Prof. CA.

Soujanya G K 2nd Sem, IBS Bangalore
The Indian Contract Act, 1872 Important Definitions

The Contract Act, 1872 LEOB

Section 2(a) 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 to such act or abstinence, he is said to make a proposal; Section 2(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when a accepted, becomes a promise; Section 2(c) The person making the proposal is called the "promisor", and the person accepting the proposal is called "promisee", Section 2(d) When, at the desire of the promisor, the promisee 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 the promise; Section 2(e) Every promise and every set of promises, forming the consideration for each other, is an agreement; Section 2(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises; Section 2(g) An agreement not enforceable by law is said to be void; Section 2(h) An agreement enforceable by law is a contract; Section 2(i) 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; Section 2(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. “Jus in rem” means a right against or in respect of a thing; - it is available against the world at large. Ex: Mr. X is the owner of a land. He has a right to have quite possession and enjoyment of that land against every member of the public. Similarly, every member of the public is under an obligation not to disturb Mr. X’s possession or enjoyment. This right of Mr. X is “jus in rem” Jus in personam means a right against or in respect of a specific person; - available only against particular person. Mr. A owns a certain sum of money to Mr. B. Mr. B has a right to recover this amount from Mr. A. this right can be exercised only by Mr. B and none else against Mr. A. this right of Mr. B is “jus in personam” “Conesnsus-ad-idem” means “the meeting of mind” i.e., the parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time. Unless there is Conesnsus-ad-idem there cannot be any contract. The term contract has been defined by many management authors, but as per Indian contract act 1872 the term has been defined under Section 2(h) as “An agreement enforceable by law is a contract”. As

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Prof. CA. Soujanya G K 2nd Sem, IBS Bangalore

The Contract Act, 1872 LEOB

per the definition given in the Indian contract Act 1872 a contract must essentially consist of the following elements: 1) An Agreement; 2) Enforceability by Law An Agreement: The term Agreement has been defined under Section 2(e) of the Indian contract Act as “Every promise and every set of promises, forming the consideration for each other, is an agreement.” Enforceability by Law: an Agreement, to become a contract must give raise to a legal obligation. The term obligation is defined as a legal tie, which imposes upon a definite person or persons the necessity of doing or abstaining from doing a defiant act or acts. It may be social or legal matters. An agreement, which gives raise, to a social contract is not a contract. In order to give raise to a contract the agreement must be a legal agreement. Therefore Contract = Agreement + Enforceability by Law. Agreement = Offer + Acceptance + Enforceability by Law Classification of contracts Based on the validity: An agreement becomes a contract when all the essential elements of a contract are present. In such case such agreement becomes a contract. If any of the essential elements are missing than such contact is voidable, void, illegal or unenforceable. Voidable contract: the term voidable contract has been defined under Section 2(i) as “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”. This happens in the case where the consent of the party has not been obtained in accordance with law or has been obtained by force or coercion or undue influence, misrepresentation, mistake. In such case the party whose consent is not free has the right to recent or accept the contract. Void Agreement: the term void agreement has been defined under Section 2(g) as “An agreement not enforceable by law is said to be void.” A void agreement does not create any legal right or obligation. Such agreement is void-ab-initio from the beginning itself. E.g., agreement with minor or an agreement with out consideration is void-ab-initio. Void contract: the term void contract has been defined under Section 2(j) as “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.” In this case when the contract was entered into, may be valid and binding on the parties as per law, but subsequently it has become void. E.g., in the case of import contract, the agreement is enforceable, but if subsequently war brakes out then the agreement becomes void contract. Illegal agreements: an illegal agreement is one, which transgresses (against) some basic rule of Public Policy or criminal in nature or is immoral. All illegal agreement is void, but all void agreements are not illegal. An illegal agreement is not only void between the immediate parties but has its further effect that even the collateral transactions to it become tinted with illegality. A collateral transaction is one, which is subsidiary, incidental or auxiliary to the principal contract. Ex: Mr. B borrows Rs.5,000 from Mr. A and enters into a contract with an alien to import prohibited goods. Mr. A knows of the purposes of agreement. The transaction between Mr. B and Mr. A is collateral to the main agreement. It is illegal since the main agreement is illegal.

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Prof. CA. Soujanya G K 2nd Sem, IBS Bangalore

The Contract Act, 1872 LEOB

Unenforceable contract: an unenforceable contract is one which cannot be enforced in a court of law because of some technical defect such as absence of consideration or absence of contract in writing. The parties to the contract may fulfill their obligations but in the event of breach of contract the other party cannot enforce it. Based on formation: Express contracts: if the terms of the contract are expressly agreed upon (whether by words spoken or written) at the time of formation of contract, such a contract is said to be an expressed contract Implied contracts: in this case the contract comes into existence by the acts or conducts of the parties or of course of dealing between them. E.g., - Getting into a Public bus. - Taking a cup of tea in a restaurant CL: a fire broke out in S’s firm. He called upon the upton fire brigade to put out the fire which the latter did. Mr. S firm did not come under the free service zone although he believes to be so. Held, he was liable to pay for the service rendered, since the services was rendered on the implied promise to pay (Upton Rural District Council vs. Powell) Quasi contract: strictly speaking quasi contracts are not contracts. A contract is one, which is entering into with the consent of the parties to the contract. A quasi contract is one, which is created by law. It is based on the principle that “a person shall not be allowed to enrich himself unjustly at the expense of another.” ESSENTIAL ELEMENTS OF A CONTRACT According to Section 10: All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. 1) 2) 3) 4) 5) 6) 7) 8) 9) Offer and Acceptance Intention to create a legal relationship Lawful Consideration Capacity of the Parties Free Consent Lawful Object Agreement not declared as void Possibility of Performance Legal formalities

Intention to create a legal relationship When two parties enter into any agreement, their intention must be to create a legal relationship between them. If there is no such intention on the part of the parties, there is no contract between them. Agreements of a social or domestic nature do not contemplate legal relationship. As such they are not contracts.

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The acceptance must also be according to the mode prescribed and must be communicated to the offeror. does not create a legal relationship because it is not intended so. when he signifies to another his willingness to do or to abstain from doing anything.. Held. The offer must contain certain terms on which the proposer is willing to act.Taking a cup of tea in a restaurant .g. (Carlill v/s Carbolic Smoke Ball Co. 4 . The wife sued for the allowance. he is said to make a proposal {Section 2(a)} A person making the offer is called “Offeror. E.g. E. Specific offer: when the offer is made to a specific person then such offer is called specific offer. Soujanya G K 2nd Sem. Advertisements A company advertises in several Newspapers that a reward of $100 would be given to any person who contracted with the influenza after using the smoke balls of the company in accordance with the printed instructions. ..) Legal rules to offer The offer must be given with an intention to create legal relationship: a proposal will not become a promise even after it has been accepted unless it was made with an intention to created legal relationship. one party making the offer and the other party accepting it. Later the parties separated and the husband failed to pay the amount.g.. CA. when A says: will you buy my car for Rs. This is an express offer.Weighing machine at the Railway Station.15000/-? Or advertises the same in the News Paper. IBS Bangalore The Contract Act. (Balfour v/s Balfour) Offer and Acceptance There must be two parties to an agreement.. Kinds of offer: Expressed offer: when the offer is made by express words. she could recover the amount as by using the smoke balls she accepted the offer.. Carlill used the smoke ball as per the instructions given by the company but contracted influenza. The acceptance to such offer can be given by the person to whom the offer is made and not by any one else.e. E. Held. . agreements such as these were outside the realm of contract altogether.Getting into a Public bus. General offer: when the offer is made to the world at large. i. Implied offer: an offer may be implied by the conducts of the parties or the circumstance of the case. A social invitation even if it is accepted. A person is said to have made a proposal. The terms of the offer must be definite: the terms of the offer must be definite and certain and must not unambiguous or vague. One Mrs. spoken or written. 1872 LEOB Case law: a husband promised to pay his wife a household allowance of $30 every month. Proposer or Promiser” and the person to whom the offer is made is called as the “Offeree or Proposee and when the offer is accepted by the offeree then he is called Acceptor or Promisee. The terms of the offer must be definite and the acceptance of the offer must be absolute and unconditional.Prof. with a view to obtaining the assent of that other to such act or abstinence.

