LEGAL ENVIRONMENT FOR TOURISM

What is a law?

 A rule or body of rules essential for binding a human society

 Law is the rule of conduct and ethics that guide all people. Without Law there
can be no public order and policy.

THE INDIAN CONTRACT ACT, 1872

TITLE, EXTENT AND COMMENCEMENT

This Act may be called be the Indian Contract Act, 1872.

Extent, commencement - It extends to the whole of except the State of Jammu and Kashmir;
and it shall come into force on the first day of September, 1872.

Interpretation -clause

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
aproposal;

When a person to whom the proposal is made, signifies his assent thereto, the proposal is said
to be accepted. A proposal, when a accepted, becomes a promise; The person making the
proposal is called the "promisor", and the person accepting the proposal is called "promisee",
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; Every
promise and every set of promises, forming the consideration for each other, is an agreement;
Promises which form the consideration or part of the consideration for each other, are called
reciprocal promises;
An agreement not enforceable by law is said to be void;
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.

A contract is defined as an agreement enforceable before the law.

 AGREEMENT –
Every promise or set of promises forming consideration for each other.
Contract Defined
An agreement with specific terms between two or more persons or entities in which there is a
promise to do something in return for a valuable benefit known as consideration. Since the
law of contracts is at the heart of most business dealings
Stages of a “contract”
 Proposal
  Promise
 Consideration
 Agreement – (valid, void )
 Contract (voidable and void)
PROMISE - when a person made a proposal to another and second person agrees to accept
the proposal it is said to be promise.

OFFER - when a person made a proposal, when he signifies to another his willingness to do
or to abstain from doing something.

AGREEMENT = OFFER + ACCEPTANCE

“All agreements are contracts but all

contracts are not agreements.”

ESSENTIAL ELEMENTS OF A VALID CONTRACT

1.Offer & acceptance.

2.Intention to create legal relationship.
3.Consideration.
4.Free consent.
5.Legality of object.
6.Possibility of performance.
7.Writing & registration.
OFFER
when a person made a proposal, when he signifies to another his willingness to do or to
abstain from doing something.
TYPES OF OFFER
 Express offer
 Implied offer
 Specific offer
 General offer
 Cross offer
 Counter offer
 Standing offer
 Express offer - When offer is given to another person either in writing or in oral.
 Implied offer - When offer is given to another person neither in writing nor in oral.
 Specific offer - When offer is given to a specific person.
 General offer - When offer is given to entire world at a large.
 Cross offer - When both the persons are making identical offers to each other in
ignorance of other’s offer.
  Counter offer - When both the persons are making offers to each other which are not
identical in ignorance of other’s offer.
LEGAL RULES FOR OFFER
 Offer must be given with an intention to create a legal relationship.
 Offer must be definite.
 Offer must be communicated.
Proposal or Offer
 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:
Promise
 When the person to whom the proposal is made, signifies his assent thereto, the
proposal is said to be accepted.
 A proposal, when accepted, becomes a promise.
Agreement
 Every promise and every set of promises, forming the consideration for each other, is
an agreement
Legal Rules Regarding A Valid Acceptance
1.Acceptance must be given only by the person to whom the offer is made.
2.Acceptance must be absolute.
3. Acceptance must be expressed in prescribe manner or in some usual manner.
4. It must be communicated by the acceptor.
5.Should be given in reasonable time.
6. Acceptance must succeed the offer.
7. Rejected offers can be accepted only if renewed.

An offer can be accepted only by the person or persons to whom it is made and with whom it
imparts an intention to contract.
 It cannot be accepted by another person without the consent of the offeror.

case
 A sold his business to his manager B without disclosing the fact to his customer- C, a
customer who had a running account with A, sent an order for supply of goods to A
by name. B received the order and executed the same. C refused to pay the price.
Verdict of the case:- It was held that there is no contract between B and C and as such C
never made order to B and hence is not liable to pay the price to B.
Acceptance must be absolute and unqualified
 In order to be legally effective it must be an absolute and unqualified acceptance of all
the terms of the offer.
 Even the slightest deviation from the terms of the offer makes the acceptance invalid.
 Such contracts are also termed as a counter offer in law.
Example
A made an offer to B to purchase a house with possession from 25th July. The
offer was followed by an acceptance suggesting possession from 1st August. Held that
there was no concluded contract.

