Business Law

~ Dr. Y.Narasimha Raja

1. Mr.A is student of Law, you as a faculty member explain what is Law ?

The law includes all the rules and principles which regulate our relations with other individuals and the
state and which are enforced by the state.

" Law is the body of principles recognized and applied by the state in the administration of Justice" It
represents a code of human conduct which is established and enforced by the the State.

Other Points

 Law is a body of rules

 Law is for the guidance of human conduct
 Law is imposed
 Law is enforceability
 Law presupposes a State
 Content of law is a living thing. It is not static

2. Mr.B would like to persuade his Law courses in India and he would like to know the ‘need for
the knowledge of Law” you as a Legal Expert give your views for this concept ?

Or Review on “Ignorantia Juris non excusat (Ignoranceof Law is no excuse)

In law, ignorantia juris non excusat, or ignorantia legis neminem excusat, is a legal principle holding that a person who
is unaware of a law may not escape liability for violating that law merely by being unaware of its content.

• Court presumes that AWARE of the Law

• Can not claim ignorance of the law as a defence to escape liability
• The notion of legalliteracy is based on the principle that eery individual must be aware of their rights and
obligations
• No Excuse
Case study

State of Maharashtra vs MH George case,

the respondent i.e. Mayer Hans George who was a German national was charged for bringing gold to India without
the permission of the Reserve Bank Of India as per Section 23(1A)(a) of the Foreign Exchange Regulations Act of 1947
and was sentenced for a year; as he was considered being doing so with an intent to defraud the government. This
case has been ordered by the Justice Subba Rao.

Mr.Gorge can not escape stating that He was not knowing the Indian law.

Case 2 : Mr.A has drunk and drived on road. He has been caught by the police, he can not take claim that Mr.A is not
aware of the Law.
Case 3: Universal cans and containers Vs. Uion of India 24th Oct 1991
where in the Delhi Highcourt held that the Doctrine is applicable not when thee law is printed int he Official gazette
but when it is made available to the public.

Case 4: Anand P Chanar Vs. State of Maharastra

Ignorance of Law stemming from dearth of legal education , hence wide legal awareness can only help in such
senarios.

General Exceptions
1. Mistake of fact
2. Infancy
3. Insanity (Mental Person)

3. Function and Purpose of Law

Justice : The goal of Law is "Justice" It is an instrument to secure justice. Justice demands a fair
treatment to all, keeping in mind different situations and demands of different people.

Continuity and uniformity This ensures "stability" and "Security of Social Order"

Impartiality :- Law is necessarily Impartial. It treats all like and is not made for a particular person or for
a particular case.

Rule of Law :-

It always preferable to rule of men. Howeer eminent and good intentioned they may be. Example :- In
India when emergency was declared in 1975 , this was suffciently and unmistakably demonstrated.

4. Define Business Law / Commercial Law / Mercantile Law

Commercial law, also known as mercantile law or trade law, is the body of law that applies to the
rights, relations, and conduct of persons and business engaged in commerce, merchandising, trade,
and sales. It is often considered to be a branch of civil law and deals with issues of both private law
and public law.

• The term ‘mercantile law’ is used to denote that branch of law which is concerned with such
matters as are usually the subject of what may be called mercantile transactions, i.e., it deals
with contractual situations and the rights and obligations arising out of mercantile transactions
between mercantile persons.

• A mercantile person may be a single individual , a partnership, or a joint stock company.

• The term ‘mercantile law’ is used to denote the aggregate body of those legal rules which are
connected with trade, industry and commerce.

5. Source of Commercial Law / Mercantile Law

The bulk of the Indian mercantile law is based on and follows, the English mercantile law.

The sources of Indian mercantile law are:-

 Common law
 Equity Law
 Statute law
 Judicial decisions or precedents
 Customs and usages

Sources of Indian Law

1. English Law
1.1 Common Law
1.2 Equity Law
1.3 Statute Law

2. Customs or Customary Law

3. Judical decisions or Law by law by precedents

4. Statue Law or legislation

5. Personal Law of the parties - (Religious)

6. Definition of Contract

Sec 2(h) "Every agreement and promise enforceable at law is a contract" Pollock

7. Essential elements of Valid Contract

According to Sec. 10 all agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object and are not expressly
declared to be void.

