Presentation on laws affecting business

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Indian Contract Act 1872

 Interpretation of words and expressions 1. PROPOSAL : when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence he is said to make a proposal 2. PROMISE : when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal,when accepted, becomes a promise 3. PROMISOR : The person making the proposal is called promisor 4. PROMISEE : The person accepting the proposal is called the promisee CONT.--

 Interpretation of words and expressions 5. CONSIDERATION : When at the desire of the promisor, the promisee or any other person had done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something,such act or abstinence or promise is called a consideration for the promise 6. AGREEMENT : Every promise and every set of promises, forming the consideration for each other are called agreement 7. RECIPROCAL : The promises which form the consideration or part PROMISES of the consideration for each other are called reciprocal promises -- cont

Route of contract Making a proposal Acceptance makes it a promise Promise becomes consideration Gives rise to agreement Enforceability at law contract

CONTRACT REQUIRING REGESTRATION 1. A promise made without consideration out of natural love and affection between the parties require registration 2. Documents of which registration is compulsory under Sec. 17 of the Registration Act, Contracts relating to Transfer of Immoveable Properties Act, Memorandum of Association, Article of Association, Debentures, Mortgage and Charges under the Companies Act, To pay time barred debts 6. An Arbitration Agreement

KINDS OF CONTRACTS  Express Contract  I mplied Contracts  C ontingent Contracts  Q uasi Contracts

KINDS OF CONTRACTS  Executed Contracts  Executory Contracts  Valid Contracts  Voiadable Contracts

KINDS OF CONTRACTS  Void Contracts  Illegal Contracts

OFFER AND ACCEPTANCE

OFFER  A proposal when accepted becomes promise  Agreement is an accepted promise  There should be two parties - one to propose, and - other to accept the proposal

OFFER  Both the parties must agree to the same thing in the same sense “ consensus ad idem “  Proposal made by a party is called “ offer’

OFFER WHAT IS AN OFFER When one person who desires to create a legal obligation, communicates to another, his willingness to do or not to do a thing with a view to obtaining the consent of that other person towards such an act or abstinence,the person is said to be making a proposal or offer

OFFER Rules regarding a valid offer 1. An offer may be Express or implied 2. An offer must contemplate to give rise to legal consequences and be capable of creating legal relations ( Social agreements vis-à-vis business agreements ) 3. The terms of the offer must be certain and not loose or vague To buy another CAR if the first proves to be lucky. lavish entertainment for doing a job’.

OFFER 4. An offer may be ‘specific’ or ‘general’ - Carlill vs Carbolic Smoke Ball Co 5. An offer must be communicated to the offeree - no contract untill offer is known to the offeree, contract - Lalman vs Gauri Datt- Nephew absconded-servent traced without knowing about the reward. - x hands a criminal to police -had no knowledge of award- no claim 6. An invitation to offer is not an offer window display, quotation, catalogues of prices,advertisement for auction sale ‘self-service system’ tenders

OFFER 7. An offer must not be ‘negative ‘in terms ` (for example, ‘if the offeree fails to communicate his refusal by a certain date, offer shall be deemed to have been accepted’, is not a valid offer.) 8. Two identical cross offers do not make a contract

OFFER LAPSE AND REVOCATION OF OFFER 1. By efflux of stipulated or reasonable time 2. By not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable mode 3. By rejection

OFFER 4. By death or insanity of any of the parties before acceptance 5. By revocation 6. Revocation by non-fulfillment of a condition precedent to acceptance 7. By subsequent illegality or destruction of subject-matter

ACCEPTANCE

 Acceptance is the second stage of completing the contract  Acceptance is an act of conveying the willingness to the terms of offer  It also signifies the offeree’s willingness to be bound by the terms of the offer communicated  Acceptance must be unconditional and absolute And should be communicated to the offeror

ACCEPTANCE KINDS OF ACCEPTANCE Express Acceptance, or Implied Acceptance

ACCEPTANCE ESSENTIALS OF A VALID ACCEPTANCE 1. To be made by the offeree 2. Communicated to the offeror 3. Acceptance only after receiving the offer 4. Acceptance before the offer lapses --cont

ACCEPTANCE 5. Communication in the prescribed mode 6. Absolute and unqualified 7. Offer once rejected cannot be accepted again unless the offer is renewed by the offeror

ACCEPTANCE Mode of Acceptance 1. In the prescribed mode 2. If no prescribed mode, some usual and reasonable mode 3. Acceptance must be expressed externally and may be communicated either by words or by conduct

ACCEPTANCE 4. Silence is not a good mode of acceptance unless offeree by his conduct indicated that his silence will mean acceptance 5. Communication of acceptance is not necessary where an offer impliedly indicates that acting on its terms will be a sufficient acceptance. 6. Acceptance need not be communicated formally ( Example.- reward for finder of lost child )

ACCEPTANCE Revocation of Acceptance Acceptance can be revoked any time before the communication of the acceptance is complete as against the acceptor, but not afterward  In other words, the offeree (acceptor) may cancel his acceptance by adopting a speedier mode of communication which will reach the offeror earlier than the acceptance itself

COMMUNICATION

Communication by post Communication of offer is complete :- when the letter containing the offer reaches to whom it is made ie the offeree  Ex :- A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter

Communication by post Communication of Acceptance is complete :- As against the offeror :- when letter of acceptance is put in a course of transmission to him so as to be out of the power of the acceptor. As against the acceptor :- when letter of acceptance comes to the knowledge of the proposer

Communication by post Communication of Revocation is complete  As against the person making it when letter of revocation is put into a course of transmission to the person to whom it is made, so as to to be out of the power of the person who makes it  As against the person to whom it is made when letter of revocation comes to his knowledge.

