Contract Act

1. What is a Contract

Contract is an agreement enforceable by law. For the formation of contract, there must

be an agreement and its enforceability at law.

Agreement An agreement is a promise or a set of promises. It is a definite

understanding between two or more persons as to what each party is to do.

How an agreement becomes legally enforceable Whether an agreement is legally

enforceable or not would depend upon two factors:

- Intention of parties to enforce it legally

- Presence of all the essential elements of a contract.

2. Essential elements of a valid Contract

All agreements are contracts if they are made by the free consent of the parties competent

to contract, for a lawful consideration and with a lawful object, and are not hereby

expressly declared to be void. Thus to form a contract, there must be

- an agreement

- which is legally enforceable

- where parties are competent to contract

- with a free consent

- for a lawful consideration

- for a lawful object

- which are not expressly declared to be void.

3. Classification of Contracts

- Valid contracts

- Void contracts

- Voidable contracts
 - Illegal contracts

- Express contracts

- Implied contracts

- Quasi contracts

4. What is an Offer

An offer is a statement of terms which it appears that you are willing to standby.

5. Essential elements of an Offer

- offer must be communicated to the offeree

- offer constitutes a willingness to do some act or abstinence

- offer must be made to some other person

- offer must be made with a view to obtaining the assent of the other

- offer may be express or implied

- offer may be conditional

- offer must be capable of creating legal relationship

- terms of the offer must be certain

- offer must not thrust the burden of acceptance on the offeree

6. Acceptance of an Offer
 Once the existence of an offer has been proved, a valid acceptance is required to form a

contract. An acceptance is an expression, by words, conduct which clearly indicates that

the person making it agrees to be bound by the terms of the offer. The acceptance must

be unqualified and must correspond to all the terms of the offer.

7. Essential elements of an Acceptance

- acceptance must be made by the party to whom the offer is made

- acceptance must be absolute and unqualified

- acceptance must be expressed in some usual or reasonable manner

- acceptance must be given within reasonable time

- acceptance cannot be made in ignorance of offer

- acceptance must be given before the offer lapses or revoked

- acceptance must be communicated to the offeror

8. What is Consideration

Consideration means something in exchange. The concept of consideration requires that

both the parties to a contract shall have given and have received something as the price of

their respective promises.

9. Essential elements of Consideration

- consideration must move at the desire of the promisor

- consideration may move from the promise or any other person

- consideration is an act, abstinence, forbearance or detriment

 10. Capacity of parties

Minor

Status of the contracts entered into by a Minor

Minor is a person who is not competent to contract. Although it is not clearly stated in

the Contract Act that the agreements entered into by a minor are void, it can be inferred

that an agreement entered into by a minor does not qualify to become a contract, and

hence is void ab initio.

- No ratification on attaining the age of majority

- No specific performance except in certain cases

- The doctrine of estoppel does not apply to a minor

- No Restitution except in certain cases

- Agreements where minor is a beneficiary are enforceable

- Minor’s liability in case of tort

- Minor’s liability for necessaries

Persons of Unsound Mind

Effect of the agreement entered into by the persons of unsound mind

- a contract entered into by a person of unsound mind is absolutely void

- a contract for his benefit is valid and enforceable

- his property is however, always liable for the necessaries supplied to him.

Disqualified Persons

Law specifically disqualifies some persons to enter into contract in order to protect the

public from the possible consequences.

- Alien enemies
 - Foreign Ambassadors

- Convict

- Insolvent

11. Free Consent

Two or more parties are said to consent when they agree upon the same thing in the same

sense.

Coercion

Coercion means forcibly compelling a person to enter into a contract

Acts amounting to Coercion

- Committing any act forbidden by the Indian Penal Code

- Threatening to commit any act forbidden by IPC

- Unlawful detaining of property

- Threatening to detain any property

- Threat to commit suicide

- Threat to prosecution

Undue Influence

Undue influence is an influence by which the exercise of free will and judgement of the

other is prevented.

Fraud

Fraud is the intentional misleading of one person by another.

Misrepresentation

Misrepresentation is a false representation of a statement of fact made innocently,

without any intention to deceive the other party.

Mistake

Mistake may be defined as an erroneous belief about something. Two parties cannot

believe same thing in the same sense when they are under a mistake.