In order to become a contract an agreement must have the following essential elements :

1) Offer & acceptance Carlill Vs Carbolic smoke ball co. ltd.

One party making an offer and the other party accepting it. The term of the offer must be definite and
the acceptance of the offer must be absolute and unconditional. The acceptance must also be according
to the mode prescribed and must be communicated to the offeror.

2) Intention to create legal relationship – Balfour v/s Balfour

Agreements of a social or domestic nature do not contemplate legal relationship. As such they are not
contract.
When the two parties enter into an agreement, their intention must be to create legal relationship
between them. If there is no such intention on part of the parties, there is no contract between them.

Balfour Vs. Balfour

A Husband promised to pay his wife a household allowance of GBP 30 every month. Later the parties
seperated and the husband failed to pay the amount. The wife sued for the allowance. Held, agreement
such as these were outside the realm of contract altogether.

3) Lawful consideration - Dunlop Pneumatic Tyre Co. Ltd Vs Selfridge & Co. Ltd.

Consideration = “Something in return”

An agreement with out consideration is ‘nudum pactum’ & is Void.

4) Capacity of parties – Mohiri Bibi v/s Dharmodas Ghose, (1903)

 Minority
 Lunaacy
 Idiocy
 Drunkenness
 Disqualificatied by law

5) Free & genuine consent

 Consent = acquiescence or act of assenting to an offer.

 Sec.13 – Two or more persons are said to consent when they agree upon the same thing in the
same sense.
 Coercion as defined in sec. 15, or
 Undue influence - sec. 16, or
 Fraud sec. 17, or
 Misrepresentation sec. 18, or
 Mistake , subject to the provisions of sec.20. 21, 22.

6) Lawful object
Illegal, Immoral , Opposed to public Interest

7) Agreement not declared void

The agreement must not have been expressly declared void by any law in force in the country. sec
24 to 30 and 56

8) Certainty and possibility of performance

9) Legal formalities
 8. Case study :-Over a cup of coffee in a restaurant. A invites his business client B to a dinner at
the restaurant on next sunday. B hires a Taxi and reach the hotel at the appointed time, but A
fails to perform his promise. Can B recover any damages from A

Ans. No.B can not claim amount.

9. Legal Rules for Offer

Legal rules as to offer

Offer must be such as in law is capable of being accepted and giving rise legal relationship.

Example :- A social Invitation.

If any social invitation even if it is accepted, does not create legal relationsh because it is not so
intended. An offer, therefore must be such as wold result in a valid contract when it is accepted.

2. Terms of offer must be definite , unabiguous and certain and not loose and vague. If the terms of an
offer are vague or indefinite it is acceptace cannot crate any contractual relationship.

Example :-

A offered to take a house on lrease for three years at Rs.3L per annum if the house was " Put into
through repaind drawing rooms handsomely decorated according to the present style" Held, the offer
was too vague to result in a contractual relation.

Example 2:-

A says to B I will sell you a car. A owns three different cars. The offer is not definite.

Example 3:-

F sold a piece of land toa motor company subject to an agreement that the company should but all their
petrol from F at price to be agreed by the parties from time to time. Any dispute was to be submitted a
arbitration.
Solution: The price was never agreed and the company refused to by. Held, there was binding contract
to but petrol of reasonable quality at a reasonable price to be determined in case of dispute by
arbitration.

1) Intention to create legal relationship – Balfour v/s Balfour

Agreements of a social or domestic nature do not contemplate legal relationship. As such they are not
contract.When the two parties enter into an agreement, their intention must be to create legal
relationship between them. If there is no such intention on part of the parties, there is no contract
between them.

Balfour Vs. Balfour

A Husband promised to pay his wife a household allowance of GBP 30 every month. Later the parties
seperated and the husband failed to pay the amount. The wife sued for the allowance. Held, agreement
such as these were outside the realm of contract altogether.

10. A forced B to enter into a contract at the point of Pistol. What remedy is available to B, if he
does not want to be bound by the contract ?
He can repudiate the contract as his consent is not free

11.Capacity to Contract (or) Explain the Section 11 ICA 1872 (or) Mohiri Bibi
v/s Dharmodas Ghose (or) explain Void ab initio.=Nullity= Zero

• Capacity = competence of the parties to enter into a valid contract.

