Basic Law For Engineers

INDIAN CONTRACT ACT 1872

CONTRACT
An agreement between two or more persons (individuals, businesses, organizations or government agencies) Contracts generally can be written, using formal or informal terms, or entirely verbal. If one side fails to live up to his/her/its part of the bargain, there's a "breach" and certain remedies for solving the differences are available. The terms of the contract - the who, what, where, when, and how of the agreement - define the binding promises of each party to the contract.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

Different sections of the Indian Contract Act lay down the essential elements of the contract. They are as under: 1. Proposal and acceptance 2. Consideration lawful consideration with a lawful object 3. Capacity of parties to contract competent parties 4. Free consent 5. An agreement must not be expressly declared to be void. 6. Writing and Registration if so required by law 7. Legal relationship 8. Certainty 9. Possibility of performance 10. Enforceable by law.

Proposal and Acceptance

The first step towards creating a contract is that one person shall signify or make a proposal or offer to the other A proposal when accepted becomes a promise. When the person to whom the proposal is made signifies his assent thereof the proposal is said to be accepted.

Consideration:

Every contract consist of two parts (1) Promise and (2) Consideration for the promise. A promise is often made in return for a promise for example a buyer realizes the goods for the price. Price for goods is therefore, consideration here. Consideration is the cause of the promise. It is the most essential element of the contract. As a general rule, agreement without consideration is void. The promise for a promise in return is consideration.

Capacity of parties to contract Competent parties

Every person is competent to contract: who is of the age of majority according to the law to which he is subject who is of sound mind and is not disqualified from contacting by any law to which he is subject.

Free Consent:

Parties to a contract must give their consent. Both the parties must agree upon the same thing in the same sense. Two or more persons are said to consent when they agree upon the same thing in the same sense. Mere consent is not enough. Consent of parties must be free, for example it must not have been obtained (1) coercion, (2) undue influence, (3) fraud, (4) misrepresentation, or (5) mistake. An agreement must not be expressly declared to be void

Writing and registration:

Oral contract is a valid contact. No particular form of writing is required to constitute a contract. Intentions of the parties to enter into a particular contract and to give effect to it must be manifest in it, in order to constitute a valid contract.

Legal relationship

Agreements which create legal relations or are capable of creating legal relations are contracts, for example, an invitation to a dinner does not create any legal relation and therefore is not a contract.

Certainty

The terms of a contract should be clear. In other words, the contract must not be vague. Contracts which are vague cannot be enforced.

Possibility of performance:

Contracts based on impossibility of performance are not valid. The contracts must be capable of being performed.

Enforceable by Law
A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. If is enforceable by law then it is contract otherwise it is an agreement. An agreement can also be inferred from correspondence exchanged between the parties.

TYPES OF CONTRACTS

WAGERING CONTRACTS

Wagering means placing something of value at stake upon the result of some future uncertain event All contracts by way of wager are considered null and void and hence no suit can be brought upon the members of such a contract in any court of law or equity. The essentials of a wagering contract are: Uncertainty in the event Equal chances of gain or loss Neither party must have control over the event Neither party should have any other intrast other than win or lose

CONTINGENCY CONTRACTS
Contingency is defined as a future event or circumstance that is possible but cannot be predicted with certainty. Contingency contracts are based on the decisions of the members or parties involved in a contract and are solely dependent on the factors that affect the respective parties, for eg. In LIC the persons death affects the contract. Contingency agreements are not void and the uncertain event is not the sole determination of the contract In such contracts both the parties are interested in the occurrence or the non occurrence of the event.

QUASI CONTRACTS
A quasi-contract (or implied-in-law contract) is a frictional contract created by courts for equitable, not contractual purposes. A quasi-contract is not an actual contract, but is a legal substitute for a contract formed to impose equity between two parties. The concept of a quasi-contract is that of a contract that should have been formed, even though in actuality it was not. It is used when a court finds it appropriate to create an obligation upon a non-contracting party to avoid injustice and to ensure fairness.

Indemnity
The term "Indemnity" means to make good the loss or to compensate. It is an act of the party to compensate the other party for the loss suffered by him.

Indemnity
A contract by which one party promises to anotherr to save him from loss caused to him by the conduct of the promisor himself , or by the conduct of any other person is called a contract of indemnity

The person who promises to make good the loss is called the Indemnifier and the person whose loss is made good is called the indemnified or indemnity holder.

