2 JOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.CONTACT:R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN
3 Classical contract theory: 3 threads Contract is a bargainWill of parties [consensus ad idem-agreement]Freedom of Contract is paramount
4 Development of Contract Law: Principles Law of obligations [vinculum juris]Moral obligations contractual obligationsLaw of unjust enrichmentLaw of restitution [Injurious reliance]
5 Writ of debt Writ of covenant writ of deceit Courts in EnglandWrit of performanceWrit of debt Writ of covenant writ of deceitQuid pro quoPacta sunt servanda
6 Freedom of contract ?‘Contract as an instrument of free bargaining between parties on the basis of equality’
7 Freedom: Need ? To determine the primary obligations of parties To understand the inequality of bargaining powerTo understand public utilities
8 Means of contract Formal and Informal contracts Bilateral and Unilateral contracts
9 Contractual terms: Formation Performance Contract may be oral or written.RepresentationExpress Implied Intermediate termsTerms/ Expressed in writingConditions/warranties Implied by Statute terms by customary usage Standard form of contract
10 Object of Law of contract To avoid litigationTo establish set of rules for complianceTo penalize defaulters
11 Point of Legality Valid Contract Void Agreements : sec. 2(g) Voidable contracts:Illegal contracts
12 Law of torts and Contract MisfeasanceMalfeasanceNonfeasance
13 Would an action stand in Tort when the Contract is silent Blackpool and Fylde Aero Club v Black pool Borough Council 1990 WLR 1195Reid v Rush Tompkin Group 1990: Car accident case.Winterbottom v Wright Eng Rep 402
15 Issues Conceptual framework Rules governing e-contracts I T 2000 Digital signatureE-auction
16 Issues in E-contractCalifornia Software Inc v Reliability Research Inc, 1356 [C D Cal, 1986]Beta Computers Ltd v Adobe Systems Ltd 1996 FSR 367TCS v State of A. PEuropean Commission and ‘Product liability’Shrink wrapClick-WrapProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir., 1996
17 Outsourcing Contract Issues Sections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments in IndiaLiability of a software developer
18 Problems with E-contract Taxing E-commerceCopyright or Patent of software ?UK Electronic Commerce Act 2002Limitation of Digital Contracts
20 Essentials of Firm 1. Association of two or more persons 2. In pursuance of an agreement or contractRe Fisher and Sons KB 491: difference between Co-owners and partners3. To combine property, labor or skill4. In a businessNew Mofussil Co v Rustomji 1936Coope v Eyre 17885. Carried on by all or any one of them on behalf of allFirm name/PropertyMiles v Clarke ALL ER 7796. With a View to share ProfitsDaulat Ram v Dharm Chand AIR 1934 Lah 110
21 Minor PartnerSec. 30(1): ‘A person who is a minor according to the law to which he is subject may not be a partner in a firm, but with the consent of all partners for the time being, may be admitted to the benefits of partnership’A A Khan v Amer Karium AIR 1952 Mys 131Lachmi Narain v Beni Ram, AIR 1931 ALL 327Rights of minor: QuestionsTulsi das v Gangaram AIR 1925 Sund 272Satya Narain v Juggal Kishore AIR 1958 All 312]Minor’s liabilities sec. 30(3)(5)(7)(9)Sanyasi Charan Mandal v Asutosh Ghose Cal 225CIT v Vijay Kumar RajeshLiability of a minor after attaining majority
22 Types of partnership Partnership at will : M O H Uduman v Ashurn AIR 1991 SC 1020:Karumuthu Thiagarajan Chettiar v Muthappa Chettiar AIR 1961 SC 1225Partnership for a fixed termParticular partnership :Limited Partnership :Partnership by Holding outSleeping partnerNominal partnerWorking partners
23 Rights of a partner 1. Joint ownership of partnership property 2. Right to take part in the management [sec. 12]Suresh Kumar v Amrit Kumar AIR 1982 Del 131Right to Express opinion [sec. 12 c] Lord Fldon in Const v Harris 1824 said“for a majority of partners to say, we do not care what one partner may say, we being the majority will do what we please is what a court of equity will not allow’.Dismissal of a servantNew businessBlisset v Daniel 18533. Access accounts and act during emergencyRe Martindale ex Truman 1832