Other Contracts Rules regarding Contracts over :- Telephone Telex Fax Oral Conversation

Consideration

 Definition 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 to abstain from doing, something,such act or abstinence or promise is called consideration for the promise

Consideration Definition (ANALYSES ) Components of consideration 1. An act or abstinence or promise which forms the consideration for the promise must be done at the desire of the promisor 2. It must be done by the promisee or any other person 3. It may have been already executed or is in the process of being done or may be still executory 4. It must be something to which the law attaches a value

Consideration )  EXAMPLES  Ram agrees to sell his house to Mohan for Rs Mohan’s promise to pay the sum of Rs is consideration for Ram’s promise to sell the house, and Ram’s promise to sell the house is the consideration for Mohan’s promise to pay the sum of Rs  A promises to maintain B’s child and B promises to pay a Rs yearly for the purpose. Here the promise of each party is the consideration for the promise of the other party.  Atal promises to pay Behari Rs at the end of six month,if Charan, who owes that sum to Behari, fails to pay it. Behari promises to grant time to Charan accordingly. Here the promise of each party is the consideration for the promise of the other party.

Consideration ) EXAMPLES  Anand promises his debtor Bhatia not to file a suit against him for one year on Bhatia’s agreeing to pay him Rs towards interest. The abstinence of Anand is the consideration for Bhatia’s promise to pay.  Arvind promises to type the manuscript of Bharat’s book and in return, Bharat promises to teach Arvind’s son for a month. The promise to each other is the consideration for the promise of the other party.  Gopal had a daughter to marry and in order to raise funds for marriage, Gopal intended to sell his house. Vineet, Gopal’s son promised that if gopal would forbear to sell the house,Vineet would give GOPAL Rs.15 lakhs. Gopal accordingly did not sell the house. The abstinence ie ‘not to sell the house’ by GOPAL is the consideration for Vineet’s promise to pay.

Consideration Signification of Consideration  Consideration is one of the essential elements of a valid contract. It is the price for which the promise of the other is bought.  A contract is basically a bargain between two parties, each receiving ‘something ‘of value or benefit to them.This ‘something’ is described in Law as consideration. For instance, in a contract of sale of goods, the consideration underlying is the price paid for goods sold.

Consideration ESSENTIAL OF A VALID CONSIDERATION ( four components explained earlier are, in fact, the essentials of valid consideration ) 1. Consideration must move at the desire of the promisor 2. Consideration may move from the promisee or other person

Consideration 3. Consideration may be Past, Present or Future a) A, at the request of B, teaches B’s son who was trying for engineering examination in the month of September,and in the month of December of the same year,B promises to pay A, a sum of Rs for A’s services. The service of A will be past consideration. b) A sells and delivers a book to B upon B’s promise to pay for it at some future date. Consideration moving from A is present since A has delivered the book on the promise of B to pay. c) A promises to sell and deliver 100 bags of rice to B for Rs after a week, upon B’s promise to pay the agreed amount at the time of delivery. It is a case of future Consideration. --cont.

Consideration 4. Consideration must be something of value  Consideration need not be adequate  Consideration must be real and competent - Not physically impossible ( marrying a dead man) - Not legally impossible (supplying liquor in a prohibited place) - Uncertain Consideration ( to pay remuneration ‘as shall be deemed right’ )  Illusory Consideration ( charging money for appearing as witness not a proper consideration )

Consideration Consideration regarded as real and valid in the following cases a. Forbearance to sue Forbearance to sue, at the instance of the debtor, is sufficient consideration. Ram, has a right to sue his debtor Amit for Rs , but infact forbears as Amit agreed to pay Rs. 500 more. Such forbearance is a valuable consideration for the promose, being in the nature of abstinence, and Ram can later on sue Amit for Rs But in order that the forbearance should be a consideration, there must be existing and lawful liability. b. Compromise of a pending suit T he compromise of a disputed or doubtful claim is a good consideration for the fresh agreement of compromise

CONSIDERATION - when not necessary 1. AGREEMENT MADE ON ACCOUNT OF NATURAL LOVE AND AFFECTION

CONSIDERATION - when not necessary 2. AGREEMENT TO COMPENSATE FOR PAST VOLUNTARY SERVICE A promise made without consideration is also valid, if it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or done something which the promisor was legally compellable to do - A finds B’s purse and gives it to B. B promises to A Rs.100. This is a contract. - A supports B’s minor son. B promises to pay A’s expenses in doing so. This is a contract. ( B was legally bound to support his minor son ) - A rescued B from drowning in the river, and B, promises to pay Rs.1000 to A. This is a contract between A and B. --cont.

CONSIDERATION - when not necessary 3. AGREEMENT TO PAY A TIME-BARRED DEBT Where there is an agreement, made in writing and signed by the debtor or his authorised agent, to pay wholly or in part, a debt barred by the law of limitation, the agreement is valid even though it is not supported by any consideration.

CONSIDERATION - when not necessary 4. GIFTS 5. CONTRACT OF AGENCY 6. CONTRIBUTION TO CHARITY 7. REMISSION BY THE PARTY ( TO ACCEPT LESS AMOUNT IN FINAL SETTLEMENT )