• Sec. 11 declares the following persons to be incompetent to contract:
• Minors
• Persons of unsound mind &
• Persons disqualified by any law to which they are subject.
• Mohiri Bibi v/s Dharmodas Ghose
• Void ab initio.=Nullity= Zero

Legal rules as to offer

Offer must be such as in law is capable of being accepted and giving rise legal relationship.

Example :- A social Invitation.

If any social invitation even if it is accepted, does not create legal relationsh because it is not so
intended. An offer, therefore must be such as wold result in a valid contract when it is accepted.

2. Terms of offer must be definite , unabiguous and certain and not loose and vague. If the
terms of an offer are vague or indefinite it is acceptace cannot crate any contractual
relationship.

Example :-

A offered to take a house on lease for three years at Rs.3L per annum if the house was " Put into
through repaind drawing rooms handsomely decorated according to the present style" Held, the
offer was too vague to result in a contractual relation.

Example 2:-

A says to B, I will sell you a car. A owns three different cars. The offer is not definite.

Example 3:-

F sold a piece of land to a motor company subject to an agreement that the company should but
all their petrol from F at price to be agreed by the parties from time to time. Any dispute was to
be submitted a arbitration.

Solution: The price was never agreed and the company refused to by. Held, there was binding
contract to but petrol of reasonable quality at a reasonable price to be determined in case of
dispute by arbitration.

3. On which condition A offer may be distinguish from

A declaration of intention and an announcement.

Lawcase :

M/s XYZ an auctioneer advertised in a newspaper that a sale of office furniture would be held. A
broker came from a distant place to attend that auction, but all the furniture was withdrawn.
The broker thereupon sued the auctioneer for his loss of time and expenses.who acted upon it.

Solution >
Held a declaration of intention to do a thing did not create a binding contact with those who
acted upon it. So that the broker could not recover.

An invitation to make anoffer or do business

Display of goods by a shopkeeper in his window, with prices marked on them, is not an offer but
merely an invitation to the public to make an offer to but the goods at the marked prices.
Likewise quotations, catalogues, advertisements in a newspaper for sale of an article or circulars
sent to potential customers do not constitue an offer. They are instead an invitation to the
public to make an offer.

Law case

Goods are sold in a shop under the "self service" system. Customers select goods in the shop
and take them to cashier for payment of the price. The contract is made, not when a customer
selects the goods, but when the cashier accepts the offer to by and receive the prices.
(Pharmaceutical Society of Great Britian Vs. Boots CAsh Chemisists)

News paper advertisements are not offers. A recognised exception to this is a general offer of
reward to the public. Thus when A advertised in a newspaper that he would pay Rs. 100 to
anyone who finds and returns her lost dog, the offer is addressed to the first person who by
performing the required act whith knowledge of the offer of reward, creates an agreement.

Offer must be communicated

An offer to be complete, must be communicated to the person to whom it is made. Unless an

offer is communicated to the offeree by the offeror or by his duly authorised agent, there can be
no acceptance of it.

Law Case :-

Mr. A sent his servant B to trace his missing his nephew would be entitled to a certain reward.
Mr. B traced the boy in ignorance of this announcement. Subsequently when he came to know
of the reward held it. Can Mr.B can get the prize money.

Solution

Subsequently when he came to know of the reward, he claimed it. Held he was not entitled to
the reward. "As offer is not communicated to him."

Offer must be made with a view to obtaining the assent.

Offer should not contain a term the non compliance of which may be assumed to amount to
acceptance.

Case Law :-
 Mr. A writes to B, " I will sell you my horse for Rs.5,ooo and if you do not reply, i shall assume
you have accepted the offer.

Solution

There is no contract if B does not reply. B is under no obligation to speak. Howeer, if B is in

possession of A's horse at the time the offer is made an he continues to use the horse
thereafter. B's silence and his continued use of horse amount to acceptance on his part of the
terms of A's offer.
 Offer should not contain a term the noncompliance of which may be assumed to
amount to acceptance
 A statement of price is not an offer.

12. What is special contract ? Give an example ?

Where any special terms are to be included in a contract , these must be duly brought to the notice of
the offeree at the time when the proposal is made. If it is not done and if the contract is subsequently
entered into, the offeree will not be bound by them. Also these terms should be presented in such a
manner that a reasonable man can become aware of them before he enteres into a contract.