in this case.” Held. The Customers select the goods in the shop and take them to the cashier for payment of the price. Case law: good are sold in shop under the self-service system. The contract. advertisements. prospectus issued by the company. etc. Otherwise the acceptance cannot create any legal relationship.. the offer would be considered as accepted 5 . (Lalman v/s Gauri Dutt) A statement of price is not an offer: a mere statement of price is not construed as an offer to sell. a declaration of intention to do a thing did not create a binding contract with those who acted upon it. Such a declaration only means that an offer will be made or invited in the future and not that an offer is made now. (Harvey v/s Facey) Offer must not contain a term the non-compliance of which may be assumed to amount to acceptance: the person making the offer cannot say that if acceptance is not communicated by a certain time. catalogues. etc. Held. CL: An auctioneer advertised in a newspaper that a sale of office furniture would be held.g. not when the customer selects the goods. Held. will. he was not entitled to reward. (Harris vs. (Pharmaceutical Society of Great Britain v/s Boot Cash Chemist) Offer must be communicated: an offer to be complete must be communicated to the person to whom the offer is made. Mere by acting to the terms of the offer without knowledge. Case law: S sent his servant. CA. invitation to offer or an announcement: An announcement: a declaration by a person that he intends to do something gives no right of action to another. “Lowest price for bumper hall pen $900” (Facey to Harvey) 3. there was no concluded contract between Harvey and facey. but when the cahier accepts the offer to buyer and accepts the price. so that the broker could not recover. IBS Bangalore The Contract Act. Soujanya G K 2nd Sem. (Taylor v/s Portington) There is a clear difference between offer. but merely gives an invitation to the public to make an offer to buy the goods at the price marked on it. “Will you sell your bumper hall pen? Telegraph lowest cash price – answer paid” 2. A broker comes from a distinct place to attend that auction. He than announced that anybody who traced his nephew would be entitled to a certain reward.Prof. is made. Auction sale. An acceptance of offer in ignorance of offer is no acceptance and does can not confer any right on the acceptor. 1. E. he claimed it. Case law: A offered to take a house on lease for three years at $ 285 per annum if the house was “put into through repair and drawing room handsomely decorated according to the present style.g. “We agree to buy bumper hall pen for the sum of $900 asked by you” (Harvey to Facey) Held. but all the furniture was withdrawn from the auction. Nickerson) An invitation to make offer: display of good by the shopkeeper with a price marked on it does not make an offer. the offer cannot be treated as accepted. L traced the boy in ignorance of this announcement. The broker thereupon sued the auctioneer for his loss of time and expenses. E. quotations. the offer was too vague to result in a contract relationship. Case law: three telegrams were exchanged between Harvey and facey. 1872 LEOB even though the proposer is free to lay down any terms and conditions in his offer. L to trace his missing nephew. Subsequently when he come to know of the reward. but they should be certain and legal..

Rao) Acceptance must be Unconditional: an acceptance in order to be binding must be absolute and unconditional. In express acceptance. there is no contract. Monteflore) It cannot precede an offer: if the acceptances precede an offer. whether material or immaterial to the contract. M offered to take shares in R Company. Mr. than it must be given with in a reasonable time and it depends on the facts of the case CL: on 08th June.e. It will be a valid acceptance unless A informs B that the acceptance is not according to the mode prescribed. The manager wrote the ward “Approve” and put the draft in the drawer of his table intending it to send it to the company’s solicitor for a formal contract to be drawn up. the offer was followed by an acceptance suggesting possession from 1st August. reply by wire. 1872 LEOB Acceptance is defined under Section 2(b) as “When a person to whom the proposal is made. If the parties are not consensus-ad-idem to all the terms and conditions of the contract. CA. Soujanya G K 2nd Sem. Where the offeror has not prescribed any mode. A makes an offer to B and says: “if you accept the offer. A proposal. Held there was no concluded contract (Routledge v/s grant) It must be communicated to the offeror: to conclude a contract between the parties. there is no contract. He received a letter of acceptance on November 23. If no time limit is specified by the offeror. was entitled to refuse as his offer has lapsed as the reasonable period during which it could be accepted had elapsed (Ramsgate Victoria Hotel Co. it is not a valid acceptance and does not result in any contract. the acceptance must be communicated in some perceptible (noticeable) form. It must be given in a reasonable time: if any time limit is specified.. B sends the reply by post. 6 . A lady invited her niece to stay with her in the same house and promised to settle on her immovable property. (V. If the acceptance is not according to the mode prescribed by the offeror. which depends upon the facts of the case. By some oversight the document remained in the drawer. signifies his assent thereto. (Brogden v/s Metropolitan Rail Co. or some usual or reasonable. He refuses to take the shares. when accepted. than. the proposal is said to be accepted. IBS Bangalore Legal rules as to acceptance The Contract Act. Niece was held to be entitled to property because she has accepted the offer of the aunt by conduct i. Mr. by going to her house and staying with her as desired. M. Acceptance may be implied or expressed. the acceptance must be given with in that time. The niece stayed with her residence till the time of her death. vs..Prof. while that given by conduct is termed as implied acceptance. Case law: a draft agreement relating to supply of coal was sent to the manager of a railway company for his acceptance. becomes a promise”. A mere resolve or mental determination on the part of the offeree to accept the offer is not sufficient and does not result in contract. The acceptance must be to all term of offer. there is no contract. Case law: A made an offer to B to purchase a house with possession from 25th July.) Acceptance must be given in the mode prescribed by the offeror: if the acceptance is not according to mode prescribed.. than the may insist the offeree to communicate the acceptance as per the mode prescribed. Held. Rao v/s A. it must by a reasonable mode. Held.

The letter is posted 10 th July. as against the acceptor.e. by a letter. CA. on 13th. The letter reaches on 15th instant.when it comes to the knowledge of the person to whom it is made. the offer was made to Brocklehurst and it was not in the power of Boulton to step in and accept and therefore there was no consent (Boulton vs. place an order with Brocklehurst for the supply of certain goods. by a letter sent by post on 13th instant. when B accepts A’s Proposal. Thus installation of a weighing machine at a public place is an offer. i. i. when the letter is received by A. there is no valid acceptance CL: Boulton brought a hose-pipe business from Brocklehurst. (Case of NT Rama Rao) 7 . Jones refused to pay Boulton for the goods because he. and the revocation of proposals respectively. The communication of the offer is complete when B receives the letter. Once the offer is rejected it can not be accepted by the offeree. The communication of an acceptance is complete -as against the proposer. Communication when complete The communication of a proposal is complete. in the above case. by his previous conduct inducted that his silence means the acceptance.e. are deemed to be made by any (a) act or (b) omission of the party proposing.Prof. when it is put in a course of transmission to him so at to be out of the power of the acceptor. unless the offeree has. IBS Bangalore The Contract Act.. by letter or telegram.. a contract comes in existence the movement the offeree gives his absolute and unqualified acceptance to the proposal made by the offeror. COMMUNICATION. Soujanya G K 2nd Sem. When the parties are at the distance and the offer and the acceptance and their revocation are made through post. ACCEPTANCE AND REVOCATION OF PROPOSALS When the contracting parties are face to face and negotiate in person. Such act or omission must however have the effect of communicating such offer.. It reaches B on 12th July. 1872 LEOB It must be given by the party or parties. The communication of acceptance is complete. to whom the offer is made: when an offer is made to a particular person.e. when the letter is posted. to sell a house to B at a certain price. as against B. when it comes to the knowledge of the proposer. E. unless the offeror renews the offer. accepting or revoking. Held.g. i. the acceptance of proposals. i. and switching off the machine amounts to revocation of the offer. The rules are as follows Mode of communication: The communication of proposals. acceptance or revocation.e. Boulton supplied the goods even though the order was not addressed to him. A Proposes. it can be accepted by him alone. E. by entering into contract with Brocklehurst. on 15th. as against A.. on 12th July. intended to set off his debt against Brocklehurst.. putting a coin in the slot of the machine is the acceptance of the offer. Jones) It must be given before the offer lapses or withdrawn. If it is accepted by another person.g.. It cannot be implied for the silence: the acceptance of an offer cannot be implied from the silence of the offeree. Jones to whom Brocklehurst owed a debt.

