BUSINESS LAW, Remedies for breach of contact

Q. What remedies are available to an aggrieved party on the breach of a contract?

Introduction:

Breach of contract means failure to perform any written or oral term of the contract without any legtimate legal excuse. This may include not completing a job, not paying in time, failure to deliver the goods, being late  or any act which shows that the party will not complete his part of promise. Breach may be actual or anticipatory with respect to time. It may be Minor or Major with respect to terms and conditions.

Suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be hidden behind the walls, must be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner cannot ask a court to order the contractor to replace the blue pipes with red pipes. The homeowner can only recover the amount of his  actual damages. In this instance, this is the difference in value between red pipe and blue pipe. Since the color of a pipe does not affect its function, the difference in value is zero. Therefore, no damages have been incurred and the homeowner would receive nothing. (See Jacob & Youngs v. Kent.)

The following are the remedies available to an aggrieved party on breach of contract.

1. Suit for Rescission
2. Suit for damages.
3. Suit upon quantum meruit.
4. Suit for specific performance.
5. Suit for injunction.

1. Rescission.

In contract law, rescission has been defined as the unmaking of a contract between parties. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract (the status quo ante).
Rescission is an equitable remedy and is discretionary.  Because rescission is supposed to be imposed mutually upon both sides to a contract, the party seeking rescission normally must offer to give back all benefits he has received under the contract.

If a party rightfully rescinds the contract, he is entitled to compensation by the other party for any damages which he was sustained through the non-fulfillment of the contract.

Example:

A contract to supply cotton to B on 12 dec. B agrees to pay the price on receipt of cotton. A doe not supply on due date. B is discharged from liability to pay. B can rescind and claim damages.

The court may grant rescission:

1. Where the contract is voidable by the plaintiff.
2. Where the contract is unlawful not apparent on its face and defendant is more to be blamed than the plaintiff.

The court may refuse to grant rescission:

1. The plaintiff expressly or impliedly ratified the contract.
2. owning to change in circumstances, the parties can not be restored to their original position
3. In the meanwhile, the third parties have acquired rights in good faith for value.

2. Suit for damages:

It is a monetary compensation awarded to the injured party for loss faced by him. The object of awarding damages is to put the injured partying the same financial position in which they would have if there were no breach.

Kinds of damages:

Ordinary Damages.

Damages which naturally arose in the usual course of things from such breach. In a contract of sale of goods, the damages payable are the difference between the contract price and the market price at the date of breach (73)

Special Damages.

Such damages must be in the contemplation of parties at the time when the contract is made if there are some special circumstances which would result in special loss in case of breach of contract. Such special circumstances must be brought to the knowledge of the other party. If there is breach of contract, special damages can be claimed.

Nominal Damages.

Nominal means very small in amount. When the injured party has not in fact suffered any loss due to breach of contract, the damages recoverable from the guilty party are called nominal damages.

Liquidated Damages.

When parties to the contract fix the amount of damages for the breach of contract at the time of formation of the contract, such damages are called liquidated damages. The court will not allow damages more than agreed amount. If the actual loss is more than the agreed amount, damages will be payable to the agreed amount.

Such damages do not form a part of law of contract. These are awarded to punish the guilty party for the breach of contract.

3. Quantum Meruit:

It means ‘as much as is merited. In simple words, it is reasonable value of work done. Where a person has done some work under when a contract and other party cancel the contract or contract becomes void, such party can claim remuneration for the work already done. The right to claim for quantum meruit arises when the original contract is discharged.

Claim on quantum meruit arises from the following:

1. When the contract is discovered to be void.
2. Where something has been done
3. When one party refuses to perform the contract.
4. Where the contract is divisible.

4. Specific Performance:

Specific performance means to do the job as agreed upon. When damages are not adequate remedy court may direct the guilty party to carry out his promise according to the terms of the contract.

Specific performance is granted in the following cases:

1. When compensation in money is not an adequate relief.
2. When there is no standard for calculating the actual damage caused by the non-performance.
3. When the compensation can not be obtained.

Specific performance shall not be granted in the following cases:

1. Where the contract is of personal nature.

2. Where the contract is uncertain.

3. Where court can not supervise its carrying out.

4. Where damages are adequate remedy.

5. Injunction:

It is an order of court restraining a person from doing some act. It is a mode of securing specific performance in negative terms. The court by issuing injunction restrains a person from doing what he has promised not to do. It is a preventive measure that is suitable in anticipatory breach.

