Business Law: Contract, Sale of Goods, Partnership and Negotiable Instruments
Contract Act 1872
Know the elements of a valid contract: offer, acceptance, lawful consideration, capacity, free consent and lawful object. Distinguish an invitation to offer from an offer, and remember that a counter-offer destroys the original offer. Consideration must be real but need not be adequate. Free consent is vitiated by coercion, undue influence, fraud, misrepresentation and mistake, producing a voidable contract; agreements without consideration, with a minor, or with an unlawful object are void.
Other statutes
Sale of Goods Act 1930: conditions versus warranties, transfer of property and risk, unpaid seller's rights. Partnership Act 1932: definition, mutual agency, joint and several liability, kinds of partners, dissolution. Negotiable Instruments Act 1881: cheques, bills of exchange, promissory notes and holder in due course. Also understand agency and bailment.
Traps
- An agreement with a minor is void ab initio, not merely voidable.
- Adequacy of consideration is never examined by the court; only its existence and legality matter.
- A counter-offer rejects the original offer; silence is generally not acceptance.
- A catalogue, price display or auction notice is an invitation to treat, not an offer.
- Partners are jointly and severally liable; a minor admitted to the benefits of partnership is liable only to the extent of the estate.
Worked example
A shopkeeper displays goods marked at Rs 500. A customer says "I accept". No contract arises, because a display of goods with a price is an invitation to treat; the customer makes the offer.