UNIT – 1 | unit 1 the indian contract act 1872 general principals of law contract

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UNIT – 1

INDIAN CONTRACT ACT, 1872 PART 1

What is the difference between agreement and contract?

ANS

CONTRACT	AGREEMENT
A contract is an agreement that's enforceable by law.	A promise or variety of promises that aren't contradicting and are accepted by the parties involved is an agreement.
A contract is merely legally enforceable.	An agreement must be socially acceptable. It should or might not be enforceable by the law.
A contract should create some legal obligation.	An agreement doesn’t create any legal obligations.
All contracts also are agreements.	An agreement may or might not be a contract.

2. Explain the classification of contracts ?

ANS

1. On the idea of validity

a) Valid contract: An agreement which has all the essential elements of a contract is named a legitimate contract. A legitimate contract is often enforced by law.

b) Void contract: A void contract may be a contract which ceases to be enforceable by law. A contract when originally entered into could also be valid and binding on the parties. It’s going to subsequently become void. There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is against "Public Policy" under any contract— than that contract itself can't be enforced under the law-

c) Voidable contract: An agreement which is enforceable by law at the option of 1 or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it's repudiated by the aggrieved party.

d) Illegal contract: A contract is against the law if it's forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to an individual or property of another, or court regards it as immoral or against public policy. These agreements are punishable by law. These are void-ab-initio.

“All illegal agreements are void agreements but all void agreements aren't illegal.

e) Unenforceable contract: Where a contract is good in substance but due to some technical defect can't be enforced by law is termed unenforceable contract. These contracts are neither void nor voidable.

2. On the idea of formation

a) Express contract: Where the terms of the contract are expressly prescribed in words (written or spoken) at the time of formation, the contract is claimed to be express contract

b) Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is formed otherwise than in words, promise is claimed to be implied.

c) Quasi contract: A contract is made by law. Thus, quasi contracts are strictly not contracting as there's no intention of parties to enter into a contract. It’s legal obligation which is imposed on a celebration that is required to perform it. A contract is predicated on the principle that an individual shall not be allowed to complement himself at the expense of another.

3. On the idea of Performance

a) Unilateral contract: A agreement is one during which just one party has got to perform his obligation at the time of the formation of the contract, the opposite party having fulfilled his obligation at the time of the contract or before the contract comes into existence.

b) Bilateral contract: A contract is one during which the requirement on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts also are referred to as contracts with executory consideration.

4. On the bases of execution

a) Executed contract: An executed contract is one during which both the parties have performed their respective obligation.

b) Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract.

5. Other Contracts

Besides the above said classification, there are other kinds of contract also. Contingent Contract is one such type.

3. What are the essential rules of a valid offer and acceptance?

ANS

RULES OF VALID OFFER

Here are some of the few essentials that make the offer valid.

1] Offer must create Legal Relations

The offer must cause a contract that makes legal relations and legal consequences just in case of non-performance. So, a social contract which doesn't create legal relations won't be a valid offer. Say for instance a dinner invitation extended by A to B isn't a valid offer.

2] Offer must be clear, not vague

The terms of the offer or offer should be very clear and definite. If the terms are vague or unclear, it'll not amount to a valid offer. See example the following offer – A offers to sell B fruits worth Rs 5000/-. This is often not a valid offer since what sorts of fruits or their specific quantities aren't mentioned.

3] Offer must be communicated to the Offeree

For an offer to be completed it must be clearly communicated to the offeree. No offeree can accept the offer without knowledge of the offer. It makes clear that acceptance in ignorance of the offer doesn't amount to acceptance.

4] Offer could also be Conditional

While acceptance can't be conditional, an offer could be conditional. The offeror can make the offer subject to any terms or conditions he deems necessary. So, A offers to sell goods to B if he makes half the payment in advance. Now B can accept these conditions or make a counteroffer.

5] Offer cannot contain a Negative Condition

The non-compliance of any terms of the offer cannot result in automatic acceptance of the offer. Hence it cannot say that if acceptance isn't communicated by a particular time it'll be considered as accepted. Example: A offers to sell his cow to B for 5000/-. If the offer isn't rejected by Monday it'll be considered as accepted. This is often not a valid offer.

6] Offer is often specific or general

As we saw earlier the offer are often to at least one or more specific parties. Or the offer might be to the public generally.

7] Offer could also be Expressed or Implied

The offeror can make an offer through words or maybe by his conduct.

