Q.Defineconsideration.

(2014,2013)
Consideration is essential fora validcontract. It is the price for a promise aquidproquo. It is the
value received as incentive for the promise. A contract without consideration is not bindingonthe
parties.
Section2(d)oftheIndianContractAct,1872 definesconsiderationinthefollowingwords:

When at the desireof thepromisor,the promisee orany other person has done or abstained from
doing, ordoesorabstainsfromdoing ,orpromisestodoorabstainfromdoingsomething, suchactor
abstinenceorpromiseiscalledaconsiderationforthepromise.

Illustration: X promises to deliver 10 kgs of basmati rice to Y and Y promises to pay Rs. 500 upon
delivery. In this contract, Ys promise to Rs. 500 upon delivery is theconsideration for Xs promise.
Similarly,Xspromisetodeliver10kgsofbasmatiriceistheconsiderationforthepromiseYmade.

Essentials

InaccordancewithSection2(d),theessentialfeaturesofavalidconsiderationareasfollows
:

1)Itisgivenatthedesireofthepromisor;

2)Itmaymovefromanyperson;

3)Itcanbepast,presentorfutureconsideration;

4)Itmustberealandpossessvalue.Itmustnotbeillusory;

5)ItmustbesomethingotherthanthePromisorsexistingobligation;

6)Itmustbelawful.

1)ItisgivenatthedesireofthePromisor

Theaction orabstinence fromactionmustbedoneatthedesireofthe promisor. Ifthepromiseehas

does somethingorabstains fromdoingsomethingatthedesireofathird partyorvoluntarily, itisnot
validconsideration. Theconsideration has to be done atthe instance ofthepromisoror thepromise
willnotbeabletoenforcethesame.

Illustration: At the request of the collector of the District, X spent money and constructed some
shops. Y, a shopkeeper who occupied one ofthoseshops, promisedtopay to X commissiononthe
sale of goods madeby himasconsideration forthe money X spent on the construction.XsuedY to
recover thepromised commission. Since,X had not constructed the shopsat the desireoftheY(the
promisor here); there was no valid consideration as required by Section 2(d). Thus, the agreement

was void andY washeld not liable to pay the promised amount.The facts are similartothe case of
DurgaPrasadvs.Baldeo

2)Itmaymovefromanyperson
.

Itdoes notmatterwho furnishes theconsideration. The considerationmaybemovedbythepromise

himselforanyotherpersonincluding.

Inthe caseofChinnayavRamaya[2],Xanoldwoman,gaveawaycertainimmovablepropertytoher
daughter through by a registered deed. She alsodirected her daughter to pay an annuity to Y the
old womans sister. The same day, the daughter executed a deed in writing and undertook to pay
annuity to Y. Subsequently, thedaughter failed to pay annuity and Y brought a suitfor itsrecovery.
Thedaughter pleaded thatshewasnotliablebecausenoconsiderationhad moved fromY.TheCourt
held that the words the promisee or any other person in Section 2(d) made it clear that
consideration need not move from the promise only and Y was entitled to maintain the suit for
recovery.

3)Itcanbepast,presentorfutureconsideration.

a) PastConsideration
. Considerationisthepricefora promiseandthus,itisusuallygiven inresponse
to and asaninducementforthepromise.Iftheconsiderationisgivenearlierthanthedateofpromise
bythepromisor,thenitisknownaspastconsideration.

For instance, the promise to pay a debt that one is already under an obligation to pay is past
consideration. Past consideration is usually not considered to beconsideration for the new promise
becauseithasnotbeengiveninexchangeforthenewpromise.

Pastconsideration as good considerationunder Indian Lawaslong asitwasgivenatthedesireofthe

promisor.

Illustration : X rendersservicetoYduringmonthsofagriculturalharvesting.YpromisestopayRs1000
to X for his past services when the new crop is being sown in the fields. The past services of X
constitutevalidconsideration.

English law does not recognise past consideration. However, the English law treats an act done at
requesttobe goodconsiderationforasubsequentpromise.In thecaseofLampleighvs.Brathwait[3],
X guilty of committing murder,requestedYtotryandgethimapardonfromtheKing.Ytravelled at
his ownexpense and put in effort to secure a pardon.Xpromisedtopayhimacertainsumofmoney
butrefusedsubsequently.ItwasheldthatYhadarighttoenforcethepromise.

Past voluntary services

. A person may rendervoluntary services to another withoutanyrequest or
promise.In some cases, the receiving party may subsequentlymakeapromisetopayfortheservices
rendered. Such a promise inenforceableinIndiaunderSection25(2)thatprovidesthatapromiseto

compensate, wholly or in part, a person who has already voluntarily done something for the
promisorisenforceable.

Illustration
: X found Ys purse ontheroad.HereturnsthesametoYwhopromisestogiveRs100toX
forhisservices.Thisisavalidcontract.

Section 25(2) also covers acts done at request and for which a promise to payis givenlater.Every
requestforanactcarriesanimpliedpromisetopay.

InSindhaShri GanpatsingjivsAbraham[4],itwasheldthatservicesrenderedtoaminorathisrequest
and also continued after his majority at the same request weregood consideration forthe minors
promisetopay

b) Present Consideration . When consideration and promise take place simultaneously, it is called
present or executed consideration. For example, in cash sales, the promise to pay the price and
promise to deliver the goods are performed at the same time. Executed consideration is good
consideration.

Illustration
: X goes to a shop and buys a bottle of water from there. He also pays the priceon the
spot.

c) Future Consideration . If theconsiderationforapromisemovesaftertheformationofthecontract,

itiscalledfutureorexecutoryconsideration.

Illustration
: X promisestodeliver 10bagsof riceto Yafter10 daysandYpromisestopayfortherice
10daysafterthedeliverybyX.

Itis a promise to do, abstainorsufferwhichismadeby onepartyinreturnforasimilarpromisefrom

the other party.Even is thepromisegivenforapromiseisdependentonacondition, itservesasvalid
consideration.

Illustration: X promises tolandscape the garden of YandY agrees to pay X as long as thelandscape
plansareapprovedbyZ,athirdparty.YspromiseisvalidconsiderationforXspromise.

4)Itmustberealandpossessvalue.Itmustnotbeillusory

Consideration must have somevalueintheeyesoflaw.Aworthlessactcannotsatisfythespiritofthe

definition.

Illustration : While the considerationmust bereal,itdoes notneedtobeadequateforthepromise.It

is for the parties to consider whatisadequate considerationforthem?This principle ofEnglishLawis
alsoenforcedinIndia.

Explanation 2 to Section 25 provides

that a contract which is supported by consideration is valid
irrespectiveofthefactthattheconsiderationisinadequate.

A contract is not invalid merely due to inadequacy ofconsideration. However,the Courts may look
into inadequacy of consideration to ascertain whether the consent of a party was free or not.
Considerationneednotbeadequatebutitmustbesufficientintheeyesoflaw.

Forbearance to sue refers to a scenariowherea partyhasarightofactionagainsttheotherpartyor

a thirdperson andhe refrains frombringingaction inconsideration ofpromise by the other orthird
party. Forbearance to sue is valuable consideration provided such action does not give rise to an
illegalcontract.

InKasturi Devi vChiranji Lal, X thewifeofY,withdrewhersuitagainstYinreturnforhis promiseto

payhermaintenance.Itwasheldthatitwasgoodconsideration.

Englishcommonlawinsistsonrealandvaluableconsideration.

In the case of White v Bluett, X theson ofY, used to constantly complain to his father that his
brothers had received more property than X.YpromisedtoreleasehimfromanoutstandingdebtifX
promised to stop complaining. It was heldthat the promise byX to not boreY in thefuturedid not
constitutegoodconsiderationforYspromisetoreleasehimfromadebt.

5)ItmustbesomethingotherthanthePromisorsexistingobligation;

Performanceofanexistingobligationorlegaldutyisnoconsiderationforapromise.

Illustratio
n: X receives summons to appear before court of law as a witness for Y. He is promised
certainamount of money byY forappearing in Court. Thepromise topayXisvoidbecauseoflackof
consideration for Y as X was already under a legal duty to appear as a witness before the Court.
(Collinsvs.Godefroa)

6)Itmustbelawful.

Theconsiderationmustnotbeunlawfuloropposedtopublicpolicy.

Illustration
: X offersRs1000 to Y forbeatingupZ,hisenemy.YbeatsupZbutXrefusesto payhim.Y
cannotrecoverthemoneypromisedtohimbecausetheconsiderationisunlawful.

Section 24. Agreement void, if considerations and objects unlawful in part.If any part of a single
consideration for one ormore objects,oranyoneoranypart ofanyoneofseveralconsiderationsfor
asingleobject,isunlawful,theagreementisvoid.

Illustration

 Apromises to superintend, onbehalf ofB, alegalmanufactureofindigo,andanillegaltrafficinother

articles.B promisesto pay to A a salary of 10,000 rupees ayear. Theagreementisvoid,theobjectof
Aspromise,andtheconsiderationforBspromise,beinginpartunlawful.

Inthe Pinnel case, it washeld that apromise topaylessthanwhatisdueunderacontractcannotbe

regardedasconsideration.ThisrulewasaffirmedinFoakesvBeer

X, adoctor,was orderedto pay2000poundstoY,alady,byajudgmentdecree. Hewasunabletopay

the entire amount together, so he entered into an agreement with her that he would 200 pounds
immediately and the rest 1800 poundsin installments. After thelast installmentwaspaid, shesued
forrecovery of interestonjudgmentdebt.ItwasheldthatYwasentitledtothepaymentofjudgment
debt as well as theinterest till the date of final paymentbecausetherewasnoconsiderationforher
promisetoacceptanythinglessthanthesumtowhichshewasentitle

Q.Explaintherulenoconsiderationnocontractwithexception.(2013)
Every agreement to be enforceable atlaw mustbe supported byvalid consideration.An agreement
made without consideration is void and is unenforceable exceptin certaincases.Section25specifies
thecaseswhereanagreementthoughmadewithoutconsiderationwillbevalid.Theseareasfollow:

1.Naturalloveandaffection[Sec.25(1)]

Anagreementthoughmadewithoutconsiderationwillbevalidifitisinwritingandregistered
and is made onaccount ofnatural love and affection between parties standingin a near relation to
eachother.Anagreementwithoutconsiderationwillbevalidprovided

(a)itisexpressedinwriting;

(b)itisregisteredunderthelawforthetimebeinginforce;

(c)itismadeonaccountofnaturalloveandaffection;

(d)itisbetweenpartiesstandinginanearrelationtoeachother.

Alltheseessentialsmustbepresenttoenforceanagreementmadewithoutconsideration.

Illustrations:a)Apromises,fornoconsideration,togivetoBRs1,000.Thisisavoidagreement

(b)Afornaturalloveandaffection,promisestogivehissonB,Rs1,000.AputshispromisetoB
intowritingandregistersitThisisacontract.
(VenkatasamyvsRangasami)

2.Compensationforservicesrendered[Sec.25(2)]

 Anagreementmadewithoutconsiderationwillbevalidifitisapromisetocompensatewholly
or in a part a person who has already voluntarily done something for the promisor or something
which the promisor was legally compellable to do.To apply this rule, the following essentials must
exist:

(a)Theactmusthavebeendonevoluntarily;

(b)forthepromisororitmustbesomethingwhichwasthelegalobligationofthepromiser;

(c)thepromisormustbeinexistenceatthetimewhentheactwasdone;

(d)thepromisormustagreenowtocompensatethepromisee.

Illustrations

(a)AfindsBspurseandgivesittohim.BpromisestogiveARs50.Thisisacontract.

(b) Asupports Bs infant son.BpromisestopayAsexpensesinsodoing.Thisis acontract.(Notethat

B was legally bound to support his infant son).
(Ahmedabad Jubilee Spinning Co. vs Chhotalal).
(AbdullaKhanvsParshottam)

3.Timebarreddebt[Sec.25(3)]

Apromisetopayatimebarreddebtisalsoenforceable.Butthepromisemustbeinwritingand
be signed by the promisor or his agent authorized in that behalf. The promise may be to pay the
wholeorpartofthedebt.Anoralpromisetopayatimebarreddebtisunenforceable
Illustration. AowesB Rs 1,000,butthedebtis barredbytheLimitationAct.Asignsawrittenpromise
to pay B Rs 500 on account of the debt. This is Ii contract (Appended to Sec. 25)
(Pestonji vs
Maherbai28)

4.Completedgifts[Exp.1toSec.25]

Explanation 1 to section 25 providesthat the rule 'No consideration, No contract' shall not
affect validity of any gifts actually made between the donor and the donee. Thus if a person gives
certain properties to another according to the provision of the Transfer of PropertyAct, he cannot
subsequentlydemandthepropertybackonthegroundthattherewasnoconsideration.

5.Agency(Sec.185)

There is one more exception to the rule. IT is given in section 185 which says that no
considerationisneededtocreateanagency.

6.Guarantee(Sec127)

Acontractofguaranteeismadewithoutconsideration.

7.Remission(Sec63)

Noconsideration is requiredfor anagreement to receive less then what is du. This is called
remissioninthelaw.

Q.HowDoesacontractdifferfromanagreement?(2013)
Contract

1.AContractisdefinedunderSec.2(h).

2.AContractisanagreementenforceableatlaw.

3.Itsscopeislimited.

4.Onlyvalidagreementarecalled

5.Acontractisenforceable.

6.Acontractarisesoutofanagreement.Therefore,acontractincludesanagreement.

7. A contract musthave all the essentialsofavalidcontractlike consideration,capacity,freeconsent,

etc.

Agreement

1.AnagreementisdefinedunderSec.2(e)

2.Everypromiseorsetofpromisesform
ingconsiderationforeachotherisanagreement.

3.Itsscopeisverywide.

4.Anagreementandbebothlegalorillegal

5.Anagreementmayormaynotbeenforceable.

6. An agreement does not arise out of a contract. Therefore, an agreement does not include a
contract.

7.Anagreementhasonlyanofferanditsacceptance.Itneednothaveotheressentials.

Q.allcontractsareagreementbutallagreementsarenotcontractsexplain.
Nodoubt itis a valid andtruestatement.Beforecriticallydiscussingthestatement,wemustknow
theexactandbasic meaningsofthetwotermscontractandagreementinthecontextofbusinesslaw.

For understanding the meaning, we have to go to the contract act 1872 that is applicable in
subcontinent.

Acontractis a legally binding agreement or relationship that exists between twoor more
parties to do or abstain from performing certain acts. There must be offer and acceptance for a
contract to be formed. An offer must backed by acceptance of which there must be consideration.
Both parties involvedmust intend to createlegal relationonalawful matter which must be entered
intofreelyandshouldbepossibletoperform.

Definitionofcontract

Accordingtosection2(h)oftheContractAct1872:

Anagreementenforceablebylawisacontract.

Acontracttherefore,isanagreementthecreatesalegalobligationi.e.,adutyenforceablebylaw.

Fromtheabovedefinition,wefindthatacontractessentiallyconsistsoftwoelements:

(1)Anagreementand(2)Legalobligationi.e.,adutyenforceablebylaw.

Example;

ApromisestosellahorsetoBforRs.100,000,andBpromisestobuyhorseatthatprice.

Allcontractsareagreements:

For a Contract to be there an agreement is essential; without an agreement, there can be no

contract. As the saying goes, where there is smoke, there is fire; for withoutfire, there canbe no
smoke. It could will be said, where there is contract, there is agreement without an agreement
there can be no contract. Just as a fire givesbirth to smoke, in thesame way, anagreement gives
birthtoacontract.

Whatisagreement?(2014)

Anagreement isaform of cross reference between differentparties,whichmaybewritten,oraland

liesuponthehonorofthepartiesforitsfulfillmentratherthanbeinginanywayenforceable.

Aspersection2(e)ofContractAt1872:

Every promise and every set of promises, forming the consideration for each other, is an
agreement.Thusitisclearfromthisdefinitionthatapromiseisanagreement.

Whatisapromise?

 the answertothisquestionis contained insection2(b)whichdefinestheterm.Whentheperson to

whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A
proposal,whenaccepted,becomesapromise.

Anagreement, therefore, comesinto existence only when one partymakesaproposaloroffertothe

otherpartyandthatotherpartysignifieshisassentthereto.

Allagreementsarenotcontracts

As stated above, an agreement to become a contract must give rise to a legal obligation. If an
agreementis incapableof creating a dutyenforceable by law. Itisnotacontract.Thusanagreement
isawidertermthanacontract.

Agreementsofmoral,religiousorsocialnaturee.g.,apromisetolunchtogetheratafriends house
or to takeawalk together are notcontracts becausetheyarenot likelytocreateadutyenforceable
by law for the simple reason that the parties never intended that they should be attended by legal
consequences

Onthe otherhand, legal agreements are contracts because they create legalrelations between
theparties.

EXAMPLE:a A invites B to dinner.Bacceptsthis invitationbutdoesnotattendthedinner.Acannot

sue B for damages. It is social agreement because it does not create legal obligation. So itis nota
contract.

b A promises to sell his car to B for one million. It is legal agreement because it creates legal
obligationsbetweentheparties.Soitisacontrac

Accordingtosection10ofthecontractact1872
,

Allagreementsarecontractsiftheyaremadebythefree
consent of the parties, competent to contract,foralawfulconsiderationandwithalawfulobjectand
notherebydeclaredtobevoid.

Thus an agreement becomes a contract when at least the following conditions are satisfied.
(2014)

1freeconsent

2competencyoftheparties

3lawfulconsideration

4lawfulobject

Conclusion:

In a nut shell, an agreement is the basis of a contract and contractis the structure
constructed on these basis. An agreement starts from an offer and ends on consideration while a
contract has toachieve an other milestone that isenforceability.Duetothis,breachofanagreement
does not giverisetoany legal remedy tothe aggrievedparty whilebreachof contractprovideslegal
remedy to the aggrieved party against the guilty party. Thus we can say that all contracts are
agreementsbutallagreementsarenotcontracts.

