4.3 Terms ology

4.3 Terminology

4.3.1 Reciprocal and Unilateral Contracts

• Unilateral contracts: These contracts have only one party obligated to perform an action. For example, in a donation contract, one person (the donor) gives something without receiving anything in return.

• Reciprocal contracts: Most contracts are this type, meaning that both parties have obligations towards each other. Each party’s rights are the other’s duties, creating multiple obligations between the parties.

4.3.2 Natural and Juristic Persons

• A person in legal terms is defined as any entity that can hold legal rights and responsibilities.

• Natural persons: These are human beings.

• Juristic persons: These are entities like companies or organizations that have legal recognition, based on laws like the Companies Act or specific provisions of laws.

• It's important to remember that legal subjects (natural and juristic persons) have rights and obligations, and they can have interests in legal objects.

• Legal objects: These can be things with monetary value that legal subjects have an interest in. The traditional categories include:

  • Things (like property)

  • Performances (like contracts)

  • Intellectual property (like copyrights)

  • Aspects of personality (like reputation)

4.3.3 Performance

• Performance means any action that fulfills a requirement in a contract. This can involve giving something, doing something, or not doing something.

• Example: In a contract where someone sells a business, the seller might have a clause that prevents them from competing in the future (this is a restraint of trade). Here, their performance is refraining from starting a similar business for a specified time.

4.3.4 Debtors and Creditors

• In law, debtors have duties they must fulfill, while creditors have rights that they can enforce.

• From an accounting perspective:

  • Debtors owe money to the business.

  • Creditors are the ones to whom the business owes money.

• Example: When Sanjay sells his laptop to Fathima, Sanjay is a debtor because he has to deliver the laptop, and a creditor because he is entitled to the payment. Fathima is vice versa: a debtor for the payment and a creditor for receiving the laptop.

4.3.5 Nominate Contracts

• These are contracts that have distinct names and specific legal rules because they occur frequently (e.g. sale contracts, lease agreements).

4.3.6 Essentialia, Naturalia, and Incidentalia

• When it comes to nominating contracts, terms are divided into:

  • Essentialia: Minimum terms required for a contract to be valid. For example, in a sale contract, the price and the item must be agreed upon.

  • Naturalia: Terms that automatically apply by law, like warranties, without needing to be stated in the contract.

  • Incidentalia: Optional terms that parties might include for convenience, such as delivery dates or conditions not mandated by law.

4.3.7 Valid, Void, Voidable, and Unenforceable Contracts

• Valid Contract: This means the contract creates legal obligations and rights, and all the necessary conditions are met.

• Void Contract: No legal obligation exists; it’s as if the contract never existed.

• Voidable Contract: This contract is valid until one party chooses to void it due to reasons like duress or misrepresentation.

• Unenforceable Contract: While the contract exists, the law won’t enforce its obligations, often due to issues like age of the parties