BUSINESS LAWS

Devanshi Dave
WHY BUSINESS LAW?
▪ The prime purpose of business law is to maintain order, resolve disputes, establish generally
accepted standards, protect rights and liberties when it comes to business and its relation to
other businesses, government authorities, and the customers.
▪ It provides a Universal set of standards.
▪ Maintenance of Equilibrium
▪ Less chances of frauds
▪ Presence of Ethical conduct
INDIAN CONTRACT ACT, 1872
WHAT IS CONTRACT..?
▪ According to Sec. 2(h) "A contract is an agreement the object of which is to
create a legal obligation.”
▪ Contract essentially contains two elements:

(1) An agreement, and

(2) Legal obligation i.e., a duty enforceable by law
 Offer + Acceptance = Agreement

Enforceable by
Agreement + = Contract
Law
WHAT IS AN AGREEMENT..?
▪ As per Section 2(e): "Every promise and every set of promises, forming the consideration for
each other, is an agreement.“
▪ What is a 'promise'?
▪ Section 2(b) which defines the term: "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."
▪ (a) Plurality of persons. There must be two or more persons to make an agreement because one
person cannot enter into an agreement with himself.
▪ (b) Consensus-ad-idem. Both the parties to an -agreement must agree about the subject-matter
of the agreement in the same sense and at the same time.
ESSENTIAL ELEMENTS OF A
VALID CONTRACT
1) Offer and acceptance
▪ There must be a 'lawful offer' and a 'lawful acceptance' of the offer, thus resulting in an agreement. The
adjective 'lawful' implies that the offer and acceptance must satisfy the requirements of the Contract Act
in relation thereto.
2) Intention to create legal relations
▪ There must be an intention among the parties that the agreement should be attached by legal
consequences and create legal obligations.
3) Lawful consideration
▪ The 'consideration' may be an act (doing something) or forbearance (not doing something)or a promise
to do or not to do something. It may be past, present or future. But only those considerations are valid
which are 'lawful'.
▪ The consideration is 'lawful', unless—it is forbidden by law; or is of such a nature that, if permitted it
would defeat the provisions of any law^ or is fraudulent; or involves or implies injury to the person or
property of another; or is immoral; or is opposed to public policy (Sec. 23).
▪ 4. Capacity of parties.
▪ The parties to an agreement must be competent to contract, otherwise it cannot be enforced by a court of law.
In order to be competent to contract the parties must be of the age of majority and of sound mind and must not
be disqualified from contracting by any law to which they are subject (Sec II).
▪ If any of the parties to the agreement suffers from minority, lunacy, idiocy, drunkenness, etc., the agreement is
void.
▪ 5. Free consent of all the parties to an agreement is another essential element of a valid
contract.'Consent1 means that the par-ties must have agreed upon the same thing in the same sense (Sec. 13).
▪ There is absence of 'free consent1, if the agreement is induced by:
▪ coercion,
▪ undue influence
▪ fraud,
▪ misrepresentation, or
▪ mistake (Sec. 14).
▪ If the agreement is vitiated by any of the first four factors, the contract would be voidable and cannot be
enforced by the party guilty of coercion, undue influence etc.
6. Lawful object
▪ For the formation of a valid contract it is also necessary that the parties to an agreement must agree for
a lawful object. The object for which the agreement has been entered into must not be fraudulent or
illegal or immoral or opposed to public policy or must not imply injury to the person or property of
another (Sec. 23).

7. Writing and registration

▪ According to the Indian Contract Act, a contract may be oral or in writing. But in certain special cases
it lays down that the agreement, to be valid, must be in writing or/and registered.

8. Certainty
▪ Section 29 of the Contract Act provides that "Agreements, the meaning of which is not certain or
capable of being made certain, are void.
 CLASSIFICATION OF CONTRACTS

▪ Contracts can be classified into five broad divisions namely:

1. The method of formation of a contract

2. The time of performance of contract
3. The parties of the contract
4. The method of legality of the contract
 THE METHOD OF FORMATION OF A
CONTRACT
1. Express Contract:
A contract is said to be an express contract, if the terms of a contract are expressly agreed upon between the
parties (either by words spoken or written) at the time of formation of the contract. An express promise results
in express contract. A promise is said to be an express promise, when the offer or acceptance of any promise is
made in words.
Ex. Employment Contract, Real-estate contracts.

2. Implied Contract:
An implied contract is one for which the proposal or acceptance is made otherwise than in words. Where the
proposal or acceptance of any promise is made otherwise than in words, the promise is known as implied
promise. Implied contracts are inferred from the circumstances of the case and conduct of the parties.
Ex. Restaurant or Doctor’s Visit
3. Quasi – Contract
▪ There are cases where the law implies a promise and imposes obligations on one party while conferring
rights to the other even when the basic elements of a contract are not present. These promises are not legal
contracts, but the Court recognizes them as relations resembling a contract and enforces them like a
contract.
▪ A quasi-contract is one, which is created by law. In the quasi-contract, there is no intention on either side to
make a contract. In a quasi contract, rights and obligations arise not by an agreement but by operations of
law.
▪ Ex. Peter and Oliver enter a contract under which Peter agrees to deliver a basket of fruits at Oliver’s
residence and Oliver promises to pay Rs. 1,500 after consuming all the fruits. However, Peter erroneously
delivers a basket of fruits at John’s residence instead of Oliver’s. When John gets home he assumes that
the fruit basket is a birthday gift and consumes them.
▪ Although there is no contract between Peter and John, the Court treats this as a Quasi-contract and orders
John to either return the basket of fruits or pay Peter.
CLASSIFICATION OF CONTRACTS ACCORDING TO
THE PARTIES OF THE CONTRACT

1. Unilateral Contract
It is also called as one-sided contract. In a unilateral contract, only one party has to satisfy his
obligation at the time of the formation of it, the other party having fulfilled his obligation at the
time of the contract or before the contract comes into existence.

