INDIAN CONTRACT ACT,

1872

A Contract is an agreement enforceable at

law.

AGREEMENT + ENFORCEABILITY AT LAW

By: Hetal Jani

 Certain Principles
The directions of the State, expressed as law,
have to be followed. Beyond these directions,
however, individuals are free to do what they like.
Agreements must be performed by the
consenting parties.
The benefit that each party to a contract receives
during the mutual exchange is called
consideration. Only agreements which have
consideration for both the parties are to be
enforced. Such agreements are called contracts.
 Contd.
Contracts tainted with illegality or similar vice
are not to be enforced.
In the cases where a contract is not
performed, a money equivalent can be
worked out for the losses incurred by the
injured party. The infringing party should be
made to pay this amount to the injured party.
 The constituents of the working of
contracts can be identified as:
Formation of agreements
Consideration
Setting aside of bad contracts
Damages and Compensation
ALL AGREEMENTS
ARE CONTRACTS
BUT ALL
CONTRACTS ARE
NOT AGREEMENTS
 Agreement & Contract
Distinguished
1. Offer + Acceptance 1. Agreement +
=Agreement. Enforceability =Contract.
2. Agreement may not 2. Contract necessarily
create any legal obligation. creates a legal
All agreements are not obligation. All contracts
contracts are agreements.
Essentials of Valid Contract
PROPOSAL & ACCETANCE (AGREEMENT =OFFER +
ACCEPTANCE)
INTENTION TO CREATE LEGAL RELATIONSHIP
LAWFUL CONSIDERATION
CAPACITY OF PARTIES
FREE AND GENUINE CONSENT
ENFORCEABLITY BY LAW- LAWFUL OBJECT
AN AGREEMENT NOT DECLARED VOID
CERTAINTY
POSSIBILITY OF PERFORMANCE
LEGAL FORMALITIES
Agreements
Every promise and every set of promises, forming the
consideration for each other is an agreement.
Types:
Valid Agreement: Enforceable by Law.
Void Agreement: Not enforceable by Law.
Enforceable Agreement: An agreement enforceable by Law is a
contract.
Voidable Agreement: A voidable agreement is one which is
enforceable by Law at the option of one or more of the parties
thereto but not at the option of the other or others.
Unenforceable Agreement: Valid in Law but is incapable of proof
because of some technical defect.
Illegal Agreement: Something against the Law itself.
 Types of Contract
Voidable Contract Types on the base of
Void Contract validity
Unenforceable Contract
Executed Contract Types on the base of performance
Executory Contract
Express Contract
Implied Contract
Quasi Contract Types on the base of formation
Contingent Contract
Speciality Contract
Simple Contract
Statutory Contract
Contracts of Records
 Contd
Executed Contract: Where both the parties have
performed their obligations.
Executory Contract: Where both the parties have
yet to perform their obligations.
Express Contract: When the terms of a contract are
reduced in writing or are agreed upon by spoken
words at the time of its formation.
Implied Contract: When the proposal/acceptance of
any promise is made otherwise than in words, it is
said to be implied which leads to an implied
contract.
 Contd
Quasi Contract: Certain relations resemble
those created by a contract. Certain
obligations which are not contracts in fact but
are so in the contemplation of law.
Contingent Contract: is a contract to do or not to
do something, if some event, collateral to such
contract, does or does not happen.
Speciality Contract: It is a contract which is in
writing, signed, sealed and delivered by the
parties called contract under seal.
 Contd
Simple Contract: it is the contract which is
not under seal.
Statutory Contract: When all or some of
the terms and conditions of a contract are
statutory, it is called statutory contract.
Contracts of Records: A contract of record
is one which is taken on the records of a
Court, like judgment of a court.
Proposal / Offer

WHEN A PERSON SIGNIFIES TO ANOTHER

HIS WILLINGNESS TO DO OR TO ABSTAIN
FROM DOING ANYTHING, WITH A VIEW
TO OBTAINING THE ASSENT OF THAT
ANOTHER TO SUCH ACT OR
ABSTINENCE HE IS SAID TO MAKE A
PROPOSAL.
Parties To Contract

A person making a proposal or offer is called

promisor or proposer or offerer
A person to whom the proposal is made is
called the offeree
A person who accepts the proposal or offer
his assent to it is called the promisee
Essentials or Rules of a Valid Offer
1. Offer is the expression of willingness, but
there must be something in the nature of a
request
2. An offer must be intended to create and be
capable of creating legal relations.
3. A mere statement of intention does not
constitute a binding promise even though a
person to whom it is made acts upon it.
4. A statement of price is not an offer.
(Harvey Vs. Facey)
Harvey Vs. Facey

Will you sell us your Bumper Hall Pen?

