Dr.

Sangita Shirude
B.Sc.(Statictics), LLM, MPM, PhD
Research: Financial Management
 LEGAL ASPECTS OF BUSINESS

INDIAN CONTRACT ACT 1872

SPECIAL CONTRACTS
SALE OF GOODS ACT 1930
NEGOTIABLE INSTRUMENTS ACT 1881
THE CONSUMER PROTECTION ACT 1986
INFORMATION TECHNOLOGY ACT 2000
COMPANY LAW 1956
IP ACT
 Indian Contract Act: Section:1 to 75

Contract:
• Formation of contract
• Performance of contract
• Breach of contract
 Formation of a contract

• Formation of a contract:
proposal…..acceptance of the proposal
promise Vs promise :
set of promises = (an agreement )
Quid pro quo = something for something
promisor and promisee
Sec:2(h) “An agreement enforceable by law is a contract.”
if Sec:10 is fulfilled, which lays down the essential conditions required for
a valid contract
 Essential conditions for a valid contract Sec:10

• Proposal and acceptance of proposal Sec:2(a),2(b)

• Competent parties Sec:11
• Lawful object Sec:23
• Lawful consideration Sec:2(d), Sec:23
• Free consent Sec:13 to 22
• Intention to enter into legal bindingness
• Agreement should not be expressly declared to be void by law
• Other formalities prescibed by law
 Types of Contract

1. Express Contract
a. Oral Contract
b. Written Contract
2. Implied Contract
3. Valid Contract
4. Void Contract
5. Voidable Contract
6. Contract in Fact
7. Contract in Law
8. Executed Contract
9. Executory Contract
10. Quasi Contract
11. Standard Form of Contract
12. Contingent contract
13. Wagering contract
14. Unlawful contract
15. Illegal contract
 Proposal Sec:2(a)

• A proposal means an expression of the desire by one person to another

person to do something or not to do something with the desire to obtain
the consent of other person.
• A….B
are you willing to buy my zen for 2 lac Rs.
if the proposal is accepted as it is then the acceptance is valid.
once the counter proposal is in existence there is lapse of original proposal
Not to do something:
 Rules for a valid proposal Sec:7

• The proposal must be for a definite and possible act

• A proposal must be made with the intention to be accepted by the other
• A proposal must be made with a view to create legal relations.
• A proposal is different from invitation to proposal.
• An inquiry as to price of the goods is not a proposal .Case: Harvey Vs Facey
• A proposal must be communicated to the promisee. Case… Lalman Vs
Gauri Dutt(1913)
• The terms and conditions of the contract must be effectively
communicated with the proposal.
• A proposal may be specific or general. Case: Carlill Vs Carbolic Smoke Ball
Co. Ltd.(1893)
• A proposal may prescribe conditions for its acceptance.
 Rules for valid acceptance of the proposal (Sec:7)

• Acceptance must be absolute and unqualified

• Acceptance must be in usual and reasonable way
• An acceptance by conduct is valid
• Acceptance must be made within a reasonable time or prescribed time
• Acceptance should be made by a person to whom the proposal has been made
• Acceptance in ignorance of the proposal is invalid. Case… Lalman Vs Gauri
Dutt(1913)
• When counter proposal comes into existence there is lapse of original proposal
• Acceptance must be communicated to the party
• Silence will not amount to the acceptance of the proposal
• Acceptance should also fulfill other conditions prescribed by the proposal for
its acceptance
• Communication of the proposal and acceptance of the proposal (Sec:3)
• Revocation of proposal and acceptance (Sec:5)
• Ways of revocation of a proposal
1. Notice
2. Lapse of time
3. Failure to fulfill condition precedent
4. By death or insanity of proposer
 Competent parties Sec:11
• Sec:11 Every major person of sound mind, who is not disqualified by law
can enter into a contract.
• Minor
• Persons of unsound mind S:12
case:Inder Sing Vs Parmeshwardhari Sing
• Persons disqualified by law
 Position of minor under Indian Contract act:
Landmark case :Moharibibi Vs Dharmodas Ghosh (1903)
mortgage for 20,000 Rs., Out of which 8000 Rs. were paid
• Minors agreement is void ab initio.
• Negotiable Instruments act
• Parents of minor
• Mortgage
• Ratification of minors agreement
• False representation of age
• Supply of necessities
• Law of Agency
• Partnership firm
• Tort act
 Consideration