An agreement made with out consideration is void. E. Consideration is a technical term used in the sense of Quid-Pro-Que (i. A revokes his offer by a telegram on 19 th May. A. i. on 19 th May. 8 . subject to some exemptions. the letter is posted on the 01 st of the month. it is important that the letter of acceptance is correctly addressed. 04 th but not afterwards Mr. B may revoke his acceptance at any time before the letter of acceptance reaches Mr. But in order to bind the offeror. adequately stamped and posted. 06th. When a party to an agreement promises to do some thing. or (4) by the death or insanity of the proposer. (2) by the lapse of the time prescribed in such proposal for its acceptance. he must get some thing in return. The letter is posted 15th May..g. some thing in return).e. to sell a house to B at a certain price.e. B posts his letter of acceptance. otherwise the acceptance is not complete as per section 04 of the Act. or does or abstains from doing. when it is put into a course of transmission to the person to whom it is made. It reaches B on 20th May. B accepts the proposal by a letter sent by post on the 04 th.. B. A Proposes.e. The contract is complete even if the letter of acceptance goes astray or is lost through an accident in the post. This some thing in return is defined as consideration. The revocation is complete as against A when the telegram is dispatched. or. It is complete as against B when he receives it. but not afterwards. something. if no time is so prescribed. so as to be out of the power of the person who makes it. 1872 LEOB The communication of a revocation is complete -as against the person who makes it. * CONSIDERATION * Consideration: the term consideration has been defined under Section 2(d) as “ When. at the desire of the promisor.e. without communication of the acceptance. when it comes to his knowledge. Mr. CA. The telegram reaches B on 21st May. as against the person to whom it is made. Revocation how made A proposal is revoked – (1) by the communication of notice of revocation by the proposer to the other party.Prof. by the lapse of a reasonable time. or promises to do or to abstain from doing. such act or abstinence or promise is called a consideration for the promise. Mr. but not afterwards Loss of letter of acceptance in postal transit: Acceptance is complete as against the offeror as soon as the letter of acceptance is posted. A on the 06th. A may revoke his offer at any time before Mr. i.. but no afterwards. Ex: Mr. if the fact of the death or insanity comes to the knowledge of the acceptor before acceptance. i. Time for Revocation of Proposals and Acceptance o A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. on 21st May. the promisee or any other person has done or abstained from doing. i... A proposes by a letter sent by post to sell his house to Mr. by a letter. The letter reaches Mr. o An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor. Consideration is one of the essential elements of the contract. IBS Bangalore The Contract Act. (3) by the failure of the acceptor to fulfil a condition precedent to acceptance. Soujanya G K 2nd Sem..e.

which the promisor had made to subscribe Rs. (Kedar Nath v/s Gouri Mohamed) The reason why the law enforces only those promises which are made for consideration is that gratuitous or voluntary promises are often made rashly and without due deliberation. something. or promises to do or to abstain from doing (Future).15000/. as the promise resulted in a sufficient detriment to the secretary.g.15000/-. to the daughter. but the Secretary in this case incurred a liability on the strength of the promise. (Abdul Aziz v/s Masum Ali) The facts of this case were similar to those of the previous case. as “the person who made the promise gained nothing in return for the promise made”. Case law: an old lady. The same day D entered into an agreement with her aunt S to pay her the agreed amount. Held. or does or abstains from doing (Present). Case Law: the Secretary of the Mosque Committee filled a suit to enforce a promise. Held. sister of S. This means that as long as there is a consideration for a promise it is immaterial who has furnished it.e.500 to the re-building of a mosque. V/s Glamorgon Country Council) It may move from the Promisee or any other Person: consideration may move from the Promisee or any other Person.2200/-. A saves B goods from fire without being asked to do so. suffered no determent as nothing had been done to carry out the repairs. and the secretary of the committee to whom the promise was made. under the direction that she should pay her aunt. Hence the suit was dismissed. The promise could. “the promise was not enforceable because there was no consideration in the sense of benefit”. But a stranger to the consideration will be able to sue only if he is a party to the contract. the contract was supported to consideration and the company was liable to pay. Held. (Glasbrook Bros.. It was ultimately agreed to provide a stationary guard at the payment of Rs. a certain some of money annually. made over certain property to her daughter D. Subsequently the company refused to pay pleading absence of consideration. Case law: during the strike by the workers in the coal mine. Present or Future: the word used in Section 2(d) are”… has done or abstained from doing (Past). S was entitled to maintain suit as consideration had moved from the old lady. for A’s promise the consideration is Rs. The law looks with disfavor (disapproval) upon an exchange of promises which would result in one of the parties obtaining “something for nothing”.. The Police authorities provided a stationary guard at the expressed desire of the manager of the company for the protection of the mine. the colliery manager wanted a stationary guard. even a stranger. be enforced only to the extent of the liability incurred by the secretary. Held.g. D. A cannot demand consideration for his services.Prof. however. D refused to pay the amount on the plea that no consideration has moved from S to D. (Chinnaya v/s Ramayya) It may be Past. IBS Bangalore The Contract Act. S (Sister of old lady). the police authorities thought it is enough to provide a mobile force for the protection of the mine.and for B’s promise the consideration is the car. Legal Rules of Consideration It must move at the desire of the promisor: an act constituting consideration must have been done at the desire or request of the promisor if it is done at the desire of the third party or without the desire of the promisor it will not be a good consideration. by a deed of gist. Later.” 9 . 1872 LEOB E.. CA. A agrees to sell his car to B for Rs. the amount could be recovered. E. i. Soujanya G K 2nd Sem.

CL: There was a promise to pay to the vakil an additional sum if the suit was successful. unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law An agreement made without consideration is void. since it adds nothing to the pre-existing legal or contractual obligation.e. either by general law or under an existing contract. (Ramachandra Chintaman vs.999.. i. it is said to be present consideration. who in return promise to discharge A from the liability. Held. it is future consideration. at the time of the promise.500 to B. A’s promise is physically impossible to perform. The promise is unenforceable due to uncertainty. the agreement was void for want of consideration (Rajlukhy vs. i. it is enforceable even is there is no consideration (Ram Dass vs. Kalu Raju) A CONTRACT WITHOUT CONSIDERATION IS VOID . it must be real and of some value in the eye of law. But no consideration moved from the wife. o Uncertain consideration: A engages B for doing a certain work and promises to pay a “Reasonable some”. A consideration to the contract must not be against Public Policy.Prof. C the servant of B. after referring to quarrels and disagreement between him and his wife executed a registered document in favour of his wife agreeing to pay her maintenance. It need not be adequate: consideration as said “some thing in return” and something this some thing in return need not be equal in value to “Something given”.. because C cannot discharge A from the debt due to B. cash sale. The law requires that the contract must be supported by consideration and not the adequate consideration. Present consideration: when consideration is given simultaneously with promise. The adequacy of the consideration is to be determined by the parties to the contract at the time of entering into it. It must be real: although consideration need not be adequate. This is legally impossible.. E. CA. There is no recognized method of ascertaining the “Reasonable Some”. Krishan Dev) CL: A Hindu husband. unless – Love and Affection: where an agreement is expressed in writing and registered under the law for the time being in force for the registration of the documents and is made on account of natural law and affection between parties standing to the near relation to each other. 1872 LEOB Past consideration: when the consideration by the party for the present promise was given in the past. the promise was void for the want of consideration. he promises to pay Rs. it is said to be past consideration. void.g. The vakil was under a pre-existing contractual obligation to render the best of his services under the original contract. IBS Bangalore The Contract Act.50 to. is not a good consideration for the new promise. It must be lawful: the consideration given for an agreement must not be unlawful. Soujanya G K 2nd Sem. but the court has no right to determine the adequacy of the consideration. before the date of promise. Bhoothnath) 10 . Immoral and illegal It must be something which the promisor is not already bound to do: a promise to do what one is already bound to do. Held. Future consideration: when consideration for one party to the other is to pass subsequently to the making of the contract.e.EXEMPTION Agreement without consideration. o Legal impossibility: A owes Rs. There is no real consideration in the following cases: o Physical impossibility: A promises to put life into B’s dead wife on the consideration of Rs.

or 2) Where the superintendence of a minor’s property is assumed to be court of wards. the jury is their servant and law is their guardian). In the following two cases. he attains majority after twenty one years of age: 1) Where a guardian of a minor’s person or property has been appointed under the guardian and wards Act. but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given. (the Judges are their Counsellors. The rules governing minor’s agreements are based on two fundamental rules: a) The first rule is that the law protects minors’ against their own inexperience and against the possible improper designs of those more experienced.20. and who is sound mind and is not disqualified from contracting by any law to which he is subject. Charitable Subscription Capacity to Contract Section 11 of the Indian Contract Act states the Persons who are competent to contract. 1872 LEOB Promise to pay a time-bared debt: A promise to pay a time-bared debt by the debtor is enforceable provided it is made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf. b) The second rule is that.  Minors  Persons of unsound mind  Persons disqualified by any law for the time being in force. a minor mortgaged his house in favour of a money lender to secure a loan of Rs. as between the donor and donee.Prof. Agency: Section 185 of the contract Act provides that no consideration is necessary for creation of agency. Explanation 2 to Section 25 provides that an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate. to pay wholly or in part debt. 1890.out of which the mortgagee paid the minor a sum of Rs. Section 11 declares the following persons to be incompetent to contract. The debt must be such “of which the creditor might have enforced payment but for the law for the limitation of suits” Completed gift: that nothing in this section shall affect the validity. CA. stating that he was 11 . a minor is a person who has not completed eighteen years of age. of any gift actually made. the law should not cause unnecessary hardship to person who deals with minors. Minors: according to Section 3 of the Indian Majorities Act.8000/-. Every person is competent to contract who is of the age of majority according to the law to which he is subject. Subsequently the minor sued for setting a side the mortgage. in pursuing the above object. 000/. Soujanya G K 2nd Sem. IBS Bangalore The Contract Act. Legal rules of Minors: An agreement with minor is void. 1875.ab-inito: case law: in this case.