Case Law

Mr.P deposited a bag in the cloak room of Railway station. On the face of the ticket issued to him, was
written "See Back". One of the printed conditions limited the liability of the company for loss of a
package to Rs.10.

The bas was lost and P claimed Rs.35 as it value. What to do ?

Solution:-

P was bound by the conditons on the back of the ticket even if had not read them Clock room should
pay Rs.10/- not Rs.35/- as he claimed. (Parker SE Rail.Co)
 13. Write a brief notes on " Offer acceptence" of Acceptance may be express or implied or
comment on Section 2(b)

1.Acceptance of particular offer.

When an offer is made to a particular people can accepted by him alone. If it is accepted by any other
person, there is no valid acceptance. The rule of law is clear that if you propose to make a contract with
A, B can not substitute himself for A without your consent.

In the case of a specific proposal or offer, it can only be accepted by the person it was made to. No third
person without the knowledge of the offeree can accept the offer. (Boulton v. Jones)

2. It has to be absolute and unqualified

Acceptance must be unconditional and absolute. There cannot be conditional acceptance, that would
amount to a counteroffer which nullifies the original offer. Let us see an example. A offers to sell his
cycle to B for 2000/-. B says he accepts if A will sell it for 1500/-. This does not amount to the offer being
accepted, it will count as a counteroffer.

Also, it must be expressed in a prescribed manner. If no such prescribed manner is described then it
must be expressed in the normal and reasonable manner, i.e. as it would be in the normal course of
business. Implied acceptance can also be given through some conduct, act, etc.However, the law does
not allow silence to be a form of acceptance. So the offeror cannot say if no answer is received the offer
will be deemed as accepted.

Case Laws:

A. A made an offer to B to purchase a house with prossession from 25th July. The offer was
followed by an acceptance suggesting possession from 1st Aug. Held there was no concluded
contract.
B. M offered to sell a piece of land to N at Rs.280 Lakhs. N accepted and enclosed Rs.80 Lackhs
with a promise to pay the balance by monthly instalements of Rs.50Lakch each. Held there was
no contract between M and N, as the acceptance was not unqualified.

3. Acceptance must be communicated

For a proposal to become a contract, the acceptance of such a proposal must be communicated to the
promisor. The communication must occur in the prescribed form, or any such form in the normal course
of business if no specific form has been prescribed.

Example :- A offers to supply B with goods, and B is agreeable to all the terms. He writes a letter to
accept the offer but forgets to post the letter. So since the acceptance is not communicated, it is not
valid.

Examples
 A. A tells B that he intends to marry C, but tells C nothing of his intention. There is no contract,
even if C is willing to marry A.
B. F offered to buy his nephew's horse for Rs.30 Saying. If i hear no more about it i shall consider
the horse is mine at Rs.30. The nephew did not write to F at all, but he told his auctioneer who
was selling his horses not to sellthat particular horse because it had been sold to his uncle. The
auctioneer inadvetently sold the horse. Helf. F had no right of action againist the auctioneer as
the horse had not been solf to F, his offer of Rs.30 not having been accepted. (Felthose v
Bindley)

4. It must be according to the mode prescribed or usual and reasonable mode.

Acceptance of the offer must be in the prescribed manner that is demanded by the offeror. If no such
manner is prescribed, it must be in a reasonable manner that would be employed in the normal course
of business.

A makes an offer to B and says

If you accept the offer, reply by wire". B sends the reply by post. It will be a valid acceptance. Unless A
informs B that the acceptance is not according to the mode prescribed.

5. It must be given with in a reasonable time :-

If any time limit is specified, the acceptance must be given within that time. If no time limit is specified,
it must be given within a reasonable time.

Example :-

On June 8, M offered to take shares in R Company. He received a letter of acceptance on Nove 23. He
refused to take the shares. Held M was entilted to refuse as his offer had lapsed as the reasonable
period during which it could be accepted had elaspsed.

6. It cannot precede an offer

7. It must show an intention on the part of the acceptor to fulfil terms of the promise. It no such
intention is present, the acceptance is not valid.
8. It must be given by the party or parties to whom the offer is made
9. It must be given before the offer lapses or before the offer is withdrawn
10. It cannot be implied from silence.
 14. Attempt the following problems given reasons

1 Are the following problems, given reasons ?

(a) A garment store gave the following advertisement in a newspaper : "Special slae for tomorrow only.
Men's night suitss reduced from Rs.200 to Rs.100

(b) P says to Q. I will sell you a camera. P owns three different types of cameras of various prices.