An offer which is formed via words, whether such words are written or spoken (oral contract) we call it an express contract and when an offer is formed through the conduct and therefore the actions of the offeror it's an implied contract.

RULES FOR VALID ACCEPTANCE

Acceptance must be absolute and unconditional
Acceptance by usual mode as desired by the offer or
Acceptance cannot precede the offer
Acceptance could also be express or implied
Acceptance must tend within an inexpensive time
Acceptance must be by an ascertained person (offeree)
Offer can't be accepted after it had been rejected unless it's renewed
Silence doesn't imply acceptance
Acceptance must be made before the lapse or revocation of the offer
Acceptance of offer means acceptance of all terms attached to the offer
An agreement not enforceable by law is claimed to be void.

4. What is contractual capacity?

ANS

The parties who enter into a contract must have the capacity to do the contract.

“Capacity “here means competence of the parties to enter into a legitimate contract. According Sec 10, an agreement becomes a contract if it's entered into between the parties who are competent to contract.

According Sec .11, every person is competent to contract who

Is of the age of majority according to the law to which he's subject
Is of sound mind
Is not qualified from contracting by any law to which he's subject.

Thus Sec. 11 declares following persons to be incompetent to contract:

1. Minors

2. Persons of unsound mind

3. Persons disqualified by any law to which they're subject.

1. MINORS

According to Sec 3 of the Indian Majority Act, 1875, a minor is a person who has not completed eighteen years of age.

In following cases he attains majority after 21 years aged

Where a guardian of minor person or property has been appointed under guardians and wards act,1890
Where the superintendence of minor’s property is assumed by a court of wards.

The position of minor as regards his agreements could also be summed up as under:

An agreement with or by a minor is void
He is often a promisee or beneficiary.
His agreement can't be ratified by him on attain the age of majority.
If he has received any benefit under a void agreement, he can't be asked to compensate or buy it.

2. PERSONS OF UNSOUND MIND

One of the essential conditions of competency of parties to a contract is that they ought to be of sound mind.

Sec 12 lays down the soundness of mind “A person is said to be of sound mind for the purpose of making the contract if, at the time when he makes it, he's capable of understanding it and of forming a rational judgment as to its effect upon his interests.

A person, who is usually of unsound mind but occasionally of sound mind, may make a contract when he's of sound mind.

A person, who is typically of sound mind but occasionally of unsound mind, might not make a contract when he's of unsound mind

E.g.: an individual may be a lunatic, who is at intervals of sound mind, may contract during those intervals.

Soundness of minds depends on two facts:

His capacity to know the contents of the business concerned,
His ability to make a rational judgment on its effect on his interests.
If an individual is incapable of both, he suffers from unsoundness of mind.

CONTRACTS OF PERSONS OF UNSOUND MIND

Lunatics: A lunatic may be a one that is mentally deranged due to some strain or personal experience. He suffers from intermittent intervals of sanity and insanity. He can enter contracts during the amount when he's of sound mind.
Idiots: An Idiot may be a one that has completely lost his mental powers. He doesn't exhibit understanding of even ordinary matters. Idiocy is permanent lunacy denotes periodical insanity with lucid intervals. An agreement of an idiot like that of minor is void.
Drunken or intoxicated persons: A drunken or intoxicated person suffers from temporary incapacity to contract i.e. at the time when he's so drunk or intoxicated that he's incapable of forming a rational judgment. The position of a drunken or intoxicated person is analogous thereto of a lunatic.

3. PERSONS DISQUALIFIED BY ANY LAW TO WHICH THEY'RE SUBJECT

Alien Enemies: An Alien (the subject of foreign state) is an individual who isn't subject of the Republic of India. He could also be Alien friend of Alien enemy.
Foreign sovereigns, their diplomatic staff and accredited representatives of foreign states: they need some special privileges and usually can't be sued unless of their own undergo the jurisdiction of our law courts. But an Indian citizen has got to obtain a previous sanction of central govt. So as to sue them in our law courts.
Corporations: an organization is a man-made person created by law, having a legal existence aside from its members. It may be available to existence by a legislative act of legislature or by registration under the companies’ Act, 1956.
Insolvents: When a debtor is adjudged insolvent, his property vests within the official receiver or official assignee. As such insolvent is bereft of his power to deal therein property.
Convicts: A convict when undergoing imprisonment is incapable of getting into contract.

