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Unit 1: Laws of Contract

If the party, which had agreed to do something, fails to do that, then the other party has a Notes
remedy.
Offer is not only one of the essential elements of a contract but it is the basic building block
also. Misrepresentation is also known as simple misrepresentation whereas fraud is known
as fraudulent misrepresentation.

Mistake may be defined as an erroneous belief on the part of the parties to the contract
concerning something pertaining to the contract. The term consideration is used in the
sense of quid pro que, i.e., “something in return”.

A lunatic is a person who is mentally deranged due to some mental strain or other personal
experience.
An alien is a person who is a citizen of a foreign country. A contract creates obligations.
‘Performance’ of contract means the carrying out of obligations under it. Appropriation of
payments means application of payments.
A breach of contract is one party’s failure, without a legal excuse, to live up to any of its
promises under a contract.
A contract terminates by breach of contract.
If the promisor has not performed his promise in accordance with the terms of the contract
or where the performance is not excused by tender, mutual consent or impossibility or
operation of law, then this amounts to a breach of contract on the part of the promisor.

1.11 Keywords

Acceptance: The act of giving consent to the proposal.
Coercion: The committing or threatening to commit any act forbidden by the Indian Penal
Code.
Contract: A contract is an agreement, enforceable by law, made between at least two parties by
which rights are acquired by one and obligations are created on the part of another.

Express Acceptance: When the acceptance has been signified either in writing or by words of

mouth or by performance of some required act of the offeree.
Formal Contract: The law gives special effect because of the formalities or the special language
used in creating it.
Money Lending Transactions: The rate of interest being high, or that the borrower is in urgent
need of money is not an evidence of undue infl uence.
Offer: An offer is synonymous with proposal.
Undue Infl uence: It consists in the improper exercise of power over the mind of one of the
contracting parties by the other.

1.12 Self Assessment

State whether the following statements are true or false:
1. An agreement, the meaning of which is not certain or capable of being made certain, is
valid.

2. An attempt to deceive which does not deceive is not fraud.
3. Communication of offer is complete when the letter of offer is posted.

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