Case law: M.Prof.from N. therefore.as advance and agreed to pay the balance the next day and collect the scooter. Held. If it is necessary a fresh contract may be entered into by the minor on attaining the majority provided it is supported by a fresh consideration Case law: M. services rendered at the desire of the minor expressed during the minority and continued at the same request after his majority form a good consideration for a subsequent express promise by him in favour of a person who rendered the services (Sindha vs. where the minor has obtained some loan or property by fraudulently and the agreement is set a side. M. it was cancelled. 1872 LEOB underage when he executed the mortgage. by misrepresenting his age. The court may. Abraham) He can always plead minority: even if he has. direct him. Further the money lender requested for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted (Mohiri Bibi vs. A minor.200/. to restore the money or property to the other party.5000/. IBS Bangalore The Contract Act. on attaining majority: “Consideration which passed under earlier contract cannot be implied into the contract which the minor enter on attaining the majority. it would be giving him an indirect means of enforcing the void agreement. agreed to purchase a second hand scooter for Rs. since agreement with minor is void-ab-inito: a contract entered into on his behalf by his Parents / guardian can be enforced by or against the minor provided the contract is (a) with in the scope of the authority of the Parent / guardian. He cannot enter into a contract of Partnership: a minor can be admitted as a beneficiary of Profits of a Partnership firm already in existence. Thus consideration given during the minority is no consideration. though M may. obtains a loan by mortgaging his property. He is not liable to refund the loan not only that. and (b) for the benefit of the minor. There is nothing that debars him from being a beneficiary. CA. Such contract may be enforced at the option of the minor and not the other party. it can not allow the minor to cheat the other person If he has received any benefit under a void agreement. Aged 17. the mortgage was void and. Where as the law gives protection to the minor. induced the other party to contract with him. N told him that he has change his mind and offered to return the advance. The second Promissory note is void for the want of consideration. borrowed Rs. (Sharafat Ali v/s Noor Mohd) Minor cannot ratify his contract. There can be no specific performance of the contract with minor. N cannot avoid the contract. Dharamodas Ghose) He can be a Promisee or a Beneficiary: incapacity of minor to enter into a contract means incapacity to bind him-self by a contract. he paid Rs. he executed another Promissory note in settlement of the first note. But he cannot be admitted as a Partner 12 . if he likes. he cannot be sued either in contract or in tort for fraud because if the injured party were allowed to sue for fraud. with the consent of all the existing Partners. even his mortgaged property cannot be made liable to pay the debt. after attaining the majority. When he came with the balance money next day.5000/. on equitable considerations. he cannot be asked to compensate or pay for it: section 65 which provides for restitution in case of agreements discovered to be void does not apply to the minor Ex: Mr. Soujanya G K 2nd Sem. (Indran Rama Swamy v/s Anthiappa Chettiar) However. a minor.from L and executed a Promissory note in favour of L.

A person. the Parent / guardian shall be liable for his acts. 1872 LEOB He can be an agent: an agent is merely connecting link between Principal and third Party. IBS Bangalore The Contract Act. to pay him certain sum of money to learn the game and play matches with him during his world tour. the agent drops out with any personal liability.” Soundness of mind of a Person depend upon two facts: a) His capacity to understand the contents of the contract. He cannot be a shareholder in a Company. A person. but occasionally of sound mind. The movement the Principal and third party comes into contract with each other. who is usually of sound mind.Prof. may make a contract when he is of sound mind.” (Robarts v/s Gray) Persons of unsound mind One of the essential conditions of competency of Parties to a contract is that they should be of sound mind. He cannot be adjudged as an insolvent. Minor’s liability for necessaries: a minor is liable to pay out of his property for “necessaries” supplied to him or to anyone whom he is legally bound to support (Section 68). at the time when he makes it. Soujanya G K 2nd Sem. R spent time and money in making arrangements for billiards matches. a minor. entered into a contract with R. The following are regarded as unsound mind: a) Lunatics b) Idiot c) Intoxicated Persons A part from above a few other Persons are also Prohibited to enter into a contract. Case law: G. His Parents / guardian are / is not liable for the contracts of the minor: the exemption to this rule is that where the minor act as an agent of his Parent / guardian. hence a minor can act as agent. CA. he is capable of understanding it and of forming a rational judgement as to its effect upon his interest. if. Again it is only the property of the minor. which is liable for meeting the liability arising out of such contracts. Held. who is usually of unsound mind. a) Alien Enemy. “A person is said to be of sound mind for the propose of making a contract. He is not personally liable. and b) His ability to form a rational judgement as to its effect upon his interest The unsound Persons are not entitled to enter into a contract. G was liable to pay as the agreement was one for necessaries as it was in effect “for teaching. He can be member in a Trade union: A Person who attained the age of 14 years can be admitted as a member. 13 . but occasionally of unsound mind. instructions and employment and was reasonable and for the benefit of the infant. Section 12 states what is a sound mind for the purposes of entering into a contract. a noted billiards player. may not make a contract when he is of unsound mind. The claim arises not out of contract but out of what are called Quasi-Contracts.

1872 LEOB Insolvent. The Principal had to give a release deed as demanded. the son of P. or (2) undue influence. The threat amounting to coercion need not be necessarily proceed from a Party to the contract. Corporations (beyond MOA and AOA). any act forbidden by the Indian Penal Code 1860 or the unlawful detaining.21. as defined in section 16. (Muthia v/s Muthu Karuppa) The Government gives a threat of attachment against the property of P for the recovery of the fine due from T. (Bansraj v/s Secretary of the State) Threat to commit Suicide – does it amount to Coercion? 14 . or (4) misrepresentation. Section 15: "Coercion" When a person is compelled to enter into a contract by the use of the force by the other party or under a threat. CA. the release deed was given under coercion and was voidable at the option of the Principal. Convicts. misrepresentation. Held the contract was induced by coercion. as defined in section 15. or threating to commit. as defined in section 18. any act forbidden by the Indian Penal Code Case law: A young girl of 13 years was forced to adopt a boy to her husband who had just died by the relatives of the husband who prevented the removal of his body for cremation until she consented. Held. Free consent According to Section 10 one of the essential elements to form a contract is that the consent of the Parties to the contract must be free. As defined under Section 15: "Coercion" is the committing. Soujanya G K 2nd Sem. Case law: an agent refused to hand over the account books of a business to the new agent unless the Principal releases from all liabilities. their diplomatic staff and accredited representatives of the foreign states. and 22. the consent was not free but was induced by coercion. undue influence. Consent is said to be free when it is not caused by – (1) coercion. fraud. as defined in section 17. with the intention of causing any person to enter into an agreement. (Ranganayakamma V/s Alwar Shetty) (b) The unlawful detaining. coercion is said to be employed.Prof. P paid the fine. The entire definition is divided into two parts (a) Committing. any property. or threating to commit. or (5) mistake. or (3) fraud. Consent is said to be so caused when it would not have been given but for the existence of such coercion. to the prejudice of any person whatever. Foreign Sovereigns. or mistake. or threatening to detain. Held. The term "Consent" is defined under Section 12 as: Two or more person are said to consent when they agree upon the same thing in the same sense. subject to the provisions of section 20. IBS Bangalore b) c) d) e) The Contract Act. or threatening to detain.

(Mannu Singh v/s Umadat Panday) Under the following relationship there is no assumption of undue influence. or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age. enters into a contract with him. (2) In particular and without prejudice to the generally of the foregoing principle. e) It is a moral character. or mental or bodily distress. The wife and son executed a release deed in favour of his brother under the threat. d) There must be unfair advantage. illness.Prof. and the transaction appears. Held. Some of the examples where undue influence between exist between the following relations: Superior and subordinate Principal and agent Doctor and Patent Promoter and Company Solicitor and Client Father and Son Teacher and Student Spiritual guru and devotee Case Laws: A Spiritual guru induced his devotee to gift to him the whole of his property in turn of a promise of salvation of the devotee. Nothing in the sub-section shall affect the provisions of section 111 of the Indian Evidence Act. Held. c) One should dominate the other. b) The relationship should satisfy between them. 1872 LEOB A Person held out a threat of committing suicide to his wife and son if they did not execute a release in favour of his brother in respect of certain property. Husband and Wife Landlord and tenant 15 . the threat to commit suicide amounts to coercion (Chikham Amiraju v/s Seshamma) Section 16: "Undue influence" Sometimes a party is compelled to enter into an agreement against his will as a result of unfair persuasion by the other party. on the face of it or on the evidence adduced. (1) A contract is said to be induced by "under influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. (3) Where a person who is in a position to dominate the will of another. IBS Bangalore The Contract Act. the consent of the devotee was given under the undue influence. or where he stands in a fiduciary relation to the other. a person is deemed to be in a position to dominate the will of another – (a) where he hold a real or apparent authority over the other. the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other. 1872 Essentials: a) There must be two persons. This happens when a special kind of relationship exists between the parties such that one party is in a position to exercise undue influence over the other. Soujanya G K 2nd Sem. CA. to be unconscionable.

