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Module 1

The document outlines the essential elements of a valid contract, including offer and acceptance, intention to create legal relations, lawful consideration, capacity to contract, free consent, lawful object, certainty of terms, possibility of performance, and legal formalities. It also discusses remedies for breach of contract, such as damages, specific performance, injunction, rescission, and restitution. Each element and remedy is illustrated with examples to clarify their application in legal contexts.

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6 views3 pages

Module 1

The document outlines the essential elements of a valid contract, including offer and acceptance, intention to create legal relations, lawful consideration, capacity to contract, free consent, lawful object, certainty of terms, possibility of performance, and legal formalities. It also discusses remedies for breach of contract, such as damages, specific performance, injunction, rescission, and restitution. Each element and remedy is illustrated with examples to clarify their application in legal contexts.

Uploaded by

johnlazarus2707
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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23MS3003 APPLIED LAW FOR BUSINESS

1. Examine the essential elements of a valid contract, providing examples to


illustrate each element.

Meaning of Contract

A contract is a legally binding agreement between two or more parties where each promises
to do or not do something. For a contract to be enforceable by law, it must fulfill certain
conditions.

Essentials of a Valid Contract

To be considered a valid contract, an agreement must meet these key essentials:

1. Offer and Acceptance:


o One party makes an offer, and the other party accepts it. Both the offer and
acceptance must be clear and specific.
o Example: A offers to sell their car to B for $5,000. B agrees to buy it for that
price.
2. Intention to Create Legal Relations:
o Both parties must intend for their agreement to be legally binding. Usually,
social or family agreements are not considered legally binding.
o Example: A friend promising to meet for coffee doesn’t create a contract, but a
signed business agreement does.
3. Lawful Consideration:
o Something of value must be exchanged between the parties, like money,
goods, services, or a promise to do or not do something.
o Example: In a job contract, the employee works, and the employer pays a
salary. The work and salary are the "consideration."
4. Capacity to Contract:
o The parties entering into the contract must be legally capable of doing so,
meaning they are of legal age (usually 18 or older) and have sound mental
capacity.
o Example: Contracts with minors or individuals with certain mental
impairments may not be enforceable.
5. Free Consent:
o The agreement must be made without coercion, fraud, undue influence, or
mistake. Both parties must willingly agree to the terms.
o Example: If someone is forced to sign a contract, it may be invalid as consent
was not freely given.
6. Lawful Object:
o The purpose or object of the contract must be legal and not against public
policy.
o Example: A contract to carry out illegal activities, like smuggling, is not valid.
7. Certainty of Terms:
o The terms of the contract must be clear and definite. Vague or ambiguous
terms can make a contract unenforceable.
o Example: If A agrees to buy "some goods" from B without specifying what
and how many, it’s too vague to be enforceable.
8. Possibility of Performance:
o The terms of the contract must be possible to fulfil. A contract requiring
impossible actions is invalid.
o Example: A contract to fly to the moon and back by tomorrow is not
enforceable because it’s not realistically possible.
9. Legal Formalities:
o Some contracts need to follow specific legal formalities, such as being in
writing or registered, depending on the type and local laws.

If these essentials are met, the agreement becomes a valid contract, enforceable by law.

2. Examine the Remedies for Breach of Contract

A breach of contract occurs when one party fails to fulfill their obligations under a contract
without a valid legal excuse. When a contract is breached the other party can seek remedies.
Here are the main remedies for breach of contract:

1. Damages (Monetary Compensation)

• The party that suffers from the breach receives monetary compensation to cover
losses caused by the breach.
• Example: A hires B to paint a house for Rs 2,000, but B does a poor job, causing A to
pay another painter Rs2,500 to fix it. A could sue B for damages to recover the extra
Rs 500 spent.

2. Specific Performance

• The party who signed the contract must fulfil the contract in cases where money
compensation is not enough.
• Example: A famous singer, A, signs an contract to sing only at B's program for a
year. But after two months, A decides to start performing at another program C,
which is a breach of the contract with B. Here court will order specific performance.

3. Injunction
• When a party in the contract does something he should not do, the court will give an
order to stop the person from doing what he should not do.
• Example: A fashion designer agrees not to work with any competitors for a year but
later starts working with a competitor. The company can get an injunction order and
stop him from working with the competitor.

4. Rescission of Contract

• The contract is canceled, and both parties are released from their duties.
• Example: A buys a car from B, but it turns out that B lied about the car’s condition. A
could seek rescission to cancel the contract and get a refund.

5. Restitution

• The breaching party must return any benefit they received from the other party.
• Example: A pays B Rs 1,000 in advance for a custom-made piece of furniture, but B
never delivers it. A can seek restitution to recover the Rs 1,000 paid.

These are the remedies for breach of contract.

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