Telegraph lowest cash price- answer paid.
(H to F)
Lowest price for Bumper Hall Pen $900.
(F to H)
We agree to buy Bumper Hall Pen for the
sum $900 asked by you. (H to F)
RULES Contd

4. The offer must be made to a definite person.

5. The terms of offer must be certain and unambiguous
6. An offer can be express or implied from the
circumstances.
7. An offer must be communicated to an offeree-(Lalman
Vs. Gauri Dutt).
8. An offer may be conditional and offer lapses when the
condition precedent is not accepted.
9. An offer should be distinguished from invitation to offer
(Window Display & Advertisements)
Various Offers

GENERAL OFFER SPECIFIC OFFER

(Mrs. Carlill vs. Carbolic Smoke Ball Co.)
COUNTER OFFER
AUCTION SALES AND TENDER
STANDING OR OPEN OFFER
Acceptance

When the person to whom a proposal is made

signifies his assent there to, the proposal is
said to be accepted. A proposal when
accepted becomes a promise.
Essentials
1. It must be absolute and unqualified.
2. It must be expressed in some usual and
reasonable manner or in manner prescribed.
3. Mental acceptance is not sufficient in law i.e.,
Acceptance must be communicated to the
offerer.
4. Acceptance of the proposal Special Terms.
5. Acceptance of the proposal need not always
be expressed in words- but silence cannot be
assumed to be acceptance.
Essentials Contd
6. Acceptance must be by a certain person.
7. If the act is done in ignorance of the
proposal, it is no acceptance of the
proposal.
8. Acceptance must be given within a
reasonable time.
9. Acceptance must be given before the offer
lapses or is revoked or is withdrawn.
10. It cannot precede offer.
Communication of Offer

Communication of offer is complete when it

comes to the knowledge of the person to
whom it is made.
Communication of Acceptance

As against the PROPOSER- When it is put

into a course of transmission to him, so as to
be out of the power of the Acceptor.
As against the ACCEPTOR- When it comes
to the knowledge of the Proposer.
 Time of Communication of
Revocation of Offer
Time of revocation of proposal- A proposal may be
revoked at any time before the communication of
its acceptance is complete as against the proposer,
but not afterwards.
Time for revocation of acceptance- An acceptance
may be revoked at any time before the
communication of the acceptance is complete as
against the acceptor, but not afterwards.
Consideration

When at the desire of the promisor, the

promisee or any other person (i) has done, or
abstained from doing or (ii) does or abstains
from doing, or (iii) promises to do or to
abstain from doing something such act or
abstinence or promise is called a
consideration for the promise.
 Essentials of a Valid Consideration
Consideration must move at the desire of the promisor.
Consideration may move from the promisee or any other
person Stranger to a contract.
Consideration may be past, present and future.
Consideration may be an act of doing or abstaining from
doing something or it may be an act or forbearance or
abstinence.
Consideration need not be adequate.
Consideration must be real and not illusory.
Consideration must not be unlawful, illegal, immoral or
opposed to public policy.
Performance of existing obligation is no consideration.
Forbearance to sue is a good consideration.
No Consideration, No Contract- When an
agreement without consideration is valid?
(Exceptions)
Agreement made on account of natural love
and affection
Promise to compensate for past voluntary
service
Promise to pay time-barred debt
Others Agents, Gifts, deed under seal,
Gratuitous Promise
 Doctrine of Privity
STRANGER TO A CONTRACT CANNOT SUE
(Dunlop Pneumatic Tyre Co. Ltd. Vs.Selfridge & Co.
Ltd.)
Exceptions:
1. Trust or charge
2. Marriage settlement, Partition or other Family
arrangements.
3. Assignment of Contract
4. Agents
5. Covenants Running through land
Unlawful Object

