Contract Law - 1 Assignment PDF

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Contract Law – 1 Assignment Q 1]. Describe briefly that “All contracts are agreements, but all agreements are not contract.” INTRODUCTION: No doubt it is a valid and true statement. Before critically discussing the statement, we must know the exact and basic meanings of the two terms contract and agreement A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. There must be offer and acceptance for a contract to be formed. An offer must backed by acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered into freely and should be possible to perform. Definition of contract According to section 2(h) of the Contract Act 1872: ” An agreement enforceable by law is a contract.” A contract therefore, is an agreement which creates a legal obligation i.e., a duty enforceable by law. From the above definition, we find that a contract essentially consists of two elements: (1) An agreement and (2) Legal obligation i.e., a duty enforceable by law. Example; A promises to sell a horse to B for Rs. 1,00,000 , and B promises to buy horse at that price. All contracts are agreements: For a Contract to be there an agreement is essential; without an agreement, there can be no contract. It could will be said, “Where there is contract, there is agreement without an agreement there can be no contract”. What is agreement? As per section 2 (e) of Contract At 1872: ” Every promise and every set of promises, forming the consideration for each other, is an agreement.” Thus it is clear from this definition that a ‘promise’ is an agreement.

What is a ‘promise‘? The answer to this question is contained in section 2(a) and 2(b) provides that 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

“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.” And when the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted. A proposal, when accepted becomes a promise. The person who making the proposal is called- “promisor” and the person accepting the proposal called “promise”. Section 2 (d) provides the definition of consideration. According to this section the definition of consideration is as follows:“When, at the desire of the promisor, the promise or any other party/person has done or abstained from doing, or does or abstains from doing, or promise to do or to abstain from doing, something such act or abstinence or promise is called a consideration for the promise”. But if under section 23 of the Contract Act, such consideration is forbidden by law, if, is of such a nature that, if permitted, it would defeat the provision of any law, or, is fraudulent; or Involves or implies injury to the person or property of other, or the Courts regards it as immoral; or opposed to public policy. Section 2(e) provides that- every promise and every set of promises, forming consideration for each other, is an agreement. All agreements are not contracts As stated above, an agreement to become a contract must give rise to a legal obligation. If an agreement is incapable of creating a duty enforceable by law. It is not a contract. Thus an agreement is a wider term than a contract. Agreements of moral, religious or social nature e.g., a promise to lunch together at a friend’s house or to take a walk together are not contracts because they are not likely to create a duty enforceable by law for the simple reason that the parties never intended that they should be attended by legal consequences.

On the other hand, legal agreements are contracts because they create legal relations between the parties. EXAMPLE: a- A invites B to dinner. B accepts this invitation but does not attend the dinner. A cannot sue B for damages. It is social agreement because it does not create legal obligation. So it is not a contract. b- A promises to sell his car to B for one million. It is legal agreement because it creates legal obligations between the parties. So it is a contract. According to section 10 of the contract act 1872, “All agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration and with a lawful object and not hereby declared to be void.” Thus an agreement becomes a contract when at least the following conditions are satisfied. 1-free consent 2-competency of the parties 3-lawful consideration 4- Lawful object.

So agreement is the first step of contract. But after making agreement, it may be enforceable by law or may not be enforceable at law. If that agreement is enforced by law then it will be treated or turned into contract, But if the agreement is not enforced by law that will not be treated as a contract but merely an agreement. So all contracts are agreement, but all agreements are not contract.

Q 2]. Define Quasi-Contracts and explain different kinds of Quasi-Contracts. Introduction Chapter -V, Section 68 to Section 72 of the Indian Contract Act, 1872 speaks about "Quasi-Contract or Certain relations resembling those created by contracts. These relations resembling contract are known as contract implied in law or a quasi-contract. It is not real contract or as it is called, a consensual contract based on the agreement of the parties. These obligations come into existence by a fiction of law. Meaning and Definition of Quasi-Contract Quasi Contract is based on the principle of equity. That "A person shall not be allowed to enrich himself unjustly at the expense of another. It means one should not accept or receive any benefit unjustly. Though the Indian contract Act, 1872 does not define quasi contract, it calls them relation resembling those of contracts. However, a quasi-contract may be defined as, “a transaction in which there is no contract between the parties; the law creates certain rights and obligation between them which are similar to those created by a contract. The term Quasi Contract is derived from the Roman Law "Obligatio quasi ex contractu". Quasi Contract is not real Contract entered into by parties intentionally. “It is an obligation created by law for the sake of justice; specif., an obligation imposed by law on parties because of relationship between parties or because one of them would otherwise be unjustly enriched. It’s not a contract, but instead is a remedy that allows plaintiff to recover a benefit conferred on the defendant” Black Law Dictionary Definition. Example XYZ leaves his wristwatch at ABC's house by mistake. Here ABC has Quasicontractual obligation to return it to XYZ. Requirement There are many situations where, even though a party has not breached a contract or had not committed a tort, yet he is required to perform obligations towards another party. A classic example is a situation where certain goods are delivered to a person by mistake. In such a situation, the person to whom the goods are delivered is supposed to either return the goods to the person who had

sent the goods to him by mistake and keep the goods in good condition till such time that they are returned. In case the person, to whom the goods were delivered by mistake, has consumed the goods, then he shall be liable to pay for the goods even though he had not placed an order for them. Note - Generally, in a contract, obligations are created on the parties out of an agreement but in these type of contracts (quasi-contracts) obligations are created on the parties without any agreement. Features of a Quasi Contract 1. It is usually a right to money and is generally (not always) to a liquated sum of money 2. The right is not an outcome of an agreement but is imposed by law. 3. The right is not available against everyone in the world but only against a specific person(s). Hence it resembles a contractual right. Kinds of Quasi Contracts Section 68 to Section 72 of the Indian Contract Act, 1872 deals with Five Kinds of Quasi-Contract which are as follows 1) Claim for necessaries supplied to person incapable of contracting, or on his account (Section 68) " If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. Illustrations

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(a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property. (b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’s property. 2) Reimbursement of person paying money due by another, in payment of which he is interested (Section 69) A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

Illustration

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B holds land in Bengal, on a lease granted by A, the zamindar. The revenue payable by A to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue law, the consequence of such sale will be the annulment of B’s lease. B to prevent the sale and the consequent annulment of his own lease pays the Government the sum due from A. A is bound to make good to B the amount so paid. 3) Obligation of person enjoying benefit of non-gratuitous act (Section 70). Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such another person enjoys the benefit thereof, the letter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. 4)

Responsibility

of

finder

of

goods (Section

71)

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A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee. 5) Liability of person to whom money is paid, or thing delivered, by mistake or under coercion (Section 72) A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. Illustrations

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(a) A and B jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing this fact, pays 100 rupees over again to C. C is bound to repay the amount to B. (b) A railway company refuses to deliver up certain goods to the consignee except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegal and excessive.

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