Contract Act, 1872

What is an Agreement?

Every promise and offer which is accepted and has free consent of both the parties to contract and also have consideration and lawful object, is called an Agreement, later on becomes a contract.

Ingredients of Agreement?

Free Consent

Parties Competent to contract

Consideration

Lawful Object

what is Void Agreement?

Agreement which is not enforceable by law and it does not fulfill all the requirements of the agreement is a void agreement, for instance:

If it is forbidden by law

If it defeats the provisions of law

If an agreement is fraudulent

If it implies injury to a person or property

If it is against the public policy

If both the parties are under mistake

If there is no consideration

If agreement is based on uncertainty

what amounts to contract?

Offer or proposal;

Acceptance;

Consideration;

Parties competent to contract;

Free consent;

Offer to treat;

Offerer;

Offeree;

Lawful object

Offer to contract is free when it is not caused/effected by:

coercion;

undue Influence;

fraud;

misrepresentation;

types of Contract:

valid contract:    An agreement which is enforceable by law to both the parties;

voidable contract:       An agreement which is enforceable by law at the option on or more parties but not at the option of others;

void contract:     A contract which is enforceable by law ordinarily but cannot be enforced due to some event or happening;

unenforceable contract:      Where there is lack of any document or necessary party of a contract which should be there is not carried out;

contingent contract:   these contracts are also called conditional contracts. It means that it depends upon conditions;

quasi-contract:   a person is bound to restore certain goods which have been left by mistake in his house is called quasi-contract.

Wagering Contract:     It is a contract in which two persons possessing to hold opposite views about the future uncertain event, mutually agreed that depends on determination of that event, one shall pay or hand over to him sum of money, neither of them have interest that the sum or stake he will lose or win. There is no other real consideration for the making of such a contract by both of the parties.  

Revocation:        Offer revoke  only when it reaches to the oferree. If it reaches to the person for whom it is made for, than it cannot revoke.

Novation of Contract

If parties to contract agree to substitute a new contract, then original contract need not be performed.

kinds of Novation:

Involving change of parties

Involving substitution of a contract  

Rules of Novation

Parties to contract may remain the same & substitute new terms

New party may be substituted by old one

Old contract is completely extinguished and no action may be taken on old one

Substituted contract must be valid and enforceable

Rescission and Remission:

when an old contract is rescinded and replaced by a new contract, old one will not revive only for the reason that there has been a failure to keep the new promise. Parties by mutual consent restore the original contract and the original will become binding on the parties.

Every person who accepts a proposal may dispense or remit the time wholly or in part, as he may extend the them for such performance and he may accept only satisfaction which he thinks fit. 

Pledge

the bailment of goods as security for payment of a debt or performance of a promise is called pledge.

pawner:     bailor/person who delivered the goods

pawnee:     bailee/pawnee for whom the goods were delivered

Essentials of Bailment:

delivery of possession;

Delivery of possession from purpose;

return or disposal of property;

Kinds of Bailment:

Deposit such as bank deposit;

commondatum such as lending of goods;

Hire;

Delivered goods;

Carried

Bailment

bailment is delivery of goods from one person to another for some purpose. Person to whom goods are delivered is called Bailee and the one deliver the goods is called Bailor.

duties of Bailee:

reasonable care of goods;

bailee not liable for loss;

loss by theft;

loss due to act of bailee’s servant bailee’s own goods;

bailee’s own goods lost with those of bailor;

contract to contrary;

Guarantee:

Contract of guarantee is a kind of contract in which in case of default to perform promise or discharge, liability of third person is available. It enables a person for a loan, goods on credit. Three parties are involved:

Surety(guarantor):       He is the person who gives guarantee of that person who is interested fir a loan .

Principal debtor:          He is the person for whom guarantee is given;

Creditor:    He is the person to whom guarantee is given.

Discharge of Surety:   

A surety is discharged from liability when his liability comes to an end in the following ways:

By Revocation;

By death of surety;

By variance;

Release of Discharge of Principal Debtor:

If creditor makes any contract with the principal debtor by which the latter is released, in this situation the surety is discharged. Any release of principal debtor is also release of surety. 