UNLAWFUL
OBJECT

AGREEMENTS AGREEMENTS
AGREEMENTS
THAT THAT
THAT
ARE AGAINST ARE ILLEGAL
ARE UNLAWFUL
PUBLIC POLICY IN NATURE
Unlawful Object / Consideration

It is forbidden by law; or
It is of such nature that, if permitted, it would
defeat the provisions of any law; or
Is fraudulent; or
Involves or implies injury to the person or
property of another; or
The Court regards it as immoral or opposed
to public policy.
Agreements against Public Policy
1. Trading with an enemy
2. Marriage brokerage agreements
3. Agreements interfering with administration of
justice:
1. Interference with the course of justice
2. Champerty and maintenance contracts
3. Stifling prosecutions
4. Agreements tending to create interest against duty
7. Agreements as regards sale of public offices
8. Agreements tending to create monopoly
9. Agreements in restraint of marriage
Agreements against Public Policy
Contd
11. Agreements in restraint of trade-
Exceptions-
Sale of Goodwill
Partners agreements
Trade Combinations
Service Contracts
12. Agreements in restraint of legal proceeding
13. Agreement in restraint of Parental rights
14. Agreement restricting personal liberty.
15. Agreements interfering with marital duties.
16. Agreements to defraud creditors or revenue authorities
17. Agreements not to bid
18. Non-compliance of Courts order
Illegal Agreements
ALL ILLEGAL AGREEMENTS ARE VOID
/UNLAWFUL BUT ALL VOID/UNLWFUL
AGREEMENTS ARE NOT NECESSARILY
ILLEGAL

Effects of Illegality:
1. Illegal agreements are void- no action can be taken
for recovery of money paid or for breach
2. Collateral transactions to illegal agreement to are
tainted with illegality
3. In cases of equal guilt in an illegal agreement, the
position of defendant is better than that of the plaintiff.
CAPACITY TO CONTRACT
Who are Competent to Contract ?

Every person is competent to contract

(i) Who is of the age of majority according to
the law to which he is subject;
(ii) Who is of sound mind; and

(iii) Who is not disqualified from contracting by

any law to which he is subject.
 PARTIES
NOT
COMPETENT
TO CONTRACT

UNSOUND DISQUALIFIED
MINORS
MINDS BY LAW
Position of a Minor in Contract
1. Minors contract is absolutely void
2. No specific performance of a minors contract
3. Ratification of a minors contract
4. If he has received any benefit under a void
agreement, he cannot be asked to compensate or
pay for it.
5. He can always plead minority.
6. His parents/guardian are/is not liable for the
contract entered into by him.
7. He cannot be adjusted insolvent.
Minors contracts are void-
Exceptions
Promisee or Transferee
Agency
Partnership
Necessaries (goods supplied or services
rendered)
 CONTRACTS BY PERSONS OF
UNSOUND MIND
Contracts by lunatics
Contracts by idiots
Contracts by drunkards
 Parties Disqualified By Law

Contracts by Corporations.
Contracts by convicts.
Contracts by insolvents.
Contracts by foreign Sovereigns, their diplomatic
staff and accredited representatives of foreign
States.
Aliens.
Contracts by Married Women & Pardanashin
Women.
FREE CONSENT
Free Consent

Consent is said to be free when it is not

caused by
(I) Coercion,
(II) Undue Influence,
(III) Fraud,
(IV) Misrepresentation,
(V) Mistake.
AD-IDEM

CONSENSUS AD-IDEM IS TWO OR MORE

PERSONS ARE SAID TO CONSENT WHEN
THEY AGREE UPON THE SAME THING IN
THE SAME SENSE.
Coercion
Coercion is committing, or threatening to
commit, any act forbidden by the Indian Penal
Code, or the unlawful detain, or threatening to
detain any property, to the prejudice of any
person whatever, with the intention of causing
any person to enter into an agreement.
It includes fear, physical compulsion and
menace of goods.
Essentials of Coercion
For an act to be forbidden by the Indian Penal Code, there must
not be merely a threat, but the act should be such as to be
punishable under the IPC.
May proceed from anybody, even a person who is not party to
the contract & be directed against even a member of his
household, not necessarily the other contracting party.
Coercion includes physical compulsion, fear and even menace to
goods. Consent must be caused by unlawfully detaining or
threatening to detain any property.
The act must have been done or threatened with the intention
of causing any person to enter into an agreement.
It does not matter whether the Indian Penal Code is or is not in
force in the place where the coercion is employed.
Effect of Coercion