5. What are the different modes of discharge of a contract ?

ANS

MODES OF DISCHARGE OF CONTRACT

Discharge by performance.
Discharge of Contract by Substituted Agreement.
Discharge by lapse of your time.
Discharge by operation of law.
Discharge by Impossibility of Performance.
Discharge by Accord and Satisfaction.
Discharge by breach.

Discharge by performance

Where both the parties have either carried out or tendered (attempted) to carry out their obligations under the contract, is mentioned as discharge of the contract by performance. Because performance by one party constitutes the occurrence of a constructive condition, the other party’s duty to perform is additionally triggered, and thus the one that has performed has the proper to receive the other party’s performance. The overwhelming majority of contracts are discharged during this manner.

Discharge of Contract by Substituted Agreement

A contract emanates from an agreement between the parties. It thus follows that; the contract must even be discharged by agreement. Therefore, what's required, inevitably, is mutuality. Discharge by substituted agreement arises when a contract is abandoned, or the terms within it are altered, and both the parties are in conformity over it.

For example, A and B enter into some agreement, and A wants to change his mind and to not perform his terms of the contract. If he does this unilaterally then he are getting to be in breach of contract to B. However, if he approaches B and states that he would adore to be released from his liabilities under the contract then the latter might agree. Therein case the contract is claimed to be discharged by (bilateral) agreement. In effect B has promised to not sue A if he doesn't perform a neighborhood of the contract and thus the consideration for his promise could also be a‘s promise to not sue B. Discharge by agreement may arise within the subsequent ways.

Novation: The term novation implies the substitution of a fresh contract for the first one. This arrangement could even be either with the same parties or with different parties. For a novation to be valid and effective, the consent of all the parties, including the new one(s), if any, is vital. Moreover, subsequent or second agreement must be one capable of enforcement in law, the consideration that is that the exchange of promises to not enforce the first contract.
Rescission: This refers to cancellation of all or few the fabric terms of the contract. If the contracting parties mutually decide to do so, the respective contractual obligations of the parties stand terminated.
Alteration: This refers to a change in one or more of the terms of a contract with the consent of all the contracting parties. Alteration results in a replacement contract but parties thereto remain the same. Here the assumption is that both the parties are to understand a fresh but different enjoy the new agreement. Remission this means the acceptance (by the promisee) of a lesser sum than what was contracted for, or a lesser fulfillment of the promise made. As per Section 63, ‘every promisee may (a) remit or dispense with it, wholly or partially, or (b) extend the time of performance, or (c) accept the opposite satisfaction instead of performance’.
Waiver: The term waiver implies abandonment or relinquishment of a right. Where a party deliberately abandons its rights under the contract, the other party is released of its obligations, otherwise binding upon it.

Discharge by lapse of your time

A contract stands discharged if not enforced within a specified period called the ‘period of limitation‘. The Limitation Act, 1963 prescribes the duration of limitation for various contracts. As an example , period of limitation for exercising right to recover an immovable property is twelve years, and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt isn't recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of your time.

Discharge by Impossibility of Performance

Sometimes after a contract has been established, something might occur, though not at the fault of either party, which can render the contract impossible to perform, or illegal, or radically different from that originally undertaken.

However, if whatever happens to prevent the contract from being performee has not been caused by either party couldn't are foreseen, and its effect is to destroy the thought of the contract then the courts will, generality, state that the contract has become impossible to perform. If that happens then the contract is discharged and neither party will have any liability there under. Section 56 of the Indian Contract Act clearly provides that an agreement to undertake to an act impossible in itself is void

The performance of a contractual obligation may become subsequently impossible on sort of grounds.

They include the next

• Objective impossibility of performance

• Commercial impracticability

• Frustration of purpose

• Temporary impossibility

Discharge of operation of law

A contract stands discharged by operation of law within the subsequent circumstances.

Unauthorized material alteration of a document

A party can treat a contract discharged (i.e., from his side) if the other party alters a term (such as quantity or price) of the contract without seeking the consent of the previous.

Statutes of Limitations

A contract stands discharged if not enforced within a specified period called the ‘period of limitation’. The Limitation Act, 1963 prescribes the duration of limitation for various contracts. As an example , limitation period for exercising right to recover an immovable property is twelve years and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt isn't recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of your time.

Insolvency

A discharge in bankruptcy will ordinarily bar enforcement of most of a debtor’s contracts.