12. Void Agreements

- Agreement in restraint of marriage

- Agreement in restraint of trade

- Uncertain agreements

- Agreements in restraint of legal proceedings

13. Quasi Contracts

Quasi contracts are the contracts which are not founded on actual promises. These

contracts are created by the circumstances, where one person has done something for

another and the other person has enjoyed the benefit of the same. Thus some legal rights

and obligations are created between the concerned parties even in the absence of real

contract. Such kind of contractual relations are known as ‘quasi contracts’.

14. Performance of Contracts

Performance of contract means fulfillment of the legal obligations created by a contract.

Essentials of a valid performance

- It should be unconditional
 - It must be entire and not of a part only

- It must be made at proper time and place

- The person making the tender must be able and willing to perform it

- The tender must be made to the proper person.

When law excuses non-performance of contract

- When the contract is discharged by any mode (other than performance)

- When promise neglects to afford reasonable facilities for performance to the

promisor.

15. Discharge of Contract

A contract is discharged when rights and obligations created by it come to an end, i.e.,

contracting parties no more owes any responsibility or liability to each other.

- Discharge by performance

- Discharge by impossibility of performance

- Discharge by mutual agreement

- Discharge by lapse of time

- Discharge by operation of law

- Discharge by breach of contract

16. Remedies for Breach of contract

The law provides various remedies which can be availed in different circumstances. An

aggrieved party can –

- cancel the contract which relieves him of all contractual obligations (Rescission)
 - recover damages

- demand for specific performance

- demand injunction

- recover any consideration already paid to the breaching party

17. Contract of Indemnity

The term indemnity literally means security against loss. In a contract of

indemnity one party viz., the indemnifier promises to compensate the other

party viz., indemnified against loss suffered by the latter. According to

Indian contract act, a contract by which one party promises to save the

other from loss caused to him by the conduct of the promisor himself, or by

the conduct of any other person, is called a contract of indemnity. Eg:

Every contract of insurance, other than life insurance is a contract of

indemnity.

18. Contract of Guarantee

The basic function of a contract of guarantee is to enable a person to get a

loan, or goods or an employment. Some person to whom we may call

guarantor comes forward and promises the lender, or the supplier or the

employer that he be trusted and in case of his default, he (guarantor)

undertakes to be responsible. The person who gives the guarantee is called

the ‘surety’; the person in respect of whose default the guarantee is given is

called the ‘principal debtor’, and the person to whom the guarantee is given

is called the ‘creditor’. A guarantee may be written or oral. Contract act

 specifically indicates that the contract of guarantee postulates concurrence

of three persons, ie., the surety, the principal debtor and the creditor.

Introduction to Environmental Laws

1. Background of Environmental Control Legislation

Environment is perhaps the most important variables affecting everyday human existence.
Though its importance has long been undermined by human beings resulting in over
exploitation and deterioration over the years, however, of late the importance of preservation
of environment has been realized and steps taken to correct the damage done and to curb
damage in future.

World over the governments and other organizations have become alive to the need to
preserve environment and various legislations and policy measures are been taken in the
endeavor to regain ecological balance. In India the genesis of environmental legislation can
be tracked back to the constitution of India. For instance “Protection and improvement of
environment and safeguarding of forests and wild life shall be one of the Directive Principles
of State Policy. As we know the Directive Principles unlike Fundamental Rights are not
enforceable by any court but there nevertheless fundamental in the governance of the country
and it shall be the duty of the state to apply them in making laws. The Environment
Protection Act, 1986 and plethora of other Acts and Rules framed there under are among the
steps taken under the Article 48 –A.

The Constitutional provisions provide the bed-rock for framing of environmental legislation
in the country. Most of the environment related laws enacted by the Parliament have been
based on Article 252 and 253 of the Constitution. Over the years, some of the major
environmental laws have been enacted by the Parliament are as follows:

- the Water (Prevention & Control of Pollution) Act, 1974

- The Air (Prevention & Control of Pollution) Act, 1977
- The Environment Protection Act, 1986
 - The Public Liability Insurance Act, 1991
- The National Environmental Tribunal Act, 1995
- The National Environmental Appellate Authority Act, 1997

The powers of Environment Protection Act are being exercised by the Central Government
through the Ministry of Environment and Forests.

