Even at the time of shopping at a supermarket or a local shop, in everyday life, we encounter various areas which are pertaining to the law of contracts. Here, we would discuss the basics of the law of contracts.
Difference between 'Offer' and 'Invitation to Offer'
In the case of Pharmaceutical Society of Great Britain vs. Boots Cash Chemists Ltd., it was held that the price tag on the goods displayed in a supermarket is merely the 'invitation to the offer'. These are not the actual 'offers'. Similarly, in the case of Harvey vs. Facey, 1893 it was held that the quotation of the price was held not to be an offer.
Intention to create a legal relationship
There should be an intention to create a legal relationship. This includes formal or legal agreements which would have legal enforceability. The agreement for going for a walk, going to a movie, playing a game, to go to dinner with a person does not form any legal obligations. These are not formal in nature and hence are not enforceable in the eyes of law.
Express and Implied Offers
The express offers are those which are expressed in nature. These would be those which would be 'expressed' in oral or written form. Those offers would be implied by the conduct of the parties. These include the 'implied' contracts.
The drafting of a contract determines the intentions of the parties and their respective roles in a particular contract. The drafting lays down the provisions related to a particular area of law. These are thereafter holding tangible proof of what was said and agreed upon by parties and they are liable for the performance.
The 'implied offers' are those which includes areas such as paying for a fare after asking a taxi for a lift. Similarly, asking the municipal authorities for help in case a fire broke out in anyone's house would invite the liability to pay the fire brigade the compensation for their service.
Indian Contracts Act, 1872
Parties to the contract:
Section 10 and Section 11 of the Indian Contracts Act, 1872 would provide a clear definition of the jurisdiction related to this case. It includes a person with:
1) A sound mind: The parties to the contract should be of a sound mind.
2) Competent to contract: i.e., he is not minor or lunatic.
3) Laws in the case of the parties are minor: In the case of Mohiribibi vs Dharmodas Ghose, it was held that the contract with a minor would be void ab-initio. The parties may supply the necessities to the minor under the provisions related to 'Quasi Contracts' would be applicable here.
4) Lawful object: There should be a lawful object regarding the subject matter. There cannot be an object related to illicit trafficking, child labour, murdering someone.
5) Lawful Consideration: Section 2(d) defines the term consideration under the Indian Contracts Act, 1872. It would include past, present and future considerations.
5.1) Past Consideration
This would mean the considerations for any promise that was given earlier and the promise is made thereafter. The words such as 'has done or abstained from doing' in Section 2(d) of the Indian Contract Act, 1872.
5.2) Present Consideration
This means the consideration which would include at the time of the performance of the contract. It is called an executed consideration. When one of the parties to the contract has performed his part, this would include the present consideration.
5.3) Future Consideration
This means that the performance would be executory in nature. It would include subsequent consideration.
Free consent
The contract so entered into should be having the free consent of parties to the contract. It should not be influenced due to:
Coercion
Coercion includes the acts which are forbidden by the Indian Penal Code. This includes the Acts which would include the unlawful detaining of the property. This would include any person who would coerce one party to enter into the contract with the other party, without any lawful justification.
Undue Influence
This includes the person in a dominant and a submissive position. This could be a real or apparent authority, having a fiduciary relationship of doctor and patience, landlord and tenant, priest and the disciple etc. Additionally, we see that the person in mental or bodily distress would be covered as the one in the field of undue influence.
Fraud
The false statement of fact, with an intent to defraud, would constitute 'fraud'. However, in the case of XYZ, it was held that mere silence would not amount to fraud. Therefore, the proper due diligence of the facts is a must before diving into the real into a contract.
Misrepresentation
There can be an instance where the person would we with bonafide intend to believe in something to be true. And for that, they pass off the same information to the other party believing it to be true. This would be a case of misrepresentation.
Mistake
In case, where there is no consensus ad idem or consent is absent, one has to be very particular about the facts of the case. The mistake can be due to the wrongful assumption of one or both parties. The mistake can be due to the title, promise, possibility of performance of the contract, identity of persons or any other matter.
Quantum Meruit in case of a breach
In case there would be a breach of the rights and duties, there would be compensation. This compensation would be based on the market value. Section 73, Section 74 and Section 75 of the Act discusses this provision. In case of no discharge, the basis on which the compensation would be given would be based on the specific circumstances whether known to the other party or not. In the case of Hadley vs Baxendale, the measure of damages should be demarcated. In this case, the plaintiff incurred a loss worth $4000/- due to non-compliance with the terms and conditions. However, the plaintiff was only provided with the 'compensatory damages' as the special circumstances were not known to the other party. In case, the plaintiff wanted to have the exemplary damages, he should have let the other party know about the special circumstances.
What would make the contract void or voidable?
In case the contract was entered into by some means such as coercion, fraud, misrepresentation; it would be termed as void. On the other hand, if it is entered due to a mutual mistake among parties, it would be termed as a 'void' contract.
Would the contract with the minor be void?
In the case of Mohini Bibi vs Dharmodas Ghose, it was held that the contract with a minor would be void ab-initio. However, in the case of Quasi-Contracts, where there would be some benefit of a minor from the transaction related to the 'necessities, the contract can be held as a valid one. However, later on, the compensation for the payment on the goods can be asked from the minor. (After the age of majority).
From the above discussion, even a layman can have a better understanding of the law of contracts. It is important to note here that there can be certain times where the offeree can refuse to get into a contract. Hence, with this blog, we have a better understanding of what law is. How we are governed with various areas pertaining to it. We see here, that the law protects our fundamental rights pertsining to Article 21, 14 and 19 here as well :)
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