law, object and consideration are unlawful,
void.
 Unenforceable Contract
Not enforceable by law due to technical reasons (like attestation,
signature, registration etc.
Contingent Contract
• Contract based on a contingent/condition.

E-Contract
• Online contracts
A made an offer to B to sell his car for 1,0000/-. B agreed. They
entered into a written contract. A gives his car to B and B gives
the money to A.

Agreement (Offer + acceptance) + lawful object (car) + lawful

consideration (Rs. 1, 0000/-) + capacity of parties (both A and B
are competent) + free consent (both A and B freely agreed) + not
void agreement + legal formalities (written, signed and registered
etc.) == CONTRACT
Essential conditions of a valid contract

1. Valid Agreement
2. Lawful consideration and lawful object
3. Parties must be competent
4. Free consent of the parties
5. Not void or unenforceable agreement.
University Exam Questions 2019

1. What is mercantile law? Discuss the history and development

of contract law in India?
2. Explain the principle given in Balfour v Balfour case?
3. State the significance of intention to create legal obligations?
4. What is the nature and scope of contract law?
5. All contracts are agreement but all agreement are not contract.
Discuss?
6. Explain the different classification or types of contract?
7. What is void ab initio?
8. What are reciprocal promises?
9.
 Offer (essentials)
Offer is made by the offeror
offer must be communicated to
the offeree
offer may be conditional
There are different types of offer
Offer can be made in any manner.
Acceptance(essentials)
Acceptance is made by the
offeree
Acceptance must be
communicated to the offeror
Acceptance must be
unconditional
Acceptance has no such forms
Acceptance can be only made in
the prescribed mode or usual or
reasonable mode.
Kinds/Types of offer

1. An invitation to offer
2. Specific offer and General/Public offer/offer at large.
3. Counter offer
4. Cross offer
5. Standing/Open/Continuing offer
Termination of offer

1. By Notice
2. By death/insanity
3. By counter offer
4. By expiry of time
5. By expiry of condition
6. By rejection
University Exam Questions 2019

1. Define offer/proposal? What are the essential conditions of an

offer? How can it be revoked/cancelled/lapsed?
2. Define promise?
3. Define acceptance? What are the essential conditions of an
acceptance?
4. State the differences between offer and acceptance?
5. What are the different kinds of offer?
6. State the rules of counter offer and cross offer? Differentiate
between them?
7. What is standing offer?
8. An unconditional offer must be accepted accordingly./ An
unconditional offer accepted conditionally is a counter offer.
Consideration

• Quid Pro Quo

• Something in return
Essentials
• Promisor
• Promisee (stranger to consideration)
• Past, present or future
• Act, not to act or a promise.
• Need not be adequate.
• Real and lawful
No contract no consideration

1. Natural love and affection

2. Voluntary service
3. Promise to pay a time-barred debt
4. Registered gift
University Exam Questions 2019

1. Define consideration? What are the essential conditions of

consideration?
2. No consideration no contract/A contract without consideration is
void. Explain?
3. What are the different types of consideration?
4. What is quid pro quo?
5. What is stranger to consideration/privity to consideration?
6. Inadequacy of consideration is immaterial. Comment?
7. Consideration need not be adequate. Comment?
Capacity of parties

1. Major
2. sound mind (non compos mentis) and
3. who is not disqualified by law from entering into a contract.
Rules regarding Minors Contract

• Void Agreement
• Plead minority
• Not personally liable
• Promisee or Beneficiary
• Necessaries
University Exam Questions 2019

1. Who is a minor? State the rules for a minors contract?

2. What is capacity of parties/competent to enter into contract.
Explain?
3. A minor can always plead minority/infancy. Discuss?
4. Is minor liable for necessaries supplied to him?
5. Is minor liable for tort?
6. Explain the importance of Mohiribibi v Dharmo Das case in a
minors contract?
7. Who is a person of unsound mind?
8. What is restitution? Explain in the light of a minors contract?
Free Consent

 Consent/consensus ad idem : When two persons agree upon

the same thing in the same sense. (meeting of minds)

 Free consent: Consent is said to be free when it is not caused

by Coercion, Undue Influence, Misrepresentation, Fraud or
Mistake
 Coercion(essentials) Undue Influence(essentials)

using or threat to use physical Involves use of moral force

force

Intention of obtaining the consent of party Intention of obtaining an unfair advantage

Punishable under IPC Not criminally liable

Stranger can be involved in coercion Between the parties to the contract

Relationship is Immaterial One party dominate the other party

Voidable at the option of aggrieved party Voidable or court can set aside

Benefit can be taken back Benefit can be taken back at the order of
court
 Fraud(essentials) Misrepresentation(essentials)

Wrongful representation is made wilfully to deceive Innocently without any intention to deceive the
the party. other party.

