Law of contract-1 - Law of Contract PDF

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Warning: TT: undefined function: 32 Warning: TT: undefined function: 32 Warning: TT: undefined function: 32 Warning: TT: undefined function: 32The Innovative Law AcademyThe Academy in which we are not only teaching subjects of LLB, Even providing Lectures of Communication Skills as well.LLB Notes Pa...

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The Innovative Law Academy The Academy in which we are not only teaching subjects of LLB, Even providing Lectures of Communication Skills as well.

LLB Notes Part I

Contract Act & Sales of Goods Best For Punjab Uni exam, BZU Uni, ISUB Uni, Quaid e azam Uni, Other all universities exams, CSS, PMS, Judicial Services,

Lecturer: Mobushar

Iqbal Chohan

LLB. LLM. DIPL Communication Skill. MSc Office: Fatima Iqbal Law Chamber Lahore Youtube/Law and Communication skills Facebook/Innovative law academy Mobile: 0300-0096491

Address: Lower mall around Chauburji Oppo: Butt sweet Hajvari Tower Basement 10-B Lahore.

Contact# 0300-0096491

“I am very thankful to my almighty ALLAH for giving me such a courage, success and honor. I am also very thankful to all the students who appreciated my work and received them warmly. In these notes the law has been elaborated with the help of landmark judgments which is delivered by the Hon’ble Courts and has been written for the examination point of view and i hope that these notes will also be received warmly by the students and may led to the success in the examination as well as in their profession. The below-given notes prepared for the student of the LLB. The subject is very technical subject and i have taken every step to ensure that these notes may fulfill the need of the students, but there may be some shortcomings or flaws in it, so every suggestion for the improvement of these notes will be warmly welcome.”

I Am Very Thankful To You All Your Well Wishers

Lecturer: Mobushar

Iqbal

LLB. LLM. Msc. Dipl communication skills Advocate High Court

Cell No: 0300-0096491

Innovative Law Academy Lahore Lower mall around Chauburji Oppo: Butt sweet Hajvari Tower Basement 10-B Lahore.

Q # 01: What are the essentials of a valid contract? Discuss them briefly 1) Preface Statement Law of contract 1872 provides the rules for commercial transactions. It is very important branch of mercantile law.A contract is a legal arrangement between two or more parties that is enforceable at law. Contract law legally binds the parties to do or not to do some particular thing between the tenure of agreement. The major elements of a contract are offer, acceptance, and its aim is to create legal relations, and consideration. The contract act 1872 is prevail into the whole Pakistan and it does not goes against any other law of the country

2) Meaning of Contract Following is the meaning of contract, according to the oxford dictionary is as under

Oxford dictionary of law “A legally binding agreement”

3) Definition of contract A contract is written or spoken agreement between two or more persons to do something or not to do something for a specified time and it legally binds them and it is enforceable by law

4) Conditions for contract There are two conditions for contract I. An Agreement II. An agreement should be enforceable by law. Contract = Agreement+ Enforceability

5) Classifications of Contract Following are the classifications of contract are as under

1. According to its Validity Validity of contract means, an agreement which fulfills all the legal requirements and is enforceable at law is called valid contract

2. According to its formation Formation of contract means, is the existence of offer and acceptance

3. According to its performance Performance of contract' means contract should be capable of being performed

Example If there is an agreement between A and B that , A will construct a house for B and B will pay 5 lakhs to A, that agreement is a contract

6) Essentials for valid contract Following are the essentials for valid contract, details are given below

1. Proposal There must be lawful proposal from one party to another party

2. Acceptance There must be lawful acceptance from other party

3. Agreement There should be an agreement between the two parties such as proposer and acceptor

4. Written It is necessary elements that agreement between the two parties should be in written form

5. Lawful agreement The agreement between the parties should be lawful, because unlawful agreement cannot be enforceable at law

6. Legal relationship The parties must create a legal relationship and both the parties must have intention to go to the court it the other party does not meet his promise

7. Lawful object The object of the contract should be lawful and does not violate the law, against the public policy or unlawful such as someone hires a house for gambling so that it will be unlawful object

8. Competency of Parties Parties of the contract must be competent to enter into contract. According to the contract act 1872, every person is competent to contract who 1) Attained the age of maturity 2) Is of sound mind

3) Is not disqualified by law to enter into the contract

9. Consideration Consideration contract plays a vital role in contract. Consideration is a benefit and this benefit itself is the reason of contract. Without consideration the contract would be considered as invalid

10. Free consent For a valid contract, it is necessary that the consent of the parties must be free, and should be free from any pressure or undue influence among the parties

11. Certain and definite The agreement should be clarified in terms because if the terms of the agreement will uncertain or confusing it will not be enforceable at law

12. Not declared void Contract has not been declared void (Cancelled) according to any law of the country because a void agreement is not enforceable by law and it has no legal authority

