LAW OF CONTRACTS

&
CONSUMER PROTECTION
Introduction
• Law of contracts is a law coming from the British era (in 1872).

• As times changed, two sections of this law have been removed from this and made into
separate laws.

• Law of Torts is an uncodified law and depends on case laws and judgments for hearing and
deciding the cases.

• The Consumer Protection Act 1986 has been specially enacted to protect the interests of the
consumers of both Goods and Services.

• This Act has now been replaced by the Consumer Protection Act 2019 with some
modification in the earlier act considering the new ways of buying goods and marketing like E-
commerce, teleshopping and multi-level marketing.
INDIAN CONTRACT LAW 1872

❖ The Indian Contract Law 1872 is a British Law made applicable to the Indian State in
1872.
❖ The law as made applicable at that time had 266 sections.

➢ 1 to 75 — General provisions
➢ 76 to 123 — Sales of Goods
➢ 124 to 147 — Indemnity/Guarantee
➢ 148 to 181 — Bailment and Pledge
➢ 182 to 238 — Agency
➢ 239 to 266 — Partnerships

❖ Two of these categories, 76 to 123 (Sale of goods) and 239 to 266 (Partnerships) were
removed from the Contract Law and have been made into separate laws.
 Agreement and Contract

✓ All contracts are agreements, but all agreements are not contracts.

Explanation: An agreement is a general understanding between two or more parties to do something together. A
contract is a more formal type of agreement that has legal consequences and is enforceable by law.

Requirements: Contracts must meet certain legal requirements to be enforceable, such as offer, acceptance,
consideration, and intention to create legal relations. Agreements may not have these requirements and may not
be legally binding.

✓ Enforceable by law means legal remedy is available in case of any breach of contract to the
aggrieved party.
 Essential elements of Contract
Some essential elements of a valid contract are:−

✓ At least two (or more parties) must participate in the contract (One makes an offer and the
other(s) accept it)
✓ Offer made is accepted by the other party
✓ Acceptance is by free consent (and not by force or any form of coercion)
✓ Both parties agree to have a legal relationship
✓ Agreement must be on potentially possible actions
✓ Capacity or eligibility for entering into contract (not a minor or of unsound mind etc.)
✓ Objective of contract must be lawful
✓ Both the parties understand the contract in the same way
✓ Contract cannot be on illegal activities
✓ Legal formalities, as required, are completed like written and signed agreements, registration,
payment of dues, witnesses etc.)
 Proposal and Acceptance
(a) When one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence, he is
said to make a proposal;

(b) 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;

The consideration or object of an agreement 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
• the Court regards it as immoral or opposed to public policy.
 FORMATION OF CONTRACTS
Sections 2 to 6 of the act deal with this aspect:

a) Making a proposal: to do or not to do something.

• Person to whom the proposal is made signifies his assent, the proposal is accepted;
• Person making the proposal is the ‘promisor’ and person accepting it is the ‘promisee’.
• When the promisee acts according to the desire of the promisor, it is ‘consideration for the
promise’.
• Every promise in consideration of each other is an agreement.
• Agreements not enforceable by law is said to be void.
• Legally enforceable agreements are contracts.

b) Formation of contract involves communicating the proposal and acceptance of the proposal.

c) A proposal can be revoked by communication to the other party or if the acceptance is not
made in time as specified or by nonfulfillment of conditions by any of the parties.
 ESSENTIALS OF CONTRACTS
Sections 10 to 23 deal with this aspect of contracts.

a) All agreements are contracts if and if they are made with the free consent of the parties
competent to contract, object of contract is lawful, for a lawful consideration and are not
declared void. All legal requirements like contract in writing, registration of documents and
signature of witnesses need to be complied with.

b) Competent to contract means the person(s) of legal maturity, of sound mind and is not
disqualified by any law.

c) Sound mind means the person capable of understanding the contract and is able to form
rational judgments about its effect on his interests.

d) Consent by two or more persons means that they agree upon some thing with the same
understanding on all its aspects.
 ESSENTIALS OF CONTRACTS

e) Free consent happens when it is free of any coercion, undue influence, fraud, misrepresentation or
mistake.

