 What is a Contract?

 Agreement enforceable by law

 An agreement creating and defining
obligations between the parties. It affects
every person in one way or the other, as all of
us enter into some kind of contract everyday.

Uma Nagarajan,IBS Guragon

 A promises to meet his friend B for a cup of
coffee at 6 pm in the evening
 A takes a seat in a public bus
 A promises to deliver 500 bags of wheat to B
at a reasonable price on July 1st
 A promises to deliver 500 bags of wheat to B
at Rs 35 per kg on July 1st 2022.
 A promises to marry B
 A promises to pay B Rs 10,000 if B beats C.

Uma Nagarajan,IBS Guragon

 A promises to meet his friend B for a cup of
coffee at 6 pm in the evening-No
 A takes a seat in a public bus -Yes
 A promises to deliver 500 bags of wheat to B
at a reasonable price on July 1st- No
 A promises to deliver 500 bags of wheat to B
at Rs 35 per kg on July 1st 2022.-Yes
 A promises to marry B-Yes
 A promises to pay B Rs 10,000 if B beats C.-
No

Uma Nagarajan,IBS Guragon

 Contract = Agreement + Enforceability by law

 Agreement =Offer+Acceptance

 Consideration

Uma Nagarajan,IBS Guragon

 Is a proposal by one party to another to enter
into a legally binding agreement.(at least two
parties)

Uma Nagarajan,IBS Guragon

 Definite and unambiguous
 Mere announcement, display or declaration of
intention is not an offer.
 Tender is an offer
 Cannot contain a term of non compliance which
may be assumed to be acceptance
 Communication- express(s) or implied
 Lalman Shukla Vs Gauri Dutt (1913)

Uma Nagarajan,IBS Guragon

 Invitation to birthday party-not an offer
 I will give you ahouse on rent of Rs 30,000 pm ,the house will be
handsomely decorated and the drawing rooms neatly furnished. A
enters into an agreement with B agreeing to buy petrol from B at a
price to be agreed upon by both parties from time to time
 Auction advertisement in newspaper; goods displayed in a store is
not an offer.
 If you don’t reply,I will assume it is a valid offer(This kind of
statement is not acceptable and does not constitute an offer)
 Lalman Shukla Vs Gauri Dutt (1913)

Uma Nagarajan,IBS Guragon

An offer lapses:
 After stipulated or reasonable time
 Death or insanity of the offeror
 If revoked(taken back)
 By counter-offer.
 Not being accepted in the mode prescribed
 When a condition in the offer is not accepted.

Uma Nagarajan,IBS Guragon

 When the offeree shows willingness to be
bound by the terms of the offer,it is
acceptance

Uma Nagarajan,IBS Guragon

 Absolute and unqualified
 Acceptance must be given by the person to whom
the offer is made
 Cannot be implied by silence
 Cannot precede the offer and must be given before
offer lapses.
 Within reasonable time
 Ramsgate Victoria Hotel Co vs Montefiore
 Must be communicated to the offeror
 Felthouse v. Bindley

Uma Nagarajan,IBS Guragon

 Offer made for Rent house from 25th July;Acceptance made
for occupying from 1st august.Offer made to buy a car for
10,00,000.Acceptance made to pay in installments of 1,00,000
each
 Felthouse v. Bindley
 Ramsgate Victoria Hotel Co vs Montefiore - Asked for shares
on June 8th,allotted on November 23rd.

Uma Nagarajan,IBS Guragon

 Something in return (quid pro quo)-

 Initiated by the promisor

 An act,an abstinence or return promise
 Past,present or future
 Need not be adequate
 Can move from promisee or any other person
 (Chinayya vs Ramayya)

Uma Nagarajan,IBS Guragon

 Offer and Acceptance
 Lawful consideration:
 Intention to create a legal relationship
 (Balfour vs Balfour,1919)
 Capacity or competency of parties
 Free and genuine consent(Consensus ad idem)
 Lawful object
 Not expressly declared void
 Legal formalities

Uma Nagarajan,IBS Guragon

 Offer and Acceptance :