13. Possibility of performance The agreement must be capable of being performed. If the parties have agreed upon a matter which is practically not possible to perform then the agreement will not be considered as valid contract

14. Legal formalities In contract the legal formalities should be performed according to law such as writing of contract, attestation of contract or registration of contract is needed in law, otherwise it should not be enforceable by law

7) Preclude Remarks The agreement is a contract which is enforceable by law. An agreement becomes enforceable by law when it fulfills some conditions given into the contract act 1872 and these conditions may be called essentials of a valid contract. If any of the essential element is missing from the contract in this case such contract will be considered as illegal or unenforceable by law

Q # 02: What is the difference between voidable and void agreement. Give your answer with example. 1) Preface Statement Law of contract 1872 provides the rules for commercial transactions. It is very important branch of mercantile law. A contract is a legal arrangement between two or more parties that is enforceable at law. Contract law legally binds the parties to do or not to do some particular thing between the tenure of agreement. The major elements of a contract are offer, acceptance, and it’s aim is to create legal relations, and consideration. The contract act 1872 is prevail into the whole Pakistan and it does not goes against any other law of the country

2) Definition of Void contract An agreement which is not enforceable by law is called void contract.

Explanation The word void means “not binding in law” A contract which cannot be enforced by law even no party can take legal action against one another.

3) Reasons of void contract Following are the main reasons when contract becomes void. 1) When contract is illegal from the moment it is made 2) Contract was legal but declared unacceptable by the courts because it violates fundamental principles 3) It becomes void due to the changes in law 4) Even it has been fully performed

4) Feature of void contract Following are the feature of void contract

1. Enforceability by law A void contract is not enforceable by law because it not fulfill the requirements of a valid contract

2. Compensation In void contract no compensation can be paid by any party because it not fulfill the requirements of a valid contract

3. Nature of contract

According to its nature because it is against the public policy that’s why it is a void contract because

4. No legal rights A void contract does not create any legal rights because it not fulfill the requirements of a valid contract

5. No obligation on any party A void contract does not create any obligation on any party because it not fulfill the requirements of a valid contract

5) Example of void contract An agreement which is based upon illegal act is an example of a void agreement. For example, a contract between drug dealers and buyers is a void contract because the terms of the contract are illegal. In such a case, no party can go to court to enforce the contract

6) Definition of Voidable contract An agreement which is enforceable only with the option of one party who can cancel or repeal the contract

I. Reasons of voidable contract Following are the main reasons when contract becomes voidable 1) Mistake in facts makes the contract voidable 2) Getting consent by undue influence makes the contract voidable 3) Making contract by minor makes the contract voidable 4) Misrepresentation and fraud, makes the contract voidable 5) Failure of performance within specified time makes the contract voidable

7) Features of voidable contract 1. Enforceability by law It is only enforceable by law on the option of one or more parties

2. Compensation In voidable contract compensation will be paid by one party to another party if any party cancels the contract

3. Nature of contract A voidable contract is a valid contract until it is avoided by the party. Once it is avoided it

becomes void

4. Legal Right It provides legal rights in hands of both parties who can claim that their consent has been obtained by undue influence etc.

5. Voidable at the option of one party The contract is voidable at the option of one party whose consent become cause of void of the contract

8) Examples of voidable contract Following are the examples of voidable contract 1) Agreement with a person of unsound minded 2) Agreement under undue influence 3) Agreement based upon fraud or misrepresentation 4) Agreement with the minor , are the examples of voidable contract

9) Difference between void and voidable contract 1. As to enforceability A void contract is not enforceable A voidable contract is enforceable at the option of one party

2. As to compensation In void contract compensation cannot be paid Compensation may be paid in voidable contract

3. Legal effect A void contract has no legal effect A voidable contract has legal effect until it is avoided

4. As to objection In void contract no party can claim his objection against other party In voidable contract each party can claim his objection against other party

5. Time factor A void contract is invalid from the moment it is created A voidable contract is valid till the time it is avoided

10) Preclude Remarks Contract is legally binding agreement between two or more parties by which rights can be

acquired by parties. A void contract is not enforceable by the law due to failure of fulfillments required by law, makes the such contract void. A voidable contract is enforceable by the law but only the option of the one or more parties

Q # 03: What is consideration? Explain its exceptions. 1) Preface Statement The meaning of consideration in legal sense is “ something in return”. Simply it can be said that exchange of something against another thing. Contract without consideration is not enforceable by the law as well as consideration can be ,in form of money, in form of other thing or to do something or not to do something , consideration has multiple natures. An agreement without consideration is void and consideration should be good and valuable. Consideration is the backbone of the contract it means without it contract cannot create it is vital element in the law of contract

2) Definition of consideration Consideration is a such benefit which becomes the reason of creation of contract between the parties Consideration is an object which can be in form of money, in form of to do something or not to do something or even other than these

