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CONTRACT ...

Question No. 1: Who is competent to contract Discuss the


law relating to minors agreement in India, with help of
decided cases. Also brief about English Law Indian law in
this context.
OR
Minors agreements are void at-initio. In which case the
above rule was established. Discuss in brief that case and
also bring out the exceptions to the above rule.
OR
What do you understand by capacity to contract What is
effect of Minors agreement and when can it enforced.
OR
A minors bind others but is never bound by others.
Explain by giving illustrations.
OR
Discuss the nature and effects of Minors Agreement.
Answer INTRODUCTION:- All agreements are not
contracts. Only those agreements are contract which fulfil
he conditions of section 10 and according to section 10 for
a contract parties must be competent, the consent must
be free. Therefore the competency of the parties to a
contract is most essentials element of a contract.
According to section 11 of Indian contract Act
1872 which provided, That every person is competent to
contract who is of the age of majority according to law to
which is subject and who is sound mind and not
disqualified from contracting by any law to which he is
subject. The following persons are competent to contract -

i) Who is major.
ii) Who is of sound mind.
It is evident that minors and unsound mind person
cannot make a contract. A Major person means who has
attained the age of 18 years. The age of majority has
been decided by Indian majority act 1875. In case of
guardian appointed by the court, the age shall be 21
years.
An agreement made by a minor is void., from
the above statement we find that the minor is not
competent to contract. Indian contract act is silent about
whether it will be void or voidable up to 1903. But it is
decided by the Court that these are void. Agreement by a
minor is void-ab-initio, such contract cannot be enforced
by law. Further the minor cannot authorise any other
person to do a contract.
Case Mohiri Bibi vs Dharamdass Ghosh (1903) A minor
Mr. Dharamdass Ghosh executed a mortgage documents
for Rs.20,000.00 in favour of a money lender Sh. Brahmo
Dutt. The money lender actually paid Rs.8,000.00 to the
minor. It is important that before this transaction the
guardian of the minor informed the Attorney of Money
lender that he (Dharamdass Ghosh) is minor. Later on a
suit was instituted by the minor Dharmadass Ghosh
against the money lender Sh. Brahamo dutt with the
intention that the mortgage be set aside. This suit was
opposed by Money lender by saying that the above
contract being voidable, he has the right to receive the
amount of the loan under section 64 and 65 of Contract
Act i.e. minor is bound to return back the amount.

Privy council held that, the contract is void abinitio which cannot be enforced. It was also held that the
minor could not be asked to repay the loan taken by him.
It was further held that law of estoppels cannot be applied
against the minor Shri Dharmodas Ghosh being misstated falsely his age because he was minor at the time of
the agreement and the agreement was void. The law of
estoppels as stand in section 115 of Indian Evidence Act
was not applicable to the present case as the plaintiff was
minor at the time of making agreement, this fact was also
known to the agent of Brahmo Dutt defendant. Under
Specific Relief Act 1877 Section 38 and 41 applies where
party had the knowledge of minority age gets restitute
degree.
A new concept of beneficial has come into
existence now. It has been held in various cases. A minor
is bound for the beneficial contract. The beneficial
contract are those contracts which are for the benefit of
minor. The first case was S.Subramanyam v/s Subha
Roy-1948 - In this case transfer of inherited property of
a minor affected by his guardian to pay off an in-herited
debt was binding on him for his benefit. Here is a list of
beneficial contract
i) Contract of Insurance Such contracts are in the benefit
of minors.
ii) Contract to purchase the immoveable property Such
contract are valid.
iii) Contract of service - These are for the benefit for the
monors
iv) Contract of apprentice ship Training period of any
minor who is taking training from any person, because of

the training minor will case his livelihood. It is for his


benefit and mono is liable to compensate hat person.
v) Contract of Marriage
When guardian made an
agreement for the marriage of the minor then another
party cannot enforce it, but minor can enforce it. If
agreement is made jointly by guardian and minor, it can be
enforced again on majority age.
vi) Contract of Necessities- Under section 68 of the
Contract Act-1872, minor is also liable for necessaries.
Necessaries means the basic things of the life. These are
mainly, ROTI KAPRA-AUR MAKAAN. If any person
supplied necessaries to minor then the minor is liable o
compensate the supplier. A case Chapple vs Cooper
The court held that necessaries are not only food, shelter,
clothes but also education or religious and any such things
which are necessary for life, comes under the definition of
necessaries. The following two conditions are necessary
for liable
1. The supply must not be more than sufficient.
2. The supply must be according to the standard of minor.
Case PETRESS VS FLEMING
The supply of a watch to a minor whose study was
considered as the necessity because to have a watch for
graduate person is his necessity.
RATIFICATION OF THE MINORS AGREEMENT
A minors agreement being void ab-initio, it is incapable of
being validated a subsequent ratification after the minor
has attained the age of majority. Here is minor accepts
the contract in some terms is entered during minority then
also he is not liable. If a minor takes 2000.00 in minority
and Rs.3000- after getting majority age and said major

give back Rs.5000- then this is valid and with


consideration. After getting majority age if minor uses his
option to be a partner, he will be bound for all the
responsibilities of minority period, which are against the
firm.
CONTRACT BY MINOR GUARDIANS
1. If the agreement is on behalf of minor done by guardian.
2. With in his Power.
3. Guardian is capable to enter into contract.
4. The agreement will be in the interest of minor.
A case of Raj Rani vs Prem - Father
agreed with the Director of Film, and according to this
agreement Director of Film will give a role to Indrani. It
was held void because no consideration was therein. It
this agreement is with the daughter then it is void absintro. If it is with his father then it has no value even to
think over it.
DOCTRINE OF RESTITUTION
Restitution means if an agreement is declared void,
benefit should be returned. Under section 64 & 65 of
contract Act, that section 68 is applies only on voidable
agreements, Section 56 is applies on the agreement which
were valid at the time of formation but due to some
circumstances(as under sec.56) it becomes void. Under
the equitable doctrine of restitution minor has to restore
back the benefit so received by him the exact things but it
is applicable in case of goods and property not in the case
of money. Restitution stop where repayments begins.
A case of Leslie vs Sheill- (1914) - It was held by the court
of Appeal that the money could not be recovered. If there
were allowed that would amounts to enforcing the

agreement to repay loan, which is void under Inflants


Relief Act-1874.
Section 39(3) specific Relief Act 1877 If the court thinks he
may pass an order of restitution in any case, now a
question arises whether he person did not know about the
age of minor. If minor is also not know his age. In this
stage plaintiff does not get compensation. If respondent
misrepresent his age on this point there are different view
of court.
Case KHARGIL VS LAKHAN SINGH -1928 LAHORE
HIGH COURT.
The court ordered a minor to refund Rs.17500- which he
had taken in advance for the sale of land. When he
refused to complete the contract. The court was of the
opinion that still the Specific Relief Act should apply
whether the minor was the plaintiff or the defendant. The
doctrine of restitution should apply whether the minor had
taken the goods or money.
Case Ajudhiya Parsad vs Chandan Lal 1937
Allahabad High Court refused to following, extended view
of restitution and held that a minor who had taken money
by mortgaging his home was not bound to restore the
money. Now section 33(2)(b) added according to this
section, when a plaintiff wants to dissolve the agreement
and says that at the time of agreement he is minor than he
can get back all his profits.
DOCTRINE OF ESTOPPELS
According to rules contained in Sec.115 of Indian
Evidence Act 1872, if you make a statement today, which
misleads another person, you are not allowed to deny the

statement to-marrow when the question of your liability


arises. A question whether a minor who has made a false
representation about his age is stopped from pleading his
minority, was raised, but it was not decided in this case of
Mohiri Bibi. Privy Council held that where the party knows
about the age of minor this principle could not apply. The
question arises that whether minor can be stopped by
false representation as to his age is now settled by this
case.
A Case Nawab Sadiq Ali Khan vs Bibi Jai
Kishori- 1928
It was held by Privy Council that if a minor makes a
contract by fraudulently expressing his age more than
actual then he cannot be stopped as per the rules of
estoppels that he was minor at the time of contract.
INDIAN AND ANGLO LAW
It is difficult to differentiate between both the law in respect
of contract by minors but generally the difference in both
the law is 1. Contract by minor under Indian law is void ab-initio.
2. It is voidable under English Law, such contract can be
declared void on the will of minor.
If the contract is for the benefit or fulfilment of necessity of
minor. Then it shall be binding.