Example: (Warner bros. vs nelson)

A film actress agreed to act exclusively for WB for two years and not for anyone else. But during this period, she contracted to act for z also. Held, she could be restrained by injunction from doing so. end

Nonverbal communication

Nonverbal communication is usually understood as the process of communication through sending and receiving wordless (mostly visual) messages - i.e., language is not the only source of communication, there are other means also. Messages can be communicated through gestures and touch (Haptic communication), by body language or posture, by facial expression and eye contact. Meaning can also be communicated through object or artifacts (such as clothing, hairstyles or architecture). Speech contains nonverbal elements known as paralanguage, including voice quality, rate, pitch, volume, and speaking style, as well as prosodic features such as rhythm, intonation and stress. Dance is also regarded as a form of nonverbal communication. Likewise, written texts have nonverbal elements such as handwriting style, spatial arrangement of words, or the physical layout of a page and removal of things.
However, much of the study of nonverbal communication has focused on face-to-face interaction, where it can be classified into three principal areas: environmental conditions where communication takes place, the physical characteristics of the communicators, and behaviors of communicators.

History

The first scientific study of nonverbal communication was Charles Darwin's book The Expression of the Emotions in Man and Animals (1872). He argued that all mammals show emotion reliably in their faces.

Universality

Paul Ekman's influential 1960s studies of facial expression determined that expressions of anger, disgust, fear, joy, sadness and surprise are universal.

Clothing and bodily characteristics

Elements such as physique, height, weight, hair, skin color, gender, odors, and clothing send nonverbal messages during interaction.
Physical environment
Environmental factors such as furniture, architectural style, interior decorating, lighting conditions, colors, temperature, noise, and music affect the behavior of communicators during interaction. The furniture itself can be seen as a nonverbal message

Proxemics: physical space in communication

Proxemics is the study of how people use and perceive the physical space around them. The space between the sender and the receiver of a message influences the way the message is interpreted The perception and use of space varies significantly across cultures and different settings within cultures. Space in nonverbal communication may be divided into four main categories: intimate, social, personal, and public space.

Chronemics: time in communication

Chronemics is the study of the use of time in nonverbal communication. The way we perceive time, structure our time and react to time is a powerful communication tool, and helps set the stage for communication. Time perceptions include punctuality and willingness to wait, the speed of speech and how long people are willing to listen. The timing and frequency of an action as well as the tempo and rhythm of communications within an interaction contributes to the interpretation of nonverbal messages. Gudykunst & Ting-Toomey (1988) identified 2 dominant time patterns

Monochronic Time

A monochronic time system means that things are done one at a time and time is segmented into precise, small units. Under this system time is scheduled, arranged and managed.
Monochronic cultures include Germany, Canada, Switzerland, United States, and Scandinavia.

Polychronic Time

A polychronic time system is a system where several things can be done at once, and a more fluid approach is taken to scheduling time.
Polychronic cultures include Saudi Arabia, Egypt, Mexico, Philippines, India, and many in Africa.

Movement and body position

Kinesics

The term "Kinesics" was first used (in 1952) by Ray Birdwhistell, an anthropologist who wished to study how people communicate through posture, gesture, stance, and movement Posture
Posture can be used to determine a participant’s degree of attention or involvement, the difference in status between communicators, and the level of fondness a person has for the other communicator. Studies investigating the impact of posture on interpersonal relationships suggest that mirror-image congruent postures, where one person’s left side is parallel to the other person’s right side, leads to favorable perception of communicators and positive speech; a person who displays a forward lean or a decrease in a backwards lean also signify positive sentiment during communication.[6] Posture is understood through such indicators as direction of lean, body orientation, arm position, and body openness.

Gesture

A gesture is a non-vocal bodily movement intended to express meaning. They may be articulated with the hands, arms or body, and also include movements of the head, face and eyes, such as winking, nodding, or rolling ones' eyes. The boundary between language and gesture, or verbal and nonverbal communication, can be hard to identify. A single emblematic gesture can have a very different significance in different cultural contexts, ranging from complimentary to highly offensive.

[ Haptics: touching in communication

A high five is an example of communicative touch.