Q.Essentialelementsofavalidcontract.(2014)
Theessentialelementsofavalidcontractmaybesummedupasfollows:

1.Offerandacceptance:

Thefirststep in creating a contract is an offer by one party and itsacceptanceby another.Theoffer

when accepted becomes an agreement. Such offerandacceptancemustbevalid.Asthedefinitionof
a contract statesthatanagreement isthe primary criteria ofmaking a contract. Practically speaking
the journey ofacontractbeginswithanagreementandthe formationofanagreementfindsitsroots
inofferandacceptance.

2.Intentiontocreatelegalrelations:

There must be an intention among the parties that the agreement should be attached by legal
consequences and create legal obligations. Agreements of a social or domestic nature do not
contemplatelegalrelations,andassuchtheydonotgiverisetoacontract.

Anagreement to dine at a friends house isnot anagreement intended to create legal relations and
therefore is not acontract. Agreements between husbandandwife also lack the intention to create
legalrelationshipandthusdonotresultincontracts.

Illustrations:

(a) MpromiseshiswifeNtogetherasareeifshe willsingasong.Nsangthe songbutMdidnotbring

the saree for her. N cannot bring an action in a Court to enforce the agreement as it lacked the
intentiontocreatelegalrelations.

3.Lawfulconsideration:

The third essential element of a valid contract is the presence ofconsideration. Consideration has
been defined as the price paid by one party for the promise of the other. An agreement is legally
enforceableonlywheneachofthepartiestoitgivessomethingandgetssomething.

10

Thesomething givenor obtainedis the pricefor thepromise and iscalled consideration.Subjectto

certainexceptions,gratuitouspromisesarenotenforceableatlaw.

The consideration may be an act (doing something) or forbearance (not doing something) or a
promisetodo ornottodosomething.Itmaybepast,presentorfuture.Butonlythoseconsiderations
arevalidwhicharelawful.

4.Capacityofparties:

The parties to an agreement must be competent to contract; otherwise it cannot be enforced by a

court of law. Inorder to becompetenttocontract the parties mustbe ofthe ageof majority andof
sound mindandmust not be disqualified fromcontracting by any lawtowhichtheyaresubject(Sec.
11).

If any of the parties to the agreement suffers from minority, lunacy, idiocy, drunkenness, etc., the
agreementisnotenforceableatlaw.

5.Freeconsent:

Free consent of all the parties to an agreement is another essential element of a valid contract.
Consentmeansthatthepartiesmusthaveagreeduponthesamethinginthesamesense(Sec.13).

There isabsenceof free consent if theagreementis inducedby(ii)coercion,(ii)undueinfluence,(iii)

fraud, (iv) misrepresentation, or (v)mistake(Sec.14). If the agreementis vitiated by anyof thefirst
fourfactors, the contractwouldbe voidable and cannot be enforced by the party guilty of coercion,
undueinfluenceetc.

The other party (i. e., the aggrieved party)can either rejectthe contract or accept it,subjectto the
rules laid down in the Act. If the agreement is induced by mutual mistake which ismaterialtothe
agreement,itwouldbevoid(Sec.20).

6.Lawfulobject:

For the formation of a valid contract it isalso necessary that thepartiestoanagreementmustagree

fora lawful object. Theobjectforwhichtheagreementhasbeenenteredintomustnotbefraudulent
or illegalorimmoral or opposed topublicpolicyormustnotimplyinjury tothepersonorpropertyof
another(Sec.23).

If theobject is unlawful for one or theother ofthe reasons mentioned abovetheagreementisvoid.

Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution, he cannot
recovertherentthroughacourtoflaw.

7.Writingandregistration:

11

Accordingtothe Indian ContractAct, acontractmaybe oralorinwriting.Butincertainspecialcases

it lays down that the agreement, to be valid, must be in writing or/and registered. For example,it
requires thatanagreement topayatimebarreddebtmustbeinwritingandanagreementtomakea
giftfornaturalloveandaffectionmustbeinwritingandregistered(Sec.25).

Similarly, certain other Acts also require writing or and registration to make the agreement
enforceablebylawwhichmustbeobserved.

Thus,(i) an arbitrationagreementmustbeinwritingaspertheArbitrationandConciliationAct,1996;
(ii) an agreement for a sale of immovable property must be in writing and registered under the
TransferofPropertyAct,1882beforetheycanbelegallyenforced.

8.Certainty:

Section 29 of the Contract Act provides that Agreements, the meaning of which is not certain or
capable of being made certain, are void. In order to give rise to a valid contract theterms ofthe
agreement must not be vague or uncertain. It must be possible to ascertain the meaning of the
agreement,forotherwise,itcannotbeenforced.

Illustration:

A agrees to sell B a hundred tons of oil. There is nothing whatever to showwhat kind of oilwas
intended.Theagreementisvoidforuncertainty.

9.Possibilityofperformance:

Yetanother essential featureof a valid contract isthatitmustbecapable ofperformance.Section56

lays downthatAnagreementtodoanactimpossibleinitselfisvoid.Iftheactisimpossiblein itself,
physicallyorlegally,theagreementcannotbeenforcedatlaw.

Illustration:

A,agreeswithBtodiscovertreasurebymagic.Theagreementisnotenforceable.

10.Notexpresslydeclaredvoid:

The agreement must not have been expressly declared to be void under the Act. Sections 2430
specifycertaintypesofagreementswhichhavebeenexpresslydeclaredtobevoid.

For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an

agreement by way of wager have been expressly declared void under Sections 26, 27 and 30
respectively.

12

Before dealing with the various essentials of a valid contract one by one in detail, it will be
appropriate to discuss thekindsofcontracts,first,becauseweshallbeusingthetermslikevoidable
contract,voidcontract,voidagreement,etc.,veryofteninthecourseofourdiscussion.

Q.Canastrangertoacontractsueonit?
STRANGERTOCONTRACT

It is general law of contract that a person who is not a party to the contract cannot sueupon it.A
stranger to a contract cannot sue inEnglishaswellasinIndiathroughitmaybemadeforhisbenefit.
Thismeansthatunlessthereisaprivityofcontract,apartycannotsueonit.

Theleadingcaseis:

DUNLOPPNEUMATICTYRECo.V.SELFRIDGE&Co.(1915)

AsoldalargequantityoftyrestoBatacertainpriceon enteringintoacovenantnottosellthetyres
below the price mentioned in price list supplied by A. B sold the tyres to C a retail dealer under a
contract stipulating the same covenant asbetweenAandB.Csoldthetyresatlessthanthelistprice.
A sued C for breach of contract.It was held that Acould not sue C as A wasnot apartytocontract
betweenBandC.

Astrangertoacontractcannotsueexpectinthefollowingcases

1. Trust. In the case of trust,the beneficiarymayenforce the contracteven though he isstrangerto

contractcreatingthetrust.

2. Where provision is made in a marriage settlement.Where an agreementis madein a connection

with marriage and a provision is made for the benefit of a person he may take advantage of that
agreementalthoughheisnotpartytoit.

3. Whereprovision is made in a partition orfamily settlement. Such members though notparties to

theagreementcansueonthefootingofthearrangements.

4. Wherea charge is created in favour of astranger on specificimmovableproperty. Astranger to a

contract can suefor themoneymadepayabletohimbyitwherethe money ischargedonimmovable
properties.

5. Wherethe promisorhas by his conductprivity ofcontractwiththe stranger.Thus, if Aadmitsto C

for the money, that he had received money from B for payment to c, he constitute himself as the
agentofC,whocansuccessfullyrecovertheamountfromA.

13

6.Whereitisconductivetojustice.

7.Contractenteredintobyanagentcanbeenforcedbytheprincipal.

8. Covenants Running withthe land. At the time oftransfer ofimmovableproperty,anoticethatthe

owner of the land is bound due to certain obligations created by a agreement relating toland, the
new purchaser will be bound by them though he wasnot apartytothe originalcovenant. [Tulk vs.
Moxhay(1919)]

Q.PrivityofcontractunderIndiancontractAc t.
Asperthelegaldefinitionofprivityofcontract:

The doctrine of privity in contract law provides that a contract cannot confer rights or impose
obligationsarisingunderitonanypersonoragentexceptthepartiestoit.

The doctrine of privity of contract means that only those involved in strikingabargainwould have
standing to enforce it. Ingeneralthisisstillthecase,onlypartiestoacontract may sueforthebreach
of a contract, although in recent years the rule of privity has eroded somewhat and third party
beneficiarieshave beenallowedtorecoverdamagesforbreachesofcontractstheywerenotpartyto.
There are two timeswhere third party beneficiariesare allowedto fall under the contract.The duty
owed testlookstoseeifthethirdpartywasagreeing topaya debtfortheoriginalparty.Theintentto
benefit test looks to see if circumstances indicate that thepromisee intends to give the beneficiary
the benefit of the promised performance. Any defense allowed to parties of the original contract
extend to third partybeneficiaries[1]. Arecent example is inEngland, wherethe Contract(Rightsof
ThirdParties)Act1999wasintroduced.

Indian law is practically same as the English common law. However, under the Indian law
consideration may move from the promiseeoranyother person . In the chinnaya vs. rammayya[2]
case, an old lady by a deedof gift, gaveover certain properties toher daughter under thedirection
that she should pay herauntacertain sum ofmoney. The same daythedaughterrefusedtopay her
aunt the money on the plea thatno consideration hasmovedfrom her aunt to her. It was heldthat
sister of theold lady (aunt) was entitledtomaintainthe suitasconsiderationhadmovefromtheold
lady,forhersistertothedaughter.

2.Whoisathirdpartybeneficiary

A third party beneficiary, in the law of contracts, is a person who may have the right to sue on a
contract, despite not havingoriginallybeen a partyto the contract.This rightariseswhere the third
party is the intended beneficiary of the contract, as opposed to an incidental beneficiary. It vests
when the thirdparty reliesonorassents totherelationship,and givesthethirdpartytherighttosue

14

either thepromisororthepromiseeofthecontract,dependingonthecircumstancesunderwhichthe
relationshipwascreated.

InEnglishlaw,the doctrine was notrecognizedatcommonlaw,butasimilarconceptwasintroduced

withtheContracts(RightsofThirdParties)Act1999.

In order for a thirdparty beneficiary to haveanyrights under the contract, he mustbe an intended
beneficiary, as opposed to an incidental beneficiary. The burden is on the third partytoplead and
provethathewasindeedanintendedbeneficiary.

A third party beneficiary, in the law of contracts, is a person who may have the right to sue on a
contract, despite not havingoriginallybeen a partyto the contract.This rightariseswhere the third
party is the intended beneficiary of the contract, as opposed to an incidental beneficiary. It vests
when the thirdparty reliesonorassents totherelationship,and givesthethirdpartytherighttosue
either thepromisororthepromiseeofthecontract,dependingonthecircumstancesunderwhichthe
relationshipwascreated.

Intendedbeneficiary

Anintendedbeneficiaryisthatonepartycalledthepromisee makesanagreementtoprovidesome
consideration to asecond party called thepromisor in exchange forthe promisor'sagreement to
provide some product, service, or supporttothe thirdpartybeneficiary namedin the contract. The
promisee must have an intention to benifit the third party but this requirement has an unusual
meaning under the law. Although there is a presumption thatthe promisor intends topromote the
interestsofthethirdpartyinthisway,ifpartyA,contractswithpartyB,tohavea thousandkillerbees
delivered to the home of A's worst enemy, party C, then C is still considered to be the intended
beneficiaryofthatcontract.

There are twocommonsituationsinwhichtheintendedbeneficiaryrelationshipiscreated.Oneisthe

creditor benificiary, which is created where A owes some debt to C,andA agreesto provide some
considerationtoBinexchangeforBspromisetopayCsomepartoftheamountowed.

Theother is thedonee beneficiary, which is created whereAwishestomakeagifttoC,andAagrees

to provide someconsiderationtoBinexchangeforBethany'spromisetopayCtheamountofthegift.
Under old common lawprinciples, thedonee beneficiary actually had a greater claim tothebenefits
thiscreated;however,suchdistinctionshavesincebeenabolished.

Anincidental beneficiaryisapartywhostandstobenefitfromtheexecutionofthecontract,although
that was not the intent of either contracting party. If the contract is breached by either party, an
incidentalthirdpartyhasnorightstorecoveranythingunderthecontract.

3.Whencanathirdpartyovercomethedoctrineofprivityofcontract?

15

A third party even though an intended beneficiary canover comethe doctrine ofprivity ofcontract
onlywhen

1.Thepartiestothecontracthavenototherwiseagreed;

2. Recognition of aright to performance inthe beneficiaryis appropriate to effectuate theintention

oftheparties;and

3.Thetermsofthecontractorthecircumstancessurroundingperformanceindicatethateither

a. the performance of thepromisewillsatisfyanobligationordischargeadutyowedbythepromisee

tothebeneficiary;or

b.thepromiseeintendstogivethebeneficiarythebenefitofthepromisedperformance."

Under Indian contract Act 1872 exceptions to the doctrine of privity of contract are contracts
executed

a.fornaturalloveandaffection

b.marriagepartitionandfamilydisputes

c.timebarreddebt

d.trust,and

e.agency.

There are a numberof general law principles which enableathirdparty,toovercomethedoctrineof

privityunderEnglishcommonlaware

(a)Agency

Therulehereis that if one of the contractingpartiescontracts as anagent, then eitherthe agentor

the principal, but not both, can sue to enforce the contract. In our example, if B is Csagent then
either BorCcan enforce the contract against A. In these casesitisimmaterialastowhetherAknew
thatBwasCsagent.

(b)Trusts

Thelaw of trustscanenableathirdpartybeneficiarytoinitiateactionthatwillenforcethepromisors
obligation. Usingthe above example, if B had contracted withA inthe capacity oftrusteefor C,Cas
beneficiaryunder the trust has enforceable rights. Theserightsarisebecausethelawoftrustsgivesa
beneficiarycertainrightsagainstatrustee.

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Inthe context ofprivity, ifCisabeneficiaryunder atrust,CcanbringanactionagainstB,thetrustee,

that has the effect of compelling B to sue A for breachofcontract.Informalprocedural termsCsues
inanactioninwhichBandAarejoinedasdefendants.

The use of trust law here does not give rise, in the strict sense, to an exception to the doctrine of
privity.Inconceptualterms,theactionagainstAispursuedbyB,albeitatCsinsistence.

When the trust exception is pursued and B sues for damages, the measure of damages that is
recoveredreflect thelosstoC, thebeneficiary of the trust. Thedamagesthatarerecoveredareheld
byBontrustforC:LloydsvHarper[3];andEsleaHoldingsLtdvButts[4]

(c)Estoppels

Followingthe decision inWaltonsStores(Interstate)LtdvMaher[5],athirdpartymay beabletoseek

relief against a promisor on the basis ofpromissory estoppelsprinciples. Tosucceedthe thirdparty
wouldneedtoestablishtheelementsofpromissoryestoppels.

InTrident,Mason CJ,WilsonJ, at 123124, were ofthe view thatitwaslikelythatestoppelscouldbe

established on thefactsof the case, butit was not necessary forthemtodeterminetheissueonthe
basisthattheyhaddecidedthecaseonothergrounds.

(d)UnjustEnrichment

Theessence of theprincipleisthatitrequiresadefendanttomakefairandjust restitutionderivedat

theexpenseofaplaintiff:Pavey&MatthewsPtyLtdvPaul[6].

In Trident, Deane J, at 145146, indicated that the principle could possibly be the basis for a third
party to seekrelief.However,itwasGaudronJ,especiallyat176,inTrident whobasedherdecisionin
favourofMcNieceBrosonthebasisoftheprincipleofunjustenrichment.

The action based upon unjust enrichments is not based upon the contract but independent of it.
However,usuallyitwillcorrespondincontentanddurationwiththepromisors.

Q.Defineproposalandacceptance .(2013)
Proposal: Whenaperson signifies to another hiswillingnesstodoorabstainfromdoingsomething
with a viewtoobtain the assentoftheothertosuchactor abstinence,heissaidtomakeaproposal
cl.(a).Thedefinitioninvolvesthefollowingimportantpoints:

(i)Itmustbeanexpressionofwillingnesstodoorabstainfromdoingsomething

(ii)toanotherperson

(iii)withaviewtoobtainhisassentthereto,towhichmaybeenaddedandfurthertermviz.

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(iv)thatexpressionofwillingnessmustbemadewithaviewtocreatelegalobligations(Anson).

Thus there can beno proposal by apersontohimself.Itmustalwaysbetoanotherperson.Further

it must been made with a view to obtain the assent of the other. Thus a casual inquiry or mere
statement of intention isnot aproposal.Asaninstanceillustratingmaybeenmentionedaninvitation
for dinner, which, though accepted, will not become an enforceable agreement, i.e.acontract
,because,though itfulfills all other conditions ofaproposal,itdoesnotsatisfythelastcondition,as
it isnotmadewiththe intentionofcreatingalegalliability.Similarly,wherepartiesexpresslystipulate
that the agreement will notbelegallyenforceablebutandshallonlybindthepartiesasandmatterof
honor,nocontractwillarise.

Acceptance: Section 7 specifies that an acceptance must be absolute and unqualified. A partial
acceptance or a clarification regarding a proposal, or specifying a condition on acceptance is no
acceptance.

In the case of Hyde vs Wrench 1840

, an offerwasmadetosellafarm for #1000,whichwasrejected
byanplaintiff, who counter offered #950for it. This wasrejected by the defendant, uponwhichthe
plaintiff agreed to pay #1000. However, it was heldthanthe defendant was not bound by any such
secondacceptance.

Section 7 furthersays thatthe acceptance must be in someusualandreasonablemanner,unlessthe

proposal prescribes the manner in whichthe acceptance should be made. If the proposalprescribes
the manner, and if the acceptance is not done in that manner, the proposer may insist that the
acceptance be made in the manner prescribed, and if he fails to do so,he accepts theacceptance.
Thus,iftheacceptanceissentbyanywayotherthanwhatis prescribedbytheproposal,theproposer
mustreject it ina reasonable time otherwise theproposeracceptsit. Thisismarkedlydifferent from
English law whereaproposalmustbeacceptedin themannerrequiredintheproposalotherwise,the
acceptance is invalid.
In the caseofElliasonvsHenshaw1819,itwasheldthatanacceptancesentby
mailinsteadofthroughthewagonthatbroughttheoffer,wasnotvalid.

