Ch 2 Business Contracts (a)

Business Contracts Unit II PUTTU GURU PRASAD INC GUNTUR

After reading this chapter you will be conversant with the following:  Legal

Elements of Contracts  Remedies of Contract  Contracts of Agency  Contracts of Indemnity  Letter of Credit Contracts  Employment Contracts  Special Rights in Contracts  Documentation of Commercial Contracts

Legal elements of contracts  An

agreement enforceable by law is a contract 2(h)  Intention to create legal relation/ bond between the parties (vinculum juris)  Balfour V Balfour ( £40 to be paid to wife for staying back in England, due to ill health –Is the agreement not enforceable ?) No  Gould V Gould ( An agreement with the words “As long as he can pay”– Is there an intention to create a binding contract?)- No

Agreement + Legal obligation = Contract Agreement made with the intention of legal enforceability is a valid contract Legal enforceability: Social or moral obligations are not considered to be valid contracts, until they create a legal obligation to make the parties bind themselves If they are legal Agreement only it is a contract

Agreements

Agreements can be Social or Legal

Legal obligations

Conditions of contracts In order to be an agreement there must be: ●Plurality of persons ( Two or more persons) ● Consensus ad idem Parties must be thinking of the same thing in the same sense ( this is with regard to subject matter of the contract) In other words it can be said that there must be meeting of minds

Scope  Voluntary

creation of legal obligations or civil obligations  Sec 10- All agreements are contracts if they are made by the free consent of parties competent to contract, for lawful consideration and with lawful object and are not hereby expressly declared to be void  All contracts are agreements but all agreements are not contracts

Essential of a valid contract     

Offer and acceptance Capacity to contract Free Consent Consideration Lawful object

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Other formalities to be fulfilled are: Certainty and possibility performance Terms of contract to be clear Agreement not be declared void Other legal formalities to be fulfilled like stamp duty, registration

Process of making a contract  Proposal

and Acceptance Who makes it? Promisor ( One who makes proposal or offerer) willing to do something or abstain from doing something Offer made with the intention to obtain assent Who accepts it? Person who accepts the said proposal is called promisee

Communication of offer and acceptance  It

can be communicated by an act or omission  Word of mouth- Expressed  Writing- Expressed  Made by conduct- Implied (A bid to Auction) Either it is express or implied, the liability to perform arises as it is a legal obligation.

Kinds of offer

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General and Specific offer

Offer to be made to a definite person (Carlill V carbolic smoke ball company)

Offer and Invitation to offer *(Harvey V Facey)

(Tender is a standing offer) Catalogue, display of goods, Auction   

Express and implied offer Positive and Negative offer Counter offer- (Hyde vs. Wrench) (Not to be mistaken for mere information being asked – Stevenson v Mc-Lean)

 Cross

offer and Standard form Contracts

Essential of Valid Acceptance  To

be made by the offeree or promisee  It should be Absolute and unqualified  Shall be in the prescribed form  Within the specified time  To be communicated- Either during the negotiations or after (E.g. Letter of acceptance typed but the author kept it inside his draw)  To

be positive

Revocation of Offer and Acceptance  Termination

of Contract Either from the offerer or offeree  By Revocation –General or Unilateral  Lapse of Time  Counter offer or Rejection  Effect of death or Insanity of either of the party  Subsequent illegality  Failure to fulfill condition precedent for acceptance