• Quid Pro Quo = Something for something

• Consideration is the price of the promise under the contract
• Nudum Pactum = A contract without consideration is void
• Example: A…………B
• Sale of CBZ bike for 50000 Rs. = consideration
• Def. Sec 2(d): When at the desire of the promisor the promisee or any
other person has done or abstained from doing or does or abstains from
doing or promises to do or abstain from doing something, such act or
abstinence or promise is called a consideration for the promise
 Characteristics of Consideration

• At the desire of promisor

Case: Durgaprasad Vs. Baldev
• Promisee or any other person
• Case: Dutton Vs. Pull
• Past, present, future
• Lawful
• Rule: Privity of contract (Only parties to the contract can claim under the
contract)
• Case: Tweedle Vs. Atkinson (1861)
• Exception: Stranger can claim under the contract if he is a beneficiary
under the contract
• Case: Chinnaya Vs. Ramayya (1882)
• Khawaja Mohammad Vs. Hussaini Begum
• Adequacy
• Rendering Services
• Voluntary Act
• Bound by Law
• Exceptions to consideration (Sec:25)
Natural love and affection
Past Voluntary Services
Gift
Agency
 Free consent (Sec:13-22)
• Consensus ad idem
• Sec:13 When two or more persons agree upon the same thing in the same
manner they are said to consent.
• Sec:14 Free consent: Consent is said to be free if it is not caused by
coercion, undue influence, fraud, misrepresentation and mistake.
• Coercion :(Sec:15) is the committing or threatening to commit any act
forbidden by IPC
• Case: Ranganaya Kamma Vs Alworsetti
adoption
Amiraju Vs Seshama
threat to commit suicide
Mistake: Case :Cundy Vs Lindsay
Blenkarn and co. ,Blenkiron and co.
 Quasi Contract (S:68-72)

• The necessaries supplied to minor (S:68)

• Payment of money by a person interested in payment which the other is
bound by law to pay (S:69)
• Obligation of a person who enjoys the benefit of non gratuitous act (S:70)
• Responsibility of finder of goods (S:71)
• The liability of person to whom money is paid by mistake or coercion
(S:72)
 Void contract
An agreement may be enforceable when its made, afterwards becomes
unenforceable due to unexpected reasons, turns to be void

• Frustration of contract S:50

• Voidable contract turns into a void contract.
• Contingent contract turns into a void contract.
Void Agreement
ICA expressly declares some agreements to be void…..
1 mistake of fact essential to the agreement…both parties
2 minor
3 object or consideration is unlawful
4 no consideration
5 in restraint of trade or lawful profession
6 in restraint of marriage
7 in restraint of legal proceedings
8 meaning is uncertain
9 wager
10 impossible
11 subsequently becomes impossible
12 trade with enemy
13 maintenance and champerty
14 to waive illegality
15 create monopoly
16 not to bid at public auction
17 sale of public office
18 Marriage brokerage
19 against marital relation
20 fraud
 Discharge of a contract
• Performance of a contract Sec:37
• Tender of performance of a contract: Sec 38
Time is the essence of commercial contracts. Sec:55
Assignment of a contract
• Performance, novatio, alteration, tender of performance, void contract,
operation of law, death of a party, lapse of time, mutual agreement,
Frustration of a contract (Sec:56), Anticipatory Breach of contract
Breach of a contract: S:73
suit for : Damages, specific performance of the contract, injunction
• Principles for damages:
• Hadley Vs baxendle (broken crankshaft)
• Natural course of circumstances
• Reasonable, actual loss suffered by the party
• Direct, not too remote
• Steps to mitigate
• Inform circumstances, additional damages
• Nominal damages
• Cost of decree
• Interest- late payment
• Market price and contract price
• Fixed sum
• Sentimental injuries
• Same position
• Quasi contract
• Compensatory not punitive
• Liqidated damages and penalty