contract act 1972

1. CONTRACT ACT 1872
Difference between Contract and Agreement.
Offer, Acceptance, Consideration.
Free Consent. Alteration, Rescission

2. CONTRACT DEFINITION:
Section 2 (h) of contract Act defines a contract as
“ an agreement enforceable by law”
Thus to make a contract there must be
1. An agreement
2.The agreement shall be enforceable by law.

3. DEFINITIONS ACCORDING TO DIFFERENT
SCHOLARS
 Every agreement and promise enforceable at law is a contract. Pollock.
 A legally binding agreement between two or more persons by which rights
are acquired by one or more to acts or forbearances on the part of the
others. Sir William Anson.
 An agreement creating and defining obligations between the parties.
Salmond

4. Difference between agreement and contract
 An agreement is any understanding or arrangement
reached between two or more parties. A contract is a specific type
of agreement that, by its terms and elements, is legally binding and
enforceable in a court of law.
 Agreement-Section 2(e) “Every Promise and every set of promises forming
consideration for each other
 All agreements are not enforceable by law and therefore, all agreements
are not contracts.

5. ESSENTIALS OF A VALID CONTRACT

6. Offer and acceptance
 Offer Proposal section 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 to such act or abstinence, he is said to make a
proposal/offer".
 There must be expressed willingness to do or not to do something. An offer
should be made to obtain the assent of the other. The offer should be
communicated to the offeree.
 If there is no offer, there is no contact, because there is no meeting of minds.
If there is an offer by one party, but it is not accepted by the other party or if
the ostensible acceptance of the offer is defective, then also, there is no
agreement and therefore no "contract".

8. Offer and acceptance
 Offer must be :
 Absolute and unqualified
 It must be

 EXAMPLES……..
 CASES
 Harvey v Facey [1893] AC 552 Privy Council
 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Court of Appeal

9. Consideration Sec 2(d) of Contract Act
 Consideration in contract law is simply the exchange of one thing of
value for another. It is one of the six elements that must be present for
a contract to be enforceable. Consideration must be both legally
sufficient and bargained-for by the receiving

10. Rules regarding consideration
 There are various rules governing the law of consideration:
 1. The consideration must not be past.
 2. The consideration must be sufficient but need not be adequate.
 3. The consideration must move from the promisee.
 4. An existing public duty will not amount to valid consideration.
 5. An existing contractual duty will not amount to valid consideration.
 Part payment of a debt is not valid consideration for a promise to forego
the balance

11. Free consent
The term free consent refers to meeting of free and fresh minds of two
parties of an agreement when two parties take and understand, purpose, subject
matter and terms and conditions of the agreement in the same sense it is free
consent. Both of them must take things in the same way. They must not
understand it in different way. An agreement which is made freely it becomes a
valid contract due to presence of free consent of both the parties. In any of the
free consent of both there will no free consent in the agreement.
 a. Coercion: - threading.
 b. Undue influence: - pressure and misuse of power for unfair advantage.
 c. Fraud, deceiving on cheating the other.
 d. Misrepresentation: - false statement without an intention to deceive the
other. e. Mistake error

12. Kinds of contracts
 Kinds of contracts from the point of view of Enforceability
 Valid contract: contract which has all the essential elements of a valid contract is
a valid contract. Like valid agreement, capacity to contract, lawful consideration,
lawful object etc
 Voidable contract. A contract which is cancellable at the option of the party. It is
enforceable by law at the option of one party and not the other party.
 Void contract: which has no value in the eyes of law. such type of contract can
not be taken to court of law.
 Unenforceable contract
 Illegal or unlawful contract

13. According to Formation
 1. Express Contract
 2. Implied Contract
 3. Quasi Contract – it is obligation created by the law in absence of contract.

14. According to performance
 1. Executed Contract
 All the obligations are fulfilled and nothing needs to be done.
 2. Executory Contract.
 Some Obligations are done and some are left.

15. Breach of contract
 Breach of contract is the failure to perform what a party is under a duty to
perform.
 When this happens, the non breaching party can choose one or more
remedies

16. Remedies for breach of contract
 Damages/ Monetary Compensation.
 Suit for specific performance;
 Quantum meruit
 recession
 Specific Performance requires the performance of the act promised in
the contract
 Injunction stay order.

