【合同法 原版教材】Contract laws - iilm

1、What is a contractA promise or a set of promises made by one person to another, which the courts will enforce.A contract intends to formalize an agreement between two or more parties, in relation to any subject matter.It is a formal culmination of the first stage of the relationship between two part

2、ies who entered into a business deal. Fundamentals of the contract lawsThe classical contracts law is founded on three essential principlesA contract is a negotiation activity.It is based on the will of parties consensus ad idem-agreementFreedom of Contract is paramount to the agreement.Foundations

3、of the modern contract lawContracts law has its foundations in the law of obligations, The law of restitution, and,The law of unjust enrichment.What does a law of contract do? Avoids litigation.Establishes set of rules for compliance.Penalizes defaulters.Freedom of contract A contract is seen as an

4、instrument of bargaining between the partiesImportantly, this bargaining activity between the parties is characterized by free bargaining without any extraneous influenceA contract is seen as an instrument of agreement between parties based upon the idea of equality.Understanding the element of free

5、dom in a contractEnsuring this strand is necessary to rule out any possibilities of inequalities in the bargaining and negotiation of a contract.Freedom of contract is ensured to understanding the primary obligations of the parties to the contractWe also need to know the element of freedom in the co

6、ntract to ensure that it is not against public policy.Essentials of a contractContract is an agreement between parties, it is understood that there is a mutual consent between the contracting parties.Mutual consent is there when the parties are in agreement about the subject matter of the contract.

7、ex: I try to sell you a BMW and you come to me with the idea that I am likely to sell you a mustang, there is no mutual consent at all, and hence no enforceable contract.Essentials of a contractOffer and AcceptanceMutual considerationPerformance of the contractGood faithNo violation of public policy

8、What does the contracts law governThe process of the formation of the contractWith regard to the performance of the contract.How is a contract formedContracts can be oral or writtenContracts can also be made through representation either express or impliedBasic considerations before the court with r

9、espect to contractsWhether the contract is a Valid Contract,Is the agreement a Void Agreement,Does the contract fall under the category of Voidable contracts,Is the contract having a subject-matter bordering on illegality or is prohibited by the law,Is it against public policy.Essentials of a contra

10、ct .Offer/proposal what it isA promise made by one party to another.Except when expressly specified, an offer can be made in any form. Although today many areas have express and standard forms of contract, ex: real estate contracts, employment contracts etc.Essentials OfferAn expression of willingne

11、ss to contract on a specific terms, made by a person, who knows that he will be bound by the contract.An offer has to be made in clear and unambiguous terms.Where more than one interpretation can be given to an offer, neither interpretation will be followed and there is no enforceable contract.Essen

12、tials OfferA counter-offer is not an acceptance of the offer.A counter-offer extinguishes the original offer and then acceptance cannot be conveyed to the original offer.Essentials OfferA request for information is not a counter-offer. You can request for information and that doesnt extinguish the o

13、ffer, and the parties are free to accept the original offer. Essentials OfferAn invitation to treat is not an offer.Goods displayed in a shop window or on a shelf. When a book is placed in a shop window priced at 7.99, the bookshop owner has made an invitation to treat. When I pick up that book and

14、take it to the till, I make the offer to buy the book for 7.99. When the person at the till takes my money, the shop accepts my offer, and a contract comes into being. Essentials OfferAdvertisements basically work in the same way as the scenario above. Advertising something is like putting it in a s

15、hop window.Auctions: The original advertising of the auction is just an invitation to treat. When I make a bid, I am making an offer. When the hammer falls, the winning offer has been accepted. The seller now has a legally binding contract with the winning bidder.Essentials AcceptanceAcceptance must

16、 be in clear and unconditional terms.Acceptance will often be oral or in writing, but in some cases an offeree may accept an offer by doing something, such as delivering goods in response to an offer to buy.The Courts will only interpret conduct as indicating acceptance if it seems reasonable to inf

17、er that the offeree acted with the intention of accepting the offer. Essentials AcceptanceWhere expressly specified, the acceptance has to be in writing, or in the manner specified in the cited instrument. For example, real estate contracts are unenforceable unless written in an express and specifie

18、d manner.An acceptance has no effect until expressly communicated to its offeror.Communication can be in both traditional and in instantaneous means.Essentials AcceptanceRemaining silent cannot amount to acceptance, unless it is absolutely clear that acceptance was intended.Brogden v Metropolian Rai

19、l Co (1877)Felthouse v Bindley (1862)Re Selectmove Ltd (1995) - The Court of Appeal pointed out that an acceptance by silence could be sufficient if it was the offeree who suggested that their silence would be sufficient.Essentials AcceptanceOffer expires, if not accepted within the specified period

20、.Offer remains open until it is withdrawn or revoked. Offer can be revoked any time before it is accepted. Express notice of withdrawal of offer is not necessary before its acceptance.Essentials Considerationsome right, interest, profit or benefit accruing to one party, or some forebearance, detrime