24 4. Right to profit 5. No claim for interest of capital Mansa Ram v Tej Bhan AIR 1958 Punj 5Delhi Veopar Mandal v IT Commissioner AIR 1967Dawood Sahib v Sheik Mohiuddin Sahib AIR 19385. No claim for interest of capital6. Right to indemnity sec. 13(e)Thomas v Atherton 1877
25 Rights of partners 6. Right not to be expelled 7. No new partner to be introduced: right to prevent8. No liability before joining unless with consent and expressly stated in the deed9. Right to retire: 3 ways
26 Nature of Liability of partners Joint and several: sec. 25: every partner is liable jointly with all the other partners and also severally for all acts of the firm done while he is a partner’TestBenefit of the partnershipWithin the scope of authorityMalyn v John Houston KB 81Moreton v Harden 1825Citizens Life Assurance v Brown 1905R W Pathirana v Pathirana AC 233
27 Nature of Implied Authority 1. Authority to purchase and sellBond v Gibson 2. power to recover money due to firm/ borrow money on credit:Higgins v Beauchamp KR 1992:3. Authority to engage lawyers4. Authority to insure firm goods
28 Conditions for application of Implied authority 1. Act must be done in the capacity of a partner:Gouthwaite v Duckworth [ ER 174]:2. Act must be done on behalf of the firm and not on personal behalf3. Act must relate to activities within the scope of business4. Act must be done in the firms name
29 Does implied authority vary acc/ to type of partnership LLP, Will the concept of mutual agency continue ?
30 Dissolution Of partnership of Firm End of the term completion of business by death/insolvency by retirement
31 Dissolution of Firm Without Court By Court By Agreement Compulsory dissolutionDissolution on contingencyBy noticeBy CourtPersistent misconduct or disregard to partnership agreementUnsoundness of partnersBusiness at lossJurisdiction of the Courts to try dissolutionMD Hassen Hashmi v Kaberi Roy AIR 1993 Cal 70
32 Winding UpRight to continue businessGood willRestraint of trade
33 What is a proposal/offer ‘I think I like your car and will try to buy it’I saw an advertisement for the sale of your car, will you sell your car to me?‘I am willing to buy your car for a reasonable price’.Are these Offer ?
34 Invitation to Treat Advertisements: General Offer Display of goods for saleCarlill v Carbolic Smoke Ball Co  1 QB 256Harvey v Facey  AC 552‘Will you sell us Bumper Hall pen, telegraph at what price’‘lowest price for the pen is 100’Powell v Lee  99 L Y 284MC Pherson v Appanna [AIR 1951 SC 184]‘wont accept less than 10,000’.
35 Modes of Offer Time table Tenders and Auctions [Harris v Nickerson] Restaurant menu cardATM or vending machines
36 Offer: Communication Counter Offer Gibbons v Proctor LTN S 594 [Reward for a criminal]Lalman Sukla v Gouri Dutt 1913ALJ 4891[Missing boys case]Tim v Hoffman 1873, 29 L T 271: cross offer is no offerCounter OfferProposal must be made to another person
37 ‘An offer can be withdrawn at any time before it is accepted’. Termination of Offer‘An offer can be withdrawn at any time before it is accepted’.Distinction between lapse of offer and revocationNotice, Death, incapacity, lapse of timeErrington v Errington  Father promises to son and daughter in law that if they pay mortgage amount of the property, the property would be theirs
38 Acceptance Acceptance must be in toto: Mirror Image Rule Manner/mode of acceptance [sec. 7]By an act promiseIs Silence an acceptance ?Felthouse v Bindley CB 869.: Uncle tells his nephew‘If I hear no more from you, the horse in mine’.The nephew during an auction stated to the auctioneer to reserve the horse for his uncleSilence and thereafter a ‘conduct’ of acceptance ?LIC of India v Vasireddy AIR 1984 SC 101427th Dec filing of proposal for LICProposer died on 12th Jan 1961Can Acceptance be revoked ?
