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4. THE LIMITED LIABILITY PARTNERSHIP ACT,2008 81 - 97
5. THE COMPANIES ACT, 2013 98 - 115
“OUR GREATEST WEAKNESS LIVES IN
GIVING UP.THE MOST CERTAIN WAY TO
SUCCEED IS ALWAYS TO TRY JUST ONE
MORE TIME”
YOUTUBE CHANNEL: ARHAM INSTITUTE
BY CA VARDHAMAN DAGA
ARHAM INSTITUTE, 9039600091, CA VARDHAMAN DAGA
, THE INDIAN CONTRACT ACT, 1872
UNIT -1: NATURE OF CONTRACTS
CONTRACT [Section 2(h)] - “an agreement enforceable by law”
Two essential elements of contract:-
1. Agreement and
2. Enforceable by law.
AGREEMENT [section 2(e)] – “Every promise and every set of
promises, forming the consideration for each other”.
AGREEMENT = OFFER/PROPOSAL + ACCEPTANCE
PROMISE [section 2(b)] - “When the person to whom the proposal is
made signifies his assent there to, the proposal is said to be accepted.
Proposal when accepted, becomes a promise”.
Agreement is the result of the proposal made by one party to the
other party and that other party gives his acceptance thereto of course
for mutual consideration.
ENFORCEABILITY BY LAW – contract must give rise to legal obligation.
PROPOSAL ACCEPTANCE ACCEPTED PROPOSAL/AGREEMENT LEGAL ENFORCEABILITY
CONTRACT
Difference between Agreement and Contract
BASIS AGREEMENT CONTRACT
MEANING Every promise and every set of promise, Agreement enforceable by law.
forming the consideration for each Agreement + legal enforceable
other.
Offer + Acceptance
SCOPE It’s a wider term including both legal It is used in a narrow sense with the
and social agreement specification that contract is only
legal enforceable agreement
LEGAL It may not create legal obligation. An Necessarily creates a legal
OBLIGATION agreement does not always grant rights obligation. A contract always grant
to the parties. certain rights to every party.
NATURE All agreements are not contracts. All contracts are agreements.
ESSENTIALS OF A VALID CONTRACT
As given by Section 10 of ICA, 1872
Offer and acceptance or an agreement.
Free Consent: Two or more persons are said to consent
when they are agree upon the same thing in the same
sense.
ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 1
, THE INDIAN CONTRACT ACT, 1872
Capacity of the parties: Every person is competent to contract who is of the age of
majority, sound mind and not otherwise disqualified by law.
Consideration: “quid pro quo” i.e something in return
Lawful consideration and object: Not prohibited by law, fraudulent or opposed to
public policy.
Not expressly declared to be void: Should not be illegal
Not covered by Section 10 of ICA, 1872
Two parties.
Parties must intend to create legal obligation: Intention is imp. Social and Domestic
are not enforceable.
Other formalities to be complied with in certain cases: Certain contracts to be in
writing and registered too.
Certainty of meaning: Must be certain not vague (not clear) or indefinite.
Possibility of performance of an agreement: An agreement to do impossible act is
not enforceable.
TYPES OF CONTRACT
ON THE BASIS OF THE VALIDITY:
Valid Contract: An agreement which is binding and enforceable.
Void Contract: Which ceases to be enforceable by law becomes void when it ceases
to be enforceable (cannot be enforced by a court of law).
Voidable Contract: An agreement which is enforceable by law at the option of one
or more parties thereto, but not at the option or other or others is a voidable
contract.
BASIS VOID CONTRACT VOIDABLE CONTRACT
MEANING A contract ceases to be enforceable An agreement which is enforceable by
by law becomes void when it law at the option of one or more of the
ceases to be enforceable. parties thereto, but not at the option of
the other or others, is a voidable
contract.
CAUSE Change in law or circumstances If the consent of the party was not free.
beyond the contemplation of
parties.
PERFORMANCE Cannot be performed If the aggrieved party does not, within
OF CONTRACT reasonable time, exercise his rights to
avoid the contract, any party can sue
the other for claiming the performance
of the contract.
RIGHTS No rights available to any party The party whose consent was not free
has the right to rescind the contract.
Illegal Contracts: It is a contract which the law forbids to be made.
BASIS VOID AGREEMENT ILLEGAL AGREEMENT
ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 2
, THE INDIAN CONTRACT ACT, 1872
SCOPE` Is not necessarily illegal Is always void
NATURE Not forbidden by law Are forbidden under law
PUNISHMENT Not liable for any punishment Liable for punishment
COLLATERAL AGREEMENT May be valid also Are always void
Unenforceable Contract: Where a contract is good in substance but because of
some technical defects i.e. absence in writing, barred by limitation etc. One or both
the parties cannot sue upon it, it is described as an unenforceable contract.
ON THE BASIS OF FORMATION:
Express Contract: If the terms are expressed by words or in writing
Implied Contract: Come into existence by implication(by law or by action)
Tacit contract: By conduct of parties without any words spoken or written.
Quasi-contract: It is a contract in which there is no intention on part of either party
to make a contract but law imposes a contract upon the parties.
E-contracts: Contract through electronic means such as emails is known as e-
commerce contracts.
ON THE BASIS OF PERORMANCE OF THE CONTRACT:
Executed Contracts: When the act is done or executed or the forbearance
(tolerance) is brought on record, then the contract is an executed contract.
Executory contract: The consideration is reciprocal promise or obligation. Such
consideration is to be performed in future only and therefore these contracts are
described as executory contract.
a. Unilateral contract: One sided contract, one party performed his duty or
obligation and other obligation is outstanding.
b. Bilateral contract: Where the obligation or promise is outstanding on the part
of both the parties.
PROPOSAL/OFFER [SECTION 2(a)] OF THE ICA, 1872
DEFINATION: “When one person signifies to another his willingness
to do or abstain from doing anything (mujhe padhane se rokne ka
offer) with a view to obtaining the assent of that to such act or
abstienence, he is said to make a proposal”.
CLASSIFICATION OF OFFER:
General offer: Offer made to public at large and hence anyone
can accept and do the desired act.
Special offer: Offer is made to a specific or an ascertained
person.
ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 3
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