Md. Wahid Murad ACA E-mail: wahid_17_apu@yahoo.

com The Institute of Chartered Accountants of Bangladesh (ICAB) Pr- Examination Evening Coaching Classes Professional Stage (Knowledge Level) Session: December 2010-February 2011 Subject: Business & Commercial Law Chapter: Contract and Agency Synopsis#1 Contract An agreement enforceable by law is called a contract. Therefore in a contract, there must be1. an agreement; 2. the agreement must be enforceable by law. There some agreements like an agreement to play cards or go to cinema, which cannot be enforced through the courts of law, are not contract. So agreements, which can be enforced through the courts of law, arent contract. Elements of a Contract i. Offer & Acceptance; ii. Intention to create legal relationship; iii. Lawful consideration; iv. Capacity of the parties; v. Free Consent; vi. Legality of the object; vii. Certainty; viii. Possibility of performance; ix. Void Agreement; x. Writing, registration and legal formalities. Acceptance & Proposal Proposal: When one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. Offer: A proposal is also called an offer. The promisor or the person making the offer is called offer. The person to whom the offer is made is called the offeree. Communication of proposal and acceptance complete The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

Md. Wahid Murad ACA E-mail: wahid_17_apu@yahoo.com How and when a proposal and acceptance can be revoked Revocation of Proposal: When the following conditions are met individually or aggregate: 1. 2. 3. 4. 5. 6. 7. 8. by notice; by lapse of time; after expiry of reasonable time; by failure of reasonable time; by failure of a condition precedent; by death or insanity; counter offer; by refusal.

Revocation of Acceptance: An acceptance can be revoked any time before the acceptance comes to the knowledge of the proposer but not afterwards. Consideration Consideration is an essential element in a contract. Something which receives and gives by each party to an agreement is called consideration. Types of a consideration Three types: 1. 2. 3. Past; Present and Future.

Good consideration it must be real; i. reasonable; ii. not illegal, immoral or opposed to public policy; iii. present, past and future; from the promisee of promisor.

Md. Wahid Murad ACA E-mail: wahid_17_apu@yahoo.com Characteristics/ Rules/ Essential Factors of Consideration i. ii. iii. iv. v. vi. vii. Desire; public duty; promise to a stranger; reality; not illegal, immoral or opposed to public policy; present, past and future; may move from promisee or from any other person.

Why a consideration is needed? Or In a formation of contract, consideration must be real but need not be adequateexplain. 1 2 3 The consideration must have some value in the eye of law. It must not be sham or illusory. The impossible acts and illusory or non-existing goods cannot support a contract. Therefore, real consideration comes from good consideration. A contribution to charity is without consideration. Therefore, it is not real consideration.

"No consideration no contract" - exceptions to the rule OR Can a contract be made without consideration? Consideration is essential for validity of a contract. A promise without consideration cannot create a legal obligation. So consideration is essential for a contract. But there are exceptional cases where a contract is enforceable even though there is no consideration. They are as follows: 1 2 3 4 5 Natural love and affection. Voluntary compensation Time bared debt Agency Completed gift.

Silence be fraudulent? 1 Mere silence is not fraud 2 Silence can be fraudulent in circumstances 3 Silence is farud where silence is in itself equivalent to speech.

Md. Wahid Murad ACA E-mail: wahid_17_apu@yahoo.com Void and Voidable contract Serial Number & Points 1.Defination Void Contract Voidable Contract An agreement not An agreement which is enforceable by law is said enforceable by law at the to be void. opinion of one or more of the parties thereto, but not at all the opinion of the other or others is a voidable contract. A void agreement confers But in case of voidable no right on any person and agreement the rights and creates no obligations. obligations of the parties concerned are present unless it becomes void. As a void agreement is void But incase of voidable from the beginning it is not agreement the effected party necessary for the effected needs to call the agreement party to declare the void. agreement void. In case of void agreement But incase of voidable the party is not bound to agreement party may refund refund the benefit received the benefit to the other to other party. party, if the agreement becomes void later on.

2. Right and obligation

3. Declaration for voiding

4.Refund

Contingent Contract and Wagering Agreement The distinctions between contingent contract and wagering agreement are given below. Subject Contingent contract Wagering agreement 1. Validity 1. A contingent contract is A wagering agreement is valid. void. 2. Dependency 2. It depends on the 2. It is void. happening or nonhappening of an event, but the contract is valid. 3. Reciprocal promises 3. It may not contain 3. It consists of certain reciprocal promises. reciprocal promises. Supervening impossibility When enter into contract it is good but subsequently impossible to perform. The condition is called supervening impossibility of contract.

Md. Wahid Murad ACA E-mail: wahid_17_apu@yahoo.com Frustration of contract by supervening impossibility When the common object of a contract can no longer be carried out, the court may declare the contract to be at an end. This is known as the doctrine of frustration. Counter Offer. Give an example. The acceptance shall be unconditional and absolute. If the acceptance is given with any condition changing any portion of the original offer then it is known as counter offer. Example: A offer to B to buy his car for Tk. 100,000 but B agree to pay tk 90,000 the offer made by B is a counter offer. In which cases a contract can be void? OR, when is an agreement said to be void? An agreement is said to be void because of mistake, lack of capacity etc. A list of void agreements is given below: 1. Lack of capacity. 2. Mutual mistake of fact. 3. Unlawful consideration or object. 4. Consideration or object partly unlawful. 5. Agreements without Consideration. 6. Agreements in restraint of trade. 7. Agreements in restraint of legal proceedings. 8. Uncertain Agreement. 9. Agreements by way of wager. 10. Impossible acts. 11. Agreements contingent on impossible event. 12. Reciprocal promises where there are void promises. 13. Agreement is restraint of trade. Indemnity and Guarantee Subject 1.Defination Contract of indemnity One party promises to save the other party from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person. 1. two parties. 2. In a contract of indemnity it is necessary to have only one contract. 5. In a contract of indemnity the indemnifier can sue only the indemnity holder for his loss.

consideration, want of

Guarantee A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. 1. three parties 2. In a contract of guarantee it is necessary to have three contracts. 5. In a contract of guarantee the surety can proceed against principal debtor.

2. Parties 3. Number of contract 4. Sue