Merger

A contract also stands discharged through a merger that happens when an inferior right accruing to party during a contract amalgamates into the superior right ensuing to an equivalent party. As an example, a hires a factory premises from B for a couple of manufacturing activity for a year, but 3 months before the expiry of lease purchases that very premises. Now since A has become the owner of the building, his rights associated with the lease (inferior rights) subsequently merge into the rights of ownership (superior rights). The previous rental contract ceases to exist.

Discharge by Accord and Satisfaction

To discharge a contract by accord and satisfaction; the parties must suits accept performance that's different from the performance originally promised. It’s getting to be studied under the next sub-heads.

Accord

An accord is an executor contract to perform an act which can satisfy an existing duty. An accord suspends, but doesn't discharge, the primary contract.

Satisfaction

Satisfaction is that the performance of the accord, which discharges the primary contractual obligation.

If the obligor refuses to perform the oblige can sue on the primary obligation or seek a decree for performance on the accord.

BREACH OF CONTRACT

A contract is breached or broken when any of the parties fails or refuses to perform its promise under the contract. Breach of contract is a legal cause of action in which a binding agreement is not honoured by one or more parties by non-performance of its promise by him renders impossible.

Section 37 of the Indian Contract Act,1872 provides that the parties to the contract are under obligation to perform or offer to perform, their respective promises under the contract, unless such performance is dispensed with or excused under the provisions of the Indian Contract Act or of any other law.

According to Section 39, where the party has refused to perform or disabled himself from performing, his promise in its entirely, the other party may put an end to the contract,, unless that other party has expressly or impliedly signified its consent for the continuance of contract. If the other party chooses to put an end to the contract, the contract is said to be broken and amounts to breach of contract by the party not performing or refusing to perform its promise under the contract. This is called repudiation. Thus, repudiation can occur when either party refuses to perform his part or makes it impossible for him to perform his part of contract in each of the cases in such a manner as to show an intention not to fulfil his part of the contract.

6.What are the different types of remedies ?

ANS

TYPES OF REMEDIES

Suit for rescission
Suit for damages
Suit for quantum meruit
Suit for performance
Suit for an i injunction

SUIT FOR RESCISSION

The term Rescission refers to the cancellation of contract.

In such cases, if one party has broken his contractual relations, the opposite party may treat the breach as discharge and refuse to perform his part of performance.

Thus, just in case of rescission of contract, the aggrieved or casualty is discharged from all his obligations of the contract.

UNDER FOLLOWING CASES THE COURT MAY REFUSE TO GRANT RESCISSION:

• The parties can't be restored to their original positions thanks to changed circumstances.

• The party(s) has acquired rights in straightness and value during subsistence of contract.

• Only a neighborhood of the contract is rescinded and this part can’t be separated from remainder of the contract.

• But if an individual rightfully rescinded, he's entitled to compensation for any damage which he has sustained through non fulfillment of the contract by the opposite party.

EXAMPLE:

'A' contract to provide 10kg of tea leaves for Rs.8, 000 to 'B' on 15 June. If 'A' doesn't supply the tea leaves on the appointed day, 'B' needn't pay the worth. 'B' may treat the contract as rescinded and should sit quietly reception. 'B' can also file a ‘suit for rescission’ and claim damages. 12 A B Breach of contract when ‘A’ don’t supply to ‘B

SUIT FOR DAMAGES

Damages are a monetary compensation allowed to the casualty for the loss or injury suffered by him as results of the breach of contract. The elemental principle underlying damages isn't punishment but to compensate the aggrieved party for the loss suffered by him within the original position as he would fare.

Rules regarding damages

• The damages must naturally arise within the usual course of things from such breach i.e. the damages must be the proximate or direct consequence of the breach of contract.

• The aggrieved party must have suffered damages by breach of contract.

• Damages are awarded to compensate the loss caused by a celebration but to not punish the party at default for the breach of contract.

• Amount of damages is often decided at the time of agreement by the mutual consent of both the parties.

Types of damages

• Ordinary

• Special

• Exemplary

• Nominal damages

• Damages for inconvenience and discomfort

• Liquidated damages and penalty

• Stipulation for interest

• Forfeiture of margin there are 8 sorts of damages

EXAMPLE: Mr. A to pay 3 lacs to Mr. On 1st April. Mr. Doesn't pay the cash thereon day. Mr. B is unable to pay her debts and suffer a loss. Mr. A is susceptible to pay B principal amount and also interest thereon. 16 A B Breach of contract when ‘A’ don’t give money to ‘B’. Payable money

SUIT FOR QUANTUM MERUIT

It means “AS much as EARNED” or “in proportion to the work done.”