She needs the money to establish her right to maintenance. (2) the active concealment of a fact by one having knowledge or belief of the fact. with intent to deceive another party thereto his agent. Essentials: a) There must be a representation b) There must be two persons c) There must be an active concealment of the fact The person making the representation does not believe it to be true d) There must be an intention of the proposer or the promiser to deceive the other person e) The other person must have relied upon the representation and must have been deceived and suffered loss f) The representation must have been made before the concealment of the contract g) The representation must relate to a material fact which exists now or existed in the past A contract induced by fraud is voidable at the option of the party defrauded. Until it is avoided it is valid. (4) any other act fitted to deceive. upon such terms and conditions as tot eh court may seem just and equitable Section 17: "fraud Fraud exists when it is shown that. not caring whether it is true or false. (b) without belief in its truth or (c) recklessly. or by his agents. CA. Soujanya G K 2nd Sem. or with his connivance. Any such contract may be set a side either absolutely or if the party who is entitled to avoid it has received any benefit there under. the agreement is contract voidable at the option of the party whose consent was so obtained. and the maker intended the other party to act upon it. or there is a concealment of material fact or that there is a partial statement of a fact in such a manner that the withholding of what is not stated makes that which is stated false. by misleading another to his prejudice. in a manner not warranted by the information of the person making it. or to the prejudice of any one claiming under him. by one who does not believe it to be true. (5) any such act or omission as the law specially declares to be fraudulent. IBS Bangalore The Contract Act. of that which is not true. though he believes it to be true. of that which is not true. or anyone claiming under him. it was case of undue influence and court reduces the rate of interest to 24% (Ranee Annapurni v/s Swaminath) When consent to an agreement is obtained by undue influence. or to induce him to enter into the contract (1) The suggestion as a fact. without an intent to deceive. gains an advantage to the person committing it. (3) a promise made without any intention of performing it. The party defrauded has the following remedies: o The contract can be rescinded within reasonable time limit o He can insist on the performance of the contract on the condition that he shall be put in the position in which he would have been if the representation made had been true o He can sue for damages Section 18: "Misrepresentation" "Misrepresentation" means and includes – (1) The positive assertion. (2) Any breach of duty which. 16 .Prof. a false representation has been made (a) knowingly. 1872 LEOB Debtor and Creditor Exempt ional Case: A Poor Hindu widow was persuaded by a moneylender to agree to pay 100 Percent rate of interest on the money lent by him to her. Held. The object of the party making misrepresentation is to deceive or induce the other party to enter into a contract "Fraud" means and includes any of the following acts committed by a party to a contract.

Soujanya G K 2nd Sem. a) Mistake of law of the country is no excuse. however innocently. of country or of foreign county. The daughter gave her consent to marry him believing the statement by her father. Essentials: a) It must be representation of material fact b) It must be made before the conclusion of the contract c) It must be wrong but the person making it believes it to be true d) It must have been made without any intention of deceiving the other Person e) It need not be made directly made to the Plaintiff Case law: A told his wife with in the hearing of their daughter that the bridegroom proposed for her was a young man. In such a case the agreement is void. the directors were guilty of misrepresentation (Derry vs. there is a bilateral mistake. A Party to the contract cannot be allowed to ask for relief on the ground that the act was done in ignorance of law. the car and the garage were completely destroyed by fire. Mistake of fact may be:a) A bilateral mistake. They honestly believe that the permission for the use of steam power would be granted.Prof. but mistake as to a law not in force in India has the same effect as a mistake of fact. It also includes non-disclosure of a material facts without any intent to deceive the other party. 21 and 22: Mistake Mistake may be defined as an erroneous belief about something. a party to an agreement. The bridegroom. Misrepresentation is a false statement which the person making it honestly believes to be true or which he does not know to be false. “Section 21: Effect of mistake as to law” A contract is not voidable because it was caused by a mistake as to any law in force in India. or b) Unilateral mistake Bilateral mistake: Section 20: Agreement void where both parties are under mistake as to matter of fact Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement. 1872 LEOB (3) Causing. The agreement is void 17 . Peek) Section: 20. (Section 21). The directors issued prospects stating therein that the company had the right to use steam power. b) Mistake of law of a foreign country: such mistake is treated as mistake of fact. It may be a mistake of law or mistake of fact. Held. is a well-settled rule of law. Singh) CL: A company’s prospectus contains a representation that it has statutory powers to run its tramways by steam provide that the consent of the government was obtained. Mistake of law may be. to make a mistake as to the substance of the thing which is subject of the agreement. A. The permission was refused. and such agreement is treated as void. Held. The mistake may be mutual: where both the parties misunderstood each other Ex: A agreed to purchase B’s car which was lying in B’s garage. IBS Bangalore The Contract Act. The company was that wound up. CA. (Babul v/s R. however was over sixty years. Unknown to the either parties. the consent was vitiated by misrepresentation and fraud.

or is of such nature that. the agreement is void Unilateral mistake: Section 22: Contract caused by mistake of one party as to matter of fact A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. Actually the painting is a new one and is worth only Rs.5. of involves or implies. 1872 LEOB The mistake may relate to the matter of the fact essential to the agreement: A man and a woman entered into a separation agreement under which the man agreed to pay a weekly allowance to the women. injury to the person or property of another. CA. the agreement was void as there was mutual mistake on the point of the fact which was material to the existence of the agreement (Galloway vs. Mistake as to subject matter covers the following cases: Mistake as to: o Existence of subject matter: if both the parties believe the subject matter of the contract to be in existence. which in fact at the time of the contract is non-existent. A cannot avoid the contract on the ground of mistake Mistake as to subject matter: where both the parties to an agreement are working under a mistake relating to the subject matter. the agreement is void o Price of the subject matter: if there is a mutual mistake as to price of the subject matter. Every agreement of which the object or consideration is unlawful is void. The consideration or object is unlawful- 18 . In each of these cases. the consideration or object of an agreement is said to be unlawful. if permitted it would defeat the provisions of any law or is fraudulent. Soujanya G K 2nd Sem. A unilateral mistake is not allowed as a defence in avoiding a contract unless the mistake is brought about by the other party’s fraud or misrepresentation Legality of the objects: Section 23 of the Act states that “What consideration and objects are lawful. IBS Bangalore The Contract Act. mistakenly believing themselves lawfully married. the contract is void o Identity of subject matter: it usually arises when one party intends to deal in one thing and the other intends to deal in another o Quality of subject matter: if the subject matter is something essentially different from what the parties thought it to be. the agreement is void o Quantity of subject matter: if both the parties are working under a mistake as to the quantity of the subject matter. Held.500.000 thinking that it is an excellent piece of art. the agreement is void o Title of the subject matter: if the seller is selling a thing which he is not entitled to sell and both the parties are under a mistake. Galloway) But an erroneous opinion as to the value of a thing which forms the subject matter of an agreement is not to be deemed a mistake as to a matter of fact Ex: A buys an old painting for Rs.Prof. now. and what not” The consideration or object of an agreement is lawful. or opposed to public policy. the agreement is void. or the Court regards it as immoral. unless -It is forbidden by law.