Essential elements of indemnity

There are two persons , the indemnifier the indemnified or the indemnity holder There must be loss either by the promisors conduct or by any other persons conduct It is a contingent contract by nature It may be express or implied

Guarantee

A contract of guarantee is a contract to perform the promise, or discharge the liability,of a third person in case of his default. The person who gives the guarantee is known as the surety, the person in respect of whom the guarantee is given is known as the principal debtor, and the person to whom the guarantee is given is called the creditor. A guarantee may be either oral or written.

Concurrence of three contracts Primary liability is that of the principal debtor In case the debtor is a minor , the suretys liability becomes primary All the essentials of a valid contract It may be in writing or oral There need not be full disclosure of facts to the surety before he gives the guarantee

Bailment
The word Bailment is derived from the French word ballier which means to deliver . Bailment means delivery of goods by one person to another for some purpose ,upon a contract ,that they shall ,when the purpose is accomplished ,be returned or otherwise disposed of according to the instructions of the person delivering them. The person delivering the goods is called the bailor and the person to whom they are delivered is called the bailee.

Essentials of bailment

Essential elements There are two persons namely Bailor and Bailee. Bailor means the person delivering the goods, Bailee means the person to whom the goods are delivered. Their must be delivery of goods . The goods must be in deliverable condition. Only the goods are delivered but not the ownership of goods, their must be purpose. Bailey can use the goods. Goods must be returned or disposed off after the purpose is accomplished.

Pledge
The bailment of goods as security for payment of a debt or performance of a promise is called Pledge. The bailor in this case is called the pledger or pawnor and the bailee is called the pledgee or pawnee

Pledge is a special kind of bailment purpose : pledge is bailment of goods for special purpose As to right of sale : the pledgee has the right of sale of goods pledged on default after giving notice to pledgor but ther is no such right of sale in case of bailment As to right of using the goods : in case of pledge the pledgee has no right of using the goods pledged while no such restriction exists for a bailee in case of bailment if nature of transaction so requires

PERFORMANCE OF CONTRACT

Contract creates obligations. Performance of contract means carrying out these obligations The parties to a contract must either perform or offer to perform their respective obligations.

Who can demand

Only promisee can demand Third party cannot demand even if the promise was made for his benefit

Who must perform

Promisor himself His agent His legal representative

Offer to perform

It has to be unconditional
it must be in a proper place and time

Contracts which need not be performed

Under novation of contract, the old contract need not be performed failure to provide reasonable facilities remission of contract when a party rescinds a contract

Time and place of performance

Where prescibed by the promisee Where not prescribed by the promisee

When time is the essence of the contract

Performance of joint promises

Devolution of joint liabilities Devolution of joint rights

Performance of reciprocal promises

Promise in return for a promise Mutual and dependent Mutual and independent Mutual and concurrent

Assignment of contract
By the operation of law Assignment by the act of parties The obligations or liabilities under a contract cannot be assigned Rights and benefits under a contract may be assigned.

Appropriation of payments

Debtors express instructions must be followed debtors implied intention must be followed appropriation by creditor appropriation by law when principal and interest both due

Discharge of contract

Discharge of a contract

Discharge Discharge Discharge Discharge Discharge Discharge

by by by by by by

performance agreement or consent impossibility of performance lapse of time operation of law breach of contract

DISCHARGE BY PERFORMANCE

Actual performance When both parties perform their promises & there is nothing remaining to perform Attempted performance When the promisor offers to perform his obligation ,but promisee refuses to accept the performance. It is also known as tender

Discharge by agreement or consent

NOVATION (Sec 62): New contract substituted for old contract with the same or different parties RESCISSION (Sec 62) : When some or all terms of a contract are cancelled ALTERATION (Sec 62):When one or more terms of a contract is/are altered by the mutual consent of the parties to the contract REMISSION (Sec 63) :Acceptance of a lesser fulfilment of the promise made. WAIVER :Mutual abandonment of the right by the parties to contract

Discharge by impossibility of performance

Known to parties Unknown to parties Subsequent impossibility Supervening impossibility (sec 56) Destruction of subject matter Non-existance of state of things Death or incapacity of personal services Change of law Outbreak of war

Discharge by lapse of time

The limitation act 1963, clearly states that a contract should be performed within a specified time called period of limitation If it is not performed and if the promisee takes no action within the limitation time, then he is deprived of his remedy at law

Discharge by operation of law

Death Merger Insolvency Unauthorized alteration of the terms of a written agreement Rights & liabilities vesting in the same person

Discharge by breach of contract

Actual breach : at the time of performance during the performance Anticipatory breach: By the act of promisor (implied repudation) By renunciation of obligation (express repudation)