Essentials of valid contract PPT presentation for under graduate students

1. NAGARAJU V
ASSISTANT PROFESSOR,
DEPARTMENT OF COLLEGIATE EDUCATION.
KARNATAKA, INDIA.

2. A contract must
have two
components
1) Existence of an
agreement and
2) its enforceability.
These are not only
the requirement of
a valid contract.
There are few
essentials of a valid
contract which laid
down in sec10of
the Act.
An agreement must
have essential
qualities given in
the chart.

3. Offer or proposal :
The offer and proposal is
defined in sec2(a) of the
Indian contract Act, ‘’when
one person signifies to
another his willingness to do
or to abstain from doing
anything with a view to obtain
the assent of that other to
such act or abstinence, he is
said to make a proposal’’.
An offer may be specific or
general.

4. The person making the proposal
or offer is called proposer, offeror
or promisor.
The person to whom the offer or
proposal is made is called the
propose or offeree.
When the offeree accepts the
offer, he is called promise or
acceptor.

5. A specific offer is one which is
made to an ascertained person.
And
A general offer is one which is
not made to a specific person,
but to the public at large.

6. Intention to create legal relations.
Offer must be definite and certain.
Offer must be communicated to offeree.
Statement of intention and invitation to offer.
Conditional offer to be made known
An offer may be Specific or general.
Two identical cross offer do not result in a contract.

7. Intention to create legal relations.
An offer will not become a promise even after it has been
accepted unless it has been made with a view to create
legal relations. An offer with social or religious
connotation, does not constitute a valid offer.
Ex: A invited B for dinner and B Failure to attend.
Offer must be definite and certain.
The offer must not be ambiguous, uncertain and vague. The
terms of the offer must be definite, unambiguous and certain. If
the offer is indefinite or vague, it will not be regarded as offer.
Ex: X purchased a horse from Y and promised to buy another, if
the first one proves lucky.
2. A offered to sell his car to B for ₹40000 or ₹45000. this offer
cannot be accepted as it is not clear about price.

8. Offer must be communicated to offeree.
According to sec4 of the Act “ the communication of a
proposal is complete when it comes to the knowledge
of the person to whom it is made”.
Ex: Lalman shukala Vs Gauri Dutt(1913).
G’s nephew had absconded from his home. He sent his
servant to search his missing nephew. When the
servant had left, G then announced that anybody who
discovered the missing boy would be given the reward
of 500. the servant discovered the missing boy without
knowing the reward. When the servant came to know
about the reward, he brought an action but it failed.
Statement of intention and invitation to
offer.
A mere statements of intention does not constitute a
offer. Similarly an invitation to offer does not
constitute a valid offer. Pricelist, catalogues,
advertisements, window display, invitation by a
company to public to subscribe to shares these are
the merely statement of intention and hence do not
form a valid contract.

9. Conditional offer to be made known
If there are special terms or conditions in an offer, these
must be brought to the notice of the offeree at the time of
making a proposal. A condition offer lapses when the
condition is not accepted by the offeree.
An offer may be Specific or general.
A specific offer is one which is made to an
ascertained person. And
A general offer is one which is not made to a specific
person, but to the public at large.
Two identical cross offer do not result in a
contract.
When parties make identical offers to each other in
ignorance of each others offer, the offers are said to be
cross offers.
A counter offer is a rejection of original offer. It is a new
offer which needs acceptance by the original promisor
before a contract is made.

10. An offer terminates when
revoked by notice of
revocation.
An offer lapses after stipulated
or reasonable time.
A conditional offer terminates
when condition is not
accepted.
It terminates by not being
accepted in the mode
prescribed or in usual and
reasonable manner.
An offer lapses on rejection by
counter offer or conditional
offer.
It terminates by subsequent
illegality or destruction of
subject matter.
An offer lapses by the death or
insanity of the offeror or
offeree before acceptance.

11. Sec2(b) defines acceptance as ” when one person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted . A proposal when
accepted becomes promise”

13. Essentials
of valid
acceptance
Must be
Absolute
and
unqualified
.
Must be
communica
ted to the
offeror
Must be in
the
prescribed
manner
Must be in
Response
to offer
Must be by
the offeree
Must be
given
before the
offer
lapses or is
revoked.
Must be
express or
implied

15. Capacity to contract is defined in
sec 11 of the Indian contract Act
as under
“ every person is competent to
contract who is of the age of the
majority according to the law to
which he is subject and who is of
sound mind, and is not disqualified
from contracting by any law to
which he is subject”.
In other words all persons are
competent to make contract except
the following.
1. Minor
2. Persons of unsound mind
3. Persons disqualified by any law
to which they are subject.

16. The term minor is explained in
section 3 of the Indian Majority
Act1875, as under
“ A minor is a person who has not
completed 18years of age”
In the following two cases, a person
becomes major on completion of 21
years:
1. Where a guardian of a minor
person or property has been
appointed under the Guardians
and wards Act1890, and
2. Where the superintendence of
minor property is assumed by a
court of wards.

17. Rules
Regarding
Minor
Contract
Can be
promise or
beneficiary
Agreement
void ab
initio
No
insolvency
Minor
cannot be a
Surety.
Liability for
necessaries No
ratification
No estoppel
Liability for
torts
Doctrine of
restitution

18. Can be promise or beneficiary
Agreement entered into by a minor for his or her
benefit are valid and enforceable. That means
minor can get all benefits from the contract.
Agreement void ab initio
Law acts as a guardian of minor and protect
their rights because they don’t possess the
capacity to judge what is good and what is
bad for them. Thus agreement with a minor is
ab initio(absolutely void).
No insolvency
A minor cant be declared insolvent even
though there are payable from the properties
of the minor.