17. Types of Damages
 There are basically four broad categories of damages:
 1.Compensatory (to cover direct losses and costs).
 2.Consequential (to cover indirect and foreseeable losses).
 3.Punitive (to punish and deter wrongdoing).
 4.Nominal (to recognize wrongdoing when no monetary loss is shown).

18. Damages/ Monetary Compensation
Consequential Damages:
Damages caused by special circumstances beyond the contract itself. They
flow from the consequences, or results, of a breach.
The breaching party must know (or have reason to know) that special
circumstances will cause the additional loss.

19. Suit of Recession
 Rescission terminates a contract and Restitution
returns the contracting parties to the positions they occupied prior to the
contract.

20. Quantum Meriut
 Suit upon Quantum Meriut as much is earned or in proportion to work:
 A right to use upon quantum meruit usually arises where after part perfor-
mance of the contract by one party, there is a breach of contract, or the
contract is discovered void or becomes void. This remedy may be availed
of either without claiming damages (i. e., claiming reason-able
compensation only for the work done)
 A, engages B, a contractor, to build a three storied house. After a part is
constructed A prevents B from working any more. B, the contractor, is
entitled to get reasonable compensation for work done under the doctrine
of quantum meruit in addition. to the damages for breach of contract.

21. Discharge of Contract Act

22. Methods of discharging a contract

23. Modes of discharging a contract Contd…

24. By Agreement or by Consent
According to Section 62-64 of Pakistani Contract Act :
A contract can be terminated or discharged by mutual
express or implied consent of both the parties in the
following ways:
A) By Novation
B) By accord and satisfaction
B)By Remission and Waiver
C)By Recession

25. Contract of Indemnity

31. Contract of Indemnity
 A form of contingent contract, whereby one party promises to
the other party that he will compensate the loss or damages
occurred to him by the conduct of the first party or any other
person, it is known as the contract of indemnity. The number of
parties in the contract is two, one who promises to indemnify
the other party is indemnifier while the other one whose loss is
compensated is known as indemnified
 Meaning of Indemnify is: to make good the loss of another.

32. Indemnity example
example; Mr. Joe is a shareholder of Alpha Ltd. lost
his share certificate. Joe applies for a duplicate one.
The company agrees, but on the condition that Joe
compensates for the loss or damage to the company if
a third person brings the original certificate.
One more common example of indemnity is the
insurance contract where the insurance company
promises to pay for the damages suffered by
the policyholder, against the premiums.

33. Contract of guarantee:
 Contract of guarantee, surety, principal debtor and creditor
 A “contract of guarantee” is a contract of perform the promise or
discharge the liability, of a third person in case of his default. The
person who gives a guarantee is called the “surety”; the persons in
respect of those default the guarantee is given is called the
“principal debtor”, and the person the whom the guarantee is
given is called the “creditor”. A guarantee may be either oral or
written.Sec 126

34. Guarantee
 Three contracts will be there, first between the principal debtor and creditor,
second between principal debtor and surety, third between the surety and the
creditor. The contract can be oral or written. There is an implied promise in the
contract that the principal debtor will indemnify the surety for the sums paid by
him as an obligation of the contract provided they are rightfully paid. The surety
is not entitled to recover the amount paid by him wrongfully.
 Here we have an example of the contract of guarantee; Mr. Harry takes a loan
from the bank for which Mr. Joesph has given the guarantee that if Harry default
in the payment of the said amount he will discharge the liability. Here Joseph
plays the role of surety, Harry is the principal debtor and Bank is the creditor.

35.  Contingent Contract and Wagering Contract
 Scenario: 1
 There is a program conducted by a FM Radio station while League Cricket
matches were going on. In that program the RJ (Radio Jockey) asks some
questions to the callers and the conversation is as follows:
 Radio Jockey: Hi Hi Hi … This is Shiva from Radio Onion FM. For
another one hour we are going to play a game. At present League Cricket
match is going on. You can call me and predict what could be the score of
a particular over. If your expectation is right then we will pay you
Rs.5,000/-. Now we shall meet the first caller. [A ring (phone call) comes …
]
 Caller: Hi sir. This is Raja.
 RJ Shiva: Hi Raja, What is the expected runs for this over?
 Raja: Sir, I predict it is 10 runs.
 [Actually, the runs scored were 10]
 RJ Shiva: Congratulations Raja! What you have predicted is right. You
have won Rs.5,000/-
 Raja: Thank you sir.