The person making the wrong statement does not The person making the wrong statement believes it
believe it to be true. to be true.

Right to claim damages Cannot claim damages

In case of fraud the contract is voidable even In case of misrepresentation the contract is not
though the aggrieved party had the means of voidable if the aggrieved party had the means of
discovering the truth. discovering the truth.

the party making the representation knows that the the party making the representation believes the
statement is not true. statement made by him is true

Fraud, In certain cases is a punishable offence Misrepresentation is not an offence under Indian
under Indian penal code. penal code and hence not punishable.

Silence is not fraud except where there is a duty to Under no circumstances can silence be considered
speak or the relations between parties is fiduciary. as misrepresentation.
(Uberrima Fidei)
Mistake

• Mistake of law: Mistake of Indian law and Mistake of foreign law

(Contract valid) (Contract void)

• Mistake of fact: Unilateral mistake and Bilateral mistake

(A contract is void if there is mistake of fact)
Bilateral Mistake of fact

• A entered into a contract with B to sell his TV. Unknown to both

the parties the TV was destroyed by A’s nephew by mistake.
• A entered into a contract with B to sell his three TV. But B had
mistakenly assumed that he was buying only two TV.
• A entered into a contract with B to sell his 32 inch HD colour TV.
But B had mistakenly assumed that he was buying 32 inch
colour TV.
• A entered into a contract with B to sell his LG TV. But B had
mistakenly assumed that he was buying a PHILIPS TV.
• A entered into a contract with B to sell his TV. But the TV was
already sold to B by A’s wife earlier, thereby technically the TV
belonged to B.
University Exam Questions 2019

1. What is consent/consensus ad idem?

2. What is free consent?
3. What is uberrima fidei contracts?
4. Define coercion? What are the essential conditions of coercion?
5. Define undue influence? What are the essential conditions of
undue influence?
6. Define fraud? What are the essential conditions of fraud?
7. Mere silence is not fraud. Explain?
8. Define misrepresentation? What are the essential conditions
of misrepresentation?
9. Differentiate between: Coercion and undue influence- fraud
and misrepresentation.
Void Agreements

Unlawful Object and Consideration\Legality of object and

consideration

 It is forbidden by law
 It defeats the provisions of any law
 It is fraudulent
 It involves an injury to a person or property of other
 It is Immoral or against public policy.
1. An agreement without consideration is void.
2. Every agreement restricting of the marriage of any person ,
other than a minor is void.
3. Every agreement restricting a lawful profession, or trade or
business of any kind , is void.
4. An agreement restricting jurisdiction of the courts is illegal
and void.
5. An agreement which is uncertain is void.
6. Agreements by way of wager are void.
University Exam Questions 2019

1. What is illegality of object and consideration/ unlawful object

and consideration?
2. Explain the different types (ten) of void agreements?
3. What is public policy? What are the agreements against public
policy?
4. What is maintenance and champerty agreements?
5. Discuss agreement in restraint of trade and its exceptions?
Privity of Contract/Stranger to contract
• Trust
• Agreement is made in a connection with marriage
• A partition or family settlement
• Immovable property
• Agency
University Exam Questions 2019

• What is privity of contract/ stranger to contract? State the

exceptions.
• Differentiate between stranger to contract and stranger to
consideration/ privity of contract and privity of consideration?
 Wagering Agreement
Rules\Essential Conditions:

 There are two parties.

 One will win and another will lose.
 The performance depends on happening or non-happening of event.
 Such an event is uncertain.
 There must be a promise to pay money or money’s worth.
 Neither party should have any other interest except the sum of money
which they will win or lose.
 Neither of the parties should have any control over the event.
 Mutual chancels of Gains or Loss.

Agreements by way of wager are void and unenforceable.

 Contingent Agreement
Rules\Essential Conditions:

• The performance of the contract is conditional on the happening of

an event.
• The performance of the contract is conditional on the non-happening
of an event.
• The performance of the contract is conditional on how a person will
act.
• The performance of the contract is conditional on the happening of
an event within a fixed time.
• The performance of the contract is conditional on the non-happening
of an event within a fixed time.
• The performance of the contract conditional on the happening of an
impossible event.
 Wagering agreement(Rules/essential conditions) Contingent agreement (Rules /essential conditions)

Wagering agreement is betting on the happening or non- A contingent contract is a contract, to do or not to do
happening of a future uncertain event something on the happening or non-happening of a future
uncertain event

Future event is the determining factor Future event is collateral

Parties do not have any interest in the happening or non- Parties have interest in the happening or non-happening of
happening of the event. the event.