It is a voidable contract.
Money paid or anything delivered must be
returned.
Aggrieved party may rescind within a
reasonable time.
Undue Influence

A CONTRACT IS SAID TO BE INDUCED BY

UNDUE INFLUENCE WHERE THE
RELATIONS SUBSISTING BETWEEN THE
PARTIES ARE SUCH THAT ONE OF THE
PARTIES IS IN A POSITION TO DOMINATE
THE WILL OF THE OTHER AND USES
THAT POSITION TO OBTAIN AN UNFAIR
ADVANTAGE OVER THE OTHER.
Presumptions as to Undue Influence
A person is deemed to be in a position to
dominate the will of another-
Where he holds a real or apparent authority over the
other (Master-Servant)
Where he stands in a fiduciary relation (relation of
trust & confidence) to other (father-son, solicitor-
client)
Where he makes a contract with a person whose
mental capacity is temporarily or permanently
affected by reason of age, illness or mental/bodily
distress (medical attendant-his patient)
Essentials of Undue Influence

One of the parties is in a position to dominate

the will of the other;
The dominating party uses that position to
obtain unfair advantage over the other,
The act of undue influence must range under
one or the other heads of coercion or fraud.
Burden of Proof: shall lie on the person in a
position to dominate the will of the other.
Rebutting the presumption
The presumption can be rebutted by showing
that-
Full disclosure of fact was made by the
influencing party to the party alleged to have
been influenced at the time of entering into the
contract.
The price was not adequate.
That the weaker party was in receipt of
independent advice, before making the
promise.
 Difference Between Coercion &
Undue Influence
COERCION UNDUE INFLUENCE
1. Consent is obtained 1. Consent is obtained
by threat of an by the dominating will
offence. Person is of the other
forced to give his 2. Consent is given in
assent. good belief, but under
2. It is mainly of physical moral influence
character 3. It is of moral character
3. It is of violent 4. It is most subtle in
character character
Misrepresentation
Misrepresentation is a false statement which the
person making it honestly believes to be true or
which he does not know to be false. It also
includes non-disclosure of a material fact or
facts without any intent to deceive the other
party.
 There is misrepresentation
When a person positively asserts that a fact is
true when his information does not warrant it
to be so, though he believes it to be true.
When there is any breach of duty by a person
which brings an advantage to the person
committing it by misleading another to his
prejudice.
When a party causes, however innocently, the
other party to the agreement to make a
mistake as to the substance of the thing which
is the subject of the agreement.
 Essentials:
It must be
a representation of material fact.
Made before the conclusion of the contract with a view to
inducing the other party to enter into the contract.
Made with the intention that it should be acted upon by
the person to whom it is addressed.
Actually have been acted upon and must have induced
contract.
Wrong but the person who made it honestly believed it to
be true
Made without any intention to deceive the other party.
Must not need to be made directly to the plaintiff.
Consequences:
The aggrieved party can
Avoid or rescind the contract except:
If he after becoming aware of
misrepresentation/fraud, takes benefit under the
contract or in some other way affirms it,
If restitutio in integrum of the parties is not possible
If a third party has acqquired rights in the subject-
matter of the contract in good faith and for value.
Accept the contract but insist that he shall be
placed in the position in which he would have
been if the representation made had been true.
Fraud
Fraud means and includes any of the following acts
committed by (a) a party to a contract: (b) with his
connivance; or (c ) by his agent, with intent to deceive
another party or his agent, or to induce him to enter
into the contract-
(i) The suggestion, as to a fact, of that which is not true
by one who does not believe it to be true;
(ii) The active concealment of a fact by one having
knowledge or belief of the fact;
(iii) a promise made without any intention of performing it;
(iv) Any other act fitted to deceive;
(v) Any such act or omission as the law specially declares
to be fraudulent
Essentials of Fraud
There must be a representation or assertion and it must be
false.
The representation must relate to a material fact which exists
now or existed in the past.
The representation must have been made before the
conclusion of the contract with the intention of inducing the
other party to act upon it.
The representation/statement must have been made with the
knowledge of its falsity or without belief in its truth or
recklessly, not caring whether it is true or false.
The other party must have been induced to act upon the
representation or assertion.
The other party must have relied upon the representation and
must have been deceived.
Effects of Fraud

