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Business Law Important Topics UNIT -  I INTRODUCTION TO THE CONTRACT ACT 1872 INTRODUCTION Development of Business Law Development of Law in Independent India . CONTRACT ACT 1872 Agreement And Contract: Elements of Contract Essentials of a valid contract Types of contracts OFFER AND ACCEPTANCE Types of Offer Essential Elements of valid Offer Essentials of valid Acceptance Communication and revocation of offer and acceptance  Modes of Revocation of Offer CONSIDERATION Essentials of valid consideration The Doctrine of “Stranger to a contract” “No consideration- No contract” CAPACITY TO A CONTRACT Rules regarding Minors agreements If you found this useful then share with others as sharing knowledge means gaining knowledge. If you have any doubt then use the comment section below. If you want to download this as study material, drop me a message in the below contact form and lastly if you want latest Accounting lessons, study materials, ...

Introduction: For a valid contract, the parties to a contract must have capacity i.e. competence to enter into a contract. Every person is presumed to have capacity to contract but there are certain persons whose age, condition or status renders them incapable of binding themselves by a contract. Section 11 of the Contract Act deals with the competency of parties and provides that “every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” It follows that the following persons are incompetent to contract: i) Minor ii) Person of unsound mind and iii) Person disqualified by any law to which they are subject. MINOR According to the Indian majority Act 1875 a minor is one who has not completed his or her 18th year of age. A person attains majority on completing his 18th year in India. Rules regarding Minor’s Agreement 1...

Every agreement to be enforceable at law must be supported by valid consideration. An agreement made without consideration is void and is unenforceable except in certain cases. Section 25 specifies the cases where an agreement though made without consideration will be valid. These are as follows: 1. Natural love and affection [Sec. 25 (1)]: An agreement though made with out consideration will be valid if it is in writing and registered and made on account of natural love and affection. For example: ‘A’ for natural love and affection promise to his son Rs 1000. ‘A’ puts his promise to ‘B’ in writing and registered it. This is a contract. 2. Compensation for services rendered [Sec. 25 (2)]: A agreement made without consideration may be valid. If it is a promise to compensate wholly or in part a person who has already voluntary done something for the promisor. For example: ‘A’ finds ‘B’s purse give it to him ‘B’ promises to give ‘A’ Rs 100 this is a contract. 3. Time – barre...

STRANGER TO CONSIDERATION: Under the Indian Contract Act 1872 consideration for a contract may move from the promisee or any other person i.e., a stranger to the consideration can also enforce the contract. This law established in the case of CHINAYYA V.S. RAMAYYA An old lady Laxmi Rani gifted her property to her own daughter Ramayya, with the direction to pay a certain sum of money annually to Chinayya, her maternal uncle. On the same day Ramayya executed an agreement with Chinayya agreeing to pay the amount annually. Later on Ramayya refused to honour the agreement on the ground that there is no consideration. Chinayya sued for the recovery of the annuity. It was held that there was sufficient consideration i.e., the property given to her by the sister of Chinayya. STRANGER TO CONTRACT: A stranger to contract cannot sue because he is not a party to a contract. This means that unless there is privity (relationship subsisting between the parties) of contract a party cannot ...

Introduction : Consideration is the foundation of every contract. The law enforces only those promise which is made for consideration. Where one party promises to do something it must get something in return. This something in return is called consideration. Definition: Section 2 (d) of the Indian Contract Act defines consideration as “when at the desire of the promisor, the promisee or any other person, has done or abstained from doing, or does or abstain from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise". According to Pollock , “Consideration is the price for which the promise of other is bought and the promise thus given for value enforceable.” Meaning: Consideration is something of value which the promise has given, gives or promises to give in return for the promise. It does not mean the payment of money only. It can be past or present or future. For example: ‘A’ agrees to sell...