(c) An auctioneer displays a refrigerator before a gathering in an auction sale

(d A advrtises in The Statesman that he would pay Rs 200 to anyone who finds and returns his lost dog.

1. Consideration 2(d) or explain “Something in return” or “Agreement with

out consideration void” or “Nundum Pactum”
"Nundum Pactum" is a legal term derived from Latin. In English, it translates to "void contract" or
"no contract." The term is used in the context of contract law to describe a contract that is
considered null and void from the outset or from the beginning. It signifies a contract that is
fundamentally flawed, illegal, or against public policy, rendering it unenforceable and without legal
effect.

In legal terminology, contracts can be classified into various categories based on their validity and
enforceability. One of these categories is "void contracts," which includes agreements that lack an
essential element for a valid contract or violate the law in such a way that they are deemed null and
void from the moment they were formed.

 Consideration = “Something in return”

 An agreement with out consideration is ‘nudum pactum’ & is Void.
 It must move at the desire of the promisor.
 It may move from promisee or any other person.
 It may be an act, abstinence or a return promise.
 It must move at the desire of the promisor.
 It may move from promisee or any other person.
 It may be an act, abstinence or a return promise.
 It must be something which the promisor is not already bound to do.
 It must not be illegal, immoral or opposed to public policy.

 Reasons for a contract to be deemed "nundum pactum" or void can include:

 Illegality: If the purpose or subject matter of the contract is illegal or against public policy, the
contract is void.

 Lack of Capacity: Contracts involving parties who lack legal capacity, such as minors or mentally
incapacitated individuals, are void.

 Contrary to Law or Public Policy: Contracts that violate the law or public policy are considered
void.

 Mistake, Fraud, Duress: Contracts entered into due to mistake, fraud, duress, or undue influence
may be considered void.

 It's important to note that a void contract is different from a "voidable contract," which is a
contract that is initially valid but can be voided by one of the parties due to specific
circumstances, such as coercion, misrepresentation, or lack of capacity.

2. Stranger to contract can not sue (or) Doctrine of Privity of Contract (or)
Dunlop Pneumatic Tyre Co. v/s Selfridge & Co, Ltd.
The doctrine of privity of contract is one of the major principles that govern the law of contracts.
The word ‘privity’ means ‘with knowledge and consent’. According to this doctrine, only parties to a
contract have the right to enforce the rights and obligations provided by the contract and strangers
to the contract are barred from enforcing any obligation on any party. This doctrine protects parties
to a contract from obligations that they never agreed to incur. Only those parties that have an
interest in the contract can sue for its enforcement. The first case in India that affirmed the
applicability of the doctrine was the case of Jamna Das v. Ram Autar Pande (1916).
For example, A and B entered into a contract where A gave Rs.100 in return for which B agreed to
deliver a watch to C. Here since C is a stranger to the contract he cannot sue B if he fails to deliver
the watch.

Though consideration can be provided by third parties, they can never enforce the performance of
the contract as they are strangers to the contract. It is important to note that there is a difference
between a stranger to contract and stranger to consideration. As a stranger to consideration
remains a party to the contract in spite of not providing consideration, he can still file a suit
challenging the contract.
The relevance of the doctrine was affirmed again when it was cited in the well-known case Dunlop
Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd (1915). In this case, Dunlop Company manufactured
tyres and they entered into an agreement with Dew & Co., who were dealers. Dunlop entered into
the agreement so that they can maintain a standard market price for the tyres and Dew & Co.
agreed that they would not sell the tyres below the fixed price. Dunlop also insisted that the dealers
must have the same terms in their agreements with the retailers. Dew & Co. entered into a contract
with a retailer Selfridge, which had a provision that if the tyres were sold below the fixed price, they
would have to pay 5 Pounds per tyre as damages to Dunlop & Co. When Selfridge sold some tyres
below the fixed price, Dunlop sued them for damages and the decision was in favour of Dunlop.
But, on appeal the decision was reversed and it was held that Dunlop did not have the right to claim
damages as the contract was only between the retailer Selfridge and Dew & Co.