Q. No 2:- State the difference between void agreement


and illegal agreement
OR

All illegal agreements are void but all void agreement are
not illegal. Comments
Ans- INTRODUCTION Under section 2(g) of Indian
Contract Act 1872, definition of void agreement has been
given and according to it , Agreement in not only
enforceable by law said to be void. For instance, an
agreement by a minor has been held to be void. Section
24 to 30 of the Indian Contract Act 1872, make a specific
mention of agreement which are void. Generally the
following agreements are not enforceable by law.
i) Whose parties are not competent to do a contract i.e.
they are not adult and are unsound mind.
ii) Whose parties do not have free consent i.e. they are
under coercion, undue influence fraud & misappropriation
etc.
iii) Whose consideration and object has not been lawful
iv) Which are immoral or against public policies.
v) Which do not create valid (illegal) liabilities between the
parties.
vi) Which have been declared as void by the court etc.
All above agreements are void because they cannot be
enforced by law.
ILLEGAL- AGREEMENTS
Illegal agreements are such agreements whose
consideration and object are not lawful i.e. they are illegal.
Such agreements are mentioned in section 23 of the
Indian Contract Act 1872. The following agreements are
considered as illegal1. Which are prohibited by Law.
2. Which is of such a nature if followed would defeat the
provisions of law.

3. Which is fraudulent.
4. Which is causing injury to body or property of any other
person.
5. Which have been declared by the court as immoral or
against public policies.
After the definition of void and illegal
agreements we have considered the following statements
That all illegal agreements are void agreements but all
void agreements need not necessarily be illegal. It can be
adjudged from the following i) Illegal agreements are void ab-initio which cannot be
enforced by law at any time whereas void agreement need
not be void-ab-initio, such agreements could become unenforceable by law later.
ILLUSTRATION An agreement takes place between the
citizen of India and Pakistan which was enforceable by law
at the time agreement, but later on in the event of war
between India & Pakistan the agreement becomes unenforceable whereas agreement to pay money by A to B
for illegal intercourse is void ab-initio which cannot be
enforced any time. This shows the illegal agreements are
always void whereas void agreements are not always
illegal.
ii) Parties of illegal agreements can be punished whereas
the parties of void agreements cannot be punished.
ILLUSTRATION - An agreement to encourage any woman
for prostitution by paying her money is punishable but an
agreement by minor or without consideration is not
punishable. This also proves the fact that every illegal
agreement is void but every void agreement is not illegal

because illegal agreement is of punishable nature


whereas void agreement is not. Void agreement does not
contain the element of illegal agreement whereas illegal
agreement contains the elements of void agreement.
iii) Void agreement cannot be enforced at any time and
illegal agreement is also never enforceable by law. Hence
illegal agreement contains impliedly the element of illegal
agreement.
iv) Illegal agreement are those which are mentioned in
Sec. 23 of contract act whereas void agreements included
various other types of agreement, like agreement by minor
or unsound mind persons, agreement without
consideration etc.
v) Void agreements include illegal agreements which are
not enforceable by law, but illegal agreements need not
contain all types of void agreement. This shows that all
illegal agreements are void but all void agreements are not
illegal.
DIFFERENCE BETWEEN VOID AGREEMENT &
ILLEGAL AGREEMENTS.
VOID AGREEMENT
ILLEGAL
AGREEMENT
1. All agreements are not void-ab-initio but become void
later due to circumstances
2 The reason of void agreement could be incompetency of
parties, lack of consideration etc.
3 Parties of void agreements are not be punished.
4 Collateral agreement to void agreements can be
enforced.

5 The area of void agreement is extremely void. It includes


all illegal agreement. 1 Illegal agreements are void abinitio.
2 The reasons of illegal agreement shall be those which
are mentioned in sec.23 of the Contract Act., like
prohibited by law. Immoral against public policies,
fraudulent etc.
3 Parties of illegal agreement can be punished.
4 Collateral agreement to the illegal agreement can also
not be enforced.
5 The area of illegal agreement is comparatively narrow. It
does not include all types of void agreement.

Question No 3 : All contracts are agreements but all


agreements are not contracts?
OR
Discuss the rule for the formation of a valid contract when
a contract becomes complete?
Introduction : i) MULLA :- Every agreement or promise enforceable by
law is a contract.
ii) SALMOND :-Contract is an agreement creating
defining obligations between parties.
A contract is an agreement enforceable by law. An
agreement is the prime stage of the contract. If
agreement is enforceable by law or if agreement is
recognised by law then it will become a contract otherwise
not. It is basically based upon British Law because the
Contract Act was passed by British Indian Govt., in 1872.

To make contract an agreement it is essential that no


contract is possible without an agreement, but we cannot
say that all agreements are contracts. Section 2(y) of
contract Act says that, Contract is an agreement
enforceable by law. All agreement e.g. to see cinema is
not contract, if offer is accepted then it becomes promise.
Promise is followed by consideration then it becomes
agreement and if an agreement is enforceable by law then
it becomes CONTRACT, see below :i) Proposal +
acceptance
=
PROMISE
ii) Promise +
consideration
=
AGREEMENT
iii) Agreement+ Enforceability
=
CONTRACT
AGREEMENT :- Agreement 2(e) promise or set of
promises forming the consideration with each other, is an
agreement.
PROMISE :- Promise is an important part of the
agreement. A proposal when accepted becomes promise.
PROPOSAL/OFFER :- According to section 2(a) when one
person signifies to other his willingness to do or to abstain
from doing anything with a view of obtaining the assent of
that offer to such act or abstinence, he is said to make a
proposal.
ACCEPTANCE:- According to section 29(b) of contract act
when the person to whom the proposal is made signifies
his assent there to the proposal then it is said to be
accepted. A proposal when accepted becomes promise.
CONSIDERATION :- Section 2(d) of contract act defines
consideration. Section 2 says that an agreement made
without consideration is void unless :a) Natural love and affection. Sec.25 of contract act, the
parties to the agreement must be standing in a near

relationship to each other. The promise should be made by


one party out of natural love and affection for the other.
The promise should be in writing and registered.
b) Compensation for past voluntary services sec. 25(2) in
case Sindha v.Abrahim-1895 Bombay : The promise to
compensate though without consideration is binding
because of this exception. The exception also covers a
situation where the promise is for doing something
voluntarily
c) Promise to pay time barred debt: Sec.25(3): The
promise must be to pay wholly or in part a time barred
debt i.e. a debt of which the creditor might have enforced
payment but for the law for the limitation of suit. The
promise must be in writing and signed by the person to be
charged therewith. Case Gobind Das v. Sarju das-1908,
Ganesh Prasad v.Mt. Rambati Bai-1942.
ENFORCEABLE BY LAW :- in Indian Contract Act 2(h) it
says that contract is agreement enforceable by law. If an
agreement is enforceable by law then it is CONTRACT,
otherwise merely an agreement.
To make an agreement a contract in Indian Contract Act
section 10, the following conditions must be fulfilled :1. Competent Parties :- Section 11 says, contract should
be made with person who must be major and sound mind
not disqualified by law.
2. Free Consent :- Section 14, says that consent must be
free, when it is not caused by coercion, undue influence
under section 16, fraud under section 17, misappropriation
under section 18 and mistake under section 20.