Section 8 specifies that a proposal isaccepted when theacceptorperformsconditionsprescribedfor

the acceptance or when he accepts the consideration given along with the offer for a reciprocal
promise. When acceptance consists of an act as in the case of StateofBiharvsBengalC &PWorks
1954 , it was held that, when an order is sent for goods, thepostingof goodsitselfis equivalent to
acceptance.Nofurthercommunicationofacceptanceisnecessary.

Inthe case of
Carlillvs Carbolic smoke ball co 1893,it was heldthat, purchasing and consuming the
medicineperformstheconditionoftheproposal.

Q.Canmentalacceptancebetreatedasavalidacceptance?(2013)
Mere mental acceptance, not evidenced by wordsor conduct is inthe eyesof lawno acceptance.

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Comment giving examples. A contract isformedwhenthe acceptor has done something signify his
intentiontoaccept,notwhenhehasmadeuphismindtodoso.Explain.

A.AcceptanceDefinedAcceptanceofanoffer istheexpressionbywordsorconduct,ofassenttothe
terms of the offer in the manner prescribed or indicated by the offer. According to Section 2(b)of
Indian Contract Act when the person to whom the offer is made, signifies his assent thereto, the
proposal issaidtoaccepted.Thustheacceptanceistheconsentthepartytowhomtheofferhasbeen
madetoestablishlegalrelationsbetweenhimandtheofferer.

Mental acceptance insufficient Generally, acceptance means a communicated acceptance. The

contract comes into existence when the acceptor has done something to signify his intention to
accept and not when he has madeup hismind,Thusmental acceptanceormere acquiescence does
not,withoutmore,amounttoacceptance.Atacitformationofintentionissufficient.Butevenifthere
is some other actorspeechtogive evidence of thatintentionthe acceptance isnotcompleteunless
and untilit is communicatedtothe offerer. In the wordsofLindlyL.J., Unquestionable,asageneral
proposition when an offer is made,it isnecessaryinorderto makeabindingcontractornot andthat
it should be accepted but that acceptance should be notified. Carlill Vs. Carbolic Smoke Ball Co.
[(1893)1,Q.B.256].

In
Felthouse Vs. Bindley [(1862) 11, C.B.H.S. 899], Felthouse offered by letter to buy his nephews
horse for 30,adding,ifhear no more aboutit I shallconsiderthehorse asminefor30.Noanswer
was returned to this letter, but the nephewtold the Bindley anauctionee, tokeep thehorse out of
sale of hisfarmstock, as heinclined to reserve it for his uncle. Felthouse sued him forconversionof
his property. The Court heldthat as the nephewhad never signedtoFelthousehisacceptanceofthe
offer before the auction sale took place, there wasnocontractto pass theproperty in thehorse to
Felthouse,and thereforehe had noright to complain for thesale. Similarly, in Powel Vs.Lee[(1908)
L.T. 2841theplaintiffwasacandidateforthepostofheadster.Theappointingauthorityselectedhim
for the post, but plaintiff was not intimatedof his selection, subsequently, the appointing authority
cancelled hisselection. The plaintiff brought a suitagainst thedefendant.TheCourtrejectedthesuit
on the basis that in the absence of any communication to him the contract was not completed. A
mere mental assent to an offer not evidencedby words or byconduct,therefore,willnot constitute
anacceptance.

Q.WhatismeantbyConsensusadidem?(2013)
Consensusadidem

Latinterm meaning an agreement, a meeting of themindsbetweenthepartieswhere allunderstand

andhaveacceptedthecontractualcommitmentsmadebyeachother,respectively.

'Meetingofminds' .For a contract tobeusefulthepartiesmustbeinagreementaboutitsprovisions.

Inthe eventof a possible breach of contract,thepartyallegedtobeinbreachmaywishtoclaimthat
the contract did not existatall,astherewas nocertaintyaboutthesubjectofthecontract.However,

19

manycontractsare not veryprecise, to allowflexibility in businessdealings, andacourtmayhaveto

examine other dealings between the contracting parties to determine what their true intentions
were.

It is not desirable, on thewhole, toinsist that all contracts are perfectly precise; this would makeit
difficultto dobusiness.However,asageneralrule,ifacontractleavessomethingtobedeterminedin
thefuture,thedeterminationitselfmustnotrequiretheagreementoftheparties.

When people develop a contract, an offer is extended and accepted, and theterms ofthe offerare
worked out. This is the stage where the consensus adidem comes in, as the parties to thecontract
discuss the specifics and the details, and focus on developing a contract all are satisfied with. The
contract must include adequate consideration, somethingof value exchangedby all parties, and the
capacity forconsentmustbedemonstrated.Thefinalqualificationneededfor legalityislegality ofthe
contract itself; the other conditions may be satisfied, but if the contract is for something illegal, it
cannotstandupincourt.

Q.Whenaproposalcanberevokedandwhatarethemodesofrevocation?(2013)
5.Revocation of Proposals
.Aproposalmayberevokedatanytimebefore thecommunicationofits
acceptanceiscompleteasagainsttheproposer,butnotafterwards.

Illustration: A proposes, byaletter sentby post,tosell his house to B." B accepts theproposal bya
lettersent bypost. B accepts theproposal byalettersentbypost."A mayrevokehisproposalatany
time before or at the moment when B posts his letter of acceptance, but not afterwards. B may
revokehis acceptance atanytimebeforeoratthemomentwhenthelettercommunicatingitreaches
A,butnotafterwards

MODESOFREVOCATIONOFOFFER(SECTION6)

1.
Bynoticeof revocation
. Offermayberevokedbya communicationofanoticeofrevocationbythe
offereetotheotherpartybeforeacceptanceiscompleteagainsttheofferorhimself.Anoffermadein
writing may be revoked by words of mouth. The noticeof revocation may not always beexpress.A
noticeofrevocationtobeeffectivemustbecommunicatedtotheofferee.
Supposea proposal issentby Sonali to Julia and isacceptedbyJuliabyletter.However,theproposal
might have been revoked any time before the letter of acceptance was posted but it can not be
revokedafterisposted.

2) By Lapse of Time: When the proposer prescribes a time within which the proposal must be
accepted,theproposallapsesassoonasthetimeexpires.

3) After expiry of reasonable time: If no time has been prescribed, the proposal lapses after the
expiryofareasonabletime.Whatisreasonabletimewilldependonthecircumstancesofthecases.

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4.By nonfulfillment of condition precedent

.Aproposalisrevokedwhentheacceptorfails tofulfilla
conditionprecedent to theacceptanceof theproposalwhichwasconditionaloffer.Thus, Xmayoffer
tosellcertaingoodstoYonaconditionthatYpaysacertainamountbeforeacertaindate.

5) By Death or Insanity
: An offer lapses by the death or insanity of the proposer, if the fact of his
deathorinsanitycomestotheknowledgeoftheacceptorbeforeacceptance.

6. By counter offer
. An offer comes to end when the offeree makes a counter offer or rejects the
offer. Where an offerisacceptedwithsomemodificationinthetermsoftheofferorwithsomeother
conditionnotformingpartoftheoffer,suchqualifiedacceptanceamounttoacounteroffer.

7.By the nonacceptanceof the offeraccording to the prescribed orusual mode

.Theofferwillalso
standrevokedifithasnotbeenacceptedaccordingtotheprescribed.

8. By subsequent illegality
. An offer lapses if it become illegal after it is made and before it is
accepted. Thus, whereanofferismadetosell10bagsofwheatforRs.2500andbeforeitisaccepted,
alawprohibitingthesaleofwheatbyprivateindividualisentered,theoffercomestoend.

Q. Define contingentcontract. Whencontingent contractbecomes contract andwhenitgetsvoid?

(2014)
ContingentContract

Basingon thepresence or absenceof Conditions,Contractscanbeclassifiedintotwogroups namely;

Absolute ContractsandContingentContracts.Incasewherethereisnocondition,itiscalledAbsolute
Contract.Asthereisnocondition,absolutecontractistobeperformedunderallcircumstances.

In case where there is condition, then such contract is called Contingent Contract. Therefore
Contingent Contract means Conditional Contract. When imposed and condition is fulfilled, the
ContingentContract becomes validandthenpartieshavetoperformtheirobligations.Ifimposedand
Condition isnotfulfilled,theContingentContractbecomeVoidandthenitneednotbeperformed.So
ContingentContractistobeperformedundersomecircumstancesonly.

According to Sec. 31 of Indian Contracts Act

, a Contract performance of which depends upon
happeningornonhappeningofanuncertaineventiscalledContingentContract.

Example: Thereis a ContractbetweenAandBaccordingtowhichA hastosellhisgoodswhichare

in voyage, to B if theshipreaches theharbor safely. Here condition canbe seenanditisContingent
Contract. All indemnity contracts, guarantee contracts and insurance contracts are Contingent
Contracts.

TypesofContingentContracts

Depending upon Happening of an Uncertain Event :

(section 32) Sometimes Contingent Contract
depends upon happening ofuncertainevent.Thenifsuchuncertaineventtakesplace, theContingent
21

Contract becomes valid and if that uncertain event does not takeplace,the ContingentContract is
Void.

Example: According to Contract formedbetween A and B, Ahastosellgoods to B, if ship comes

theresafely,theirContractisvalidandiftheshipgetsdrowned,theirContractisvoid.

Depending upon nonhappening of an uncertain event: (Section 33

) At times the Contingent
Contract may depend upon nonhappening of uncertain event.Then if that event does nothappen,
theContractisValidandifthateventtakesplace,thecontractisvoid.

Example: Thereis a contract between Aand Baccording to which A hastosell goodsto B, if the
ship does not come back. Here, if the ship comes back, the Contract is void and if the ship gets
drownedaway,thenitisvalid.

Contract contingent on the future conducts of a living person: (Section 34) If the contract is
contingent upon as to how a person will act at an unspecifiedtime,thateventshallbeconsideredto
be impossible when such persons doesanythingwhich renders itto beimpossible that he should so
actwithinanydefinitetimeorotherwisethanunderfurthercontingencies.

Example: A makes acontractwithBto buyB'shorseifAsurvivesC. Thiscontractcannotbeenforced

bylawunlessanduntilCdiesinA'slifetime.

Depending upon happening of an uncertain event in a fixed period: (Section 35 (i)) At times
Contingent Contract may dependupon happeningof uncertain event in afixed period. If such event
happens within fixed period, the contract is Valid. If such event does not take place with in fixed
period,thecontractisvoid.

Example : Asper thecontract formedbetween A and B, Ahastosellgoods toB,iftheshipcomes
back within10days. Ifit comeson 8th day (or) 9thday, thecontract isvalidand if it comesbackon
12thday(or)13thday,thecontractisvoid.

Dependinguponnonhappening ofanuncertaineventinafixedperiod :
(Section35(ii))At timesthe
Contingent Contract may depend upon nonhappening of uncertain event in a fixed period then if
such eventplace within that fixed period,the contract is void and if that event does not takes place
withinagreedperiod,thenitisvalid.

Example : Ahastosell goods to Bifthe ship doesnotcomebackwithin10 days.Ifitcomeson8th

day (or) 9th day, thecontract isvoidandifit comesback on 12th day(or) 13th Day, the contract is
valid.

Dependinguponan Impossible Event :

(Section
36) Sometimes theContingent Contractmaydepend
uponimpossibleevent.SuchatypeofContingentContractisabinitiovoid.

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 Example : there is a contract between A and B where AwillpayRs.100000/ to B ifBmarries C.

Assumethat C wasdead 5years ago, nowelement ofimpossibility canbe seenandtheircontractis
abinitiovoid.

ConditionsWhenAContingentContractCanBeEnforced

There are some certain conditions on which an event can be fulfilled. These are some rules which
havetobefollowedforacontingentcontracttobeenforceable.

OnTheHappeningofanEvent

Section 32 of The Indian Contract Act, 1872 provides that contingent contracts to do ornot to do
anything ofanuncertain future eventhappen cannot be enforced by law unlessand untilthatevent
hashappened.
For instance, if X makes a contract with Y to buy Ys horse if X survives Y. this contract cannot be
enforced by law unless and until Y dies in Xs lifetime. Bashir Ahmed & others vs Government of
AndhraPradesh

OnTheEventNotHappening

Section33ofTheIndianContractAct,1872clearlystatesthat
:

Contingent contractstodo or not to do anything if an uncertainfutureeventdoesnothappen,can

beenforcedwhenthehappeningoftheeventbecomesimpossible,andnotbefore.

If a personpromises to pay anothera sumof moneyifashipdoesnotreturnback,hewillbeobliged

to payonlyandonlyafter thepossibilityoftheship returningbecomes impossible. Inthisillustration,
if the ship sinks, the possibility of it returningbecomesnil.Thus,thecontracthastobeenforced.The
personhastopaymoneyandhecannotwaitwiththehopeoftheshipreturning. FrostvsKnight

OnTheEventNotHappeningWithinASpecifiedTime

Section35oftheActstatesthat:

Contingentcontractstodoornottodoanythingifaspecifieduncertaineventdoes nothappen within

a fixed time may be enforced by law when the time fixed has expired, and such event has not
happened, or, before the time fixed has expired, and such event has nothappened, or,before the
timehasexpired,ifitbecomescertainthatsucheventwillnothappen.
If X promisesY a sum of money if acertain ship does not return within ayear. Thecontractmaybe
enforcediftheshipdoesnotreturnwithintheyear,orisburntwithintheyear.

SituationsWhenAContingentBecomesVoid

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TheEventBeingImpossible

If X contracts to payYifYmarriesZandZdieswithoutbeingmarriedtoY,thecontractbecomesvoid.
A contingent contract will become void if the future uncertain event becomes impossible to occur.
Section32oftheactstatesthat:

Iftheeventbecomesimpossible,suchcontractsbecomevoid.
SatyabratavsMugneeram,

NonHappeningOfEventWithinFixedTime

Section35ofTheIndianContractAct,1872statesthat:

Contingentcontracts to do or not todoanythingisaspecifieduncertaineventhappenswithinafixed

time becomesvoidif,atthe expiration ofthe time fixed, such event has nothappened, or if, before
the time fixed, such event becomes impossible.Ifamanpromisesto payanothermansomemoneyif
a ship does notreturnwithinayear,thecontractbecomesvoidifthe shipisburntorsinkswithinthat
year.

AgreementsContingentonImpossibleEvents

Section36oftheactclearlystatesthat:

Contingentagreements to do or nottodoanythingifanimpossibleeventhappens,arevoid,whether
theimpossibilityoftheeventisknowntothepartiestotheagreementatthetimewhenitismade.
If X agrees to pay Y 1000 rupeesifY will marry Xs daughter but at the timeof theagreement, the
daughterwasdead.Thus,thiscontractisvoid.

ConductOfALivingPerson

Section34ofTheIndianContractActstatesthat:

If thefutureevent on which on which acontractiscontingentisthe wayinwhichapersonwillactat

an unspecified time, the event shall be considered to become impossible when such person does
anything which renders it impossiblethathe shouldsoactwithinanydefinitetime,orotherwisethan
underfurthercontingencies.
If X agrees to pay Y asumofmoneyifYmarriesZ.Z marriesK.themarriageofYtoZisconsideredto
beimpossiblealthoughitmaybepossiblethatKmaydielater,makingthemarriageofYtoZpossible

Q.Distinguishbetweenvoidagreementandvoidablecontract.(2014)
Voidagreement&Voidablecontract:

1Enforceability:

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Avoidagreementisnotenforceablebylaw.
Avoidablecontractisenforceablebylawtillitisrejected.

2Defects:

Avoidagreementisnotvoidabinitioanditsdefectscannotberemoved.
Avoidablecontractisnotvoidabinitioanditsdefectscanberemoved.

3Rightsofthirdparty:

Inavoidagreementathirdpartywhobuysgoodsingoodfaithandforconsiderationdoesnotacquire
anyrights.
Inavoidablecontractathirdpartywhobuysgoodsingoodfaithandforconsiderationacquiresrights
beforethecontractIsrejected.

4Compensation:

Inavoidagreementthepersonisnotentitledtocompensationforlossarisingdueto
nonperformanceoftheagreement.
Inavoidablecontract,apersonisentitledtocompensationforlossarisingduetononperformanceof
thecontract

5Collateralagreement:

Acollateralagreementtovoidagreementisnotenforceablebylaw.
Acollateralagreementtoavoidablecontractisenforceablebylaw.

6Lapseoftime:

Itcanneverbecomeavalidcontractontheexpiryofreasonabletime.
Itmaybecomeavalidcontractiftheaggrievedpartydoesnotrejectitwithinareasonabletime.

7Freeconsent:

Itisvoidduetolackofanyessentialsofavalidcontractexceptfreeconsent.
Itisvoidablecontractbecausetheconsentofapartyisnotfree.

Q. What is void agreement? Can all void agreement betermed as void abinitio? giveexamples.
(2013)

Anagreementnot enforceable by law issaid to be void [Sec.2(g)].Thusavoidagreementdoesnot

give rise to any legal consequences and is voidabinitio. In the eye of lawsuchan agreementis no
agreementatallfromitsveryinception.

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Yesallvoidagreementsarevoidabinitio

Examples:

1.Agreementsbyaminororapersonofunsoundmind
(Sec.11).

2.Agreementsenteredintothroughamutualmistakeoffactbetweentheparties.
(Sec.20).

3.Agreementsofwhichtheconsiderationorobjectisunlawful
(Sec.23).

4. Agreements of which theconsideration or object isunlawfulin part and theillegalpart

cannotbeseparatedfromthelegalpart
(Sec.24).

5.Agreementsmadewithoutconsideration
(Sec.25).

6.Agreementsinrestraintofmarriage(Sec.26).

7.Agreementsinrestraintoftrade(Sec.27).

8.Agreementsinrestraintoflegalproceedings(Sec.28).

9.Agreementsthemeaningofwhichisuncertain(Sec.29)

10.Agreementsbywayofwager(Sec.30).

11.Agreementscontingentonimpossibleevents(Sec.36).

12.Agreementstodoimpossibleacts(Sec.56).

