The Indian Contract Act-1872 The Indian Contract Act, 1872 lays down the law relating

to contracts. It does not lay down a number of enforceable rights and duties, but lays down a number of limiting principles subject to which the parties may create rights and duties for themselves. Definition: Contract: Sec. 2 (h) ‘An agreement enforceable by law is a contract’. To make a contract, there must be (I) an agreement and (ii) the agreement should be enforceable by law. Agreement: Agreement is defined as ‘every promise and every set of promises forming consideration for each other „. A promise is defined as “an accepted proposal.” Thus, every agreement in its ultimate analysis is made of a proposal from one side and its acceptance by the other. To become a contract an agreement must be enforceable by law. Sec. 10 of the Act lays down the condition of enforceability. An agreement becomes enforceable only when it is coupled with obligation. An obligation is the legal bond, which binds the parties to a contract. The obligations springing from agreements should be legal obligations and not moral, social or religious obligations. Essentials of a Valid Contract : All contracts are agreements but all agreements need not be contracts. The agreements that create legal obligations only are contracts. The validity of an enforceable agreement depends upon whether the agreement satisfies the essential requirements laid down in the Act. Section 10 lays down that ‘all the agreements are contracts if they are made by the free consent of the parties competent to contract for a lawful object and are not hereby expressly declared to be void’. The following are the essentials: a) Agreement : An agreement which is preliminary to every contract is the outcome of offer and acceptance. An offer to do or not to do a particular act is made by one party and is accepted by the other to whom the offer is made. Then we say that there is a meeting of the minds of the parties. Such a position is known as consensus ad idem. b) Free consent : The parties should agree upon the same thing in the same sense and their consent should be free from all sorts of pressure. In other words it should not be caused by coercion, undue influence, misrepresentation, fraud or mistake. c) Contractual capacity: The parties entering into an agreement must have legal competence. In other words, they must have attained the age of majority, should be of

sound mind and should not be disqualified under the law of the land. A contract entered into between the parties having no legal capacity is nullity in the eyes of law. d) Lawful consideration: There must be consideration supporting every contract. Consideration means something in return for something. It is the price for the promise. An agreement not supported by consideration becomes a ‘nudum pactum’ i.e., naked agreement. The consideration should be lawful and adequate. However, there are certain exceptions to this rule. e) Lawful object : The object or purpose of an agreement must be lawful. It should not be forbidden by law, should not be fraudulent, should not cause injury to the person or property of another, should not be immoral or against public policy. f) Not expressly declared void: The statute should not declare an agreement void. The Act itself has declared certain types of agreements as void. E.g., agreements in restraint of marriage, trade, legal proceedings. In such cases, the aggrieved party can’t seek any relief from the court of law. g) Possibility of performance: The agreement should be capable of being performed. e.g., Mr. A agrees with Mr. B to discover treasure by magic. Mr. B can’t seek redressal of the grievance if Mr. A fails to perform the promise. h) Certainty of terms: The terms of the agreement should be certain. E.g., Mr. A. agrees to sell 100 tons of oil. The agreement is vague as it does not mention the types of oil agreed to be sold. i) Intention to create legal obligation: Though Sec. 10 is silent about this, under English law this happens to be an important ingredient. Therefore, Indian courts also recognise this ingredient. An agreement creating social obligation can’t be enforced. j) Legal formalities: Indian Contract Act deals with a simple contract supported by consideration. Agreements made in India may be oral or written. However, Sec. 10 states that where the statute states that the contract should be in writing and should be witnessed or should be registered, the same must be observed. Otherwise, the agreement can’t be enforced e.g., Under Indian Companies Act, the Memorandum of Association and Articles of Association must be registered.

Classes of Contracts: On the basis of enforceability, contracts may be classified as follows:

it becomes unenforceable.g. It is to be noted that while all the illegal agreements are void.g. an agreement to commit fraud. The party entitled to affirm or reject it is the aggrieved party. It is right to call illegal agreement. When the aggrieved party avoids the contract. Unenforceable contract: An unenforceable contract is one which is valid but for certain technical reasons such as want of proof.” The person making the proposal is called ‘promisor’ and the person accepting it is called ‘promisee’. he is said to make a proposal. An agreement which ceases to enforceable by law becomes void when it ceases to be enforceable. Offer or Proposal Sec. Such a contract. it is inappropriate to call it void contract. An agreement is illegal when it is against the law of the land. However. though valid in the beginning becomes void subsequently. sometimes it may happen that an agreement which is valid in the beginning may become void subsequently due to various reasons. Void contract: “An agreement not enforceable by law is said to be void. By clearing the technical reasons it can be enforced..’ An agreement void from the beginning is known as ‘Void ab initio’. absence of writing or registration etc. 2 (g). 10. the other party there to need not perform any promise and the party avoiding the contract should restore any benefit he has received under the contract. A void agreement is a nullity in the eyes of law creating no legal rights or obligations. This right of revocation has to be exercised within the reasonable time and before third parties acquire rights under contract. 2 (a) defines offer as follows: “When one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other person to such act or abstinence. an agreement with a minor. expiry of period within which enforceable. crime or one that is opposed to good morals.’ Sec.. Voidable contract: An agreement which is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others is a voidable contract. Therefore. Essentials of a Valid Offer: . such as impossibility of performance or illegality. all void agreements need not be illegal. Then we can’t use the term void contract. Illegal contract: There is nothing like a legal contract or an illegal contract. Then we do refer to the term ‘void contract. E.Valid contract: It is a contract which satisfies all the legal requirements provided for under Sec. E.

is generally accepted as vital to form a legal agreement. In the course of such negotiations one party may make some declarations regarding his intention of doing something. In Carlill Vs Carbolic Smoke Ball Co. A invites Mr. The plaintiff used the smoke mokeball as per the directions but subsequently suffered from influenza. However. B to dinner. Whether the offeror intended to enter into legal obligations or not could be known from the nature of the agreement and the surrounding circumstances. This is so because the courts cannot say what the parties to the contract are to do and whether there is violation of the contract. Mr. A cannot sue Mr. an announcement about the stock of goods for sale. This is not an offer. But the contract is made only with the person who accepts and fulfills the conditions of the proposal. Mr. The test of contractual intention is objective and not subjective.g. b) An offer should be made with an intention of creating legal obligation: This principle of English law though not incorporated specifically under Section 10. An offer may be made to the world at large. ‘An offer need not be made to an ascertained person. B for unconsumed food. it will not make a contract for them out of terms which are indefinite or illusory ‘. B fails to attend. An invitation to offer is not an offer. (1893). It was added that ‘£1000 is deposited with the Alliance Bank showing our sincerity in the matter’. display of goods in shop . The court has to ascertain the intention of the parties. Social. cold or any disease caused by taking cold after having used the ball as per printed directions. all the terms of an offer need not be expressed. but no contract can arise until it has been accepted by an ascertained person‘. In the words of Anson. 2 (a) an offer must be made to a specific person. Mr.. e. Anson expressed ‘The law requires the parties to make their own contract. A tells B ‘I want to sell my car’. An advertisement for tenders for sale of goods by auction. d) A statement of intention and an invitation to offer are not offers: Preliminary negotiations are likely to take place before entering into an agreement. What is considered is not what the parties had in mind but what a reasonable person would think in the circumstances their intentions to be. moral or religious agreements are not legally enforceable. For example. If some of the essential terms of a bargain may not be specified but are capable of being determined by some method other than by a future agreement there will be a good contract between the parties. Such a declaration by itself does not become an offer. She was held entitled to recover the promised reward. a Company offered by advertisement to pay £100 to any one who contacts the increasing epidemic influenza. c ) An offer must be definite and certain: The terms of an offer should not be uncertain and ambiguous.a) An offer may be general or specific: According to Sec.