Right to ‘Quantum Meruit’ literally means a right to say the compensation for the work already done.

EXAMPLES Mr. Engages Mr. a contractor, to create a 3 storied house. After a neighborhood is made ‘A’ prevents ‘B’ from working any longer. ‘B’ the contractor, is entitled to urge reasonable compensation for work done under the doctrine of quantum merit additionally to the damages for breach of contract. 18 Breach of contract when ‘A’ told ‘B’ to prevent building construction. A B

SUIT FOR PERFORMANCE

Suit for performance means demanding the court’s direction to the defaulting party to hold out the promise consistent with the terms of contract Cases where suit for performance isn't maintainable

i. Where compensatory damages arising from breach aren't measurable

Ii. Where monetary compensation isn't an adequate remedy.

Example agreed to sell an old painting to Y for Rs50, 000. Subsequently, X refused to sell the painting. Here, Y may file a suit against X for the precise performance of the contract.

SUIT FOR INJECTION

It means demanding court’s stay order.

An order of the court which prohibits an individual to try to a specific act

A party to a contract does something which he presumed to not do, the court may issue an order prohibiting him from doing so.

EXAMPLES: A, a singer contracts with B the Manager of a theatre to sing at his theatre for one year and to abstain from Singing at other theatres during the theatre. She absents herself, B cannot compel A to sing at his theatre, but he may sue her for an injunction restraining her from Singing at other theatres.

G agreed to require the entire of his supply of electricity from a particular company. The agreement was held to import a negative promise that he would take none from elsewhere. He was, therefore, restrained by an injunction from buying electricity from the other company.

7. EXPLAIN THE LAW OF CONTRACT

ANS

The Indian Contract Act, 1872 prescribes the law regarding contracts in India and is that the key act regulating Indian law.

The Act relies on the principles of English Common Law. It’s applicable to all or any the states of India. It determines the circumstances during which promises made by the parties to a contract shall be legally binding.

Under Section 2(h), the Indian Contract Act defines a contract as an agreement which is enforceable by law.

OBJECTIVE OF THE ACT

The purpose of the Contract Act is to make sure that the rights and obligations arising out of a contract are honored which legal remedies are made available to an aggrieved party against the party failing to honor his a part of agreement. The Indian Contract Act makes it obligatory that this is often done and compels the defaulters to honor their commitments.

EXTENT AND COMMENCEMENT

It extends to the entire of India except the State of Jammu and Kashmir
It came into force on the primary day of September, 1872.
The sale of goods was repealed from this Indian Contract Act in 1930. Contracts regarding partnership were repealed in 1932.

DEVELOPMENT

The Act as enacted originally had 266 Sections, it had wide scope

General Principles of Law of Contract – Sections 01 to 75
Contract regarding Sale of goods – Sections 76 to 123
Special Contracts- Indemnity, Guarantee, Bailment & Pledge and Agency – Sections 124 to 238
Contracts concerning Partnership – Sections 239 to 266

At present the Indian Contract Act could also be divided into two parts:

Part 1: deals with the overall Principles of Law of Contract Sections 1 to 75
Part 2: deals with Special sorts of Contracts like Contract of Indemnity and Guarantee and Contract of Bailment and Pledge

STEPS INVOLVED WITHIN THE CONTRACT

1. Proposal and its communication

2. Acceptance of proposal and its communication

3. Agreement by mutual promises

4. Contract

5. Performance of Contract

8. WHAT IS COUNTER OFFER?

ANS

A counteroffer may be a response given to an initial offer. A counteroffer means the initial offer was rejected and replaced with another one. The counteroffer gives the first offerer three options: accept the counteroffer, reject it, or make another offer.

There is typically no binding contract between the parties involved until one accepts the other's offer. Counteroffers are prevalent in many types of business negotiations, transactions, and private deals between two individuals. You’ll find them in land deals, employment negotiations, and car sales.

UNDERSTANDING COUNTEROFFERS

When two parties get to negotiate a transaction or deal, one may put an offer on the table. A counteroffer may be a reply thereto original offer and should change the terms of the deal including the price. The price is also greater or but what was originally quoted depending on who makes it. So if the person receiving the first offer doesn't accept or reject it, he may attempt to renegotiate with a counteroffer.