3. Lawful consideration & object :- According to section


23, when agreements consideration or object are
unlawful, they are void.
4. Not expressly declare as void:- The such agreements
which are made without consideration or expressly
declared to be void as per section (25) are no contract,
these are as under:i) Agreement in restrain of marriage section-26.
ii) Agreement in restrain of trade section-27.
iii) Agreement in restrain of legal proceedings section -28.
iv) Agreement which is ambitious and uncertain sec.29.
v) Agreement by way of wages section-30.
vi) Agreement to do an impossible act section-56.
5.FORMALTIES PERFORMED IF NEEDED BY LAW:The person by whom the contract must be performed time
and place and performance opportunity of payment. Thus
when these conditions are fulfilled then an agreement is
made contract because these are enforceable by law. But
some agreements are not made contract because they are
not enforceable by law. These are :1. Social Agreement :- When agreements based only
social relationship and parties, we cannot enforce these
agreements by law, for example:A case Jones v/s Paday
If A give invitation of dinner to B and B accept this
but does not go to dinner then A suffers damage after
this. But A cannot file a sue against B because it is
Social Agreement which is not enforceable by law.
FAMILY LAW:- Family law are not made contract as in the
case of :

Balfour v/s Balfour:- In this case the defendant who was


employed in Govt.,job in Ceylon went to England with his
wife on love. For health reasons the wife was unable to
return to Ceylon. The husband promised to pay 30 ponds
per month to his wife as maintenance for the period she
had to live abart. The husband failed to pay this amount.
The wife filed a suit against her husband for this money.
The court held that this agreement is not enforceable by
law.
Case : Jones v/s Padavllon :
Where a girl left service to join legal education on the
promise of her mother to stand the expenses. It was held
to be a family matter and not a binding contract. Thus we
can say that all the agreements are not contracts but all
the contracts are not agreements.
A Case LALMAN V/S GAURI DATT-1913 : The
defendants nephew absconded from home. The Plaintiff
who was defendant servant was sent to search for the
missing boy. After the plaintiff had left in search of boy, the
defendant issued handbill announcing a reward of
Rs.501.00 to anyone who might find out he boy. The
Plaintiff who was ignorant of this reward, was successful in
searching the boy. When he came to know of the reward,
which had been announced in his absence, he brought an
action against he defendant to claim this reward. It was
held hat since the Plaintiff was ignorant of the offer of
reward, his act of bringing the lost boy did not amount to
the acceptance of he offer, and , therefore, he was not
entitled to claim the reward. If a person has the knowledge
of the offer, his acing in accordance with the terms thereof
amount to the acceptance of the same. In such a case, it

is immaterial that at the time of accepting the offer, the


acceptor does not intend to claim the reward mentioned in
the offer.
DIFFERENCE BETWEEN AGREEMENT AND
CONTRACT
AGREEMENT
CONTRACT
1. Three important points for
Two important
points
for contract
Agreement: i) acceptance
are i) agreement ii)
enforcement
ii) Offer iii) and consideration
by law.
2. An agreement could be legal or
2. Agreement in
contract to be lawIllegal.
Ful and
enforceable by law.
3. Agreement may or may not be
3. Contract is
enforceable by law.
Enforceable by law.
4. Area of contract
is limited as
4. Area of agreement is very wide
every
agreement cant become
As it can be any type legal, moral
contract.
Etc. Any agreement even if not
5. In contract the
valid liability is
Enforceable by law remains an
created
between the parties.
Agreement.
5. The certain of valid liability is not
6. Contract
requires the

Requires in all agreement like, moral


competency of
parties, free
Religious etc.
Consent,
sufficient consi6. Every agreement does not requires
duration etc.
Competency of parties, free consent,
Sufficient consideration etc., because
Agreement could be by un-enforceable
Law.

Q. No 4 :- Discuss the meaning of consideration? When


the consideration becomes unlawful? How does the Public
Policy Effect he consideration? OR
An Agreement without consideration is void. Discuss with
Exceptions ? OR
Define consideration, Past Consideration, Contract without
consideration and consideration by a person unknown to
contract with suitable examples. OR
Explain consideration. In what cases the consideration of
an agreement are said to be unlawful under contract Act.?
Illustrate with suitable examples.
Answer : INTRODUCTION :
The consideration has
important place in contract. It is important part of Contract.
A valid contract requires a consideration.
Agreement
without consideration are void. The study of consideration
in respect of the subject matter is required.
Section 2 (d) of the Indian Contract Act- 1872
defines consideration. It says, When at the desire of the
promisor, the promise or any other person has done or
abstained from doing or does or abstains from doing or
promises to do or to abstain from doing-something, such

act or abstinence or promise is called a consideration for


promise.
In other words when a the desire of one
person, another person does sense act or abstains from
doing, then it consideration for the first person.
ILLUSTATION :- A purposes B to buy his cycle for
/rs.1000.00. B agrees to buy that cycle for Rs.1000/-.
Here Rs.1000/- is the consideration for cycle.
According to Pollock :- A party does or abstains from
doing or promise to do or abstain from doing something, is
a price for which the promise is bought, the promise thus
given for value is enforceable.
According to Auson :- Consideration is that which is to be
done abstain from doing, to be bear or promises to do or
which the promises abstains from doing in respect of
promise or bears it.
ELEMENS OF CONSIDERATION :I) Consideration to be at the desire of promisor.
II) Consideration can be given by the promise or any other
person.
III) Consideration may be past, future or present.
IV) Consideration must be legally adequate and valuable.
V) Consideration must be valid.
A case : Mirahul Enterprises V/s Mrs. Vijaya Srivastav AIR
2003 :
Delhi High Court said that a valid agreement requires the
consideration to be definite.
In a Case :-Durga Parsad v/s Baldev The Plaintiff
constructed certain shops in a market at the instance of
the Collector of that place. Subsequently the defendants
occupied one of the shops in the market. Since the Plaintiff

had spent money for the construction of market, the


defendants in consideration thereof, made a promise to
pay the plaintiff commission on the articles sold through
their (defendant) agency in that market. The plaintiff failed
to pay the promised commission. In an action by the
plaintiff to recover the commission, it was observed that
the consideration for the promise to pay the commission
was the construction of the market by the plaintiff. Such
construction had not been done at the desire of the
defendants, but on the order of the Collector. It was
therefore held that since the consideration did not moved
at the desire of the defendants ( Promisors in this case),
this did not constitute valid consideration and therefore the
defendants were not liable in respect of the promise made
by them.
TYPES OF CONSIDERATION ;- There are three types of
consideration which are as under :i) Past consideration.
ii) Present consideration.
iii) Future consideration.
Present consideration means such consideration which is
paid to the promissory immediately. Example : A offers to
B to sell his vehicle for Rs.50,000/-, B pays to A
Rs.50,000/- at that moment, and A gives the possession
of vehicle to B. This is present consideration.
Past consideration is the consideration for the service or
promise performed in past. Example :- A at the desire of
B takes care of the family of B. After three years B
promises o A that he shall pay him Rs.10000/- for his
services given. Here, the services provided by A in the
past to B shall be called past consideration.

Future consideration means such consideration which


shall be paid in future. Example:- A promises to sell his
house for Rs.75,000/- to B on 5th.Feb 2003, and both
parties decide that possession of house shall be delivered
on 1st.Dec.2003 and on that day he payment of
Rs.755,000/- shall be made. This is future consideration,
because the contract had originated on 05.02.2003 but its
consideration was to be paid on 1st December, 2003.
WHEN THE CONSIDERATION IS
ILLEGAL
A valid contract requires the consideration to be valid or
legal contract with illegal consideration is not enforceable.
Sec.23 of Contract Act mentions those situations in which
the consideration shall be considered to be illegal. These
situations are as under:i) When it is prohibited by law.
ii) When it is of such nature that if followed would defeat
the provisions of law.
iii) When it is fraudulent.
iv) When it involves injury to the person or property of
another.
v) The court regards it as immoral or opposed to public
policy.
Consideration forbidden by Law:-Such agreements are
void. An agreement or act forbidden by law is that which
is not permitted by law to be followed or which is against
the law. A case: Ram Sewak v/s Ramcharan : AIR 1982
Allahabad. : The partners of a partnership firm made an
agreement for the concealment of profit for the purpose of
deceiving tax. It was held illegal consideration or an
agreement forbidden by law.

