BBA 1st Semester Business Low Contract Notes

BBA 1st Semester Business Low Contract Notes


BBA 1st Semester Business Low Contract Notes :- All BBA 1st semester students’s we are provide the study material and r of BBA . and in this article you can find few year notes. BBA Business Low notes 2020 today our team presented BBA Business Low previous year question paper for you practise. and special links related to the BBA Business Low and all subject question paper and study material. we provided mock paper, question paper, simple paper, unsold paper last five year question paper.


The Indian Contract Act came into force on 1st September, 1872. It was enacted mainly with a view to ensure reasonable fulfilment of expectations created by the promises of the parties and also enforcement of obligations prescribed by an agreement between the parties. The object of the Act is also to introduce definiteness in commercial transactions. It applies to the whole    of the country except that State of Jammu and Kashmir.

The Act is neither retrospective nor exhaustive. It deals mostly with the general principles embodying contracts. The Act does not cover the whole field of contract law. Besides the Contract Act, there are various other laws regulating different types of agreements, e.g., the Transfer of Property Act deals with agreements relating to transfer of immovable property; the Sale of Goods Act deals with contract of sale of goods; the Partnership Act deals with partnership agreements, etc. The present Contract Act also does not affect particular customs and usages of trade, which are not inconsistent with any of the provisions of law, for example, usages relating to Hundies as negotiable instruments. The Law of Contract is different from other branches of law in as much as that the contracting parties are at liberty to make rules and regulations about the enforcement of their rights and fulfilment of their duties.

Application of the English Law – Business Low Contract Notes

In case, a particular matter is not covered by any section of the Contract Act or by any other law in force in India, the courts may follow the principles of English Common Law, provided they are not inconsistent with Indian conditions and circumstances.

Indian Contract Act applies only to those agreements which are valid and enforceable by law. Further, the Law of Contract is not the whole law of agreements nor is it the whole law of obligations. An agreement which does not give rise to any legal obligations will not be enforceable by law. There are various social, religious and moral obligations, e.g., marriage, conveyance of gifts, etc., which are not enforceable by law as contracts. Obligation to maintain one’s wife and children does not arise out of contract. Agreements which result in the transfer or the destruction of rights are not covered by the Contract Act.

Business Low Notes Meaning and Nature of Contract

BBA 1st Semester Business Low Contract Notes :-

A contract has been defined as follows: Salmond defines a contract as “an agreement creating and defining obligations between the parties”.

Sir William Anson observes, A contract is an agreement enforceable at law made between two or more persons, by which rights are acquired by one of more to acts or forbearances on the part of other or others.

According to Sir Federick Pollock, “Every agreement and promise enforceable at law is a contract”.

Sec. 2(h) of the Indian Contract Act defines a contract as “An agreement enforceable by law”.

Thus a contract requires:

  • Two Parties : There must be two parties to constitute a contract. A contract can only be bilateral and the same party cannot be a party from both the sides. Hence, there cannot be a contract between A on one side and A on the Nor can a partner be a servant of his own firm as a man cannot be his own employer. A person cannot enter into a contract with himself.

The person who makes the. promise is known as the “promisor” and the person to whom the promise is made is known as the “promisee”. As a matter of fact in a contract each party is a promisor as well as promisee. For example when A promises to sell his car for a sum of Rs.20,000 to B, A is a promisor because he has promised to sell his car while he is also a” promisee because there is a promise from B to pay   a sum of Rs. 20,000 to him. The same is the position of B.

  • An Agreement : A proposal from the side of one party to do or abstain from doing a particular act and its acceptance by the other party are the two essential elements   of an agreement. An agreement is constituted by means of an offer and a binding acceptance of the Thus, an agreement occurs when two minds meet for a common purpose; they ijiean the same thing in the same sense at the same time. The meeting of the mind is called consensus ad idem, i.e., consent to the matter.