13. Incase of reciprocal promisetodothingslegalandalsootherthingsillegal,thesecondset

ofreciprocalpromisesisavoidagreement.

14. Anagreementtoenterintoanagreementinfuture.

Q.Timeistheessenceofcontract.Justifythestatement.(2014)
Under Section 55 when a party to a contract promisestodoacertain thingator before aspecified
time and fails to doanysuchthingatorbeforethespecifiedtimethecontract,orsomuchofitashas
notbeen performed, becomesvoidableat the option of the promisee, if theintentionof the parties
wasthattimeshouldbeoftheessenceofthecontract.

If theotherpartytoacontractdoes notperformitsobligationsontime,youmayfindyourselflatefor
a very important date, much likethe White Rabbitin Alice inWonderland. Parties to acontractare
sometimes surprised to learn that missing a contractual deadline does not always amount to a
material breach of the contract. When it comes to many types of contracts for example,
construction, real estate sales, loans, or other nongoods contracts courts often don't consider

26

timingtobe essential. They believethatminordeviationsfromacontract'sschedulearen'timportant

enough to warrant damages or termination of the contract. In some circumstances, however, the
parties would beg to differ. For example, thetimingofaloancontractmaybeveryimportantindeed,
if the lender's failure to fund theloan ontimemeansthatyoucan'tbuyahouseorpursuealucrative
business opportunity. For that reason, lawyers began to use "time is of the essence" provisions in
contracts. When a party wants to make sure that the agreement makes it clearthatit is important
that the contractobligationsbecompletedontime,acontractcaninclude aprovisionthatspecifically
states: "Time is of the essence with respect to all [obligations/deliveries/payments] under this
Agreement."

Will"TimeisoftheEssence"ProvisionsBeEnforced?

Themodern view held bymost courtsis that a party'sfailure tomeetthe conditionsof a "time isof
the essence"provision amountstoa material breach of thecontract. And,alternatively,mostcourts
will not consider the timingascrucialifthislanguageisleftout.However,evenwhena"timeisofthe
essence" clause is included in acontract, a courtmaygive the breaching party time to cure (fix)the
breach, or may even disregardthe provision completely if otherevidence indicates that it would be
unfair to enforce the "time isof the essence"clause or shows that thepartiesreally didn'tintend for
thecontracttobeterminatedoveramisseddeadline.

SaleofGoodsand"TimeisoftheEssence"Provisions

Incontractsforthesale ofgoods,courtsconsiderdeliverydates tobeveryimportant.Aseller'sfailure

to hit a deliverydate isusuallyconsideredamaterialbreachofthecontractevenwithouta"timeisof
the essence" provision. That's not the case when it comes to the date for paying for the goods,
however. Courts give the parties more leeway to miss payment dates because a late payment can
alwaysbeaddressedbycharginginterestontheamountdue.

Illustration: A promises todeliver goods at Bswarehouse on the 1st January.On that day A brings
the goods to Bs warehouse,but after the usual hour for closing it, and they are not received.Ahas
not performed his promise. Swarnam Ramchandranv.Aravacode ChakungalJayapalan,AIR 2000
Bom 410; Arosan Enterprises Ltd. v. Union of India, AIR1999 SC 3804.; Y.A.Kaderv.Muthulakshmi
Ammal,AIR1992Mad208.

Q.Whatarethemodesofdischargingacontract?(2014)
Contract creates relationbetweenthe parties and binds them over. Termination ofsuchcontractual
relations iscalled dischargeofcontract.Thefollowingaredifferent modesofdischargeortermination
ofcontract.

DischargebyPerformance.

DischargebyBreachofContract.

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DischargebyImpossibility.

DischargebyOperationofLaw.

DischargebyLapseofTime.

DischargebyMutualunderstandingorbyAgreement.

1. DischargeofcontractbyPerformance

Acontractcanbedischargedbyperformanceineitherofthefollowingways:

a. Actualperformance: A contract is saidtobe discharged by actual performance whenparties

tothecontractperformtheirpromisesinaccordancewiththetermsofthecontract.
b. Tender or attemptedperformance : undersection38whereapromisor hasmadeanofferof
performance to the promisee but the promisee refuses to accept it, then tender i.e.,
attempted performance tantamount to actual performance and a validtenderdischargesthe
promisor from all the responsibilities of performing contract without losinghis rights under
thecontract.

Example : Acontractsto deliver to B at hiswarehouse,onthe1st

march2015,100balesofcotton
of a particular quality. A brings the cotton to Bs warehouse on the appointed day, under such
circumstances that B gets areasonable opportunity ofsatisfyinghimself that the thing offeredis
cotton ofthe qualitycontracted for, and that there are 100 bales.B refuses to accept thebales.
This isa validtender. The tender discharges A fromallthe dutiesofperformingcontractwithout
losinghisrightsunderthecontract.

2. DischargeofcontractbymutualAgreement

Thiscanbeasfollowing;

a)Novation [Section 62
] Novationmeans the substitutionofanewcontractfortheoriginalcontract.
Such a new contract may be either between the same parties or between different parties. The
considerationforthenewcontractisthedischargeoftheoriginalcontract.

:[Section 62
By Alterations ] Whenever Material alterationsin contract aremade, then itissaidthat
oldcontracthasgotdischargedandanewcontracthascomeintoforce.

By Renewal:
At times parties to the contractsmaysubstitute completelynewcontractintheplaceof
oldcontract.Nowtheoldcontracthasgotdischarged.

: [Section 62
By Recession ] In case of recession old contract gets discharged and there will be no
formationofnewcontract.

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Example: There is a contract between A and B according to which A has to supply 100 pairs of
readymade dresses to B on 10th January. Where date offormation of contractee`s1st January.On
2nd January A says to B that those dresses have become out of fashion and hence not possibleto
assemble 100 pairs. StillBsays thatthough he(B)supplies 100 pairs bytaking a lotof risk, Bcannot
sell them because they are outdated. Thus by mutual understanding, they have terminated their
contract.

3. DischargeofcontractbyImpossibilityofperformance(section56)

Theelementofimpossibilityterminatecontractualrelations.Impossibilityisoftwotypes.Namely;

PreContractualimpossibilityandPostContractualimpossibility
.

If impossibility has already come into force before the contract itself, it is called PreContractual
impossibility. Here discharge of Contract takes place soon after formation of Contract. The
impossibility which comes into force after the contractis called PostContractual Impossibility.Here
contractualrelationswillexistsonlyuptooccurrenceofimpossibility.

Example:
A and B contract to marry each other. Before thetimefixed for the marriage, Agoesmad.
Thecontractbecomesvoid

4. Dischargeofcontractbylapseoftime

Limitation act has specified duration to perform different contracts. The duration thus specified is
calledlimitationperiod.Soonafterexpiryoflimitationperiod,thecontractgetsdischarged.

Example: There is a contract of loan between A and B. Her limitation period is 3 years. After
completion of3rd year discharge of contract takes placeand debtorcreditorrelationshipcomesan
end.Thusitbecomestimebareddebtwhichcannotberecoveredbymeansoflegalproceedings.

5. DischargeofcontractbyOperationoflaw

Thiscanbeasfollowing;

ByDeath
:Wheneveroneofthepartiescomesacrossdeath,contractualrelationswillcometoanend.

By Insolvency
: When one of the parties to the contract becomes insolvent, he forgoes capacity to
contractandthosecontractswhichweremadebythatpersonwillgetdischarge.

Bylunacy
:Whenoneofthepartiesgetsattachedbylunacydischargeofcontracttakesplace.

Right and liabilitygoingintothehands ofsameparty:Contractcreatesright toonepartyandliability

totheotherwhenrightandliabilityreachthesameperson,theresultisdischargeofcontract.

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Example: X has drawn a bill on Y. HereX has right to collect amountonthe bill and Y has liability to
pay.There after X has endorsedthe bill to Z. Where Z has gottherightandliabilityiswithY.Assume
that Z has endorsedthe bill to Y. Nowright as well as liability iswith Y. This situation discharges the
contract.

6. DischargeofcontractbyBreach

Failure in performance of contractual obligation is called breach of contract. Discharge of contract

takesplacebybreachofcontractalso.Breachofcontractisoftwotypes.Namely;

ActualbreachandAnticipatorybreach.

Incase where contract is breached by partyon thedate ofperformance,it is called actual breach.If
breachofContracttakesplacebeforedataofperformance,itiscalledanticipatorybreach.

Q. If there is absence of free consent in acontract what would bethestatus of contract? Explain
withexamples(2013)
FREECONSENT

Meaningofconsent :itmeansanactofassentingto anoffer.Accordingtosection13,"Towormore
persons are said to consentwhentheyagree uponthe samething in thesamethinginsamesense."
Thus, consent involves identity of minds in respect of the subjectmatter of the contract. InEnglish
Law,thisiscalled'consensusadidem'.

EffectofAbsenceofconsent
:

Whenthereis noconsent at all,theagreementisvoidabinitio,i.e.itisnotenforceableattheoption

ofeitherparty.

Example : X hasone Maruticar and onefiat car. He wants tosell fiat car.Y doesnotknowthat Xhas
twocars. Y offers to buy X's Maruti carRs50,000. X acceptstheofferthinkingittobe anofferforhis
Fiat car. Here, there isnoidentityofmindinrespectofthesubjectofthesubject matter.Hencethere
isnoconsentatallandtheagreementisvoidabinitio.

Meaning ofFreeconsent :Itisoneofthe essentialelementsofavalidcontractasitisevidencedby

section 10 which provides that all agreementsare contracts if they are made bythe freeconsent of
the parties...according to section 14, consent issaid to be freewhenitisnot causedby(a)Coercion,
or(b)Undueinfluence,or(c)Fraud,or(d)Misrepresentation,or(e)Mistake.

EffectofAbsenceoffreeconsent:

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Whenthereis consent but itisnotfree(i.e.whenitiscausedbycoercionorundueinfluenceorfraud

or misrepresentation),the contract is usuallyvoidableat the option of the party whose consentwas
socaused.

COERCION

Meaning of coercion [section 15]: It means compelling a person to enter intoa contract, by use of
physicalforce/activitiesforbiddenbyIndianpenalcode,OR

ThreatenstodoactivitiesforbiddenbyI.P.C,OR

Threatenstodamagetheproperty.

Effectofcoercion: Voidableandcan becanceled attheoptionofaggrievedparty.ORA'suicideanda

'threat to commit suicide' are not punishable butanattempt to commit suicide is punishable under
theIndianpenalcode.

X threatens to kill Y if he does not sell his house for Rs. 1,00,000 to X. Y sells his house to X and
receives the payments. Here, V's consent has been obtained by coercion. Hence, this contract is
voidable at theoptionofY.If Ydecidestoavoidthecontract,hewillhavetoreturnRs1,00,000which
hehadreceivedfromX.

"Y"(aggrievedparty)willreturnRs.1,00,000

"X"(defendantparty)willreturnthehouseandanybenefitfromthegoods.

Whenvoidablecontractcannotbecanceled:

When the third party become interested into avoidablecontract. E.g. A obtain thecar of B through
coercion.Let,Asolditto"C"aninnocentbuyer,nowBcannotgetthecontractcanceled.

Whentheaggrievedpartyratify/confirm/affirmthencontractcannotbecancel.

2.UNDUEINFLUENCE:

Meaning ofUndue influence[section16(1)]:Theterm'undueinfluence'meansdominatingthe willof

the other person to obtain an unfairadvantage overthe other.Accordingtosection16(1),acontract
issaidtobeinducedbyundueinfluence

where the relations subsisting between the parties are such that one of them is ina position to
dominatethewilloftheother,and

thedominantpartyusesthatpositiontoobtainanunfairadvantageovertheother.

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When twopartner arein relation, and one of them isdominantandother is in weakerposition and
dominantpersontakesundueAdvantage,thenitiscalled"Undueinfluence."

Nopresumptionofdominationofwill

Accordingtojudicialdecisionsheldinvariouscases,thereisnopresumptionofundueinfluencein the
followingrelationships:

Husbandandwife

landlordandtenant

Creditoranddebtor

Effectofundueinfluence[section19A]:whenconsenttoanagreementiscausedbyundueinfluence,
theagreementisacontractvoidableattheoptionofthepartywhoseconsentwassocaused.

Comparisonbetweencoercionandundueinfluence:

Similarities: In case of bothcoercion and undue influence, the consent is not freeandthecontractis
voidableattheoptionoftheaggrievedparty.

3.FRAUD

Meaning and essentialelementsoffraud[section17]:Theterm'fraud'meansafalserepresentation

offactmadewillfullywithaviewtodeceivetheotherparty.Fraudincludesfollowing:

Wrongsuggestionaboutafact,knowingthatitisnottrue;

E.g. XsellstoY locallymanufactured goodsasimportedgoods charging a higher price,itamountsto

fraud. OR A seller claimed that his projector is made in Singapore, and sold it for Rs. 100,000/
Howeverthefactisthat"ProjectorwasmadeinsouthIndia".

Activeconcealment(Hide)ofdefectingoods:

E.g. "Acarpainter, uses paint to hide the scratches over the old furniture and sold itclaimingthat is
Now". Thisisfraud.OR Xa furnituredealer, concealsthecracksinfurnituresoldbyhimbyusingsome
packingmaterialand polishing itin such a way that thebuyerevenafterreasonableexaminationcan
nottracethedefect,itwouldtentamounttofraudthroughactiveconcealment.

Promisemadewithoutintentiontoperform:

E.g. "A man and a woman underwent aceremonyof marriage with thehusbandnotregardingit asa
real marriage. Held,the husbandhad no intention to perform the promisefrom thetimehemadeit
and hence the consent of the wifewasobtained underfraud. OR "A farmer agreestosupply 100kg

32

potato that willbeproducedbyhimoutofhisfield,afterthreemonth".Twomonthshasbeenlapsed,

butthefarmerneitherimplantseeds,nordoescultivation.Thisiscaseoffraud.

Anyactivitydeclaredfraudasperotherlaw; undercompaniesactandinsolvencyacts,certainkinds
oftransfershavebeendeclaredtobefraudulent.

Note: Incaseof fraud,the seller is always liable eventhough buyerhasanopportunity to check the
fraud.

Any activity fitted(supported) todeceive. It covers those acts whichdeceive but are not covered
underanyotherclause.

EffectofFraud[section19]

Theeffectsoffraudareasfollows:

(a) The party whose consent was causedby fraud can rescind(cancel) thecontractbuthecannotdo
sointhefollowingcases:

Where silence amounts to fraud, the aggrieved party cannot rescind the contract if he had the
meansofdiscoveringthetruthwithordinarydiligence;

Wherethepartygavetheconsentinignoranceoffraud;

Wherethepartyafterbecomingawareofthefraudtakesabenefitunderthecontract;

Where an innocent third party before the contractis rescinded acquiresfor consideration some
interestinthepropertypassingunderthecontract.

Wherethepartiescannotberestoredtotheiroriginalposition.

(b) Thepartywhoseconsent wascaused byfraudmay,ifhethinksfit, insistthatthe contractshallbe

performedandthathe shallbe put in thepositioninwhichhewouldhavebeeniftherepresentation
madehadbeentrue.

Thepartywhoseconsentwascausedbyfraud,canclaimdamageifhesufferssomeloss.

4.Misrepresentation

Theterm "misrepresentation"meansafalserepresentationoffactmadeinnocentlyornondisclosure
of a material fact without any intention to deceive the other party. Section 18 defines the term
"misrepresentation"asfollows

"Misrepresentation"meansandincludes

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 Thepositive assertion, in amanner not warrantedby the information ofthe person makingit, of
thatwhichisnottrue,thoughhebelievesittobetrue;

Any breach of duly which, without an intent to deceive, gains an advantage to the person
committing it, or anyone claiming under him, by misleading an other to his prejudice or to the
prejudiceofanyoneclaimingunderhim;

Causing,however innocently,apartyto anagreement,tomakeamistakeastothesubstanceofthe

thingwhichisthesubjectoftheagreement.

Essentialelementsofmisrepresentation:

By a party to acontract : The representation must be madeby apartytoacontractorby anyone

with his connivance or by his agent.Thus, themisrepresentation bya stranger tothe contract does
notaffectthevalidityofthecontract.

False representation: There must be a false representation and it must be made without the
knowledgeofitsfalsehoodi.e.thepersonmakingitmusthonestlyevenitistobetrue.

Representationas tofact: Therepresentationmustrelatetoafact.Inotherwords,amereopinion,

astatementofexpressionorintentiondoesnotamounttomisrepresentation.

"InnocentmisstatementmadeintogoodfaithORwithoutanyintentiontocauseloss"

E.g. A farmer says that his land is very productive and produces 100 quintal per acre. This is
misrepresentationandbuyercancancelthecontract.

Note: When the buyer has an opportunity to check the misrepresentation, but he fails then buyer
cannotcancelthecontract.

E.g. An owner offactory, while selling hisfactory,expresshisopinionasmyfactoryproduces1000kg

perannum and requested the buyertofindoutexactproductionbychecking"productionrecord".If
thebuyerfailstochecktheproductionrecordthenbuyercannotblameseller.

Effectofmisrepresentation[section19]

Theeffectsofmisrepresentationareasfollows:

RighttorescindthecontractThepartywhose consentwascausedbymisrepresentationcanrescind
(cancel)thecontractbuthecannotdosointhefollowingcases:

wherethepartywhoseconsentwascausedby misrepresentationhadthemeansofdiscoveringthe
truthwithordinarydiligence;

34

wherethepartygavetheconsentinignoranceofmisrepresentation;

wherethepartyafterbecomingawareofthemisrepresentation,takesabenefitunderthecontract;

where an innocentthird party, before the contractis rescinded, acquiresfor considerationsome

interestinthepropertypassingunderthecontract;

wherethepartiescannotberestoredtotheiroriginalposition.

(
b) Rightto insistuponperformanceThepartywhoseconsentwascausedbymisrepresentationmay
if he thinks fit, insistthatthe contract shallbe performed, and thathe shallbe put in thepositionin
whichhewouldhavebeeniftherepresentationmadehadbeentrue.

