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Legal Unit 2
Legal Unit 2
The Indian Contract Act, 1872 prescribes the law relating to contracts in India and is
the key act regulating Indian contract law. It is applicable to all the states of India. It
determines the circumstances in which promises made by the parties to a contract shall be
legally binding. Under Section 2(h), the Indian Contract Act de nes a contract as an
agreement enforceable by Law.
Unlawful Consideration
1. Forbidden by law
2. If it involves injury to a person or property of another:
3. If courts regards it as immoral.
4. Is of such nature that, if permitted, it would defeat the provisions of any law:
5. fraudulent, or
6. Is opposed to public policy.
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7. Agreements in restrained of legal proceedings:
8. Traf cking in public of ces and titles: agreements for sale or transfer of public of ces
and title or for procurement of a public recognition like Padma Vibhushan or Padma Shri
etc. for monetary consideration is unlawful, being opposed to public policy.
9. Agreements restricting personal liberty
10. Marriage brokerage agreements:
11. Agreements interfering marital duties
Discharge of Contract
The term discharge of contract means ending of the contractual relationship
between the parties. A contract is said to have been discharged when it ceases
to operate i.e. when the rights and obligations created by the parties came to
an end. A contract can be discharged if the parties mutually agree to terminate
the contract.
Also there are different methods through which contracts can be
discharged:
A contract is said to be discharged using the following methods:
• Discharge by Performance
• Discharge by Agreement or Consent
• Discharge by Impossibility of Performance
• Discharge by Lapse of Time
• Discharge by Operation of Law
• Discharge by Breach of Contract
Breach of Contract
A breach of contract is a violation of any of the agreed-upon terms and conditions of a
binding contract. The breach could be anything from a late payment to a more serious
violation, such as the failure to deliver a promised asset.
Types of Contract Breaches
One may think of a contract breach as either minor or material.
• Minor breach: A minor breach happens when you don’t receive an item or service by the
due date. For example, you bring a suit to your tailor to be custom fit. The tailor promises
(an oral contract) that they will deliver the adjusted garment in time for your important
presentation but, in fact, they deliver it a day later.
• Material breach: A material breach is when you receive something different from what
was stated in the agreement. Say, for example, that your firm contracts with a vendor to
deliver 200 copies of a bound manual for an auto industry conference. But when the boxes
arrive at the conference site, they contain gardening brochures instead.
Further, a breach of contract generally falls under one of two categories:
• Actual breach: When one party refuses to fully perform the terms of the contract.
• Anticipatory breach: When a party states in advance that they will not be delivering on
the terms of the contract.
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Remedies
There can be various remedies for breach of contract. They are mentioned below:
• Suit for Rescission
• Suit for Injunction
• Suit for performance
• Suit for the Quantum Meruit
• Suit for damages
Conclusion
Breach of contract is a legal procedure introduced to protect the rights of the involved
parties. With the increase in technologies, people are using specialized methods to break
contracts. Breach of contract is a legal procedure and laws of the court should be followed
properly.
In case one of the parties is not satis ed with the contract they can break it within three
days. If the contract is broken without any prior information then the involved parties are
eligible to take legal actions. You can contact the legal professionals so that they can
explain the remedies for breach of the contract properly.
E contract
E contracts are contracts that are not paper based and are electronic in nature. These
contracts are generally made for speedy entering into a contract or for the convenience of
the parties. They are best made between parties who live in 2 different parts of the world
and have to enter into an agreement. A digital signature is all they need to enter into a
contract as a a party even though both the parties to the contract are sitting miles away
from each other.
Bailment
The term “bailment” refers to a legal relationship between two parties in common law,
where assets or property are transferred from a bailor to a bailee. In this relationship, the
bailor transfers physical possession of a piece of personal property to the bailee for a
certain period of time but retains ownership.
There are three different types of bailment: those that benefit the bailor, the bailee, or both.
• A bailment involves the contractual transfer of assets or property from a bailor, who
temporarily relinquishes possession but not ownership, to a bailee.
• The bailee must intend to and actually physically possess the bailable chattel or asset.
• Damage or loss to property due to negligence of duty in a bailment can result in legal
disputes.
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Pledge
Pledge is a legal term that refers to the transfer of a good’s possession to secure a debt.
The pledgor gives the good to the pledgee. The pledgee holds the good until the debtor
repays the debt. If the debtor fails to repay, the pledgee has the right to sell the good. The
pledgor bears the risk of loss. This process involves three parties: the pledgor, the
pledgee, and the debtor.
• Pledgor: The pledgor is the person who owns the good and transfers its
possession to the pledgee. The pledgor uses the good as security for a debt or
obligation.
• Pledgee: The pledgee is the person who receives the good from the pledgor. The
pledgee holds the good until the debtor repays the debt. If the debtor fails to repay,
the pledgee has the right to sell the good.
• Debtor: The debtor is the person who owes the debt or obligation. The debtor’s
repayment of the debt leads to the return of the good from the pledgee to the
pledgor. If the debtor fails to repay, the good may be sold by the pledgee.
Types of Pledge
The following are the different types of pledges:
• Pawn: This is a type of pledge where the borrower (pawnor) gives an asset to the
lender (pawnee) as security for a loan.
• Hypothecation: In this type of pledge, the borrower retains possession of the asset
but gives the lender the right to sell the asset if the borrower defaults on the loan.
• Lien: This is a type of pledge where the lender has the right to retain possession of
the asset until the borrower repays the loan.
AGENCY
Agency is defined as a relationship between two people in which one person has the authority to act
on behalf of another, thereby entitling him or her to a legal relationship with the third party. In an
agency contract, there are two parties: the principal and the agent. The agency contract is based on
the fact that one person cannot perform all transactions; thus, he can appoint someone else to do or
act on his behalf.