Mutual promises No mutual promises

void valid

It is contingent in nature It is not wagering in nature

Eg: X and Y agree that, if it rains on a particular day, X will give Eg: A contract to pay B, Rs.1000 if it rains on a particular
Y Rs.1000 and if it does not rain on that day Y will give X day.
Rs.1000.
University Exam Questions 2019

1. Define wagering agreement? What are the essential conditions?

2. Define contingent agreement? What are the essential
conditions?
3. Differentiate between wagering agreement contingent
agreement?
4. All wagering agreements are contingent in nature but all
contingent agreements are not wagering in nature. Comment.
Quasi Contract
• Supply of necessities
• Payment by interested persons
• Liability to pay for non-gratuitous acts
• Finder of goods and
• Mistake or coercion
Online Contracts/ E-Contracts
• Meaning (not paper based ,electronic in nature, speedy, global, e-
governance, e- commerce)
• Two parties (Originator and Addressee)
Originator : a person who sends, generates, stores or transmits any
electronic message to be sent, generated, stored or transmitted to any
other person and does not include an Intermediary.
Addressee : a person who is intended by the originator to receive the
electronic record but does not include any Intermediary
• Types (Shrink Wrap Agreements, Click Wrap Agreements, Browse Wrap
Agreements and Online shopping agreement)
• Essential conditions
Digital Signature

• Meaning
• Advantage/Benefits (Privacy, Authentication, Integrity, and Non-
repudiation)
• Document- Encryption and Decryption-Key Cryptography- Public
Key and Private Key - Digital Signature Certificate- CA (NSDL,
CDAC, TATA CONSULTANCY SERVICES, NIC, IDRBT etc..)
University Exam Questions 2019

1. What are the different types of quasi contract?

2. What is digital signature?
3. What is digital signature certificate?
4. What is a certifying authority?
5. What are intermediary?
6. What is digital cryptography?
7. What ids public key infrastructure?
8. What are online contracts? How to enter into such contract?
What are the different types of online contracts?
9. What are certifying authorities? What are the powers and
functions of CA’s?
Discharge of contracts

1. By Performance
2. By impossibility of performance
3. By agreement
4. By law
5. By lapse of time
6. By breach of contract
 By performance

 Actual performance (actually performing your duties

 Attempted performance/tender of performance (when one
person attempts and other person refuses the performance)
• It must be unconditional
• It must be made at the proper time and place.
• Promisee must have reasonable time and opportunity to verify
the quality and quantity of goods delivered.
 By Impossibility of performance
(when performance becomes impossible; subsequent
impossibility.
 Doctrine of impossibility of performance/supervening/
subsequent/superimposing impossibility or doctrine of
frustration: Inherent and subsequent impossibility.
 A contract to perform something which is impossible in its very
nature is void (inherent impossibility)
 By agreement

 Novation (replacing old performance with new)

 Rescission (cancelling the performance)
 Remission (reducing the performance)
 Alteration (changing the performance)
 Merger (combining different performance together)
 Waiver (giving up performance)
 By law (In personal contracts)
 Death
 Insanity
 Insolvency
 By lapse of time (when time given for performance comes to
an end)
 By breach of contract (breaking the contract)
 Actual breach (breach at the time or during the performance)
 Anticipatory breach (breach before the performance)
University Exam Questions 2019
1. What is assignment of contract?
2. Who all can perform a contract?
3. What is the effect of refusal to accept offer of performance?
4. How to perform reciprocal promises?/ What are the rules
regarding performance of reciprocal promises?
5. What are different types of performance of contract? State the
essential conditions of tender of performance/offer of
performance?
6. What do you meant by devolution of joints rights and
liabilities/joint promises?
7. What is appropriation of payments?
8. Why do you mean by time as essence of a contract?/ What is
the importance of time and place in in a contract?
 Remedies for breach of Contract:

When a contract is broken or breached by one party there are

certain remedies available to the other party.
1. Rescission
2. Damages
3. Specific Performance
4. Injunction
5. Quantum Meruit
 Rescission (cancellation of contract)
 Damages (compensation)
 Types of damages : Decided by parties and decided by court

 Decided by Court
1. Normal/Ordinary Damages- Loss for natural and direct result of
breach of contract
2. Special/Extraordinary damages- Loss for special circumstances.
3. Punitive/Vindictive/Exemplary damages-Damages given as
punishment to other party.
4. Nominal damages-When no loss, the court may give a very small
damages

 Decided by parties
 Specific Performance
demanding performance of promise agreed in contract instead of
damages or in addition to it.
 Injunction
stay order granted by court. This order prohibits a person from
doing a particular act.
 Quantum Meruit (as much as merited)
To pay damages to a person for the part of contract already
performed by him.
University Exam Questions 2019

1. What are the types of breach of contract?

2. What do you mean by quantum meruit?
3. What are the types of remedies for breach of contract?
4. What are the different types of damages?
5. Differentiate between liquidated damages and penalty?