For example; if A says to B that he is willing to sell him his car for Rs.20,000 and     B gives his assent to this offer, the agreement will come into being.

  • An Obligation : An obligation is the legal duty to do or abstain from doing something. An agreement to a contract should give rise to some legal obligation i.e., obligation which is enforceable at Agreements which give rise only to social or domestic obligations cannot be termed as contracts. Thus, an agreement to go to a picture or attend a dinner is.not a contract, as it was not intended to give rise to any obligation. Similarly, an agreement to agree in future is not a contract because unless all important terms of the contract are settled, there cannot be any binding obligation. Such agreements are void for want of certainty. For example, if A agrees to sell 100 bales of cotton to B at a price to be settled in future. .

All Agreements are not Contracts – Business Low Contract Notes

BBA 1st Semester Business Low Contract Notes :-

Agreement is a much wider concept than a contract. Agreements in which the intention to create legal obligation is absent are not contracts. Therefore, agreements relating to social matters are not contracts. For example, an agreement between two persons to go together for a walk, or  a cinema show does not create any legal obligation on their part to abide by it.

Also, agreements which the parties declare not to be binding do not constitute a contract. They may be just “honoured pledges” and expressly stated to be “outside the jurisdiction of any court”. (Rose Frank Co. v. Cromptoon Bs. (19257). There cannot be any binding contract unless there is intention to create legal relationship.


All Obligations also do not constitute contracts (Business low Notes)

BBA 1st Semester Business Low Contract Notes :-

Any obligation, which arises independently of an agreement, cannot be the basis of a valid contract. A domestic arrangement with no intention to create legally binding relations will not constitute a contract, such as a promise by a father to pay pocket money to his son In the words of Lord Atkin, “The most usual form of agreements, which do not constitute a contract, are the agreements made between husband and wife”. They are not contracts because the parties do not intend that they should be attended by legal consequences. Leading Case-Balfour v. Balfour (1919).

Mr. Balfour left his wife in England on medical grounds and left for Ceylon, the place .of his appointment. He had promised to pay £30 P.M.  to his wife until she returns. Subsequently,  he stopped sending money to her and decided to live apart. The wife sued the husband for the recovery of the amount promised for, on the ground that her consent to the agreement was enough to constitute valid consideration for the contract. The court did not agree with the views of the wife and dismissed her claim. It was held that it was only a domestic arrangement and   not a legal contract because domestic arrangements are outside the realm of contract altogether.

However, parties standing in a domestic or social relationship may enter into an enforceable contract if they intend their agreements to have legal consequences Merrit V Merrit (1970),

Therefore, to sum up, a contract results from a combination of agreement and obligation, But it is not necessary that all agreements should create an obligation between the parties to the agreements. An agreement may exist without any legal obligation but a contract cannot. Agreements giving rise to social obligations will not constitute binding contracts. Obligations arising from a trust or a decree or from statutes do not fall within the scope of the Contract Act. Thus, an agreement is the genus of which contract is the species, and therefore, all contracts are agreements but all agreements are not contracts- Hence, “the law of contracts is not the whole law of agreements nor is it the whole law of obligations. It is the law of those agreements which create obligations, and those obligations which have their sources in agreements.”—Sir John Salmond.

Essential Elements of a Valid Contract – Business Low Contract Notes

BBA 1st Semester Business Low Contract Notes :-

An agreement to be enforceable at law must satisfy the essentials of a valid contract According to Section 10 of the Act. “All agreements are contracts, if they are made by the free consent of parties, competent to contract, for a lawful consideration and with a lawful object, and not hereby expressly declared to be void.”