Haptics is the study of touching as nonverbal communication. Touches that can be defined as communication include handshakes, holding hands, kissing (cheek, lips, hand), back slapping, high fives, a pat on the shoulder, and brushing an arm.These behaviors are referred to as "adapter" or "tells" and may send messages that reveal the intentions or feelings of a communicator. The meaning conveyed from touch is highly dependent upon the context of the situation, the relationship between communicators, and the manner of touch.
 Touching is treated differently from one country to another and socially acceptable levels of touching vary from one culture to another.
Striking, pushing, pulling, pinching, kicking, strangling and hand-to-hand fighting are forms of touch in the context of physical abuse.

Eye gaze

The study of the role of eyes in nonverbal communication is sometimes referred to as "oculesics". Eye contact can indicate interest, attention, and involvement. Studies have found that people use their eyes to indicate their interest and with more than the frequently recognized actions of winking and slight movement of the eyebrows. Eye contact is an event when two people look at each other's eyes at the same time. It is a form of nonverbal communication and has a large influence on social behavior. Frequency and interpretation of eye contact vary between cultures and species. Eye aversion is the avoidance of eye contact. Eye contact and facial expressions provide important social and emotional information. People, perhaps without consciously doing so, probe each other's eyes and faces for positive or negative mood signs.[8] Gaze comprises the actions of looking while talking, looking while listening, amount of gaze, and frequency of glances, patterns of fixation, pupil dilation, and blink rate.[10]

Paralanguage: nonverbal cues of the voice

Paralanguage (sometimes called vocalics) is the study of nonverbal cues of the voice. Various acoustic properties of speech such as tone, pitch and accent, collectively known as prosody, can all give off nonverbal cues. Paralanguage may change the meaning of words.

 Functions of nonverbal communication
Argyle (1988) concluded there are five primary functions of nonverbal bodily behavior in human communication:[14]

• Express emotions
• Express interpersonal attitudes
• To accompany speech in managing the cues of interaction between speakers and listeners
• Self-presentation of one’s personality
• Rituals (greetings)
  

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DEFINE CONTRACT, WHAT ARE THE VARIOUS TYPES OF CONTRACTS.

  Definition:
                Literally: The word contract comes from a Latin word"Contractus" which means consent, agreement or to enter into an agreement with a particular person.
Traditionally: Salmond says , "A contract is an agreement creating and defining obligations between the parties"
Sir John Smith says,"A voluntary, deliberate and legally binding agreement between competent parties."
Example: Asif says to Hamid,"Will you purchase my car for Rs.500000?.it is an offer, Hamid says yes, the offer is accepted and a contract is formed.

The contracts can be classified into four categories:

1. According to enforceability
2. According to formation
3. According to performance

   4.  According to parties 


  ACCORDING TO ENFORCEABILITY:

According to enforceability, a contract can be divided as under:
a- Valid contract.----
                            A valid contract is enforceable by law. An agreement becomes enforceable when all the essentials of a valid contract are present.

Obligation of the parties. 
                                         In one valid contract, all the parties are legally bound for the performance of the contract. If one of the parties breaches the contract
,the other party can enforce it through the court of law.
Example:
              A agrees to sell his car to B. If it fulfills all the essentials of a contract, it is a valid contract. If A fails to deliver the car, B can him and if B fails to pay, A can sue him.

 b- Void contract:
                            The word void means not binding in law. Section 2(j) defines"A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable" It means that void contract is not void from beginning. It s valid  contract when it is made but subsequently it becomes void due to certain reasons.

Obligation of parties. (MAQSOOD AHMED, B.COM, ACMA, 03333424200)
                                  In a void contract both the parties are not bound to fulfill the contract. Under this contract the party who has received any benefit is bound to return to the other party.
                                   A contract becomes void under the following circumstances:
1. Impossibility of performance.
2. Subsequent illegality.
3. Rejection of voidable contract.
4. Impossibility of depending event.

Voidable contract:
                            " An agreement which is enforceable by law at the option of  one or more of the parties thereto, but not at option of the other or others, is a voidable contract."
Example: A promises to sell his car to B for rupees 100000.Hi consent is obtained
 by fraud.The contract is voidable at the option of A. He may avoid the contract or elect to be bound by it.

