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Legal Aspects of Business

Answer any one of the questions 1 and 2. Question number three and four is compulsory.

1.”All agreements are not contracts but all contracts are agreements.” Discuss the statement explaining the essential elements of a valid contract.

2.What is an “offer”? When is it complete? State the rules of a valid offer.

{15 marks}

3. Attempt the following problems, giving reasons:-

A] Over a cup of coffee in a restaurant, A invites B to a dinner at his house on a Sunday.

B hires a taxi and reaches A’s house at the appointed time, but A fails to perform his promise.

Can B recover any damages from A? {5 marks}

B] M mows L’s lawn without being asked by L to do so.

L watches M do the work but does not attempt to stop him.

Is L bound to pay any charges to M? {5 marks}

C} P applied for the principal’s post of a local college, and the Governing Body passed a resolution appointing him.

After the meeting, a member of the Governing Body privately informed him of the resolution.

The resolution was subsequently rescinded. P claims damages. Will he succeed? {5 marks}

4. What is meant by capacity to contract with special emphasis on rules relating to minors contract? Give a brief note on the relevant cases. {10 marks}

Answer any one of the questions 1 and 2. Question number three and four is compulsory. 1."All agreements are not contracts but all contracts are agreements." Discuss the statement explaining the essential elements of a valid contract. 2. What is an "offer"? When is it complete? State the rules of a valid offer. {15 marks) 3. Attempt the following problems, giving reasons:- A] Over a cup of coffee in a restaurant, A invites B to a dinner at his house on a Sunday. B hires a taxi and reaches A's house at the appointed time, but A fails to perform his promise. Can B recover any damages from A? {5 marks B] M mows L's lawn without being asked by L to do so. L watches M do the work but does not attempt to stop him. Is L bound to pay any charges to M? (5 marks C) P applied for the principal's post of a local college, and the Governing Body passed a resolution appointing him. After the meeting, a member of the Governing Body privately informed him of the resolution. The resolution was subsequently rescinded. P claims damages. Will he succeed? (5 marks 4. What is meant by capacity to contract with special emphasis on rules relating to minors contract? Give a brief note on the relevant cases. (10 marks)

Answer 1

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Among 1 and 2 questions I choose to answer question 2.

2. What is an “offer”? When is it complete? State the rules of a valid offer.

Section 2(a) of the Indian Contract Act, 1872 describes the proposal or offer as follows:-

If one person expresses to another his willingness to do or refrain from doing something with a view to obtaining the consent of that other person to such an act or abstinence, he shall make a proposal The person making the offer shall be known as the offeror and the person to whom the offer is made shall be known as the offeror.

Essential Requirements of a Valid Offer:

It should be an expression of willingness to do or to abstain from doing something.

It must be made to another person. There can be no 'proposal by a person to himself.

It must be made with a view to obtain the assent of that other to such an act or abstinence.

Legal Rules Regarding a Valid Offer:

1. The offer has to be able to form legal relationships: If the offer does not seek to give rise to legal implications, it is not a legitimate deal in the courts of law Often offers are made which are of a social nature These social arrangements do not constitute a contractual contract as in these situations the intention is not to form a legal partnership.

2. The terms of the offer must be clear, simple and definite and must not be loose or vague: An offer must be definite and certain An indefinite or vague offer can nol be accepted because the courts, in such cases, can not tell what the parties are to do The intention of the parties must be very clear, as to what they intend to do.

3. An offer must be distinguished from a mere declaration of intention: Sometimes there may be a preliminary discussion or an invitation by one party to the other to negotiate terms or simply declaration of intention. Such declaration merely indicates that an offer will be made in future.

4. An invitation to offer is not an offer: An offer must be distinguished from an invitation to offer. In the case of an invitation to offer, the person making an invitation invites others to make an offer to him. For example, quotations, catalogs of prices or display of goods with prices marked thereon do not constitute an offer.

5. An offer must be communicated to the offeree : An offer must be communicated to the person to whom the same is addressed Communication of offer is important to conclude an agreement because acceptance can be given only after one knows about the offer. This applies to both specific' as well as general offer Section 4 states that communication of a proposal is complete when it comes to the knowledge of the person to whom is is made.

6. An offer should not contain a term the non-compliance of which would amount to acceptance : The offeror can not say that if the offeree does not communicate acceptance by a certain time offer would have been deemed to be accepted. The burden of communication of rejection of offer can not be imposed on the offeree I the offeree sends no reply, there is no contract.

