Ans. Law of Contract and Sale of Goods Act + Law of Contract ; Nature of Contract and Essential Elements | | of Valla Contract, Offer and | Acceptance, Consideration 1 Give definitions of contract, Ans. : Definitions of contract 1. A contract is a promise or a set of promises for the breach of which the law gives a remedy, ot the performance of which the law in some way recognizes as a duty. A contract is a binding agreement between two or more parties which is enforceable by law. A. legally enforceable.contract is an exchange of promises with specific legal remedies for breach. According to Salmond "A contract is an agreement creating and defining obligation between two or more persons by which rights are acquized by one or more to acts or forbearance on the part of others”. According to Sir William Anson - "A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of others’. Q2 State different types of contracts. Ans. : Types of contracts © There are four types of contracts 1, Contracts based on formation 2, Contracts based on nature of consideration 3. Contracts based on execution 4. Contracts based on validity. Q.3 Explain requirements of contract. fequirements of contract + There are four major requirements of contract =|] 1. Agreement : The parties must have reached mutual agreement. The offeror must have made an offer, and the offeree must have replied with | an acceptance, Consideration : Each promise must be made in return for the performance of a legally sutficient act or promise. If one party isn't required to e something of legal value (e.g, money, property, a service), an agreement lacks sufficient ‘consideration. ‘Contractual capacity : Both parties must possess. the full legal capacity to assume contractual duties. Limitations to full capacity inctude mental, illness and such diminished states as intoxication. Lawful object : The purpose of the contract must be legal. A contract to commit an unlawful act or to violate public policy is void (without legal fore). Q4 Explain essentials of a valid contract. Ans. : Essentials of a valid contract * To form a valid contract, essentials of contract are- 1, Offer and acceptance 2. Intention to create legal relationship 3. Lawful consideration 4. Capacity to contract 5, Genuine and free consent 6, Legality of object 7. Certainty and possibility of performance 8, Legal formalities. Q.5 Explain offer and acceptance Indian Contract Act. Ans. : Offer in Indian Contract Act @ part of To enter into an agreement there must be at least two parties and out of these two parties, one has !° —Professional Practice, Law and Ethies ° e _ 2-2 express his willingness to anot do something which is ice, a mee | other the party has to give his con = = acceptance to the terms of the offer. " * Offer means an offer’ made by another person with the intent of obtaining his or her acceptance to do or abstain from doing any act. | « Offer or the proposal is 4 fundamental aspect of the contract, When. an individual signifies his or her veillingness to do or not to do something with an expectation of obtaining the assent of that other person then it is called an offer. or | + Offer is an expression of any person to do or abstain from doing something or anything made to obtain, the assent of the other person to whom he or she has made such a proposal. #So offer is the proposal of any particular individual to another or a particular group or to the group of general people with an expectation of getting the acceptance on the matter that he or she has proposed Acceptance in Indian Contract Act @ Acceptance means the acceptance -given by the ‘person to whom the offer has been made in the same meaning in which the offer is made. Acceptance is defined as the consent or assent signified to the offer. Therefore it is an act of expressing ascent to the offer by the party to whom it is made is called acceptance. It is the outcome of the expression of assent. + Acceptance of the person to whom the offer is made creates the contractual relationship between the parties and will bound by contractual rights and obligations. + Acceptance of an offer may be made verbally ot in| writing, or it may be inferred from the conduct of the parties. However, certain rules must be complied with before acceptance of an offer is valid. ‘First, acceptance must be communicated by the offeree to the offeror in the manner requested by OF ‘implied in the offer. Second, the acceptance must be dear, unequivocal, and unconditional. When the letter of acceptance 15 received by the offeror, the communication of acceptance # considered as completed. Q.6 State the*features