The contract is voidable

He may insist that the contract shall be
performed
He may rescind the contract within a
reasonable time
He has a right to sue for damages
Contract not necessarily
voidable - exceptions
Where the consent of a party to a contract was caused by
misrepresentation or fraud and that party could discover
the truth by ordinary diligence.
Where a party enters into a contract in ignorance of the
misrepresentation or fraud.
Where, before the contract is avoided, the interests of
third parties intervene. But it is important that the third
party acquires interest in the subject matter for value and
act bona fide.
Where a party to a contract whose consent was caused
by misrepresentation/fraud, cannot be put in the position
in which he would have been if the representation made
had been true.
Silence as to facts
Mere silence is not fraud: exceptions
Where the circumstances of the case are
such that, regard being had to them, it is the
duty of the person keeping silence to speak.
Where silence is, in itself, equivalent to
speech.
Mistake
It is an erroneous belief about something.
Two Types: Mistake of law, Mistake of fact
Mistake of Law:
Of the country ignorantia non excusat, contract
cannot be avoided.
Of foreign country treated as mistake of fact,
agreement becomes void.
Mistake of Fact
A bilateral mistake
A unilateral mistake
Bilateral mistake
Both the parties are under a mistake as to a
matter or fact essential to the agreement.
Essential conditions:
Mistake must be mutual
It must relate to a matter or fact essential to the
agreement
Cases are:
Mistake as to subject-matter: existence, identity,
quality, quantity, title, price
Mistake as to possibility of performance: physical
impossibility, legal impossibility
Uniteral mistake

Only one of the parties is mistaken regarding

the subject matter or in expressing or
understanding the terms or the legal effect of
the agreement.
Exceptions:
Mistake as to the identity of the person
contracted with
Mistake as to the nature of the contract
 FLAW IN CONSENT
FLAW IN CONSENT

COERCION UNDUE INFLUENCE MISREPRESENTATION MISTAKE

FRAUDULENT OR INNOCENT OR
MISTAKE OF LAW MISTAKE OF FACT
WILFUL UNINTENTIONAL

MISTAKE OF
BILATERAL UNILATERAL
THE COUNTRY

MISTAKE OF AS TO AS TO POSSIBILITY OF AS TO NATURE OF

AS TO PERSON
FOREIGN COUNTRY SUBJECT MATTER PERFORMANCE CONTRACT

EXISTENCE PHYSICAL

IDENTITY LEGAL

QUALITY

QUANTITY

TITLE

PRICE
 DISCHARGE OF CONTRACT

DISCHARGE

BY
BY IMPOSSIBILITY PROMISEE
BY REFUSING BY
BY BREACH OF FAILING BY BY BY
BY TENDER OF AGREEMENT
BY DEATH OF PERFORMANCE TO OFFER OPERACION MATERIAL LAPSE OF
PERFORMANCE PERFORMANCE OR BY
CONTRACT (SUPERVENING FACILITIES OF LAW ALTERATION TIME
CONSENT
IMPOSSIBILITY) FOR
PERFORMANCE