A contract becomes voidable due to following reasons:
1. A  contract is voidable when consent is not free.
2. In case of attempted performance, the contract is voidable at the option
     of promiser.
3. When the promiser fails to perform the contract within specified time, contract   is voidable at the option of promisee.

Obligation of the parties.
                                        It is a valid contract if it is not rejected by the party having the right to reject it. If the aggrieved party avoids the contract, he must restore the benefit received and it can claim damages from the other party.

Unenforceable contact:
                                     It is a contract which can not be enforced in court of law because of some technical defects such as absence of writing, registration, attestation or stamp etc. It can be enforced when defects are removed. The aggrieved party is not entitled to legal remedies.
Example. Ali borrows Rs. one million from Baber makes a promissory note on a Rs.10 stamp paper. It is unenforceable because note is undervalued.
Obligation of parties.  NO party is legally bound to perform the contract.

According to formation:
                               According to formation, a contracts has following three kinds.
Express contracts:
                              Where the offer and acceptance of an y promise is made in words spoken or written, the promise is said to be express. An express promise results in an express contract.
Example. ASIF tells through email to HAMID that he wants to sell his house and Hamid informs that he agrees to buy the house, it is an express contract.

Implied contract:
                            Contracts which are inferred from the acts or conduct of the parties or due to course of dealing or circumstances are called implied contracts.
According to section 9, "where the proposal and acceptance of any promise is made otherwise than words, the promise is said to be implied."
Example. A went to a tea cafe and had a cup of tea. It is an implied contract and A will pay for the cup of tea.

Quasi contract:
                        A quasi contract is created by law and is termed as "certain relations resembling those of contracts" It rests on the principle of equity that no person shall be allowed to enrich himself unjustly at the expense of another.
Example. A, finds lost bag of B. A is bound to return the bag to B.

According to performance:
          According to performance, a contracts is of two kinds

Executed contract:
                              An executed contract is one in which both the parties to a contract have performed their respective obligations. It means nothing remains to be done.
Example. A paints a picture for B, and B pays for the picture.

Excutory contract:
The contract is executed where both the parties to a contract have yet to perform their obligation under the contract, it s an executory contract.
Example. A agrees to paint a picture for B and B agrees to pay him Rs. 500. The contract is executory.

According to parties:
                                 According to parties, a contract is of two kinds.
Unilateral contract:
                               In a unilateral contract only one party makes a commitment. It is a contract where only one party is bound but the other party chooses to be bound by it.
Example. A promises to Rs. 1000 to any one who finds his lost bag. B finds the bag and returns it to A. It is a unilateral contract which comes into existence when the is found.

Bilateral contract:
                             A bilateral contract is one in which both he parties  to the contract have yet to perform the obligations arising out of contract.
Example. A promises to make bed for B and B promises to pay Rs. 10000 to A.

DEFINE BREACH OF CONTRCT. WHAT ARE THE REMEDIES AVAILABLE TO AN AGRIEVD PARTY.

INTRODUCTION:
                          Breach of contract occurs where a party to a contract fails to perform precisely and exactly his obligation under the contract without any legitimate legal excuse.This may include not completing a job, not paying in full or on time,failure to deliver the goods etc.
          With respect to time, breach of contract may be anticipatory or actual.
Actual beach occurs where one party refuses to perform his obligation on due date or performs incompletely.
  Anticipatory breach occurs where one party announces,in advance of the due date,that he intends not to perform his obligation.

Effect of breach:
                           A breach of contract,no matter what form it may take, always entitles the innocent party to maintain an action for damages.
 
The innocent party has two options:
1. He may elect to treat the contract as still valid, complete his obligation and sue for payment from other side.
2. He may treat the contract as discharged and bring a action for damages for breach o contract immediately.

                 INTRODUCTION TO REMEDIES FOR BREACH OF CONTRACT
          Damages is the basic remedy available for breach of contract. The object of damages is to put the injured party into the same financial position he would have been in had had the contract been properly performed.Sometimes damages is not an adequate remedy and this is where the equitable remedies may be awarded.

The following are the remedies available to an aggrieved party on breach of contract.

1. Rescission of the contract.
2. Suit for damages.
3. Suit upon quantum meruit.
4. Suit for specific performance.
5. Suit for injunction.

1. Rescission.

When one of the parties to a contract commits breach, the other party may treat the contract as rescinded and is absolved of all obligations under the contract.