Consideration to defeat the provisions of Law:- An


agreement with such consideration is also void, whose
purpose is to defeat the provisions of law. In other words,
where an agreement is done with such consideration that
if applied would defeat the provisions of law, then such
consideration and agreement shall be considered void.
ILLUSTRATION : A and B agrees with the intention that
they shall be able to take any dispute related to a
particular subject to the court, even though the limitation
for it has been determined,. This agreement defeats the
provisions of Limitation Act, and is therefore void.
IN Nutan Kumar v/s Additional District Judge, Banda (AIR
1994 Allahabad): Allahabad High Court held that such an
agreement between landowner and tenant which is
inconsistent to the provision of Rent control Act shall be
void. Such agreements cannot be enforced through court.
Fraudulent
Consideration: Agreement
with
such
consideration which are fraudulent, are void. For
example: A, B and C agrees for the partition among
themselves of the profits obtained or to be obtained by
fraud. Agreement is void because its object and
consideration is against law.
Consideration to cause injury to Body or property of any
other person:- Such agreement is void whose object and
consideration are illegal owing to be causing injury to body
or property of any other person. A case : K.Abdul `Qader
v/s The Plantation Corporation of Kerla. AIR 1983: Kerla
High Court said that a contract made with the object to
cause injury to body or property of any other person, is
void and unenforceable.

Immoral and Opposed to Public Policy:- Agreement with


consideration being immoral and opposed to public policy
are void and unenforceable. Several decisions of court in
his respect have been made. Several judicial decisions
have considered following object and consideration to be
immoral and opposed to public policy :a) Agreement to lent house on rent for prostitution.
b) Agreement to lent vehicle to be used for prostitution.
c) Agreement to provide money to have cohabitation with
the wife of any other person.
d) Consideration of earlier cohabitation.
e) Agreement to give consideration for future illegal
cohabitation.
A case of Subhash Chandra v/s Narbada Bai (AIR- 1982
of MP) A man made agreement for maintenance with a
woman. It was the result of an earlier cohabitation with a
woman with that man. Court held it to be void and
unenforceable. Agreement with consideration being
opposed to public policy are also void. The public policy
does not have any universal definition, but several judicial
decisions have considered following things to be against
public policy :I) Insurance conscience.
II) Obstruction in freedom.
III) Elements creating restrain to trade or natural or legal
rights.
IV) Against good conduct etc.
The following agreements have been considered to be
against public policy :
a) Agreement to cause injury to public service.

b) Transfer of decree for the purpose of avoiding the effect


of decree to other creditors.
c) Agreement to pay money in return of marriage.
d) Agreement to bribe for adoption etc..
A case : SBI v/s Aditya Finance and Leasing co. 1999
Delhi) It was held that the land spotted or embarked for
residential purposes is used for commercial purposes by
an agreement which shall be void by being against public
policy. Thus the agreement with such consideration that
adversely effect over the interest of common people or
which are not proper in respect of public shall
unenforceable by being void.
AGREEMENT WITHOUT CONSIDERATION ARE VOID
As we have seen above that Consideration is essential for
a valid contract. Agreement without consideration cannot
be imagined. Section 25 of Indian Contract Act-1872
clearly provides that Agreement without consideration is
void.
ILLUSSTRRATION :- A promises B to pay him Rs.2000/without any consideration. This is void agreement.
Exceptions :- But the above rule have some exceptions
also i.e. an agreement without consideration in following
situation is valid and enforceable :1. Agreement Under Natural Love and Affection:Agreement without consideration due to Natural Love and
Affection are valid and enforceable provided that they are
written and registered.
ILUSTRATION : A promise to pay his son B a sum of Rs.
5000.00 under the Natural Love and Affection. A writes his
promise toward B and gets it registered. This is contract.
Natural love and affection includes relation between

father-son husband-wife, brothers etc. Such relations do


not require consideration for a valid agreement. A case :
Manali Singhal V/s Ravi Singhal-1999-Delhi), It was said
by Delhi High Court that where any family agreement in
relation to the amount of maintenance has been made for
love and affection, family peace, harmony and satisfaction
there consideration shall not be required. Such
agreement shall be enforceable by Court.
2. Agreement to pay compensation for past service
Where any person without the knowledge of promisor or
otherwise than his prayer, does any service or has done
service and the promisor promise to compensate him,
there consideration shall not be required, with the
following thing which are necessary :i) An act has been voluntarily done already for the
promisor
ii) At the time of commission of that act, promisor was
competent to contract.
ILLUSTRATION A at the desire of B does service for the
relatives of B. Later B agrees to pay Rs.1000/- to A for
the service. This agreement been result of earlier service
is valid and enforceable. Such consideration is also called
past consideration.
3.Agreement for payment of Time Barred Debt. Such an
agreement for payment of a debt barred by time under
limitation act, is considered to be lawful because a time
barred debt is also a good consideration as the debt
remains ever after the completion of time of recovery. A
case: Tulsiram v/s Samey Singh AIR-1981 Delhi Delhi
High Court held that an agreement for the payment of a
time barred debt can be made under Se.25(3) but it

requires that the agreement shall mention that consent


has been given for the payment of time barred debt.

UNIT III
Question No. 5. Discuss contingent contract. Elaborate
with suitable illustrations. How are such contract is
different from Agreements?
Answer :- INTRODUCTION : Contingent contract is
special types of contract. Generally in most contracts
rights of parties are enforced immediately after the
execution of contract, but sometimes there are contracts
whose enforcement depends upon happening or nonhappening of an event.
DEFINITION :Section 31 of Indian Contract Act 1872 defines that
Contingent Contract according to it : A contingent contract
is a contract to do or not to do something, if some event,
collateral to such contract does or does not happen.
ILLUSTRATION : A contracts with B that if the house of B destroyed by
fire then he shall pay Rs.10,000/- to B. It is contingent
contract because the enforcement of contract depends on
the happening or non happening of an event.
Thus the contingent contract depends upon the
happening of a uncertain event. If the event is of certain
nature, then it shall not be contingent contract.
ELEMENTS OF CONTINGENT CONTRACT
These are as under:1. The contingent contract depends upon the happening or
non-happening of an event.

2. Such event shall be of uncertain nature i.e. it may or


may not be happen.
3. Such event is not the part of mutual promises of parties.
4. Happening or non happening of the event does not
depend on the will of the parties.
5. The future uncertain even is collateral to the main
contract.
In case : Ranchoddas V/s Nathmal Hirachand and
company 1951 (Bombay)
In this case the court decided and did not accepted the
contention and said that reaching of cloth to India was a
method of delivery. This cannot be said contingent
contract.
NATURE OF CONTINGENT
CONTRACT:Section 32 to 36 of Act mention that various forms of
contingent contract like:i) According to Section 32 . Contingent contract to do or
not to do be anything if an uncertain event happens
cannot be enforced by law unless and until that event has
happened. If the event becomes impossible such contract
becomes void.
ILLUSTRATION :- A contract to pay B a sum of money
when B marries C. C dies without being married to B. The
contract becomes void.
ii) Section 33 says : contingent contract to do or not to do
anything, if an Uncertain future even does not happens
can be enforced by law when the happening of that event
becomes impossible.