Principal
the "principal" is the person for whom such an act is done or who is so represented. As a result, the
person to whom authority has been delegated will be the principal. The principal is any person who
employs another person to perform an act and is represented by another person in dealings with a
third party.
Agent
"Agent" as "a person employed to do any act for another or to represent another in dealing with
third people." An agent is a person engaged by the principal to act on his behalf, represent him in
dealings with third parties, and bring him into a contractual relationship with the third party.
The sense of goods act 1930
It provides for the setting up of contracts where the seller transfers or agrees to transfer
the title (ownership) in the goods to the buyer for consideration. It is applicable all over
India. Under the act, goods sold from owner to buyer must be sold for a certain price and
at a given period of time.
Rights of the Buyer as per the of the Sale of Goods Act, 1930:
• Right to Delivery of Goods as per Contract: The buyer has the unequivocal right to
receive the goods in accordance with the terms and conditions specified in the contract.
• Right to Reject Non-Conforming Goods: If the delivered goods do not match the
description, quality or quantity explicitly stated in the contract, the buyer retains the right
to reject them.
• Right to Repudiate the Contract in the Absence of Agreement for Instalments: When the
seller delivers the goods in instalments without prior agreement, it grants the buyer the
right to repudiate the contract. This safeguards the buyer from being subjected to
unexpected or unapproved instalment deliveries.
• Right to Be Informed and Arrange for Insurance: If the seller intends to send the goods
via sea route, obliges the seller to inform the buyer accordingly. This enables the buyer
to make arrangements for insurance coverage to protect against potential damage
during transit.
• Right to Examine Goods for Conformity: The buyer has the right to examine the goods
thoroughly to ascertain whether they conform to the specifications outlined in the
contract.
• Right to Sue for Price Recovery: In the event that the seller fails to deliver the goods as
agreed, the buyer possesses the right to file a suit to recover the price already paid for
the goods.
• Right to Sue for Damages for Non-Delivery: If the seller wrongfully neglects or refuses to
deliver the goods to the buyer, the right to seek damages for any losses incurred due to
the non-delivery.
• Right to Sue for Breach of Warranty or Condition: the buyer to sue the seller for
damages in case of a breach of warranty or a condition treated as a breach of warranty,
respectively. These provisions safeguard the buyer’s interests and provide remedies for
any deviations from the contract terms.
• Right to Sue for Interest on Breach of Contract: In situations where the seller breaches
the contract and a refund of the price to the buyer becomes necessary, Section 61 allows
the buyer to claim interest as compensation for the breach.
Rights of Seller
Rights of the Seller as per the of the Sale of Goods Act, 1930:
• Right to Reserve Disposal of Goods:The seller has the right to retain control and
ownership of the goods until specific conditions are fulfilled (as outlined in Section 25(1)).
This provision allows the seller to safeguard their interests and ensures that the goods
are not transferred until the agreed-upon conditions are met.
• Right to Assume Buyer’s Acceptance: Under certain circumstances, the seller may
assume that the buyer has accepted the goods. This assumption occurs when the buyer
conveys their acceptance, performs an act indicating adoption of the sale or retains the
goods without giving a notice of rejection beyond the specified date or reasonable time
(in a sale on approval), as per Section 24. This right helps prevent unnecessary delays
and facilitates smoother transactions.
• Right to Deliver Goods upon Buyer’s Application: The seller is obligated to deliver the
goods only upon formal application by the buyer (as stated in Section 35). This ensures
that the seller provides the goods when the buyer is ready to receive them, avoiding
premature deliveries or unnecessary storage costs.
• Right to Exercise Lien and Retain Possession: The seller holds the right to exercise a
lien on the goods and retain possession until the full payment of the price is received (as
specified in Section 47(1) of of the Sale of Goods Act). This right empowers the seller to
protect their interests and ensures that payment is made before the buyer takes
possession of the goods.
• Right to Stop Goods in Transit: If the buyer fails to make the payment, the seller has the
right to stop the goods while they are in transit and resume possession until the price is
paid (as per Sections 49(2) and 50). This right allows the seller to recover the goods if
the buyer defaults on payment.
• Right to Resell Goods under Certain Circumstances: In specific situations, such as the
buyer’s default, the seller has the right to resell the goods and claim damages for any
losses incurred (as per Section 54). This right protects the seller from potential losses
and ensures that they can recover their losses through a resale.
• Right to Withhold Delivery when Property has not Passed: If the property in the goods
has not passed to the buyer (as per Section 46(2)), the seller can withhold delivery until
the necessary conditions for transfer of ownership are met. This right aligns the delivery
with the transfer of ownership.
• Right to Sue for Price: When the property in the goods has passed to the buyer or when
the price is due on a specific date as per the contract, and the buyer fails to make the
payment, the seller has the right to sue the buyer for the price (as per Section 55 of of
the Sale of Goods Act). This right ensures that the seller can seek legal recourse for
unpaid dues.
International sale contract
An international sales contract is an agreement between a buyer and a seller that identifies
the parties in the transaction, the goods or services being sold, the terms and conditions of
the sale, and the price to be paid. International sales fall under the United Nations
Convention on Contracts for the International Sale of Goods (CISG).
A sales contract can be a verbal agreement between two parties, a collection of
documents such as a purchase order and an order acknowledgement exchanged between
two parties, or a formal, written agreement signed by the buyer and the seller. The type of
agreement your company uses may depend on the value of the sale, the nature of the
goods, and the complexity of the terms of the agreement. We always recommend having a
written contract.