Exceptions to the rule that a Third Party to contract cannot sue

The doctrine of privity of contract is however not absolute. There are several exceptional situations
in which a third party to a contract can sue. The following are the exceptions to the doctrine of
privity in Indian law :

1. Trust of contractual rights or beneficiary under a contract

A trust refers to something created by a contract for the benefit of a third party. In a contract of
trust, the trustor transfers the title of a property to the trustee, so that the trustee holds it for the
benefit of a third party who is also called the beneficiary. Even though beneficiaries are third parties
to a contract they have the right to enforce the provisions of trust.

To cite an example, in the case of Rana Uma Nath Baksh Singh v. Jang Bahadur (1938), the trustor
was a father who transferred all of his estates to his son for him to hold in trust for the benefit of
the trustor’s illegitimate son. The son had the obligation to provide the illegitimate son with money
on a regular basis. When the son failed to perform his obligation, the illegitimate son filed a suit to
recover the amount to be paid and the suit was maintainable even though he was not a party to the
contract.

2. Provision for marriage or maintenance under family arrangement

In a contract for a family settlement either for marriage or maintenance, where the contract is
intended to benefit a third party, he may sue on the contract to secure his rights.

For example, in the case of Lakshmi Ammal v. Sundararaja Iyengar (1914), there was an agreement
among the brothers of a Hindu joint family to pay for the expenses to be incurred for the marriage
of their sister. Despite being a third party to the agreement, the sister had the right to enforce the
provision that was made for her.

In the case of Veeramma v. Appayya (1955) the daughter of the family had the responsibility of
taking care of the father. So, there was a family arrangement made for conveying the father’s house
to her. Since the agreement benefited her, she had the right to file a suit for the specific
performance of the contract.
 3. Acknowledgement or Estoppel
According to the law of estoppel, if a person by words or conduct suggests something, he is not
allowed to contradict it later. Thus, if a party to a contract acknowledges by words or conduct that a
third party has the right to sue him, he cannot deny that later by the rule of estoppel. In such cases,
a suit filed by that party, despite being a stranger to the contract, is maintainable.

For example, A and B enter into a contract where A pays B a sum of money that has to be given to
C. B acknowledges to C that he is holding the sum for him. If B defaults in the payment, C will have
the right to recover the sum from him.

In the case of Devaraj Urs v. Ramakrishnayya (1951), A bought a house from B. B asked A to pay the
price for the sale to B’s creditor. The buyer paid a part of the price to the creditor and promised him
that he would pay the rest later. On his default, the creditor filed a suit against him. The court ruled
in favour of the creditor, though he was a third party to the contract.

4. Contracts entered into through an agent

It is not uncommon for people involved in commerce and business to enter into contracts through
their agents. These agents can enter into contracts for them and represent them in the relations
that arise in such contracts. Thus, whatever contracts entered into by an agent while acting within
the scope of his authority can be enforced by the principal. It may seem that the agent is the party
to the contract, but in reality, he is more of a representative of the principal.

For example, A appoints B as his agent. He asks B to buy a bag of rice from C on his behalf. Here, B
enters into a contract with C when he buys the bag of rice, but it is A who has the right to enforce
the contract as B is a mere representative of A.

5. Charge created on a specific immovable property

In certain cases, charges or covenants are made on a specific immovable property, like land for the
benefit of a third party. In such cases, these third parties can enforce the contract, though they are
strangers to the contract.

6. Assignment of a contract
Assignment of contract refers to the transfer or assignment of the rights and liabilities arising from
contractual relations to a third party. In cases where the benefits of a contract are being assigned,
the assignee of the benefits can sue upon the contract though he is not a party to the contract.
For example, a husband assigns his insurance policy in favour of his wife. As the benefit of the
contract is assigned to her, she has the right to enforce the contract though she is not a party to it.

7. Collateral contracts
Collateral contracts refer to the contracts subsidiary to the original contract. It could be entered
into by the same parties or one of the original parties with another party. It can be made before or
after the main contract is formed. When a third party has entered into a collateral contract, he can
also file a suit to enforce the main contract in spite of not being a party to it. The best example of a
collateral contract is a manufacturer’s guarantee regarding the goods sold. The sale of the goods is
the main contract and the guarantee is the contract collateral to it.

