1.business Laws - Unit I - Indian Contract Act, 1872 - Introduction - 1

BUSINESS LAWS
Code : 402 Credits: 3
Dr K Bhavana Raj
Introduction to Laws
• What is Law?
• Blackstone : “Law is a rule of civil conduct,
commanding what is right and prohibiting what is
wrong”.
• In the words of Salmond, a great Jurist, “It is a set
of principles applied in the administration of
Justice”.
• Law: The rules and regulations made and enforced
by a society’s government to mange the conduct
of the people within the said society.
• The study of law-Jurisprudence.
Meaning of Law
• Every society that has ever existed has recognized
the need for laws (both written and unwritten).
This does NOT mean all Laws are “fair”, and “just”.
• A democratic system of Govt. cannot function
unless the laws are respected by the people they
are intended to regulate.
Society must be based on the “rule of law”.
Rules should be known in advance and created
democratically.
Nobody is above the law (Ex: Nixon).
Broad Classification of Law
Classification of Laws
Connecting Law and society
• Law is multi-centered and takes many forms .
• It is not always an instrument of state power.
• There are many sources/lawyers of law in
Society i.e., informal law, traditional law, etc.
which all exist in a constant state of dynamic
tension characterized by resistance and
accommodation.
• Understanding legal consciousness requires an
appreciation of the over-lapping fields of law.
Law and society
Indian Contract Act, 1872 - Definition
• The Indian Contract Act, 1872 prescribes the law
relating to contracts in India and is the key act
regulating Indian contract law.
• The Act is based on the principles of English Common
Law.
• It is applicable to all the states of India.
• It determines the circumstances in which promises
made by the parties to a contract shall be legally
binding.
• Under Section 2(h), the Indian Contract Act defines a
contract as an agreement which is enforceable by
law.
Agreement
• Every promise and set of promises that forms
the consideration for each other is an
agreement.
• Agreement subject to ratification by others
who are not parties to it is not a conclusive
contract.
• All contracts are agreements.
• But every agreement is not a contract.
Essential elements of a Valid Contract
Offer & Acceptance
Intention to create legal relation
• Business Agreements : The parties are presumed
to have intended to enter into legal relationship.
Taking house on rent.
Selling goods.
• Social, domestic or family agreement : The
parties are presumed not to have an intention to
enter into legal relationship.
Inviting friends for social gatherings.
Asking Mom to clean your bedroom.
Lawful Consideration
• Agreement must be supported by
consideration.
• Consideration means something in return i.e.,
both the parties must get something in return
for the promise.
• If the promise is not supported by
consideration, it will be a bare promise, and
hence not enforceable by law.
• Consideration must be lawful, real and not
illusionary.
Capacity of parties
Free Consent
• Consent: Two or more persons are said to consent
when they agree upon the same thing in the same
sense.
• Free consent: Consent is said to be free when it is
not caused by coercion or undue influence or fraud
or misinterpretation or mistake.
• Consent= Consensus ad idem : Agreeing upon the
same things in the same sense.
• Consent is said to be free when it is not caused by
any one of the following:
1.Coercion 2.Undue-influence 3.Misinterpretation
4. Fraud 5.Mistake
Lawful object
• For a Valid Contract object must be lawful.
• It has nothing to do with consideration.
• It is just for the design or purpose of a contract.
• Object is unlawful if:
It is forbidden by law.
It is fraudulent.
It involves injury to a person or property.
The court regards to immoral or opposed to public
policy.
It is of such nature that if permitted it would defeat
the provisions of any law.
Certainty of meaning
• The agreement must be certain and not vague
or indefinite.
• The terms and conditions of a contract must
be clear, complete and certain.
• If the terms are uncertain , the agreement is
void.
• As a general rule, the courts will not enforce
vague or incomplete agreements.
Possibility of performance
• Agreement to do an impossible act ,can’t be
enforced.
• Law doesn’t compel to do what is impossible.
• A valid contract must be capable of being
performed.
• An agreement to do an impossible act is void.
• If the act is legally or physically impossible to
perform , the agreement can’t be enforced by
law.
Not declared to be void
• Void agreement is an agreement which is not enforceable by
law.
• It implies the rights and liabilities of which can’t be enforced in
the court.
• It has no legal significance from the beginning.
• Although an agreement contains all the elements yet, certain
agreements are declared illegal or void agreements such as:
Restraining marriage 2.Restraining trade
3. Restraining legal proceedings
4. Wagering agreements : ‘ a bet’; Gambling
• If A and B enter into an agreement that A will pay Rs. 1000 to B
if it rains today. Now this agreement may be a wager because
during this event if it does not rain today then B will need to pay
Rs. 1000. And there's a mutual chance of gain or loss for both A
and B.
Legal formalities
• A contract may be made by words spoken or
written.
• As regards the legal effects, there is no
difference between a contract in writing and a
contract made by word of mouth.
• It is however, in the interest of the parties that
the contract should be in writing.
• In some other cases, a contract, besides being a
written one ,has to be registered.
Legality of Contracts…1
• For a contract to be binding , it must be legal.
• Contracts can be illegal or void at both statute
and common law.
• Statute Law : The law made by the
Commonwealth, State and Territory
Parliaments.
• Common Law : The law made by judges in the
exercise of both common law and equitable
jurisdiction.
Legality of Contracts…2
• There are basic elements that are mandatory
to be in an agreement and are legally
enforceable, which include the following:
1. Adequate consideration
2. Legality
3. Capacity
4.Mutual consent (with a valid offer and
acceptance)

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BUSINESS LAWS

Code : 402 Credits: 3

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