39 Acceptance: contd Is Communication of Acceptance essential? Acceptance through post: Mailbox ruleAdams v Lindsell [ B& Ald. 681.2/9/1817, defendants offered to sell a quantity of wool at a certain price and expected the answer by post, the letter reached the plaintiff on 5th, the same day, he posted the acceptance, which reached the defendants on 9th.The defendants waited till 7th and on 8th sold the same wool to another personIs there an acceptance ?Who can communicate the acceptance ?When is a unilateral contract accepted ?
40 When does the mailbox rule apply? Q. Is revocation of acceptance possible ?Henthorn v Fraser 1892Secretary signed a note giving option to purchase for 14 days at P-750, next day withdraws through post at pm, claimant posts the acceptance on the same day between 3-4 pm.Which ever communication reaches first is valid
41 Offer and Acceptance: Where the contract is made? It determines the time of forming the contractIt stipulates the jurisdiction of the court; andIt affixes the rights and obligations of partiesIs the contract complete at the instance and place of the acceptor or offeror?
42 Invitation to Treat Advertisements: General Offer Display of goods for saleCarlill v Carbolic Smoke Ball Co  1 QB 256Harvey v Facey  AC 552‘Will you sell us Bumper Hall pen, telegraph at what price’‘lowest price for the pen is 100’Powell v Lee  99 L Y 284MC Pherson v Appanna [AIR 1951 SC 184]‘wont accept less than 10,000’.
43 Modes of Offer Time table Tenders and Auctions [Harris v Nickerson] Restaurant menu cardATM or vending machines
44 ‘An offer can be withdrawn at any time before it is accepted’. Termination of Offer‘An offer can be withdrawn at any time before it is accepted’.Distinction between lapse of offer and revocationNotice, Death, incapacity, lapse of timeErrington v Errington  Father promises to son and daughter in law that if they pay mortgage amount of the property, the property would be theirs
45 Acceptance Acceptance must be in toto: Mirror Image Rule Manner/mode of acceptance [sec. 7]By an act promiseIs Silence an acceptance ?Felthouse v Bindley CB 869.: Uncle tells his nephew‘If I hear no more from you, the horse in mine’.The nephew during an auction stated to the auctioneer to reserve the horse for his uncleSilence and thereafter a ‘conduct’ of acceptance ?LIC of India v Vasireddy AIR 1984 SC 101427th Dec filing of proposal for LICProposer died on 12th Jan 1961Can Acceptance be revoked ?
46 Acceptance: contd Is Communication of Acceptance essential? Acceptance through post: Mailbox ruleAdams v Lindsell [ B& Ald. 681.2/9/1817, defendants offered to sell a quantity of wool at a certain price and expected the answer by post, the letter reached the plaintiff on 5th, the same day, he posted the acceptance, which reached the defendants on 9th.The defendants waited till 7th and on 8th sold the same wool to another personIs there an acceptance ?Who can communicate the acceptance ?When is a unilateral contract accepted ?
47 When does the mailbox rule apply? Q. Is revocation of acceptance possible ?Henthorn v Fraser 1892Secretary signed a note giving option to purchase for 14 days at P-750, next day withdraws through post at pm, claimant posts the acceptance on the same day between 3-4 pm.Which ever communication reaches first is valid
48 Offer and Acceptance: Where the contract is made? It determines the time of forming the contractIt stipulates the jurisdiction of the court; andIt affixes the rights and obligations of partiesIs the contract complete at the instance and place of the acceptor or offeror?