f) Coercion is committing any unlawful act forbidden by Indian penal laws.

g) Undue influence (in entering into a contract) happens when one of the parties hold such powers
as to dominate the decision of the other by apparent authority or the other party is of weal
disposition.

h) Fraud means making a suggestion that something is true when it is not, concealing facts, making
promises with no intention of doing it or by doing anything fraudulent.
 ESSENTIALS OF CONTRACTS

i) Misrepresentation means positively asserting something as true when it is not, breach of duty to
gain some advantage and causing someone to make a mistake.

j) An agreement arrived at by coercion is voidable; same is the case for fraud and misrepresentation.

k) The agreement is also voidable if both the parties make mistake in understanding substance of the
agreement.

l) Lawful object of any agreement means that the object is not specifically forbidden in law.
(Example: agreement to supply prohibited drugs or make forbidden weapons)
 Consumer Protection

➢ A consumer is one who purchases goods or services by paying for it and for personal use.

➢ ‘Consumer is king’. Consumers can make or break a product.

➢ If consumer is the king, why does he/she need protection?

➢ This is probably because consumers get cheated by businesses

✓ i) with spurious products,

✓ ii) by not offering any services after an item is sold
✓ iii) sometimes even supplying unsafe products.

➢ At present, consumer protection is legally enforced by enacting consumer protection laws.

➢ Consumer protection is applicable to products and services.

 Consumer Protection

A consumer can be cheated in many different ways:

✓ Product not conforming to the specifications advertised or told to the consumer at the
time of purchase
✓ Not informed of actual pricing or cost of accessories necessary to operate the product.
✓ Spurious product being supplied as a branded product.
✓ Many things in fine print not explained to the consumer
✓ Overcharging for the product or service
✓ High cost of replacement parts
✓ Absence of appropriate maintenance service or high service charges
✓ Supplying old refurbished product as original and new
Consumer Rights
• It is also in the interest of the business to ensure that consumer remains satisfied about any product
or service.
Consumer rights can be generally stated as:
❖ Safe product: Consumer is entitled to receive a safe product that does not cause any harm
during use.
❖ Product Choice: The availability of goods/service at reasonable price is a right of the consumer.
Competition in the market generally ensures variety of choices and fair prices for the consumer.
❖ Product Information: Product information has to be clear and accurate and in sufficient detail
to enable the consumer to make an informed decision about purchase and use.
❖ Consumer grievance and redressal: When a consumer has purchased a product, it is quite
possible that the product malfunctions or the consumer has problems with it. There must be a
mechanism by which his grievances are heard and if required appropriate action is taken to
address the same.
❖ Consumer Education: It educates the consumers about their rights, about various goods and
services, prices, quality and durability, trade practices and also about being an ethical consumer.
 Consumer Protection Acts
• Consumer protection acts addresses the rights of consumers.

The objectives of the Consumer Protection Act are to:

➢ Give a legal status to consumer rights

➢ Facilitate formation of consumer organizations
➢ Provide a forum for the consumers to go to with their complaints
➢ Provide a structure for speedy redressal of grievances
➢ Give the consumer a speedy but simpler and cost-effective means to get his complaints
resolved
 Consumer Protection Acts

➢ Consumer Protection Act (1986) is the main legislation to protect the interests of consumers in
India.
➢ In addition to detailing the consumer rights and consumer empowerment, the act provides for
quasi-judicial structures for speedy and less-costly processes for grievance redressal for
consumers.
➢ Earlier, consumer awareness was less.
➢ Also the only forum for redressal of complaints was the normal judicial system.
➢ Consumers were unwilling to register complaints due to the high cost and extreme delay in
getting justice.
 Consumer Protection Acts
The Consumer Protection Act recognizes the rights of consumers as:

