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CAIIB Paper 4 BRBL Module D Unit 1 : Tax Laws (New Syllabus)
IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “Meaning And Essentials of A Contract”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.
In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module D (COMMERCIAL & OTHER LAWS WITH REFERENCE TO BANKING OPERATIONS) Unit 1 : Meaning And Essentials of A Contract, Aspirants must go through this article to better understand the topic, Meaning And Essentials of A Contract and practice using our Online Mock Test Series to strengthen their knowledge of Meaning And Essentials of A Contract. Unit 1 : Meaning And Essentials of A Contract
Meaning of Contract
In India the law relating to contracts is provided by the Indian Contract Act 1872.
Contract means an agreement enforceable by law meaning thereby that the rights and obligations arising out of the contract must be enforceable in a court of law.
All agreements between two or more persons are contracts if those satisfy the following
- It is made by free consent of all the parties
- It is made by parties who are competent to contract.
- It is made for a lawful consideration
- It is made with a lawful object and
- It is not declared as void expressly in the Indian Contract Act
Therefore, a Contract =Agreement + Enforceability. Thus, all contracts are agreements but all agreements are not necessarily contracts.
Key Components To Form A Contract
- When one person signifies to another person, his willingness to do or not to do something, with a view to obtaining the consent of that other person, he is said to make a
- When a person to whom the proposal is made, signifies his assent (consent), the proposal is said to be accepted. A proposal becomes a promise when it is accepted.
- The person making the proposal is called the ‘promisor’. The person accepting the proposal is called ‘promisee’.
Essentials Of A Valid Contract
Proposal and Acceptance
- A contract comes into being only when an offer of a proposal is made by one party known as the promisor and is accepted by another party known as the
- The offer should be without any qualification and be definite. It must be clear, definite, complete and final. It should be communicated to the offeree. The process of making a proposal is completed by the act of communicating it. The acceptance of the offer should be absolute and unconditional. Moreover, the offer and acceptance must be ‘consensus ad idem’ which means that both the parties must agree on the same thing in the same sense.
Example: A proposes by a letter to B to sell his car for Rs. 10,000. This is known as a proposal. A is the promisor. If B accepts the proposal then he becomes the promisee. This results into a contract.
Intention to Create Legal Relationship
- The intention of the two or more parties entering into an agreement must be to create a legal relationship between them. If there is no such intention between them there is no contract.
- Agreements of social nature, as they do not contemplate legal relationship, are not contracts.
An Agreement may be oral or written
- Under certain laws such as The Transfer of Property Act certain agreements are required to be in writing only and are also required to be registered and/or attested. If such formalities are not complied with, then the agreement cannot be enforced before a court of law.
- This applies in the case of sale or mortgage of immoveable property, lease, etc. This is brought out in Section 10(2).
- As per this section wherever there is a statutory requirement that the contract must be in writing and also registered etc, the statutory requirements must be complied with. Otherwise an agreement may be oral also.
There must be a lawful consideration for both the parties to enter into an agreement. Consideration here means ‘something in return’.
The Contract Act (Section 2d) defines consideration as under:
- When, at the desire of the promisor, the promisee or 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 a consideration for the promise.
- An agreement not enforceable by law is said to be An agreement enforceable by law is a contract. An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable
However, in the following cases an agreement without consideration is valid:
- An agreement made out of natural love and affection.
- Between parties standing in near relation to each other.
- Which is in writing and registered.
The object of a contract should be lawful
- It must not be illegal or immoral or opposed to public policy. It is lawful unless it is forbidden by law. When the object of a contract is not lawful, the contract is void.
Free and Genuine Consent
- Free and genuine consent of the parties to a contract is required. A consent is said to be free when the parties agree to the same thing in the same sense. Consent is said to be free when it is not caused by coercion, as defined in section 15, or undue influence, as defined in section 16, or fraud, as defined in section 17, or misrepresentation, as defined in section 18, or mistake, subject to the provisions of sections 20, 21, and 22.
Certainty and Possibility of Performance
- The agreements, in which the meaning is uncertain is deemed void. The contract must be certain and not vague or indefinite (Section 29).
Agreement not declared void
- The agreement must not have been expressly declared void by the law in force in the country. For example dealing in ‘rhinoceros horn’is banned. An agreement for export of the horn between A and B is void.
Capacity to Contract
- According to Section 11 dealing with ‘who is competent to contract “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”.
Contract Act and Banking
- The relationship between a banker and customer is the transactional relationship and depends on the type of transaction.
- When money is deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor. The relationship between bank and customer becomes that of creditor-debtor when customer has borrowed money from the
- When a bank accepts securities, valuables, bonds, or other documents with the bank for safe custody from a person, the bank, besides becoming trustee, becomes a bailee and the customer is the bailor. When ancillary services rendered by the bank such as remittance, collection of cheques, bills, etc. on behalf of the customers, it is acting as an agent of its customer. In respect of hiring of safe deposit lockers by the bank, the relationship is that of lessor and lessee, etc.