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WHAT IS A CONTRACT ?

WHAT IS A CONTRACT ?. Agreement enforceable by law Lawful proposal by one party and the other party must accept it (promisor & promisee) There must be a lawful cosideration An agreement may be oral or written

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WHAT IS A CONTRACT ?

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  1. WHAT IS A CONTRACT ? • Agreement enforceable by law • Lawful proposal by one party and the other party must accept it (promisor & promisee) • There must be a lawful cosideration • An agreement may be oral or written • An agreement may be without consideration if it is made out of nature, love and affection between close relatives • Free consent & Capacity to contract (section 11)

  2. CONTRACT OF INDEMNITY • It is a contract by which one party promises to save the other party from any loss caused to him either by the conduct of promisor himself or by that of any other person. • Indemnifier & Indemnified • Indemnified is entitled to receive all damages and all costs made by him in suits

  3. GUARANTEE • It is a contract to perform the promise or discharge the liability of a third person in case of his default. It may be either written or oral. • The person who gives the guarantee is called ‘Surety’ and in respect of whom the guarantee is given is called ‘Principal Debtor’. The person to whom the guarantee is given is called “Creditor” • Anything done or any promise made for the benefit of principal debtor is a consideration

  4. CONTINUING GUARANTEE • A guarantee which extends to a series of transactions • Death of surety ends the guarantee then and there • Any variance made in the terms of contract between the Creditor and Principal Debtor without the consent of the Guarantor discharges the surety after such varience

  5. Misrepresentation by creditor discharges the surety • Surety is discharged if the Principal Debtor is released by the creditor • Release of one surety does not discharge the other co-sureties • Surety can claim his debt from the principal debtor • Forbearance on the part of creditor does not discharge the surety

  6. CONTINUED • Implied promise by the principal debtor to indemnify the surety • Co-sureties are liable to pay equal share of the whole debt or the part which remains unpaid by the principal debtor • Indemnity & Guarantee are different because the liability of indemnifier is primary and that of the surety is seciondary

  7. CONTRACT OF BAILMENT • It is the delivery of goods by one person to another for some purpose. The person delivering the goods is called bailor or the person to whom they are delivered is called the bailee. • Bailor is bound to disclose the faults in the goods to bailee of which he is aware. The fault which may expose the bailee to extraordinary risk should also be made known by the bailee.

  8. RIGHTS AND DUTIES OF BAILEE • To take care of goods (as for his own goods) • To return the goods at expiry of the time or purpose, for which it was bailed • To receive due remuneration for any service rendered in respect of the goods bailed. He has a right to retain the goods until he receives such remuneration.

  9. PLEDGE • The bailment of goods as security for payment of a debt or performance of a promise is called a pledge. • The bailor is called ‘pawnor’ and the bailee is called ‘pawnee’. • In case of default the pawnee can sell the things after giving due notice of the sale to the pawnor. If there is a shortfall or surplus, the pawnor is liable for that or entitled to receive that.

  10. CONTRACTS OF AGENCY • If a person is authorised to act for a person in such a manner as to bind that person, then a contract of agency is created. • The person for whom the act is done is called the Principal and the person who represents other person is called the Agent. • No consideration is necessary although it is a contract in itself.

  11. ESSENTIALS OF AGENCY • The principal and agent both should be major and of sound mind • The authority of an agent may be expressed or implied. • Agent is authorised to do every lawful thing necessary to conduct the functions of agent. In emergency agent is authorised to do all acts to protect the interest of principal.

  12. OTHER FEATURES • Ratification by the principal for any act done by the agent without knowledge or authority from principal • Termination of agency (either the principal or agent becomes of unsound mind or dies or the principal is adjudicated insolvent) • The principal may repudiate any transaction concealed or dishonestly done by agent

  13. CONTINUED • Agent guilty of misconduct is not entitled to remuneration • Agent is entitled to retain property/papers received for principal if the amount due to him is not paid to him • Agent to be indemnified for consequences of lawful acts or acts done in good faith

  14. CONTRACT OF SALE • A contract of sale of goods is a contract under which the seller transfers or agrees to transfer the property in goods to the buyer for a price. • Goods means every kind of moveable property other than actionable claims and money. i.e. stock, shares, growing crops etc. • The contract may be written or oral

  15. OTHER FEATURES OF SALE • Bilateral contract • Only movable property is covered • May be immediate delivery or payment or payment or delivery in instalments. • A contract of sale may be absolute or conditional. If delivery is at a future time ,it is Agreement to sell.

  16. Ownership passed to the buyer (irrespective of delivery of goods) Risk in goods with buyer Buyer can sue seller for non-delivery or quality Seller can claim price or stop delivery of goods in transit or can resell it Promises are not performed Ownership not passed to the buyer and risk of goods with the seller Buyer can claim damages, if the seller does not deliver the goods The seller can only sue fore damages DIFFERENCE BETWEEN SALE AND AGREEMENT TO SALE

  17. INDIAN CONTRACT ACT 1872 Sec11: Minors, lunatics are incompetent to enter into any contract Sec25(3): An agreement without consideration is void unless it is a promise to pay a time barred debt Sec68: Advances to minors for necessities of life(quasi contract) are valid contracts Sec124: Defines Indemnity

  18. INDIAN CONTRACT ACT,1872 Sec126: Defines guarantee Sec128: Surety’s liability is co-extensive Sec130: A continuing guarantee may be revoked by the surety as to future transactions by notice to the creditor Sec131: Death of surety revokes a continuing guarantee for future transactions

  19. INDIAN CONTRACT ACT,1872 Sec134: Discharge of surety by release or discharge of principal debtor by account of omission of the creditor Sec140: Rights of surety on payment or performance: he is invested with all the rights which the creditor has against the principal debtor Sec133: Any variance made without the surety’s consent in terms of contract discharges the surety

  20. INDIAN CONTRACT ACT,1872 Sec151: Bailee is bound to take reasonable care of goods bailed to him Sec190: An agent cannot generally delegate his authority Sec201 Termination of agency on the death or insolvency or insanity of the principal Sec202: Agency is not terminated where agent himself has an interest in the property which forms the subject matter of agency

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