2. Bilateral Contract
A contract is said to be a bilateral contract where the obligations of both the parties to the
contract are pending at the time of formation of the contract. In this type of contract, a promise
on one side is exchanged for a promise on the other.
CLASSIFICATION OF CONTRACTS ACCORDING TO
TIME OF EXECUTION

1. Executed Contract
A contract is said to be executed contract when both the parties to contract have performed their
share of obligation.

2. Executory contract
An executory contract is one, which is either wholly unperformed, or something remains in there
to be done by both the parties to contract. Sometimes, a contract may be partly executed and
partly executory.
THE METHOD OF LEGALITY OF THE
CONTRACT
▪ Under the method of the method of legality of the contract may be five kinds

▪ Valid Contract
▪ Void Agreement
▪ Void able Contract
▪ Unenforceable Agreement
▪ Illegal Agreement
WHAT IS VOID CONTRACT?
▪ Void contracts are not contracts. In most cases, a void contract misses one or more essential
elements that would make it valid. Because it's not an actual contract, neither party to it has to do
anything to terminate it.

▪ Features of a void contract include the following:

1.It's not legally enforceable.
2.It imposes no obligations on the parties.
3.It fails to create legal rights.
4.It's against the law.
5. Neither party shall receive compensation.
▪ Examples of void contracts include the following:

▪ Contracts with a party who's not mentally or legally competent, such as someone with a mental
illness or a minor
▪ Contracts that involve illegal actions, such as committing a crime.
▪ Contracts restraining certain activities, such as the right to work or the right to choose one's
spouse
WHAT IS VOIDABLE CONTRACT?
▪ An agreement which is enforceable by law at the open of one or more parties of the contract
but not at the open of the other or others is a void able contract.
▪ A void able contract is one which can be avoided and satisfied by some of the parties to it.
Until it is avoided, it is a good contract.

▪ Example: contracts brought about by coercion or undue influence or misrepresentation or

fraud.
UNENFORCEABLE & ILLEGAL
CONTRACT
▪ An Unenforceable Agreement is one which cannot be enforcing in a court for its technical and
formal defect.

▪ An illegal agreement is one which is against a law enforcing in India.

VOID, VALID AND VOIDABLE
CONTRACT
▪ Void: Not an actual contract and is unenforceable
▪ Valid: Legally binding and enforceable in a court of law
▪ Voidable: Valid and enforceable but contains a flaw that may make it void
PERFORMANCE OF
CONTRACT
▪ It means the promisor and ‘Promisee’ both have fulfilled their part of obligations.
▪ For Ex.
▪ A visits a stationary shop to buy the pen. The merchant delivers the pen and A pays the price.
▪ It is said that the contract was terminated for mutual performance.
TYPES OF PERFORMANCE

▪ Actual Performance
▪ Attempt to Performance or Tender
REQUISITES OF A VALID
TENDER
▪ It must be unconditional
▪ It must be made at proper time and place
▪ It must be for complete obligation
▪ Must be in a legal tender money
▪ It must be made to Promisee or his authorised dealer
▪ A tender may be made to one of several joint Promisee.
▪ Contractual capacity
▪ In case of tender of goods, reasonable opportunity for inspection of goods.
WHO MUST PERFORM THE
CONTRACT
▪ Promisor himself
▪ Agent
▪ Legal representative
▪ Third party
▪ Joint Promisor
DISCHARGE OF CONTRACT

▪ The discharge of contract means the termination of contractual relationship between the parties
to a contract.
▪ It is said that a contract will be terminated when the rights, duties and obligations of the parties
under the contract comes to an end.
▪ When we say that the rights and liabilities created by law under contract have been terminated.
METHODS OF DISCHARGE THE
CONTRACT
▪ By performance
▪ A) Actual
▪ B) Attempted

▪ By agreement/consent
▪ a) Alteration
b) Remission
c) Merger
d) Novation
e) Rescission
f) Waiver
▪ Discharge by lapse of time
▪ By operation of law
▪ a) Insolvency
▪ b) Death
▪ By Breach of a Contract
▪ a) Anticipatory Breach
▪ b) Actual Breach

▪ By impossibility of performance

▪ a) Initial impossibility
▪ 1) Known Impossibility
▪ 2) Unknown Impossibility

▪ b)Subsequent Impossibility
▪ 1) Restriction of subject matter
▪ 2) Death or incapacity of person in case of personal services
▪ 3) Outbreak of War