Gives a brief idea abut the nature and type of contracts

1. Law of CONRACT
ATUL PRAJAPATI
PHM-17-19

2. INDIAN CONTRACT ACT, 1872
1. Enacted by Parliament of India
2. Date enacted 25 April 1872
3. Date commenced 1 September 1872
4. Total sections 238
5. Extent All States of India except the State of
Jammu & Kashmir

3. The Indian Contract Act consists off
the following two parts:
GENERAL
PRINCIPALS
OF THE
LAW OF
CONTRACT
SPECIAL
KINDS OF
CONTRACTS
SECTIONS 1 TO 75 OF
THE INDIAN CONTRACT
ACT, came into force on
September 1, 1987
SECTIONS 124 TO 238 OF
INDIAN CONTRACT ACT.

4. What is a Contract?
1. A contract is a voluntary arrangement between two
or more parties that is enforceable by law as a
binding legal agreement.
2. An agreement which is legally enforceable alone is
a contract

5. 1. Agreements which are not legally enforceable are
not contracts but remain as void agreements which
are not enforceable at all or as voidable agreements
which are enforceable by only one of the parties
to the agreement.
“All contracts are agreements, But all agreements
are not contracts”

6. OFFER/PROPOSAL ACCEPTANCE PROMISE

7. 1. Offer/Proposal Sec 2(a) - When one person signifies to
another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other
person either to such act or abstinence, he is said to make a
proposal.
2. Acceptance Sec 2(b) - When the person to whom the
proposal is made, signifies his assent there to, the proposal
is said to be accepted.
3. Promise Sec 2(b) - A Proposal when accepted becomes a
promise. In simple words, when an offer is accepted it
becomes promise.
4. Promisor and promise Sec 2(c) - When the proposal is
accepted, the person making the proposal is called as
promisor and the person accepting the proposal is called as
promise.

8. PROMISE
CONSIIDERATIION
AGREEMENT

9. 1. Consideration Sec 2(d) - When at the desire of the
promisor, the promise or any other person has done
or abstained from doing something or does or
abstains from doing something or promises to do or
abstain from doing something, such act or
abstinence or promise is called a consideration for
the promise.
2. Price paid by the one party for the promise of the
other Technical word meaning QUID--PRO--QUO
i.e. something in return.
3. Agreement Sec 2(e) - Every promise and set of
promises forming the consideration for each other.

10. • Contract sec 2(h) - An agreement enforceable
by Law is a contract.
CONTRACTAGREEMENT ENFORCEABLE BY LAW

11. PROPOSAL
PROMISE
CONSIDERATION
AGREEMENT
LEGALLY
ENFORCEABLE
LEGALLY NOT
ENFORCEABLE
CONTRACT
VOIDABLE
AGREEMENT
VOID AGREEMENT

12. ESSENTIALS OF A VALID CONTRACT
• As per Section 10 “All agreements are contracts, if
they are made – by free consent of the parties,
competent to contract, for a lawful consideration and
with a lawful object, and not hereby expressly
declared to be void .”

13. ESSENTIAL ELEMENTS OF A VALID
CONTRACT
1. Offer and acceptance
2. Legal relationship
3. Consensus -ad-idem
4. Free consent
5. Capacity or competency of parties
6. Lawful object
7. Lawful consideration
8. Certainty and possibility of performance
9. Agreements not declared to be void
10. Legal formalities

14. 1. Offer and Acceptance: In order to create a valid
contract, there must be an agreement between two
parties. An agreement involves a valid offer by
one party and valid acceptance of the same by the
other party.
2. Legal relationship: The parties must intend their
agreement to result in legal relations. This means
that the parties must intend that if one of them
falls to perform his promise, he shall be
answerable for that failure in law. Duties and
rights should be legal and not merely moral. [an
agreement of a purely domestic or social nature is
not a contract.

15. 1. Consensus-ad-idem: The minds of both the
parties must be ad-idem. In other words, the two
parties must have agreed about the subject matter
of the contract at the same time and in the same
sense.
2. Free consent (Permission or Willingness): An
agreement must have been made by free consent
of the parties. consent is said to be free when it is
not caused by coercion, undue influence, fraud,
misrepresentation or mistake.