According to Section 6 of the Act, a proposal may be revoked in any of the following ways: 1. By notice of revocation: Offer may be revoked by a communication of a notice of revocation by the offeror to the other party before acceptance is complete against the offerer himself. A notice of revocation to be effective must be communicated to the offeree. For example: At an auction sale, ‘A’ made the highest bid for ‘B’s goods. He withdrew the bid before the fall off the hammer. ‘B’ knocked down the goods in favour of ‘A’. ‘B’ sued ‘A’ for the price of goods. It was held that ‘A’s bid was no more than offer and he was entitle to withdraw the same before it was accepted. 2. By lapses of time: A proposal will come to an end by the lapse of time prescribed in such proposal for its acceptance or, if no time is so prescribed by the lapse of reasonable time. For example: ‘D’ offered to sell wool to ‘H’ on Thursday and agreed to give him three days time to accept. ‘H’ accepted the offer on ...

When the contracting parties are physically present and negotiate in person, an agreement comes into existence the moment, the offeree gives his absolute and unqualified acceptance to the proposal made by the offeror. When the parties are at a distance and the offer and acceptance are exchanged through post, rules contained in section 4 and 5 apply. These rules are discussed below: 1. Communication of an Offer (Section 4) Section 4 clearly indicated that actual communication of the offer is not necessary. It is sufficient if the offer comes to the knowledge of the offeror. Then it is for the latter to accept or reject the offer. But when an offer is sent by post, its communication will be complete when the letter making the offer reaches the offeree. The offer is completed not at eh place from where it was sent but where it was received. For example: ‘A’ proposes by letter to sell a house to ‘B’ at a certain price. The communication of the proposal is complete when ‘B’ receives ...

ACCEPTANCE When the person to whom the proposal is made signifies his assent, it is an acceptance of the proposal. An accepted proposal is called a promise or an agreement. (Section 2 (b). The person who accepts the proposal or offer is known as acceptor. The acceptor should do something to signifies his intention to accept. For example: ‘A’ offers to sell his horse to ‘B’ for Rs 500. ‘B’ accepts the offer to purchase the horse for Rs. 500. This is acceptance. ESSENTIALS OF VALID ACCEPTANCE 1. Acceptance must be absolute and unconditional: An acceptance must be unconditional & unqualified. Accepting an offer with conditions, variations and reservation amounts to counter offer and rejection of the original offer. For example: ‘M’ offered to sell land to ‘N’ at $280, ‘N’ replied accepting the offer and enclosing $30 and promising to pay the balance amount by monthly instalments of $50 each. Since ‘N’ accepted the offer subject to making payments in instalments, it was held t...

ESSENTIAL OF VALID OFFER The following are the essential elements of a Valid Offer: 1. It must be capable of creating legal relations: The offerer must intend the creation of legal relations. He must intend that if his offer is accepted a legally binding agreement shall result. Social or domestic agreement does not express a legal relation. For example: ‘A’ accepts an invitation to dine at B’s place on a certain date but fails to turn up on the appointed date, ‘A’ cannot be sued for breach of a contract, because it was the social arrangement and parties do not intend legal relation. The leading case on this point is BALFOUR V.S BALFOUR 2. It must be certain, definite and not vague: No contract can come into existence if the terms of the offer are vague or loose and indefinite. Both the parties should be clear about the legal consequences arising out of a contract. A vague offer does not convey what it exactly means. For example: The leading case on this point is TAYLOR V.S P...

Definition/Meaning of Offer: Offer or proposal is the starting point in the formation of a contract. Section 2 (a) defines proposal as “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.” The word proposal is synonymous with the English word “ Offer ”. The person making the proposal is called the proposer or offeror and the person to whom the proposal is made is called the offeree. For example: ‘A’ offers to sell his motor cycle to ‘B’ for Rs. 3,000. ‘B’ agrees to pay ‘A’ Rs 3,000 for the motor cycle. Here ‘A’ is called the offeror or promisor and ‘B’ the offeree or promise. Thus, a proposal is an expression of will or intention. A person making the proposal expresses that he is willing to contract on the terms stated in it provided the other party to whom the proposal is made will likewise express his assent to the same terms. Section 2 (a) reveals 3 essential...