The court will not enforce such an agreement. IBS Bangalore The Contract Act. Agreement to commit crime: where the consideration in an agreement is to commit a crime. This is base upon one of the following two reasons: either that the further performance involves commercial intercourse with the enemy.. Bansi Mandar) If the court regards it immoral: an agreement. knowingly that it was to be used by the prostitute to attract man.. the agreement was void (Nandlal vs. being immoral. transfer or sublease of the licence or the creation of a partnership to run the shop. Thomas) It is fraudulent: an agreement if any made for any fraudulent purpose is void. Mr. the agreement cannot be enforced in the court of law. though not directly forbidden by law. illicit cohabitation or prostitution. e. an agreement in fraud of creditors with a view to defeat their right is void. L without pay for a period of 02 years. agreement between husband and wife for future separation. CL: A was licensed under an Excise Act to run a liquor shop. it would defeat the provision of any law. Soujanya G K 2nd Sem.g. e.g. if permitted. property includes both movable and immovable. harm or damage. Such agreements whether past or future is against law and unlawful (S. the contract was void as it involved injury to the person of Mr. the agreement is unlawful. than such agreement is unlawful and as such void. CA.g. If it involves or implies injury to any person or property of another: injury means wrong. coach builders could not recover the hire as the agreement was unlawful (Pearce vs. the consideration or object of which is immoral. Held. B borrowed Rs. the agreement is void. In case of default. it would defeat the provisions of any law: if the object or the consideration of an agreement is such that.100 from Mr. Likewise an agreement to indemnify a person against consequences of his criminal act is opposed to public policy and hence unenforceable 19 . where A agrees to let her daughter on hire to B for concubinage.Prof. If it is of such a nature that. The Act forbade the sale. Held. A took B into partnership. Held. B has to pay interest (at a very high rate) and the principle sum at once. Thus. B (Ram Saroop vs. and such agreement is against public policy.Sabu) Where the object of the agreement is furtherance of sexual immorality. lending money to a prostitute to help her in her trade A firm of coach builders hired out a carriage to a prostitute.. For example. is unlawful (Sumitra Devi v/s Sulekha Kundu) Where the consideration is an act of sexual immorality: e. 1872 LEOB It is forbidden by law: if the object or consideration of an agreement is forbidden by law. or that the continued existence of agreement would confer upon the enemy immediate or future benefit.Yellappa v/s Y. Brooks) Where the court regards it as opposed to Public Policy Agreement of trade with enemy: an agreement made with alien enemy in the time of was is illegal on the ground of public policy. An act is forbidden by law when it is punishable under the criminal law or is prohibited by special legislation or regulations made by the competent authority. Person means ones body. L and executed a bond promising to work for Mr. Mr.

Agreements in restrain of legal proceedings.Prof. by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract. trafficking in public offices and titles: agreement of the sale or transfer of public offices and titles or for the procurement of a public recognition like Param Veer Chakra for monetary consideration are unlawful. however does not make them absolutely void. This right cannot be bartered away of an agreement.. to another to enable him to bring or defend legal proceedings when the person giving assistance has got no legal interest of his own in the subject matter. Agreements tending to create interest opposed to duty: if a person enters into an agreement whereby he is bound to do something which is against his public or professional duty. is void to the extent. by the usual legal proceedings in the ordinary tribunals.Nor shall this section render illegal any contract in writing. by which two or more persons agree to refer to arbitration any question between them which has already arisen. CL: An agreement by a newspaper proprietor not to comment on the conduct of a particular person is unlawful being opposed to Public Policy (Neville vs. It may take any of the following forms: Interference with the course of justice: an agreement which obstructs the ordinary process of justice is unlawful. void (Section 28) Every agreement. Exception 1: Saving of contract to refer to arbitration dispute that may arise. Under English law both the agreement are void. B in consideration of his beating Mr. That is in the case of non compoundable offence. he must be prosecuted and punished. the agreement is void on the ground of public policy. CA. Limited) Agreement in restraint of parental rights: a father or in his absence his mother is the legal guardian of a minor child. IBS Bangalore The Contract Act. the agreement is opposed to public policy Agreement which interfere with the administration of justice: an agreement the object of which is to interfere with the administration of justice is unlawful. This section shall not render illegal contract. Soujanya G K 2nd Sem. Thus an agreement for using improper influence of any kind with the judges or officers of the justice is unlawful. C. A father cannot enter into agreement which is inconsistent with his duties arising out of such custody. Dominion of Canada News Co. Under Indian law. or affect any provision of any law in force for the time being as to reference to arbitration. financial or other wise. by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subject shall be referred to arbitration. If he enters into any such agreement such agreement is void on the ground of public policy. Maintenance and Champerty: “Maintenance” is an agreement to give assistance. “Chaperty” is an agreement whereby one party is to assist another to bring an action for recovering money or property. Exception 2: Saving of contract to refer question that have already arisen . being opposed to public policy. A promises to indemnify Mr. 1872 LEOB Mr. Stifling prosecution: it is in public interest that if a person has committed a crime. if enforced would lead to inefficiency and corruption in public life. and is to share in the proceeds of the action. such agreement is unlawful. or which limits the time within which he may thus enforce his rights. Hence an agreement not to prosecute an offender is an agreement for stifling prosecution is unlawful. being opposed to public policy. 20 . Such agreements. and that only and amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

profession or vocation is called an agreement in restrain of trade is void. Similarly. (Ex: sale of goodwill. Soujanya G K 2nd Sem. if permitted it would defeat the provisions of any law or is fraudulent. Section 24: Agreements void. though satisfies all essential elements of contract. is against public policy (Tikyat vs. A contract by which an employee gets an expense allowance grossly in excess of the expenses actually incurred by him is illegal and a fraud on revenue authorities. and who is sound mind and is not disqualified from contracting by any law to which he is subject. of involves or implies. or the Court regards it as immoral. being opposed to public policy.Prof. but if declared as void as per the law of the country. Section 23: the agreement the consideration or the object is unlawful The consideration or object of an agreement is lawful. Agreement interfering with marital rights: any agreement which interferes with the performance of martial duties is void. 1872 LEOB Agreement restriction personal liberty: agreements that unduly restrict the personal freedom of the parties to it are void as being against public policy. CA. Agreement in restraint of trade: an agreement which interfere with the liberty of a person to engage him-self in any lawful trade. unless -It is forbidden by law. Subject to some exemptions. Agreement in restraint of marriage: every agreement in restraint of the marriage of any person. an agreement to pay money to the parent of a minor child in consideration of his/ her consenting to give the minor in marriage is void. Manohar) Agreement to defraud creditor or revenue authorities: an agreement the object of which is to defraud the creditors or revenue authorities is not enforceable. Section 20: Agreement void where both parties are under mistake as to matter of fact Explanation: An erroneous opinion as to the value of the things which forms the subject-matter of the agreement. promises in return to procure the marriage of another is void. In each of these cases. is void. the consideration or object of an agreement is said to be unlawful. Marriage brokerage or brokerage agreement: an agreement by which a person. CL: An agreement to lend money to a women in consideration of her getting a divorce and marrying the lender. IBS Bangalore The Contract Act. for a monetary consideration. being oppose to public policy. being oppose to public policy. Every agreement of which the object or consideration is unlawful is void. injury to the person or property of another. outgoing partner in a partnership firm) Void Agreements An Agreement. being oppose to public policy. other than a minor.” The following Agreements have been expressly declared as void by the contract act: Section 11: Who are competent to contract Every person is competent to contract who is of the age of majority according to the law to which he is subject. if consideration are objects unlawful in part 21 . or opposed to public policy. The term void is defined under Section 2(g) as “An agreement not enforceable by law is said to be void. then such agreements are void agreements. is not be deemed a mistake as to a matter of fact. or is of such nature that.

after the contract is made. if an impossible event happens. void Every agreement in restraint of the marriage of any person. is unlawful. becomes impossible or. void. is void to the extent. or which limits the time within which he may thus enforce his rights. or capable of being made certain. other than a minor. or any one or any part of any one of several consideration of a single object. void 22 . are void. becomes void when the act becomes impossible or unlawful. such promisor must make compensation to such promise for any loss which such promisee sustains through the non-performance of the promise. by the usual legal proceedings in the ordinary tribunals. o Agreements by way of wager. Section 27: Agreement in restraint of trade. to do certain other things which are illegal. whether the impossibility of the event is known or not to the parties to agreement at the time when it is made. Soujanya G K 2nd Sem. firstly to do certain things which are legal. might have known. Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which. and also other things illegal Where persons reciprocally promise. with reasonable diligence. 1872 LEOB If any part of a single consideration for one or more objects. and which the promisee did not know to be impossible or unlawful. void Every agreement. void Section 36: Agreements contingent on impossible event void Contingent agreements to do or not to do anything. CA. unlawful. the meaning of which is not certain. the agreement is void. void Every agreement by which anyone is restrained from exercising a lawful profession. IBS Bangalore The Contract Act. Section 28: Agreements in restrain of legal proceedings. is to that extent void. Section 29: Agreements void for uncertainty Agreements. Section 30: Agreements by way of wager. secondly under specified circumstances. Section 56: Agreement to do impossible act An agreement to do an act impossible in itself is void. is void. the first set of promise is a contract. but the second is a void agreement. trade or business of any kind. Section 26: Agreement in restraint of marriage. are void. Compensation for loss through non-performance of act known to be impossible or unlawful: Where one person has promised to be something which he knew or. Section 25: Agreement without consideration. and. Section 57: Reciprocal promise to do things legal.Prof. in consideration of the other party’s promise to pay if the event does not happen. Wager Agreements or Wager: Section 30 A Wager is an agreement between two parties by which one promises to pay money or money worth on the happening of some uncertain event. unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law an agreement made without consideration is void. by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract. by reason of some event which the promisor could not prevent.

