Page 10 - DMGT407Corporate and Business Laws

Unit 1: Laws of the Contract

obligations are created on the part of the parties to the agreement. Thus, all agreements Notes
are not contracts; but all contracts are agreements. Further all legal obligations are not
contractual. Only those legal obligations which have their source in an agreement are
contractual. Thus, a legal obligation not to create a nuisance for others does not give rise
to a contract; but nevertheless it is actionable by law.
Figure 1.1: Contract = Agreement + Legal Obligation

Examples:
1. A agrees to sell his motorcycle to B for ` 10,000. The agreement gives rise to a legal
obligation on the part of A to deliver the motorcycle to B and on the part of B to pay
` 10,000 to A. The agreement is a contract. If A does not deliver the motorcycle, then
B can go to a court of law and file a suit against A for non-performance of the
promise on the part of A. On the other hand, if A has already given the delivery of
the motorcycle and B refuses to pay the price, A can go to the court and file a suit
against B for non-performance of promise.
2. A invites B for dinner in a restaurant. B accepts the invitation. On the appointed day,
B goes to the restaurant. To his utter surprise A is not there or A is there but refuses
to entertain B. B shall have no remedy against A. Similarly, in case A is present in the
restaurant but B fails to turn up, then A shall have no remedy against B.
In example (2) above, the promises are not enforceable by law as there was no intention to
create legal obligation. Such agreements are social agreements which do not give rise to
legal consequences. In example (1) the obligation has it source in an agreement and the
parties intend to be bound by the same and therefore it gives rise to a contract.

Notes Ignorance of Law is no Excuse
This is the literal translation of maxim “ignorantia juris non excusat”. Every member of the
society is expected that his actions conform to a set pattern or standard as reflected in legal
rules. For this purpose, he is presumed to know the legal rules. He cannot take the plea
that he did not know them. No doubt, in practice, he cannot learn and understand all the
laws of the land, but he can obtain expert guidance from those who possess legal knowledge.
Thus, he has access to books on law and to those persons who are experts in legal matters.
Therefore, the maxim “ignorantia juris non excusat” places a burden on every member of
the society with the knowledge of law. In other words, “ignorance of law is not a good
excuse”.

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