ILLUSTRATION :- A agrees to pay to B a sum money if a


certain ship does not return. The ship is sunk. The contract
can be enforced when the ship sinks.
iii) Section 34 says : that if future event on which a
contract is contingent is the way in which a person will act
at an unspecified time, the event shall be considered to
become impossible when such person does anything
which renders it impossible that he should so act within
any definite time, or otherwise than under further
contingencies.
ILLUSTRATION :- A agrees to pay B a sum of money if B
marries C. C marries D. The marriage of B to C must
now be considered impossible, though it is possible that D
may die, and that C may afterwards marry B .
iv) Section 35 says that :- contingent contacts to do or not
to do anything if a special uncertain event happens within
as fixed time become void if, the expiration of the time
fixed, such event has snot happened, or if, before the time
fixed, such becomes impossible.
ILLUSTRATION :- A promises to B to pay a sum of money
if a certain ship returns within a year. The contract may be
enforced if the ship returns within a year, and becomes
void if the ship is burnt within the year.
v) Section 36 says that : contingent contract to do or not to
do anything if an impossible event happens, are void,
whether the impossibility of the event is known or not to
the parties to the agreements at the time when it is made.
ILLUSTRATION: - A agrees to B, a sum or Rs.1000.00, if
two straight lines should on close a space. The
agreement is void.

Contingency dependent on the behaviour of the parties. It


is important that if the performance of the promise
depends on the mere will and pleasure of the promisor, it
is no promise at all but promise to pay what a third party
decide is valid promise.
DIFFERENCE BETWEEN CONTINGENT
CONTRACT & WAGER CONTRACT
Contingent Contract
Wager
contract
1. All contingent contract are
All wager contract have
the element of
Not wager.
Contingent contract.
2. The interest of the parties
The interest of the
parties is vested upon
Is vested on the happening
wining or losing sum of
money.
Or non-happening of event.
3. The future event is collateral
The future event is the
base of decision.
To the contract.
4. Only one party shall give
Parties give reciprocal
promises.
Promise.
5. Win or loss of the parties is
One party has to win
and other has to
Not important.
Lose.
6. Contingent contract are
Wager contract are
void with few
Valid.
Exceptions.


Question No.6 : Define Fruad? Distinguish between Fraud
and Misrepresentation. Whether silence amounts to fraud?
OR
2. What are the factors which vitiate consent and make
the Agreement
Void or voidable?
OR
3. What is consent? When is consent said to be free under
Indian Contract Act?
OR
Distinguish between coercion and undue influence.
Answer : INTRODUCTION :An agreement becomes contract if it fulfils the conditions
of /section 10. According to sec. 10 for an agreement
becomes contract with law full object and consideration. It
means free consent is not free then the contract is invalid.
But it is voidable not void. Voidable means a contract
which can be declared void by the court at the option of
other party.
under sec.2(1). Section 198, 10(a) also deines the term
voidable.
Section 13 : Consent : According to Indian Contract Act
1872:- Two or more persons are said to consent when
they agree upon something in the same sense.
In the above definition it shows that (i) At least two
persons are must (ii) for the same thing and same sense.

ILLUSTRATION : At least two persons are must:- A


agrees to sell his house to B for Rs.50,000/- B accepts this
proposal.
For same thing and same sense:- A have two cars; one
Maruti and the other is Fiat. He agree to sell to B. A might
be thinking to sell Maruti car while B might be thinking to
purchase fiat car. In this example A & B do not agree upon
the same thing in the same sense, hence there is snot
contract in this case.
A Free Consent :- under sec.14 Consent: is said to be free
when it not caused by : i) Coercion Sec. 5.15 (ii) Undue
influence sec..16 (iii) Fraud sec..17 (iv)
Misrepresentation .18 (v) Mistake 5.20.
In other words consent is free if it is not affected by
coercion, undue influence, fraud and misrepresentation.
In case of consent taken by mistake the consent shall be
void.
1.
COERCION ( 5.15) :
Coercion means by force or compulsion. Coercion is a
method of doing consent. This method is against the law.
When any person by doing an illegal act gets the consent
of any other person on an agreement it is called coercion.
It means:
Explanation : It is immaterial whether the IPC-1860 is or is
not in force in the place where the coercion is employed.
(a) Threading to commit any act forbidden by IPC: If
consent obtained by threat of committing act forbidden by
SC it called is coercion. Example : A kidnapped a son of B,
A says you give me your scooter in Rs.50/- then I will give
you your child. B agreed, it is a coercion. Case : Masjidi
v/s Ashiya 1880: It was held that it cannot be simple upon

these facts that the consent of such person was caused by


coercion.
Case:- Raganayaswami V/s Alyar Sette A Madrasi man
died leaving behind a widow. The relative of the dead
threaded the widow to adopt a boy otherwise they will not
allow her to remove the dead body of her husband. The
widow adopted the boy and subsequently applied to
cancel the adoption. The court held the adoption is not
valid.
Muthiah Chettiar V/s Karupan Chettiar
A was an agent of B. A at the end of his services denied
to give account to other agent. He said to B to release him
from liabilities otherwise he shall not give the account
book. It held by coercion.
(b) Threat to commit suicide: It comes under sec.15.
Case: Ammiraja V/s Seshamma
A person held out a threat to commit suicide to his son and
wife, if they refused to execute a release deed in his
favour. They executed the deed in his favour. It was held
by the court that this coercion. According to old filled J
threat to commit suicide no body can be punishable under
IPC, and suicide itself not a crime under IPC, because
after suicide no body can be punished. Only attempt to
commit suicide is punishable.
(c) Un lawful detaining of any property : According to
sec.15 coercion could also be caused by unlawful
detaining or threatening to detain any property to the
prejudice of any person whatsoever with the intention of
causing any person to enter into an agreement. Property

may be moveable or immovable. If one person detains


unlawfully, it is coercion.
(d) To Prejudice of a person : Coercion may be against a
party as well as against any person.
(e) Legal Threatening not coercion:- A commits accident
with B. B says you give me Rs.500 otherwise I shall sue
against you. It is not coercion.
(f) Place of coercion: coercion may be committed at any
place. It may also be committed even outside India.
(g) Burden of proof on Plaintiff:
(h) Remedies: Voidable or restitution.8
Andhra Sugar Ltd. v/s State of Andhra Pradesh 1968 : It
was held that the agreement cannot be said to be by lack
of free consent.
2. UNDUE INFLUENCE : SEC.( 16)
Undue influence means unreasonable influence or
improper or not right influence. When consent is taken by
way of unreasonable influence or improper way then it is
not free. The consent can be declared void on this ground.
Section 16 says that when any person has such position
over the other person as to dominate his will, the person
who dominates the will of the other must have superiority
over the other. This is done under the following
conditions.
1. Relationship superior or inferior may be real or apparent
relationship as
(a) Money lender or borrower.
(b) Income Tax Officer and shopkeeper.
(c) Income Tax Officer and assessee.
(d) Police and thief.

Case :- J.R.Bhatt v/s State of U.P. Pt. Was employed in


the court of UP. He wants a leave. Registrar said leave
can be granted on the condition if you will not come in
service after the end of leave. He wrote it. It was held by
servant under undue reference influence.
(B) Fiduciary Relationship :- 1. Advocate & Client. 2.
Master & Servant. 3. Guru and chela
4. Father and
children 5. Teacher & student. 6.Doctor & Patient. 7.
Creditor and Debtor. 8. Trustier and benefishes. Case :
Manu Singh v/s Umadat Pandey : An old Hindu woman
gifted the whole property to her religious guru to get peace
in heaven. It held undue influence .
Parda-Nashin women : contract with parda-nashin women
is presumed to have been induced by undue influence.
She can avoid the contract unless he other party can show
that it was her intelligent and voluntary act, A case : Ismiel
v/s Amir Bibi 1902 : It was held that the women does not
become parda-nashin women.
Mental sickness:-If one party is not in position to think his
interest due to mental sickness. Case : Rani Annpurna v/s
Swami Nath. A widow who did not have any mental fitness
went to creditor, she got Rs.1500/- or 100% interest. It was
held voidable because she was not in a position to give
free consent. The Party attempted to influence the will of
other party. A state of mental fear is not undue influence.
If a party is in a position to influence others will it is not
undue influence whether other party gets damaged.
2. Real Damage :- If no damage is done to the Pt. Then it
will not be undue influence. Remedies : 1. Voidable u/s
19.2. Restitution u/s 64 3.damages u/s 73. The court
under section 19 can declare the whole agreement as void