Contracts may be classified on the basis of their Validity, Formation or Performance. I. Basis on Validity or Enforceability 1. Valid Contracts: An agreement enforceable at law is a valid contract. An agreement becomes a contract when all the essential of a valid contract as laid down in Section 10 are fulfilled. For example: ‘A’ offers to sell his house for Rs 5 lakhs to ‘B’. ‘B’ agrees to buy it for this price. It is a valid contract. 2. Void Contracts: An agreement which was legally enforceable when entered into but which has become void due to supervening impossibility of performance. For example: A contract between a citizen of Pakistan and India is a valid contract during peace but if war breaks out between the two countries, the agreement will become void contract. 3. Void Agreements: According to Section 2 (g), “ An agreement which is not enforceable by law by either of the parties is void.” No legal rights or obligations can arise out of a void agreement. It is...

Essentials Elements of a Valid Contract  All agreements are not contracts, only that agreement which is enforceable at law is a contract. An agreement which is not enforceable at law cannot be a contract. Thus, the term agreement is wider in scope than a contract. All agreement, to be enforceable by law, must possess the essential elements of the valid contract as contained in Section 10 of the Indian Contract Act. 1. Offer and Acceptance: In order to create a valid contract there must be a lawful offer by one party and lawful acceptance of the same by the other party. For example: ‘A’ offers to sell his motorcycle to ‘B’ for 30,000, ‘B’ agrees to pay Rs. 30,000 for the motorcycle. Here, ‘A’ is the offerer and ‘B’ is the Acceptor 2. Intention to create legal relation: In case, there is no such intention on the part of parties, there is no contract. Agreements of social or domestic nature do not contemplate legal relations. The leading case on this point is Balfour vs. Ba...

Introduction: The law relating to the contract is governed by the Indian Contract Act 1872 the Act came into force with effect from 1st September 1872. It is applicable to the whole of India except the State of Jammu & Kashmir. The Act is by no means exhaustive on the law of contract. The Indian Contract Act is divisible into two parts. The first part from section 1-75 deals with the general principles of the law of contracts, and therefore applies to all types of contracts irrespective of their nature. The second part from section 124 – 238 deals with special types of contracts namely Indemnity and Guarantee, Bailment and Pledge, Agency etc. Meaning of Law of contract: Law of contract is the most important and basic part of Mercantile Law. It is the foundation for many other laws falling in the category of Mercantile Laws. It is not only the merchant or trader but every person who lives in the organized society, consciously or unconsciously enters into contracts form ...

Introduction: Prior to 1872, business/mercantile transactions were regulated by the law of the parties to the suit (i.e. Hindu law, Mohammedan law). In 1872, the first attempt is made to codify and establish uniform principle of business law when the Indian Contract Act, 1872 was enacted. Since, then various Acts have been enacted to regulate various business transactions. The Contract Act came into force with effect from September 1, 1872. It is applicable to the whole of India except the State of Jammu & Kashmir. The Act as enacted originally had 266 Section divided into following groups: General Principle of law of Contract                               Sections 1 to 75. Contracts relating to Sales of Goods                                Section 76 to 124* Special kinds of Contracts          ...

DEVELOPMENT OF BUSINESS LAW Introduction: A vital element impacting business transactions and decisions is business regulatory framework. Different laws and regulations govern specific aspects of many vital decisions taken by business enterprise. Meaning of Law: Law denotes rules and principles established by authority whether in the form of legislation or self imposes customs applicable to people. These are enforced by state to regulate behavior of individuals and groups (e.g. Business firms) to secure justice, peaceful living and social order. Definition of Law: Austin defines law as “a rule of conduct imposed and enforced by the sovereign.” Salmond says “Law is the body of principles recognized and applied by the state in administration of justice”. Branches of Law: There are many branches of laws viz; 1. Constitutional law 2. Administration law 3. Civil law 4. Criminal law 5. Mercantile or commercial law Mercantile/Business Law: The legal frame work...