Example A agrees to sell his car to B for Rs. 3 lakh. Now B promises to pay such amount to A, this amount is consideration in this contract or agreement

3) Types of consideration Following are the three types of consideration

1. Past consideration When consideration is given even before the creation of contract. It is consideration that is already given is called past consideration

2. Present consideration If the consideration is given at the time of creation of contract, it is called present consideration

3. Future consideration It the consideration is given after the creation of contract, it is called future consideration

4) Essentials of consideration Following are the essentials of consideration 1) Consideration should be given by the promisee 2) Consideration should be given by the desire of promisor

3) Consideration should be lawful 4) Consideration should be real 5) Consideration may be, past, present, or future 6) It may be consisted of an act or money or other than these

5) Exceptions It is a fact that without consideration an agreement cannot be created but it has following exceptions

1. Love and affection If an agreement has been created between the parties for natural love and affection, in such case consideration is not necessary

2. Contract of agency In the contract act of 1872, it has been mentioned that there is no consideration is required for contract of agency

3. Voluntary services A contract made without consideration is also valid if there is a promise to compensate, in such case there is no consideration is required

4. Time barred debt Money a person borrowed and didn't repay but is not legally collectable because too many years have passed. In such case there is no consideration is required

5. Contract under seal Under the English law, a contract which is made in form of a deed under seal is valid even it is made without consideration

6. Extension in time limit If agreement is made for extension in time limit for enforcement of the contract, in such case, there is no need of any consideration

6) Unlawful consideration If in a contract any object which violates the law or based upon a fraud or creates an injury to others it will be considered unlawful consideration

7) Cases of unlawful consideration Following are the cases of unlawful consideration which are being given below

1. Prohibited by law

If the object of an agreement is prohibited by the law, in this case the consideration will be unlawful

2. Element of fraud If the object of an agreement has element of fraud, in this case the consideration will be unlawful

3. Immoral If the object of an agreement is immoral in nature, in this case the consideration will be unlawful

4. Against public policy If the object of an agreement is against the public policy, in this case the consideration will be unlawful

5. Injury to other person or property If the object of an agreement which become cause of an injury to other person or property, in this case the consideration will be unlawful

6. Unlawful object If the object of an agreement is itself unlawful, in this case the consideration will be unlawful

8) Preclude Remarks It said that the consideration is the one of the most important essential of the valid contract. Without consideration there is not contract but there are certain exception according to them a contract can be valid without the consideration. Consideration removes the fear from the mind of other persons those think that there is a chance of lose in deal. Consideration an object which can be in form of money, in form of to do something or not to do something or even other than these. Consideration play vital role in the a valid contract and it is like a backbone in the human body which may help the being to stand without any support

Q # 04: What is void contract? What contract are specifically declared void contracts under the contract act 1872. 1) Preface Statement The word void means “not binding in law”. A contract which cannot be enforced by any party is void contract. It cannot create legal relationship between the party because it is not recognized by the law. A lot of reasons which makes such kind of contracts void and no one can take legal action against other on the behalf of void contract

2) Definition of Void contract An agreement which is not enforceable by law is called void contract.

Explanation The word void means “not binding in law” A contract which cannot be enforced by law even no party can take legal action against one another.

3) Reasons of void contract Following are the main reasons when contract becomes void 1) When contract is illegal from the moment it is made 2) Contract was legal but declared unacceptable by the courts because it violates fundamental principles 3) It becomes void due to the changes in law 4) Even it has been fully performed

4) Feature of void contract Following are the feature of void contract

1. Enforceability by law A void contract is not enforceable by law because it not fulfill the requirements of a valid contract

2. Compensation In void contract no compensation can be paid by any party because it not fulfill the requirements of a valid contract

3. Nature of contract According to its nature because it is against the public policy that’s why it is a void contract

4. No legal rights A void contract does not create any legal rights because it not fulfill the requirements of a valid contract

5. No obligation on any party A void contract does not create any obligation on any party because it not fulfill the requirements of a valid contract

5) Contracts which are specifically declared void Following are the contract which declared to be void

1. Agreement in restraint of marriage Any contract which restraints to any adult person from marriage for whole life or for specified time is void contract.

Illustration If A agrees with B that she will not marry C.it is a void marriage

2. Agreement in restraint of trade Any agreement which restraint to any businessman from establishing lawful business is void contract

3. Agreement in restraint of legal proceeding Each and every body is allowed to obtain his legal rights through the legal proceeding. So following agreements is void Any agreement which restrains from taking legal proceedings, while law enable the same person to take action against any one

4. Agreement when both parties are at mistake Any agreement in which both the parties are under mistake as to a matter of fact, such agreement is void contract

5. Agreement by way of wager Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements and it is void contract

6. Uncertainty ...