Comparisonbetweenfraudandmisrepresentation

Similarities
:Therearebasicallytwosimilaritiesincaseoffraudandmisrepresentationasfollows:

Inboththecases,afalserepresentationismadebyaparty;

Inboth thecases, thecontract isvoidableat the option ofthepartywhoseconsentisobtainedby

fraudormisrepresentation.

5.Mistake

Meaningofmistake[section20]

Amistake issaid to have occurredwherethepartiesintendingtodoonethingbyerrordosomething

else.Mistakeis"erroneousbelief"concerningsomething.

ClassificationofMistakeofLaw:

(a) Mistake of Indian Law

(In sense of penalty): The contract is not voidable because everyone is
supposedtoknowthelawofhiscountry.e.g.disobeyingtrafficrules"

(b) Mistake of Foreign Law (voidabinitio): A mistake of foreign law istreated as mistakeof fact, i.e.
the contract isvoidifboth thepartiesareunder amistakeastoaforeignlawbecauseonecannotbe
expectedtoknowthelawofothercountry.

Mistakeoffact

MistakeoffactbeeitherUnilateralmistakeorBilateralmistake.

Unilateral mistake [section 22]: The term 'unilateral mistake' means where only one party to the
agreementis under amistake.
According to section 22 , "Acontractisnotvoidablemerelybecauseit
wascausedbyoneofthepartiestoitbeingunderamistakeastomatteroffact."

35

Bilateral mistake [section 22]: The term 'bilateral mistake' means where both the parties to the
agreement are under a mistake. According to section20 ,"where both the partiesto anagreement
are under a mistake as to a matter offact essential to theagreement, theagreement isvoid."thus,
thefollowingthreeconditionsmustbesatisfiedbeforedeclaringacontractvoidunderthissection:

1. Boththepartiesmustbeunderamistake
2. Mistakemustbeoffactbutnotoflaw.

According to explanation to section 20

. "An erroneous opinion as to the value of the thing which
formsthesubjectmatterofagreementisnottobedeemedamistakeastoamatteroffact."

Note:Mistakeaboutpriceisvalid.

Q.Weathermeresilenceistreatedasfraudinrespectofcontract?Comment(2013)
General concept: Accordingto
explanationto section17 ,"Meresilenceastofactslikelytoaffectthe
willingnessofapersontoenterintoacontractisnotfraud".

Inotherwords,Silenceisnotfraud.Itisbuyer,whomustcheckthegoods&suitability.

E.g. X purchased a used computer from Z thinking it as acomputer imported from USA, Z failed to
disclose the fact to X. On knowing the fact X wants to repudiate the contract. So, here X cannot
repudiate/rescind/cancelthecontract.

Exceptionstothegeneralrule:

The general rule that silence does not amount to fraud has the following exceptions. Where the
circumstances ofthecasearesuchthat,regardbeinghadtothem,itisthedutyofthepersonkeeping
silencetospeak.Suchdutyarisesinthefollowingtwocases:

Whensilence isequivalent to speech: E.g. "A student ofBBAselect a Business lawbook and asks
the seller". If seller don't stop me from buying this book, I will assume that "it is best". The seller
remained silent here the student will treat "silence" as speech.If the book wasinferior,then it isa
caseoffraud.

Disclosureof dangerous nature: E.g.Shyam sold hishorse to Ram a buyerfor Rs. 11000/Shyam
knows that horse was "wicked" but fails to discloseit to buyer. Here seller has committed fraud by
remainingsilent.

Q.Whatisquasicontract?Discussdifferenttypesofquasicontract.(2013)
QuasiContracts

In case of Quasi Contract, there will be no offer and no acceptance either on express base or on
implied base.Butunder certaincircumstances Courtcreates contract between the parties artificially
and thus binds over the parties. Such contracts which are createdby virtue oflaw are calledQuasi

36

Contracts. Section 68 to 72 of Contract Act read about thesituations where court cancreate Quasi
Contract.

Important types of Quasi Contract thatSec. 68 to 72 of the Indian Contract Act 1872 deals with are
givenbelow:

Types

(i)Claimfornecessariessuppliedtopersonincapableofcontracting(Sec68):

If a personis incapableof enteringinto a contract, or anyone whomhe islegallybound tosupportis

provided by anotherperson with necessaries suitedtohiscondition inlife, thesupplierisentitledto
recoverthepricefromthepropertyofsuchincapablepersons.Example:

Example:

Xsupplies the wife and childrenof Y, a lunatic withnecessariessuitabletotheirconditionsinlife.Xis

entitledtobereimbursedfromYsproperty ChavalVsCooper.

(ii)Paymentbyaninterestedperson(Sec69):

Aperson who isinterested inthe payment of money which anotherisboundbylawtopay,andwho

thereforepaysitisentitledtobereimbursedbytheother.

Example:

The consignee suffered loss due to fire in thewagon duringtransit. Theinsurermade good the loss.
TheclaimwasallowedasperSection39. GovindramGovardhanDasVsStateofGondal.

(iii)Obligationtopayfornongratitousact(Sec70):

Where apersonlawfully does anything for anotherperson,ordelivers anythingtohim,notintending

to doso gratuitously and such otherpersonsenjoys thebenefit thereof,the latter isbound tomake
compensationtotheformerinexpectofortorestorethethingsodoneordelivered.

Example:

X, atradesman, leaves goods at Ys house bymistake;Y treatsthe goodsashis own. He is boundto

payXforthem.DamodarModaliarVsSecretaryofState

(iv)Responsibilityoffinderofgoods(Sec71):

Under Section 71 ofthe Act, a person whofinds goods belonging to anotherandtakestheminto his
custodyissubjecttothesameresponsibilityasabailee.

37

Example:

F picks up a diamond on the flooron k's shop.He handsitovertoKtokeepittilltrueownerisfound

out. No one appears to claim it for quite some weeks in spite of the wide advertisement in the
newspapers. F claims thediamondfromKWho refusestoreturn.Kisboundtoreturnthediamondto
F who is entitled to retain the diamond against the whole world except thetrue owner. Hallius Vs
Fowler

(v)Liabilityformoneypaidorthingsdeliveredbymistakeorundercoercion(Sec72
):

At lastSection 72of the Indian Contract Act, 1872provides that apersontowhommoneyhasbeen

paidoranythingdeliveredbymistakeorundercoercionmustrepayorreturnit.

Example:

A railway company refuses to deliver certain goods to the consignee, except upon thepayment of
illegal chargefor carriage. Theconsigneepaysthesumchargedtoobtainthegoodstoheisestimated
recoversomuchofthechargesaswasillegalexcessive. KhaniyalalVsSalesTaxOfficer

Q. Who are competent to contract under Indian Contract Act 1872? Agreement made by minor
(2011)
One oftheessentialelementsofavalidcontractisthatthepartiesto thecontractmustbecompetent
tocontract.

Everypersonis not competent to enter into anycontractunlesshefulfillstheconditionslaiddownin

thecontractact.Accordingtothecontractacteverypersoniscompetenttocontract.

1.Whoisanadult.

2.Whoisofsoundminded.

3.Whoisnotdisqualified.

PersonNotCompetentToContract:

Following persons are not competent to enter into a contract or we may say that they have no
contractualcapacity.

1. Minor :According to contract actaperson below than 18years is aminor and cannot enter into
anycontract.Acontractmadebytheminorisvoid.

2.MentallyDeficient
:

Mentallydeficientpersoncannotmakeavalidcontract.

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Example1:Mr.Aliisapersonwhooccasionallyofunsoundmindmaynotenterintoacontractwhen
heisunsoundmind.

Example2
:Mr.Lalaisapersonwhoisusuallyofunsoundmindcannotenterintoacontract.

Example3:Mr.Arjunisso drunkthatcannotunderstandthetermsofcontractandcannotenterinto
acontract.

3.PersonDisqualifiedByLaw:

Ifanypersonisdisqualifiedbythelawenforceablelawofthecountrycannotenterintovalidcontract.

4.JointStockCompany:

Joint stock company is a person in the eye of law but the capacity of the company to enter into
contract is limited bylaw.Company has no physicalexistence.Ithasanartificialpersonality.Soitcan
notmakethecontractpersonally.Itwilldothecontractthroughagentaccordingthe law.Otherwiseit
willbevoidcontract.

Example : Khanani & Company makes an agreement with TATA Companytosellits assets whicha
companyisnotauthorizedbyitsmemorandumofassociation,soagreementisvoid.

5.Foreigner
:

Aforeigner cannot do anycontract. Anytypeof contractwhichismadewithoutthepermissionofthe

governmentisvoidandillegal.

Example : Mr.Bhawani contracts with Mr. Chips a citizenof a Russiawithoutthe permission of the
govt.tobuycertaingoods.Thisagreementwillbevoidandillegal.

6.ImprisonedPerson:

If somepersonis imprisoned bythe court of law, he cannotenterinto contract during theperiodof

sentence.Butasthesentenceexpiresthisdisabilityalsocomestoanend.

7.DiplomatorAmbassador:

Thediplomatsareinprivilegepositionandtheycannotbesuedwithoutthepermissionof thegovt.So
theyareconsideredincompetenttocontract.

Example :
Mr. Kapul diplomat got the house on rent from Mr. Pritam. Mr. Pritam sued for the
recoveryofarrearsofrent.Itwasheldthatnoactioncouldbebroughtagainsthim.

8.Insolvent:

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Incase of property asolvent cannot enterinto contractwhichisunderthecontrolofofficialreceiver.

Hecanenterintocontractaftertheissuanceofdischargeorder.

Example : Mr.Sikandar insolvent whoseland is underthecontrolofofficialreceiver. Hepromisesto

sellhishousewithMr.Lalatheagreementisvoid.

ContractsbyMinorRulesrelatingtoaMinorscontract

According to section 3of the Indian Majority Act1875 aminor domiciledin India isonewhohasto
complete hiseighteen years of age. But in cases wherea guardianof theminorspersonorproperty
(or both) is appointed or where a minors property istaken over by a Court ofWards, the minority
continuesup to thecompletionof hisageoftwentyoneyears.Ageofmajorityis tobedetermined by
thelawtowhichtheminorissubject.Aminorisnotcompetenttocontract.

Minors contact is absolutely void : In Mohori Bibee v Dhurmodas Ghose (190330 Cal. 539) Privy
Council had held thatminorscontractis void abinitioandnotmerelyvoidable.Aminorsagreement
being absolutely void, neither he nor the other party acquires any right or incursany liabilityunder
the agreement. Soa minor isneither liable toperform that hehas promised too under a agreement
nor is he liable to repay money that he has received under it. The principle behind this ruling is, a
minor isincapableofjudgingwhatisgoodforhim.Evenifaminor hasreceived anybenefit,hecannot
be asked to compensate or pay for it. A minor is incapable of giving promise imposing a legal
obligationuponhimself.

In Mohori BibeevDhurmodas Ghose , a minor executed a mortgage forthe sumof Rs20,000outof

whichhereceivedRs8,000.Minorfiledasuitsubsequentlyforsettingasidethemortgage.Themoney
lender clamedrefundof Rs 8,000 from the minor. It washeldthatminorscontractisaltogethervoid
andthemoneylenderthereforecannotrecovertheamount.Aminorscontractbeingabsolutelyvoid,
hecanneithersuenorbesueduponit.

Specific performance ofa minors contract : Asa minors contract is absolutely void,therecanbeno
specific performance of such a contract Even aminorcannotenforcespecificperformanceasthereis
nomutuality. However, whensucha contract is enteredinto byaguardian on behalfof aminor,for
minorsbenefititcanbespecificallyenforcedbyoragainsttheminor.

Ratificationofaminorscontract :Ratificationmeansconsentingtoapastcontactenteredintoduring
minority at a future date on attaining majority. It relates back to the date of the making of the
contract.Sincea minors contract is void, there canbenoquestionofratifyingit astheconsideration
given during the minority is held to be no consideration at all. It cannot be made valid by a
subsequent ratification.A fresh contract canbe entered intoby a minor onattainingmajoritywitha
freshconsideration

False representation by a minorEstoppel: A minor cannot bestopped by a false representation as

there can benoestoppel against a statute.Aminorwhofalselyrepresentshimselftobea majorand
40

thereby induces another person to enter into acontractwithhim,can plead minorityasa defense.
Theinfantisnotstoppedfromsettingupinfancy.

A minor cannot be sued on the ground that he falsely repres ented that he is of full age thereby
induced other persons to enter into a contract because to allow an inured person to sue a minor
person,wouldbegivinghimaindirectmeansofenforcingavoidcontract.

However, it has beenheld by AndhraPradesh HighCourt that equity requires a minor who seeks to
avoid a contract which he induced the opposite party to enter into with him by a fraudulent
misrepresentation as to his age to return the considerations which he received under it and this
equitable principle is also fond statutorily embodied in section 39 and41 of theSpecific ReliefAct.
Therefore, the Court should not grant the relief to the minor without at the same time imposing
conditionsthatheshouldreturnwhathereceivedunderthecontract.

Q. Discussthe principles on which the courts award damages to the injuredpartyonthebreachof

contract.(2011)
Damages are a financial remedy which aimstocompensatetheinjuredpartyfortheconsequencesof
a breach in the contractthey werein. Ingeneral, the principle of awarding damages to a party isto
putthem back intothe position, as far as possible,thatthey wouldhave beenin hadthebreachnot
have occurred. However, there are limitations to that principle which may affect the availabilityof
damages.

A claimant cannot recover damages in respect of a loss which is too remote a consequenceof the
defendantsbreachofcontract.

The amount of damages available to the plaintiff for breach of contract was not considered by the
courtsuntilHadleyvBaxendalein1854.

ThejudgmentinthiscasegaverisetoallnewforeseeabilitytestperAldersonB:

Where two parties have made a contract which one of them has broken, the damages which the
other party ought to receive in respect ofsuch breach of contract shouldbe such as may fairlyand
reasonably be considered either arising naturally, i.e., according to theusual courseof things, from
such breach of contract itself, or such as may reasonably be supposed to have been in the
contemplation of both parties, at the time they made the contract, as the probable result of the
breachofit.

Thequestion to be asked iswhether thisnewtest is an effectivemethodwhichshouldbeappliedto

the law of remoteness for breach of contract. Lords Hoffman and Hope in their judgments do not
assess thedifficultiesinusingthis testtodeterminewhatassumedresponsibilitiesare fortheparties
in relation to the types of loss, as this is in itself a difficult task. When two parties enter into a
contract,theirmainfocusisonthecompletion ofthetaskat handandnotthepossibletypesoflosses
they are assuming responsibility for shouldthere be a breach. Thereforea court cannot determine
41

whatlosses thepartiesassumedresponsibility for and thuslooktowhat thereasonableparty would

havecontemplated.

Itis also more than likely thatthe courts willlookintothecurrentmarketpracticeasitisakeyfactor

in assessing the breadth of the presumed assumption of responsibility, [19] which will aid in the
decision of whether or not the loss is recoverable. In the Transfieldcase, one of the criticalfactors
which persuaded the House of Lords, to conclude that theloss wasnt recoverablewas the general
understanding at that time amongst shipping lawyers, that liability was restricted to difference
between the market rate and the charter rate for the overrun period. Had their Lordships not
consideredthispoint,thedecisionmayhavediffered.

In conclusion it can be seen that decisions of the House of Lordsin TheArchilleashasintroduced a

new assumed responsibilitytest,todeterminetheremotenessinrelationtotheawardingofdamages
for breach of contract. It also suggests that courts may be less willing to seeforeseeability as the
determinativefactorasitdoesnotprovidesufficientregardtocommercialpractice.

Q.Explaintypesofdamagesawardedbycourt(2011)
Section 73 of the Contract Act is lays down the provision relating to damages. It providesthatthe
party, who breaches a contract, is liable to compensate the injured party for any loss or damage
caused,duetothebreachofcontract.

1. Compensatory Damages: These are damages for a monetary amount that is intended to
compensate the nonbreaching party forlosses that result from the breach. Theaim isto"make the
injuredpartywholeagain".Therearetwotypesofcompensatorydamages:

Expectation Damages: These are damages that are intended to cover what the injured party
expected to receive fromthe contract. Calculations are usually straightforward as theyare basedon
thecontractitselformarketvalues.

Consequential Damages: These are intended to reimbursethe injured party for indirect damages
other than contractual loss; for example, loss of business profits due to an undelivered machine. In
ordertorecover,the injuriesmust"flowfromthebreach,"i.e.beadirectresultofthebreach,andbe
reasonablyforeseeabletobothpartieswhentheyenteredintothecontract.

2) Liquidation Damages: Damages that are specifically stated in the contract. These are available
when damagesmay behardtoforeseeandmustbeafairestimateofwhatdamagesmightbeifthere
is a breach. Both parties determine what would be an appropriate amount during contract
negotiations.

3) PunitiveDamages:Thesearedamages that are intend topunishthe breaching party andtodeter

him or her fromcommittinganyfuturebreaches.They are rarely awarded in contract cases,though
theymaybeavailableinsomefraudortortcasesthatoverlapwithcontractlaw.

42

4) Nominal Damages: These are damages that are awarded when the injured plaintiff does not
actually incur a monetaryloss, but thejudgewants to showthatthe winning party was inthe right.
These are typically rarely awarded in contract cases because breaches of contract usually involve
some sort of loss to one party, however they might be awardedin tort cases that cross overwitha
breachofcontractcase.

5) Restitution: These arenotreallylegaldamagesper se,butratherareanequitableremedyawarded

to preventthe breaching party from being unjustly enriched.Forexample, if onepartyhasdelivered
goods but the other party has failed to pay, the party that delivered the goods may beentitled to
restitution,i.e.thecostofthedeliveredgoods,inordertopreventtheunjustenrichment.

Q.Whataregeneralandspecialdamages?
SpecialDamages

Between the timeyoureinjuredandyourcourtdate,youllincurcertainexpensesorlossesrelatedto

yourinjury.Sometypesofexpensesandlossescoveredbyspecialdamagesinclude:

Medicalandhomehealthcareexpenses

Replacementofpersonalpropertyinvolvedintheinjury,suchasacar

Lostwagesorearnings

Lossofitemsthatcantbereplaced

If youdnever been injured, youwouldneverhavespentmoneyonhospitalbillsorcaretakinginyour

home.Youwouldnthavehadtoreplaceyourcar,otherpersonalproperty,oranyirreplaceableitems,
such as heirlooms lost inafire.Also,youdhaveneverhadtomisswork,soyouwouldnthavemissed
outonwagesorearnings.Specialdamagesrestoreyourfinancialsituationtowhatitwouldhave been
iftheseeventshadneverhappened.

