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LAW OF CONTRACT -- The Contract Act 1872

LAW OF CONTRACT -- The Contract Act 1872. Contract The term ‘contract’ is derived from the Latin word ‘ contractum ’ . The Law of Contract is governed by the Contract Act-1872. According to sec-2(h) of the Act-1872

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LAW OF CONTRACT -- The Contract Act 1872

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  1. LAW OF CONTRACT -- The Contract Act 1872 • Contract • The term ‘contract’ is derived from the Latin word ‘contractum’. The Law of Contract is governed by the Contract Act-1872. • According to sec-2(h) of the Act-1872 • ‘An agreement enforceable by Law is a contract’. It signifies that in a contract there must be an agreement and it must be enforceable by Law.

  2. Definition • According toSalmond ‘ A contract is an agreement creating and defining obligations between the parties.’ • According toFrederick Pollock ‘Every agreement and promise enforceableat Law is a contract

  3. Characteristics • From the above definitions we find that, there are two characteristics of a contract : • An agreement • Legal obligation i.e. a duty enforceable by Law.

  4. Agreement • As per section-2(e) ‘Every promise and every set of promises, forming the consideration for each other, is an agreement” Thus it is clear from the definition that a ‘promise’ is an agreement. According to section-2(b) ‘When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.’

  5. Legal obligation • An agreement to become a contract must give rise to a legal obligation i.e., a duty enforceable by law. If an agreement is incapable of creating a duty enforceable by law, it is not a contract. Thus an agreement is a wider term than the contract. ‘All contracts are agreements but all agreements are not contract.’ Agreements of moral, religious or social nature are not contracts because they are not likely to create a duty enforceable by law.

  6. Example • Mr. A promises to sell his house to Mr. B for TK 5,00,000/; then an obligation is created on the part of Mr. A to sell his house and on the part of Mr. B to buy the house at the settled price. This sort of agreement is enforceable by Law and thus become a CONTRACT.

  7. Distinction between agreement and contract • Every promise and every set of promises, forming the consideration for each other, is an agreement. An agreement enforceable by Law is a contract. • Agreement is the prior and the contract is the subsequent stage of contract.

  8. Con’t 3. Agreement is created by mutual promise but contract is created by enforceable agreement. 4. All agreements are not lawful but all contracts are lawful. 5. Agreement is used in wider sense than that of contract. 6. All agreements are not enforceable by Law and all contracts are enforceable by Law.

  9. Essentials of a contract • According to Sec-10 of the Contract Act, All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

  10. Thus the essential elements are: • Offer and Acceptance • Intention to create legal relation • Lawful consideration • Lawful object • Capacity to contract • Free consent • Certainty • Possibility of performance • Written and Registered

  11. Offer and acceptance • There must be a Lawful offer and a lawful acceptance of the offer, thus resulting in an agreement. The adjective ‘Lawful’ implies that the offer and acceptance must satisfy the requirements of the Contract.

  12. Intention to create legal relation • There must be an intention among the parties that the agreement should be attached by some legal consequences and create legal obligation. Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. Ex: an agreement to buy goods.

  13. Con’t • An agreement of a social or domestic nature does not contemplate legal relations and as such they are not contract.

  14. Lawful consideration • The term consideration may be defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties is to give something and get something. This something given or obtained is the price for the promise and is called consideration. Only those considerations are valid which are Lawful. Subject to certain exception an agreement without consideration is void.

  15. Lawful object • The parties to the agreement must agree for a lawful object. The object for which the agreement has been created must not be • Fraudulent • Illegal • Immoral • Oppose to public policy • If the object is unlawful the agreement is void.

  16. Capacity to contract A person is capable of making a contract-- Who has attain majority as per the Law Who is of sound mind Who is not disqualified from contracting according to the law of his country

  17. Free Consent A consent is said to be free when it is not caused by— Coercion Undue influence Fraud Misrepresentation Mistake

  18. Certainty • The agreement must be unambiguous. So that its meaning can be ascertained. A vague agreement cannot be enforced by Law.

  19. Possibility of performance • Sec-56 of the Act says an agreement to do an impossible in itself is void. So, it is necessary that agreement shall have to be performable.

  20. Written and Registered • There may be oral agreement but it cannot be enforced by the Court. An oral agreement is accepted if the Law says that it need not be registered.

  21. Solve the following problems(1,2) • A invites B to a dinner. B accepts the invitation. A made elaborate arrangement but B failed to turn up. Can A sue B for the loss he has suffered?

  22. Con’t • A agrees to pay B taka 100/ and in consideration B agrees to write for him 100 pages within five minutes. Is it a valid contract?

  23. Case study Mr. X is a small businessman. His business office is very far from his residence. Because of the heavy traffic of the present time, Mr. X decide to take a house on rent near his business office. He found a suitable house. The landlord seemed to be a gentleman and well behaved.

  24. Cont’d The land lord said he is in some crises and for that the landlord claimed four months rent at a time in advance. Mr. X thought if he takes the rent for two years ( as agreed between him and the landlord orally), he has to face a temporary hard time, it will be profitable for him in future.

  25. Cont’d Taking all these things in consideration Mr. X took the house on the terms of the landlord. But unfortunately only after four months the landlord said Mr. X has to leave the house or has to pay tk 2000/ more from the next time. Mr. X is now totally broken both financially and mentally.

  26. Cont’d Now answer the following question: Do you think Mr. X could have saved his luck if he had acted under Law? If so how?

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