or the court may be declared it void on reasonable


condition.
Burden of Proof. : Pt. Will have to prove that the def. Was
in a position to dominate the will of the pt. Thus if such
relationship is proved by the pt. The court will presume the
undue influence. Now burden to disprove this presumption
comes on defendant, that there was no undue influence.
He should prove that he did not try to dominate other will.
He paid sufficient consideration to aggrieved.
That the plaintiff had opportunity to take free advice.
Effect of Undue Influence:- Section 19A says when
consent to an agreement is caused by undue influence,
the agreement is a contract, voidable at the option of the
party whose consent was so caused.
FRAUD UNDER SECTION
(17):Section 17 defines that Fraud includes any of the
following act committed by a party to a contract or with his
connivance or by his agent with intent to deceive another
party there or his agent or to include him, to enter into the
contract( whenever a person obtains any material
advantage from another by unfair and wrongful means. It
is said that he has committed fraud. Fraud is the wilful
representation made by a party to contract with the intent
to deceive the other party or to induce such party to enter
into a contract.
ESSENTIALS OF FRAUD :- (1) To give a suggestion that
a fact is true, while it not true: (false suggestion) such
suggestion, which is not true.
Case : Mithu Lal v/s LIC of India :- In this case the court
held that Devlata committed fraud.

i) Active concealment of a fact which is in the knowledge


of the person: Every body has the duty to disclose the
defects in the material or the property while entering to the
contract, if it is not done then the agreement is based on
fraud.
Example :- A agrees to transfer his land to B but the land
is already mortgaged to C, A does not disclose this fact. It
is a fraud.
ii) To do such promise without intention of perform(false
promise )
iii) Any other act fitted to deceive.
iv) Any act which is declared by law as fraudulent : such
as in slavery act for companies it has been specified that
certain type of transfer of property is fraud.
v) Fraud committed by partner or agent of the firm: such
as River silver mining v/s Smith AIR 1869: The court held
that this act was done by the Agent of company u/s liabe.
vi) There must be a false representation i.e. A shopkeeper
tells B that these goods are fresh. It is A option to reject it.
It will not be fraud.
vii) Representation must have been made by the Party or
by his agent: The representation must have been made
knowing that it is false without knowing its truth. In both
cases it will be fraud.
viii) The representative must have been an intention to
deceive.
ix) Mere silence is no fraud: under sec.17: A contracting
party is not obliged to disclose each and everything to the
other party. Merely because a person does not disclose
the defects in the goods sold by him, there is no fraud.
Shri Krishan v/s Kurukshetra University- 1976 : It was held

that there was no fraud by the candidate and the


University has no power to withdraw the candidature of the
candidate on that account.
x) There are two exceptional cases where mere silence
may amount to fraud :1. Duty to speak : when the circumstances of the case are
such that, regard being had to them, it is the duty of the
person keeping silence to speak. Keeping silence in such
case amounts to fraud.
Case : Srinivasa Pillai v/s LIC of India, AIR-1977 : It was
held that the claim is not maintainable against the insured
corporation.
2. Duty to disclose changes :- If a statement is true when
made, but subsequently becomes false by the change of
circumstances, there is duty to disclose the change before
the other party acts upon it.
xi)
Ratification : When even after the knowledge
committing fraud party ratifies agreement now he cannot
repudiate. Damage, Restitution.
Prof of Fraud
Fraud is essentially a question of fact and has to be
proved by the person who alleges that the fraud was done
on him.
MISREPRESENTATION (UNDER SEC. 18)
When a false statement is made with the knowledge that it
is false and also with the intention to deceive the other
party and make him enter into a contract on that basis, it is
known as Fraud,

But when the person making a false


statement believe the statement to be true and does not
intend to mislead the other party to the contract, it is
known as Misrepresentation it is somewhat different from
fraud. example : A while selling his watch tells B that his
watch is made in Switzerland, A does not know that the
watch is not made in Switzerland. It is fraud because the
watch is made in India. A is guilty of misrepresentation.
It includes :- 1) The positive assertion, in a
manner not warranted by the information of the person
making it of that which is not true, though he believes it to
be true. 2. Any breach of duty which without an intention to
deceive gains an advantages to the person committing it.
ESSENTIALS
1. The positive assertion of material fact: When one party
believes that his statement is true but it is not true, it is
called misrepresentation. Case: The Ocean steam
Navigation comp. v/s Sunderdas Dharmsay: A sold ship
telling it is of 28 tons but it was of less tons. A did not
know about it. It held misrepresentation.
2. Any Breach of duty : When on Party without intention of
committing fraud breaches duty and if he also takes
benefit from the agreement it will be misrepresentation.
Case : Bamarsi Dass v/s New India Assurance : Actually
one liability of party released in that deed held
misrepresentation. There was the duty of the party to
disclose the fact of deed. B could not read it but he did
not. It means he trusted on A and it is his false statement,
which held then it is Misrepresentation.
3. Innocent Misrepresentation: When false statement is
made innocently then it is Misrepresentation. Smith v/s

Land & House Property Corp.: A sold a hotel and said that
all rent holders are gentleman. Actually they it all were
defaulters. It held misrepresentation. Case : Derry v/s
Peek(1889) it was held that the management of the
company was guilty of misrepresentation, and not for
fraud. Another Case : Noor-ud-din v/s Umerao Bibi 1998: A
sale deed was challenged on this ground that it was
executed under fraud and misrepresentation seller was a
blind person. He was also not paid sufficient consideration.
The possession of property was also transferred to the
buyer, court declared such sale deed to be set-aside.
DIFFERENCE
BETWEEN
FRAUD
&
MISREPRESENTATION
FRAUD
MISREPRESENTATION
1. Fraud contains the intention
It does not contain any
such intention.
To deceive.
2. The facts are altered with the
No such thing in
misrepresentation. Any
Intention to deceive the other
is presented as such
presented as such
Person.
Whereas it does not
came out to be true
3. The guilty person has the
The guilty person has
no knowledge of
Knowledge of truth.
Truth.
4. Fraud is a type of tort and
It does not come under
tort.
So punishable.

5. Contract by fraud can be


Contract by
misrepresentation can only
Rescinded to demand
be rescinded not
demand compensation
Compensation.
6. The guilty person can not
Such defence could be
availed.
Take the defence that the
Victim person as plaintiff
Could have find out the
Truth.
MISTAKE (Section: 20-22)
The fifth element defecting the consent is MISTAKE,
contract by mistake are either void or voidable. It is not a
free consent. One or both of the parties may be working
under same.
Mistake is of three kinds :1. Mistake in the mind of the parties is such that there is
no genuine agreement at all. There is no meeting of
minds or consensus ad idem.
2. There may be mistake as to a matter of fact relating to
that agreement.
3. The mistake essential to the agreement as to the
subject matter.
TYPES OF MISTAKE :Mistake when there is no consensus ad idem: According
to sec.13: two or more persons are said to consent when
they agree upon the same thing in same sense. If there is
no meeting of minds or consensus ad idem, there arises
no contract which could be enforced.

Section 20 requires that:- Mistake of both the parties : The


agreement is void if there is mistake on the part of both
the parties. A case Ayekam Angahal Singh v/s Union Bank
Of India, AIR- 1970: It was held that since the mistake was
unilateral, the contract was not affected thereby and the
same could not be avoided.
According to Sec.21 of the Contract Act which lays that
mistake of law of country is not excusable i.e. any contract
is done under a mistake of law being followed in India then
such contract shall not be voidable, but if contract is under
a mistake of foreign law that i shall be void, i.e. Mistake of
Foreign Law and Mistake as to individual rights. Case :
Cooper v/s Phibbs-1867: The court held that the mistake
related to general ownership shall the same effect what
the mistake of fact would have. Mistake of fact is not
excusable.
ILLUSTRATION :- A agrees to buy horse from B at the
time of agreement, the horse had already died but both
the parties had no knowledge of it such, agreement is
void.
The following points are important in respect of Mistake of
Fact :1. Mistake must be mutual. Case: Courturier v/s Hastie:
1856: It was held that the agreement was void because of
the mutual mistake as to existence of the subject matter.
2. Mistake must relate o any substantive fact, like mistake
as to identity of the parties, identity of subject matter
identity of nature of transaction etc.
3. Mistake must relate to present or existing fact.