Acceptance must be in a prescribed manner

 The acceptance of the offer should be in a manner prescribed in case no mode is
prescribed, the acceptance must be communicated according to some usual and
reasonable mode.
No communication = No Acceptance.
 The usual mode of Communicating Acceptance are:-
Express Acceptance.
Implied Acceptance.
Acceptance must be communicated by the acceptor
 For a acceptance to be valid, it must not only be made by the proposee but must also
be communicated by, or with the authority of, the proposee to the Proposer.
Example
P was a candidate for the post of Headmaster in a school. The managing
committee of the school passed a resolution selecting him for the post. A, member of
the managing committee, acting in his individual capacity, informed P that he had
been selected but P received no other intimation. Subsequently the resolution was
cancelled and P was not appointed to the post. P filed a suit against the Committee for
breach of contract. The Court held that in the absence of an authorized
communication from the Committee the mistake is of the managing committe.
For acceptance there should be given in reasonable time:
 To be legally effective acceptance must be given within specified time limit, if
any, and if no time is stipulated, acceptance must be given within a reasonable
time because an offer cannot be kept open indefinitely.
Acceptance must succeed the offer:

 Acceptance must be given after receiving the offer. It should not

precede the offer.

 Rejected offers can be accepted only if renewed

 Offer once rejected cannot be accepted again unless a fresh offer is made.
Communication of Offer, Acceptance, Revocation
 An offer, its acceptance and their revocation (withdrawal) to be completed must be
communicated.
The rule for this are:-
 Communication of Offer:-
The communication of an offer is complete when it comes to the knowledge of the
person to whom it is made.
Communication of Offer, Acceptance, Revocation
 Communication of an Acceptance:-
The communication of an acceptance is completed in two aspects:-
1. As against the proposer:
It is completed when it is put in a course of transmission to him.
2. As against the acceptor:-
It is completed when it is put in a course of transmission to him.
 Communication of an Acceptance:-
The communication of an acceptance is completed in two aspects:-
1. As against the proposer:
It is completed when it is put in a course of transmission to him.
2. As against the acceptor:-
It is completed when it is put in a course of transmission to him.
 Communication of an Revocation:-
Revocation means “taking back” “recalling” or “withdrawal”.
1. As against the person who makes it:-
As against the person to whom it is made, when it comes to his knowledge.
2. As against the person to whom it is made:-
As against the person to whom it is made, when it comes to his knowledge.
Communication of an Revocation
 A revokes his offer by telegram. The revocation is complete as against A when the
telegram or other mode of communication is dispatched. It is complete as against B
when B receive the telegram or communication.
Communication of an Revocation
 Revocation can be of
Offer
Acceptance
  Time for RevocationRevocation of Proposal:-
 A proposal/offer may be revoked at any time before the communication of its
acceptance is completed but not afterwards.
 The letter revoking the offer must be received by the acceptor. Once the letter of
acceptance is dispatched the offer cannot be revoked.
 Time for Revocation of Acceptance:-
 An acceptance may be revoked at any time before its communication is completed as
against the acceptor, but not afterwards.
 Once the letter of acceptance reaches the proposer, the acceptance cannot be revoked.
INVALID CONTRACTS
 Void contract
Is void
Becomes void
 Voidable contract
 Illegal contract
 Unenforceable contract
 Invalid contract - In a contact if any one condition is not fulfilled.
 Is void - An agreement which is not valid from the beginning.
 Becomes void - An agreement which is valid in the beginning but due to some
reasons the contract becomes void.
 Voidable contract - A contract which is valid unless until avoided by either the party.
 Illegal contract - An agreement forbidden by law.
 Unenforceable contract - It is valid but due to some technical defect the contract
becomes void. In case defects are removed the contract is enforceable.(lack of
registration, lack of signature etc.,)
LEGAL RULES FOR ACCEPTANCE
• Acceptance must be given as per the mode prescribed by the offerer.
• Acceptance must be given before the lapse of time specified or within reasonable
time.
• Acceptance must be unconditional.
CONSIDERATION
When a party to an agreement promises to do something he must get “something” in
return .This “something” is defined as consideration.
If no consideration is there, there will be no contract