mere knowledge of a proposal does not amount to communication unless the offeree acquires it with express or implied intention of the offeror. General offers are communicated to public through notice and advertise-ments. However. But as regards reward cases the question arises whether the person performing the conditions of the offer can claim the reward even if he is ignorant of the offer. a letter containing an offer which is never mailed is not an offer even if the contents are known by the offeree in some manner. dry cleaners. catalogue. Therefore. in modern times the buyer of an article is in an unfavourable position. printed forms of agreements known as ’standard form contracts’ are used. are merely invitations to offer or On the other hand if the acceptor knew that there was writing and knew or believed that the writing contained conditions he is then bound by the conditions even though he did not read them. The Court too finds it difficult at times to protect the interest of the weaker party. Gouri Dutt case it was held that knowledge of the offer is essential. public utilities etc. prospectus of a company. A can’t sue B for remuneration since B’s consent can’t be presumed from his silence. Communication is necessary whether the offer is specific or general. It is also difficult to draw up a separate agreement with each individual. The economically weaker party has to accept all such terms and conditions irrespective of whether he likes them or not. . Under Section 4 ‘the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made ‘. landlords. However.g. Therefore the courts have evolved certain methods. Freedom of contract becomes one-sided in the case of agreements with common carriers. The Act does not indicate the mode of communication. loudspeaker announcements etc. When the offer is not communicated silence on the part of the offeree does not amount to consent since he does not have the opportunity to reject the offer. E )An offer must be communicated to the offeree: An offer becomes operative only when it has been communicated to the person to whom the offer is made. price-lists. There can be no acceptance unless there is knowledge of the offer. tailors. The offeror may communicate the offer by choosing any available means.. In Lalman Shukla Vs. When the offer contains special terms and conditions the offeror must communicate all the terms and conditions either before or at the time of contracting in order to bind the acceptor. Such forms contain large number of terms and conditions very often small in print absolving the dominant party of all liability. However. f) The terms and conditions of offer should also be communicated: An agreement is a twosided bargain based on freedom of contract. It is enough if the offeror has done all that can be considered necessary to give notice to the acceptor. E. A works for B without the request or knowledge of B. insurance companies.

A proposal. He can’t say. It produces something which can’t be recalled or undone. Anson has given an analogy of a lighted match stick. it ceases to be valid. In the case of bilateral contracts acceptance must be communicated. c) Acceptance should be communicated: The party accepting the offer must communicate his acceptance to the offeror. Acceptance is not a mental resolve but some external manifestation. They are just two identical or cross offers. 2 (b) “When the person to whom the proposal is made signifies his willingne ss thereto the proposal is said to be accepted. he is deemed to have accepted the offer. The offeror can’t force a contract on . he can’t prescribe the form or time of refusal so as to fix a contract upon the acceptor. when accepted. it is a valid acceptance. 7 (I) states that the acceptance should be absolute and unconditional.” An acceptance turns the offer into a binding obligation. As regards unilateral contracts (e. becomes a promise . for example. However.g) Two identical offers do not make a contract: An offer made by a person may cross a similar one made by another person of course in the course of transit.” By accepting the offer. The acceptor can accept or reject them. Rules Regarding Acceptance: a) An offer can be accepted only by the person to whom it is made: The offeree only has to accept the offer.g. “Acceptance is to an offer what a lighted match is to a train of gunpowder. offer of reward) it is impossible to the offeree to communicate his acceptance otherwise than by performing the contract. Acceptance According to Sec. The acceptance can be communicated in writing or word of mouth or also by conduct. While the offeror can prescribe mode of acceptance. in case authority is given to another person to accept the offer on behalf of the person to whom it is made. b) Acceptance should be unconditional and absolute: Sec. In case it is accepted by any other person no agreement is formed. a qualified or conditional acceptance is nothing but a counter-offer. An agreement does not result from a mere state of mind. the acceptor expresses his willingness to be bound by the terms and conditions of the offer. If it is qualified or conditional.. In fact. though there seems to be identity of mind. Regarding an offer and its acceptance. that if the offeree does not communicate before a given time. The acceptor should accept the offer in toto. h) An offer should not contain any term the non-compliance of which amounts to acceptance: There may be any number of terms and conditions in an offer.

However. Contract by post: No problem arises where there is instantaneous communication of offer and acceptance which is possible when the parties are face to face. [Lalmann Shukla V. But how to determine the point of time when the contract is complete if the parties are at distance by each other ? As regards the point of time when the contract is complete. Where no time limit is prescribed the acceptance has to be within the reasonable time. such a regid rule is not followed in India. Even if he fulfills the conditions mentioned in the offer. the proposer is legally bound by the acceptance effected through postal medium when the letter is prepared. addressed. if he is ignorant of the offer itself. stamped and mailed eventhough it is delayed or lost in transit. He can also waive his right or may ask the offeree to express acceptance by some gesture. Otherwise it will be presumed that the proposer has accepted the deviated acceptance. If the offeree does not signify his assent to the offeror according to the mode prescribed it becomes ‘deviated acceptance’ and strictly speaking it is no acceptance at all. 4) lays down that ‘the communication of an acceptance is complete as against the proposer when it is put in a course of transmission to him so as to be out of the power of the . he can’t give a valid acceptance. Sec. The proposer has the right to prescribe the manner of acceptance. 7 of the Act does not tell that deviated acceptance is no acceptance. Indian Law (Sec. acceptance should be communicated only to the offeror and not to somebody else. In the case of deviated acceptance the proposer may insist for the acceptance in the prescribed manner. f) Acceptance must be given before the offer lapses or is revoked: Where a time limit has been fixed the acceptor has to accept the offer within such time. Under English Law.offeree by fixing the mode of refusal. He may require it to be oral or in writing or to be communicated to him by phone or telephone etc. whether an agreement is provisional or final depends upon the intention of the parties. d) Acceptance should be according to the prescribed form: Unless specified in the offer the acceptance must be in some usual and reasonable manner. g) Provisional acceptance is no acceptance: A provisional acceptance does not make a binding agreement unless final approval is given. Further. He then has to do this within a reasonable time after communication of acceptance to him. An offer once dead can’t be accepted unless there is a fresh offer. Gouridutt]. Once he prescribes the mode of communication later he can’t say that it was insufficient. e) Acceptance must be provoked by offer: The acceptor must be aware of the offer. However. there is fundamental difference between English Law and Indian Law. The offer may be withdrawn before giving final approval.