2. International Agreements

The Stockholm Conference opted for a non-binding declaration of principles, reflecting

commitments of a political and moral, rather than legal nature, a document embodying the
aspirations of world’s people for a better environment, rather imposing specific obligations
on governments in order to fulfill those aspirations. Yet notwithstanding its non-binding
character, the Stockholm Declaration is generally regarded as the foundation of modern
international environment law. Moreover, Stockholm Declaration has served as a basis for
the subsequent development of international environmental law in the form of numerous
bilateral and multilateral conventions and other legally binding instruments.

3. Concept of Sustainable Development

The concept of sustainable development has been accepted in Rio-declaration in Earth

Summit, 1992. It is a policy change or strategy which approaches and guarantees that
economic growth should not proceed in way that it reduces the ability of future generations to
live well. In Vellore citizens Welfare Forum Vs UOI, Supreme Court has said that the
traditional concept that development and ecology are opposed to each other is no longer
acceptable. Sustainable development is the answer. Sustainable development means
development that meets the needs of the present generations without comprising the ability of
the future generations to meet their own needs. Sustainable development is a balancing
concept between ecology and development the view that precautionary principle and polluter
pays principle are essential features of sustainable development.

4. Principles of International Environmental Law

In the sphere of environment, scientific theorems are not seldom accurate. It therefore
necessitates the World Conferences to innovate legal theories of common application. They
form part of International Environment Law. Its aims to guide behavior of mankind, as well,
in relation to acceptable technical and operational devices. Currently IEL has mostly been a
compendium of Treaties, Conventions, Declarations, and Protocols etc.

It desires to build up a Creative World Environmental Order. It attempts to settle common

principles and norms. In a relationship between the nations, by the International Law, the
private law right needs to yield to the international obligations. As a result certain legal
theories as evolved on global level, viz., Sustainable development, Environment Impact
Assessment, Conservation of Bio-Diversity, Polluters Pays, Environmental Insurance Policy
have entered into municipal laws of several countries thus to some extent there exists a
rhythm.

5. Law & Procedure under Environment Protection Act, 1986

The Act aims at protecting and improving the environment and prevention of hazards to
human beings, other living creatures, plants and property. The main provisions in the Act
envisage taking all such measures as the Government deems necessary or expedient for the
purpose of protecting and improving the quality of the environment and preventing,
controlling and abating environmental pollution.

Central Government has been given powers to take following measures under Section – 3 of
the Act:

- co-ordination of actions of State Govt and officers and other authorities

- planning & execution of a nation wide programme for the prevention, control and
abatement of environmental pollution
- laying down standards for the quality of environment in its various aspects.
- Laying down standards for emission or discharge of environmental pollutants from
various sources
- Laying down procedures and safeguards faor prevention of accidents which may
cause environmental pollution and remedial measures for such accidents
- Laying down procedures and safeguards for the handling of hazardous substances
- Examination of manufacturing process, materials and substances as are likely to cause
environmental pollution
 - Carrying out and sponsoring investigations and research relating to problems of
environmental pollution
- Inspection of premises, plant, equipment, manufacturing or process necessary for the
prevention, control and abatement of environmental pollution
- Establishment and recognizing environmental laboratories.
- Collection and dissemination of information in respect of matters relating to
environmental pollution
- Such other matters as the Central Government deems necessary or expedient for the
purpose or securing the effective implementation of the provisions of the Act.
Further the Act confers following powers on Central Government

- Power to issue directions

- Power of entry and inspection
- Power of search & seizure
- Power to take samples and analyze the same
- Power to make rules

6. Penalties under EPA

Any person failing to comply with provisions of the Act or rules or directions made under the
Act is punishable with imprisonment upto 5 years and fine upto Rs. 1 lakh or both. In case
the offence continues, additional fine upto Rs. 5000 per day of continuance of default can be
levied.