To ensure that you receive full compensation for these losses and expenses, keep copies of all
paystubs, invoices, receipts, and other crucial financial documents. Its easier to calculate your
personal injuryclaim when youdemonstrate how muchmoneyyouspenttotreattheinjuryandhow
muchyoumighthaveearnedhadtheinjurynevertakenplace.

GeneralDamages

The types of losses covered by special damages can be assessed mathematically. General damages
cover losses that arent so easy to quantify. Many solicitors and judges calculate general damages
accordingtotheJudicialCollegeGuidelines.

Thesedamagescanincludecompensationfor:

43

 Pain, suffering, and loss of amenity (PSLA). In additiontoinflicting physical pain, personal injury
incidents cancause significant mentalhealthchallenges.Theycanalsomakeitdifficulttoenjoy lifeas
youoncedid,andtheycanmakeithardforyoutoperformeverydaytasks.

Difficultyfinding a future job. Ifyour injuries makeithardforyoutocompeteonthejobmarket,a

courtmightawardgeneraldamagestocompensateforfuturefinanciallosses.

Loss of auniquecareer.Ifyouwereaprofessionalathleteorhadanotheruniquecareer,youinjury
might make it impossible to use your talents. General damages acknowledge how this uniqueness
contributedtoyouridentityandyourplaceinhistory.

Q.Canapersonvalidlymakeacontractwithanotherrestrainingtheotherfrommarrying?(2013)
Section 26 of the Indian Contract Act of1872 statesthatevery agreement inrestraint of marriage,
exceptthoseinrestraintofmarriageofminors,isvoid.TheContractActwasthefirstlawtobeplaced
in India whichexpressly madeanysuchagreement, which inits effect would resultin restrainingthe
liberty of either of the parties to marry as per their wish, void. The fundamental idea behind this
provision was to ensurethat the citizensdid notlose theirrighttomarryaspertheirchoice,whichis
an essential part of a civil society having both personal and social significance, due to some
contractualobligationenteredintoatanypointoftime.

Illustrations:

(a)AagreeswithBforgoodconsiderationthatshewillnotmarryC.Itisavoidagreement.

(b)AagreeswithBthatshewillmarryhimonly.Itisavalidcontractofmarriage.

PartialorCompleteRestraint:

Further, unlike Section 28 which makes agreements only in complete restraintof legal proceedings
void,the choice ofwordsofSection26keepsitsscope rathergeneralwithoutforwardingadifference
between partial or complete restraint of marriage, and has been interpreted tohold an agreement
serving to either result as void. One may be absolutely restrained from marrying at all or from
marrying for a fixed period or partially restrained from marrying a particular person, or a class of
persons, in any of the above events, the agreement is void. Section 26 does not differentiate in
between absoluterestraint and partial restraintupon the freedom of marriage.Thishasbeenstrictly
followedbythejudiciaryinvariouscases.

EXCEPTION:

44

Section 26oftheIndianContractActisawidelyphrasedprovisionwithonlyonesignificantexception.
Itdoes nothold voidanyagreementmadeinrestraint,partialorabsolute,ofthemarriageofaminor.
This exception ispresent asit is against public policyin generaltomarry a minorandbyexercisinga
restraint on such acts, theagreement restraining such marriagescan be saidtofurther public policy
instead.

Q. Difference between (i) misrepresentation and fraud (ii) Undue influence and coercion (iii)
contract and quasi contract (iv) General damage and special damage (v) contingent contractand
wageringcontract.

(i)Misrepresentationandfraud

Differencebetweenfraudandmisinterpretation:

1. In misrepresentation thepersonmakingthefalsestatementbelievesittobetrue.Infraudthefalse
statementispersonwhoknowsthatitisfalseorhedoesnotcaretoknowwhetheritistrueorfalse.

2. Thereis nointentiontodeceivethe other party when there is misrepresentation offact.Thevery

purposeofthefraudistodeceivetheotherpartytothecontract.

3. Misrepresentation renders the contract voidable at the option of the party whose consent was
obtained by misrepresentation. In the case of fraud the contract is voidable It also gives rise toan
independentactionintortfordamages.

4. Misrepresentation isnotanoffence under Indian penal codeandhencenot punishable. Fraud, in

certaincasesisapunishableoffenceunderIndianpenalcode.

5. Generally, silence is not fraud except where there is a duty to speak or the relations between
parties is fiduciary. Under no circumstances can silence be considered as misrepresentation.6.The
party complainingof misrepresentation cant avoidthe contract if he had themeans to discover the
truth with ordinarydiligence. But in thecase of fraud, theparty makingafalsestatementcannotsay
thattheotherpartyhadthemeanstodiscoverthetruthwithordinarydiligence.

(ii)Undueinfluenceandcoercion

1.CoercionisdefinedinSec.15

UndueInfluenceisdefinedinSec.16

2. Coercion means compelling a person to enter into a contract by committing or thartening to

commitanunlawfulact.

Undueinfluencemeansinducingapersontoenterintoanagreementbymoralormentalthreat.

45

3. Coercionisaphysicalthreat.

Undueinfluenceisamoralormentalthreat.

4.
Coercioninvolvesdoingorthreatingtodoanillegalact.

Undueinfluenceisamoralormentalthreat.

5
.Incaseofcoercionnotonlytheagreementisvoidablebutalsothatpartymaybepunished.

In case of undue influence ordinarily, thereis nopenalaction only theagreement will be voiable at
theoptionoftheaggrievedparty.

6.Coercionmaybe exercisedagainstpartytotheagreement orathirdparty.Itmayalsobeexercised

byapartytotheagreementorbyathirdparty.

Undueinfluencemustbeexercisedbyoragainstthepartytothecontract.

7.
Forcoercionnospecialrelationshipbetweenthepartiesisnecessary.

For undue influence aspecial relationshipmustbetheree.g.,masterand servent,doctorandpatient,

etc. If there is no such relationship, thenone of the parties shouldbe in aposition to dominatethe
willoftheotherparty

8.
Incaseofcoercionburdenofproofthatcoercionwasexercisedisontheaggrievedparty.

Incase of the undue influenceburden of proof that undueinfluencewasnotexercisedwillbeonthe

partywhowasindominatingposition.

(iii)Contractandquasicontract

1. Acontractis a contract between twoparties. In contract,always there is anagreementbetween

the parties. A quasicontract is not a real contract. Quasi contracts are also known as
constructivecontractsorcertainrelationsresemblingthosecreatedbycontracts.
2. Incontract, always thereis an agreementbetweenthe parties. Whereasinquasicontract,there
isnoagreementbetweentheparties.
3. In contract, the parties must give their consenttoit. Where as inquasicontract, thepartiesdo
notconsent.
4. Incontract, theliabilityexists between the parties by the terms of theparties.In quasicontract,
the liability exists independent of the agreement and rests upon equity, justice and good
conscience.
5. It is created by the operation of the contract. It is imposed by law. It is not created by the
operationofthecontract.

46

6. Itis rightin rem, and also right inpersonam.Itisrightinpersonam.I.e.strictlyavailableagainsta

personandisnotavailableagainsttheentireworld.
7. Sec.2(h)ofthe Indiancontractact,1872,definescontract:an agreementenforceablebylawisa
contract. Quasi contract is not defined in Indian Contract Act, 1872, Salmond defines quasi
contracts:there are certainobligationswhich arenotin truth contractualinthesenseofresting
onagreement,butwhichthelawtreatsasiftheywere
8. Examples:AsellshishousetoBforcertainconsideration.Itisacontract.Theconsumerspurchase
the goods and services from the shopowners . Example : A is a lunatic. He has some property.
BsonofA,metanaccident.MovedbythepitiableconditionoftheboyB, XspendsRs.1,000/for
Bstreatment.XcanclaimthisamountfromAandhisproperty.

(iv)Generaldamageandspecialdamage

Giveninexplanationofgeneraldamagesandspecialdamagesinpageno.40

(v)ContingentContractandWageringContract

1.A contingent contract has beendefined as acontract to do or not to do something, ifsomeevent

collateraltosuchcontract doesordoes nothappen.Acontingentcontractis widerinscope.Awager
is a promise to pay money or money's worth on the happening or nonhappening of an uncertain
event.

2.A contingent contract thusincludes a wager.In otherwords awageringagreementisacontingent

agreement(contract).A contingentcontractneednotnecessarilybeawager.Thuswecansaythatall
wageringagreementsarecontingentbutallcontingentcontractsarenotwager.

3. In a contingent contract mutual promises are not necessary. Example : A promises B to pay Rs.
1,000 if a ship does not return. Here A is making a promise to pay but B is not making a similar
promise to pay A. thus there is no mutuality of promises in a contingent contract. In case of a
wagering agreementpromisemust bemutual. Example : InwageringagreementAagreestopayB20
rupees if it rains on Monday and if itdoesnot rain B will pay 20 rupees to A.In theabove example
there is mutualityof agree mentbutthismutualityofpromisesisnotnecessaryincaseofacontingent
contract.

4.In a contingent contract there isanindependentinterest.Example .Agetshishouseinsured.Itisa

contingent contract as A has independentinterest in thiscase. In a wagering agreement there is no
independent interest apart fromthe money to be won orlost.Example .ApromisestopayRs.100to
BifitrainsonMonday.ItisawageringagreementasAhasnoindependentinterest.

5. In a contingent contract determination of an uncertain event is not the sole condition. In a

wageringagreementdeterminationofanuncertaineventisthemainconditionofthecontract.

47

6
.Acontingentcontractisvalid.Awageringagreementisvoid/illegal.

Q.ExplainDoctrineofsuperveningimpossibility.
(2014)
ACCORDING to Section 56, an agreement to do an act impossible in itself is void (for example, an
agreement to discover treasure by magic). Supervening impossibility or illegality refers to the
intrusion or occurrence of an unexpected event or change of circumstances beyond the
contemplation of theparties;sucheventorchangeofcircumstancesmustbesofundamentalas tobe
regarded by law as striking at theroot of contract as a whole or the basisof thecontract no longer
exists.

Subsequent impossibility in the UKis referred to as Doctrine of Frustration.A contract isdeemed to

havebecomeimpossibleofperformanceand,thus,voidunderthefollowingcircumstances:

a)destructionofthesubjectmatterofthecontract;

b) by death or permanent incapacity of the parties (like insanity) where the contract is personal in
nature;

c)superveningimpossibilityorillegality,involvingactionscontrarytolaworpublicpolicy;

d)outbreakofwar,warrestrictions(avoidanceoftradingwithalienenemy,andsoon);

e)impositionofgovernmentrestrictionorordersoracquisitionbygovernment;and

f)nonexistenceornonoccurrenceofaparticularstateofthings.

Apart fromthe above circumstances, impossibility does not dischargeapersonfromthecontract.He

whoagreestodoanactshoulddoitunlessimpossibilityarisesinanyofthewaysmentionedabove.

Exceptions: Difficulty of performance, commercial impossibility, strikes and lockouts, civil

disturbances, riots, failure of one of the objects when contract is entered into for several objects,
default or failure of a third person on whose word the promisor relied, increase in the cost of
performance, arenotcoveredbythedoctrineofsuperveningimpossibility,andtherefore thecontract
isnotdischarged.

Q.ExplainQuantummerit.(2014)
Quantum Meritmeans"Asmuchasearnedordeserved","asmuchasis merited".Theprincipleoflaw
provides for payment of compensationunder certain circumstances, to a person who has begun the
work but could not complete it and he himselfis notat default, he can claim remuneration forthe
work he has already done under the contract. The action of Quantum Meruit is allowedin Indian
CourtsunderSection70oftheContractAct.Theclaimofquantummeritarisesinthefollowingcases:

48

1.Whenacontractisdiscoveredtobevoid:

When a agreement is discovered to be void or when acontractbecomes void, any person whohas
received any advantage under such agreement or contract is bound to restore it, or to make
compensationforit,tothepersonfromwhomhereceivedit. (Section65).

Example: A contracts with B to deliver to him 200 kg of rice before 1st

April. Adelivers 130 kg only
before the day, and noneafter.B retains the 130 kg afterthe first ofApril. He is boundtopay A for
them.

2.Wheresomethinghasbeendonenongratuitously:

Where work is done or goods delivered by a person without an intention to do sogratuitously, and
the benefit of the same isenjoyedby theother party, the latter is boundtomake compensationto
theformerinrespectof,ortorestore,thethingsodoneorsodelivered.

For example , X forgets certain goods at Y's house. He had no intention to leave them with him
gratuitously.Yusesthosegoodsforhispersonalbenefit.XcancompelYtopayforthosegoods.

3.Wherethecontractisdivisible:

Where acontract isdivisible, andapartytothecontracthasdoneapartofhisobligation,hemaysue

onquantum merit.Thisruleapplieseventhoughthepartyclaimingonquantummeritis himselfguilty
ofbreachofcontract.

Example: A engages B to install 10 TVs to be supplied by A within 31st

March 6pmin Bsofficefora
totalremuneration ofRs. 10000. A supplies7 units and B installsthem tothesatisfactionofAwithin
time limit agreed upon byA and B.Bcanrecoveronquantummeruitfortheworkhehasdoneunder
thecontractasthecontractisdivisible.

4.Whenonepartyabandonstoperformthecontract.

Example: A engages B to write a book to be published. When he had written part ofthe bookthe
defendants abandoned the project and repudiated the contract. B can recover under quantum
meruit,fortheworkhehasdoneunderthecontract.

5.Whenanindivisiblecontractiscompletelyperformedbutbadly.

Example: A agrees to decorate Bs flat for a lump sum of Rs. 500000. A finishes the work but B
complained of faultyworkmanship.ItcostsBRs.50000toremedythedefects.AcouldrecoverfromB
thedifference,i.e.,Rs.450000(Hoeningvs.Isaacs)

Doctrineof'quantummeritis,however,subjecttothefollowingtwolimitations:

49

1
. In a contract which isnotdivisible into partsandalump sumof money is promised to bepaidfor
thecompletework,partperformancewillnotentitlethepartytoclaimanypayment.

2. A person, who himself is guilty of breach of contract, cannot be allowed to claim any payment
underthedoctrineofquantummerit.

Q.ExplainReciprocalPromise.
According to Sec. 2(f),
Promises which form the consideration or a part ofconsideration foreach
otherarecalledreciprocalpromises.

Anagreement may consistof either(a) a promisesupported by considerationgiven,or(b)apromise

supportedbyanotherpromise.

In the latter case, when an agreement is supported by another promise, it will be a reciprocal
promise. Thus, inreciprocal promiseseach partygives a promise for a promise.Reciprocal promises
areofthefollowingtypes:

1.Orderofperformanceofreciprocalpromises:(Section52)

Wheretheorderinwhichreciprocalpromisesareobeperformedisexpresslyfixedbythecontract,
theyshallbeperformedinthatorder.Andwheretheorderisnotexpresslyfixedbythecontract,they
shallbeperformedintheorderinwhichthenatureoftransactionrequires.
Example: AandBcontractedthatAshallconstructBshouseatafixprice.Inthiscasethenatureof
contractrequiresthatAspromisetoconstructthehousemustbeperformedbeforeBspromiseto
payforit.ThusAmustfirstconstructthehouseonlythenhecanclaimthepricefromB

2.Mutualandindependentreciprocalpromise:

Wheneach partyperformshis promiseindependently and irrespectiveof the factwhethertheother

party has performed, or is willing to perform his promise or not, the promises are mutual and
independent.

Example: X agrees Y to supply milkdaily, while Yagrees topaythe price of milk every month.Both
thesearemutualandindependentpromises.

3.Conditionalanddependentreciprocalpromises:(section54)

When the performance of a promise by one party depends upon theprior permission of the other
party,itwillbeaconditionalanddependentpromise.

Example:

50

X promises to construct Ys house, provided that Y supplies cement and bricks. This will be a
conditional and dependent promise.Here, XneednotperformthepromiseifYfailstosupplycement
andbricks.

4.Mutualandconcurrentorsimultaneousreciprocalpromise:(section51)

Thisisthestatewhentwocontractsaretobeperformedsimultaneously.

Example:

Allcashsalesare examplesofsimultaneousorconcurrentpromises,asdeliveryofgoodsandpayment
ofpricetakeplacesimultaneously

Q.ExplainAlternatePromise
Alternative promise,one branch being illegal. In the case ofanalternativepromise, onebranchof
which is legal and the other illegal, the legal branch alone can be enforced. In the case of an
alternative promise,one branch ofwhich is legal and the otherillegal, the legal branch alone canbe
enforced."

Illustration A and B agree thatA shall pay B 1,000 rupees,for whichB shallafterwards deliver toA
either rice or smuggled opium. A and B agree that A shall pay B 1,000 rupees, for which B shall
afterwards deliver to Aeither riceorsmuggled opium." Thisis a valid contract to deliverrice, anda
void agreementastotheopium.Thisisavalidcontracttodeliverrice, andavoidagreementastothe
opium."

Q.ExplainPublicPolicy.
Anagreement isunlawfulifthe court regards itas opposedtopublicpolicy.ThetermPublicPolicyin
its broadestsense meansthatsometime the courtswill, on considerations of publicpolicy, refuseto
enforce a contract. The normal function of the courts is to enforce contracts; but consideration of
publicinterestmayrequirethecourtstodepartfromtheirprimary functionandtorefusetoenforcea
contract. Interpretation of the concept of public policy is the function of the court and not of the
executive.