In the case of Shanklin Pier Ltd. v. Detel Producers Ltd. (1951), a person A was employed as a
contractor by B. B asked A to buy some paint manufactured by C. B wanted A to buy C’s paint
because of a statement that was once made by C that the paint would last for seven years. But the
paint only lasted for three months. In this case, the guarantee given by C to B forms a contract that
is collateral to the contract made by A and B. The suit filed by B was maintainable even though he
was not a party to the main contract.

Conclusion
To sum up, the doctrine of privity of contract is not an absolute rule. There are many cases in which
a person who is not a party to a contract can enforce the contract as explained above. The doctrine
of privity of contract protects the parties to a contract from legal action taken by strangers against
them, as they are obligated to only the party with whom they contracted. But, there are situations
where third parties can be aggrieved by the breach of a contract and the exceptions to the doctrine
enable them to take action against the parties to the contract.

3. Brief note on “Indian Contract Act 1872”

The Act deals with:-

 General principles of law of contract (Sec. 1 to 75 ) , deals with:-
 Stages in the formation of the contract
 Essential elements
 Performance or breach &
 Remedies for breach of contract.
 Discharge of contract
 Special contracts (Secs. 124 to 238 ) deals with:-
 Indemnity & Guarantee
 Bailment & Pledge
 Contract of Agency
4. Explain what is Free Consent (or) Explain in details Sec. 13 & 14 of Indian Contract Act 1872
(or) acquiescence or act of assenting to an offer.
Ans:
 Consent = acquiescence or act of assenting to an offer.
 Sec.13 – Two or more persons are said to consent when they agree upon the same thing in the
same sense.
Free Consent is said to be free when it is not caused by:
 Coercion as defined in sec. 15, or

 Undue influence - sec. 16, or

 Fraud sec. 17, or
 Misrepresentation sec. 18, or
 Mistake , subject to the provisions of sec.20. 21, 22.

5. Explain the Types of Offers

Offer can be :
 Specific offer
 Express offer
 Implied offer
 General offer – Carlill v/s Carbolic Smoke Ball Co. (Plaintiff V/s Defendant )
 Names of the parties
 Facts of the case
 Principle involved in the case.
 Judgment
6. Performance of Contract
Performance of the contract takes place when the parties to the contract fulfill their obligations arising
under the contract within the time and in the manner prescribed. Sec. 37

A contract may be performed by :-

 Promisor himself Sec 40

 An agent
 Legal representative

7. Give the overall review of Indian Contract Act 1872

The Act deals with:-

 General principles of law of contract (Sec. 1 to 75 ) , deals with:-

 Stages in the formation of the contract
 Essential elements
  Performance or breach &
 Remedies for breach of contract.
 Discharge of contract
 Special contracts (Secs. 124 to 238 ) deals with:-
 Indemnity & Guarantee
 Bailment & Pledge
 Contract of Agency

8. Capacity to enter the contract or

Mohiri Bibi v/s Dharmodas Ghose (or)

Void ab initio.=Nullity= Zero

 Capacity = competence of the parties to enter into a valid contract.

1. Age of majority,

2. Sound mind &

3. Not disqualified from any law to which he is subject.

 Sec. 11 declares the following persons to be incompetent to contract:

 Minors

 Persons of unsound mind &

 Persons disqualified by any law to which they are subject.

 Mohiri Bibi v/s Dharmodas Ghose

 Void ab initio.=Nullity= Zero

Mohori Bibee (Mohori Begum):

Mohori Bibee She was involved in a legal case against Dharmodas Ghose
regarding a mortgage agreement.

Dharmodas Ghose:

Dharmodas Ghose was a minor who borrowed money from a moneylender and
used his property as collateral.

The case, known as the "Mohori Bibee v. Dharmodas Ghose" case, is a landmark
case in Indian contract law that dealt with the issue of the validity of a contract
entered into by a minor. In this case, Dharmodas Ghose, being a minor, had
mortgaged his property to Mohori Bibee, who was also a minor.

The Privy Council, in its decision, held that a contract with a minor is void ab
initio (from the beginning) and cannot be ratified even after the minor attains
majority. This decision established an important legal principle that contracts
entered into by minors are void and unenforceable, protecting minors from
entering into contracts that they might not fully comprehend or benefit from.