CAPACITY TOCONTRCT
Following are the condition for a person to enter into contract
 He must be major
 He must be sound mind
 He must not be disqualified by any other law.
Minor
According to Indian majority act minor is defined as any person under the age of 18
years .
Unsound person
 A person generally of sound mind , occasionally unsound can enter into a
contract when he of sound mind
 A person generally unsound occasionally sound can enter into contract when
he is sound mind .
Persons of unsound mind
1)Mad ,
2)Idiots ,
3)Drunken or intoxicated persons,
4) Crazy.
FREE CONSENT
According to the Indian Contract Act one of the essentials of a valid contract is “Free
Consent”
“consent” is defined as “Two or more persons are said to consent when they agree
upon the same thing in the same sense”.
Consent is said to be free when it is not caused by:
1.Coercion
2.Undue influence
3.Fraud
4.Misrepresentation
5.Mistake
COERCION
Coercion means- unlawful detaining or threatening to detaining any other persons property
with a view to enter into an agreement.
The threat amounting to coercion need not necessarily be from a party to contract , it may
also proceed from a stranger to the contract.

For example
A and B , both Indians are on a voyage trip to America when the ship is on the Atlantic ocean
B threatens A, that if doesn’t transfer his property to B’s name then he will push him into the
water. Now though the IPC is not in force on the Atlantic ocean it is still considered a
coercion.
Important cases:
Chikkim Ammiraju vs. Seshamma:
In this case a person threatened his wife and son that he would suicide if she doesn’t transfer
her property in his brother’s favor. The wife and son executed the release of the deed under
the threat . Held the threat of suicide amounted to coercion and the release deed was therefore
voidable.
Case-I
A young widow was forced to adopt a boy by her relatives who prevented the removal of his
husband’s body for cremation until she consented. Held that the consent was not free but was
induces by coercion. Consequently the adoption was set aside.
Case-II
An agent refused to hand over the account books of a business to the new agent unless the
principal released him from all liabilities. The principal had to give a release deed. Held the
deed was given under coercion and was voidable at the option of the principal.
UNDUE INFLUENCE
A contract is said to be induced by “undue influence” where the relations between the parties
are such that one of the parties is in a position to dominate the will of the other and uses that
position to obtain an unfair advantage over the other
Essentials of undue influence
1. There are two persons
2. One must dominate the other
3. There must be unfair advantage
4. It involves the moral pressure
There is an undue influence between the following persons:
-Principal and agent
-Superior and subordinate
-Doctor and patient
- Father and son
-Teacher and student
-Promoter and company
-Master servant
-Spiritual advisor and devotee
FRAUD
Fraud means and includes any of those acts
committed by a party to contract with an intent to deceive or induce a person to enter a
contract:
1. The suggestion that a fact is true when it is not true and the person making it does not
believe it to be true.
 2. The active concealment of a fact by a person having knowledge or belief of the fact.
3. A promise made without any intention of performing it.
4. Any other act fitted to deceive.
5. Any such act or omission as the law specially declares to be fraudulent.
MISREPRESENTATION
There is misrepresentation:
1. When a person positively asserts, a fact is true when his information does not warrant
it to be so, though he believes it to be true
2. When there is any Breach of duty by a person which brings an advantage to the
person committing it.
3. When a party causes however innocently the other party to the agreement to make a
mistake as to the substance of the thing which s the subject of the agreement.
Important case:
M was a marriage broker who gave Y the photograph of a man and told him that the
man was young and rich. Y conveyed the same to his daughter who agreed for the proposal.
But on the day of marriage it was discovered that the man was the age of 60. There is fraud
between M and Y.
UNLAWFUL
OBJECTIVES
&
VOID AGREEMENTS
Unlawful agreements are in following cases