 Capacity or competency of parties

 Major;sound mind;not disqualified from entering
into a contract
 Free and genuine consent
 Consensus ad idem -Agree about the subject
matter in the same mind in the same sense. No
coercion, fraud, misrepresentation
 Lawful Object: must not be illegal or immoral
 Not expressly declared void: should not be
declared void by any law(goods banned for import)
 Legal formalities
 Can be oral or written;stamped or regd in cases
where there is a statutory requirement
Uma Nagarajan,IBS Guragon
Uma Nagarajan,IBS Guragon
 Carlill vs Carbolic Smoke Ball(1893)

 We did not make an offer to any specific person

 The plaintiff(Carill) never communicated any
acceptance
 We received no consideration

 Definite offer not vague

 Depositing money shows seriousness
 If the conditions of an offer are fulfilled,you do not
have to communicate acceptance
Uma Nagarajan,IBS Guragon
1) A hires B for a mowing his lawn and promises to
pay a remuneration of Rs 1,000 pm fixed by C.
2) A is drowning in a river and B saves him. A
promises to pay B Rs 2,000.Is this a contract?
3) M mows D’s lawn without being asked to do so.D
watches M do the work,but does not stop
him.Does D have to pay M for the work?
4) A promises to pay B Rs 15,000 for appearing in
court and testifying on his behalf.B has already
received a summons from court.
5) A tells B “I will not pay you the commission I
promised for selling my magazines.You are minor
and cannot force me to pay”
Uma Nagarajan,IBS Guragon
 1)There is a contract between A and B and A
is bound to pay the remuneration
 2)Yes.It is a verbal contract
 3)Yes,M has to pay D a remuneration. (Case
in point:When a coolie picks up the luggage
in the railway station and carries it to the
train,we have to pay even if we never asked
him for help with our luggage!)
 4)No there is no valid contract and B cannot
sure if A refuses to pay.
 5)No,A has to pay B.A minor can be a
beneficiary/promise ,not a promisor.

Uma Nagarajan,IBS Guragon

 According to validity
 According to formation
 According to performance

Uma Nagarajan,IBS Guragon

 According to validity:

 Voidable contract
 Void Agreement
 Void Contract
 Illegal agreement:
 Unenforceable contract

Uma Nagarajan,IBS Guragon

 According to validity

 Voidable contract:
 An agreement enforceable at the option of
one party,but not at the option of the other.
 Coercion,misrepresentation,fraud,no free
consent. (Ranganayakkama vs Alwar Setti)
 When time runs out
 When one person prevents the other from
doing the work.

Uma Nagarajan,IBS Guragon

 Void Agreement :void from beginning(minor)
 (Mohiri bibi vs Dharmadas Ghosh)

 Void Contract :not enforceable in the court of

law
 Taylor v Caldwell (1863)

 Illegal agreement:

 Unenforceable contract-sale of house(not in

writing)
Uma Nagarajan,IBS Guragon
 According to formation

 Express-spoken or written
 Implied-implied by action
 Quasi (ground of equity)
 E commerce contract (via internet)

Uma Nagarajan,IBS Guragon

 Quasi contract:
 The term `quasi contract` is a ` contract which
resembles that created by a contract.` ;is not a
contract in the strict sense because there is no real
contract in existence and no intention of the
parties to enter into a contract
 Reimbursement of person paying money due by
another
 Liability of person to whom money is paid, or
thing delivered by mistake or under coercion

Uma Nagarajan,IBS Guragon

 According to Performance

 Executed contract
 Executory contract/Bilateral Contracts
 Unilateral Contract
 (Coolie)

Uma Nagarajan,IBS Guragon

 Executed contract:
 A goes to the coffee shop and buys a cup of coffee. He buys
the coffee in exchange for the cash . This is an executed
contract.( when the act in the contract has been performed by
both parties and consideration paid)

 Executory: terms of contract will be fulfilled at some future

date.A and B sign an agreement where A agrees to paint B’s
portrait and B agrees to pay him Rs 20,000 for it.B pays him
an advance of Rs 5,000.The contract will not be executed till
A paints the portrait and B pays the balance amount.

