Question

A.)

Describe the concept of a contract, the 4 elements of an enforceable contract and explain how a contract can be discharged.

B.)

Describe some defenses to contract enforceability. Describe a quasi-contract and explain why courts impose quasi-contracts in a legal dispute.

C.)

Describe the elements of an enforceable offer and explain when an offer can be legally revoked. Describe the elements of an enforceable acceptance and explain when an acceptance can be unenforceable?

Answer 1

Answer A-

Contract-

A contract is an agreement enforceable by law. In other words, we can say that a contract is anything or a promise or an agreement enforceable by the law.

A contract is a legally enforceable agreement between two or more parties where each assumes a legal obligation that must be completed. Many aspects of daily life involve contracts, including buying property, applying for a car loan, signing employment-related paperwork, and agreeing to terms and conditions when buying products and services or using computer software.

The 4 elements of a contract are-

1. Offer - One of the parties made a promise to do or refrain from doing some specified action in the future.

2. Consideration - Something of value was promised in exchange for the specified action or nonaction. This can take the form of a significant expenditure of money or effort, a promise to perform some service, an agreement not to do something, or reliance on the promise. Consideration is the value that induces the parties to enter into the contract.

The existence of consideration distinguishes a contract from a gift. A gift is a voluntary and gratuitous transfer of property from one person to another, without something of value promised in return. Failure to follow through on a promise to make a gift is not enforceable as a breach of contract because there is no consideration for the promise.

3. Acceptance - The offer was accepted unambiguously. Acceptance may be expressed through words, deeds or performance as called for in the contract. Generally, the acceptance must mirror the terms of the offer. If not, the acceptance is viewed as a rejection and counteroffer.

If the contract involves a sale of goods (i.e. items that are movable) between merchants, then the acceptance does not have to mirror the terms of the offer for a valid contract to exist, unless:

(a) the terms of the acceptance significantly alter the original contract; or
(b) the offeror objects within a reasonable time.

4. Mutuality - The contracting parties had “a meeting of the minds” regarding the agreement. This means the parties understood and agreed to the basic substance and terms of the contract.

When the complaining party provides proof that all of these elements occurred, that party meets its burden of making a prima facie case that a contract existed. For a defending party to challenge the existence of the contract, that party must provide evidence undermining one or more elements.

Discharge of a contract -

1-Discharge byPerformance

When the parties to a contract fulfil the obligations arising under the contract within the time and manner prescribed, then the contract is discharged by performance.

Example: Peter agrees to sell his cycle to John for an amount of Rs 10,000 to be paid by John on the delivery of the cycle. As soon as it is delivered, John pays the promised amount.

Since both the parties to the contract fulfil their obligation arising under the contract, then it is discharged by performance. Now, discharge by the performance of a contract can be by:

1. Actual performance
2. Attempted performance

As shown in the example above, actual performance is when all the parties to a contract do what they had agreed for under the contract. On the other hand, it is possible that when the promisor attempts to perform his promise, the promisee refuses to accept it. In such cases, it is called attempted performance or tender.

2- Discharge by Mutual Agreement

If all parties to a contract mutually agree to replace the contract with a new one or annul or remit or alter it, then it leads to a discharge of the original contract due to a mutual agreement.

Example: Peter owes Rs 100,000 to John and agrees to repay it within one year. They document the debt under a contract. Subsequently, he loses his job and requests John to accept Rs 75,000 as a final settlement of the loan. John agrees and they make a contract to that effect. This discharges the original contract due to mutual consent.

3- Discharge by the Impossibility of Performance

If it is impossible for any of the parties to the contract to perform their obligations, then the impossibility of performance leads to a discharge of the contract. If the impossibility exists from the start, then it is impossibility ab-initio. However, the impossibility might also arise later due to:

• An unforeseen change in the law
• Destruction of the subject-matter essential to the performance
• The non-existence or non-occurrence of a particular state of things which was considered a given for the performance of the contract
• A declaration of war

Example: Peter enters into a contract with John to marry his sister Olivia within one year. However, Peter meets with an accident and becomes insane. The impossibility of performance leads to a discharge of the contract.

4-Discharge of a Contract by Lapse of Time

The Limitation Act, 1963 prescribes a specified period for performance of a contract. If the promisor fails to perform and the promisee fails to take action within this specified period, then the latter cannot seek remedy through law. It discharges the contract due to the lapse of time.

Example: Peter takes a loan from John and agrees to pay instalments every month for the next five years. However, he does not pay even a single instalment. John calls him a few times but then gets busy and takes no action. Three years later, he approaches the court to help him recover his money. However, the court rejects his suit since he has crossed the time-limit of three years to recover his debts.

5-Discharge of a Contract by Operation of Law

A contract can be discharged by operation of law which includes insolvency or death of the promisor.