c) Rejection: By rejecting the offer offeror can terminate an offer. Law does not infringe his freedom of making an agreement with anybody he likes. A proposal is revoked by the death or insanity of the proposer. Contractual Capacity Legal disability of the parties would render the agreement entered into between them unenforceable in a court of law. A counter offer has the same effect as rejection. This rejection may be express or implied. e. an acceptance can’t be revoked. An acceptance is not effective if it is communicated to the legal representatives of the proposer. law seeks to protect their interests from being exploited by unscrupulous persons. Sec. even a desirable person may enter into an agreement. 6 (3) provides that an offer is terminated by the failure of the acceptor to fulfil a condition precedent to acceptance. it can be accepted. 1. B has to comply with this condition if he has to accept the offer. In the absence of any stipulation of time. In fact. While under English Law. death or insanity of the proposer. the offer itself lapses. In case time limit for acceptance is prescribed by the offeror. the acceptor is bound by acceptance the moment the letter is mailed properly. it has to be accepted within a reasonable time depending upon the circumstances of each case. The distinction between English Law and Indian Law lies with regard to the position of the acceptor. Till the acceptance of the offer.. But in case the offeree is ignorant of the offeror’s death. a) Lapse : An offer lapses because of passage of time. offer lapses if not accepted within that time. the offeror can revoke it.00. if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. e) Revocation: The withdrawal of an offer by the offeror is known as revocation. Termination of offer: Following are the circumstances under which an offer is terminated. . under Indian Law the communication of acceptance is complete as against.g. 5 provides that a proposal may be revoked by the proposer at any time before the communication of its acceptance is complete. d) Destruction of the subject matter or illegality : If the thing offered is destroyed or can’t be bought and sold due to operation of law.acceptor. A offers to sell his car to B for Rs. But by declaring certain classes of persons having no contractual capacity. the acceptor only when it comes to the knowledge of the proposer.000 on the condition that B has to show his driving licence to A. as against the acceptor when it comes to the knowledge of the proposer ‘. Communication of acceptance as against the proposer is complete where it is put in the course of transmission to him so as to be out of the reach of the acceptor. b) Failure to fulfill a condition procedent: Sec. In England.

there could be no change in the character or status of the parties. the judges are their counsellors. No liability in contract or tort arising out of contract: A minor is. No estoppel against minor: A minor who has made an agreement by misrepresentation of his age may disclose his real age. II of the Act is silent as regards the legal effects of an agreement entered into by or with a minor. the law should not cause unnecessary hardship to those who deal with minors. In Mohari Bibi Vs. Suppose the minor has sold the goods he can’t be made to repay the value of the goods because that would amount to enforcing a void contract. Where there is no contract.” This section declares following persons to be incompetent: (1) Minors (2) persons of unsound mind and (3) persons disqualified by law to which they are subject. the effects of a minor’s agreements are worked out independently of any contract. excuses their shortcomings and negligences and assists them in their pleadings. A minor who misrepresents his age to obtain a contract cann’t be sued for deceit. There is no estoppel against him. According to Indian Majority Act. if a guardian is appointed by the court or if the minor or his property is under the supervision of a court of wards. This is known as the equitable doctrine of restitution. the jury are their servants and law is their guardian. in law. 2. Where. the age of majority is 21 years. Effects of minor’s agreement: A minor’s agreement is void-ab-initio. he can be compelled to restore it but only so long as the same is traceable in his possession.Definition: Section II lays down that “Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subj ect. incapable of giving consent. Dharmo Das Ghosh case it was held that a minor’s agreement is voidab-initio. however. ‘You cann’t convert a contract into a tort to enable you to sue an infant. 1. Hence. the tort is independent of contract the mere fact that a contract is also involved will not absolve the minor from liability. there should be no contractual obligation on either side. 3.’ This principle has been followed in India. . Hence. Doctrine of restitution: If a minor obtains property or goods by misrepresentating his age. preserves either their rights and estates. Minors: A minor is a person who has not attained the age of majority. Sec. Principles governing minor’s contracts: The law protects minor’s persons. 1875 the age of 18 years is a major. However. In pursuing the above objective.

lodging etc. the class has to be ascertained and then whether a thing is a necessity or not has to be determined. A new contract requires a fresh consideration. Therefore. 68 reads “If a person incapable of entering into a contract or any one whom he is legally bound to support is supplied by another person with necessaries suited to his conditions in life. a person can’t ratify an agreement made by him when he was a minor. What may be necessary for one class may be luxury for another.” The liability is only for necessaries. a contract which was void originally can’t be made valid by subsequent ratification. where the other party was aware of the infancy so that he was not deceived or where the other party was unscrupulous in his dealings with the minor. But what is ‘necessary’ is not defined by the Act. But the court will not compel any restitution by a minor even when he is a plaintiff.. Beneficial contracts: The law that a minor’s agreement is absolutely void has been confined to the cases where a minor is charged with obligations and the other party seeks to enforce them. 5. Sec. A minor is capable of purchasing immovable property and he may sue to recover the possession of the property purchased by tendering the purchase money. The consideration which passed under the earlier contract can’t be implied into the contract into which the minor enters on attaining majority.However. . Things necessary are those without which an individual cann’t reasonably exist such as food. We have to depend upon judicial decisions. On the other hand a minor is allowed to enforce a contract which is of some benefit to him and under which he is required to bear no obligations. To render an infant’s estate liable for necessaries. 68): Persons incompetent to contract are made liable for necessaries supplied to them. the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. If it is necessary. Therefore. or a promisee under a contract. 6. Ratification: On attaining majority. when a minor invites the aid of the court for the cancellation of his contract the court may grant relief subject to the condition that he shall restore all benefits obtained by him under the contract or make suitable compensation to the other party. Liability for necessaries (Sec. 4. two conditions must be satisfied: (1) The contract must be for goods reasonably necessary for his support in his state of life and (2) he must not have already a sufficient supply of these necessaries. A minor can be a beneficiary e. a payee. raiment. A promissory note executed in favour of a minor is valid and can be enforced in a court. Thus.g. an endorsee. the liability for supply of necessaries attaches only to the estate of a minor and he does not incur any personal liability. Ratification relates back to the date of making of the contract. The supplier has to prove not only that the goods supplied were suitable to the conditions in life of the minor but that he was not sufficiently supplied with the goods of that class. a fresh contract should be made on attaining majority.