Continuing Guarantee:

A guarantee which contends to series of transactions is called continuing guarantee.

Contract of Indemnity:

Two parties are necessary;

It is for compensation of loss;

It is direct engagement may be made independently of the existence of any third party;

The indemnifier cannot sue third party in his own name unless there can be an assignment,

It is created without request of third request of third party;

Liability is contingent that it may or may not arise;

undertaking in a contract of indemnity is original;

In indemnity there being no third party or person. The indemnifier’s liability is in itself primary;

In indemnity there is only one contract against loss between indemnity holder and indemnifier;

liability of surety is co-existence with principal debtor.  

Agency:

A contract of agency is where a person authorized to purchase goods, hold them and assess them.

Agent:

an agent is a person employed to do an act for another or to represent another in dealings with third person. such person whom one employs to transact the business on one’s behalf is termed as an Agent. Agent must be distinguish from servant or contractor.

who may be an Agent:

Agent appointed by guardian;

appointed by the adult/principal

Principal:

Principal is a person who employee an agent and on whose behalf an agent works or meet third party.

Duties of Principal towards Agent:

to create agency;

to appoint an agent;

to check the accounts;

to gain benefits and profits;

to gain payments;

principal does not invoke authority;

termination of Agency;

revocation of agency.

Duties of Agent:

Statutory Authority provided vide contract;

construction of authority as per contract;

Authority to borrow;

Authority to collect debts;

authority to reserve payments;

authority to sell authorized goods;

termination of Agent’s Authority:

Agency terminated through actual or express notice of revocation of agent’s authority. It is sufficient to establish that the person had knowledge of revocation of agent’s authority.

Sub Agent:

An agent having an authority which is given by the principal or Agent’s works on principal’s behalf is called sub-agent.

Agent’s Lien on Principal’s Property:

An agent’s lien to commission is restricted to certain specific property for things. He is not in a position of a mortgagee who can remain in possession until he is paid, The lien of agent extends only to retention of the property till his dues are paid. He cannot sell property without the consent of principal and satisfy his lien.

Agent of Limited Company:

When an agent incurs expenditure before an order for winding up of the company is passed, unless the agreement between the company and the agent excludes the operation of this section, the court has no authority to deprive him of the right of possession.

Agent incurring personal liability:

when an agent renders himself by contracting, he is personally liable for the price of goods, the property of the goods vests in the agent, and his rights with respect them are identical with those of principal, enabling him to resell and stop in transit, if the principal does not act as prescribed under law. 

Ratification:

Consent is an express or implied agreement to waive the right to avoid an act and precedes the transaction. Ratification is subsequent in point of time to the transaction which is voidable.

Essentials of Ratification:

Act must be done by agent for principal;

principal must be in existence when act is done;

Act forbidden by Principal or by law cannot be ratified;

Thing ratified must be in existence;

Ratification cannot be partial;

Ratification how proved:

 An effective ratification involves knowledge of all the material facts on the part of him who ratifies. Therefore, in order to establish a case of ratification. It is essential that party ratifying should be conscious that an act beyond the authority of urgent had been done, it further after notice of that fact, the party consciously by an overt act agreed to be bound by it , in situation arising allowing the business to continue.

Government Ratification:

A contract entered into by a government without complying with the formalities provided by law is a void contract and is not enforceable such a void contract cannot be ratified at subsequent stage by the government. But an act done by an agent the government, though the excess of his authority can be ratified by the government is on being ratified it is equivalent to previous authority. 

Ratification by Reversioner:

After accepting or affirming the validity of a transaction made by a limited owner a particular reversioner may preclude himself from challenging the same.  

Ratification of Reference, Arbitration:

When a dispute was referred to arbitration by an unauthorized agent and the principal was aware of r=the arbitration proceedings and ratify agent’s action, he cannot question the validity of the award later on. When a submission to arbitration was unauthorized and was not ratified by all the partners of the firm, the award based on such reference will not bind one of the partners who has ratified the unauthorized submission.

Ratification of Mortgage:

A mortgage executed by a general agent holding a power of attorney, which did not authorize him to execute mortgages is operation if acted upon and ratified by the principal.  

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