10-Feb-2024

Contract Act 1872

Corporate Law
The Contract Act 1872 was enacted on 1st September 1872 for the purpose to
regulate all the agreements and contracts to save the rights of parties of any such
agreement or contract, taking place in Sub-Continent ruled by the British.
Act No. IX of 1872
All agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object, and
CONTRACTS AND COMMERCIAL TRANSACTIONS are not hereby expressly declared to be void.

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Difference between agreement and

Learning Objectives contract
What is the difference between agreement and contract?

Contract Act
A legal agreement can be informal, meaning nothing needs to be
Difference between Contract and Agreement
witnessed or written down.
Doctrine of Privity
A contract, on the other hand, is both more formal and legally
Principles of law of contract
binding—which means it must be documented. Both an agreement
General types of Contracts
and contract represent specific arrangements between two or more
parties.

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 10-Feb-2024

Principles of Contract Law : Offer

Doctrine of Privity
Privity is a doctrine of contract law that says contracts are Offer:
only binding on the parties to a contract and that no third Contracts always start with an offer. An offer is an expression of a willingness to enter
party can enforce the contract or be sued under it into a contract on certain terms. It is important to establish what is and is not an offer.
Offers must be firm, not ambiguous, or vague. A person who is making the offer is called
the offeror.
Invitation to Treat: Offers are different than an invitation to treat. An invitation to treat
is not an offer. When you list your home for sale, you are not making an offer; you are
making an offer to treat.
Puffery: Advertisers often use puffery to promote their products. So, was the advertising
slogan “Red Bull Gives You Wings” meant to be a true statement or puffery?

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Five main Principles of Contract Law Principles of Contract Law : Acceptance

Following are main principles of Contract Law Acceptance:
Offer
Acceptance by the offeree (the person accepting an offer) is the unconditional
Acceptance, agreement to all the terms of the offer. There must be what is called a “meeting of
Consideration, the minds” between the parties of the contract.
Intention to create legal relations, This means both parties to the contract understand what offer is being accepted.
The acceptance must be absolute without any deviation, in other words, an
Capacity, and
acceptance in the “mirror image” of the offer. The acceptance must be
Legality. communicated to the person making the offer. Silence does not equal acceptance.
Consideration contract law involves the mutual exchange of value between parties, such as money,
goods, services, or promises, in order to make the contract legally enforceable.

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 10-Feb-2024

Principles of Contract Law: Consideration Principles of Contract Law : Capacity

CONSIDERATION: Contractual Capacity :
Consideration is the act of each party exchanging something of value to their Is the ability of an individual to enter into a binding legal contract, and in so
detriment. A sells A’s automobile to B. A is exchanging and giving up A’s doing expose themselves (or their company, if they have signatory authority) to
automobile while B is exchanging and giving up B’s cash. Both parties must the obligations and consequences that flow from the contract.
provide consideration.
Past Consideration: Voluntarily doing something for someone is not consideration. A The law requires that a party to a contract has capacity to enter a contract. This
sees B’s lawn needs to be cut so A voluntarily does so. means that the person is recognized in law as being able to commit to a contract.
Performance of an Existing Duty: If a person has a duty to do something, such as a
public servant, the performance of the duty is not consideration.
Promissory Estoppel: In some instances, one party is not providing consideration but is
relying on a reasonable promise made by another. e.g. A charitable subscription or a
marriage settlement and/ or Retirement benefits

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Principles of Contract Law : Legality Business Contracts

LEGALITY: Contracts Commonly Used in Business Settings :
The fourth required element of a valid contract is legality. The basic rule is that courts will not For business owners, there are several benefits of understanding the different types of contracts.
enforce an illegal bargain. Contracts are only enforceable when they are made with the intention For starters, being able to distinguish between the various types of contracts means you can
that they are legal and that the parties intend to legally bind themselves to their agreement. choose the right type of agreement for each situation your business encounters.
An agreement between family members to go out to dinner with one member covering the check
is legal but is not likely made with the intent to be a legally binding agreement. General Business Contracts

Just as a contract to buy illegal drugs from a drug dealer is made with all the parties knowing that Bill of sale
what they are doing is against the law and therefore not a contract that is enforceable in court.
Employment agreement
Lack of Mental Capacity
Licensing agreement
Minors and Contracts
Promissory note
Contracts That Must Be In Writing

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 10-Feb-2024

Business Contracts : Employment agreement

Business Contracts : General Business Contracts
General Business Contracts includes: Employment agreement
 Partnership agreements,
When you hire an employee as a business owner, you may have that
 Indemnity agreements,
employee enter into an employment agreement to work for you. This
Non-disclosure agreements or NDAs, and employment agreement includes details about the duties an employee
 Property and equipment lease agreements. will perform, the compensation they will receive, and other essential
Terms and other specifics can vary quite a bit from contract to contract, so the details are terms.
important.