Thus, the following are the essential elements of a valid contract-

  • Agreement, i.e., Proposal and Acceptance.
  • Intention to create legal relationship
  • Lawful Consideration
  • Competent Parties
  • Free Consent
  • Not expressly declared void by
  • Certainty and possibility of performance ‘
  • Compliance with legal
  • Agreement: An offer or proposal by one party and an acceptance of that offer by another party is called an agreement. An agreement has been defined by the Act as “every promise or every set of promises forming considerations for each other.” The acceptance of the offer must be according to the mode prescribed and must be communicated to the Further, the intention of the agreement must be to create legal relationship between the parties. Agreement must be capable of performance with terms which are clear and certain. It should not be suffering from either a fundamental mistake or impossibility of performance.
  • Intention to create legal relationship: Whenever parties make an agreement, their must be an intention to create a legal relationship between them. If such intention is not present, there is no contract between the parties. In case of social or domestic agreements, parties do not contemplate legal relationship, as such these are not [Balfour Vs. Balfour (1919)2 K.B. 571]

But in case of business agreements or commercial agreements, the usual presumption is that the parties have intention to create legal relationship. But this presumption is rebuttable with the help of evidence.

[Rose and Frank co. Vs. Crompton Bros. (1925) A.C. 445] [Jones Vs. Vernon’s Pools. Ltd. (1938) 2 AII.R. 626]

  • Free Consent: Two or more persons are said to have consented when they agree upon the same thing in the same sense. Thus, if two persons enter into an apparent contract concerning a particular person or thing and it turns out that each of them was misled, by a similarity of name and actually each had a different person or thing in mind, no contract would exist between them. For example, A has two cars, one blue and the other red. He wants to sell his blue B, who knows of only A’s red car, offer to purchase A’s car for Rs.20.000. A accepts the offer thinking that it ;s for his blue car. There is no consent because both the parties are not understanding the same thing in the same sense. Besides, to make a contract valid not only consent is necessary but the consent must also be free. According to Sec. 14, consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake. A clear distinction must be made between ‘no consent’ and ‘no free consent’. In the case or ‘no consent,’ there is no identity of mind and therefore, in the absence of consent the agreement is void abinitio—from the very beginning. In the later case of ‘no free consent’, consent is there but it is not free, the agreement is voidable at the option    of the party whose consent is not free.

A thief who deprives a person of his goods without his consent cannot claim any title whatsoever in the goods. But a dacoit who obtains goods from the other person by obtaining his consent at the point of pistol (coercion) can retain the goods until the real owner claims them back. The possession of the thief is void for want of consent but the possession of the dacoit is voidable at the option of the real owner, i.e., valid unless challenged by the real owner because   it has been obtained with the consent of the real owner though the consent had not been free.

  • Competent Parties: At least two parties are essential for every valid A person cannot enter into a contract with himself except in a different capacity, e.g., a partner may purchase goods from his own firm. In order that an arrangement may be a binding contract, the parties must have the legal capacity of entering into the contract.

According to Sec. 11 of the Act “Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” Thus, a contract entered into by a minor or by a lunatic is void. In India, a person who has  not completed his 18th year of age is considered to be a minor. However, a lunatic can enter into binding contracts during his lucid intervals.

The legal presumption is that every party to a contract has the capacity to contract unless contrary is proved and the presumption is rebutted.

  • Lawful Consideration: Consideration is an essential element of a valid contract. An agreement without consideration is a bare promise and is not binding on the

Contracts result only when a promise is made in-exchange for in something in return. This something in return is termed as “consideration”. Consideration is the price paid by the promisee for the obligation of the promisor. Consideration need not be a benefit to the promisor. If the promisee has suffered some loss or detriment, it will be taken as a sufficient consideration  for the promisor to fulfill his promise.

Example: A agrees to sell his car to B for a sum of Rs. 10,000. For A’ a promise the consideration is a sum of 10,000 while for B’s promise consideration is the car.

Consideration is also the necessary evidence required by law about the intention of the parties   to establish legal relationship.

Consideration must be real, and not illusory or illegal. Consideration may be past, present or future. It may move from the promisee or any other person but it should always be furnished at the desire of the promisor. Consideration must be valuable in the eyes of law, i.e., it must result in some gain to one party and detriment to the other.