49 Chapter-3: Capacity to Contract Two kind of ‘persons’NaturalLegal or juristic personNatural PersonLatent incapacity patent incapacity[infancy, unsoundness, lunacy] [B’cos of Status: insolvency, alien enemy, Married]
50 Legal person Ultra vires winding up any other Acts of sovereign, Corporate and companies
51 Liability of Minors in Contract Sec. 68: ‘if a person, incapable of entering into a contract is supplied with necessaries in life, the person who supplies is entitled to be reimbursed’Doyle v White City Stadium KB 110,
52 Insanity/lunacy Inder Singh v Parmeshardhni Singh AIR 1957 Pat. 49 Mathews v Baxter [1873, L R 8 Ex. 132]
53 Other Incapacities Political Status Corporation Alien enemy Foreign sovereigns and ambassadorsMighell v Sultan of Johore [1894, 1 QB 149][Also see sec. 86 of CPC which provides that in case of suit against a foreign sovereign, the consent of the Central Govt is required]CorporationAshbury Railways Carriage Co. V Riche 1875, 7 HL 653. [an agreement for purchase of railways which was not mentioned in the MOA was held ultra vires]Q. Does Ultra vires means void contract ? Are third parties protected from such ultra vires acts ?
54 Other Incapacities Married Status Professional status: can an advocate sue in contract, his client for fee ?
55 Chapter 4: Consideration Sec. 10 requires Lawful consideration as an essential factor for giving enforceability to an agreement.Sec. 25 an agreement without consideration is void [nudum pactum]Sec. 23 and 24 deal with circumstances in which the consideration will be treated unlawful
56 What is consideration Money [need not be adequate] An act, abstinence or promiseMust be real [White v Bluett]Performance of a legal duty is no consideration
57 Why Consideration ? Consideration only at the desire of the promisor Durga Prasad v Baldeo [Building a market place at the order of the Collector, Defendants, a tenant made a promise to pay, later refused, was held not liable to pay]Consideration by the promisee or any other personChinnaya v Ramaya [old lady granted an estate to the daughter with a direction that the daughter should pay an annuity of Rs 653 to the lady’s brother. On the same day the daughter executed a promise to pay to the mother’s brother Rs 653. She failed and claimed that the brother had not given any consideration. Held: consideration by the mother is enough consideration]Consideration may be Past, Present or FuturePrivity of contractA person may not give any consideration, but is a party to the contract may enforce the contractA stranger to a contract cannot sue : Suppose A and B enter into a contract for the benefit of C. The agreement between and A and B cannot be enforced by C.Tweddle v Atksinson : two father entered into an agreement to pay a new couple money on their marriage. The couple cannot sue for enforcement of the contract between the fathers.
58 Exceptions Law of Trust/ Insurance Klause Mittelbachert v East India Hotels [pilot, head injuries during a dive at the swimming pool, contract between Lufthansa and hotel Oberoi, can the pilot claim damages, though the consideration was not moving from him ?]Conduct, Acknowledgment or AdmissionNarayani Devi v Tagore Commercial Corporation [If the defendants start the payment and then withdraws]Provision for marriage expenses or maintenance under family arrangement/Veeramma v Appayya [daughter agreed to take care of the father for which the father promised to convey property to her. Later when the father refused, the daughter sued successfully.Sundaraja Aiyangar v Lakshmiammal [partition deed between brothers to provide for marriage expenses of the sister, is enforceable by the sister]Subscription for a charitable purposeKedar Nath v Gorie Mahomed
59 Doctrine of Promissory Estoppel Central London Property trust Ltd V High Trees House Ltd 1947 KB 130.Rule in Pinnel Case [promise to pay less than the due amount]D&C Builders v Rees QB 617M P Sugar Mills v State of U PAIR 1979 SC 621Forbearance to sue is good consideration