Case : Raffles v/s Wichellehaus 1864 : It was held that


owing to mistake as to the identity of subject matter of
contract, such contract was void.
4. Mistake as to Promise:- If a mistake because of which
the promise does not reflect the real intention which was
there in the proposed agreement, such an agreement
would be void. Case :Hartog v/s Colins& Shields: 1939 It
was held that there had arisen no contract in this case
because the buyer could have noticed the mistake.

Q.No. 7:- Explain the law relating to agreement in restraint


of trade with reference to Indian Law along-with
exceptions.
Answer :-INTRODUCTION : Section 25 to 30 of the
Indian Contract Act-1872 mentions that those agreement
which are void. Void agreement are defined in sec. 2(g) of
the act. According to it :- An agreement not enforceable
by law is said to be void. Thus sec.25 to 30 of the act
mentions following agreements to be void :AGREEMENT IN RESTRAINT OF TRADE
Section 27 of the act mentions that all such agreements
shall be void which creates restraint or partial restraint in
any type of occupation, trade or business of a person. In
simple language, agreements creating restraint in lawful
trade, occupation or business are void.
Indian constitution provides every person the freedom to
trade, occupation or business. This freedom cannot be
interfered except in certain situation. Freedom of trade,
occupation or business is in accordance to public policy.
This is the reason that this provision has been mentioned

in sec.27 of the act. But it is important that a reasonable


restraint on trade, occupation or business shall not make
an agreement void. The requirement is that restraint shall
be reasonable.
Case : Northernfelt v/s M.N.Felt Guns and Ammunition Co.
Ltd. 1894: It was held that before declaring agreement in
restraint of trade to be void, the reasonability of restraint
shall be examined and the examination shall consider
mainly that whether it is reasonable or not for parties or
public interest.
Illustration : If two neighbouring land owner agrees that
they shall not organise market for cattle on their lands on
the same day then such agreement shall not be void
because it is in the interest of both.
Case : Ms.S.Dey Forments Industrial Ltd v/s Ravindera
Nath S.Kamath 1999: It was held that where any person
is appointed in a company as an advisory and a condition
is laid that he shall not act anywhere during his service,
there such an agreement shall not be void.
The above rules does have few exceptions which are
under :1. Sale of Goodwill : Where the goodwill of any trade,
occupation or business is sold, there the buyer shall have
an agreement with the seller that the seller shall not do
any such business within the local limits for a specific time
which shall be done by the buyer with that goodwill. Four
things are necessary for the exception:
i) Trade is similar.
ii) Within specified local limits.
iii) Buyer is doing such business.
iv) The restraint is reasonable in the eye of court.

Case : Gujrat Bottling Co. Ltd. v/s Coca Cola Co. 1995: It
was held that provisions related o agreement in restraint of
trade shall not apply in such matters in which are
prohibited only for the time of existence of contract. If they
are applied even after the termination of contract, then i
shall be void.
2. Partnership Agreements : Where there is an agreement
between partners at the time of formation of firm that any
partners shall not carry a similar or otherwise any trade
during the existence of partnership, then such an
agreement is not considered to be creating restraint.
3. Dissolution of Partnership :- If any agreement is made
between the partners at the time dissolution of partnership
or a partner shall not carry a business similar to that of
firm for a specific time, then such agreement shall not be
void provided that it is reasonable.

Question No.8 : What do you understand by Quasicontract? State its essential features. OR
Quasi-Contract are in law but not in fact. Explain. OR
Quasi- contract is not the product of an agreement entered
into parties but a creation of law on the basis of equitable
principles. Discuss the above statement and state the
quasi contract relations recognised by the India in
Contract Act.? OR
What do you understand by Quasi-contracts? Explain
some relations which are resembling to those created by
contracts as incorporated under the Indian Contract Act
1872.

Answer :- INTRODUCTION: For a valid contract there


must be offer, acceptance and consideration with some
other requirements. But sometime the position comes
when there is neither offer not acceptance still there is
contract. Such position is put under the category of
Quasi- Contract or relation resembling to those contract.
The term Quasi Contract generally means half or
semi. It means Quasi contract is half or semi contract.
But this meaning does not fulfil our aim. It is a confusing
term. However we can say that quasi contract means the
contract, which is equal to that of a valid contract. Chapter
5 of the Indian Contract Act deals with such situations
under the heading of certain relations resembling to those
created by contract. The chapter avoids the word quasicontract.
Generally the contracts or agreements are the result of
acts of parties. Parties agree to do or not to do something
but several times there is no agreement between the
parties, but still the liabilities arise between the parties
such liabilities are called by, Quasi-Contract.
Definition : Indian Contract act does not define the Quasicontracts. It only mentions that, certain relations
resembling those created by contract. However the
various jurists have defined the Quasi-contract as
under:-:According to Whartons Law Lexicon: An act
which has not strict form of a contract but has the effect of
it, is an implied Contract.
According to Desai : Quasi contract or implied contracts
are exceptional kind of contracts by which one party is
bound to pay money in consideration of something done
or suffered by the other party. They are not founded on

actual promises but arise when one party so conducted


himself that he must be deemed as if had made promise
although he has not,
According to Pollock:- Quasi contracts are contracts in
law but not in fact. In other words it can be said that
Quasi contracts is not a product of an agreement entered
into parties but a creation of law on the basis of equitable
principles.
Basic of Quasi-Contract : Lord Mansfied is considered as
the father of this contract. According to him, Natural
justice demands that one should not get unjust profit at the
cost of another unjust loss. This order has been laid down
in the case of :- MOSES v/s MACFERLAN : Such action
lies for money paid by mistake or upon a consideration
which happens to fail or for money got through imposition
or extortion or oppression or for an undue knowledge
taken of the pts situation. Country to the law made for
protection of persons under those circumstances of the
case. It is obliged by lies of natural justice and equity o
refund the money.
Under section 68 to 72 It has been recognised by Indian
Contract act under the heading of , Certain relations
resembling to those contracts.
CHARACTER/SKETCHES OF QUASI-CONTRACTS
1. These agreement are never made by parties but
imposed by law.
2. One party is bound to pay money to other party.
3. Such contract gives right to one party. Again the other
party in not against world.

4. Only money can be obtained not the liquidated


damages.
KINDS/ESSENTIAL OF QUASI-CONRACT
1. Necessaries supplied to a person of contracting: Sec.
68 says that if a person who is incapable to enter into a
contract is supplied necessaries, then he is bound to
compensate the suppler. Incapable means, who are not
capable under sec. 11 and 12, Minor is insane or disqualify
by law. If basic necessities are supplied to this, it will be
deemed quasi contract and its price can be recovered
through medical aid, clothes, food, marriage of minors
sister etc., that is depending upon him. Minors marriage is
not a basic necessity. The ingredients of sec.6 are as
under :
i) Necessaries supplied to a person not competent to
make contracts.
ii) These goods must be for the basic needs.
iii) The goods must be according to the status of minor.
iv) The supplier can recover the price against the property
of minor. It is not personal liability.
Case : Chapple v/s Cooper: 1844: It was held the things
for necessities shall be considered those without which it
is not possible to live. The food, clothing, shelter, medicine
etc., are the necessaries to minor or lunatic. But it must
not be more than sufficient.
2. PAYMENT BY AN INTERESTED PERSON : Section 69
of act is provides that a person who is interested in the
payment of money which another is bound by law to pay,
and who therefore pays it, is entitled to be reimbursed by
other.