When a party treats the contract as rescinded, he makes himself liable to restore any benefit that he has received under the contract from the other party.

If a party rightfully rescinds the contract, he is entitled for compensation by the other party for any damage which he was sustained through the non-fulfillment of the contract.

Example:

A contract to supply cotton to B on 12 dec. B agrees to pay the price on receipt of cotton. A doe not supply on due date. B is discharged from liability to pay. B can rescind and claim damages.

The court may grant rescission:

1. Where the contract is voidable by the plaintiff.
2. Where the contract is unlawful not apparent on its face and defendant is more to be blamed than the plaintiff.

The court may refuse to grant rescission:

1. The plaintiff expressly or impliedly ratified the contract.
2. owning to change in circumstances, the parties can not be restored to their original position
3. In the meanwhile, the third parties have acquired rights in good faith for value.

2. Suit for damages:

It is a monetary compensation awarded to the injured party for loss faced by him. The object of awarding damages is to put the injured partying the same financial position in which they would have if there were no breach.

Kinds of damages:

Ordinary Damages.

Damages which naturally arose in the usual course of things from such breach. In a contract of sale of goods, the damages payable are the difference between the contract price and the market price at the date of breach (73)

Special Damages.

Such damages must be in the contemplation of parties at the time when the contract is made if there are some special circumstances which would result in special loss in case of breach of contract. Such special circumstances must be brought to the knowledge of the other party. If there is breach of contract, special damages can be claimed.

Nominal Damages.

Nominal means very small in amount. When the injured party has not in fact suffered any loss due to breach of contract, the damages recoverable from the guilty party are called nominal damages.

Liquidated Damages.

When parties to the contract fix the amount of damages for the breach of contract at the time of formation of the contract, such damages are called liquidated damages. The court will not allow damages more than agreed amount. If the actual loss is more than the agreed amount, damages will be payable to the agreed amount.

Such damages do not form a part of law of contract. These are awarded to punish the guilty party for the breach of contract.

3. Quantum Meruit:

It means ‘as much as is merited. In simple words, it is reasonable value of work done. Where a person has done some work under when a contract and other party cancel the contract or contract becomes void, such party can claim remuneration for the work already done. The right to claim for quantum meruit arises when the original contract is discharged.

Claim on quantum meruit arises from the following:

1. When the contract is discovered to be void.
2. Where something has been done
3. When one party refuses to perform the contract.
4. Where the contract is divisible.

4. Specific Performance:

Specific performance means to do the job as agreed upon. When damages are not adequate remedy court may direct the guilty party to carry out his promise according to the terms of the contract.

Specific performance is granted in the following cases:

1. When compensation in money is not an adequate relief.
2. When there is no standard for calculating the actual damage caused by the non-performance.
3. When the compensation can not be obtained.

Specific performance shall not be granted in the following cases:

1. Where the contract is of personal nature.

2. Where the contract is uncertain.

3. Where court can not supervise its carrying out.

4. Where damages are adequate remedy.

5. Injunction:

It is an order of court restraining a person from doing some act. It is a mode of securing specific performance in negative terms. The court by issuing injunction restrains a person from doing what he has promised not to do. It is a preventive measure that is suitable in anticipatory breach.

Example: (Warner bros. vs nelson)

A film actress agreed to act exclusively for WB for two years and not for anyone else. But during this period, she contracted to act for z also. Held, she could be restrained by injunction from doing so. end

ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS.

ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS

All contracts are agreements but all agreements are not contracts. Explain this statement. Ads

INTRODUCTION:
                             No doubt it is a valid and true statement. Before critically examining the statement,we must know the exact and basic meanings of the two terms contract and agreement in the context of business law. For understanding the meaning, we will have to go to the contract act 1872 that is applicable in subcontinent.
              A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. There must be offer and acceptance for a contract . An offer must backed by acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered into freely and should be possible to perform.
            
Definition of contract
According to section 2(h) of the  Contract Act 1872:
 " An agreement enforceable by law is a contract."
A contract therefore, is an agreement the which creates a legal obligation i.e., a duty enforceable by law.
From the above definition, we find that a contract essentially consists of two elements:
(1) An agreement and (2) Legal obligation i.e., a duty enforceable by law.

Example;

A promises to sell a horse to B for Rs.100,000, and B promises to buy horse at that price.

All contracts are agreements:
 For a Contract to be there an agreement is essential; without an agreement, there can be no contract. As the saying goes, "where there is smoke, there is fire; for without fire, there can be no smoke". It could will be said, "where there is contract, there is agreement without an agreement there can be no contract". Just as a fire gives birth to smoke, in the same way, an agreement gives birth to a contract.

What is agreement?

An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable. 

As per section 2 (e) of Contract At 1872:
 " Every promise and every set of promises, forming the consideration for each other, is an agreement." Thus it is clear from this definition that a 'promise' is an agreement.

What is a 'promise'?
 the answer to this question is contained in section 2 (b) which defines the term." 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."
An agreement, therefore, comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent thereto. 

All agreements are not contracts
  As stated above, an agreement to become a contract must give rise to a legal obligation. If an agreement is incapable of creating a duty enforceable by law. It is not a contract. Thus an agreement is a wider term than a contract. 
     Agreements of moral, religious or social nature e.g., a promise to lunch together at a friend's house or to take a walk together are not contracts because they are not likely to create a duty enforceable by law for the simple reason that the parties never intended that they should be attended by legal consequences
       On the other hand, legal agreements are contracts because they create legal relations between the parties.
EXAMPLE: a- A invites B to dinner. B accepts this invitation but does not attend the dinner. A can not sue B for damages. It is social agreement because it does not create legal obligation. So it is not a contract.

b- A promises to sell his car to B for one million. It is legal agreement because it creates legal obligations between the parties. So it is a contrac
According to section 10 of the contract act 1872,
                                                                          "All agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration and with a lawful object and not hereby declared to be void."
    Thus an agreement becomes a contract when at least the following conditions are satisfied.
1-free consent
2-competency of the parties
3-lawful consideration
4- lawful object.

Conclusion:
                  In a nut shell, an agreement is the basis of a contract and contract is the structure constructed on these basis. An agreement starts from an offer and ends on consideration while a contract has to achieve an other milestone that is enforceability. Due to this, breach of an agreement does not give rise to any legal remedy to the aggrieved party while breach of contract provides legal remedy to the aggrieved party against the guilty party. Thus we can say that all contracts are agreements but all agreements are not contracts.

Road map of a contract:
                                    OFFER                   + ACCEPTANCE                      = PROMISE
                                    PROMISE              + CONSIDERATION                = AGREEMENT
                                    AGREEMENT        + LEGAL OBLIGATION          =CONTRACT

CONTRACT

Question: Define contract, what are the essentials of a contract?

Answer:
            Introduction: The security and stability of business world depend upon the law of contract. Indeed the basis of trade and commerce today is the enforceability  of promises, very often contracts are made at one time and the performance is to follow latter, there should be legally enforceable obligation to perform the agreement.
  Definition:
                Literally: The word contract comes from a Latin word"Contractus" which means consent, agreement or to enter into an agreement with a particular person.
Traditionally: Salmond says , "A contract is an agreement creating and defining obligations between the parties"
Sir John Smith says,"A voluntary, deliberate and legally binding agreement between competent parties."
Example: Asif says to Hamid,"Will you purchase my car for Rs.500000?.it is an offer, Hamid says yes, the offer is accepted and a contract is formed.

Contract law in Pakistan
                                          The law relating to contracts in Pakistan is contained in Contract Act 1872. It extends to whole Pakistan and came in to force on the first day of September 1872. It provides rules relating to commercial transactions. It determines the circumstances in which promises made by the parties shall be legally binding on them.
According to Contract Act1872:
                                            Section 2(h) defines contract as,"An agreement enforceable by law is a contract"
A contract consists of two elements, 1- Agreement    2- Enforceability.
  Agreement: Section 2(e) defines the term agreement as," every promise and set of promises forming the consideration for each other is an agreement."
Now what is promise? Section 2(b) says,"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"

ENFORCEABILITY:
Enforceability is the second requirement of the contract. An agreement is enforceable if it is recognized by the courts of law. In order to be enforceable by law, the agreement must create legal obligation between the parties.
ESSENTIALS OF A VALID CONTRACT
A contract has been defined in section 2(h) as "an agreement enforceable by law." To be enforceable by law, an agreement must possess the essential elements of a valid contract as contained in sections 10, 29 and 56. According to section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and where necessary, satisfy the requirements of any law as to writing or attention or registration. As the details of these essentials form the subject matter of our subsequent chapters, we propose to discuss them in brief here.
The essential elements of a valid contract are as follows.
1. Offer and acceptance. There must a 'lawful offer' and a 'lawful acceptance' of the offer, thus resulting in an agreement. The adjective 'lawful' implies that the offer and acceptance must satisfy the requirements of the contract act in relation thereto.
2. Intention to create legal relations. There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations.
Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. An agreement to dine at a friend's house in not an agreement intended to create legal relations and therefore is not a contract. Agreements between husband and wife also lack the intention to create legal relationship and thus do not result in contracts.
Try to work out the solution in the following cases and then go to the answer.
3. Lawful consideration. The third essential element of a valid contract is the presence of 'consideration'. Consideration has been defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something and gets something. The something given or obtained is the price for the promise and is called 'consideration' subject to certain exceptions; gratuitous promises are not enforceable at law.
The 'consideration' may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. It may be past, present or future. But only those considerations are valid which are 'lawful'. The consideration is 'lawful'. unless it is forbidden by law; or is of such a nature that, if permitted it would defeat The provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or is immoral; or is opposed to public policy (sec.23).
4. Capacity of parties. The parties to an agreement must be competent to contract. But the question that arises now is that what parties are competent and what are not. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject (sec.11). If any of the parties to the agreement suffers form minority, lunacy, idiocy, drunkenness etc. The agreement is not enforceable at law, except in some special cases e.g., in the case of necessaries supplied to a minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate (sec 68).
5. Free consent. Free consent of all the parties to an agreement is another essential element. This concept has two aspects.(1) consent should be made and (2) it should be free of any pressure or misunderstanding. 'Consent' means that the parties must have agreed upon the same thing in the same sense (sec. 13). There is absence of 'free consent,' if the agreement is induced by (i)coercion, (ii) undue influence, (iii) fraud, (iv) mis-representation, or (v) mistake (sec. 14). If the agreement is vitiated by any of the first four factors, the contract would be voidable and cannot be enforced by the party guilty of coercion, undue influence etc. The other party (i.e., the aggrieved party) can either reject the contract or accept it, subject to the rules laid down in the act. If the agreement is induced by mutual mistake which is material to the agreement, it would be void (sec. 20)
6. Lawful object. For the formation of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must mot imply injury to the person or the other of the reasons mentioned above the agreement is void. Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution, he cannot recover the rent through a court of law or a contract for committing a murder is a void contract and unenforceable by law.
7. Writing and registration. According to the Indian contract Act, a contract to be valid, must be in writing and registered. For example, it requires that an agreement to pay a time barred debt must be in writing and an agreement to make a gift for natural love and affection must be in writing and registered to make the agreement enforceable by law which must be observed.
8. Certainty. Section 29 of the contract Act provides that " Agreements, the meaning of which is not certain or capable of being made certain, are void." In order to give rise to a valid contract the terms of the agreement must not be vague or uncertain. It must be possible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced
Illustration. A, agrees to sell B " a hundred ton of oil" there is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainly.
9. Possibility of performance. Yet another essential feature of a valid contract is that it must be capable of performance.
Section 56 lays down that "An agreement to do an act impossible in itself is void". If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law.
Illustration. A agrees with B, to discover treasure by magic. The agreement is not enforceable.
10. Not expressly declared void. The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly declared to be void. For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an agreement by way of wager have been expressly declared void under sections 26, 27 and 30 respectively.

QUASI CONTRACTS

QUASI CONTRACTS

Q: Explain in detail what is Quasi Contract? Also explain its different kinds Under contract act 1872.

Introduction:

                   Most of us are familiar with the term contract , which refers to a legal agreement that binds the parties with duties and obligations. The contracting parties agree to the conditions of the contract, either orally or in writing and such contracts are enforceable in a court of law. .in order to be classified as a valid contract, there must be an offer, acceptance between the parties for a valid consideration; however, there is one type of contract wherein these factors are not needed for the formation of the contract. There is not contract between the parties, till the court creates it. these are quasi contracts that are created by courts to prevent one party from getting   unjust enrichment at the expense of the other.

What does quasi contracts mean.

Denotative meanings:

                    Quasi is a Latin word for “as if, almost, somewhat, to a degree and analogous to”

Connotative meaning:

                            A quasi contract is an obligation invoked by law in the absence of an agreement. Its purpose is to create a legal duty where, in fact, no agreement was entered into by the parties. Quasi contracts are based on the principle of equity and justice. It simply states that no body shall enrich himself unjustly at the expense of another.

Example:

            A is knocked down by a vehicle. B, a stranger, who found A on the road in unconscious state, takes A to doctor. The doctor provides treatment to A, who is In a unconscious state. In such a situation, there is no contract between A and doctor and A claims that he is not liable to pay for the services offered by the doctor, as he was unconscious at the time of treatment and there is no agreement between the two.

Application:

                   In such a situation, the theory of quasi contract applies. In this case the doctor has spent his valuable time for the treatment of accident victim(A) and so, A is liable to pay for the services of the doctor. If A fails to do so, the court can apply the doctrine of quasi contract and order A to pay. This is to prevent the unjust enrichment of A at the expense of doctor.

Liability:

             The main question that arises in such situations is the liability of the defendant. As the aim of this doctrine is to prevent unjust enrichment of one party, at the expense of the other,

The damages are usually restricted to the value of services rendered or the cost of the goods delivered. If the damages exceed that value, the whole concept of quasi contract will be defeated, as it will be unfair for the defendant.

Under contract act 1872

                                      Section 68 to 72 deals with “certain relations resembling those created by contract” under the contract act 1872.There are five kinds of quasi contractual obligations for which brief discussion is discussed below.

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1.Supply of necessaries (sec. 68)

                                                      If necessaries are supplied to a person who is incompetent to contract or to someone whom he is legally pound to support, the supplier is entitled to recover the price from the property of the incompetent person. The necessaries must be suited to conditions of life of the incompetent person.

  Example1: A supplies B, a lunatic, with necessaries suitable to his conditions in life. A is entitled to be reimbursed from B’^s property.

  Example 2: A supplies the wife and children of B, a lunatic with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’^s property.

2. Payment by an interested person: (sec. 69)

                                                                             “A person who is interested in the payment of money which another is bound by law to pay, is entitled to be reimbursed by the other.”

Example:

The conditions of liability under this section are:

1. Plaintiff should be interested in making payment to protect his interest. The interest should be legally recognizable.
2. It is necessary that the plaintiff himself should not be bound to pay.
3. The defendant should have been ‘bound by law’ to pay the money.
4. The plaintiff should have made the payment to another person.    

Example:

              A holds land on lease granted by B,  the zamindar. The revenue payable by B to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue law, the result of such sale will be the annulment of A’^S lease. A wants to prevent the sale and his own lease, pays the sum due from B. B is bound to make good to B the amount so paid.

3. Liability to pay for non-gratuitous acts:  (sec. 70)          

Section 70 states, ”where a person lawfully does anything for any other person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of or to restore the thing so done or delivered.”

Example:

              A, a tradesman, leaves goods at B’^s house by mistake. B treats the goods as his own. He is bound is bound to pay A for them.

Example:

    A saves B’^s property from fire. A is not entitled to compensation from B, if circumstances show that he intended to act gratuitously.

4. Responsibility of finder of goods: (sec.71)

                                                                    “A person who finds goods belonging to another and takes them into his custody, is subject to the same as a bailee.”

Thus in respect of duties and liabilities, a finder is treated as bailee.

 The rights of a finder of goods include the following:

1. He can sue the owner for the specific reward announced for the return of goods and recover the reward.
2. He is entitled to recover his lawful charges incurred in preserving the goods and in order to find the true owner.
3. He can sell the goods if

 a-The goods are perishable in nature.

 b-His lawful charges exceed two third of the value of goods.

 c- When after due search, the true owner can not be found.

 d- Even if the true owner is found out, but he refuses to pay the lawful charges to the finder.

5. Mistake or Coercion (sec.72)

                                                        sec. 72 states, “A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it.”

 Example:

    A and B jointly owe Rs. 100 to C. A alone pays the amount to C, and B, not knowing this fact pays Rs. 100 again to C. C is bound to repay the amount to B.

Money paid under mistake is recoverable whether the mistake is of fact or law.

Example:

                A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charges as was illegally excessive.       end