Page 11 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes Self Assessment

Fill in the blanks:
1. A contract essentially consists of two elements which are ………………..and its
enforceability by law.

2. In a contract there are at least ……………parties.

1.2 Indian Contract Act, 1872

For business executives, contract law is tremendously significant because it underlies or is
related to all major areas of law affecting business. References to sections in this unit are to this
Act, unless otherwise specified.
The general principles of the law of contracts are covered in 75 sections. Contract forms the basis
of almost all the business law and you must know it thoroughly. The understanding of how a
contract is made and ended and how the remedies for breach of the contract can be availed is
essential to deal with laws.
That branch of law which determines the circumstances in which promises made by the parties
to a contract shall be legally binding on them is governed by the Indian Contract Act, 1872. Also,
it defines the remedies that are available through a court against a person who fails to perform
his contract, and prescribes conditions under which the remedies are available.
The Indian Contract Act is concerned with the most important branch of business law as it affects
all of us in one way or the other at one time or the other. However, it is of particular importance
to business persons as bulk of their transactions are based on contracts. The Act imparts
definiteness in business transactions as it ensures that what a person has been led to expect shall
come to pass and what has been promised to him shall be performed. Thus the purpose of the
law of contract is to ensure the realization of reasonable expectations of the parties who enter
into a contract.

Self Assessment

Fill in the blanks:
3. The general principles of the law of contracts are covered in ……………sections.

4. That branch of law which determines the circumstances in which promises made by the
parties to a contract shall be legally binding on them is governed by the ………Act, 1872.

1.3 Essentials of the Contracts

Section-10 provides that all the agreements are contracts, if they are made by the free consent of
parties, competent to contract, for lawful consideration and with a lawful object and are not
expressly declared by law to be void. To constitute the contract:
1. There must be an agreement between the two or more than two parties. No one can enter
into the contract with himself.
2. An agreement is composed of two elements – offer or proposal by one party and acceptance
thereof by the other party. Party making the offer is known as offeror or proposer and the
party to whom the offer is made is called as offeree.

3. When an offeree gives his assent to the offer, then he is known as acceptor.

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