DEFINATION

An offer made in response to a previous offer by the other party during negotiations for a final contract. Making a counter offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or there's no contract.

Example:

Susan Seller offers to sell her house for $150,000, to be paid in 60 days; Bruce Buyer receives the offer and provides Seller a counter offer of $140,000, payable in 45 days. The first offer is dead, despite the shorter time for payment since the value is lower. Seller then can prefer to accept at $140,000, counter again at some compromise price, reject the counter offer, or let it expire.

There is no limit to the amount of times each party can counter during negotiations. When countering back and forth, each offer should present a price but the previous offer. This conveys to the seller that the customer is nearing his final offer.

Neither party is obligated to settle until they agree on a contract, which occurs once the counteroffer is accepted. This is often when a binding contract is made. The contract is enforceable against either party. The counteroffer voids a previous offer, and therefore the entity that presented that provide is not any longer legally liable for it.

[Important: When negotiating, never let emotions affect negotiations—instead, ask questions, do your research, and invite additional time to think about the new offer.]

TERMS OF THE COUNTEROFFER

A counteroffer may include explanations of the terms of the offer or requests for supplementary information. Finalizing counteroffer negotiations requires the customer and offeror to simply accept the terms with none additional conditions or modifications.

A counteroffer is usually conditional. When the seller receives a low offer, he can counter with a price he feels is cheap. The customer can either accept that provide or counter again. The vendor can counter the offer. The person receiving the counteroffer doesn't need to accept it.

KEY TAKEAWAYS

• A counteroffer is that the response given to an offer, meaning the original offer was rejected and replaced with another one.

• Counteroffers give the first offerer three options: accept it, reject it, or make another offer and continue negotiations.

• Parties aren't obligated by a contract until one accepts the other's offer.

• Counteroffers are common in business negotiations and transactions, like assets deals, car sales, and employment contracts.

10. WHAT IS CONSENT AND FREE CONSENT (AS PER SECTION 13, 14 -18, 39, 53, 55, 66)

ANS

CONSENT AS PER UNDER SECTION 13

Sec 10 of contract act states “all agreements are contract, if they're made by the free consent of parties.” in order to form a valid contract it's necessary that there should be a (a) consent & (b) Free consent. For the formation of a contract the parties should either have assented, or be deemed to possess assented, to an equivalent thing within the same sense it's called consensus ad idem.

MEANING OF CONSENT:

The term consent has been defined by many scholars are as under:

Webster’s College Dictionary: Consent means “to agree or to be willing to try to something.”
Section 13 of Contract Act: “Two or more persons are said to be consented when they agree upon the same thing in a same manner.”

ESSENTIALS OF CONSENT:

Parties must be agreeing on an equivalent thing: “same thing” the entire material of the agreement whether it consist wholly or partially of an act or promise to try to or abstain from doing something. If the parties have various things in mind or the parties though agree upon a thing but do so in several sense, it's not said to be a true consent and agreement.
Parties must agree within the same sense: if one among the parties to a clear contract, by his own fault enters into it during a sense different from that during which it had been understood by the opposite party he could also be precluded from fixing that there was no agreement within the same sense.
Parties expressions must be in agreement: the aim of the good majority of contract is to effect and exchange of promises, or of certain performance. To attend this purpose, there must be mutual expressions of assent to the exchange.

FREE CONSENT

AS PER SECTION 14

There need to be two parties to a contract, who willingly and knowingly enter into an agreement. But how does the law determine if the parties are both these things? This is often where the concept of free consent comes in. Allowing us to learn more about free consent and therefore the elements vitiating free consent.

DEFINITION:

In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. Therefore the two people must comply with something within the same sense also.

Example: A agrees to sell his car to B. A owns three cars and needs to sell the Maruti. B thinks he's buying his Honda. Here A and B haven't prescribed an equivalent thing within the same sense. Hence there's no consent and subsequently no contract.

Now Free Consent has been defined in Section 14 of the Act. The section says that consent is taken into account free consent when it's not caused or suffering from the subsequent,

Coercion
Undue Influence
Fraud
Misrepresentation
Mistake
Elements Vitiating Free Consent

Let us take a glance at these elements individually that impair the free consent of either party.