E. or entrusted to any person to abide the result of any game or other uncertain event on which may wager is made. collateral to such contract. i. IBS Bangalore The Contract Act. Essentials: a) There are two persons b) There must by uncertain future event c) The performance depends upon the happening or non-happening of an uncertain future event d) The event must be collateral. Soujanya G K 2nd Sem. Section 31 of the Indian Contract Act defines "Contingent contract" A "contingent contract" is a contract to do or not to do something. 1872 LEOB o Agreements by way of wager are void. Exception on favour of certain prizes for horse-racing: This section shall not be deemed to render unlawful a subscription or contribution. Section 294A of the Indian Penal Code not affected: Nothing in this section shall be deemed to legalize any transaction connected with horseracing. if some event. the contract is contingent contract depending upon the act of the buyer to accept or reject the buyer. or agreement to subscribe or contribute.Prof.. by both the parties to the agreement e) No other interest in the event f) There must be reciprocal promises g) Other are not interested in the contract Exemptions: The following transactions will not be regarded as Wager Agreements: a) A Crossword competition b) Games of skill c) Share market transaction d) Contract of insurance A contract may be – a) An absolute contract.e. CA.. and no suit shall be brought for recovering anything alleged to be won on any wager. which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply. incidental to the event e) There are no reciprocal promises f) Others may be interested in the contract g) It is a valid contract Section 32: Enforcement of Contracts contingent on an event happening 23 . made or entered into for or toward any plate. prize or sum of money. Essentials of a Wager Agreement: a) Promise to pay money or money’s worth b) Uncertain event c) Each party must stand to win or lose. to. or b) A contingent contract An absolute contract is one in which the promisor binds himself to the performance in any event without any condition. to be rewarded to the winner or winners of any horse-race. d) No control over the event. does or does not happen. goods sent on approval.g. of the value or amount of five hundred rupees or upwards.

or otherwise than under further contingencies. or before the time fixed has expired. and not before. IBS Bangalore The Contract Act. such event has not happened. or if. This is known as “attempted performance” or “tender”. or of any other law. their respective promises. may be enforced by law when the time fixed has expired and such event has not happened.Prof. PERFORMANCE OF CONTRACT Performance of Contract takes place when the parties to the contract fulfill their obligations arising under the contract with in the time and in the manner prescribed. can be enforced when the happening of that event becomes impossible. CA. Soujanya G K 2nd Sem. whether the impossibility of the event is known or not to the parties to agreement at the time when it is made. the event shall be considered to become impossible when such person does anything which renders it impossible that the should so act within any definite time. 1872 LEOB Contingent contracts to do or not to do anything in an uncertain future event happens. which are contingent on specified event not happening within fixed time: Contingent contract tutu or not to do anything. Every such offer must fulfill the following conditions – (1) it must be unconditional: it becomes conditional when it is not in accordance with terms of the contract (2) it must be made at a proper time and place. if a specified uncertain event does not happen within a fixed time. Section 35: When contracts become void. Offer to Perform Sometimes it so happens that the promisor offers to perform his obligation under the contract at the proper time and place. and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is been made is able and willing there and then to do the whole of what he is bound by his promise to do. if an impossible event happens. Section 38: Effect of refusal to accept offer of performance Where a promisor has made an offer of performance to the promisee. and the offer has not been accepted. nor does he thereby lose his rights under the contract. Section 33: Enforcement of contract contingent on an event not happening Contingent contracts to do or not to do anything if an uncertain future event does not happen. are void. unless such performance in dispensed with or excused under the provision of this Act. If the event becomes impossible. 24 . cannot be enforced by law unless and until that event has happened. but the promisee does not accept the performance. if it is the future conduct of a living person If the future event on which a contract is contingent is the way in which a person will act at an unspecified time. Section 34: When event on which contract is contingent to be deemed impossible. if a specified uncertain event happens within a fixed time. the promisor is not responsible for non-performance. before the time fixed. Section 36: Agreements contingent on impossible event void Contingent agreements to do or not to do anything. which are contingent on happening of specified event within fixed time Contingent contracts to do or not to do anything. become void. Para 1 of Section 37 lays down that The parties to a contract must either perform. if it become certain that such event will not happen. such event becomes impossible. or offer to perform. at the expiration of the time fixed. if. such contracts become void. When contracts may be enforced.

unless he has signified. In such a case it has the same effect as a tender to all of them. the performance of the promise made to him or extends the time for such performance or accepts any satisfaction for it. Legal Representatives: A contract which involves the use of the personal skills or is founded on the personal considerations comes to an end on the death of the promisor. B is at liberty to put an end to the contract When a promisee puts an end to the contract under Section 39. which need not be performed a) When the performance become impossible. wholly or in part. An offer to one of several joint promisees has the same legal consequences as an offer to all of them. his promise in its entirety. volition or diligence of the promisor or which are founded on personal confidence between parties (for instance a contract to marry) must be performed by the promisor him self. Contracts. (5) It must by the person who is in position. A. the manger of the theatre.Prof. enters into a contract with B. a singer. being rightly entitled to do so. Soujanya G K 2nd Sem. it must give a reasonable opportunity to the promisee for inspection of the goods. By whom must contracts be performed? Promisor himself: if there is something in the contract to show that it was the intention of the parties that the promise should be performed by the promisor himself. (7) It may be made to one of the several joint promisees. The rule of the law is: action personalis moritur cum persona. IBS Bangalore The Contract Act. b) When the parties agrees to substitute a new contract for it or to rescind the contract. in such case he cannot repudiate it.300 for each night’s performance. be bound to restore to the other party all the benefits that he may receive under the contract. But their liability is limited to the extent of the value of the property they inherited from the deceased. d) When the person at whose option it is voidable. such promise must be performed by the promisor.a personal action dies with person. (8) In case of tender. to perform the contract. the legal representatives of the deceased promisor are bounded to perform it unless a contrary intention appears from the contract. 1872 LEOB (3) if the offer is an offer to deliver anything to the promisee. c) When the promisee dispenses with or remits. 25 . Section 39: Effect of refusal of party to perform promise wholly When a party to a contract has refused to perform. it shall be deemed as if he has rescinded a voidable contract and he shall. A tender of an instrument when the contract stipulates payment in full is not a valid tender. (4) It must be of the whole quantity contracted for or of the whole obligation. (6) It must be made to the proper person. his acquiescence in its continuance. f) When it is illegal. the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. the promisee may put an end to the contract. e) When the promisee neglects or refuses to afford the promisor reasonable facilities to perform the promise. to sing at his theatre two nights in every week during the next two months and B agrees to pay him Rs. On the 06th night A willfully absents him-self from the theatre. Agent: where personal consideration is not the foundation than such contract may be performed by the promisor or his representative may employ a competent person to perform it. by words or conduct. CA. or disabled himself from performing. resends it. As regards any other contract. and willing. This means that the contract which involve the exercise of personal skill. by virtue of Section 64.

Prof. then unless contrary intention appears from the contract. all such persons. the remaining joint promisors must bear the loss arising from such default in equal shares. It should be seen that that Section 42 deals with voluntary discharge of obligations. compel any one or more of such joint promisors to perform the whole promise. Section 43 comes into play. 26 . or entitle the principal to recover anything from the surety on account of payments made by the principal. and. from his principal. as between him and them. payments made by the surety on behalf of the principal. he cannot afterwards enforce it against the promisor. and. the right to claim performance rests. his representative jointly with the survivor or survivors. then. If the parties do not discharge their obligation of their own volition. with the representative of such deceased person jointly with the survivor or survivors. during their joint lives. after the death of the last survivor the representatives of all jointly. In certain cases. It makes no difference whether the promise is for the benefit of the promisee or for the benefit of the other person. in such contribution. Section 45: Devolution of joint rights When a person has made a promise to two or more persons jointly. with them during their joint lives. Section 42: Devolution of joint liabilities and right When two or more person have made a joint promise. with the representatives of all jointly. a release of one of such joint promisors by the promisee does not discharge the other joint promisor. This means that the liability of the joint promisors is joint and several. 1872 LEOB Section 41: Effect of accepting performance from this person When a promisee accepts performance of the promise from a third person. Who can demand performance? It is only the promisee that who can demand performance of the promise under a contract. a third party can also enforce a promise under a contract even through he is not a party to the contract. in the absence of express agreements to the contrary. IBS Bangalore The Contract Act. after the death of any of them. Soujanya G K 2nd Sem. Sharing of loss by default in contribution: If any one of two or more joint promisors makes default. Each promisor may compel contribution: Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise. Section 43: Any one of joint promisors may be compelled to perform Any one of the joint promisors may be compelled to perform the promise: When two or more persons make a joint promise. unless a contrary intention appears from the contract. the promisee may. neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors. after the death of the last survivor. CA. Section 44: Effect of release of one joint promisor Where two or more persons have made a joint promise. unless a contrary intention appears by the contract. must fulfill the promise. and. Explanation: Nothing in this section shall prevent a surety from recovering. after the death of any one of them. and.