Itis not enough that the terms of contracthavebeenbroughttotheknowledgeoftheotherpartyby

a sufficientnoticebefore thecourt is enteredinto,it is also necessary that the termsofthecontract
themselves should be reasonable. If the terms of the contract are unreasonable and opposed to
public policy, theywillnot beenforced merely becausetheywereprintedonthereverseofabillor a
receipt or have been expressly orimpliedlyagreeduponbetweentheparties.Oneoftheleadingcase
ofpublicpoliciesare:

The consideration or object of an agreementis lawful, unless The considerationor object ofan
agreementis lawful, unless" it isforbidden bylaw;orisofsuchanaturethat,ifpermitted,itwould
defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or

51

property of another; orthe Court regards it as immoral, or opposedto

publicpolicy
.Ineachofthese
cases, theconsideration or objectof an agreement is saidtobe unlawful.Every agreement of which
theobjectorconsiderationisunlawfulisvoid.Illustrations

(a) A agrees to sell his house to B for 10,000 rupees. Here, Bs promise to pay the sum of 10,000
rupeesis the consideration forAs promisetosell the house and As promise to sell thehouseisthe
consideration for Bs promisetopay the 10,000rupees. These arelawfulconsiderations.(a)Aagrees
to sell his house to B for 10,000 rupees. Here, Bs promise to pay the sum of10,000 rupees is the
consideration for As promise to sell thehouseandAs promisetosellthehouseistheconsideration
forBspromisetopaythe10,000rupees.Thesearelawfulconsiderations."

(b) Apromises to pay B 1,000 rupees at theend of six months,ifC, who owesthat sumtoB,failsto
pay it. B promises to grant time toCaccordingly.Here,thepromiseofeachpartyis theconsideration
forthe promise of theother party, and they are lawful considerations. (b) A promisestopay B1,000
rupeesat the endof six months, ifC,whoowesthat sumtoB,failsto payit.Bpromisestogranttime
to C accordingly. Here, the promise of each party is theconsideration for the promise ofthe other
party,andtheyarelawfulconsiderations."

Caselaws:CentralInlandWaterTransportCorporationLtd.VBrojoNath

Q.ExplainAnticipatoryBreachActualbreachofcontract
AnticipatoryBreachofContract:

It occurs when prior to the due date of performance, the promisor absolutely refuses or disables
himselffrom theperformance of his obligations. In other words,itisadeclarationby onepartyofhis
intention not to perform his obligations under the contract. Thus, the anticipatory breach is the
premature destruction of the contract, i.e., the repudiation of the contract before due date of
performance.

Example:

X contracted to supply to Y 100 pieces of spark plugs on 15thDecember2005. But beforethe due
dateof performance (i.e.,15thDecember),XinformedYthatheisnotgoingtosupplythesparkplugs
at all. On Xs refusal to supply the goods,the anticipatory breach ofthecontractoccurs.AndYputan
endtothecontract.

This doctrineofanticipatorybreachiscontained
in Section39oftheIndian ContractAct,whichreads
asunder:

Wherea party toacontracthasrefusedtoperform ordisabledhimselffrom.performinghispromise

in its entirety,the promisee may put an end to thecontract, unlesshe has signified,by words or by
conduct,hisacquiescenceinitscontinuance.

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Consequences:

In case of an anticipatory breach of the contract, the aggrieved party may exercise either of the
followingtwooptions:

1.Hemaytreatthecontractasdischargedandbringanimmediateactionfordamages.

2.Hemaytreatthecontractasoperativeandwaittillthetimeofperformancearrives.

Thus, the option of bringing the action lies with the aggrieved party. He may bring an immediate
actionorwaittillthetimeforperformancearrives.Ifhetreatsthecontractoperativeandwaitstillthe
timeofperformance,theconsequenceswillbeasunder

(1)The party who has committed the anticipatorybreachof contractmayperformhispromisewhen

thetimeforperformancearrives,andtheotherpartywillbeboundtoaccepttheperformance.

(2)The party who has committed the anticipatorybreachof contract mayalsotaketheadvantageof

any subsequent eventwhichdischarges the contract. Sometimes, whilethecontractisoperative,the
contract is discharged duetosubsequentimpossibilityorfrustration.Insuchcases,thepartyguilty of
breach may take theadvantage of such discharge ofthe contract.And theother partyloseshisright
tosuefordamages.

Example:

X agreed to sell his horse to 7on1 st December, 2005. But beforethis date. X informed Ythathe
wouldnotsell hishorseatall.However,Ydidnotaccepttherefusalandkeptthecontractalivetill1st
December,2005.

Thehorse diedbefore this date.In thiscase, thecontract is discharged bythe deathof thehorseon
the ground ofimpossibility ofperformance. X cantake advantageofthisevent,andYcannotrecover
anydamagesformXforthebreachofthecontract.

ActualBreachofContract:

Itoccurs when on the duedateofperformanceorduringtheperformanceapartyfailstoperformhis

obligations.Thus, the actual breach of contract may bediscussed under the followingtwoheads:(I)
Actualbreachofcontractontheduedateofperformance:

Sometimes,onthe due dateof performance, one partyfailstoperformhisobligations.Insuchcases,

the other party is discharged from the performance of his obligations and canhold the guilty party
liableforthebreachofcontract.

Example:

53

Xagreed to sell his car toYon1stJune.Buton1stJuneXrefusedtosellthe cartoY.OnXs refusalto

sellthecar,thereoccurredabreachofthecontract.AndYcanholdXliableforthebreachofcontract.

But sometimestheparty,whohasfailedtoperformthecontractonduedate,subsequentlyexpresses
his willingness to perform the same.In such cases,whether hecan perform thecontractornotwill
depend upon the fact whetherornotthetimewasthe essenceofthecontract(i.e.,whetherthetime
wastheessentialconditionfortheformationofthecontract)

If the time was the essence ofthe contract,the failure to perform thecontractwithin the specified
time resultsin breach of the contract.And if the time was not the essenceofthecontract,the other
partymayacceptperformanceandclaimcompensationfordelayedperformance.

(II)Actualbreachofcontractduringitsperformance:

Sometimes,one party performs his obligations under thecontractandtheotherpartyfailsorrefuses

toperformtheseobligations.Itisanactualbreachofcontractduringitsperformance.

And sometimes, one party, no doubt, performs his obligations but not strictly according to the
contract.It isalso an actualbreachofcontract.Thistypeofbreachofcontractoccurswhentheparty,
performingthecontract,commitsabreachoftheessentialconditionstocontract.

However, the breach of nonessential terms does not discharge the contract. It only entitles the
aggrievedpartytoclaimdamagesfromthedefaultingparty.

Example:

X a shoe manufacturer, contracted with Y a dealer in shoes, to supply him 500 pairs of shoes at a
certainprice.The shoes were to be deliveredininstallments.Afterthe supplyof200 pairsofshoes,Y
told X that no more shoes arerequired.Inthis case,the breachofcontractwascommittedduringthe
performanceofthecontract.

Q.ExplainTendertreatedasavalidperformance.
Tender is offer to perform ones obligation. Undersection38,whereapromisorhasmadeanofferof
performance tothepromiseeandtheofferhasnot beenaccepted, thepromisorisnotresponsiblefor
nonperformance, nor does hethereby losehisrightsunderthecontract.So,whereapromisoroffers
to perform his obligation, but promisee refuses to accept it, then tender (i.e., promisors effort to
perfprm hiobligation) tantamount to actual performance and a valid tenderdischargesthepromisor
from all the responsibilities of performing contract without losing his rights under the contract. A
tender,forthevalidperformanceofthepromisemustsatisfythefollowingessentialconditions:

1.Itmustbeunconditional

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2. it mustbemadeatapropertimeandplace,andundersuchcircumstancesthatthepersonthatthe
person to whomitismadehasareasonableopportunityofascertainingthatthepersonbywhomitis
madeisableandwillingthereandthentodothewholeofwhatheisboundbyhispromisetodo.

3. if theoffer is an offertodo deliver anything to the promisee, the promisee musthavereasonable

opportunityofseeing thatthethingofferedisthethingwhichthepromisorisboundbyhispromiseto
deliver.

Thustenderisanattemptedperformance.

An offer to one of the several joint promises has the same legalconsequences as an offertoallof
them.

Example: A contracts to B at his warehouse on 1st

March 2015, 100 bales of cottonof a particular
quality. A brings thecottonstoBs warehouseontheappointedday,undersuchcircumstancesthatB
gets a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality
contractedfor,andthatthereare100bales.Thisisavalidtender.

Q.ExplainNovation
Section62ofTheIndianContractAct,1872 setsout thegeneralparametersfornovation.TheSection
readsinpertinentpartasfollows:

Effect of novation, rescission and alteration of contract If the parties to a contract agree to
substituteanewcontractforit,ortorescindoralterit,theoriginalcontractneednotbeperformed.

Illustration: (a) A owes money to B under a contract. It is agreed between A, B andCthat B shall
thenceforthaccept C as his debtor, instead of A. Theold debt ofA to B isat an end,andanewdebt
fromCtoBhasbeencontracted.

It is to be noted
that Section 62 speaks of substitution of a new debtor, creditor, contract, etc.in
placeofanoldone.Theessentialfeatureofnovationofcontractisthatwhenacontractissubstituted
the rights under theoriginal contractarerelinquishedorreplacedbythenewcontract.Illustration(a)
to Section 62 indicatesthatone of the requisites of such novation is theagreementofalltheparties
tothenewcontract.

Ineverynovationtherearefouressentialrequisites:

(1)Apreviousvalidobligation;

(2)theagreementofallthepartiestothenewcontract;

(3)theextinguishmentofoldcontract;and

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(4)thevalidityofthenewone

Anovationisnewcontractualrelation.Itisbaseduponanewcontractbyallthepartiesinterested

Q.ExplainRecessionofcontract .
Incontractlaw,rescissionhasbeendefinedastheunmakingofacontractbetweenparties.Rescission
is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the
positioninwhichtheywerebeforetheyenteredintoacontract(thestatusquoante.

Rescission is anequitableremedyandisdiscretionary.Acourtmaydeclinetorescindacontractifone
party has affirmed thecontractby his action 1 or a thirdpartyhasacquiredsomerightsortherehas
been substantial performance in implementing the contract. Furthermore, because rescission is
supposedtobeimposedmutuallyupon bothsidestoacontract, thepartyseekingrescissionnormally
mustoffertogivebackallbenefitsheorshehasreceivedunderthecontract(an"offeroftender")

The injured party may rescind thecontract by givingnotice tothe representor.However, this isnot
always necessary as any act indicating repudiation,
eg notifying the authorities, may suffice.(Car &
UniversalFinancevCaldwell)

Q.ExplainRestraintofTradeaccordingtoIndiancontractact.
Section27"Agreementisrestraintoftrade,void"saysthus,

Everyagreement by which anyoneisrestrainedfromexercisingalawfulprofession,tradeorbusiness

of any kind, is to that extentvoid.Saving of agreement not to carryonbusinessofwhichgoodwillis
sold.

Exception .One who sells the goodwill of a business may agree with the buyer to refrain from
carryingonasimilarbusiness,withinspecifiedlocallimits,solongasthebuyer,oranypersonderiving
title to thegoodwill fromhim, carrieson alikebusiness therein, provided thatsuchlimitsappearto
theCourtreasonable,regardbeinghadtothenatureofthebusiness.

MahbubChander vs Raj Koomar1874 Twoshopkeeperenteredintoanagreementthat onewillpay

the other to close his business in thatlocality. One closed the shop but the otherrefused to pay.It
washeld thatthe agreementwas void. Since thewordingsof section 27 do not donotusetheword
"absolute"asinsection28,eveniftherestraintispartial,itwillbevoid.

CollusionbetweenBiddersandTenderers

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Ingeneral mutualarrangements betweenbidderssoasto affectthefinalbidpricearenotconsidered

inrestraintoftrade.

Mohd Isack vs Daddepaneni AIR1946However,nowsuchmattersshouldbeconsideredwithrespect

toMonopoliesandRestrictiveTradePracticesAct1969,whichforbidssuchcollusions.

FreedomofPress

Anagreement that puts a restraintof press not topublishontheconductofa personisvoidbecause

itisopposedtopublicpolicy.

RestrictiononLease

Vidya Wati vs Hans RajAIR 1993 Lesor of aproperty can put a restrictiononwhatkindofbusiness
canbedoneontheproperty.Itisanoutletofcarryingbusinessandnotarestraint.

Exceptions

1.Saleofgoodwill

2.Partnership : Under Partnership Act, partnersof a firmmayrestrict their mutualliberty todoany

tradeother thanwithintheirfirm.Anoutgoingpartnermayalsoberestrictedfromcarryingonsimilar
tradeforaperiodoftime.

3. Trade Combinations : Companies doing business in the same field may regulate their trade
practices for example opening and closing time of business even if they marginally put restraint.
However,restrainonemploymentarenotallowedindisguiseofregulation.

Korus Mfg vs Koluk Mfg 1959 Companies made an agreement that they would nothireanybody
whohasworkedintheothercompanyinpast5yrs.Heldvoid.

4.Exclusivedealingagreements

5.Restraintuponemployees

NiranjanShankar Golkari vs Century Spinning andManufacturingCo1976 Acompanywasoffered

collaboration by a foreign company on the condition that they will maintain complete secrecy. A
person wasemployedinthe companyontheconditionthathewillnotworkforanyothercompanyin
thesamebusinessfor5years.SCheldtheagreementvalid.

Q.ExplainFiduciaryRelations
whereonepersonplacescompleteconfidenceinanotherinregardtoa particulartransactionorone's
general affairs or business. The relationship is not necessarily formallyor legallyestablished as ina

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declaration oftrust,butcanbeoneof moralorpersonalresponsibility,duetothesuperiorknowledge

andtrainingofthefiduciaryascomparedtotheonewhoseaffairsthefiduciaryishandling.

Example: A enters intoanagreementgrantingtoBtheexclusiverightstocertainintellectualproperty

in exchangeforBsagreementtouseandexploittheintellectualpropertyandpayAaroyaltyorother
sums derived from such use andexploitation. The intellectual property can be rightstorecordings,
musicalcompositions,books,software,trademarksandotherIP.

B failstoeither use or exploit the same or failstoproperly payAforsuchuseandexploitation.

For the sakeof simplicity of thisarticle,weshallassumethatBisinbreachoftheagreemententitling
Atocompensatory damages(i.e.damages for unpaid royaltiesand othersums). Theissueis,alsofor
the sake of this article, whether or not there is a fiduciary relationship created by the agreement.
Thedifferenceissignificantsinceifsuchafiduciaryrelationshipwascreated,thenAwouldpossiblybe
entitled to punitive damages in addition to the compensatory damages. Punitivedamages are not
awardableinbreachofcontractclaims.

Q.Explainunilateralmistake
UnilateralMistake

If only one party is under Confusion, it is called Unilateral Mistake. In case of Unilateral Mistake
Contractcannotbeavoided.

For example: A wants to sell away his house at aprice of$6000. He makes anoffer to B and by
mistakehe quotes a priceof$5000towhichBgiveshisacceptance.HereonlyAisundermistake.Itis
UnilateralmistakeandContractcannotbeavoided.

ExceptionsforUnilateralMistake

ThefollowingaretheexceptionswherecontractcanbeavoidedthoughthereisUnilateralMistake.

Mistake as toidentity of Parties

: Ifonlyone party isunderConfusionwithregardtoidentificationof
party,Contractcanbeavoided.

Acase on this pointis

LakeVsSimons . In this case AisagoldmerchantandBisadacoitwoman.
She convinces A that she is wifeof Charles and thusobtains some Ornamentson Credit basis. Here
only A is under mistake. There after B sells away those ornaments to C and goes out of which.
Afterwards A comes to know that hisOrnaments are at C. HeSuesCtogetthemback.Courtdecides
that Contractcan be avoided and hence C isunderobligationtoreturntheseOrnamentsto A.Saleof
goodsActsaysthatsellercannotpassonabettertitlethatwhathehimselfhas.

Mistake as to Nature of Contract

: If only one party is under confusion with regard to nature of
Contract,thenalsoContractcanbeavoided.

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 Acase onthis pointis FasterVsMachillon .InthiscaseAisagentlemanandheisnotgoodatsight.

B is A`s relative. On one day B bringsabond to A and askshim to sign, saying that itis Surety form.
But it is actually bill ofexchange. Believing thatit is Suretybond, Asigns.Here mistake can beseen
onlyfromthesideofAonly.UnderthisexceptionCourtdecidesthatAcanavoidpaymentofthebill.

Q.ExplainUnjustenrichment
Theprincipleofunjustenrichmentissimplystatedas:

Aperson who has been unjustlyenrichedattheexpenseofanotherisrequiredtomakerestitutionto

the other. The meaning of this line is that if a person has gained benefit from other person and
therebycausinglosstotheotherperson,then thepersonwhohasgainedisrequiredtoreimbursethe
plaintiffequaltotheamountofbenefitreceivedbythedefendant.

Illustration: Aowns a house and heapproaches Bwho is abuilder toconstruct a garageforB.There

contract is only for the construction of garage. After constructing the garage, B also constructs
driveway outside the house of A. Then A becomes liable to pay the expenses incurred by B in the
makingofdriveway.

RemediesavailableforUnjustEnrichment

According to Section 68, if a person, incapable of entering into a contract or anyone whom he is
legallybond to support,is suppliedbyanotherpersonwithnecessariessuitedtohisconditionsinlife,
the person who has furnished such supplies is entitledtobe reimbursed from the property of such
incapableperson.

For example
, AsuppliesB,alunatic,withnecessarieswhicharenecessaryforhissurvival.Aisentitled
tobereimbursedfromtheBsproperty

According to Section 69, apersonwhoisinterestedinthepaymentofmoneywhichanotherisbound

bylawtopay,andwhothereforepaysitisentitledtobereimbursedbytheother

According to Section 70, where a person lawfully does something for another person, or delivers
anything to him, not intending to do so gratuitously, and such other person enjoys the benefit
thereof, thelatter isboundtomakecompensationtotheformerinrespectof,orto restore,thething
sodoneordelivered.

For example, if A,atradesman,leavesgoodsatBshousebymistake.Btreatsthegoodsasiftheyare

ofhisownandusesthatgood.ThenBisrequiredtoorboundtopaytheamounttoAforthegoods.

According to Section 71, a person who finds goods belonging to another and takes them into his
custodyissubjecttothesameresponsibilitiesasthatofbailee.

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According to Section 72, apersontowhom money has been paid, or anything delivered, bymistake
orundercoercion,mustrepayorreturnit.