Restraint of trade
UNLAWFUL OBJECT
 If the object of an agreement is the performance of an unlawful act, the agreement is
unenforceable.
 For a contract to be valid only if the object and the consideration should be legal.
 The word object means purpose or design.
CONTINGENT CONTRACTS
A contingent contract is a contract to do or not to do something, if some event, does or does
not happen. It is also called a conditional contract.
Essential Elements of a Contingent Contract:
 There are two persons.
 There must be an uncertain future event.
 There is no reciprocal promise between the persons.
 It is a valid contract.
Example:
 A contracts to pay B Rs.10,000 if B’s house is burnt. This is a contingent contract.

CONTRACT OF INDEMNITY
INDEMNITY
A contract by which one party promises to another to save him 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
MORE SPECIFICALLY
 It has a more specific meaning, to compensate another party to a contract for
any loss that such other party may suffer during the performance of the contract.
 It is the right of an injured party to claim reimbursement for any loss, damage, or
liability from any person who had such a duty.
 To indemnify someone means to cover them for their loss in a certain circumstance.
Most forms of insurance - except life insurance– are based on the indemnity principle.
This means you can only recover the replacement value of your loss.
 The person who promises or makes good the loss is called the indemnifier (promisor)
 The person whose loss is to be made good is called the indemnified or indemnity
holder (promisee)
ESSENTIAL FEATURES OF INDEMNITY
 There are two persons , the indemnifier the indemnified.
 There must be loss either by the promisor’s conduct or by any other person’s conduct.

CONTRACT OF GUARANTEE
 ‘Contract of Guarantee’ is a contract to perform the promise, or discharge the liability
of a third person in case of his default.
Parties to a contract of guarantee-
 person who gives the guarantee is called the ‘Surety’,
 person in respect of whose default the guarantee is given is called the ‘Principal
debtor’
 person to whom the guarantee is given is called the ‘Creditor’
ESSENTIAL FEATURES OF GUARANTEE
 Primary liability is that of the principal debtor
 In case the debtor is a minor , the surety’s liability becomes primary
 All the essentials of a valid contract
 It may be in writing or oral

BAILMENT
  The word Bailment is derived from the French word “ballier” which means “to
deliver” .
 Bailment means delivery of goods by one person to another for some purpose ,upon a
contract ,that they shall ,when the purpose is accomplished ,be returned or otherwise
disposed of according to the instructions of the person delivering them. The person
delivering the goods is called the ‘bailor’ and the person to whom they are delivered
is called the ‘bailee’.
Essentials of bailment
 There are two persons namely Bailor and Bailee.
 Bailor means the person delivering the goods, Bailee means the person to whom the
goods are delivered.
 Their must be delivery of goods .
 The goods must be in deliverable condition.
 Only the goods are delivered but not the ownership of goods, their must be purpose.
 Bailey can use the goods.
 Goods must be returned or disposed off after the purpose is accomplished.
 Only the goods are delivered but not the ownership of goods, their must be
purpose.
 Bailey can use the goods.
 Goods must be returned or disposed off after the purpose is accomplished.

CONTRACT OF AGENCY
An agent as a person employed to do any act for another ,
or to represent another in dealings with third persons, the person for whom such act is done
is s called the principal.
ESSENTIALS OF RELATIONSHIP OF AGENCY
 Agreement between principal & agent
 Intention of agent to act on behalf of the principal
 Anyone can be an agent
 Anyone can employ an agent
Termination of agency
 By act of parties
-Agreement
-Revocation by the principal
-Revocation by the agent
 By operation of law
-Performance of the contract
-Expiry of time
-Death of either party
-Insanity of either party
-Insolvency of either party
-Destruction of the subject matter
-Dissolution of a company
-Termination of sub-agents authority