1 st lecture

1. 1st lecture Essential of contracts Kinds of Contract Distention b/w different kinds of contract

2. What is a promise? s.2(b) of Contract Act 1872 “When the person to whom the proposal is made signifies his assent, thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.

3. Definition of agreement • According to sec.2(e) of Contract Act 1872 • “Every promise or every set of promises forming the consideration for each other is called agreement”.

4. Definition of Contract s.2(b) of Contract Act 1872 Every agreement which is enforceable by law is a contract. Some other definitions. According to Pollack:- “Every agreement and promise enforceable at law is contract”. According to Salmond:- “A contract is an agreement creating and defining obligations between the parties”.

5. In short What is a Contract? Offer promise agreement contract

6. Agreement and Contract • Every contract is an agreement but every agreement is not a contract. • As it is clear from very definition of contract that every agreement which is enforceable by law is a contract. • But so far as agreement is concerned there are some social agreements as well, but they lake enforceability therefore are not enforceable by law, like invitation to attend a birthday party.

7. Examples • Agreement: Invitation to attend the marriage party, promise by other party to come. (not enforceable by law). • Contract: Offer to sell a car by one party accepted by other party for a price of 10,00,000. (enforceable by law).

8. What is meant by Enforceability? • Recognize by courts • Creating legal obligation • Right of compensation • In simple words enforceability means in case of violation or breach of contract, proper legal proceedings can be initiated against the breaching party.

9. Essentials of contract 1. Offer • What constitute offer? • Intention of person to do or abstain from doing something • Expressing the willingness to do what he intends to do • Conveying the willingness All these three things together constitute an offer.

10. Kinds of offer • Particular offer • General offer (like auction) • Unconditional offer • Conditional offer

11. Essentials of contract 2. Acceptance • Acceptance of offer by other party • Example (A offer to sell his cycle to B for Rs. 3000. If B accepts this offer, this is an acceptance). 3. Law full consideration • Consideration may be some benefit to other party. • Example (A agrees to sell his house to B for 60 lacs. For A 60 lacs and for B house is the consideration.

12. Essentials of contract 4. Legal obligations • Parties to an agreement must create legal obligation. • If one party does not fulfill his part of legal obligation he shall be liable for breach of contract. 5. Capacity of parties • Agreement is enforceable only if it is made by parties who are competent to contract. • According to contract Act following persons are competent to contract. • Person attaining the age of majority • Person of sound mind • Who are not disqualified to enter into any contract.

13. Essentials of contract 6. Law full objects • Object should not be illegal or immoral (example: vine) 7. Free consent • Consent is consider to be free if it is not made by following things • Fraud • Coercion

14. Essentials of contract • Undue influence • Misrepresentation 9. Must be in writing 10. Law full agreement • Agreement must be law full as unlawful agreements are not enforceable by law.

15. Kinds of Contract • Valid Contracts • Voidable Contracts • Void Contracts

16. 1. Valid Contract • A valid contract is enforceable by law. An agreement becomes enforceable by law when all the essentials of a valid contract are present. • Examples.

17. Rights and Obligations of Parties • In valid contract all the parties are legally responsible for the performance of the contract. • If one of the parties breaches the contract, the other party can enforce it through the court of law. • If one party fails to fulfill his part of obligation under the contract the other party is entitled to compensation. • Example:

18. 2. Voidable Contracts • Sec 2(i) of Contract Act 1872 “An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract”. • A contract becomes voidable in the following three cases. • When the consent of one or more of the parties to a contract is not free i.e. the same is obtained by coercion, fraud, undue influence, misrepresentation.

19. 1. Coercion • Sec 15(i) of Contract Act, 1872 “Coercion means the committing or threatening to commit any act forbidden by Pakistan Penal Code”. • In simple words we can say coercion means forcibly.

20. 2. Undue Influence • “ Contract is said to be induced by undue influence where the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses the position to obtain an unfair advantage over the other”.

21. Elements of Undue Influence • Existence of fiduciary relations b/w the parties • Dominating position of one party due to certain relationship • Use of that position by that party

22. 3. Misrepresentation • “Misrepresentation means “misstatement” about the facts. In other words, it means to conceal the facts deliberately about something in such a way that other party may be induced and become ready to enter into the contract”. • Examples.

23. 4. Fraud • Section 17 of the Contract Act provides, “Fraud means and includes any of the following acts committed by a party to a contract or by his agent, with intent to deceive another party thereto or his agent or to induce him to enter into the contract”. • False Statement • Active Concealment • Intention of Non-performance • Intention to Deceive • Fraud simply means “to deceive someone so that believing on such fraud he be induced to act as such”.

24. 2. Voidable Contracts • According to Section 53 of the Contract Act, when a person promises to do something for another person but that other person prevents him from performing his promise, the contract becomes voidable at the option of promisor. • Example

25. 2. Voidable Contracts • According to Section 55 of the Contract Act, when a party to contract promises to do a certain thing within a specified time but fails to do it, then the contract becomes voidable at the option of the promisee, if time is essence of the contract. • Example

26. Rights and Obligations of Parties in Voidable Contracts • Contract may be avoided/rejected. • On rejection contract become void. • When the voidable contracts become void no party will have any right or obligation. • Contract may be accepted/acted upon. • When the voidable contracts are acted upon they become valid. • When the voidable contracts become valid both parties will have the same right and obligation as in case of a valid contract.

27. 3. Void Contracts • The word void means not binding in law. • This contract is absolutely null. • Section 2(i) defines “A contract which ceases to be enforceable by law becomes void contract, when it ceases to be enforceable”. • It means that a void contract is not void from the beginning. It is valid contract when it is made but subsequently it becomes void due to certain reasons. • For example non existence of subject matter etc.

28. Rights and Obligation of Parties in Void Contracts • In void contract both the parties are not legally responsible to fulfill the contract. • Under this contract the party who has received any benefit is bound to return it to the other party.

29. When a Contract becomes Void? • A contract becomes void under the following circumstances: • Impossible of Performance • A contract becomes void due to impossibility of performance. Such contract becomes void before performance. • Example: ii. Subsequent Illegality • A contract becomes void by subsequent illegality. • Example: (private sale of wheat if ban by govt)

30. When a Contract becomes Void? iii. Rejection of a Voidable contract • Avoidable contract becomes void when the party whose consent is not free rejects the contract iv. Impossibility of depending Event • A contingent contract becomes void, when the event upon happening of which its performance depends does not happen.

31. Distinction b/w Valid and Void Contracts • Legal Status( Effective and null) • Enforceability • Obligation of Performance • Right of Compensation

32. Distinction b/w Valid and Voidable Contracts • Legal Status • Enforceability • Obligation of Performance • Right of Ratification

33. Distinction b/w Void and Voidable Contracts • Enforceability • Obligation of Performance • Right of Compensation • Right of Rejection • Conversion into a valid contract