21、nt, loss or responsibility given, suffered or undertaken by the other. Lush J. in Currie v Misa (1875) LR 10 Exch 153.What this means is that the party trying to enforce the contract must have paid something in exchange for the promise of the other party. Essentials Consideration“An act or forebeara

22、nce of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.“ Lord Dunedin in Dunlop v Selfridge Ltd 1915 AC 847.Consideration has to be in real terms and need not be in monetary terms alone. Even exchange o

23、f promises can be a valid consideration.There can be no valid contract without consideration.Capacity to contractAny person is competent to bind himself to any contract he chooses to make, provided that it is not illegal or void for reasons of public policy.Exceptions to these are the minors, lunati

24、cs, people under the influence of intoxication.Corporations, though seen as legal person, were severely restricted in case of contractual capacity, which is largely erased out now and a corporation can enter into contracts just like any natural person. Capacity to contractThe law made special rules

25、with regard to minors capacity to contract.A contract made with a minor is binding upon the adult and not on the minor.The contract can, however, be ratified by the minor upon attaining the age of majority.There need be no consideration for ratification.A contract entered into by a minor with regard

26、 to the supply of necessaries to him for a consideration is a valid contract. Essentials.Free ConsentConsent is said to be free when There is no coercion,No undue influence on either of the contracting parties,Absence of fraud,No misrepresentation by either of the partiesNo mistake as to the determi

27、ning terms of the contract. Essentials Free ConsentCOERCIONAny act forbidden by the penal laws, unlawful detention, or threat to do so, any property, to the prejudice of any person, with the intention of causing any person to enter into an agreementEx:- A, using a threat of suicide, forces B to rele

28、ase certain properties in his favour, which B believed to be his own. B can sue A for avoiding the deed of release, as A has acted in violation of the Contracts law(Sec.15 of Act,1872).Use of coercion vitiates the contract and makes it a voidable contract. Essentials Free ConsentUNDUE INFLUENCEwhere

29、 the relations between the parties are such that one party is likely to dominate the will of the other and uses that position to obtain an unfair advantage over the other.Undue influence is said to be there when Where one person holds a real or apparent authority over the other or where he stands in

30、 fiduciary relation to the other; orWhere he makes a contract with a person suffering from a temporary or permanent mental incapacity by reason of age, illness or distress.Essentials Free ConsentFRAUDAn intentional misrepresentation of facts.Assertion of facts without belief in their truth,Active co

31、ncealment,Mere silence is no fraud, it is fraud when there is a duty to speak.Half-truths. In an absence of duty of voluntary disclosure, if a person stops mid-way disclosure, he is guilty of fraud.Promise made without an intention of performing the promise.Essentials Free ConsentMISREPRESENTATIONA

32、misstatement of a fact material to the contract. It renders the contract voidable at the option of the deceived person.Unwarranted statements positive assertion of an untrue information as true.Breach of duty any act or omission which brings an advantage to the person committing it by misleading the

33、 other to his prejudice.Inducing mistake about the subject-matterSuppression of vital facts.Essentials Free ConsentMISTAKEA mistake as to a matter of fact,Such a fact about which the parties are mistaken is essential to the contract.This factor vitiates free consent only with regard to a mistake of

34、fact, not law.MISTAKE ESSENTIAL FACTSWith regard to the identity of the parties,The identity and nature of the subject-matter, andThe nature and content of the promise itself. Void Agreements Agreement in restraint of marriage: sec. 26 Agreement in restraint of trade sec. 27Exception to an agreement

35、 in restraint of trade1. Sale of Good will2. Exception under Indian Partnership Act3. Restraint by a contract of service employmentTrade combinations Agreement in restraint of legal proceedings: sec. 2 Wagering Contracts.Performance of contractsOffer of performance is called a tenderA tender must be

36、 unconditionalMust be made at proper time and placeThe promisee must be given an opportunity to ascertain that the goods are according to the contract andWhere there are a number of joint promisees, the offer of performance may be in favour of anyone of them.Discharge of contractBy performance of th

37、e contract when both the parties have performed their obligations in the contract.By breach of contract actual breach and anticipatory breach of contractBy impossibility of performance death or incapacity of a party, doctrine of frustrationBy agreement and novation end of contractual obligations by

38、consent of parties, and substitution of the existing contract with a new one.Breach of contractWhen a party having duty to perform a contract fails to do that, or does an act whereby the performance of the contract by him becomes impossible, it is seen as breach of contract.On the breach of contract

39、 by one party, the other party is discharged from the contract.The breach may be actual non-performance of the contractual obligation on the date its performance fell due, the breach can be anticipatory before its performance was due.Anticipatory breach gives an option to the promisee to put an end

40、to the contract.Breach of contractAnticipatory breach of contract the promisee has two options.He may rescind the contract immediatelyHe may not put an end to the contract immediately, and may still wait for its performance on the appointed date, or when it fell due.The promisee has the right to ele