7. Environment Audit

Environment Audit is the basic management tool comprising a systematic, documented

periodic and objective evaluation of how will environmental organization, management
systems and equipment are performing. The aim of the audit is to facilitate management
control of environmental practices and to enable the company to assess compliance with
company policies including meeting regulatory requirements. Environment Audit is made
mandatory by the Central Govt and covers all industries which fall under Water Act, Air Act,
Hazardous Waste Rules. Every industry has to submit environment audit report in prescribed
form every year on or before 15th May every year. The audit report should be signed by the
industry itself and not by any outside auditors.
Eco Labelling: In order to encourage industries to use environmental friendly policies, a
scheme of Eco mark or Eco labeling has been introduced. This mark will be permitted to be
put on products made by industries which follow eco-friendly policies and the product is also
eco-friendly.

8. Environment Impact Assessment

With the enactment of multifarious laws to control and prevent pollution and protect
environment from further degradation, those setting up new industries have to obtain
environmental clearance to ensure that adequate measures are taken to protect the
environment. In order to assess the environmental impact of developmental projects,
Ministry of Environment and Forests, Government of India, has issued a Gazette notification
wherein 30 categories of projects are required to obtain environmental clearance. The
Environment Impact Assessment notification is the first statutory legislation where by
developmental activity requires to be assessessd from the point of view of its associated
impacts on the society and environment. EIA in its simplest form is a systematic examination
of the likely but significant impacts of development proposals on the environment prior to the
beginning of any activity. EIA is the most valuable inter disciplinary , objective decision
making tool with respect to alternate routes for development, process, technologies and
project sites. A good EIA report prepared by a competent consultant, therefore forms the
basis of the success of the entire process.. EIA should be organized and effectively
communicated and present clear options for the mitigation of impacts and sound
environmental management.

10. MC Mehta case law series

Supreme Court has consistently taken a tough view in respect of pollution. Many spirited
citizens have approached Courts for protection of environment by filing Public Interest
Litigation. PIL have obtained orders from the court for protection of environment.
In MC Mehta Vs UOI, Supreme Court massive awareness about environmental pollution
should be created by slides, films, etc environment should be a compulsory subject in
school. . It has ordered closure of 168 pollution industries in Delhi.

In MC Mehta Vs UOI (1987) (Ganga water pollution case) it was observed – the financial
capacity of the industry should be considered as irrelevant while requiring them to establish
primary treatment plants,. Just like an industry which cannot pay minimum wages to its
workers cannot be allowed to be exist an industry (tannery in this case) which cannot set up
primary treatment plant cannot be permitted to continue to be in existences for the adverse
effects on the public.

In MC Mehta Vs UOI, 1987, (Oleum Gas leak case), Supreme Court appreciated the
difficulties. It was observed – It is not possible to totally eliminate hazard or risk inherent in
the very use of science and technology. Otherwise it would mean end of all the progress and
development.

The principles of sustainable development was approved in MC Mehta Vs UOI 1997, in this
case, further building construction in sensitive areas i.e area upto 5 kms from the bird
sanctuary was stopped .

12. Public Liability Insurance Act, 1991

The emergence of the new principles of absolute liability coupled with the duty to
compensate to the extent of the capacity of the enterprise has led to the passing of the Public
Liability Insurance Act, 1991. The Act provides that the owner of a hazardous industry is
liable to compensate persons, other than the workmen, affected by accidents occurring in the
industry. The occupier of the enterprise under law is expected to take out an insurance
policy to cover the above mentioned liability.
The enactment of this legislation could be traced directly to Hon’ble Justice Bhagwati’s
Judgement in the Shriram gas leak case and the enshrinment of a new jurisprudence.

This Act was enacted to provide, for public liability insurance for the purpose of providing
immediate relief to the persons affected by accident occufring while handling any hazardous
susbstance and for matters connected there with or incidental thereto.

Section – 3 stipulates that when there3is death or injury to any person (other than a
workman) or damage to any property has resulted from an accident, the owner shall be
liable to give such relief as will be specified without pleading the defense of negligence or
default or wrongful act of any third party.

Every owner of an industry shall take out, before he starts handling any hazardous
substance, one or more insurance policies, providing for Contract of Insurance whereby he
is insured against liability to give relief. Any failure to comply with the provision will make
the individual as well the company liable for prosecution.