60 When Agreement without consideration is valid Natural love and affectionCompensation for past voluntary servicesPromise to pay a time barred debtCreation of Agency does not require consideration
61 Free ConsentCoercion: committing or threatening to commit an act forbidden by IPCRanganayakamma v Alwar Setti [Adoption of son by a widow]Chikkan Ammiraju v Chikkam Seshama [Threat to commit suicide]Economic duressB& S Contracts & Designs v Victor Green Publications Ltd 1984 ICR 419 [erecting a stand, contractor claimed labour strike and increased amount]
62 Undue Influence: a Specie of fraud Taking of unfair advantage [sec. 16]Misuse of influenceAbuse of trust and confidenceConnotation of improprietyClasses of undue influenceActual presumed undue influenceBased on proof
63 What constitute undue influence Relationship of parties is such that one party is in a position to dominate the will of the other.Real and apparent authority fiduciary relationship mental capacity, age, illnessThe party in the dominating position uses that position to obtain an unfair advantage
64 Presumption of undue influence: position of domination Parent and childGuardian and wardTrustee and beneficiarySolicitor and clientDoctor and patientSpiritual adviser and discipleThe list does not include husband and wife nor does it include principal and agent, banker and customer or teacher and student
65 Illustration Tate v Williamson 1866 LR 2 Ch. App 55 Allcard v Skinner Ch.d 145
66 Rebutting the presumption of undue influence Whether the victim had independent and qualified advise ?Solicitors must give fair and disinterested adviseHe must ensure that the decision of his client is proper and to his benefitThe victim understood the nature and consequences of the transaction ?Disclosure of material factsWhether he was able to arrive at independent and informed decision/judgment.Objective and conduct of parties
67 Fraud False statement of facts Mere silence is no fraud Duty to speak by lawP Sarojam v LIC [aliments were not disclosed in the form]Rajinder Singh v Pomilla [premartial status of a party was a material fact]Active concealmentShri Krishna v Kurukshetra University
68 Misrepresentation Fraudulent Negligent Innocent Rescind claim damages[tort] no claim
69 MisrepresentationConditions [sec 12 (2) of the Sale of goods Act] WarrantiesA representation is a statement made at the time of the contract by way of affirmation, denial or description or presentation of a material fact to contract.It is more than the intention of parties and different from opinionSmith v Land & House Property Corp (1884) 28 Ch D 7The plaintiff put up his hotel for sale stating that it was let to a 'most desirable tenant'. The defendants agreed to buy the hotel. The tenant was bankrupt. As a result, the defendants refused to complete the contract and were sued by the plaintiff for specific performance. The Court of Appeal held that the plaintiff's statement was not mere opinion, but was one of fact.
70 Representation Must relate to fact and not law Must relate to Fact and promiseThere must be a representation or assertionIt must be made with the knowledge that it is false or without belief in its truthIt must be acted uponDamages must be suffered: No fraud no damages [sec. 17 read with sec. 19 of ICA]Ex: Prospectus of a companySec. 55 of the TP Act requires the seller of immovable propery to disclose to the buyer material defects in the property
71 Implied representation Spice Girls v Aprilia World Service BV 2002 Ch DA entered an contract for endorsing product [scooter] with Spice Girls [a group of 5]. Within two weeks, ‘Ginger spice’ left the group, making the product vulnerable in the market. The Pop group did not disclose this to the Agency.Was the group split before endorsement ?Was there an intention to split ?Was there a misrepresentation that the group was together ?Held misrepresentation. [Carbolic smoke ball company]
73 Mistake Of Law Of Fact Of ordinary law of foreign law of pvt rights As to nature of contract as to persons contracted with as to subject matter
