Business Law – An overview

Prof. S.Shoba
Asst Professor
PG and Department of Commerce
Guru Nanak College (Autonomous)
Chennai
Contract and its
Classification
Definition
Contract – Agreement enforceable by Law
Agreement – Every Promises and set of
Promises forming consideration
Promise – Proposal when accepted
Consensus ad idem – Meeting of minds or
understanding the subject matter in the
same sense and at the same time
 Classification of Contract
Enforceability Formation
Performance
Void Agreement
Express Contract Executed Contract
Void Contract

Voidable Contract
Implied Contract Executory Contract
Unlawful Agreement

Illegal Agreement
Partly Executed
Quasi Contract
Unenforceable Contract Contract
Enforceability
 Void Agreement - not enforceable by Law
 Void Contract – Ceases it enforceability
 Voidable Contract – enforceable at the option of one
or more parties but not at the option of the other
 Unlawful Agreement – on ground of public policy
 Illegal Agreement – involves in crime or violate basic
public policy or immoral in nature
 Unenforceable Contract – owing due to technical
defects in agreement
Formation

Express Contract – by words -

spoken or written
Implied Contract – inferred from
their acts or behavior
Quasi Contract –no person should
enjoy benefit at the cost of others
Performance

 Executed Contract – when both parties

fulfil their obligations
 Executory Contract – when both parties
are yet to fulfil their obligations
 Partly Executed Contract – one party has
fulfilled his obligation and the other is yet
to fulfill his obligation
Essentials of a valid Contract

➢ Validoffer and acceptance

➢ Legal relationships
Case Law: Balfour Vs. Balfour
➢ Consideration
➢ Capacity of Parties
➢ Free Consent
➢ Legality of Object
Contd…

➢ Agreement not declared Void

➢ Agreement terms must be certain
➢ Possibility of Performance
➢ Legal Formalities
Offer

 Definition : According to Sec 2 (a), when one

person signifies his willingness to do or abstain
from doing anything with a view to obtaining the
assent of the other, is said to be offer
 Offeror – The person making the offer
 Offeree – The person to whom the offer is made
 Promisee – When the offer is accepted
Types of Offer
 Express offer – by words
 Implied Offer – by conduct of the parties
 Specific offer – specific person or group
 General offer – world at large Case Law: Carlill Vs.
Carbolic Smoke Ball Company
 Cross offer – identical offers without knowing the
intention of the others
 Counter offer – desires modification
 Standing offer – continuous offer
Legal Rules regarding Offer
 It must create legal relationship between the parties
 Offer must be certain and clear
 Declaration of intention is not an offer
 Invitation to offer is different from Valid offer
 It must be communicated
 It shall not contain a term that non-compliance would
amount to acceptance
 Statement of price does not constitute offer
 Special terms must be communicated to the offeree
Acceptance

 Definition– Sec 2 (b) – When the

person signifies his assent , the
proposal is said to be accepted.
Legal rules regarding Acceptance
 It must be absolute and unqualified
 Mere mental acceptance is not an acceptance
 According to the prescribed mode
 Acceptance must be given within the time specified
 It can be made by an authorized person
 Conveyed only to the offeror
 It cannot be implied by silence
 Acceptance cannot be presumed
 It must be communicated before the offer lapses
Discharge of contract
Discharge by Performance

 Actual Performance – manner in which a contract is

discharged
 Attempted Performance – when the promisor
offers to perform but the promise does not accept the
performance
Discharge by Mutual Consent

 Novation – substitution of a new contract for the original

contract
 Rescission – cancellation of the contract
 Alteration – terms of contract altered by mutual consent
 Remission – acceptance of a lesser fulfilment of the
promise
 Waiver – not to insist on a certain obligations
 Merger – an inferior rights combines with superior right
Discharge by Impossibility

 Destruction of subject matter

 Death or Personal incapacity
 Change of Law
 Declaration of war
 Change in the state of a thing forming the basis of
contract
Discharge by Operation of Law

 Death
 Insolvency
 Unauthorised Material alteration
 Liabilities and rights accruing to the same person
Discharge by Breach
 Actual Breach
 On the due date
 During performance

 Anticipatory Breach
 Express
 Implied

 Discharge by Lapse of time – a contract

must be performed within a specified period
Remedies for Breach of Contract
 Breach of contract – when a party fails to fulfil his obligations
 Remedies are
Rescission – rescinded or cancelled
Damages – monetary compensation
Quantum meruit – payment in proportion to the amount of
work done
Specific performance – direction by court to fulfil his
promise
Injunction – stay order / preventing a person from doing an act.
Contract of Sale

A contract of sale – whereby the seller transfers or

agrees to transfer the property in goods to the buyer for a
price

A contract of an Agreement to sell – if the

property in goods is to be transferred to the buyer in
future subject to the fulfillment of certain conditions.
Essentials of a contract of Sale

 Two parties – buyer and seller

 Subject matter – Goods, does not include sale of
immovable properties
 Consideration – Price
 Transfer of general property in goods
 All essential elements of a valid contract
Goods

 Definition – Every kind of movable property other than

actionable claims and money and includes stocks and
shares, growing crops, grass and things attached to or
forming part of the land which are agreed to the severed
before sale or under the contract of sale.
Types of Goods
 Existing Goods – owned and possessed by the seller at the time of
sale
 SpecificGoods – identified and agreed upon at the time of sale
 Ascertained Goods – identified out of mass of unascertained
goods
 Unascertained Goods – not identified and defined only by
description
 Future Goods – seller does not possess at the time of sale

 Contingent Goods – goods are acquisition of which by the seller

depends upon a contingency which may or may not happen
Sale by Non - Owners
 A person who is not the owner of certain goods has no legal right to sell the
same

Exceptions - Sale by
 Estoppel
 mercantile agent
 one of several joint owners
 Voidable contract
 Seller in possession of the goods after sale
 Buyer in possession before transfer of ownership
 Unpaid seller
 Finder of goods
 Pawnee
 ‘official receiver or assignee or liquidator
Delivery of Goods
 Delivery - Voluntary transfer of possession of goods from one person
to another

Types of Delivery
 Actual Delivery – physically hands over the goods to the buyer

 Symbolic Delivery – symbolically deliver the goods

 Constructive Delivery –third person may be bailee acknowledges
the buyer that he holds goods on behalf of the seller
Rules regarding Delivery of Goods

 Payment of Price
 Mode of Delivery
 Effect of part delivery
 Buyer to apply for delivery
 Place of delivery
Contd…

 Goods in possession of a third party

 Time of delivery
 Cost of delivery
 Delivery of wrong quantity
 No instalment delivery of Goods
 Delivery of goods to a Carrier
Rights of the Buyer
 To have delivery of goods as per the contract
 The buyer can reject the goods, if the right quantity
is not sent
 Not to accept in instalments
 Buyer has to be informed about the goods sent by sea
route
 Right to examine before accepting the goods
 Rights against seller – claim damages, recover the
price paid, sue for specific performance, breach of
warranty, repudiation of contract before due date,
sue for interest.
Duties of the Buyer
 Accept goods and pay for it
 Apply for delivery
 Demand delivery of goods within a reasonable time
 Risk of deterioration in the goods incident to the
course of transit
 Refuse to accept in instalments
 Take delivery of goods as per the contract
 If buyer wrongfully refuses to accept and pay for the
goods, then buyer shall compensate the seller for
damages for non-acceptance.