16. 1. Capacity : The parties to a contract must have capacity (legal
ability) to make valid contract.
2. Section 11:- of the Indian contract Act specify that every person is
competent to contract provided.
3. Is of the age of majority according to the Law which he is subject
4. Who is of sound mind and
5. Is not disqualified from contracting by any law to which he is
subject.
6. Lawful object :The object of agreement should be lawful and
legal.
7. Consideration or object of an agreement is unlawful if it is
forbidden by law; or is of such nature that, if permitted, would
defeat the provisions of any law; or is fraudulent; or
8. Involves or implies, injury to person or property of another; or
9. Court regards it as immoral, or opposed to public policy.

17. 1. Lawful consideration : All contracts must be supported
by consideration.
2. Consideration means “something in return” (quid pro
quo). It can be cash, kind, an act or abstinence. It can be
past, present or future. However, consideration should
be real and lawful.
3. A consideration must not be unlawful, immoral or
opposed to the public policy.
4. Not expressly declared to be void
5. Possibility of performance
6. Necessary legal formalities
7. A contract may be oral or in writing

18. Consequences of Breach of Contract
1. Compensation of loss or damage caused by
breach of contract
2. Compensation of breach of contract where
penalty stipulated for
3. Party rightfully rescinding contract, entitled to
compensation

19. Loss or damage caused by breach of
contract
• Compensation
1. When a contract has been broken, the party who
suffers by such breach is entitled to receive, form
the party who has broken the contract,
compensation for any loss or damage caused to him
thereby, which naturally arose in the usual course of
things from such breach, or which the parties knew,
when they made the contract, to be likely to result
from the breach of it.
2. Such compensation is not to be given for any
remote and indirect loss of damage sustained by
reason of the breach.
3. Compensation for failure to discharge obligation
resembling those created by contract

20. Breach of contract where penalty
stipulated for
• Compensation
1. When a contract has been broken, if a sum is
named in the contract as the amount be paid in
case of such breach, or if the contract contains
any other stipulation by way of penalty, the
party complaining of the breach is entitled,
whether or not actual damage or loss or proved
to have been caused thereby, to receive from
the party who has broken the contract
reasonable compensation not exceeding the
amount so named or, as the case may be, the
penalty stipulated for.

21. Party rightfully rescinding contract,
• Compensation
1. A person who rightfully rescinds a contract is
entitled to consideration for any damage which
he has sustained through the no fulfillment of
the contract.

22. ELEMENTS OF A VALID CONTRACT

23. TYPES OF CONTRACT

24. SPECIAL CONTRACTS
1. CONTRACT OF INDEMNITY-SEC. 124 & 125
2. CONTRCAT OF GUARANTEE-SEC. 126 TO 147
3. CONTRACT OF BAILMENT-SEC. 148 TO 181
4. CONTRACT OF PLEDGE

25. 1-CONTRACT OF INDEMNITY
1. Section 124 defines a contract of indemnity
as “A contract of indemnity is a contract
whereby one party promises to save the
other from loss caused to him by the conduct
of the promisor himself or by the conduct of
any other person.
2. Definition of Indemnity under Section 124 is
restrictive.

26. FEATURES OF INDEMNITY
1. It must possess all ingredients of a valid
agreement.
2. It is a contingent agreement to make good the
loss.
3. The loss must be caused by human conduct
only.
4. Loss must have actually been suffered.

27. PARTIES TO CONTRACT OF INDEMNITY
• Examples:
• Motor insurance
• Marine insurance
• Fire insurance

28. • RIGHTS OF INDEMNITYHOLDER WHEN SUED
1. All Damages
2. All Costs
3. All Sums
• RIGHTS OF INDEMNIFIER
1. The contract act is silent about the rights of
indemnifier.

29. 2-Contract of Guarantee
• Meaning and Definition
1. A contract of guarantee is defined by the
Indian Contract Act, as “A contract to
perform the promise or discharge the
liability of a third person in case of his
default.” A guarantee may be either oral
or written. [section 126].

30. ESSENTIALS OF CONTRACT OF GUARANTEE
1. Existence of a principal debt.
2. Consideration for a contract of guarantee.
3. There should be no misrepresentation or
concealment.
4. Contract of guarantee must contain all the
essential elements of valid contract.
5. Contract of guarantee is a complete and
separate contract by itself.

