Contract Law1 Part1 Short Notes

1) Privity of contract

The doctrine of privity in contract law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages as such. However, the doctrine has proven problematic due to its implications upon contracts made for the benefit of third parties who are unable to enforce the obligations of the contracting parties.

2) Voidable, avoidable and unenforceable contracts

In general, there are three classifications of contracts that are not binding:

Void: If a contract is held to be void, the contract has never come into existence.

For example, a contract is void if it is based on an illegal purpose or contrary to public policy; the classic example is a contract with a hit man. Such a contract will not be recognized by a court, and cannot be enforced by either party.

Voidable Contract - An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. [section 2(i)]. - - (a) When consent is obtained by coercion, undue influence, misrepresentation or fraud is voidable at the option of aggrieved party i.e. party whose consent was obtained by coercion/fraud etc. However, other party cannot avoid the contract. (b) When a contract contains reciprocal promises and one party to contract prevents the other from performing his promise, the contract becomes voidable at the option of the party to prevented. (section 53). Obvious principle is that a person cannot take advantage of his own wrong (c) When time is essence of contract and party fails to perform in time, it is voidable at the option of other party (section 55). A person who himself delayed the contract cannot avoid the contract on account of (his own) delay.

Avoidable: A contract is avoidable if one of the parties has the option to terminate the contract. Contracts with minors are examples of avoidable contracts.

Unenforceable: If a contract is unenforceable, neither party may enforce the other's obligations. For example, in the United States, a contract is unenforceable if it violates the Statute of frauds. An example of the above is an oral contract for the sale of a motorcycle for US$ 5,000 (because in the USA any contract for the sale of goods over US$500 must be in writing to be enforceable).

3) Coercion

Coercion (Section 15): "Coercion" is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

4) Undue influence

Undue influence (Section 16): "Where a person who is in a position to dominate the will of another enters into a contract with him and the transaction appears on the face of it, or on the evidence, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in the position to dominate the will of the other."

5) Consideration

Some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other
(something of value given by one party, in return for the performing of a contract, or for the promise to perform a contract, by the other party)

Under contract law, there is no contract if there is no consideration. But consideration does not necessarily have to be quantified or quantifiable in monetary terms. Any discernible detriment to one of the parties could be that party's consideration.

In one case, Hubbs v. Black, 1918, agreeing not to take a certain plot in a cemetery was considered to be sufficient consideration. Giving a right to sue on a "bona fide" claim has been deemed to be adequate consideration. Also, the courts don't really care about the adequacy of the consideration. This is the business of the parties and not a matter for judicial interference.

6) Standard form contract

A standard form contract (sometimes referred to as an adhesion contract or boilerplate contract) is a contract between two parties that does not allow for negotiation, i.e. take it or leave it. It is often a contract that is entered into between unequal bargaining partners, such as when an individual customer is given a contract by the salesperson of a multinational corporation. The customer is in no position to renegotiate the standard terms of the contract and the company's representative usually does not have the authority to do so. While adhesion contracts, in and of themselves, is not illegal per se, there exists a very real possibility for unconscionability.

7) Wagering Agreements

A contract which is of the nature of wager. Contracts of this nature include various common forms of valid commercial contracts, as contracts of insurance, contracts dealing in futures, options, etc. Other wagering contracts and bets are now generally made illegal by statute against betting and gambling, and wagering has in many cases been made a criminal offence.

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.

8) Essentials of Contract

Having ascertained the particular features of contract as a juristic conception, the next step is to ascertain how contracts are made. A part of the definition of contract being that it is an agreement enforceable at law; it follows that we must analyze the elements of a contract such as the law will hold to be binding between-the parties to it.

As there must be an agreement directly contemplating and resulting in an obligation, and the agreement must be enforceable in the law, therefore -

(a) There must be a distinct communication by the parties to one another of their intention, or an offer and acceptance.

(b) The agreement must possess the marks which the law requires in order that it may affect the legal relations of the parties, and be an act in the law. Therefore -

(1) It must be in the form required by law.

(2) There must be a consideration, when required by law.

(c) The parties must be capable in law of making a valid contract.

(d) The consent expressed in offer and acceptance must be genuine.

(e) The objects which the contract proposes to effect must be legal.

9) Revocation

Revocation is the act of recall or annulment. It is the reversal of an act, the recalling of a grant, or the making void of some deed previously existing.

In the law of contracts, revocation is a type of remedy for buyers when the buyer accepts a nonconforming good from the seller. Upon receiving the nonconforming good, the buyer may choose to accept it despite the nonconformity, reject it (although this may not be allowed under the perfect tender rule and whether the Seller still has time to cure), or revoke their acceptance. Under Article 2 of the Uniform Commercial Code, for a buyer to revoke, he must show (1) the goods failed to conform to the contract and (2) it substantially impaired the value of the goods (this is a question of fact).

An offer may generally be revoked at any time before it has been accepted, provided that the revocation is communicated to the offeree. This is so even though the offeror has indicated that he will keep his offer open for a specified time. Where, however, the offeror has contracted to keep his offer open, revocation of that offer will amount to a breach of the contract of option. An offer can't be revoked after acceptance.

10) minor's agreement

Who is under 18 yrs that person is minor and a minor's agreement is ab initio void and that is declared by court in Mohari biwi v. Dharmodas ghosh case.

An agreement is said to be "void ab initio" if it has at no time had any legal validity.

This is the case law where Dharmodas Ghose was a minor & Mohri Bibi's husband has given him loan...
When Mohri Bibi's husband died, she demanded loan money back from Dharmodas Ghose but he denied...
The court resolved that "A contract with or by a minor is void and a minor therefore cannot bind himself by a contract as he is not competent to contract". He is not liable to pay the loan

11) free consent

A consent is said to be free when it not caused by coercion or undue influence or fraud or misrepresentation or mistake.

Elements Vitiating free Consent

1. Coercion (Section 15): "Coercion" is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

2. Undue influence (Section 16): "Where a person who is in a position to dominate the will of another enters into a contract with him and the transaction appears on the face of it, or on the evidence, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in the position to dominate the will of the other."

3. Fraud (Section 17): "Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract.

4. Misrepresentation (Section 18): " causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement".

5. Mistake of fact (Section 20): "Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void".