19. Minor cannot be a Surety.
A minor cannot be a surety as he is not liable to
pay or compensate anything under a contract.
Liability for necessaries
Minor liable for necessaries supplied or
necessary services rendered to him or his
minor dependents. That means supplier can
claim reimbursement from the property of
minor person.
No ratification
The term ratification may be defined as the act
of confirming or approving. No ratification
implies that an agreement made by a minor
cannot be confirmed by him on attaining
majority.

20. No estoppel
A minor who falsely represents himself to be a
major and thereby induces another persons to
enter into an agreement with him, can
nevertheless plead minority as a defense in an
action on the agreement.
Liability for torts
The minor is liable for his tort, unless the tort is
in reality a breach of contract. The tort must be
separate from and independent of contract.
Doctrine of restitution
If minor obtains property or goods by
misrepresenting his age, he can be compelled to
restore it, if it is traceable in his possession. This
is known as the equitable doctrine of restitution.
Where minor sold the goods or converted them,
he cannot be made to pay the value of the goods.

21. A person is said to be of sound
mind for the purpose of making a
contract if, at the time when he
makes it, he is capable of
understanding it and of forming a
rational judgement as to its effect
upon his interest.
Persons of unsound mind includes
1. Idiots: An idiot is a person who
has completely lost his mental
thinking. Idiocy is a congenital
defect caused by lack of
development of the brain.
2. Lunatics: Lunatics is a person
whose mental thinking is disordered

25. Consideration is what a
promisor demands as the
price for his promise.
Consideration is “which
for what” something that
a person gives for
something he receives.
Section2(d) of the Indian contract Act defines consideration as
follows: “ when at the desire of the promisor, the promise or
any other person has done or abstained from doing, or does or
abstains from doing , or promises to do abstain from doing
something , such act or abstinence or promise is called a
consideration for the promise.”

27. Section 12 defines consent as “
Two or more persons are said
to consent when they agree
upon the same thing in the
same sense”.
Consent is free if it is not
caused by
1. coercion, 2. Undue influence,
3. Fraud, 4. Misrepresentation
and
5. Mistake.

28. Coercion means forcibly compelling a
person to enter into contract. Coercion
is threat or force used by one party
against the other for making him to
enter into agreement.
Coercion
The term undue influence means the unfair use of
one’s superior power in order to obtain the
consent of a person who is in a weaker position.
Undue
influenc
e• Example: Relationship between police and accused.
• Relationship between doctor and patient.
• Relationship between Teacher and student.
• Relationship between Religious advisor and disciple,
etc.

29. The term fraud may be defined as an
intentional , deliberate or willful
misstatement of facts which are material for
the formation of contract. It includes all acts
committed by a person with a view to deceive
another person.
Frauad
Misrepresentation is any untrue statement
made by a party to the contract to another,
Misrepresentation arises when the
representation or statement made is
inaccurate but the inaccuracy is not due to
any desire to defraud the other party.
Misrepresenta
tion
Mistake
Mistake may be defined as an incorrect belief
which leads one party to misunderstand the
other. The mistake takes place where the
concerned parties are not aware of the terms
of the agreement, and they take the term in a
different sense.

30. According to section 23, “ The consideration or object of an
agreement is lawful unless:
If it is forbidden by law; or
Is of such a nature that, if permitted, it would defeat the
provisions of any law; or
Is fraudulent; or
Involves or implies injury to the person or property of another;
or
The court regards it as immoral, or opposed to public policy.
In such cases, the consideration or object of an agreement is
said to be unlawful. Every agreement of which the object or
consideration is unlawful is void.”

31. 1. If it is forbidden by law.
If the object or consideration of an agreement is
the doing of an act forbidden by law the
agreement is void . An act or an undertaking is
forbidden by law;
i. When it is punishable by the criminal law of
the country, or
ii. When it is prohibited by special legislation
derived from the legislature.
If it Is of such a nature that, if permitted,
it would defeat the provisions of any law
This clause refers to cases where the object or
consideration of an agreement is of such a
nature that, though not directly forbidden by
law, it would indirectly lend to a violation of
law, whether enacted or otherwise.

32. If it Is fraudulent
An agreement enter into between parties
with a fraudulent purpose is unlawful within
the meaning of section 23 and hence void.
If it involves injury to the person or
property of another.
If the object of an agreement is to cause injury to
the person or property of another, it is void,
being unlawful agreement.
If the court regards it as immoral
An agreement whose object or consideration is
immoral, is illegal and, therefore, void. An
agreement is unlawful for immorality in either
of the following cases;
1. Case of sexual immorality, or
2. Furtherance of sexual immorality.

33. FORM A GROUP OF
5 STUDENTS AND
TELL TO COLLECT
CASE LAWS AND
PERFORMED ROLE
PLAY..

34. 1. BUSINESS LAW - RSN PILLAI AND BAGAVATHI
– S. CHAND PUBLICATION
2. BUSINESS LAW – P. SARAVANAVEL AND S.
SUMATHI- HPH
3. BUSINESS LAW – K. ASWATHAPPA AND G.
SUDARSANA REDDY- HPH
4.RIGHT TO INFORMATION ACT- P.K. DAS –
UNIVERSALPUBLISHING.
5. BUSINESS AND CORPORATE LAW- P.P.S.
GOGNA – S.CHAND PUBLICATION.
IMAGES COPIED FROM GOOGLE .