of offer. ‘Ans, : « The major features of offer are are - 1. Itis an expression of offerer's intention regarding anything, Itis related to doing or not doing something It'is made with the hope of getting acceptance ‘from the person, to whom it is made, 4, It can be made by expressed words of mount or written words or by the conduct impliedly 5. It may be of general or specific 6 It tums into promise when it is accepted by the offeree, 7. It should be communicated to the offeree. Q7 Under which circumstances an offer under contract Is ceases ? ‘Ans. i+ An offer ceases to be capable of acceptance or offer lapses or comes to an end in the following circumstances 1) By communication of notice of termination of offer to the offer 2) By lapse of the specified or reasonable time 3) By death or insanity of the offer 4) 5) By counter offer By not being accepted according ta the prescribed ‘or usual mode. 6) By non-fulfillment of a condition precedent. Capacity to Contract and Free Consent, Legality of Object Q8 Explain capacity. ‘Ans. : Essential conditions for contractual capacity ~ + Contractual capacity is an essential ingredient of a valid contract. + According to Section 10 of this act, parties making an agreement must have contractual capacity: ‘= Contractual capacity means they must be legally competent for making @ contract. _—— an upttrust for knowledge a TEGHNIGAL PUBLICATIONS‘Professional Practice, Law and Eehies To have a contractual capacity, one must fulfil the following conditions : 2) Age - According to Indian Contract Act, only a major person is competent to contract. Thus, contract with or by a minor is altogether void. The person continues to be a minor until he completes his age of 21 years * The word "Void" when used in relation to a minor, it should be understood as “void against the minor’. 2) Soundness of mind - According to Section 12 of this act, a person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. A person who is usually of unsound mind, but occasionally of sound mind, may make 2 contract when he is of sound mind, +A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. Illustrations : (a) Lunatics : A lunatic is a person who is mentally affecied due to some mental strain or other personal experience. He suffers from intermittent intervals of sanity and insanity. He can enter into a contract only during the period when he is of sound mind, (b) Idiot : An idiot is a person who is permanently (0) Drunken person 3 of unsound mind. He does not exhibit minor understanding of even minor objects or things. An idiot cannot enter into a valid contract. : A person who takes any intoxicants like alcohol or drugs etc. he is temporarily incompetent of entering into a contract. Thus, so long as one remains under the influence of intoxicants or drugs, he has no contractual capacity. Thus agreement made by such person are void. Legal disqualification - India Contract Act has defined who shall be able to contract and who are either temporarily barred or permanently barred. It has been described in Section 11 of the act. nea TECHNICAL PUBLICATIONS n of Contract and Sale of Goods Act # The essential aspect of capacity to contract ic. disqualification of person to- contract can be broken down into three considerations : - {) Disqualification because of infancy }) Disqualification because of insanity i) Other methods of disqualification as prescribed by law: QS What is mean by free consent according to Indian Contract Act. ‘Ans. : According to Section 13 of Indian Contract act, “two or more persons are set to consent when they agree upon the same thing in the same sense.” + Section 14 of this act states that, consent is said to be free when it is not caused by 1. Coercion : Application of physical foree 2. Undue influence : Use of mental pressure Innocent false 3. Mistepresentation =: representation 4. Fraud : Cheating or deceiving 5. Mistake : Wrong impression about anything. Element of Free Consent : 1. Coercion + It implies use of some kind of physical force by daing some act forbidden by liv to seek consent of other party. 2. Undue influence : It implies unfair use of dominating position to cause the concent of other party for a contract. In undue influence some Kind of mental and moral pressure” is brought upon a party to cause his consent. 3. Misrepresentation : While making a contract, one of the party may make any statement regarding the subject matter of a contract. Such statement, if tums fo be untrue amounts to misrepreseniation, It is a misstatement of material facts. 