1. Coercion (Section 15)

Coercion means using force to compel an individual to enter into a contract. So force or threats are wont to obtain the consent of the party under coercion, i.e. it's not free consent. Section 15 of the Act describes coercion as committing or threatening to commit any act forbidden by the law within the IPC unlawfully detaining or threatening to detain any property with the intention of causing a person to enter into a contract

Example: A threatens to harm B if he doesn't sell his house to A for five lakh rupees. Here albeit B sells the house to A, it'll not be a legitimate contract since B’s consent was obtained by coercion.

Now the effect of coercion is that it makes the contract voidable. This suggests the contract is voidable at the choice of the party whose consent wasn't free. Therefore the aggravated party will decide whether to perform the contract or to void the contract. So within the above example, if B still wishes, the contract can plow ahead.

Also, if any monies are paid or goods delivered under coercion must be repaid or returned once the contract is void. And therefore the burdens of proof proving coercion are going to be on the party who wants to avoid the contract. Therefore the aggravated party will need to prove the coercion, i.e. prove that his consent wasn't freely given.

2 Undue Influences (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the relations between the 2 parties are such one party is during a position to dominate the opposite party, and uses such influence to get an unfair advantage of the opposite party it'll be undue influence.

The section also further describes how the person can abuse his authority within the following two ways: When an individual holds real or maybe apparent authority over the opposite person or if he's during a fiduciary relationship with the opposite person. He makes a contract with an individual whose brain is suffering from age, illness or distress. The unsoundness of mind is often temporary or permanent

Example: A sold his gold awaits only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) isn't freely given, he was under the influence of his teacher.

Now undue influence to be evident the dominant party must have the target to require advantage of the opposite party. If influence is wielded to profit the opposite party it'll not be undue influence. But if consent isn't free thanks to undue influence, the contract becomes voidable at the choice of the aggravated party and therefore the burden of proof is going to be on the dominant party to prove the absence of influence.

3. Fraud (Section 17)

Factors Impairing Free Consent: Fraud

Fraud means deceit by one among the parties, i.e. when one among the parties deliberately makes false statements. Therefore the misrepresentation is completed with full knowledge that it's not true, or recklessly on faith for the trueness, this is often said to be fraudulent. It absolutely impairs free consent.

So consistent with Section 17, a fraud is when a celebration convinces another to enter into an agreement by making statements that are suggesting a incontrovertible fact that isn't true, and he doesn't believe it to be true the active concealment of facts a promise made with none intention of performing it the other such act fitted to deceive.

Example: A bought a horse from B. B claims the horse are often used on the farm. Seems the horse is lame and A cannot use him on his farm. Here B knowingly deceived A and this may amount to fraud.

One factor to think about is that the aggravated party should suffer from some actual loss thanks to the fraud. There’s no fraud without damages. Also, the falsehood must be a fact, not an opinion. Within the above example if B had said his horse is best than C’s this is able to be an opinion, not a fact. And it might not amount to fraud.

4. Misrepresentation (Section 18)

Misrepresentation is additionally when a celebration makes a representation that's false, inaccurate, incorrect, etc. The difference here is that the misrepresentation is innocent.

I.e. not intentional. The party making the statement believes it to be true. Misrepresentation are often of three types an individual makes a positive assertion believing it to be true any breach of duty gives the person committing it a plus by misleading another. But the breach of duty is with none intent to deceive.

When one party causes the opposite party to form an error on the topic matter of the contract but this is often done innocently and not intentionally.

5 Mistake: an error is described as a component, which when occurs during a contract makes it void.

There are two sorts of mistakes, which occurs during a contract

Unilateral Mistake: A mistake is claimed to be unilateral when one party is mistaken within the agreement.
Bilateral Mistake: A mistake is claimed to be mutual when both parties misunderstood one another. Thus it shows that there's a breach within the principle of consensus-ad-idem within the contracts and therefore the contract is to be considered as void.

Example: “A” made an offer to “B” to sell his scooter. “A” intended to sell his 3G scooter but “B” believed that “A” would sell his 4G scooter. Thus there was no proper communication and therefore the fact was mistaken. It might amount to an effective agreement.

Common mistake: Section 20 of the Indian Contract Act, 1872 lays down the supply for common mistakes. A contract arising out of common mistake is taken into account to be void. This sort of mistake is possessed by both the parties but this error isn't the results of mutual mistake, it arises individually.