  • Legal object: The agreement must not relate to a thing which is contrary to the provisions of any law or has expressly been forbidden by any law or which is opposed to public policy or immoral. All agreements which are not lawful cannot be enforced by This is because courts will not allow polluted hands to touch the pure fountains of justice. No agreement can be allowed to defeat the provisions of any law or to cause injury to the person or property of any person or to achieve fraudulent objects.

Example: A agrees to sell certain goods to B. A knows that the goods are to be smuggled out of the country. The contract is unlawful and not enforceable.

A person who knowingly lets out his house for prostitution cannot recover the rent thereof because the purpose of the agreement has been immoral.

  • Not expressly declared void: The agreement must have not been expressly declared void by any law in force in the In India agreements in restraint of trade, in restraint of marriage, or to do things which are impossible or are in the nature of illegal or immoral agreements, etc. are expressly declared void by the Indian Contract Act.

Example: A and B are competitors in o business. B agreed to pay A a sum of money if he would close his business. A did so but B refused to pay him the money. Held, the agreement was void because it was in the nature of restraint of trade and therefore, money could not be recovered.


  • Certainty and possibility of performance. The agreement between the parties must be certain. It should not be vague or indefinite. If it is vague and the determination of its meaning is not possible, it is hot a contract and can not be

In addition to this, the terms of the contract must be such .which can be performed. An agreement to do an impossible act can not be enforced. For example, A agrees with B to put life into B’s dead child, the agreement is void as it is impossible of performance. [Sec 56 (1)

  • Compliance with Legal Formalities: If any legal formalities of writing, registration, etc. are necessary by law, these must be satisfied. In the absence of these legal formalities, agreements will not be enforceable in courts of Contracts which must be registered
  • A promise made without consideration on account of natural love and affection between parties standing in near relation to each
  • Documents of which registration is compulsory under Sec. 17 of the Registration Act, 1908.
  • Contracts relating to the transfer of immovable properties under the Transfer of Property Act
  • Memorandum and Articles of Association, debentures, mortgages and charges under the Companies Act,

Kinds of Contracts – Business Low Contract Notes

BBA 1st Semester Business Low Contract Notes :-

Contracts may be classified as follows:

  1. On the basis of enforceability
    • Valid
    • Void
    • Voidable
    • Illegal
    • Unenforceable
  2. On the basis of mode of creation
    • Express
    • Implied
  3. On the basis of the extent of
    • Executed
    • Executory
  4. On the basis of the form of the Contract
    • Formal Contracts. (b) Simple

Void Agreement and Void Contract

Thus, a void agreement is void from the very beginning i.e., void abinitio, while a void contract was valid at the time when it was made but becomes void later on because of certain reasons.

Difference between void agreements, illegal agreements and voidable contracts

BBA 1st Semester Business Low Contract Notes :-

  1. The term “illegal agreement” has wider conception than void agreement. All illegal agreements are void but all void agreements are not necessarily illegal, g., a wagering agreement is void but not illegal or an agreement with a minor is void but not illegal. Illegal agreements are-prohibited by law. Void agreements are declared non-enforceable in a court of law. If the parties wish to perform, they can perform void agreements.
  2. Though the legal effects of both are the same, i.e. void abinitio. But a void agreement does not affect the performance of collateral transaction but illegality of the original contract will make even the collateral transactions tainted with illegality.
  3. For entering into a void agreement, there is no penalty on the parties. But for an illegal agreement the parties may be punished.