For example, A andBjointlyowe100rupeestoC,AalonepaystheamounttoCandBnotknowingof

thisfact,pays100rupeesoveragaintoC.ThenCisboundtorepaytheamounttoB

TheSpecificReliefAct,1963
Q.Defineinjunction.Whatarethetypesofinjunctions.
A court order by which an individual is required to perform, or is restrained from performing, a
particularact.Awritframedaccordingtothecircumstancesoftheindividualcase.

Aninjunctioncommandsanactthatthecourtregardsasessentialtojustice,oritprohibitsanactthat
is deemed to be contrary to good conscience. It is an extraordinary remedy, reserved for special
circumstancesinwhichthetemporarypreservationofthestatusquoisnecessary.

Aninjunctionisordinarilyand properlyelicitedfromotherproceedings.Forexample,alandlordmight
bring anaction against a tenantfor waste, inwhich the righttoprotectthelandlord'sinterestinthe
ownership ofthe premises isat issue. Thelandlordmight apply to the courtforaninjunctionagainst
thetenant'scontinuingharmfuluseoftheproperty.Theinjunctionisanancillaryremedyintheaction
againstthetenant.

Injunctive reliefis nota matter ofright,butitsdenialiswithinthediscretionofthecourt.Whetheror

notaninjunctionwillbegrantedvarieswiththefactsofeachcase.

The courts exercise their power to issue injunctions judiciously, and only whennecessityexists.An
injunction isusually issued only incases where irreparable injurytothe rightsof anindividualwould
result otherwise. It must be readily apparent to the court that someact has been performed, or is
threatened, that will produce irreparable injury to the party seeking the injunction. An injury is
considered irreparable when it cannot be adequately compensated by an award of damages. The
pecuniary damage that wouldbe incurred from thethreatened action need notbegreat,however.If
a loss canbe calculated in termsofmoney,thereisno irreparableinjury.Theconsequentrefusalbya
court to grant an injunction is, therefore, proper. Loss of profits alone is insufficient to establish
irreparableinjury.Thepotentialdestructionofpropertyissufficient.

Injunctive reliefis nota remedythat is liberally granted, and,therefore,a court will always consider
any hardship that the parties will sustain by the grantingorrefusal of an injunction. Thecourt that
issues an injunction may, in exercise of its discretion, modify or dissolve it at a later date if the
circumstancessowarrant.

TypesofInjunction

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Preliminary Apreliminaryortemporary injunctionis aprovisionalremedythatisinvokedtopreserve

the subject matter in its existing condition. Its purpose is to prevent dissolution of the plaintiff's
rights.Themainreasonforuseofapreliminaryinjunctionistheneedforimmediaterelief.

Preliminary or temporary injunctionsare not conclusiveastothe rights of the parties, and they do
notdeterminethe merits of acaseordecide issuesin controversy. They seek to preventthreatened
wrong, furtherinjury, and irreparable harm or injusticeuntilsuchtimeastherightsofthepartiescan
be ultimately settled. Preliminary injunctive relief ensures the ability of the court to render a
meaningfuldecision and servestopreventachangeofcircumstancesthatwouldhamperorblockthe
grantingofproperrelieffollowingatrialonthemeritsofthecase.

A motion for a preliminary injunction is never granted automatically. The discretion of the court
should be exercised in favor of a temporary injunction, which maintains thestatusquountilthefinal
trial. Suchdiscretionshouldbeexercisedagainstatemporaryinjunctionwhenits issuancewouldalter
the status quo. For example, during the Florida presidentialelection controversy in 2000, the
campaign of george w. bush asked a federal appeals court for a preliminary injunction to halt the
manual counting of ballots. It sought a preliminary injunction until the U.S. Supreme Court could
decide on granting a permanent injunction. In that case, Siegel v. Lepore,234F.3d 1163 (11thCir.
2000). the U.S. Courtof Appeals for theEleventhCircuit refused to grant the injunction, statingthat
the Bush campaign had not "shown the kind of serious and immediate injury that demands the
extraordinaryreliefofapreliminaryinjunction."

Preventive Injunctions An injunction directinganindividualtorefrainfromdoinganactispreventive,

prohibitive, prohibitory, or negative. This type of injunction preventsa threatened injury, preserves
the status quo,orrestrains the continued commissionof an ongoing wrong, butitcannotbeusedto
redressaconsummatedwrongortoundothatwhichhasalreadybeendone.

TheFloridavotecount in the presidentialelectionof2000againservesasagoodexample.There,the

Bush campaign sought preventive injunctions to restrain various counties from performingrecounts
after the Florida results had been certified. The Bush campaign did not attempt tooverturn results
already arrived at, but rather attempted to stop new results from coming in. In turn, the Gore
campaign attempted to obtain a preventive injunction to prevent Florida's secretary of state from
certifyingtheelectionresults.

MandatoryInjunctionsAlthoughthecourtisvestedwithwidediscretiontofashioninjunctiverelief,it
is also restricted to restraint of a contemplated or threatened action. It also might compel Specific
Performance of anact.Insuch acase,itissuesamandatoryinjunction,commandingtheperformance
of apositive act.Because mandatory injunctions are harsh, courtsdonotfavorthem,andtheyrarely
grant them. Such injunctionshave beenissuedtocompeltheremovalofbuildingsorotherstructures
wrongfullyplaceduponthelandofanother.

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Permanent Injunctions A permanent or perpetualinjunction is onethatis grantedby the judgment

that ultimately disposes of the injunction suit, ordered at the time of final judgment. This type of
injunction must be finalrelief.Permanentinjunctionsareperpetual,providedthattheconditionsthat
produced them remain permanent. They have been granted to prevent blasting upon neighboring
premises, to enjoin the dumping of earthorother material upon land, and to preventPollution ofa
watersupply.

Anindividualwho has been licensedby thestate to practice a profession may properlydemandthat

others in the same profession subscribe to the ethical standards and laws that govern it. An
injunction is a proper remedy to prevent the illegal practice of a profession, and the relief may be
sought by either licensed practitioners or a professional association. The illegal Practice of Law,
medicine,dentistry,andarchitecturehasbeenstoppedbytheissuanceofinjunctions.

Acts that are injurioustothepublichealthorsafetymaybeenjoinedaswell.Forexample, injunctions

havebeenissuedtoenforcelawsprovidingfortheeradicationofdiseasesinanimalsraisedforfood.

Thegovernment has theauthority toprotectcitizensfromdamagebyviolenceandfromfearthrough

threatsandintimidation. Insomestates,aninjunctionistheproperremedytobartheuseofviolence
againstthoseassertingtheirrightsunderthelaw.

Acts committed without Just Causethat interferewiththe carrying on ofabusinessmaybeenjoined

if noother adequate remedy exists. ATradeSecret, forexample, may beprotectedby injunction.An
individual's right ofpersonal privacy may be protectedby an injunctionifthereisnootheradequate
remedy,orwhere aspecific statutory provision for injunctiverelief exists. Anindividualwhosename
or picture is used for advertising purposes without the individual's consent mayenjoin its use. The
theory is that injunctive relief is proper because of a celebrity's unique property interest in the
commercialuseofhisorhernameandlikeness(i.e.,theirrightofpublicity).

Restraining Orde rs A Restraining Order is granted to preserve the status quo of the subjectof the
controversy until the hearingon an application fora temporaryinjunction.A Temporary Restraining
Order is an extraordinary remedy of short duration that is issued to prevent unnecessary and
irreparable injury. Essentially, such an order suspends proceedings until an opportunity arises to
inquire whether an injunction should be granted. Unless extended by the court, a temporary
restrainingorderceasestooperateupontheexpirationofthetimesetbyitsterms.

Contempt

Anindividualwhoviolatesan injunctionmaybepunishedforContemptofcourt.Apersonisnotguilty
of contempt,however, unless heorshe can bechargedwith knowledge oftheinjunction.Generally,
an individual whois charged with contemptis entitledtoatrial or a hearing. Thepenaltyimposedis
withinthediscretionofthecourt.Ordinarily,punishmentisbyfine,imprisonment,orboth.

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Q.whenaninjunctioncanbegrantedtoenforceanegativeagreement?
42.Injunctiontoperformnegativeagreement

Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an
affirmative agreementtodoa certainact,coupledwithanegativeagreement,express orimplied,not
to do a certain act,the circumstance that thecourt is unable to compel specific performance of the
affirmative agreement shall not preclude it from granting an injunction to perform the negative
agreement:

Providedthattheplaintiffhasnotfailedtoperformthecontractsofarasitisbindingonhim.

Illustrations

(a) A contracts to sell to B for taka 1,000 the goodwill of a certain business unconnected with
businesspremises, andfurther agrees not to carryon thatbusinessin Chittagong. B pays A the taka
1,000butAcarriesonthe businessinChittagong.TheCourtcannotcompelAtosendhiscustomersto
B,butBmayobtainaninjunctionrestrainingAfromcarryingonthebusinessinChittagong.

(b) A contracts to sell to B the goodwill of a business. Athen sets up similarbusinesscloseby B's
shop and solicits his oldcustomers to deal with him. This is contrary tohis implied contract, and B
may obtain an injunctiontorestrain Afromsolicitingthecustomers,andfromdoinganyactwhereby
theirgoodwillmaybewithdrawnfromB.

(c) A contracts with B to sing for twelve months as B's theatre andnottosinginpublicelsewhere,B
cannot obtain specific performance of the contract to sing, but he is entitled to an injunction
restrainingAfromsingingatanyotherplaceofpublicentertainment.

(d) BcontractswithAthathewillservehimfaithfully fortwelvemonthsasaclerk.Aisnotentitledto

a decreeforspecificperformanceofthecontract.ButheisentitledtoaninjunctionrestrainingBfrom
servingarivalhouseasclerk.

(e)A contracts withBthat,inconsiderationoftaka1,000tobepaidtohimbyB onadayfixed,hewill

not set up a certain business within a specified distance. B fails to pay the money. A cannot be
restrainedfromcarryingonthebusinesswithinthespecifieddistance.

Q.Whencananinjunctionberefusedbycourt?
Aninjunctioncannotbegranted

(a) tostayajudicialproceedingpending attheinstitutionofthesuitinwhichtheinjunctionis sought,

unlesssuchrestraintisnecessarytopreventamultiplicityofproceedings;

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(b)tostayproceedingsinaCourtnotsubordinatetothatfromwhichtheinjunctionissought;

(c)torestraintpersonsfromapplyingtoanylegislativebody;

(d) to interferewiththe public dutiesof any department of theGovernment,orwiththe sovereign

actsofForeignGovernment;

(e)tostayproceedingsinanycriminalmatter;

(f)topreventthebreachofacontracttheperformanceofwhichwouldnotbespecificallyenforced;

(g) to prevent,on thegroundof nuisance,anact ofwhich itis notreasonably clear that itwillbe a
nuisance;

(h)topreventacontinuingbreachinwhichtheapplicanthasacquiesced;

(i) when equallyefficaciousrelief cancertainly beobtained by any other usualmode of proceeding

exceptincaseofbreachoftrust;

(j) when the conduct of the applicant on his agents has been such as to disentitle him to the
assistanceoftheCourt;

(k)wheretheapplicanthasnopersonalinterestinthematter.

Illustrations

(a) A seeks an injunctiontorestrain hispartner,B,fromreceivingthepartnershipdebtsandeffects.

Itappears thatA had improperly possessedhimself ofthe books of the firm and refused B accessto
them.TheCourtwillrefusetheinjunction.

(b) Amanufactures and sells crucibles,designating them as "patent plumbago crucibles",though, in

fact, they have never been patented. B pirates the designation. A cannot obtain an injunction to
restrainthepiracy.

(c) A sells an articlecalled"MexicanBalm,"statingthatitiscompoundedofdiversrareessences,and

has sovereign medicinal qualities. Bcommences tosell a similararticle towhichhegivesanameand
description such as to lead people intothe belief that they arebuyingA'sMexicanBalm.AsuesBfor
an injunctiontorestrainthesale.BshowsthatA'sMexicanBalmconsistsofnothingbutscentedhog's
lard.A'suseofhisdescriptionisnotanhonestoneandhecannotobtainaninjunction.

Q.DistinguishbetweenTemporaryandperpetualinjunction.
1. A temporaryinjunction is to continue untila specified time, oruntilthefurtherorderoftheCourt.
It is granted at any period of suit whereas a permanent injunctioncan only be granted by a decree
madeatthehearinganduponthemeritsofthesuit.

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2. A temporary injunction is provisional in its nature. It cannot conclude the right. But Permanent
injunction finally determines the rights of the parties and forms part of the decree made at the
hearing.

3. A temporaryinjunction can begranted atanystage ofthesuitWhereasaperpetualinjunctioncan

onlybegrantedatfinalstage/hearingofthesuit.

4. It may be granted to the plaintiff onhis making out a prima facie case in his support. Whereas a
perpetualinjunctionisgranteduponthemeritsofthesuit.

5 A temporary injunction can be granted at the discretion of the Court, and upon certain
circumstances ofthecasebuta permanent injunctioncanonlybegranteduponthemeritsofthecase
andatfinalhearingofthesuit.

6.Atemporaryinjunctionisamereorderontheotherhandaperpetualinjunctionisadecree.

7. The Court,who issuesit, can withdraw it,at anystage, untilafinalorderordecreeisordered.But

thecourtwhichissuesapermanentinjunctioncannotwithdrawit,afteritsdeclaration

8. A temporary injunction is temporary nature as its name itself implies. Whereas a perpetual
injunctionispermanentinnature,finaldecreeasitsnameitselfimplies.(Perpetual=Permanent).

9. Generallya temporaryinjunction is granted after hearingfrom theplaintiffsideonly. Defendantis

not heard. Sometimes the defendant is also heard. But Ingranting aperpetual injunction theCourt
musthearboththepartiesofthesuit.

10. Acquiescence, delay or laches on the part of the plaintiff cannot entitle him to obtain the
temporaryinjunction. Where as in permanent injunctionthe plaintiffmaygivesufficientreasonsfor
delay,laches,andacquiescenceoncertaincircumstances,ifitsatisfies

Q.Mandatoryinjunctionscanbegrantedinrarecases
Although the court is vested with wide discretion to fashion injunctive relief, itis also restricted to
restraint ofa contemplated orthreatenedaction.It alsomightcompelSpecificPerformanceofanact.
In such a case, it issues a mandatory injunction, commanding the performance of a positive act.
Because mandatory injunctionsare harsh, courtsdonotfavorthem,andtheyrarelygrantthem.Such
injunctions havebeenissued tocompeltheremovalofbuildingsorotherstructureswrongfully placed
uponthelandofanother.

Thenatureofmandatoryinjunctions

As summarized above, a mandatoryinjunction compelsa party to which itis directedtocarry out a

specific obligation or perform a specified act.Where one isdealing with a perpetual injunction, the
case law would suggest that, in theoryat least,thereis little difference as to whether the nature of
the injunction is prohibitory or mandatory. In practice, however, a mandatory order imposes an
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additionaldegreeofhardshiporexpenseonadefendant,whichcaninfluenceajudgewhenexercising
his or her discretion. Asput inthe English authority ofRedlandBricksLtdvMorris,"itisajurisdiction
to [be] exercised sparingly and with caution but, in the proper case, unhesitatingly. However,
different considerations apply where the mandatory injunction is sought on an interlocutory basis.
Thegrant of aninterlocutory injunction issubjecttoits owntest forconsideration bythecourt,(2)
namely,whether:

thereisafairandbonafidequestiontobetried;
damageswouldbeanadequateremedy;and
thebalanceonconveniencefavoursthegrantofaninjunction.

Thetest foraninterlocutory injunctionwhichismandatoryinnatureismoreonerousthanisthecase

for aninterlocutory injunctionwhich is prohibitoryin nature.This is well established in thecase law
and has been reaffirmed in the recent authority ofO'Brien vDromoland Castle Owners Association
Inc.

Q.Conditionsinwhichaninterimorderofinjunctioncanbegranted.
During the course of a legal dispute, itmaybe necessary fora party to seekatemporary remedy in
the form of an injunction. By their nature, interim injunctions are aseparate actionwithin a larger
claim, but they can beessential incircumstanceswhere apartywishes to preserve thestatus quo
oftenensuringthatmoneyremainsinabankaccountuntilthedisputehasbeenresolved.

Aninterim injunction isoften sought where the otherparty,ifunrestrained,might causeirreparable

or immeasurable damage bycontinuing theconduct which hasledtothedispute.Interiminjunctions
maybecomepermanentiftheclaimantissuccessfulattrial.

In general terms, when exercising its discretion to issue an injunction, the court will need to be
persuaded that there is a good reason why the respondent's rightsshould berestrictedbefore the
court knows whether the applicant will succeed at trial. The applicant does not have to prove its
underlying claim at the injunction hearing, but it must show that it has a good arguable case. The
court will not prejudge the litigation, but mustbe persuaded that there is a serious questionto be
considered.Ifthisisestablishedthenthecourthasthediscretiontogranttheinjunction.

Incommercialdisputesacourtcanmakeorderstorestrainactualorthreatened:

publicationofobviousanddefamatorylies;

infringementofcopyright,trademarkorotherintellectualpropertyrights;

wrongfuluseofconfidentialinformationandtradesecrets;

ongoingbreachofcontract;

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activitieswhichconstituteanuisance;and

dealingswithparticularcustomersorsuppliers.

Breach of the injunction can amount to a contempt of court, which is punishable by a fine or
imprisonment. In an emergency, an injunction canbe obtainedvery quickly without giving notice to
the other party. Urgency arises most often where the other party would take advantage if given
notice of the application or where further damage would result from any delay in making the
application.Freezinginjunctionsareoftenobtainedinthisway.

AdvantagesandDisadvantages

Injunctions are, by their nature, urgent and timeconsuming, even in clearcut cases. Preparation,
witness and documentexamination, service, furtherhearingsandenforcement areallessentialparts
of the process. The costs of makinganapplication foraninjunctioncanthereforebehigh,althougha
large amount ofthe workmayultimately havebeen necessary for thepurposeof thelitigationitself
and the injunctionprocess may lead to a resolution ofthe underlying dispute without theneedfora
trial.

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