4. Fraud ; An intentional misrepresentation of the facts amounts to fraud, Fraud is always committed with a view to deceive to cheat another person, Thus, when one person does anything or makes false statement knowing 10 induce other for causing this consent, it is known as fraud, 5. Mistake : It may be defined as a wrong impression of erroneous opinion in the mind of a 1 upsthrst fr knowledgepoesional Practice, Law and Etiey person about any subject matter, event or it may consent something, 040 Explain legality of object as per Indian Contract Act. ans. : Legality of object - e Every contract is made for object or purpose. The abject of @ contract is formed on the basis of promises made by the parties. « The contract to be legally valid, must contain lawful object. When the contract is made for doing something illegal defeating provisions of the law such contract is not valid in the eyes of law. « According to Section 23 of this act the unlawful acts are 1. Forbidden by law 2. Prohibited by special legislation It would defeat the provisions of any law It is fraudulent Involves enquiry to person/property if another Courts tp public policy Opposed to public policy Trade with alien enemies 9. Interference with course of justice 10. For suppressing prosecution 11. For sale of public tilles/offices and honours 12. Marriage brokerage. | 23 inlawful and Illegal Agreements | 0.11 Explain unlawful and illegal agreement. ‘Ans. : Unlawful agreements «To define Wegal Agreements in their most basic form, they are considered to be those agreements that violate existing laws in the particular domain. and are of criminal nature. An agreement will not be enforced by the court if its object or the consideration is unlavrful. * According to Section 23 of the act, the consideration and object of an agreement are unlawful in the following. cases : 4) If it is forbidden by law; 2 an of Contract ant Sle cf C08 permitted, it would >) If its of such nature that if defeat the provision of laws c) If itis fraudulent; 4) If it involves or impli property of another; ¢) If the court regards it as immoral: ; f) If the court regards it as opposed 10 public policy. some | [24 Contingent Contracts _ | 0.42 Explain contingent contract. ‘Ans. + Contingent contract- « Under Section 31 of the Indian Contract Act, 1872, contingent contracts are defined as follows = “If two or more parties enter into a contract to do or not o something, if an event which is collateral to the contract does or does not happen, then it is a contingent contract” es injury to the person OF The ‘contingent contract’ implies that the enforceability of that contract is directly dependent fan an occasion occurring or not occurring. In the Indian Contract Act, 1872, the term was used to mean conditional. | 25: Performance and | Discharge of Contracts | Q.13 Comment on discharge or termination of contract. ‘Ans, + Discharge of contract - * Discharge of a contract implies termination of the contractual relationship between the parties. # On the termination of the such relationship the parlies are released from their obligations in the ‘contract, And in this way contract comes to an end. Modes of discharge in contract : By performance By mutual agreement By supervising impossibility By operation of law By lapse of time By material alteration By breach of contract nae ee pe ‘TECHNICAL PUBLICATIONS® - en up-fhust for knowledgeProfessional Practice, Law and Ethies 2 | 2.6 : Remedies for Breach of Contract Q.14 What Is breach of contract and Its types, Explain remedies of breach of contract. Ans. : Breach of contract - A formation of contract results in creating ‘contractual obligations between the parties. © These contractual agreements are to be fulfilled by the parties on the due date as per terms and conditions of a contract. © When the party does not fulfil his obligation or refuses to fulfil it or disables himself from fulfilling him it is known of breach of contract © Chapter VI (Section 73 to 75) of the Indian Contract Act1872 deals with the consequences of breach of the contract. + Breach of contract is defined is a legal cause of action in which a binding agreement for exchange is not honoured by one or more parties to the contract by non-performance of interference with the other party's performance, ‘Tf the party does not fulfil his contractual promise, or has given information to the other party that he will not perform his duty as mentioned in the contract or if by his action and conduct he seems to be unable to perform the contract, he is said to be breach of contrac ‘Types of Breach * Breach of contract is of two types 1) Actual breach : This contract takes place when the promiser fails to perform his obligation or refuses to do so on the due date of performance. 