Classification of contracts on the basis of mode of creation

BBA 1st Semester Business Low Contract Notes :-

  • Express Contracts Business Low Contract Notes: Contracts entered into between the parties by words spoken or written, are termed as express In such contracts, parties make oral or written declaration of their intentions and of the terms of the .transaction.
  • Implied Contracts Business Low Contract Notes: Contracts which come into existence on account of the conduct and acts of the parties are termed as implied contracts. For example, if a person takes a seat in a bus. His act shows that he has entered into an implied contract that he will pay the specified fare to the bus owner for taking him to his

Classification of contracts on the basis of the extent of execution

BBA 1st Semester Business Low Contract Notes :-

  • Executed contracts Business Low Contract Notes: When both the parties to the contract have fulfilled their respective obligations, contract is said to be
  • Executory contract Business Low Contract Notes: When one or both the parties to the contract have still to perform certain things in future, the contract is termed as an executory contract. For Example: A agrees to sell a radio set to B for Rs.200, B pays the price in advance. The contract is executed as regards B, but executory as regards A, for he is yet to deliver the radio set to

On to the basis of execution, contracts may also be. divided as :

  • Unilateral
  • Bilateral
  • Unilateral contracts: A contract is said to be unilateral where one party has performed his obligation either before or at the time when the contract comes into existence, whereas the other party is yet to perform his

Example: A, a coolie, puts B’s luggage in the carriage. A has performed his obligation. It  is now for B to perform his obligation by paying the charges to the coolie.

  • Bilateral contracts: A contract is bilateral if the obligations of both the parties are outstanding at the time of the formation of the They are executory or bilateral contracts.

Example: A agrees to sell his car to B after a month. B promises to pay the price on the delivery of the car. The contract is bilateral.

It is to be noted that the contract comes into existence on the date on which it is entered into between the parties and not from the time its performance is due.

ACCEPTANCE – Business Low Contract Notes

BBA 1st Semester Business Low Contract Notes :-

All contracts ate made by the process of a lawful offer by one party and its lawful acceptance by the other party. Acceptance is the manifestation by theofferee of his assent to the terms of the offer. Mathematically stated, offer + acceptance = agreement Agreement + enforceability = Contract.

Who can accept’? An offer made to a particular person can only be accepted by him as he is the person with wtoom the coMfact is itttended to be entered into.

An offer made to a class of nersons can be accented by any member of that class.


BBA Notes Contract through the Post Office

An offer and its acceptance may be made by post. Under Indian Law, an offer is made when the letter containing the offer is delivered to the offeree.

An acceptance is complete against the proposer or offerer when it is posted to him. Acceptance binds the acceptor only when it reaches the offerer.

An offer can be revoked if the letter of revocation reaches the offeree before he posts the letter of acceptance.

An acceptance can be revoked as against the offerer if the letter of revocation reaches the offerer before he receives the letter of acceptance.

Definition of consideration – Business Low Contract Notes

BBA 1st Semester Business Low Contract Notes :-

Pollock defines it as :- “An act or forebearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” Consideration must be an act or forbearance of some value in the eye of law. The promisee must suffer a legal detriment. The detriment need not be real, it need not involve actual loss to the promisee. This means legal detriment as different from detriment infact. It is giving  up by the promisee of a legal right, the refraining from doing what he has the legal right to do,   or the doing of what he has the legal right not to do. So. a benefit to the promisor or a detriment to the promisee is sufficient consideration for a contract.

In the English case, Currie Vs. Misa (1875) 10 Ex. 153, consideration was defined as a

“some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other.”

Section 2(d) of the Indian Contract Act defines consideration as follows: “when at the desire of the promisor, the promisee pr any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called consideration for the promise.”


  • A agrees to sell his motor car to B for 70,000. For the promise of A, the consideration is Rs.70,000. For B’s promise, the consideration is the motor car.
  • A employs B as a manager of his factory at a salary of Rs. 4,000 a month. The monthly salary is the consideration by B, and the services rendered by B constitute the consideration received by A.
  • A agrees not to file a suit against B if B pays him Rs. 500 by a fixed date. The forebearance of A is the consideration for B’s payment.


BBA Business Low Question Paper 2018-2020


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