Indian Contract Act 1872 -- Banking related general awareness
Indian Contract Act 1872 - Presentation Transcript
1. THE INDIAN CONTRACT ACT (ICA), 1872
2. What is a contract?
o Section 2(h)
o “ An agreement enforceable by law is a contract”.
o Contract = Agreement + Enforceability at Law
o Section 2(e)
Promise/(s ) Promise/(s) = Agreement (in exchange for)
o Section 2(b)
o Promise = Proposal/Offer + Acceptance
o Section 2(a)
o Expression of willingness
o With a view to seek the assent of the other
o Thus, mere expression of willingness doesn’t constitute offer/proposal.
o Section 2(b)
o Giving of assent to the proposal.
o Enforceability by Law
o Agreements which are not enforceable
o Illegal/unlawful agreements, e.g., to smuggle/to kill
o Social Agreements ( Balfour vs. Balfour )
6. Agreements Declared Void under ICA
§ Agreement with or by a minor
§ Agreement in restraint of trade
§ Marriage brokerage contract
§ Wagering/Betting Agreements
7. Kinds of Contracts
§ From the point of view of Enforceability
8. Void Agreement vs. Void Contract
o Void Agreement
o i.e., void-ab-initio i.e. unenforceable from the very beginning
o Becomes void (Void Contract)
o i.e., void + able
o i.e., capable of being declared void
o (unenforceable) at the option of one of the parties to the contract but not at the option of the other.
9. Valid Contract
o Section 10
o To be a valid contract, it must satisfy the following:
o Offer and Acceptance
o Consensus-ad-idem (Meeting of minds) i.e., persons must agree to the same thing in the same sense and at the same time.
o Intention to create legal relationship as against social relationship or illegal/unlawful relationship.
o Free and Genuine Consent , i.e., free from
§ undue influence
o Parties competent to contract
o Lawful consideration and object, i.e., something in return and that must be lawful.
11. Valid Contract
o (‘Object’ and ‘Consideration’ usually overlap. However, there may be difference at times e.g., object may be to kill competition and for that purpose in view, a senior manager of the competitor may be paid a certain amount to give unrealistically high quotation .)
o Here: Object is to kill competition.
o Consideration is :
o (i) payment of money
o (ii) giving high quotations
12. Valid Contract
o Agreement not declared void .
o Certainty of Meaning : e.g. sale and purchase of 100 tonnes of oil. But which oil? Thus, agreement being uncertain – not valid.
o But, if the seller deals only in one kind of oil and one variety, then it shall be valid since it is capable of being made certain.
13. Valid Contract
o Possibility of performance: Impossibility whether known to the parties or not, renders a contract invalid.
o Necessary legal formalities : e.g. sale-deed of immovable property.
14. Void vs. Illegal Agreements Void Agreement Illegal Agreement
o Not Punishable
o Collateral transactions unaffected.
o Punishable (fine or imprisonment or both)
o Collateral transactions are also void.
15. Specific and General Offer
o Specific Offer:
§ made to a specified person or a group of persons.
§ can be accepted only by the person to whom made.
o Thus, if offer is addressed to ‘A’, ‘B’ cannot accept it.
o Case Law: Boulton vs. Jones
16. Specific and General Offer
o General Offer:
§ which is not a specific offer.
§ made to the world at large.
§ can be accepted by anyone by complying with the terms of the offer.
o Case Law: Carlill vs. Carbolic Smoke Ball Co.
17. Offer vs. Invitation to offer
o Illustrations of Invitation to Offer:
§ Prospectus issued by a college.
§ Prospectus issued by a company.
§ Invitation of bids in an auction.
§ Price-catalogues, price lists, quotations
§ Display of goods with a price-tag in a shop window.
18. Special Terms in a Contract
o Examples: Dry cleaner’s receipt, courier’s receipt, shipment receipt, insurance policy, etc.
o Binding if communicated or attention drawn to the fact that there are certain special terms and conditions.
o Not binding if attention is not drawn and the other party not aware of.
19. Cross Offers & Counter Offers
o Cross Offers
o Identical offers cross each other and none of the parties is aware of the same. Doesn’t result in a contract unless one of them is accepted.
o Counter Offer
o Instead of accepting an offer, the offeree makes a counter offer, i.e., accepts the same subject to certain conditions or qualification.
20. Contracts through Post
o Communication of Offer
o is complete when the offeree has the knowledge of the same.
o Communication of Acceptance
§ It has two aspects, viz.,
§ As against the proposer
§ As against the acceptor
21. As against the proposer
o Communication is complete as soon as a duly addressed letter of acceptance is put into the course of transmission.
o Whether the same reaches the proposer or not.
o As against the acceptor
o Communication is complete only when the proposer has received the letter and learnt the contents thereof.
22. Communication of Revocation
o Communication of revocation (of offer or acceptance) is complete:
§ As against the person who makes it when it is put into the course of transmission.
§ As against the person to whom it is made, when it comes to his knowledge.
o Comparing ‘offer’ to a ‘train of gunpowder’ and ‘acceptance’ to a ‘lighted match stick’ – How far correct?
o William Anson’s observation though valid in the English context doesn’t hold good in India since in India acceptance is revocable.
24. Claim for Damages Damages U/S Section 73
Damages U/S Section 74 Only damages naturally flowing From breach (Ordinary Damages)
Special Damages (No claim for consequential loss unless in the Contemplation of the parties ( Hedley v. Baxendale Exemplary Damages Nominal Damages Pre-fixed Damages Penalty Liquidated Damages (What can be recovered is actual loss or amount prefixed, whichever is less)
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