or (iii) fraud as defined under Section 17. In English Law. the agreement of a person of unsound mind is absolutely void. consent is said to be free when it is not caused by (i) coercion as defined under Section 15. however. So also under English Law. He may avoid his contract by satisfying the court that he was incapable of understanding the contract at the time of its formation and the other party knew it. They are (i) the person making a contract should be capable of understanding it and (ii) should be capable of forming a rational judgement as to its effects upon his interests. A person of unsound mind. A person who is usually of sound mind but occasionally of unsound mind may not make a contract when he is of unsound mind (Sec.Persons of Unsound Mind: A person is said to be of sound mind for the purpose of making a contract if at the time when he makes it. Two tests are laid to determine the soundness of mind while making a contract. 12). 1. may make a contract when he is of sound mind. or (v) mistake subject to the provisions of Section 21. coercion must be applied to one’s person only whereas under Indian Law it can be one’s person or property. or (iv) mis-representation or defined under Section 18. Under English Law. 12 also puts the persons such as drunkard or a person who is delirious from fever in the same category as a person of unsound mind. to the prejudice of any person whatever. the subject of it must be the . 15) “Coercion is the committing or threatening to commit any act forbidden by the Indian Penal Code or the unlawful detaining or threatening to detain any property. 21 and 22. a person of unsound mind is competent to contract. with the intention of causing any person to enter into an agreement.” There should be ‘consensus ad idem’ or ‘identity of minds. Coercion: (Sec. Free Consent One of the essentials of a valid contract is free consent.” It is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed.’ The validity of a contract depends not only on consent of the parties but their consent must also be free. or (ii) undue influence as defined under Section 16. Sec. Sec. 13 of the Act defines consent as “Two or more persons are said to consent where they agree upon the thing in the same sense. 14. According to Sec. The contract is voidable at his option. Under Indian Law. he is capable of understanding it and of forming a rational judgement as to its effects upon his interests.

While threat to sue does not amount to coercion threat to file a false suit amounts to coercion since such an act is forbidden by Indian Penal Code.” A person is deemed to be in a position to dominate the will of other – a) Where he holds a real or apparent authority over the other or where he stands in a fiduciary relation to the other. Sec. parent. child or other near relative. illness or mental or bodily distress. In other words. he uses that position to obtain unfair advantage over the other. Where the parties are not in equal footing or there is trust and confidence between the parties.” According Sec. Under Indian Law. where there is no relationship shown to exist from which undue influence is presumed. Undue influence: In the words of Holland. such power being obtained by virtue of a present or previously existing dominating control arising out of relationship between the parties. However. “Undue influence refers to “the unconscious use of power over another person. The first one is that the relations subsisting between the parties to a contract are such that one of them is in a position to dominate the will of the other. the act or threat may be against any person. 2. What contributes coercion or undue influence depends upon the facts of each case. Presumptions as to undue influence: Sec.contracting party himself or his wife. Both coercion and undue influence are closely related. The burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Secondly. They are (i) parent and child (ii) guardian and . 16 (2) mentions certain types of relationships which give rise to presumptions of undue influence. Unlawful detaining or threatening to detain any property is also coercion. 16 (1) “A contract is said to be induced by undue influence where the relation 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. one party may be able to dominate the will of the other and use that position to obtain an unfair advantage. unlike coercion undue influence must come from a party to the contract and not a stranger to it. enters into a contract with him and the transaction appears to be unconscionable. that influence must be proved. c) Where a person who is in a position to dominate the will of another. or b) Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age. 16 (i) provides that two important elements must be present. It is to be noted that the act need not be committed in India itself.

Undue influence must proceed from a party to the contract. There is no presumption as regards coercion. The party avoiding the contract must prove the existence of undue influence. grandson and grand/father there exists no presumption of undue influence. The law presumes undue influence in the case of a contract with a pardanashin women. In the case of undue influence the consent is obtained by dominating the will of the other. mother and daughter. 5. husband and wife.ward (iii) trustee and beneficiary (iv) religious advisor and disciple (v) doctor and patient (vi) solicitor and client (vii) fiance and fiancee. landlord and tenants. Coercion and undue influence distinguished: 1. Ordinary presumption is that a person who signs a document understands its contents. b) Full disclosure of facts was made to him and he understood the same. infirmity or impaired bargaining power. Coercion may proceed from a stranger and may be directed against a stranger. 16 (3) lays down that in the case of unconscionable bargain the onus of proof that the transaction was not induced by undue influence is on the person who is in a dominating position in relation to the other party to the contract. that the party understood the contents and the effects of the document upon her interests. c) There was no undue influence and adequate consideration was there. In the case of coercion. contract is obtained by committing or treatening to commit an act punishable under Indian Penal Code. he may take undue advantage or that others ignorance. But as regards a pardanashin woman this presumption does not hold good. The offence may be committed in or outside India in order to render it coercion. 2. The presumption about undue influence is rebuttable one by proving that – a ) the person complaining of undue influence had independent advice. . 3. Contracts with pardanashin women: A pardanashin woman is one who according to the customs of her community lives in complete seclusion. Coercion involves physical force. Sec. Such contracts are known as unconscionable contracts. The burden of proof lies on the other party to show that there was no undue influence. Undue influence involves moral force. 4. As regards the relationship between debtor and creditor. Undue influence must be exercised in India. Unconscionable or catching bargains: When a dominant party enters into contract with a weaker party. On the other hand law presumes undue influence in certain circumstances.

The party avoiding a contract under coercion has to restore any benefit he received under the contract to the other party. 3. So if a party makes a promise without having any intention of performing it. 7.6. Active concealment of facts amounts to fraud: Instead of making a false representation a person may conceal a material fact which according to him. 4. The fertility of man’s invention in devising new schemes of fraud is so great that it would be difficult to confine fraud within the limits of any exhaustive definition. Sec. would be disadvantageous to him. Making a false suggestion: There should be a false suggestion by a party who knows it to be false or the statement must have been made recklessly without caring to know its truthfulness. Sec. 5. A promise made without any intention of performing it: A promise includes a representation to the effect that the promisor has the intention of performing it. The suggestion that a fact is true when it is not true by one who does not believe it to be true. 3. Fraud: A false statement made knowingly or without belief in its truth or recklessly careless whether it be true or false is called fraud. buying goods with no intention of paying for the same. . An absence of honest belief in the truth of the statement made is essential to constitute fraud. The representation must be of a fact. Any other act fitted to deceive. gives various acts which amount to fraud. The false suggestion can be made by conduct of the party.g. 4. Under undue influence the party avoiding the contract may or may not be directed by the court to do so. The false suggestion or representation must be of a fact and not of opinion or intention. Essentials of fraud: 1. 17 of the Act instead of defining fraud. 2. Coercion affects provisions of Indian Penal Code. such concealment of fact amounts to suppression of truth. The active concealment of a fact by a person who has knowledge or belief of the fact. if stated. The false statement must be made intentionally. 8. Commendatory explanations as found in advertisements that a ’soap washes whiter than white’ do not constitute representations of fact. A promise made without any intention of performing it.. 17: Fraud means and includes any of the following acts committed by a party to a contract or with his connivance or by his agent to induce him to enter into contract: 1. It is usual for a trader to praise his own goods. A false statement intentionally made is fraud. Mere non-disclosure is not fraud where there is no duty to disclose. Any such act or omission as the law specially declares to be fraudulent. There is no criminal liability for undue influence. he commits fraud e. 2.

The party acting on the representation should have been deceived and suffered damage. 8. Any act of ommission which the law specifically declares to be fraudulent. Silence – whether fraud ? While active concealment of a material fact is fraud. A representation is a statement of fact made by one party to the other at the time of entering into contract with an intention of inducing the other party to enter into the contract. contracts of suretyship. However. Misrepresentation should be addressed to the party misled: The idea behind making misrepresentation should be that the other person must act upon it.5. it is known as misrepresentation. The representation must induce the contract: The person to whom the representation is made should rely upon the same and should enter into a contract. Any other act filled to decieve: Sec. if he voluntarily discloses something and then stops half the way. may amount to fraud considering the facts of the case. Once it is shown that the misrepresentation was addressed to him. releases or compromises. A misrepresentation may be innocent or intentional. under the following two circumstances silence would amount to fraud: a) Circumstances of the case cast a duty upon the person keeping silence to speak and (b) silence itself is equivalent to speech. 9. 18 deals with an innocent misrepresentation. he may become guilty of fraud by non-disclosure. If the representation is false or misleading. If one knows that he is going to be deceived later he cannot complain of being deceived by entering into contract. Such statements are called representation. the most common examples being insurance contracts. 17 (4) brings within the purview of Sec. . Duty to speak arises when the parties to a contract are in a fiduciary relationships. Sec. should act upon it. When a person is under no duty to speak. the parties will make certain statements inducing the contract. but are unknown to the other party. 7. silence is not fraud except under two circumstances. There is no general duty cast upon a party to a contract to disclose to the other party material facts within his knowledge. This principle is known as ‘Caveat Emptor’ (let the buyer beware) in contracts of sale of goods. Such contracts are known as uberrimae fide contracts. 6. 4. it becomes fraud if the person acts upon it though the person making representation may say that he did not intend that the person to whom it was addressed. Misrepresentation: Before entering into a contract. The aggrieved party can not set aside the contract if he has not sustained damage. An intentional misrepresentation is called fraud and is covered under Section 17.17 all such acts which though apparently amount to misrepresentation of fact. A false representation is merely irrelevant if it has not induced the party to whom it was made to act upon it by entering into a contract.

a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. Under no circumstances can silence be considered as misrepresentation. It is sufficient if it is made to a third party so that the plaintiff becomes aware of it. Then he is said to have misrepresented the fact. It also gives rise to an independent action in tort for damages. When a party to the contract has a duty to disclose all the material facts concerning the subject matter of the contract. in certain cases is a punishable offence under Indian Penal Code. But in the case of fraud. 4. he is guilty of misrepresentation. Causing mistake about the subject matter: If a party to an agreement induces the other to commit mistake as to the nature or quality of the subject matter of the agreement. though he believed it to be true. 18 misrepresentation means and includes (i) the positive assertion in a manner not warranted by the information of the person making it. if the misrepresentation has not been embodied in the contract it creates no contractual obligation unless it turns out to be fraudulent. Misrepresentation is not an offence under Indian Penal Code and hence not punishable. The very purpose of fraud is to deceive the other party to the contract. 1. of that which is not true.Sec. A false statement need not be made direct to the plaintiff. Breach of duty: A person may commit breach of duty without any intention to deceive the other party thus gaining an unfair advantage over the other. gains an advantage to the person committing it. The party complaining of misrepresentation cann’t avoid the contract if he had the means to discover the truth with ordinary deligance. silence is not fraud except where there is a duty to speak or the relation between parties is fiduciary. Misrepresentation renders the contract voidable at the option of the party whose consent was obtained by misrepresentation. 6. In misrepresentation the person making the false statement honestly believes it to be true. This should also be disclosed before the contract is entered into. In fraud. 2. but later becomes false. by misleading another to his prejudice. the false statement is made by person who knows that it is false or he does not care to know whether it is true or false. Generally. There is no intention to deceive the other party when there is misrepresentation of fact. (iii) by causing however innocently. But he may assert positively that a particular fact concerning the subject matter of the agreement is true. but does not do so. 5. Positive assertion of a fact: A person might have received information from an untrustworthy source or hear-say. (ii) any breach of duty which. 2. 3. 3. without an intent to deceive. A representation may be true at the time of making it. Fraud. Distinction between fraud and misrepresentation: 1. he is said to be guilty of misrepresentation. . the party making a false statement cannot say that the other party had the means to discover the truth with ordinary deligance. In the case of fraud the contract is voidable. However.

the agreement is void. Such a mistake may relate to – (i ) existance of the subject matter: Two parties may enter into the contract on the assumption that the subject matter exists at the time contract. there can’t be an enforceable contract between them. Mistake: Usually. Sec. The parties are not really in consensus-ad-idem. 20 deals with bilateral mistake. . A bilateral mistake may be regarding the subject matter or the possibility of performing the contract. its meaning is restricted and is to mean “operative mistake”. Courts recognise only such mistakes which invalidate the contract.5. mistake refers to mis-understanding or wrong thinking or wrong belief. 20 “Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement.” Sec. (iv)Price of the subject matter: An explanation to Sec. Mistake may be mistake of fact (either unilateral or bilateral) or mistake of law (either Indian law or foreign law). But legally. (ii) Identity of the subject matter: A mutual mistakes as to the identity of subject matter renders the contract void. 21 “A contract is not voidable because it was caused by a mistake as to any law in force in India. but a mistake as to a law not inforce in India has the same effect as a mistake of fact. that a certain state of things exists. the buyer or seller has to presume that he has made a bad bargain.” Bilateral mistake: Sec. If it is unilateral. Therefore there is no agreement at all. 20 provides that “an erraneous opinion as to the value of the thing which forms the subject matter of the agreement is not to be deemed a mistake as to a matter of fact. Bilateral mistake is one where there is no real correspondence of offer and acceptance. Where the mistake is mutual and the parties enter into the contract with false assumption and mistake as to the value of the subject matter is the basis of their agreement. Then the contract becomes void. (iii) A mistake as to the quality of the subject matter will not render the agreement void owing to the application of the principle of ‘caveat emptor’ unless there is misrepresentation or guarantee by the seller. but in reality it does not exist. But actually it may have ceased to exist or has never existed at all.” A mistaken notion about the value of a thing bought or sold may be unilateral or bilateral. Mistake as to the subject matter: This mistake arises when the parties to the contract assume at the time of making the contract.