36.  Scenario: 2
 A conversion between Bookie and Cricketer:
 Bookie: You should miss all the catches which you are about to do.
You should voluntarily bowl 25 noballs and wides. If so we will pay
you Rs.10,00,000/-
 Cricketer: Yes Sir. I agree.

37.  Contingent Contract
 Wagering Contract
 What we discussed under Scenario: 1 is contingent
 What we discussed under Scenario: 2 is wagering contract.
 A contingent contract has been defined as a contract to do or not to do
something, if some event collateral to such contract does or does not happen. A
contingent contract is wider in scope.
 The intention of contingent contract is to run business. While in wagering
agreement there is no intention of doing a business.
 In contingent contract there is a loss and profit of both the parties. While in
wagering agreement one party is completely at loss while the other is at profit.
 A wager is a promise to pay money or money’s worth on the happening or non-
happening of an uncertain event.
 In a contingent contract mutual promises are not necessary. In case of a
wagering agreement promise must be mutual. A contingent contract is valid.
A wagering agreement is void/illegal.

38. PARTNERSHIP ACT 1932
 PARTNERSHIP ACT 1932
 Nature of partnership.
 Rights of Partners
 General duties of partner.

39. Definition of Partnership in Partnership
Act

41.  RIGHTS OF PARTNERS
 CATEGORY A:
 1. Right to share profits.
 2. Right to take part in conduct of business
 3. Right to be consulted.
 4. Right to access books.

42. CATEGORY B:
 5. Right to Remuneration.
 6. Right to interest on capital.
 7. Right to interest on advances.

43. CATEGORY C:
 8. Right to retire.
 9. Right to stop admission of a new partnere.
 10. Right of outgoing partnere to do competing business.
 11. Right of outgoing partner to share subsequent profits.
 12. Right not to be expelled.

44. CATEGORY D:
 12. Right to be indemnified.
 13. Right to use property of partnership business.

45. Duties of Partners:
 General Duties:
 1. To carry on the business of the firm, to do what is in the greatest
common advantage.
 2. To be just and faithful, to give true accounts and complete information.
 3. To Indemnify the firm for the loss caused by him during the conduct of
the firm’s business.
 4. To contribute to the losses of the firm in equal proportion.
 5. Have partners advantage of his knowledge.
 6. Return personal profit from the firm assets or name.
 7. Return profit for competing business.

46. Negotiable Instruments

47. Definition

48. Promissory Note

49. Characteristics of Promissory Note

50. Parties of promissory Note

51. PROMISSORY NOTE

52. Bill of Exchange

53. Essentials of Bill of Exchange

54. Parties to Bill of Exchange

55. Specimen of Bill of Exchange

56. Cheque

57. Essentials of cheque

58. Parties to cheque

59. Specimen of cheque

60. Types of Cheques

61. Negotiation

62. SALE OF GOODS ACT
Definition of Sale:

65. Why is the transfer of ownership important

66. Agreement to Sell
 Definition: An agreement of sale constitutes the terms and conditions
of sale of a property by the seller to the buyer. These terms and conditions
include the amount at which it is to be sold and the future date of full
payment.
 Explanation: An agreement to sell does not involve any transfer of the
property in the goods. In an agreement to sell the arrangement is that the
transfer of property in the goods in (1) to take place at some future date, or
(2) subject to some condition to be fulfilled thereafter. An agreement to
sell becomes a sale when the condition are fulfilled.

67. Basis for comparison Sale Agreement to sell

68. Company Law
Definition:
Salient features of the company
Lifting up the corporate veil.

69. Definition of a Company

73. TYPES OF RESOLUTIONS
1. Ordinary resolutions
(1) An ordinary resolution of the members (or of a class of members) of a
company means a resolution that is passed by a simple majority.
(2) A written resolution is passed by a simple majority if it is passed by members
representing a simple majority of the total voting rights of eligible members.
(3) A resolution passed at a meeting on a show of hands is passed by a simple
majority if it is passed by a simple majority of-
(a) the members who, being entitled to do so, vote in person on the resolution,
and
(b) the persons who vote on the resolution as duly appointed proxies of members
entitled to vote

74. Special Resolutions
A special resolution requires twenty-one days clear notice to those entitled to attend
and vote. It is passed by a majority of not less than 75% of those voting, in person and
by proxy, or of shares voted by way of a poll.
Examples of decisions passed by special resolution are:
Amendments to memorandum and articles of association;
Change in company name;
Reduction in share capital;
Voluntary wind up of a company; and
Varying of class rights attaching to classes of shares.