✓ Right to be protected against marketing of goods and services that are hazardous to life and
property
✓ Right to be informed about the quality, quantity, standard, and price of goods or services so as
to protect the consumer against unfair trade practices
✓ Right to receive assured access, wherever possible, to a variety of goods and services at
competitive prices
✓ Right to be heard and to be assured that consumers interests will receive due consideration at
appropriate forums.
✓ Right to seek redressal against unfair trade practices.
✓ Right to consumer education
 Consumer Protection Acts
❖ The consumer protection act seeks to protect the interest of consumers against deficiencies or
defect in product or service.
❖ The act applies to only individual consumers purchasing goods/services for personal use and
applies to all goods and services unless specifically mentioned otherwise.
❖ Consumer Protection Act, 1986 was enacted to facilitate quick redressal of consumer grievances
by avoiding long-drawn litigation and court fees.
❖ A structure is created from the district level to National Level for smoother, simpler and quicker
functioning of the system.
❖ The essential idea is to help the consumer and supplier to negotiate and arrive at a consensus to
solve the problems of the consumer.
❖ The Act covers all goods and Services (unless exempted specifically) and covers public, private
and co-operative sectors.
❖ Consumer courts provide relief only to goods and services bought for personal use and does not
cover items meant for commercial use.
PRODUCT AND PRDUCT LIABILITY

"Product" means any article or goods or substance or raw material or any extended cycle of
such product, which may be in gaseous, liquid, or solid state possessing intrinsic value which
is capable of delivery either as wholly assembled or as a component part and is produced for
introduction to trade or commerce, but does not include human tissues, blood, blood products
and organs;(as defined in the Act).
 Defect and Deficiency

❖ "Defect" means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or
standard which is required to be maintained by or under any law for the time being in force or
under any contract, express or implied or as is claimed by the trader in any manner whatsoever in
relation to any goods or product and the expression "defective" shall be construed accordingly;

❖ "Deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality, nature
and manner of performance which is required to be maintained by or under any law for the time
being in force or has been undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service and includes:

(i) any act of negligence or omission or commission by such person which causes loss or injury to
the consumer; and

(ii) deliberate withholding of relevant information by such person to the consumer;

 Product Liability

➢ "Product liability" means the responsibility of a manufacturer or seller, of any product or service,
to compensate for any harm caused to a consumer by such defective product manufactured or
sold or by deficiency in services relating thereto;

➢ "Product liability action" means a complaint filed by a person before a District Commission or
State Commission or National Commission, as the case may be, for claiming compensation for
the harm caused to him;
A product manufacturer shall be liable in a product liability action, if

a) the product contains a manufacturing defect; or

b) the product is defective in design; or
c) there is a deviation from manufacturing specifications; or
d) the product does not conform to the express warranty; or
e) the product fails to contain adequate instructions of correct usage to prevent any harm or any
warning regarding improper or incorrect usage.
A product service provider shall be liable in a product liability action, if

a) the service provided by him was faulty or imperfect or deficient or inadequate in quality,
nature or manner of performance which is required to be provided by or under any law for
the time being in force, or pursuant to any contract or otherwise; or
b) there was an act of omission or commission or negligence or conscious withholding any
information which caused harm; or
c) the service provider did not issue adequate instructions or warnings to prevent any harm; or
d) the service did not conform to express warranty or the terms and conditions of the contract.
A product seller who is not a product manufacturer shall be liable in a product liability action, if

a) he has exercised substantial control over the designing, testing, manufacturing, packaging or
labelling of a product that caused harm; or
b) he has altered or modified the product and such alteration or modification was the substantial
factor in causing the harm; or
c) he has made an express warranty of a product independent of any express warranty made by a
manufacturer and such product failed to conform to the express warranty made by the product
seller which caused the harm; or
d) the product has been sold by him and the identity of product manufacturer of such product is not
known, or if known, the service of notice or process or warrant cannot be effected on him or he
is not subject to the law which is in force in India or the order, if any, passed or to be passed
cannot be enforced against him; or
e) he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he
did not pass on the warnings or instructions of the product manufacturer regarding the dangers
involved or proper usage of the product while selling such product and such failure was the
proximate cause of the harm.
Thank you