Unilateral mistakes: Mistake of one of the parties to a contract as to a matter of fact is known as unilateral mistake. (vi) A false and fundamental assumption: A false and fundamental assumption going to the root of the contract would render the contract invalid. . Mistake as to identity is of two types: (i) where the parties are dating with each other from a distance (ii) where they are face to face with each other. If it is accepted by some one else. Mistake as to the law of the land doesnot render the contract voidable as ‘ignorance of law is no excuse’. 14 of the Sale of Goods Act imposes an implied condition as to the title of the seller. B cannot give himself any right under it. provided he can prove that the nature of the document is different from what it is supposed to be. 22 provides that a contract is not voidable merely because it was caused by unilateral mistake. However. Where there is no such warrantee or the buyer purchases his own property the agreement will be void-ab-initio. (b)Mistake as to the character of a written document: If a person signs a document under the mistaken impression that he is signing a document of a different nature altogether he may escape liability in the document signed by him. The following are such exceptional cases: (a)Mistake as to identity: It is a rule of law that if a person intends to contract with A. However. 56 which lays down a positive rule of law regarding responsibility. the unilateral mistake multifies the consent and the contract becomes void. Mistake as to the possibility of performance: There may not be any possibility of the performance of the contract. A mistake as to the title does not invalidate a contract since Sec. One party to a contract may not disclose to the other the nature of the document and induce the other to sign the same. there arises a unilateral mistake rendering the contract void. where consent to an agreement is given by a party to it under mistake which prevents the formation of a contract. Sec.(v) Title of the subject matter: If a person agrees to purchase property which is unknown to himself and the seller is his own already. Mistake of law: A mistake of law may be of law of land or of foreign law. In such a case. the contract may be void. impossibility of performance cannot be included under the head bilateral mistake as there is Sec. The other party may sign it presuming it to be a document of different nature. the contract becomes wholly void for want of concent. A person is bound by an agreement to which he has expressed a clear assent unless the unilateral mistake is caused by misrepresentation or fraud. An offer can be accepted only by the person to whom it is offered. This impossibility of performance may be physical or legal impossibility.

A mere promise is not enough. The consideration should be the outcome of the desire of the promisor.It is one of the essentials of valid contract. 2 (d) of the Act defines consideration in the following terms: “When at the desire of the promisor the promisee or any other person has done or abstained from doing.” In the words of Pollack. B goes and helps in extinguishi ng it. e. the subsequent promise to pay is merely fixing a reasonable compensation for the services. Under English Law. or promises to do or abstain from doing something. Nevertheless. (ii) Consideration may move from the promisee or any other person: Sec. B later cannot ask for any payment for his services. The question arises whether a promise of a subscription to a public or charitable trust becomes legal. past consideration will support a subsequent promise of the promisor. a right of action would vest to him. At this point Indian law differs from English law according to which the consideration must move from the promisee only and not from the third party. .g.” Sec.Consideration Consideration means something in return. (Kedarnath Vs Gorie Mohammed). or does or abstains from doing.” Rules Governing Consideration: (i) Consideration should be furnished at the desire of the promisor. (Abdul Aziz Vs Maznoon Ali). Even spiritual promises or mental satisfaction are not enforceable. The desire may be express or implied. (iii) Consideration may be past. “Consideration is the price for which the promise o f the other is bought and the promise thus given for value is enforceable. ‘Ex Nudo Pacto Non Oritar Actio’ means ‘out of bare promise no action arises’. before the making of the agreement. However. present or future: Past consideration is something done or not done at the request of the promisor. past consideration is no consideration. The act done at the instance of third party or gratuitously does not become consideration. 2 (d) provides that the consideration may be furnished by the promisee or any other person. such act or abstinence or promise is called a consideration for the promise. The promisee must have done some act or incurred expenses on the strength of the promise. there is a doctrine known as constructive consideration under which if the person who was to take a benefit under the contract was nearly related by blood to the promisee. If services are rendered under circumstances which raise an implication of a promise to pay for them. A’s house catches fire. Definition: Blackstone defined consideration as “the recompense given by the party contracting to the other. But this doctrine is no more valid.

However. Exceptions to the rule ‘no consideration. Nearness of relation implies blood relationship. (vii) Consideration should be certain and lawful: Consideration should not be illusory or uncertain or impossible. However. . 25 also provides for the following statutory exceptions: 1. 25 (2) provides that a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor is valid and enforceable. no contract’: Sec. Agreement made on account of natural love and affection: It is valid provided it is in writing. for example. doing or agreeing to do more than what a person is legally bound amounts to good consideration.g. The parties as between themselves can determine adequate consideration. B promises to give A Rs. In the same way performing or promising to perform an existing obligation imposed by a previous contract will not form consideration. 25 of the Act declares that an agreement made without consideration is void. but the inadequacy of the consideration may be taken into consideration by the court in determining whether the consent of the promisor was freely given. is registered and is made between the parties standing in near relation to one another. Promise to compensate voluntary services: Sec. 25 provides that the agreement to which the consent of the promisor is given is not void merely because the consideration is inadequate. The consideration which the contracting parties give to each other need not be of equal value. even mental relationship is equally nearness of relationship. However. However. This is a contract.In India past consideration is sufficient to support a promise provided it is made at the request of the promisor. A finds B’s purse and gives it to him. Then the mere doing of such act can’t become consideration for another’s promise. Present and future considerations are also known as executed and executory consideration respectively. Where both the parties to a contract promise to each other of doing or not doing something the consideration on both sides moves to a future date and is known as future consideration. It is the lookout of the promisor. Discovering a treasury by magic. (iv) Consideration need not be adequate: The law does not expect that the consideration should be adequate. explanation 2 to Sec. though the value of the consideration need not be the same as the value of the promise which it supports. cannot form consideration.. 2. It should be valuable. E. (vi) The discharging of a pre-existing obligation is not consideration: The law may compel a person to do an act. Sec. 50. (v) Consideration should be valuable: The consideration should not be unreal or illusory or of the nature of moral obligation. Present consideration refers to one furnished at the time of the promise.

an agreement to extend time for performance of a contract need not be supported by consideration. 7. can’t be recovered. Contribution to charity: A promise to contribute to charity. the one barred by the law of limitation. 25 (2) is that under Section 2 (d) the services are rendered at the request of the promisor whereas under Section 25 (2) the services are voluntary. iv) The intention of the promisor should have been to compensate the promisee. iii) The promisor should be competent to contract at the time when the act was done. 2 (d) also deals with past consideration. voluntary act should satisfy following conditions so as to become an exception: i) The voluntary act should have been done for the promisor and not anybody else. Remission: No consideration is necessary for an agreement to receive less than what is due. But the difference between Sec. the promisee takes definite steps in furtherance of the object and undertakes a liability.Sec. v) The services rendered should not be immoral. . Similarly. would be enforceable if on the faith of the promised subscription. Privity of Contract The general rule of law is that a person who is not a party to a contract can not claim any rights under the contract even though the contract is for his benefit. 3. mere oral promise or acknowledgement of debt is not enforceable. 4. The donor and donee may not be the near relatives. However. A promise to pay a time-barred debt: The time-barred debt i. though gratuitous. 6. Agency: No consideration is necessary to create an agency. 2 (d) and Sec. Such a person is known as a stranger to the contract. 25 (3) provides that if a promise is made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf. ii) The promisor must have been existing at the time when the act was done.e. to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits is valid and enforceable. A completed gift: In the case of a gift actually made not being an agreement to make a gift. However. no consideration is necessary. 5. But Sec.

Though Indian Contract Act is silent about the position of a stranger to a contract. In the case of assignment: When rights under a contract are assigned. or is of such a 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. the beneficiary can enforce his rights which the trust has conferred upon him eventhough he is not a party to the contract creating the trust. 5. In the case of agency: A contract entered into by the agent acting within the scope of his authority can be enforced by the principal.” Unlawful consideration and objects: In the following cases consideration or the object of an agreement is unlawful: (a)Forbidden by law: Sec. In the case of family and marriage settlements: When a provision is made for the maintenance of female members of a Hindu family in a partition of Joint Hindu property. 23 provides that if the consideration or object is forbidden by law it becomes unlawful and the agreement based on it also becomes unlawful and hence void. or for the marriage expenses of a female member the person for whose benefit such a provision is made is entitled to enforce the provision in her favour. 2. In each of these cases the consideration or object of an agreement is said to be unlawful. The promisor may acknowledge the payment by conduct or otherwise to the third party. 23: “The consideration or object of an agreement is lawful unless it is forbidden by law. Sec. Every agreement of which the object or consideration is unlawful is void. 3. Then the third party can sue the promisor though there is no privity of contract between himself and the promisor. 4. Lawful Object Section 23 of the Act seeks to impose limitations on the freedom of contract by declaring certain agreements to be void and certain others unlawful and void. Under the English law a contract that is expressly or implicitly prohibited by statute is . In the case of acknowledgement or estoppel: Wherein a contract between two parties. Exceptions: The rule discussed above has the following exceptions: 1. the promisee may be required to make a payment to a third party. the assignee can sue upon the contract for the enforcement of his rights. the Privy Council and later the Supreme Court extended the principle of the English Law to India. In the case of a trust or a charge: Where a trust is created by a contract.

Lord Truro defined: ‘Public policy is that principle of law which holds that no subject can lawfully to that which has a tendency to be injurious to the public or against the public good. ‘Public Policy’ is an elastic term and its connotations may vary with the social structure of the state. Then it becomes void under Section 23. the difference between the two is very thin and quite often they are used interchangeably. agreement to pay money for future cohabitation. then it is unlawful. (b)Defeat the provisions of any law: Sometimes the object may not be illegal. But it may aim at circumventing the provisions of any law. On the other hand Sec.’ As the courts can decide whether a particular type of agreement could be considered to be opposed to public policy the judiciary can invent new heads of public policy considering the economic and social conditions prevailing in India. contracts of sale or hire of things to be used in a brothel or by a prostitute for purposes incidental to her profession. But a promise to pay for future cohabitation whether adultery or not is unenforceable. A promise to pay for past cohabitation has been held to be enforceable by the Supreme Court. “Although it has sometimes been said that contracts contrary to good morals are void the only aspect of immorality with which courts of law have actually dealt is sexual immorality. (d)Injury to the person or property of another: If the object of an agreement is to cause injury to the person or property of another. (e)Immoral: Anson states. Agreements which are held void on the ground that the consideration or object is opposed to public policy are as follows: . Nevertheless.”The same view was referred to by the Supreme Court. 23 means the enactment of the legislature. Sec. subordinate legislation and the Hindu and Mohammadan laws. contracts facilitating divorce as immoral. (f)Opposed to public policy: The Act has not defined the term “public policy”. The term ‘law’ under Sec. So also a promise to pay for past cohabitation for securing the continuation of the cohabitation is not enforceable. Though both illegal and unlawful agreements are void an illegal agreement is necessarily unlawful whereas an unlawful agreement need not be illegal. Sec. Thus though the word immoral is very comprehensive. 23 intends to leave what is opposed to public policy for the courts to decide considering the circumstances of the case. (c)Fraudulent: An agreement entered into between the parties with a fraudulent purpose or to perpetuate fraud on others is void. Agreements interfering marital relations are also considered immoral. 23 of the Act regards promises to pay in consideration of concubinage. 23 of the Act uses only the term unlawful.termed as illegal contract.

they must be against public policy. This principle of law was established in 1866. Thus. v) Trafficking in public offices: These agreements interfere with free exercise of governmental functions. trade or business of any kind is void. The term alien enemy means a person resident in the enemy country or the enemy-occupied territory. However. Because such an agreement if performed would benefit an enemy country or injure the State in its relations with other States. In order to be unlawful. iii) Maintenance and champerty: Maintenance refers to an agreement seeking to provide assistance – financial or otherwise to bring or defend a lawsuit. vi) Marriage brokerage contracts: Society desires to prevent reckless or unsuitable marriages. Such agreements to pay money to one who brings marriage connections are void. to provide money to the members of parliament for presenting his convictions on a certain legislation. vii)Agreements in restraint of trade: Every agreement by which any one is restrained from exercising a lawful profession. They include agreements to influence public officers by promising illegal gratification. However. Even temporary residence is sufficient. Thus an agreement to render professional service with a bona-fide object of assisting a claim which is just. are opposed to public policy. is void.. Champerty refers to the agreement for sharing the benefit to be derived from the lawsuit. any agreement intended to obstruct or prevent legal process or interfere in any manner the course of justice. it is not so in India. trade combinations. So third parties are not allowed to make money by bringing about matrimonial unions.e. The object of maintenance is to encourage speculative litigation whereas the object of champerty is to share the proceeds of the litigation. sale of public offices etc. ii) Stifling prosecution: An agreement which seeks to absolve an offender of the criminal liability either by promising not to prosecute him for his offence or withdraw a criminal case pending against him is known as an agreement to stifle prosecution. Such an agreement is unlawful as opposed to public policy. But if it is made by way of champerty (i. partner’s agreements.i) Trading with enemy: An agreement entered into with an enemy country’s citizen is against public policy. iv) Interference with the course of justice: Agreements for using improper influence of any kind with judges or officials of court. negative stipulations in service agreements. to bribe witnesses. although made by way of maintenance is valid. Under English law the agreements of this kind are illegal and void. vii) Agreements tending to create an interest against duty: If an agreement entered into by or with a public servant imposes an obligation upon such person to do something which is inconsistent with his duty (official) then it is void as being opposed to public policy. an agreement in restraint of trade is valid in the following cases: sale of goodwill. . inducing them to give false evidence etc. making the remuneration dependent to any extent whatsoever upon the result of the suit) it is void.