74 Mistake1. Mistake when there is no consensus ad idem [Raffles v Wichelhuas 1864 ]2. Mistake as to a matter of fact essential to the agreement[sec. 20] Ayekam Angahal Singh v UOI Air 19703. Mistake of LawLakshman Prasad and Sons v Achuthan Nair AIR 1955 Mad 6524. Mistake on subject matter:Leaf v International Galleries  1 All ER 6935. Mistake as to possibility of performance of the contractSheikh Bros v Ochsner 1957 AC Griffith v Brymer (1903) 19 TLR 4346. Mistake as to identity of partiesBoulton v Jones Said v Butt 1920
75 Mistake: New developments Contract made inter praesentesPhillips v Brooks 1919Ingram v Little  3 All ER 332Bell v Lever Bros Ltd. [1932 AC 161]Plea of ‘Non est factum’Dularia Devi v Janardan Singh AIR 1990 SC 1173
76 Legality of object and Consideration 1. It is forbidden by lawUniversal Plast Ltd v Santosh Kumar AIR 19852. Defeat the provision of any lawRam Sewak v Ram AIR 1962 All 177 -Abdul Piojkhan Nabab v Hussenbi 19043. Injurious to person or propertyGurmukh Singh v Amar Singh SCC 794. Agreement Injurious to public policySukha v Ninni AIR Punnakotiah v Kallapalli Kolikamba AIR 1967 AP Mewa Ram v Ram Gopal ILR 19265. ImmoralPearce v Brooks Bai Viji v Nansa Nagar Narayani v Pyare Mohan AIR 19276. Agreement opposed to public policy Sec. 23Trading with an enemyTrafficking in public officesInterference with the administration of justiceMarriage brokerage contracts: Herman v Charlesworth KB 123
77 Void Agreements 1. Agreement in restraint of marriage: sec. 26 Rao Rani v Gulab Rani AIR 19422. Agreement in restraint of trade [sec. 27]Herbert Morris Ltd Saxelby 1916Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co 1894Gujarat Bottling Co v Coca Cola Company Air 1995 SC 2372Exception to an agreement in restraint of trade1. Sale of Good will2. Exception under Indian Partnership Act3. Restraint by a contract of service [employment]Niranjan Shankar v Century Spinning and Manufacturing Co AIR 19674. Trade combinationsSheikh Kalu v Ram Sharan Bhagat CNN 3885. Agreement in restraint of legal proceedings: sec. 28Ghose v Reliance Insurance Co 19346. Wagering Contracts
78 Quasi Contracts1. Claim for necessaries supplied to a person incompetent to contract [sec. 68]2. Reimbursement of money paid due by anotherExall v Patridge 1799Bansidhar Joshi v Chandrakumar AIR 1964 All 3483. Obligation of person enjoying benefit of non-gratuitous act: [sec. 70]Indu Mehta v State of UP AIR 1987 ALL 3094. Enjoyment of benefit by the defendant is necessary:P C Wadhwa v State of Punjab AIR 1987 PH 1175. Finder of Lost goods: sec. 71
79 Discharges/ Remedies under Law of Contract 1. Performance of contract2. Quantum meruit
80 Performance of Contract Every such offer must fulfill the following conditions:-1) it must be unconditionalNavin Chandra v Yogendra Nath2) it must be made at a proper time and placeStart-up v Macdonald 18433) under such circumstances that the person to whom it is made may have a reasonable opportunity for inspectionPerformance on death of a partyPerformance by the promisor or his agent or representatives.4) An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
82 The Law Indian Contract Act 1872 Specific Relief Act Law of obligation Law of Unjust enrichmentLaw of Restitution
83 Plea Non est factum Specific Performance/substantial performance Gallie v LeeSpecific Performance/substantial performanceDakin v LeeWhen ‘time’ is the essence of the contract: Right to rescind the contractR K Saxena v Delhi Development Authority AIR 2002 SC 2340Impossibility of PerformanceTaylor v Caldwell (1863) 3 B&S 826Doctrine of FrustationArti Sukhdev Kashyap v Daya Kishore Arora AIR 1994
84 Discharge of Contract Bilateral discharge Accord and satisfaction RESCISSION AND SUBSTITUTION and NovationVARIATIONWAIVER
85 Breach of contract Anticipatory breach Hochster v De La TourLiability of loss only due to CAUSATION [carpenter left the door unlocked]Remoteness of damagesMitigation of loss
86 Breach Rectification and cancellation of Instrument Damages Injunction NominalPenaltyInjunctionTemporaryPermanent
87 JOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.CONTACT:R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN