Contracts and Agreements: A Comprehensive Guide
What is Sale and Agreement to Sale?
Agreement
As per section 2(e) of Contract Act states “every promise or set of promises forming a consideration for each other” is an agreement. Simply put, when two people agree for something in exchange of a consideration (or money), it becomes an agreement. It is not necessarily a contract since it could be betting as well which is not permissible by law. Reach out to Kolkata lawyers for contracts and agreements for in-depth understanding.
Contract
As per section 2(h) of the Indian Contract Act, 1872, “an agreement enforceable by law is a contract”. In other words, when two parties agree to certain terms in exchange of consideration which is in consonance with the existing laws, it becomes a contract. Eg, A agrees to pay B Rs 1000 in return for some goods and such a promise is mutually agreed, goods promised are legally permitted, it is a contract in the eyes of law. Valid contract is the one which complies with conditions enunciated under Sections 10 to 30 of the Indian contract which include free consent, no undue influence, no misrepresentation, etc.
Sale
Section 54 of Transfer of property provides that “sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.” In other words, when the ownership of a property is handed over to another person in exchange of a certain price (whether fully or partially paid), the phenomenon is known as sale.
Agreement to Sell
Section 4 (3) of Sale of Goods Act, 1930 directly explains this context with the words as “Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.” It is a promise among parties regarding a future transaction.
Difference Between Agreement to Sell and Sale Deed
- A written agreement to sell includes all terms and conditions agreed upon by the buyer and seller for a future exchange of goods and consideration. However, a sale deed contains the terms and conditions of a sale being executed. For such matters, civil lawyer in Kolkata can assist the legal matters arising in Kolkata.
- An agreement of sale contains a future date or the set of conditions on which a future sale may take place. While a deed of contract of sale contains the date on which such sale is being executed and it does not contain any future conditions except in regard with partial payment.
- In case of an agreement of sale, future transfer of title of goods is clearly mentioned. While in case of a sale deed, immediate transfer of ownership and title is clarified in the terms.
- An agreement to sell is the base for future contract of sale/ sale deed. When an agreement to sell becomes a sale it is executed on the said terms only.
- Registration of an agreement to sell is not mandatory. It may be an oral agreement as well. However, registration of a sale deed is mandatory as per applicable laws.
Discharge of Contract- Meaning
The term discharge of contract means ending of the contractual relationship between the parties. A contract is said to have been discharged when it ceases to operate i.e. when the rights and obligations created by the parties came to an end. A contract can be discharged if the parties mutually agree to terminate the contract. Also there are different methods through which contracts can be discharged. In this article, we will discuss the different methods of disc
Discharge of Contract Method
A contract is said to be discharged using the following methods:
Discharge by Performance
Discharge by Agreement or Consent
Discharge by Impossibility of Performance
Discharge by Lapse of Time
Discharge by Operation of Law
Discharge by Breach of Contract
Discharge by Performance
Performing means doing all those things which are required by a contract. Discharge of performance occurs when the parties to the contract fulfill their obligations set out under the contract within the specified time and in the manner prescribed. In such a case, parties are discharged and contracts come to an end. But if only one of the party performs, he alone is discharged. Such a party gets the right of action against the other party who is guilty
Discharge by Agreement or Consent
Novation
The term novation means the substitution of the new contract by the original one. The new agreement may be with the same parties or with the new parties. For a contract to be valid and effective, the consent of all the parties including the new one if any is necessary. Moreover, the second party must be capable of enforcement of law, the consideration for which is the exchange of promise not to carry out the original contract.
Discharge by Impossibility of Performance
If it is impossible for any of the parties entered in the contract to perform their obligations, then the impossibility of performance of contract leads to discharge of contract. If the impossibility of performing the contract exists from the start, then it is termed as impossibility by ab-initio.
Discharge of Contract by a Lapse of a Time
According to The Limitation Act, 1963, there is a specific time period for the performance of a contract. If the promisor failed to perform his duties and the promisee failed to take action within this specified period, then the promisee in such a case cannot be deprived of his remedy through law. Here, the contract is said to be discharged due to the lapse of time. For example: John takes a loan from one of his friends and agrees to pay him installments every month for the next five years. However, he does not pay even a single installment. His friend calls him several times but then gets busy and takes no action. After three years, he approaches the court to help him recover his money. However, the court rejects his complaint because he has crossed the time-limit of three years to recover his debts.
Discharge of Contract By Operation of Law
A contract can be discharged by the operation of law in the following circumstance:
Unauthorized Material Alteration of Written Document: A party can discharge the contract i.e from his side if the other party changes the terms such as price or quantity of contract without taking any permission from the former.
A contract is obliged to perform according to its terms. But when a promisor fails to perform a contract according to the terms of the contract, then he is said to have committed a breach of contract
___Who is unpaid seller?
He is the seller to whom:-
1. Whole of the price is not paid
2. Conditional payment
Bill of exchange/ promissory note/ cheque has been received by seller but it dishonours. Till
the time bill of exchange/ promissory note/ cheque is with the seller so, till that time he is
only called as seller but when any of the mentioned instruments dishonours then after this
seller is called unpaid seller.
___Features of an unpaid seller
1. Seller must sell the goods on cash basis and must be unpaid (in cash transactions
payment becomes due instantly)
2. Seller must be unpaid either wholly or party
3. The decided period has expired and the price has not been paid to seller
4. Seller must not refuse to accept the payment
5. Where the price paid through negotiable instrument (bill of exchange/ promissory
note/ cheque) and the same has been dishonoured
Example: A sells his bike to B for Rs. 60,000 and receives a cheque for the price. Till this time
seller will only be called as seller. But when subsequently, the cheque is dishonoured due to
insufficiency of funds in B’s bank account, then only A becomes an unpaid seller.
Rights (Remedies) of Buyer against Seller
1.Suit for damages for non-delivery
2.Suit for interest and special damages
3.Suit for specific performance
4. Suit for breach of contract
What is the Consumer Protection Council?
The Consumer Protection Council is an organisation that provides legal assistance to Indian consumers. They do this by developing and promoting effective consumer protection measures, as well as educating people about their rights under the law. It has a wide range of services that it offers, including product liability, consumer disputes, and credit information. Additionally, the council conducts awareness campaigns to educate people about their rights as consumers. The council offers free information and support to individuals who have been wronged by companies or government agencies. So, whether you’re the victim of a scam or just feel like you’ve been wronged in the past, the Consumer Protection Council can help.
Composition of the Consumer Protection Council
The Consumer Protection Council acts as the mediator between businesses and consumers, providing education and legal interpretations of consumer rights. In addition, the council tries to make it easier for consumers to take action if they feel that their rights have been violated.
Objectives of the Consumer Protection Council
Now that you know a little about the composition of Consumer Protection Council, it’s time to learn about the important functions and Objectives of this organization.The Consumer Protection Council provides impartial advice and support to consumers with regard to their rights under the law. Its members are experts in consumer protection and come from different parts of the business community. They work together to provide objective, impartial guidance, and support to consumer concerns. In addition, the council also works towards increasing consumer awareness of their rights and protecting businesses from unfair practices by customers.
It performs functions like:
- To formulate policy guidelines for the protection and promotion of consumer interests.
- To provide guidance on matters relating to consumer protection.
- To advise Government on all issues related to consumer protection.
- To monitor compliance with rules/regulations issued by the Government or any other authority or organisation as per directions given by it.
- To receive complaints from consumers regarding violations or non-compliance with any provision.
Contract Of Agency
To understand agency, we need to understand the terms agent and principal, which are defined under Section 182 of the Indian Contract Act (referred to as Act). The employer, who authorises a person to act as his representatives, whose actions will bind the employer legally with the third party the employee deals with, is known as the principal. And the person authorised to perform such Act or act as a representative is known as an agent.
The term persons discussed above can be a natural person or a legal person. Therefore, the term agent can be given to an individual who is a living person and an imaginary being capable of rights and liabilities as per the law.
The High Court of Madras attempted to clarify the meaning of agency in P. Krishna Bhatta V. Mundila Ganpathi Bhatta [1]. In this case, Justice Ramaswami attempted to explain that any individual acting on behalf of another is not referred to as an agent in legal terms.
An individual who behaves as another person’s representative in business transactions and negotiations in front of a third party is referred to as an agent by him. That person may be legally referred to as the representative of the person for whom he is working.
The essentials for the creation of an agency are as follows:
- The principal should be competent to contract
- The agent should be competent to contract
- Consideration not required
- Intention to create a contract
Competency Of Principal
A person competent to contract under section 10 of the Indian Contract Act, 1872 is qualified for the contract of agency. The conditions for the eligibility are given under section 183 of the Act, which are:
- The person should have attained the age of maturity
- The person should be of sound mind
Competency Of Agent
The eligibility for a person to be an agent is specified under section 184 of Act 1872. As per the section, any person is eligible to be an agent, but no person who has either not attained majority or is of unsound mind can be held responsible for their actions taken against their actions as an agent.
Consideration Not Necessary
According to section 185 of the Act, no consideration is needed to establish an agency contract. In most cases, an agent is paid by commission for services rendered, although no payment is required at the time of the appointment.
Intention Of The Agent
There is a necessity for the intention to be present on behalf of the agent to act as a representative of the principal. And if the agent enters into a contract with its own beneficiary intention, then the principal is not liable.
Agreement with Minor
The Indian Contract Act, 1872 is important legislation in the field of commercial law in India. It is basically responsible for regulating contractual relationships and obligations. A common legal complexity often arises when an agreement with minor parties takes place. This is problematic because the Act does not permit such agreements outrightly.
Contractual Capacity
Section 11 of the Contract Act, 1872 explains the requirements of competency for entering into contracts. Individuals or entities can create contracts only if they meet these requirements. The very first such requirement is that of majority age.
The general rule of contracts is that every person, whether natural or artificial, can enter into contractual obligations.
Section 11, however, lays down certain exceptions. For example, minors, persons of unsound mind and those whom the law specifically disqualifies are the exceptions
The rationale behind Section 11 is that all parties to a contract must be competent to understand their obligations. Since a mature mind is important for this purpose, the law prohibits agreement with minor parties.
This is because minors would find it difficult to comprehend and fulfil their obligations. Hence, the law itself prohibits them from creating contracts.
Agreement with Minor parties
Section 11 states that only persons who have attained majority according to the law are competent to contract. Therefore, there must be a law that defines the age of majority.
In India, the Indian Majority Act, 1875 declares the age of majority of all persons to be 18 years. If a minor has a guardian or Court of Ward looking after him, his age of majority becomes 21 years. Hence, any contract with a party below the age of 18 years is invalid as per the Act.
Rules relating to Agreement with Minor Parties
Although, as a general rule, a contract with minors is void, we must keep in mind the following rules as well:
1) A contract with a minor is void and, hence, no obligations can ever arise on him thereunder.
2) The minor party cannot ratify the contract upon attaining majority unless a law specifically allows this.
3) No court can allow specific performance of a contract with minors because it is void altogether.
4) The Partnership Act also prohibits minors from becoming partners in a firm. They can, however, receive the benefits of partnership and ratify the same upon attaining majority.
5) The rule of estoppel under evidence law does not apply to minors under contractual obligations. In other words, even if a minor forms a contract claiming majority age, legal obligations cannot arise against him.
6) Parents or guardians of minors can name them in contracts only if it benefits them. But even in this case, the minor cannot be personally liable.
What Is Undue Influence?
Undue influence occurs when an individual is able to persuade another’s decisions due to the relationship between the two parties. Often, one of the parties is in a position of power over the other due to elevated status, higher education, or emotional ties. The more powerful individual uses this advantage to coerce the other individual into making decisions that might not be in their long-term best interest.
Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. This inequity in power between the parties can vitiate one party’s consent as they are unable to freely exercise their independent will. In exerting undue influence, the influencing individual is often able to take advantage of the weaker party. In contract law, a party claiming to be the victim of undue influence may be able to void the terms of the agreement.1
Understanding Undue Influence
Undue influence occurs when an individual is able to use an advantage to coerce another party’s decisions. Often, this coercion occurs to the detriment of the weaker party and the gain of the more powerful or influential party. Some relationships, such as one between a patient and a doctor or a parent and a child, are considered to run the risk of undue influence and are legally outlined.2
The onus in this type of relationship is on the person with influence to prove that he was not using his position to take advantage of the other party. In other situations, one party, based on previous interactions, can be accused of using the trust of the other party to his advantage.
Undue Influence in Financial Markets
There is a pandemic of undue influence in the financial markets of the world. It can be as simple as leveraging information someone has on someone else in order to induce a sale or purchase, or it can be as complicated as forcing board members to vote a certain way. Having third-party counsel, or a mediator, present when deals or large trades are occurring can help to mitigate instances of undue influence.
1. When was Consumer Protection Act 2019 enacted?
The Consumer Protection Act 2019 was notified on August 9th 2019. However, it came into
effect from July 20th 2020.
2. What are the main features of Consumer Protection Act 2019?
While retaining certain old provisions, the New Act has certain new provisions that tightens
the existing rules to further safeguard consumer rights and create exhaustive consumer
protection law.
New provisions under Consumer Protection Act 2019
• Inclusion of E- commerce, Direct selling
Establishment of Central Consumer Protection Authority (CCPA)
• Strict Norms for Misleading Advertisement
• Strict Norms for product liability
• Changes in the Pecuniary Jurisdiction
• Greater ease to dispute resolution
Addition in the clause of “Unfair Trade Practice”:
• Unfair Contract
• Alternate Dispute Resolution through mediation
3. Who is a consumer?
A person who buys any goods or services for a consideration, which has been paid or
promised or partly paid and partly promised, or under any system of deferred payment also
includes the user with approval of such goods or beneficiary of services.
As per Consumer Protection Act 2019, the expression “buys any goods” and ‘hires or avails
any services” includes offline or online transactions through electronic means or by
teleshopping or direct selling or multi-level marketing.
4. Who is a not a consumer?
• A person who obtains;
• goods free of charge
• who avails services free of charge
• who obtains goods for resale or for any commercial purposes
• who avails services for any commercial purposes
• who avails services under contract of service
As per the provisions of the Act, commercial purpose does not include use by a person of
goods bought and used by him exclusively for the purposes of earning his livelihood by means
of self-employment.
5. What Consumers Rights are guaranteed under Consumer Protection Act, 2019?
Consumer is having the following six consumer rights under the Act
• Right to Safety
• Right to be Informed
• Right to Choose
• Right to be heard
• Right to seek Redressal
• Right to Consumer Awareness
6. What are goods?
“goods” means every kind of movable property and includes “food” as defined in clause
(j) of sub-section (1) of section 3 of the Food Safety and Standards Act, 2006;
7. Who can make complaint?
i. a consumer; or
ii. any voluntary consumer association registered under any law for the time being in force; or
iii. the Central Government or any State Government; or
iv. the Central Authority; or
v. one or more consumers, where there are numerous consumers having the same interest; or
vi. in case of death of a consumer, his legal heir or legal representative; or
vii. in case of a consumer being a minor, his parent or legal guardian;
8. Can a person buying goods or hiring services for business purpose make a
complaint?
No
9. What are Consumer Disputes Redressal Agencies?
These are quasi-judicial bodies established under the Act to provide simple, speedy and
inexpensive redressal to the grievances of the consumers. These have been established at
three levels: District, State and National known as:
• District Consumer Disputes Redressal Commission or District Commission
• State Consumer Disputes Redressal Commission or State Commission
• National Consumer Disputes Redressal Commission or National Commission.