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Business Contracts : Bill of Sale Business Contracts : Licensing agreement

A bill of sale is a legal document that Licensing agreement
allows one party to transfer ownership
of property to another party in exchange In a licensing agreement, one party agrees to allow another party to
for money. use a licensed product or service in exchange for royalties. The
These contracts are used when a specific details regarding royalties and permissions will be outlined in
business sells something, such as a car the contract.
or an order of materials.
Fortunately, this is one of the simpler
types of contracts to implement.

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Business Contracts : Promissory note Fixed Price Contracts

Promissory note: Fixed-price contracts, also known as lump-sum contracts, are

A promissory note is a written contracts in which the parties involved decide which goods or
agreement by one party (the
borrower) to pay back a
services will be exchanged and determine a set price for said goods or
certain amount of money to services.
another party. With a
promissory note, the payment
is due when the lender
requests it, although lenders These contracts can be particularly effective when you can determine
must give advance notice the scope of a project before you get started. Because fixed-price
according to the terms of the
contract contracts are simpler than some other types of contracts, they can be
useful for accelerating the agreement process.

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General types of Contracts Cost-Plus Contracts

Following ten are General types of Contracts :
Fixed Price Contracts
With cost-plus contracts, one party is paid for all the expenses they
Cost-Plus Contracts
incur while completing a project in addition to an extra fee when the
Time & Material Contracts
job has been completed.
Unit Pricing Contracts
Unilateral Contracts These contracts can be effective when it’s difficult to determine the
Bi-Lateral Contracts scope of a project from the jump.
Simple Contracts By having the customer pay for expenses, contractors can share some
Implied Contracts of the risk that comes with a long-running or over-budget project.
Express Contracts Cost-plus contracts are common in construction and other industries
Unconscionable Contracts where raw material costs can be unexpectedly high

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 10-Feb-2024

Time & Material Contracts

UNILATERAL VERSUS BILATERAL CONTRACTS
Time and materials contracts are another popular type of contract for UNILATERAL CONTRACTS:
construction projects as well as those that heavily rely on labor and Most contracts are bilateral, meaning both parties are in agreement and the four basic
elements of a contract exist.
materials.
For example, B offers to buy A’s automobile for a specific price and A accepts the offer
With a time & materials contract, one party agrees to pay a fixed and agrees to give B the automobile upon receipt of those specific funds. Both parties
amount for each hour of labor as well as the cost of materials. are agreeing to the contractual arrangement. It is bilateral.
BILATERAL CONTRACTS:
If a project takes longer than expected or a contractor needs more
In a unilateral contract, one party is making an offer and promise if someone does
materials, that cost is rolled into the contract. While these contracts something in return. There is no agreement necessarily between two individuals as there
are fairly simple, they can also lead to high project costs for the is in a bilateral contract.
customer. An example would be if A offers a reward of $100 to the person who finds and returns
A’s missing cat

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Unit Pricing Contracts Simple contracts

Simple contracts

Unit Price Contracts A simple contract is an oral or written agreement that two parties enter into despite not legally
recording or sealing the contract at any point. These contracts may or may not be legally binding,
With unit pricing contracts, a contractor provides a set price for each unit (or and breeches may be ruled on by a court. Simple contracts are generally better for minor
segment) of work that needs to be completed. agreements.
Implied contracts
While material and labor costs are used to determine the price of each unit of
work, the price per unit is what the customer will immediately see. An implied contract is a contract that’s derived from the actions or circumstances of the parties
involved—meaning there is no written or oral agreement.
However, it’s not uncommon for contractors to include an itemized list of the
An example of an implied contract would be the agreement that is established when you order a
calculations they used to reach that unit price. round of drinks at a bar.

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 10-Feb-2024

Express contracts

Express contracts
Express contracts are contracts that two or more parties wilfully agree
to either verbally or in writing. Express contracts clearly define the
terms of the agreement and all parties are aware of what they’ve
committed to.
These contracts are legally binding and a court may rule on breaches
of contract. Express contracts are sometimes used in conjunction with
an e-signature solution, but that depends on whether the contract is
written or oral.

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Unconscionable Contract
If a contract is deemed to be unfair or abusive to one of the parties
involved, the court may determine that the contract is
unconscionable. Contracts are generally determined to be
unconscionable due to either unfair bargaining practices or unfair
substantive terms.

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