13. The Principle of Sustainable Development

The term “Sustainable Development” means development that meets the needs of the
present without compromising the ability of the future generations to meet their own needs.
The inherent idea behind the principle is that of limitations imposed by the state of
technology and social organization, on the environment’s ability to meet present and future
needs. This concept of living off nature’s income rather than squandering its capital is a key
tenet of the principle of sustainable development.

There are four recurring elements which comprise the legal elements of the concept of
sustainable development as reflected in international agreements.

- first, the need to preserve natural resources for the benefit of future generations
- second, the aim of exploiting natural resources in a manner which is prudent and
sustainable
- third, the equitable use of natural resources, which implies that use by one State must
take into account the need of other States.
 - Fourth, the need to ensure that environmental considerations are integrated into
economic and other development planss, programmes and projects, and that
development needs are taken into account in applying environmental objectives.

14. The Precautionary Principle

The precautionary principle is based on the self – evident truth that an ounce of prevention is
better than a pound of cure. The core essence of the principle is that – where there are
threats of serious or irreversible damage, lack of full scientific certainty shall not be used as
reason for postponing cost – effective measure to prevent environmental degradation.

15. Polluter – Pays Principle

The polluter –pays principle requires that the cost of pollution should be borne by the person
responsible for causing the pollution and consequential costs. The meaning of the principle
and its application to particular cases and situations remains open to interpretation,
particularly in relation to the nature and extent of costs included. The practical effects of the
principle are in its allocation of economic obligations in relation to environmentally
damaging activities, particularly in relation to liability, the application of rules pertaining to
competition and subsidy. Principle 16 of the Rio Declaration provides that “National
authorities should endeavor to promote the internalization of environmental costs and the
use of economic instruments, taking into account the approach that the polluter should, in
principle, bear the costs of pollution, with due regard to the public interests and without
distorting international trade and investment.”

16. Carbon Credits

Emissions Trading

Emissions Trading, a market-based instrument used for environmental protection, has been
adopted as one of the primary tools for international cooperation to reduce greenhouse gas
emissions under the Kyoto Protocol. As a result, many countries will implement emissions
trading programmes for the first time. However, Emissions Trading is not new—tradable
rights for pollution control were first proposed in 1968—and trading programmes have been
implemented to reduce emissions of SOx, NOx , CO2 and other pollutants.

Emissions Trading allows sources flexibility to determine how and where to meet an overall
limit on the amount of emissions. This compliance flexibility reduces the cost of meeting the
overall emissions limit. To ensure that the environmental goal is achieved, an emissions
trading programme requires accurate monitoring, effective enforcement and, in the case of
conventional pollutants, provisions to protect local air quality.

Since its inclusion in the Kyoto Protocol—as one of three market-based mechanisms to
reduce greenhouse gas (GHG) emissions—the prospect of an international emissions trading
system has attracted wide interest among policy makers, industrialists and others. In
principle, emissions trading is simple. However, in practice, applying the concept effectively
to different pollutants can become quite complex and the term emissions trading applies to a
fairly broad spectrum of systems of different design.

Carbon Credits
The Credits, or Certified Emission Reductions (CERs), are products of the Kyoto Protocol.

One credit is equivalent to 1 tonne of CO2 emission reduced

Exchanges where Carbon Trading is done

i). Chicago Climate Exchange, North America’s first and only multi-sector marketplace for
reducing and trading greenhouse gas (GHG) emissions

ii). European Climate Exchange

iii). Multi-Commodity Exchange (MCX), India’s leading commodity exchange.

Business Opportunity for India

i). Developed countries have to spend nearly $300 to $500 for every tonne reduction in CO2.
This is against $10 to $25 to be spent by developing countries

ii). In developing countries like India, the emission levels are much below the target fixed by
the Kyoto Protocol. So, they are excluded from reduction of GHG emission, on the contrary,
they are entitled to sell surplus credits to developed countries
iv). The European countries and Japan are the major buyers of carbon credits. Foreign
companies which cannot fulfill the protocol norms can buy the surplus credit from companies
in other countries. This lead to a flourishing trade in Credit Emission Reduction

v). India is considered as the largest beneficiary, claiming about 31 per cent of the total world
carbon trade through the Clean Development Mechanism (CDM)

vi). India is expected to rake in at least $5 billion (Rs 22,500 crore) over the next several
years

Best Wishes - Tirumala Sridhar