6-Discharge by Breach of Contract

If a party to a contract fails to perform his obligation according to the time and place specified, then he is said to have committed a breach of contract.

Also, if a party repudiates a contract before the agreed time of performance of a contract, then he is said to have committed an anticipatory breach of contract.

In both cases, the breach discharges the contract. In the case of:

• an actual breach, the promisee retains his right of action for damages.
• an anticipatory breach of contract, the promisee cannot file a suit for damages. It also discharges the promisor from performing his part of the contract.

7-Discharge of a Contract by Remission

A promisee can waive or remit the performance of promise of a contract, wholly or in part. He can also extend the time agreed for the performance of the same.

In example 3 above, Peter only repays a part of the money he owes to John. However, John agrees to accept it as a final settlement of the debt. John’s act of remission discharges the contract.

ANSWER B- Some defenses to contract enforceability-

Undue influence arises when certain persons may have a great deal of control over a party and utilize that control in order to unduly influence a person to enter into a contract.

Impossibility arises where it truly becomes impossible to perform a contract due to something that is unforeseen by the parties. For instance, the destruction of the World Trade Center made the performance of the leases for that building impossible.

A related concept is that of frustration of purpose. For instance, during the inauguration of a new president, there may be certain contracts entered into. If the inauguration, however, is canceled, then the purpose of those con­tracts has been frustrated. If you were one of the suppliers who agreed to provide the grandstands for the inauguration the U.S. Government may be able to void the con­tract .

Lack of capacity to contact-if one of the parties was a minor or suffering from mental incompetency at the time the contract was entered into, then those facts may be defenses to the validity of the contract. This defense is called lack of capacity to contract.

Quasi contract-

The word ‘Quasi’ means pseudo. Hence, a Quasi contract is a pseudo-contract. When we talk about a valid contact we expect it to have certain elements like offer and acceptance, consideration, the capacity to contract, and free will. But there are other types of contracts as well.

There are cases where the law implies a promise and imposes obligations on one party while conferring rights to the other even when the basic elements of a contract are not present. These promises are not legal contracts, but the Court recognizes them as relations resembling a contract and enforces them like a contract.

These promises/ agreements areQuasi contracts.

Ans.3- Elements of an enforceable offer-

i)Communicate-

Thep making the offer (the offeror) must communicate his offer to a person who may then choose to accept or reject the offer (the offeree). Often, this is not a serious issue to analyze, as the offeror is free to communicate his offer in any means, whether orally (spoken offers) or in writing.

ii)Committed-

Whether the offeror is committed requires an analysis of whether the offeror, in his communication of the offer, intended to be bound by the offer. An intent to be bound may arise through course of conduct, such as explicitly stating “That is my final offer.” There may be a question as to whether the alleged offer is an actual offer or merely an invitation to receive offers. Auctions are a common example of invitations to receive offers, rather than a contractual offer in itself.

iii)Definite Terms-

All offers must be definite and specific in their terms. The essential terms of the deal, such as price, manner of acceptance and timing, must be stated. An example is “I offer you my grandfather’s antique watch for $200. You must tell me that you accept this offer in writing, and I must receive it before 2 p.m. on Tuesday, or I will offer it to my brother.

• A offer can be legally revoked if-

The main criteria for a binding revocation is that it's communicated to the offeree before they accept the offer.

Communication of revocation can be direct or indirect and can be made by a third party. If the communication is indirect, it must meet several requirements. It needs to be:

• Correct
• Communicated by a reliable source
• Able to be understood by a reasonable person.

Selling an item to someone else is considered a legal revocation so long as the original offeree is notified of the sale before they accept the offer.

Offers made through a publication are something of a special case. These offers can be revoked by a notice in that publication without specifically contacting the offeree.

Legal Acceptance-

1] Acceptance can only be given to whom the offer was made

In the case of a specific proposal or offer, it can only be accepted by the person it was made to. No third person without the knowledge of the offeree can accept the offer.

2] It has to be absolute and unqualified

Acceptance must be unconditional and absolute. There cannot be conditional acceptance, that would amount to a counteroffer which nullifies the original offer. Let us see an example. A offers to sell his cycle to B for 2000/-. B says he accepts if A will sell it for 1500/-. This does not amount to the offer being accepted, it will count as a counteroffer.

3] Acceptance must be communicated

For a proposal to become a contract, the acceptance of such a proposal must be communicated to the promisor. Communication must occur in the prescribed form, or any such form in the normal course of business if no specific form has been prescribed.

Further, when the offeree accepts the proposal, he must have known that an offer was made.

4] It must be in the prescribed mode

Acceptance of the offer must be in the prescribed manner that is demanded bythe offeror. If no such manner is prescribed, it must be in a reasonable manner that would be employed in the normal course of business.

An acceptance will be unenforceable if the offer is accepted under undue influence,under pressure,or with threat.