LEGAL ASPECTS OF CONTRACTSPREPARED BY:

• Abhinav Jain 2K11/EN/01

• Abhishek Pandey 2K11/EN/02

• Aditya Singh Patel 2K11/EN/03

• Ajay Singh 2K11/EN/04

• Akash Jai Singh 2K11/EN/05

• Aman Sokhal 2K11/EN/06

• Ankush Das 2K11/EN/06

As per Contract Act, an agreement enforceable by law is a contract. [section

2(h)]

“A promise or set of promises which the law will

enforce”.

The agreement will create rights and obligations that

may be enforced in the courts.

The normal method of enforcement is an action for

damages for breach of contract.

CONTRACT

WHAT IS A CONTRACT ?

INDIAN CONTRACT ACT, 1872

In India, all contracts are covered/governed by the Indian Contract Act, 1872

COMPONENTS OF A VALID CONTRACT

Discharge of the Contract

Agreement should not be void or voidable

Lawful consideration

Legal Capacity to contract

Offer/Proposal & Acceptance

Parties to an contract

 PARTIES TO A CONTRACT

Promisor

A person making the proposal

(offer) is known as a promisor

We can also recognize him as

a proposer.

Promisee

A person accepting the

proposal (offer) is known as a

promisee.

He is also known as an offeree.

OFFER/PROPOSAL

OFFER

Can be oral, written or through conduct

Offer and Invitation

Must be communicat

ed to the offereeOffer

gets terminat

ed by

Lapse of time

Withdrawal of Offer

Death

Rejection

ACCEPTANCE

“When a person to whom the proposal is

made signifies his assent thereto, the

proposal is said to be accepted.” – Sec 2(b)

LEGAL CAPACITY TO CONTRACTWHAT IS LEGAL CAPACITY?

The ability, capability, or fitness to do something; a legal right, power, or competency to perform some act.

An ability to comprehend both the nature and consequences of one's acts.

The parties must be legally capable of entering into a contract

LAWFUL CONSIDERATION Both parties must have provided consideration, i.e.

each side must promise to give or do something for the other.

For Example

Property

Anything of Value

Money

AGREEMENT SHOULD NOT BE VOID OR VOIDABLE

WHAT IS VOID AGREEMENT?

Agreement to do an impossible act

Agreement without consideration; except for gifts, debt etc.

Agreement in restraint of legal proceedings

DISCHARGE OF CONTRACTSThe cases in which a contract is discharged may be classified as

follows

By performance or tender.

By impossibilit

y of performanc

e

By operation

of law.By lapse of

time By breach of contract

BY PERFORMANCE OR TENDER• When both the parties

perform their promises and fulfil the contract

BY IMPOSSIBILITY OF PERFORMANCE

• Inherent impossibility • Known/Unknown to

the parties

• Subsequent impossibility• Destruction of subject

matter of contract

BY OPERATION OF LAW• By death• By insolvency

• the state of having liabilities that exceed assets, inability of a debtor to pay their debt

• By merger

BY LAPSE

OF TIME

a contract should be performed within a

specified period i.e. period of

limitation.

if the contract is not

performed promisee is

deprived of his remedy at law.

Actual Breach of Contract:

• when a party fails to perform his obligation upon the date fixed for performance by the contract

Anticipatory Breach

of Contract:

• takes place before the date of actual performance.

• the promisor may either inform the promisee that he will not perform the contract

ADVANTAGESCAN BE COST-EFFECTIVE

• The use of contract manufacturers means that the hiring firm does not need to purchase expensive manufacturing facilities, equipment, machinery, raw materials or hire specialized labor.

• This not only allows the hiring firm to focus solely on sales, advertising and marketing but also allows a firm that is comparatively more efficient at manufacturing to carry out the process.

• As a result, hiring firms often benefit from economies of scale and the purchasing power of large manufacturers. All of these factors lower production costs.

ENCOURAGES CONSISTENCY

• Having a written agreement provides one set of procedures for everyone to follow. For example, if a group rotates its secretary and treasurer, each person might track money and keep records a little differently, which could create an administrative muddle.

• Providing the secretary and treasurer with written procedures will help prevent that problem

HELPS PREVENT AMNESIA • Putting information and

decisions on paper means keeping less of it in your head; there's a limit to how many details we can keep organized in our brains.

• Even with people whom you trust completely, you may have had the experience of remembering the same event or conversation differently.

LEADS TO A WELL-THOUGHT-OUT PLAN

• Putting ideas in writing helps a group think through details that might not have been ironed out during discussions.

• Plans that seem really great over a glass of wine don't always make as much sense when you lay them out on paper.

DISADVANTAGES

TIME AND MONEY• Perhaps the main disadvantage to

the use of contracts to reduce risk is that drawing up contracts takes both time and money. To construct an airtight contract, a company has to employ the services of a lawyer to draft the contracts, and lawyers are seldom inexpensive.

• In addition, focusing on contracts draws time away from other activities that could help grow the business.

LITIGIOUS ATMOSPHERE• Making every person who deals

with an organization sign contracts that are designed to reduce the company's risk can create an atmosphere in which everyone has their hackles up.

• This may not only breed suspicion, but it can actually increase the likelihood of a lawsuit, as people forced to sign these contracts may seek the counsel of a lawyer they wouldn't otherwise approach.

BINDING CONTRACTS

• Once a contract is signed with a manufacturer, the hiring firm essentially calls all the shots. This can lead to serious problems for the reputation of the manufacturer if the wrong firm is partnered with.

• Consequently, through no fault of their own a manufacturer can be linked to an inferior product, possibly damaging their future business prospects.

PRESSURE TO DELIVER• Due to unforced delays, the parties

are left with less time to perform the work. The pressure to deliver in less time reciprocates itself in the reduced quality of the work.

• For a written contract, no evidence outside the document itself, i.e. extrinsic evidence, may normally be adduced to contradict, vary, add to or subtract from the written terms

EXTRINSIC EVIDENCE

• The contract must ascertain the meaning of the words actually used.

EXPRESSED

INTENTION

A FEW MORE IMPORTANT POINTS TO GIVE THE ESSENCE OF LEGAL

ASPECTS.

ATTACKING THE

CONTRACT

•A contract is void or voidable because of misrepresentation, fraud, mistake, illegality, duress, minority or made by a mentally disordered person or that the contract has been varied.

NEGLIGENCE LIABILITY

•Negligence means the breach of a contractual obligation to take responsible care or to exercise reasonable skill or breach of an equivalent common law duty

AGREED FACTUAL

ASSUMPTION

•When parties have acted in a transaction upon an agreed assumption that a particular state of facts between them is to be accepted as true, each is to be regarded as estopped as against the other from questioning as regards that transaction the truth of the facts so assume.

THANK YOU