DESTRUCTION
CHANGE
OF LAW
DEATH OR
PERSONALBY NOVATION
INCAPACITY
BY REMITTANCE
ACTUAL BY INSOLVENCY
ANTICIPATORY OUT-BREAK
BY WAIVER
BREACH BYMERGER
OF WAR BY RESCION
NON-EXISTENCE
OF
PARTICULAR
STATE OF
THINGS
How is the contract discharged?
By performance
By death
By refusing tender of performance
By breach of contract
By impossibility of performance
By agreement or by consent
By promisee failing to offer facilities for
performance
By operation of law
By unauthorized material alteration of a contract
By lapse of time.
 By performance:
If both the parties to the contract have performed
what they have agreed to do, the contract is
discharged.
By death:
Where a contract is personal in character, or where
personal skill or ability is involved, death of promisor
discharges the contract.
By refusing tender of performance
If a party offers to perform his promise and the offer
has not been accepted by the other party, the
promisor is not responsible for non-performance.
 By breach of contract:
If a party to a contract has refused to perform his part of the
promise, it is breach of contract.
It can be Actual breach or Anticipatory breach
By impossibility of performance:
When the performance of a contract becomes subsequently,
it becomes void & discharged.
Cases of impossibility:
Destruction of the object necessary for performance of
the contract.
Change of law.
Death or personal incapacity.
Out-break of war.
Non-existence of particular state of things which forms
the basis of the contract.
 By agreement or by consent:
Contract can be terminated by mutual express or implied
agreement between the parties.
Novation: If the parties to a contract agree to substitute a
new contract for it, or to rescind or alter it.
Accord & satisfaction: Where a lesser sum is actually paid
than what is due under an existing contract, the new
contract is called accord and the actual payment is called
satisfaction.
Remission and waiver: When a party to the contract
abandons or waives his rights, contract is discharged
Rescission: When a person at whose option a contract is
voidable rescinds it, the other party thereto need not
perform his promise.
 By promisee failing to offer facilities for
performance: If the promisee refuses to afford
the promisor reasonable facilities for the
performance of his promise, the contract is
dischared.
By operation of law:
By insolvency: On a person being adjudicated
insolvent, he is realised from all his debts and
liabilities.
By Merger: Merger of superior right into an inferior
right.
 By unauthorized material alteration of a
contract: In case of material alteration by one
party to the contract without the consent of
the other party, the contract is discharged.
By lapse of time.
PERFORMANCE OF
CONTRACT
 WHO MUST PERFORM:
The parties to a contract must either perform, or offer to perform their respective promises.
promisor or joint promisors, agent, third person, legal representative.

OFFER TO PERFORM OR TENDER OF PERFORMANCE:

The promisor offers to perform his obligation under the contract at the proper time and place
but the promisee does not accept the performance. This is known as attemptea performance
or tender. Tender of performance is equivalent to actual performance.
Consequences:
Promisor is not responsible for non-performance.
He does not lose his rights under the contract.
Entitles him to sue promisee for the breach of contract.

Essentials :

1. IT MUST BE UNCONDITIONAL
2. MADE BY PROMISSOR OR HIS REPRESENTATIVE
3. IT MUST BE AT A REASONABLE TIME & PLACE
4. IT MUST HAVE REASONABLE OPPORTUNITY TO PROMISEE OF ASCERTAINING
5. IT MUST BE FOR THE WHOLE OF THE PROMISE
6. IN CASE OF JOINT PROMISES, AN OFFER TO ONE IS OFFER TO ALL OF THEM
7. IT MUST BE MADE TO THE PROMISEE OR HIS DULY AUTHORISED AGENT
Reciprocal Promises
Promises which form the consideration or
part of the consideration for each other are
called reciprocal promises
Classifications:
Mutual and independent each party must perform
his/her promise independently and irrespective of the fact whether
the other party has performed or is willing to perform his promise
or not, the promises are mutual and independent.
Conditional and dependent where the performance of
promise by one party depends on the prior performance of the
promise by other party.
Mutual and concurrent where the promises of both the
parties are to be performed simultaneously.
Rules regarding performance
of reciprocal promises
To be simultaneously performed
Order in which reciprocal promises are to be
performed
In case of dependent promises where one
cannot be performed till the other is
performed
Effects, where a party prevents performance
To do certain things legal and also other
things illegal.
APPROPRIATION OF
PAYMENT
Where payment of debt to be discharged
indicated.
Where payment of debt to be discharged is
not indicated.
Where debtor does not intimate & the creditor
fails to appropriate.
BREACH OF
CONTRACT