ILLUSTRATION : B holds land in Bengal, on a lease


granted by A, who is a zamidar. The revenue payable by
A to the government being in Wlaw, the consequences of
such sale will be the annulment of Bs lease. B prevent
the sale and consequent annulments of his own lease,
pays to the government the sum due from A. A is bound
to make goods to B the amount so paid.
i) Person is legally bound to pay money.
ii) The person paying has the interest in such paymen.
iii) Payment is t o be made to another person.
Case : Govind Ram Gordhan dass Sekajri v/s State of
Himachal : Where Maharaja, having sold mills without
paying the overdue municipal taxes was sued by the
buyer, who had to pay to save the property from being old.
The Privy Council held that he was bound by law to pay
without the meaning of the sec. Where a person is only
morally bound and is not legally compellable to pay he will
not bound to pay.
3. LIABILITY TO PAY FOR NON-GRATUITOUS ACT: When any person lawfully does any act for another person
not gratuitously and the other person has enjoyed the
benefit of that act then he is bound to compensate him.
ILLUSTRATION:- A is a trade man leaves goods at Bs
house by mistake. B treats the goods as him own. He is
bound to pay A for them. A Case : Subramanyam v/s
Thaippa 1961: A contractor did more build more that what
was required by the contract and did not intended act
gratuitously. Court held that the contractor was entitled to
compensation for extra work.
Essential conditions of section 70:i) One person legally works for other

ii) The act is done voluntarily.


iii) He gets some benefit for this work.
iv) To whom it is done takes benefit of that act.
v) Act has been done not gratuitously.
A case : Kanhiya Lal v/s Inder chand: The court held that
section 68 does not apply because she was a minor at
sec.70 also does not apply because she did not get any
benefit. Because it was not a quasi-contract as his friend
having no interest in this payment.
4. Responsibility of Finder of Goods:- Section 71 of the Act
provides that a person who finds belonging to another
there will be a quasi contract . If bailment between two
looses all the rights and duties of bailer and balee will be
presumed under section 165 & 169( rights and Duties of
bailee).
5. MISTAKE OF COERCION:- Section 72 of the act says
that, when anything is delivered by way of mistake then it
is the duty of the person to return that things to the
concern person or to compensate him.
A case :- Sales Tax Officer Banaras v/s Kanhayya Lal : In
this case it was held that the transactions is to be ultrawires. The firm was allowed to recover back the tax which
he had paid.
Similarly if any person takes any thing from another
person by coercion i.e. by way of force under this petition
also the person is bound to return the goods to the
concerned person under quasi-contract obligation.
For example :- A at the point of pistol takes some gold
rings from B. Here A is bound to return the gold rings to
B under quasi contract obligation. The word coercion is
same as defined in sec.15 and the word mistake is same

as defined under sec.20. There are the provisions with


regard to quasi-contract.
CONCLUSION
Thus, in all above matters there is no agreement between
the parties but the conduct and actions of parties show
that an agreement has originated between them and get
binding in similar way as like a contract. This is called
Quasi-Contract.

UNIT-III
Question No.9:- Explain the term Anticipatory Breach of
Contract and discuss the consequences of such a
breach.
OR
Discuss the consequences of breach of contract with
relevant case.
OR
Who must perform the Contract? Who can demand for the
performance of Contract?
Answer: INTRODUCTION ; Contracts are important when
they are performed. There are two main questions in this
respect :i) Who shall perform the contract,
ii) Who can enforce the performance of the contract.
i) Who shall Perform a Contract :- Section 40 of the Act
mentions that generally the contract shall be performed by
the promisor itself if the parties has such intentions.
Otherwise the promisor can employ any other person for
the performance of contract.

Generally contract based on personal qualifications shall


be performed by the promisor himself. For example, A
promise to paint a picture for B. The performance of
contract requires it to be done by the promisor himself
because painting in personal skill of A. Whereas the
contract of sale of property can be performed by promisor
himself or by some other person.
Promisor can perform a contract by himself in the following
conditions :
a. Where the intention of parties was that the contract
shall be performed by the promisor only.
b. Where the performance depends upon personal skill of
promisor. Such contracts get terminated on death.
c. By Agent :- If the performance of contract does not
depend upon personal skill, then such contract can be
performed by the agent of promisor. Generally such
contracts are contracts for the sale of property.
d. By Legal Representative : Where the promisor dies
before the performance of contract and the performance
does not depend upon personal skill of promisor, there
such contracts shall be performed by the legal
representatives of deceased promisor, but only up to that
limit to which the legal Representative had the interest in
the property of deceased.
e. By Third Person:- Where promises accepts the
performance from a third person, there such promise can
be performed by that third person. In such mattes, promise
cannot enforce performance from promisor under section
41 of the Indian Contract Act.
PERFORMANCE OF JOINT PROMISES

There are provisions in the Indian Contract Act in this


respect:i) Under section 42 of the act when two or more persons
have made a joint promise, all such persons must jointly
fulfil the promise.
ii) When any one of joint promisor dies, his legal
representatives shall perform the promise.
iii) Under section 43 of the act when two or more persons
make a joint promise, the promise may compel any of
such joint promisors to perform the whole promise.
iv) Section 44 of the act says that where two or more
persons have made a joint promise, a release of one of
such joint promisor, by the promisee does not discharge
the other promisor of joint promisors neither does it free
the joint promisor so released from responsibility to the
other joint promisor or joint promisors.
WHO CAN DEMAND FOR THE PERFORMANCE OF
CONTRACT.
The following persons can demand for the performance of
the contract :a) The first right for the performance of contract is with the
promisee. He can demand for the performance of contract.
b) If the contract is not of personal nature then on the
death of promisee his legal representative or
representatives can demand the performance.
c) Where there is joint promise, there all the joint
promisors can jointly demand.
d) Where any one of the joint promisee dies, then the legal
representative of such deceased shall demand for the
performance.

e) Where are promisee dies, then their legal


representatives can demand the performance.
ANTICIPATORY BREACH OF CONTRACT:
Section 39 of the Act provides for the Anticipator Breach of
Contract which means : That before the performance of the contract, any party to
contract refuse to perform the promise or contract or
makes itself disable for performance is breach of contract.
ILLUSTRATION :- A singer enters into a contract with B
the manager of theatre to sing at his theatre for two nights
in every week during the next two months and B agrees to
pay her Rs.1000/- for each nights performance. On the
sixth night A wilfully absents herself from the theatre. B is
at liberty to put an end to the contract. In such cases
promisee can cancel the contract.
The base of section 39 is when a party to a contract has
refused to perform or disable himself from performing his
promise in its entirety, the promisee may put an end to the
contract, unless he has signified by words or contract his
acquiescence in its continuance.
REMEDIES :
The following remedies are available against the
anticipatory breach of contract :1. The promisee can file a suit for the breach of contract
considering it to be actual breach.
2. The promisee shall wait till the actual date of
performance and then file the suit.
3. Specific performance and Injuction : sometimes a party
to the contract instead of recovering damages for the
breach of contract may have protection to the alternative
remedy of specific performance of the contract.

4. Damages : Remedy by way of damages is the most


common remedy available to the injured party. This
entitles the injured party to recover compensation for the
party who causes the breach. Sec.73 to 75 incorporate the
provisions in this regard. A case : Hadley V/s Baxendale1854: It was held that the special circumstances were not
communicated by the plaintiffs to the defendants. The
plaintiffs were therefore not entitled to recover the loss.
Victoria Loundry Ltd. v/s Newman Industries Ltd. 1949.
It was held that the defendant had the knowledge of the
fact. The case was referred to official Referee to determine
the damages payable in this case.
5. Quantum Meruit:- When the injured party has
performed a part of his obligation under the contract
before the breach of contract has occurred, he is entitled
to recover the value of what he has done under this
remedy.
6. Measure of Damages :- That after certain result of the
breach of contract in nearest time is to be compensated.
Damages are therefore, to fix amount of that basis if a
party takes security deposit from the other for the due
performance of the contract.
A case : State of Kerla V/s K.Bhaskaran 1985.
It was held that generally 10% profit is taken as an
element in the estimation of the contract and the
contractor was entitled to claim compensation on that
basis.