2) Anticipatory breach : This contracts the promiser either refuses to perform or makes himself unable to perform a promise before the due date of performance, Anticipatory breach of contract takes place before the date of actual performance ‘Remedies for breach of contract * When a contract is broken, the aggrieved party (the party who is not in breach) has one or more of the following remedies - 1) Recession of the contract Law of Contract and Sale of Goods Act 2) Suit for damages 43) Suit upon quantum merit 4) Suit for specific performance 5) Suit for injunction. “2.71 Indemnity and Guarantee, | Contract of Agency | Q.45 Explain indemnity and contract of guarantee. ‘Ans, : Indemnity - * The term indemnity means "security or protection against a loss" or compensation. © According to Section 124 of the Indian Contract Act, 1872 "A contract by which one party promises to save the other 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.” # There are two parties in this form of contract. The party who promises to indemnify/ save the other party from loss is known as ‘indemnifier, whereas the party who is promised to be saved against the loss is known as ‘indemnified! or indemnity holder. Contract of guarantee * Contract of guarantee means a contract to perform the promises made or discharge the liabilities of the third person in case of his failure to discharge such Liabilities, * AS per section 126 of Indian Contract Act, 1872, a contract of guarantee has three parties : 1. Surety : A surety is a person giving a guarantee in a contract of guarantee, A person who takes responsibility to pay a sum of money, pesform any duty for another person in case that person fails to perform such work, 2 Principal Debtor : A principal debtor is a person for whom the guarantee is given in a contract of guarantee. 3. Creditor : The person to whom the guarantee is given is known as the creditor, TECHNICAL PUBLICATIONS® + en up-thnust for knowisdga =~‘rofessional Practice, Law and Ethics Kinds of guarantee 1. Retrospective or Prospective 2. Specific or continuing 3, Entire or pattiel debt |__and Warranties, Performance of Contract of Sale 284 Sule ef Gcdcac Sale of Goods Act-1930 ; General Principles, = Q.16 State essentials of sale of goods act, ‘Ans. : Sale of goods act “According to section 4 of the sale of goods act, the seller transfer or agrees to transfer the proper Essential clements of eale of goods act + Essential elements of sale of goods act are as follows : 1. There must be at least two parties. (Bilateral contracts) 2. The subject matter of the contract must be goods 3. A price in money should be paid or promised. 4. A transfer of property in goods from seller to the buyer must take place, 5. 6. 1930 ‘Contract of sale of goods is a contract whereby ty in goods to the buyer for a price’. j. It must be absolute or conditional. All other essentials of a valid contract must be present. Contractor sale Aareerieat to sale COumarship in tae goods is ‘Where the transfer of ownership in goods is ta take place, al a lransterred by the seller to the buyoe immediately at the time of contract. future tine or subject to {ulfimont af some condition Fig. Q.16.1 Q.17 Explain condition and warranties under sale of goods act. ‘Ans, : Condition + the stipulation forms the very basis of the contract or is essential to the main purpose of the contract, it is a condition: «The breach of the condition gives the suffering party a right to treat the contract as repudiated (cancelled). Thus ifthe seller fails to full a condition, the buyer may treat the contrat as repudiated, refuse the goods and, if he has already paid for them recover the price, He can also clsim damages for the breach of contract Warranties: . oo. +f the stipulation is collateral to the main purpose of the contract, i 2 subsidiary promise it i 4 warranty. TECHNICAL PUBLICATIONS® - an up-nist for knowledge* The effect of a breach of a warranty is that the ‘suffering party cannot repudiate (cancel) the ‘contract but can only claim damages. * Thus, if the seller does not fulfil a Warranty, the >uyer must accept the goods and claim damages. * Stipulation (condition) as to time of Payment are | not to be deemed conditions (and hence not to be | of the essence of a contract of sale) unless such an intention appears from the contract. * Whether any other stipulation as to time (eg, time of delivery) is of the essence of the contract or not | depends on the terms of the contract. O48 Explain performance of contract of sale, Ans. : Performance