THE CONTRACT ACT-1872
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WHY CONTRACT ACT ?
• According to Sir Willium Anson –
“The law of contract is intended to ensure that what a man has to expect
shall come to pass and that what has been promised to him shall be
performed”
The objective is –
- to ensure that the rights and obligations arising out of a contract are
honoured
- legal remedies are made available to an aggrieved party against the
party failing to honour his part of agreement.
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WHAT IS CONTRACT ACT ?
• Contract Act 1872 (Act No. IX of 1872) governs the
law of contracts in Bangladesh. The Act came into
force in Bengal on 1 September of 1872 .
• This Contract Act of 1872 is the foundation of law of
contract introduced by British law was adopted in
Bangladesh without change.
• The Act has 238 sections under its 11 chapters.
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DEFINITIONS
• “An agreement enforceable by law is contract”.
-Section-2(h) of the Contract
Act-1872
CONTRACT = AGREEMENT+ENFORCEABILITY AT LAW
• “Every promise and every set of promises, forming consideration for each
other is an agreement” –
Section-2(e) of the Contract Act-1872
AGREEMENT = OFFER + ACCEPTANCE + CONSIDERATION
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‘All contracts are agreements but
all agreements are not contracts’
DEFINITIONS
• “ When, at the desire of the promisor the promisee or
any other person has done or abstained from doing
something, such act or abstinence or promise is called a
consideration for the promise .”
- Section 2 (d) of the Contract Act
• Combining two sections aforesaid, we can opine that-
“Contract is an agreement between two or more parties
which is supported by consideration and enforceable by
law”
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INTERPRETATION CLAUSE
(a) When one person signifies to another his willingness to do or to
abstain from doing anything, with a view to obtaining the assent of
the other to such act or abstinence, he is said to make a proposal .
(b) 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.
(c) The person making the proposal is called the “promisor”
(d) The person accepting the proposal is called the “promisee” 6
INTERPRETATION CLAUSE
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INTERPRETATION CLAUSE
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THE ESSENTIAL ELEMENTS OF
CONTRACT
• An agreement becomes enforceable by law when it fulfills certain conditions.
These conditions are the essential elements of contract which are as follows :
1. Offer and Acceptance : There must be a lawful offer by one party and a lawful
acceptant of the offer by the other party or parties.
2. Intention to create Legal Relations: There must be an intention (among the
parties) that the agreement shall result in or create legal relations (Ch-3).
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THE ESSENTIAL ELEMENTS OF
CONTRACT
3. Lawful consideration: An agreement to do something
for nothing is usually not enforceable by law. (Ch.4)
4. Lawful Object : The object should not be illegal or
immoral or opposed to public policy . (Section-23)
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THE ESSENTIAL ELEMENTS OF
CONTRACT
5.Capacity of parties :
Sec-11Contract Act-1872 & Section 3 (1) & (2) of the Majority Act-
1875 –
“Every person is competent to contract who is of –
the age of majority
sound mind and
not disqualified from contracting
( by any law to which he is subject.)
Insolvency Act-1997
• (As per Section 12 of Contract Act-A person is said to be of sound
mind for the purpose of making a contract if, at the time when he
makes it is capable of understanding it and of forming a rational 11
judgment as to its effect upon his interests)
THE ESSENTIAL ELEMENTS OF
CONTRACT
6. Free consent : There is absence of free consent if
the agreement is induced by –
a) Coercion
b) Undue influence
c) Misrepresentation
d) Fraud
e) Mistake
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THE ESSENTIAL ELEMENTS OF
CONTRACT
7. Writing and registration : An oral contract is a perfectly
good contract except in those cases where writing or
registration is required by some statute.
• In law writing is required in case of lease, gift, sale and
mortgage of immovable property, negotiable instrument,
Memorandum and Articles of Association of a Company
(Section-25)
8. Certainty: “agreements, the meaning of which is not certain or
capable of being made certain, are void” (Section-29)
9. Possibility of Performance :An agreement to do an act
impossible in itself is void . (Section-56) 13
KINDS OF CONTRACT
Contracts may be classified from different points of view-
1.Enforceability-
a)Valid contract b) Voidable contract
c) Void Contract d) Unenforceable
2. Modes of Creation:
a) Express Contract b) Implied Contract
c) Constructive or Quasi Contract
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CONTRACT ACT : AT A GLANCE
Chapter Particulars Clause
Chapter-1 Proposal or offer & Acceptance 3-9
Chapter-2 Voidable & Void contract 10-30
Chapter-3 Contingent Contract 31-36
Chapter-4 Performance of Contract 37-61
Chapter-5 Certain Relations resembling to Contracts 68-72
Chapter-6 The Consequences of Breach of Contracts 73-75
Chapter-7 Sale of Goods 76-123
Chapter-8 Indemnity & Guarantee 124-147
Chapter-9 Bailment 148-181
Chapter-10 Agency 182-238
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Chapter-11 Partnership 239-266
WHY NECESSARY ?
• For any individual, it is essential to know the elements of a
contract if he is engaged in business or in buying and
selling of goods and properties.
• It is essential for a banker to know the elements of a
contract because a bank frequently enters into contract
with the depositors, customers and borrowers.
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WHY NECESSARY FOR BANKERS
•Opening of accounts is entering into a contract. Both of the
parties i.e. bank and the account holders are bound by this
contract.
•When a banker advances money to a borrower is a contract with
borrower who undertakes to repay.
•Under the broad area of indemnity and guarantee, chapter eight
defines contract of indemnity, contract of guarantee, surety, and
principal debtor and creditor.
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INDEMNITY
• SEC. 124- “A contract by which one party promises to save the
other from loss caused to him by the conduct of the promisor
himself, or by the conduct of any other person, is called a
“Contract of Indemnity”.
INDEMNITY Features-
• TWO parties- Indemnity holder & Indemnifier
• Sec. 10- essentials should be satisfied
• Rights of Indemnity Holder:
• To claim damages
• To claim costs & Other payments
• All insurance contracts are contracts of indemnity except life 18
insurance.
ESSENTIAL FEATURES OF INDEMNITY
There are two persons , the indemnifier the indemnified
or the indemnity holder
There must be loss either by the promisor’s conduct or by
any other person’s conduct
It is a contingent contract by nature
It may be express or implied
Sec125 deals with the commencement of the
indemnifier’s liability. His liability commences
when the event causing the loss occurs or when
the event saving the indemnified from the loss
becomes impossible
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GUARANTEE
• SEC. 126- A “Contract of Guarantee” is a contract to perform the
promise, or discharge the liability, of a third person in case of his
default.
• The person who gives the guarantee is called the ‘surety’.
• The person in respect of whose default the guarantee is given is called
‘principal debtor’.
• The person to whom the guarantee is given is called ‘creditor’.
• It is tripartite agreement.
1- principal debtor and creditor.
2- creditor & surety and
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3- principal debtor and surety.
Thank You
Thank YOU
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