 Unilateral Contract:The offer clearly states that payment is

made only after a party's performance.Eg:contract with coolie
in a railway station.

Uma Nagarajan,IBS Guragon

 Breaking the obligation which a contract
imposes.
 When a party to the contract does not fulfil
his contractual obligation and has no legal
excuse for it or by his own act makes it
impossible to perform the obligation.

Uma Nagarajan,IBS Guragon

 Breach may be:
 Actual Breach of contract
 Anticipatory or constructive breach of
contract

Uma Nagarajan,IBS Guragon

 Actual Breach of contract
 One party fails or refuses to perform his
obligation.

 When performance is due (A has to deliver 5 kgs of rice

on 1st January,but refuses to do so.)
 During the performance of the contract
 Express: A has to deliver 5,000 kgs of rice in 10
instalments. He refuses to deliver after 4 instalments
 Implied (impossibility created by the act of a party to
the contract; A has to deliver 5,000 kgs of rice in 10
instalments, but he has already sold all the rice)

Uma Nagarajan,IBS Guragon

 Anticipatory Breach of contract
 Declares his intention of not performing the
contract before the performance is due

 Express:
 A promises to sell a house to B at the end of 7 years,but
he refuses to do so at the end of the third year

 Implied:
 A promises to sell a house to B at the end of 7 years,but
A sells it to C at the end of the third year

Uma Nagarajan,IBS Guragon

 The means given by the law for enforcement
of the right.

Uma Nagarajan,IBS Guragon

 Rescission of the contract
 Suit upon quantum merit
 Suit for specific performance
 Suit for injunction
 Suit for damages

Uma Nagarajan,IBS Guragon

 Rescission of the contract:

 A promises to supply 5 bags to rice to B.When A does

not supply it,B can treat the contract as rescinded and
refuse further performance.

Uma Nagarajan,IBS Guragon

 Suit upon quantum merit:

 Quantum meruit is a claim under quasi-contract.

 Compensates a party for a work that they have done or
services they have provided to another party.

 Void agreement/contract
 Prevents contract completion
 Divisible contracts
 Indivisible contracts

Uma Nagarajan,IBS Guragon

 If A sells his car to B not knowing that his car has been
stolen, then A will have to return the money to B
because the contract becomes void.
 A agrees that B should mow his lawn every week,but A
prevents B from doing the work by asking home to
come later.
 A singer and a music director enter into a contract for
10 shows.After 6 concerts,the music director refuses to
go ahead with the contract.The singer can claim the
amount for the 6 shows.
 A writes a book for B for Rs100,000.When most of the
work is completed B withdraws the contract.

Uma Nagarajan,IBS Guragon

 Suit for specific performance

 If damages are not seen as the right remedy,then

court will order specific performance

 SRK Movie contract

Uma Nagarajan,IBS Guragon

 Suit for injunction

 To stop or restrict ,ie,Breach of negative term

Uma Nagarajan,IBS Guragon

 Suit for damages-Money

 Arising naturally-ordinary - Hadley vs Baxendale ( 1854)

 Special Damages (Simpson vs London & N.W.Rail Co)
 Vindictive(Punitive) /Exemplary (Marriage/Cheque)
 Pre agreed damages

Uma Nagarajan,IBS Guragon

 A promises to sell his piano to B for Rs 5,000.B
refuses and offers to buy it for Rs 2,000.A agrees.On
the day of delivery A gets an offer for the piano from
C for 10,000.He sells it to C.Can B sue for breach of
contract?
 A agreed to set up a plant for B for Rs 10,00,000.The
contract stipulated that A would pay B Rs 20,000 for
every month of delay beyond the agreed date.The
plant was delayed by three months.B sued for Rs
200,000 which was his actual loss.Is this justified?

Uma Nagarajan,IBS Guragon

 A is liable to pay damages to B for failture to carry
out his part of the contract.
 No,B can only claim the pre agreed amount in the
contract,ie, 20000*3 = 60,000

Uma Nagarajan,IBS Guragon