By: Hetal Jani

 Remedies of Breach of Contract
Suit for specific performance
Suit for injunction
Suit for damages, for the loss sustained
Quantum Meruit
 Contd
Suit for specific performance:
The court directs the party committing the breach of
contract to perform the promise according to the terms
of the contract.
Suit for injunction:
It is an order of the Court directing a person to do or
refrain from doing some act, which is the subject-matter
of the contract and which a party undertakes to do or
not to do.
 Contd
Suit for damages, for the loss sustained:
Injured party can claim damages for the loss
caused by breach of contract.
Damages are given by way of restitution and as a
monetary compensation to the injured party.
The aggrieved party can recover the actual loss
caused to him and not the exemplary or unusual
damages.
 Contd
TYPES OF DAMAGES
Compensatory Damages:
Damages which are calculated to actually
compensate or make up the loss suffered by the
party.
Nominal Damages:
Damages which naturally arise in the usual course of
things from the breach are called nominal damages.
 Contd
Exemplary Damages:
Damages which are due to remote or indirect
consequences.
They are granted only in case for injured feelings,
mental pain, suffering etc.
Special Damages:
Damages arise on account of unusual circumstances.
These are recoverable only when they are brought to
the knowledge of the defendant.
 Rules for ascertaining damages
When a contract has been broken, the party who suffers
by such breach is entitled to receive from the party who
has broken the contract, compensation for any loss or
damage caused to him thereby, which naturally arose in
the usual course of things from such breach or which the
parties knew, when they made the contract to be likely to
result from the breach of it.
Such compensation is not to be given for any remote and
indirect losses or damages sustained by reason of the
breach.
 Contd
In estimating the loss or damage arising from
a breach of contract, the means which
existed of remedying the inconvenience
caused by the non-performance of the
contract must be taken into account.
QUASI CONTRACTS
certain relations resembling those created by
contracts
A QUASI CONTRACT RESTS ON THE GROUND OF EQUITY THAT
A PERSON SHALL NOT BE ALLOWED TO ENRICH HIMSELF
UNJUSTLY AT THE EXPENSE OF ANOTHER.

THE LAW OF QUASI-CONTRACT IS THE LAW OF RESTITUTION.

TYPES:

1. SUPPLY OF NECESSARIES

2. PAYMENT BY AN INTERESTED PARTIES

3. OBLIGATION TO PAY FOR NON-GRATUITOUS ACTS

4. RESPONSIBILITY OF FINDER OF GOODS

5. COERCION OR MISTAKE
 Quantum Meruit
Means as much as earned or deserved or as
much as is merited.
A person can under certain circumstances claim
payment for the work done or goods supplied
without any contract or under a contract which is
discharged by the breach of the other party.
It is for work done or services rendered.
 The claim for quantum merit arises when:
An agreement is discovered to be void
Something is done without any intention to do so
gratuitously
There is an express or implied contract to render
services but there is no agreement as to
remuneration
The completion of the contract has been
prevented by the act of the other party to contract
A contract is divisible
An indivisible contract is completely performed but
badly
Wagering Agreement and
Contingent Contract
A wager is an agreement between two parties
by which one promises to pay money or
moneys worth on the happening of some
uncertain event in consideration of the other
partys promise to pay if the event does not
happen.
Contingent contract is a contract to do or not
to do something, if some event, collateral to
such contract, does or does not happen.
 Difference: Wagering
Agreement and Contingent

Contract
WA consists of reciprocal promises whereas a
contingent contract may not contain reciprocal
promises.
WA is essentially of a contingent nature whereas a
contingent contract my not be of a wagering nature.
WA is void whereas contingent contract is valid.
WA is a game of chance. This is not so case of a
contingent contract.
In a WA the future event is the sole determining factor
while in a contingent contract the future event is only
collateral.
 Earnest Money: It is treated as part payment of the price when the
contract is completed.

It represents a guarantee that the contract will be fulfilled or earnest

is given to bind the contract.

It is forfeited when the transaction falls through by reason of the

default or failure of the purchaser.
Security Deposit: It made by a party to a contract with the other
party, as security for guaranteeing due performance of the contract.

It can be forfeited in the case the party neglected to perform his part
of contract.
Advance Money: It is made merely as per payment of the purchase
price agreed upon between the parties.