of contract of sale * The performance ef contract of sale deals expressed from Section 31 to Section 44 of the sales of Goods Act 1920, ‘* The process of displacing the goods and how the Possession of goods are being transferred from one Person to another voluntarily is described in these | sections. "For a legal agreement, the parties are the main essential element. In the contract of the sale of goods, there are two parties, one is the seller and the other is the buyer. © The parties are free to provide any terms in their contract regarding time, place, delivery, payment of goods and so on. But if the parties are silent and no terms are mentioned in the contract then rules contained in the sale of goods act will be applicable, Moaning of delivery * Voluntary transfer of possession from one person to anothe ‘Types of dalivery 41. Actual delivery i «Tt means actual physical delivery of the goods to | the buyer or his authorized agent by the seller or his authorized agent. 2. Symbolle delivery * When goods are not physically delivered but the means of obiaining possession of goods is delivered to buyer. A symbol is used for delivery. i a Law of Contract and Ste of Goads aa Example : Handing over of keys of godown where goods are safely kept ei, 3. Constructive delivery «Third party is involved in delivery. Seller don't deliver the goods directly. Example : Seller > Warehouseman/Warchouse keeper —> Buyer Fill in the Blanks for Mid Term Exam Qi In a standardized contract, the individual has no choice but to __ and ___on the dotted line. One party's failure to fulfil any of its contractual obligations is known as a of the contract. The term "goods" is defined in section of the sale af goods act, 1930. a2 In an. agreement to sell, the property in goods is transferred in "Contract of sale” under section 4 of the sale ef goods act, 1930 comprises of ‘ | Multiple Choice Questions for Mid Term Exam. ‘The correct sequence in the formation of a contract is a| Offer, acceptance, agreement, consideration. >) Agreement, consideration, offer, acceptance. S| Offer, consideration, acceptance, agreement. Offer, acceptance, consideration, agreement Terms of contract relate to statements, assertions, or representations contained in a written contract which relate to the subject matter of the contract and : To Something to be done b To something not be done under the contract Has no application to a provision in the nature of a condition precedent to the Yee existence or formation of a contract d Allof them Q2 TECHNICAL PUBLICATIONS® - an upthnust for knowlegerofssonal Prete, Lat and Ethics a3 as ar as ‘An agreement becomes a contract if - "2 It is by free consent of the parties “b Parties are competent, c This enforceable by law. (d None of the above. “Under the Indian Contract Act: ‘a. A third person from whom the consideration has proceeded can sue BA third person cannot sue even if the consideration has proceeded from him Tc. A third person who is the beneficiary under the contract can sue (dA third person cannot sue at all for want of privity of contract. Express contract means a contract made by = ‘al Words either spoken or written b, Documents €) Both words and documents [All of the above Which section of the Indian Contract Act defines free Consent ? ‘a Section 10 €) Section 14 B Section 13, id Section 25 ‘The Indian Contract Act of 1872 defines consent as ‘2 agreeing on all the conditions of the agreement. agreeing on the same thing. agreeing on the same thing in the same sense d_ none of the above Which of the following is not an essential ‘element for a valid contract ? la Adequate consideration. 1D. Lawful consideration ‘e, Lawhul object ‘d Free consent _ Law of Contract and Sale 'a) Mutual promises by law “b Agreement net enforceable by law ‘¢| Involuntary obligations “d None of the above 10 "Goods" means - 4] Every kind of movable property other than actionable elaims and money Some kinds of immovable property only = Every kind of movable property including actionable claims and money Cd Both "a" arid "b* 11 The objective of the Sale of Goods Act, 1930 is to define and amend the law telating to “al sale of immovable properties Tb) sale of goods agreements to sell “all of the above 12 The sale af goods act, 1930 came into force in a| 1 day of July, 1930 bb 1 day of September, 1930. c! 1" day of January, 1930 ad 31" day of December, 1930. Fin th aecept and sign Q2 breach Os 27) Oa Future TECHNICAL PuaticaTions® - an up-thrust for knowledge:‘Professional Practice, Lave and Ethics ae cet ef Conte mk Sate of Can dix Answer Keys for Multiple Choice Questions