7. Two identical cross-offers do not make a contract: Where two parties make identical offers to each other in ignorance of each other's offer, the offers are known as cross offers. 'Cross offers' do not constitute acceptance of one's offer by the other and as such there is no completed agreement.

3. Attempt the following problems, giving reasons:-

(a) Over a cup of coffee in a restaurant, A invites B to a dinner at his house on a Sunday. B hires a taxi and reaches A’s house at the appointed time, but A fails to perform his promise. Can B recover any damages from A?

An agreement which gives rise to social obligation is not a contract.

An agreement is a wider term.

An agreement may be a social agreement or a legal agreement.

If A invites B to a dinner and B accepts the invitation, it is a social agreement.

And so no, B cannot recover the damages from A as both the parties share a social relationship and there is no intention to create a legal relationship. So, it was just an agreement which is not enforceable at law.

(b) M mows L’s lawn without being asked by L to do so. L watches M do the work but does not attempt to stop him. Is L bound to pay any charges to M?

As there is no contract i.e. No legal agreement between parties L & M, hence L is not liable To pay M for This services. However if M has mown The lawn not out of gratitude or without expectation of any compensation but rather with an intention To get compensation in return , Then M can still claim compensation under Sec.70 of Indian Contract Act. According To Sec.70, The act in question would be called a ‘Non - Gratuitous AcT’.IT states That, If a person lawfully does or delivers anything To another person not intending To do so freely (gratuitously), Then such other person who enjoys such benefit is bound To compensate The former. His kind of contract between Two or more parties is called a “Quasi Contract”. In This case, L didn’t ask M To mow his lawn but when he/she observed M doing The act, L didn’t stop him, which means L wanted To enjoy The benefit coming out of M’s act of mowing The lawn. Hence, The conditions of The ‘Quasi Contract’ are met and hence M is entitled to a reasonable remuneration.

(c) P applied for the principal’s post of a local college, and the Governing Body passed a resolution appointing him. After the meeting, a member of the Governing Body privately informed him of the resolution. The resolution was subsequently rescinded. P claims damages. Will he succeed?

For contract, there should be clear offer and acceptance between two parties .But in this case this factor is absent. P cannot claim damages as there was no formal communication and since it was a private meeting.

4. What is meant by capacity to contract with special emphasis on rules relating to minors contract? Give a brief note on the relevant cases.

Capacity to Contract: Every person can enter into a valid or legal contract if he is above 18 years and has sound mind. Examples of unsound mind include lunatics, drunken or intoxicated persons. Alien enemies, bankrupt people, foreigners and convicts cannot enter into contract.

Capacity to Contract for Minors: Minors are allowed to contract but whether the contract is enforceable depends on a number of factors. The general rule of contracting with minors is it is voidable by the minor. This rule has been put forth to protect minors who may not fully understand the contract and its consequence. So the court provides minors with the ability to exit contract at their decision. Though the minor is allowed to exit a contract at his will, this will be a case of abuse in certain conditions. So the law has enforced certain conditions under which a minor may not be allowed to void a contract.

Cases which cannot be voided: The below cases cannot be voided because then it would not be legal to make contract with a minor if he can break it at his will. So the below cases or scenarios have been identified where the contract cannot be voided. Necessary items for the minor’s health and safety like food, lodging, shelter and clothing cannot be voided. Also based on the parent’s economic status some items will be considered necessary and cannot be avoided. The minor might be required to pay the fair market value for the good or services used.

Bank Accounts: Minors entering into contract with banks cannot be voided and the court would suggest to comply with bank’s contract as stated. The fees and penalty would be the same for minors and other customers.

Employment Contracts: Minors entering into employment like acting would need to comply with the contract signed. The court would need to approve the contract so that the minor at a later stage cannot void the contract. In some cases the contracting party can contract with the minor’s parents as well which would make the minor comply with the contract.

Sports Contracts: Some sports related contract in which the minor has been contracted with cannot be voided.

Voiding a contract: In some cases the contract can be voided once the minor turns 18 within 6 months. If he chooses not to void the contract then he would never be able to void it and be held to comply with it. Minors can void contract in 2 ways. One way is to file a law suit with the court asking them to void the contract. The second way is to raise defense in lack of capacity if the minor has been sued. While voiding the contract the minor can only void the entire contract and cannot choose the void certain conditions of the contract.

Conclusion: Though the capacity to contract does not include minors but minors are allowed to contract and their contract cannot be voided in the above related cases.