11. WRITE A NOTE ON GOODS UNDER ACT.

ANS

Definition of GOODS under the Act

'Goods' means every kind of moveable property and includes stock and shares, growing crops, grass, and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
Actionable claims and money are not included in the definition of goods.
Thus, goods include every kind of moveable property other than actionable claim or money. Example - goodwill, copyright, trademark, patents, water, gas, and electricity are all goods and may be the subject matter of a contract of sale.
The test is if the property on shifting its situation, does not lose its character, the said property shall be movable and fall within the definition of Goods.

TYPES OF GOODS

Existing goods
Future goods
Contingent goods

1. Existing goods:

Goods which are physically in existence and which are in seller's ownership and/or possession, at the time of entering the contract of sale are called 'existing goods.' Where seller is the owner, he has the general property in them.

2. Future goods:

Goods to be manufactured, produced or acquired by the seller after the making of the contract of sale are called 'future goods' [Sec. 2(6)]. These goods may be either not yet in existence or be in existence but not yet acquired by the seller. Ex: - A agrees to sell to B all the milk that his cow may yield during the coming year. This is a contract for the sale of future goods.

3. Contingent goods:

Though a type of future goods, these are the goods the acquisition of which by the seller depends upon a contingency, which may or may not happen [Sec. 6 (2)].

Ex: - (a) A agrees to sell to B a specific rare painting provided he is able to purchase it from its present owner. This is a contract for the sale of contingent goods. (b) X agrees to sell to 25 bales of Egyptian cotton, provided the ship which is bringing them reaches the port safely. It is a contract for the sale of contingent goods. If the ship in sunk, the contract becomes void and the seller is not liable.

12. EXPLAIN THE CONDITIONS AND WARRANTIES.

ANS

Sec 12(2) of Sales of Goods Act, 1930 has defined Condition as: “A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated”.

A condition is a stipulation

(a) Which is essential to the main purpose of the contract?

(b) The breach of which gives the aggrieved party a right to terminate the contract.

It goes to the root of the contract.
Its non-fulfillment upsets the very basis of the contract.

Example:-

By charter party( a contract by which a ship is hired for the carriage of goods), it was agreed that ship m of 420 tons “now in port of Amsterdam” should proceed direct to new port to load a cargo. In fact at the time of the contract the ship was not in the port of Amsterdam and when the ship reached Newport, the charterer refused to load. Held, the words “now in the port of Amsterdam” amounted to a condition, the breach of which entitled the charterer to repudiate the contract.

WARRANTY

Sec 12(3) of Sale Of Goods Act, 1930 has defined Warranty as : “A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to only claim for damages but not to a right to reject the goods and treat the contract as repudiated”.

It is a stipulation collateral to the main purpose of the contract
It is of secondary importance
If there is a breach of a warranty, the aggrieved party can only claim damages and it has no right to treat the contract as repudiated.

B. DISTINCTION BETWEEN CONDITION AND WARRANTY

CONDITION	WARRANTY
A condition is a stipulation (in a contract), which is essential to the main purpose of the contract.	A warranty is a stipulation, which is only collateral or subsidiary to the main purpose of the contract.
A breach of condition gives the aggrieved party a right to sue for damages as well as the right to repudiate the contract.	A breach of warranty gives only the right to sue for damages. The contract cannot be repudiated.
A breach of condition may be treated as a breach of warranty in certain circumstances.	A breach of warranty cannot be treated as a breach of condition

C. IMPLIED CONDITIONS AND WARRANTIES (TYPES)

Conditions and Warranties may be either express or implied.
They are said to be "express" when they are expressly provided by the parties.
They are said to be 'implied' when the law deems their existence in the contract even without their actually having been put in the contract. Sec(14 to17)

Implied conditions

Conditions as to title [Sec.14(a)] [Rowland v. Divall,(1923)]
Sale by description [Sec.15] [Bowes v.shand,(1877)]
Condition as to quality or fitness.[Sec.16(1)]
Conditions as to Merchantability [Sec.16(2)] [R.S.Thakur v. H.G.E. Corp., A.I.R.(1971)]
Conditions implied by custom [Sec.16 (3)]
Sale by Sample (Sec.17)
Condition as to wholesomeness.
Warranty of Quiet possession-Sec.14(6)
Warranty against encumbrances-Sec.14(c)
Warranty to disclose dangerous natures of goods.
Warranty as to quality or fitness by usage of trade – Sec.16 (4).