31. TYPES OF GUARANTEE
1. SPECIAL GUARANTEE
• A guarantee is a “specific guarantee”, if it is
intended to be applicable to a particular debt
and thus comes to an end on its repayment.
2. CONTINUING GUARANTEE
• A guarantee which extends to a series of
transactions is called a “continuing guarantee”,
e.g., (i) fidelity guarantee, (ii) overdraft.

32. RIGHTS OF SURETY
• AGAINST THE PRINCIPAL DEBTOR
1. Right of subrogation
2. Right to indemnity
• AGAINST THE CREDITOR
1. Right Of Securities
2. Right To Claim Set Off
• AGAINST THE CO-SURETIES
1. When several co-sureties have given guarantee for
the same debt with their maximum limits, they
are liable to pay equally but subject to the limits
they have fixed

33. 3-CONTRACT OF BAILMENT
• Section 148 defines Bailment as:
• “The delivery of goods by one to another person
for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or
otherwise disposed of according to the directions
of the person delivering them.” The person
delivering the goods is called the ‘Bailor’, and the
person to whom goods are delivered is called the
‘Bailee’

34. ESSENTIALS AND LEGAL RULES AS TO
BAILMENT
• Contract:
1. Delivery of Goods:
2. No Transfer of Ownership:
3. Delivery of Goods for Some Purpose:
4. Return of Specific Goods:
5. Movable Goods:
6. Deposit of Money Into Bank:

35. Kinds OF Bailment
• On the basis of benefit
1. Bailment exclusive for Bailor’s benefit.
2. Bailment exclusive for Bailee’s benefit
3. Bailment for mutual benefit.
• On the basis of willingness
1. Voluntary Bailment
2. Involuntary bailment
• On the basis of Rewards
1. Gratituous Bailment
2. Non-Gratituous Bailment

36. • Rights Of Bailor
1. Right of indemnity for losses due to negligence by bailee[S.152]
2. Termination of bailment on inconsistent use by the bailee[S.153]
3. Compensation for unauthorised use by the bailee[S.154]
4. Compensation when the bailee mixes the goods bailed with own
goods [S.155]
5. Right of return of goods back[S.160]
6. Right to profit from goods bailed[S.163]
• Duties Of Bailor
1. To Disclose faults in goods bailed [S.150]
2. To repay the necessary expenses [S.158]
3. To indemnify the bailee [S.164]
4. Liability on premature breach of bailment[S.159]

37. • Rights Of Bailee
1. Right to compensation for loss on account of fault in goods
bailed[S.150]
2. Right to receive necessary expenses[S.158]
3. Right against premature termination of bailment[S.159]
4. Right to compensation in case of defective title[S.164]
5. Delivery of goods to one of the joint owners[S.165]
6. Right against third parties
• Duties Of Bailee
1. Take reasonable care of goods[S.151]
2. Not to make unauthorized use of goods[S.154]
3. Not to mix goods with his own goods[S.155-157]
4. Duty to return goods[S.160&161]
5. Not doing any act inconistent with terms of bailment[S.153]
6. Returning any profit [S.163]

38. 4-CONTRACT OF PLEDGE OF PAWN
• Section 172
“Pledge is the bailment of goods as security for
payment of debt or performance of a promise.”
Bailment of goods as a security for payment of
debts or performance of promise is called
pledge. The bailor is called pledgor or pawnor
and the bailee is called Pawnee.

39. • ESSENTIALS OF PLEDGE:
1. Delivery of Goods:
2. Delivery of goods should be by way of security..
3. Goods must be movable.
• RIGHTS AND DUTIES OF PAWNEE
1. Right of retainer {S.173}:
2. Right of particular lien
3. Right to extraordinary expenses {S.175}
4. Right in case of default of the pawnor
• RIGHTS AND DUTIES OF PAWNOR
1. Right of redemption
2. Right to take back the goods.

40. PLEDGE BY NON OWNERS
1. Pledge by mercantile agent
2. Pledge by person in possession under voidable
contract
3. Pledge where pawnor has only a limited interest
4. Pledge by co-owner in possession
5. Pledge by seller or buyer in possession after
sale

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