A false statement made knowingly or without belief in its truth or recklessly careless whether it be true or false is called fraud. An acceptance turns the offer into a binding obligation. A void agreement is a nullity in the eyes of law creating no legal rights or obligations. Father being the natural guardian can entrust the custody of his children to others. To make a contract. Undue influence refers to “the unconscious use of power over another person. with the intention of causing any person to enter into an agreement. Under Indian Companies Act. An agreement which is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others is a voidable contract. An offer must be communicated to the offeree. A contract is valid only if it is not caused by coercion. . fraud or mistake. One of the essentials of a valid contract is free consen.ix) Agreements intefering with parental duties: Agreements tending to transfer absolutely the rights of parents over their children as to their custody. Coercion is the committing or threatening to commit any act forbidden by the Indian Penal Code or the unlawful detaining or threatening to detain any property. the Memorandum of Association and Articles of Association must be registered. such power being obtained by virtue of a present or previously existing dominating control arising out of relationship between the parties. x) Agreements restraining personal liberty: An agreement which unduly restrains the liberty of an individual is void. An offer should not contain any term the non-compliance of which amounts to acceptance. An offer should be made with an intention of creating a legal obligation. An agreement not enforceable by law is said to be void. The object or purpose of an agreement must be lawful. An agreement enforceable by law is a contract. undue influence. The object or purpose of an agreement must be lawful. to the prejudice of any person whatever. Two or more persons are said to consent where they agree upon the thing in the same sense. All contracts are agreements but all agreements need not be contracts. The person making the proposal is called „promisor‟ and the person accepting it is called „promisee‟. education and religious training are void as being opposed to public policy. But this is revokable. An agreement which is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others is a voidable contract. misrepresentation. Summary                       The Indian Contract Act lays down the law relating to contracts. there must be (I) an agreement and (ii) the agreement should be enforceable by law.

Para 1.” The following conditions must be fulfilled: (1) that the act should have become impossible. Para 2. renders performance impossible or unlawful. . unlawful.” Subsequent impossibility: Section 56. the contract is discharged. which provides: “An agreement to do an act impossible in itself is void. it is logical to absolve the parties from further performance of it as they never did promise to perform an impossibility. Cases where the doctrine of supervening impossibility applies: A contract will be discharged on the ground of supervening impossibility in the following cases: 1. Destruction of subject-matter: When the subject-matter of a contract. an agreement to discover treasure by magic. Such statements are called representation. This is known as frustration of the contract brought about by supervening impossibility. subsequent to its formation.. becomes impossible. It does not depend on the choice of the parties. because. The rationale behind the doctrine is that if the performance of a contract becomes impossible by reason of supervening impossibility or illegality of the act agreed to be done. and (3) that the possibility should not be self-induced by the promisor or due to his negligence.  Before entering into a contract. declares: “A contract to do an act which. In the case of subsequent impossibility or illegality. under Section 56 (Para 2). is destroyed. where an extent which could not reasonably have been in the contemplation of the parties when the contract was made. Blackstone defined consideration as “the recompense given by the party contracting to the other. The doctrine of supervening impossibility as enunciated in Section 56 (Para 2). or. the dissolution of the contract occurs automatically. in such a case there is no contract to terminate. after the contract is made. It is so only when specific property or goods are destroyed which cannot be regained. The doctrine of frustration is an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. becomes void when the act becomes impossible or unlawful. without the fault of the promisor or promisee. is wider than the “doctrine of frustration” kn own to the English law. it being an agreement void ab-initio by virtue of Section 56. the contract becomes void and stands dischraged. It is also known as the doctrine of supervening impossibility.g. e. Thus. by reason of some event which the promisor could not prevent. the parties will make certain statements inducing the contract. (2) that impossibility should be by reason of some event which the promisor could not prevent.” Doctrine of Frustration Discharge by subsequent or supervening impossibility or illegality: Impossibility at the time of contract: There is no question of discharge of a contract which is entered into to perform something that is obviously impossible.

3. the contract is discharged on the illness or incapacity or the death of that person. and cannot claim to be excused by the mere fact that performance has subsequently become unexpectedly burdensome. The law may actually forbid the doing of some act undertaken in the contract. Strikes and lock-outs: A strike by the workmen or a lock-out by the employer does not excuse performance because the former is manageable and the latter is self-induced. as a rule. ------------------ . it is said that the performance of the contract has become commercially impossible. Death or personal incapacity of promisor: Where the performance of a contract depends upon the personal skill or qualification or the existence of a given person. excuse from performance. Cases not covered by supervening impossibility: “He that agrees to do an act must do it or pay damages for not doing it” is the general rule of the law of contra ct. 5. a person is bound to perform any obligation which he has undertaken. 4. the failure of one of them does not discharge the contract. Commercial impossibility also does not discharge a contract. 3. As such these events also do not discharge a contract. Some of the cases where impossibility of performance is not an excuse are as follows: 1. Failure of ultimate purpose: Where the ultimate purpose for which the contract was entered into fails. or it may take from the control of the promisor something in respect of which he has contracted to act or not to act in a certain way. Section 56 would not apply. Where the impossibility is not absolute or where it is due to the default of the promisor himself. 2. Commercial impossibility: When in a transaction profits dwindle to a very low level or actual loss becomes certain.2. Difficulty of performance: Increased or unexpected difficulty and expense do not. the contract is discharged. although there is no destruction of any property affected by the contract and the performance of the contract remains possible. Failure of one of the objects: When a contract is entered into for several objects. Change of law: A subsequent change in law may render the contract illegal and in such cases the contract is deemed discharged. more difficult or expensive. 4. unless the performance becomes absolutely impossible (as discussed above). Thus. The doctrine of supervening impossibility does not cover cases where the contract could not be performed because of the impossibility created by the failure of a third person on whose work the promisor relied. Impossibility due to the default of a third person.

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