Professional Documents
Culture Documents
Week 2 & 3
Law of Contract
By Muhammad Naveed Chohan
Outline
Week 2
Week 3
Formation of Contract Classification of Contracts Discharge of Contract Remedies for Breach of Contract
Contingent and Quasi Contracts Indemnity and Guarantee Bailment and Pledge Contact of Agency
Week 2
Formation of Contract Kinds of Contract Discharge of Contract Remedies for Breach of Contract
Formation of Contract
What is Contract? An agreement enforceable by law is a contract
[Sec. 2 (h) of contract Act 1872]
Contract= Agreement + Enforceable
Formation of Contract
Concluded Points :
Agreement: Every promise and every set of promises, forming the consideration for each other is an agreement
[Section 2(c)]
Agreement = Promise + Consideration
Enforceability:
Formation of Contract
Contract
STEP 1 Promise = Proposal + Acceptance
STEP 2
STEP 3
Formation of Contract
Essentials of a Valid Contract:
All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared void
[Section 10]
Formation of Contract
Essentials of a Valid Contract:
All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared void
[Section 10]
Formation of Contract
Essentials of a Valid Contract :
Agreement Free Consent Capacity of Parties Lawful Consideration Lawful Object Not Expressly Declared Void Legal Relationship Legal Formalities Certainty Possibility of Performance
Formation of Contract
Essentials of a Valid Contract :
1. 2. Agreement: There must be two parties Existence of offer and acceptance Legal offer and unconditional acceptance Free Consent: Two or more persons are said to consent when they agree upon the same thing in the same sense
[Section 13]
Consent is said to be free when it is not caused by: (i) coercion, (ii) undue influence, (iii) fraud, (iv) misrepresentation, or (v) mistake
[Section 14]
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Formation of Contract
Essentials of a Valid Contract :
3. Capacity of Parties: Every person is competent to contract who (i) is of age of majority, (ii) is of sound mind and (iii) is not disqualified from contracting by any law
[Section 11]
4.
Lawful Consideration:
Consideration - Price for which promise of another is bought [Pollock] A contract without consideration is void Consideration of an agreement is lawful unless (i) forbidden by law, (ii) it defeats the provision of law, (iii) fraudulent, (iv) involves injury to a person or property, (v) immoral or (vi) opposed to public policy
[Section 23]
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Formation of Contract
Essentials of a Valid Contract :
5. Lawful Object: Object of an agreement is lawful unless (i) forbidden by law, (ii) it defeats the provision of law, (iii) fraudulent, (iv) involves injury to a person or property, (v) immoral or (vi) opposed to public policy
[Section 23]
6.
Not Expressly Declared Void: Agreements in restrain of marriage [Section 26] Agreement in restrain of trade [Section 27] Agreement in restrain of legal proceedings [Section 28] Wagering agreements [Section 30]
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Formation of Contract
Essentials of a Valid Contract :
7. 8. 9. Legal Relationship: Intention to create a legal relationship Filing of suit under legal relationship In Commercial transactions parties intend to create legal relationship Legal Formalities: Writing Attestation Witness Registration Certainty: Agreement not certain or being made certain is void [Section 29]
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Formation of Contract
Essentials of a Valid Contract :
10. Possibility of Performance: Agreement to do an impossible act is void [Section 56] Contract to do an act that after formation becomes impossible becomes void [Section 56]
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Classification of Contracts
Contract
According to Formation
According to Performance
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Classification of Contracts
Types According to Validity :
Valid Contract: Can be enforced by each of the parties Who fails can be sue by other Void Contract:
A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable
[Section 2(j)]
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Classification of Contracts
Types According to Formation :
Express Contract: Offer or acceptance in words Words in written or spoken form Implied Contract: Offer or acceptance Inferred from the acts or conduct of the partitas Quasi Contracts: No express or implied contract Under certain circumstances the law recognizes the existence of contract
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Classification of Contracts
Types According to Performance :
Executed Contract: Two or more parties All have performed their obligations Executory Contract: Two or more parties Have yet to perform their obligations arising under contract Unilateral Contracts: Two or more parties One of the parties to a contract has performed his obligation but other party is yet to perform
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Discharge of Contract
When a Contract is Discharged?
A contract is said be discharged or terminated when the rights and obligations created by it come to an end.
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Discharge by Performance
Discharge by Agreement
Actual Anticipatory
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Actual Performance: (Sec. 37) Each party to a contract perform obligations under contract According to terms and condition Attempted Performance/Tender: Tender Promisor offer of performance and promisee does not accept Promisor can file a suit against promisee in case of breach (Sec. 38)
Essentials of a Valid Tender: Unconditional Proper time and Proper Place Opportunity to promisee to check goods Made to an able person
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Discharge by Agreement:
1. 2. Novation: Parties to a contract agree to substitute a new contract Change in terms of contract Change of Parties Both Alteration :
2.
Destruction of subject matter Failure of purpose Death or personal incapacity Change of law Declaration of war
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Kinds of Damages
28
Direct loss Naturally arises as a result of breach of contract Ordinary damages = Difference in contract price and market price Wednesday, May 02, 2012
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2. 3. 4.
Kinds of Damages:
Special Damages: Indirect loss Notice to parties Special circumstances Exemplary Damages: Awarded to punish for guilt Monetary loss and disappointment to aggrieved party Examples; Contract to marry, Dishonor of cheque Liquidated Damages: Fixed at the time of formation of contract Should be fair and reasonable
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5.
Kinds of Damages:
Nominal Damages: Not for punishment and not for compensation No loss to claiming party
when damages are not adequate relief Loss caused by breach of contract
Cases - Granting Specific Performance: Compensation in money is not adequate relief Damages can not be calculated Compensation in money can not be recovered Cases - Not Granting Specific Performance: Damages are adequate relief Performance involves personal skill Where court can not supervise execution Contract is uncertain Contract is inequitable to either party
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