Meaning and Essentials of a Contact: Jaiib/DBF Paper 3 (Module D) Unit-1

Meaning and Essentials of a Contact: Jaiib/DBF Paper 3 (Module D) Unit-1

Dear bankers,

As we all know that is Meaning and Essentials of a Contact for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are Meaning and Essentials of a Contact (Unit-1), Commercial Laws with Reference to Banking Operations (Module D), Legal & Regulatory Aspects of Banking -Paper 4.

♦Meaning and Essentials of a Contact

The law of contact constitutes the most important branch of commercial law. In India, the law relating to contracts is governed by the Indian Contract Act, 1872.

♦MEANING OF CONTRACT

Contract means an agreement enforceable by law. It has two major constituents:

  1. An agreement between two persons or more.
  2. The agreement must be enforceable by law (i.e. the rights and obligations arising out of it).
  • It is made by free consent of all the parties.
  • 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

♦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 proposal.

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

There must be a lawful proposal by one party and the other party must accept the proposal.

An Agreement may be Oral or Written

While an agreement may be Oral or Written, under certain laws an agreement is required to be in writing only and is also required to be registered and 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 if immoveable property, lease, etc.

The Contract Act 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.

♦Free Consent

Free 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.

Capacity to Contract

The parties to an agreement must be legally competent to enter into a contract. Section 11 of the Contract Act lays down that every person is competent to enter into a contract if,

  • He has attained the age of majority, and
  • He is of sound mind and
  • He is not disqualified from entering into an contract by any law to which he is subject.

Minor’s Contracts

As per Section 11 of Indian Contract Act, a minor is a person who has not attained the age of 18 years, But if a guardian has been appointed to the person or property of the minor by a court, the age of majority of such a person is 21 years and not 18 years.

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