41、ct to rescind the contract and when he does so, he also has a right to bring an action for breach of contract.The promisee may also elect to keep the contract alive.Remedies for breach of contractDAMAGESCompensation for loss or damage caused by the breach of contract.Two factors need to be answered

42、in an action for damages for breach of contract.Whether the action is a proximate consequence of the breach of contract or was the action based on a consequence of remoteness of damage. ex: Hadley v. Baxendale (1854)Remedies for breach of contract2. If the damage was found to be a result of the prox

43、imate consequence of breach of contract, then the next question would be the quantum of compensation. What is the measure of damage?Quantum of damages is based on the idea of making good the loss suffered by the promisee and to put him in the same position in which he would have been if the breach h

44、ad not occurred and the contract performed.Remedies Damages are ascertained as on the date of breach of contract.Non-ascertainment with certainity or precision does not absolve the party defaulting on the contract, from paying up adequate damages.The plaintiff is under a duty to mitigate the loss co

45、nsequent upon the breach of contract, which means he cannot claim any sum which is arising out of an act attributed to his own neglect.The burden of proof with regard to steps taken to mitigate the loss is on the plaintiff.RemediesLiquidated damages parties themselves might decide at the time of the

46、 formation of contract as to the amount payable to the other, in the event of a breach of contract. In this case, the plaintiff can recover the said agreed amount without having to prove the quantum of loss suffered by him.If the amount fixed is excessive and highly disproportionate to the likely lo

47、ss, the amount is fixed in terrorem, with a view to discouraging breach, and is known as penalty.Remedies.QUANTUM MERUITwhere a contract could not be completed by the promisor, because of the breach of contract, by the other party, he can bring in an action to claim compensation for the part-perform

48、ance.This remedy is available only for the part of the work done by the party other than the one making a breach of contract.It is not an action for compensation for breach of contract, but just an action for restitution, for compensation for the part performance of the contract. Remedies.Essentials

49、 of an action for quantum meruit - One of the parties make a breach of contract, or prevents the performance of it by the other side.The party injured by the breach of the contract, who has already performed a part of it, elects to be discharged from further performance of the contract, and brings a

50、n action for recompense for the value of work already done.Law of agencyWho is an agentA person employed to do any act for another or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the principal.Where the agent is duly au

51、thorized to do a particular act on behalf of the principal, the principal is bound by such act with the third party as if the principal had done the act himself.If my agent sells my house to the third party, I am bound by such sale to the third party.Different kinds of agentsAUCTIONEERSan agent with

52、 business to sell property by public sale and is seen as a mercantile agent under the Sale of Goods Act. Where the auctioneer has got the rightful possession of the goods from the owner, even if he did not have the permission to sell them, an innocent buyer from the auctioneer will still get a good

53、title in respect of those goods. An auctioneer will not give any warranties on behalf of the seller, unless expressly authorized to do so.Different kinds of agentsFACTORSA factor is a mercantile agent who is entrusted with the possession of the goods for the purpose of sale. He has the power to sell

54、 goods on credit and also receive price from the buyer.A factor has a general lien over the goods of his principal, which are in his possession, for the general balance of the account.BROKERAGE HOUSE AGENTS - A broker negotiates a sale. Unlike a factor, he doesnt have possession of the goods, and on

55、ly get his commission from his principal.CREATION OF AGENCYBy actual authority,In an emergency situation,By estoppel,By ratificationWhere an employer agrees to collect the LIC premium from the salary of his employees and transmit it to the LIC, he is an LIC agent for that purpose, and is under legal

56、 liability for that purpose. (DESU v. Basanti Devi 2000 SC)CREATION OF AGENCYRATIFICATIONPrincipal is bound by the act done by his agent, even without authority, if he ratifies such act and accords subsequent approval.Such ratification should be for an act done on behalf of another.(Keighley, Maxste

57、d&Co. V.Durant)Principal should be in existence and competent to contract. (Kelner v. Baxter)Ratification with full knowledge of the facts.ratification of the entire transaction and not in bits and pieces.CREATION OF AGENCYRATIFICATIONRatification cannot be injurious to a third person. For example,

58、a party to the contract cannot ratifiy the acts of an unauthorized person, in a manner detrimental to the rights of a third person.Ratification can be both express and implied in the conduct of the person on whose behalf the acts are done.EFFECT OF RATIFICATION OF AGENCYThe same effects follow as if

59、 the act has been done with the principals knowledge and prior authority.The date of making the contract by the agent, and not the date of ratification by the principal, becomes the date of reckoning for the contract.Where the agent acts with a rider, adds subject to ratification clause, the date of

60、 contract would be the date of ratification.Rights Of Principal And Agent Inter SePrincipal can demand that the agent should not delegate his duties delegatus non potest delegare.A sub-agent may be appointed in the following exceptional circumstances:Where there is a customary rule to that effect,Wh