Section 49: Place for the performance of promise. 27 . the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.Prof. Explanation: The question "what is proper time and place" is. unless reciprocal promisee ready and willing to perform When a contract consists of reciprocal promises to be simultaneously performed. Section 50: Performance in manner or at time prescribed or sanctioned by promise The performance of any promise may be made in any manner. the engagement must be performed within a reasonable time. his legal representative can demand performance. where time is specified and no application to be made When a promise is to be performed on a certain day. the promises are conditional and dependent. Rules regarding performance of reciprocal promises Section 51: Promisor not bound to perform. it is the duty of the promisee to apply for the performance at a proper place within the usual hours of business. where no application to be made and no place fixed for performance When a promise is to be performed without application by the promisee. Conditional and dependent: where the performance of the promise by one party depends on the prior performance of the promise by the other party. Soujanya G K 2nd Sem. and the promisor has not undertaken to perform it without application by the promisee. and no place is fixed for the performance of it. which the promisee prescribes. or at any time. Section 47: Time and place for performance of promise. in each particular case. Section 48: Application for performance on certain day to be at proper time and place When a promise is to be performed on a certain day. his promise or not. and to perform it at such a place. and no time for performance is specified. where no application is to be made and no time is specified Where. the usage of the trade or the intention of the parties at the time of entering into contract. a question of fact. CA. the promise are mutual and independent. by the contract. no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise. it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise. and the promisor has undertaken to perform it without the application by the promisee. or sanctions. a promisor is to perform his promise without application by the promisee. Mutual and dependent: where each party must perform his promise independently and irrespective of the fact whether the other party has performed. in each particular case. 1872 LEOB Death of the promisee: in case of the death of the promisee. b) It depends on the special circumstance of the case. or is willing to perform. Explanation: a) The question "what is a reasonable time" is. Time and place of Performance? Section 46: Time for performance of promise. IBS Bangalore The Contract Act. a question of fact. Reciprocal Promises Promises which form the consideration or part of the consideration for each other are called “Reciprocal Promises” [Section 2(f)].

the promisee cannot claim compensation of any loss occasioned by the non-performance of the promise at the time agreed. unless. becomes voidable at the option of the promisee. the contract becomes voidable at the option of the party so prevented. and there are no other circumstances indicating to which debt the payment is to be applied. or that its performance cannot be claimed till the other has been performed. but the second is a void agreement. he give notice to the promisor of his intention to do so. owing several distinct debts to one person. the contract or so much of it as has not been performed.Prof. Section 53: Liability of party preventing event on which contract is to take effect When a contract contains reciprocal promises and one party to the contract prevents the other from performing his promise. the payment if accepted. Effect of acceptance of performance at time other than agreed upon: If. must be applied accordingly. or under circumstances implying. such that one of them cannot be performed. the contract does not become voidable by the failure to do such thing at or before the specified time. and fails to do such thing at or before a specified time. in contract in which time is essential When a party to a contract promises to do a certain thing at or before a specified time. and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract. CA. in contract consisting or reciprocal promises When a contract consists of reciprocal promises. the first set of promise is a contract. 28 . if the intention of the parties was that time should be of essence of the contract. secondly under specified circumstances. and where the orders is not expressly fixed by the contract. and also other things illegal Where persons reciprocally promise. Section 60: Application of payment where debt to be discharged is not indicated Where the debtor has omitted to intimate. the promisee accepts performance of such promise at any time other than agree. IBS Bangalore The Contract Act. but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. they shall be performed in that order. Soujanya G K 2nd Sem. Effect of such failure when time is not essential: If it was not the intention of the parties that time should be of the essence of the contract. and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract. Section 59: Application of payment where debt to be discharged is indicated Where a debtor. such promisor cannot claim the performance of the reciprocal promise. the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor. to do certain other things which are illegal. in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed. and. Section 54: Effect of default as to the promise which should be performed. Section 55: Effect of failure to perform a fixed time. that the payment is to be applied to the discharge of some particular debt. whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits. firstly to do certain things which are legal. makes a payment to him. they shall be performed in that order which the nature of transaction requires. Section 57: Reciprocal promise to do things legal. and the promisor of the promise last mentioned fails to perform it. either with express intimation. or certain thins at or before a specified time and fails to do such thing at or before a specified time. 1872 LEOB Section 52: Order of performance of reciprocal promises Where the order in which reciprocal promises are to be performed is expressly fixed by the contract. at the time of acceptance.

Attempted performance or tender: tender is not actual performance but is only an offer to perform the obligation under the contract. Discharge by agreement or consent: As it is an agreement of the parties which bind them. and alteration of contract If the parties to a contract agree to substitute a new contract for it. CA. Section 62: Effect of novation.e. It may be: Actual performance: when both the parties perform their promises. precise and according to the terms of the contract. Soujanya G K 2nd Sem. Discharge of contract Discharge of contract means termination of contractual relationship between the parties. Performance should be complete.. i. in the place of original debtor). The contract may be discharge by any of the following ways: a) b) c) d) e) f) By Performance By agreement or consent By impossibility By lapse of time By operation of law By breach of contract Discharge by Performance Performance means the doing of that which is required by the contract. the payment shall be applied in discharge of each proportionally. The tenderer is discharged from the responsibility for non-performance of the contract with out in any way prejudicing his rights which accrue to him against the promisee. But if only one party performs the contract he is only discharged. except in the case of tender of money.e. In such a case. the original contract need not be performed. If the debts are of equal standing. This means the contractual obligations may be discharged by agreement which may be expressed or implied. It is essential for the principle of 29 . IBS Bangalore The Contract Act. (to take another person as his debtor. The rule of law is in this regard is as follows: eodem modo quo quid constituitur. the parties are discharged and the contract comes to an end. such party gets the right of action against the other party who is guilty of breach. so by their further agreement or consent the contract may be terminated.. rescission. Where the promisor offer to perform his obligation. tender is equal to actual performance. eodem modo destruitur. or to rescind or alter it. Novation: Novation takes place when (i) when new contract is substituted for an existing one between the same parties. Discharge by performance takes place when the parties to the contract fulfill their obligation arising under the contract with in the time and in the manner prescribed. A contract is discharged when it ceases to operate i. when the rights and obligations created by the parties comes to an end. but the promisee refuses to accept the performance. The effect of a valid tender is that the contract is deemed to have been performed by the tenderer. Performance of contract is the most usual mode of discharge. whether they are or are not barred by the law in force for the time being as to the limitation of suits.Prof. or (ii) a contract between two parties is rescinded in consideration of a new contract being entered into on the same terms and conditions between one of the parties and a third party. the contract is discharged. 1872 LEOB Section 61: Application of payment where neither party appropriates Where neither party makes any appropriation. a thing may be destroyed in the same manner in which it is constituted. the payment shall be applied in discharge of the debts in order of time.

e. Remission (Section 63): Promise may dispense with or remit performance of promise Remission means accepting less consideration in fulfillment of the contract. the performance of the promise made to him. as apply to the communication or revocation of the proposal. it is void-ab-inito. CA. The party rescinding a voidable contract shall. Consideration is not necessary for waiver. IBS Bangalore The Contract Act. This is known as pre-contractual or initial impossibility. i. This is base on the following two maxims: i. The facts of the impossibility may be – 30 . It may occur: i. Rescission: rescission of a contract takes place when all or some of the terms of the contract are cancelled. Merger: merger takes place when an inferior right accruing to a party under a contract merges into a superior right accruing to the same parties under the same or some other contract. 1872 LEOB novation to apply that there must be the mutual or tripartile consent of all the parties concerned. Where one party fails to perform his obligation In such case the other party may rescind the contact with out prejudice to his right to claim compensation for the breach of contract. By mutual consent of the parties. Alteration: alteration of contract may take place when one or more of the terms of the contract is / are altered by mutual consent of the parties of the contract. Partial rescission is the variation of the terms of the contract by deleting or adding or substitution of some of the terms and conditions of the contract. and Impossibilium nulla obligato est. Rescission may be total or partial: Rescission of the contract may be total or partial. Every promise may dispense with or remit. or may extend the time for such performance. wholly or in part. Section 56 of the Act deals with the “Agreement to do impossible act.” Impossibility existing at the time of entering into contract: An agreement to do an act impossible in itself is void. or may accept instead of it any satisfaction. ii. The rescission is said to be total when the entire contract is terminated. In such case the old contract is discharged. the law does not recognize what is impossible. Novation shall take place before expiry of the time of the performance of contract. which he thinks fit.e. if he have received any benefit thereunder from another party to such contract restore such benefit.. and subject to some rules. i.. Soujanya G K 2nd Sem. Section 66: Mode of communicating or revoking rescission of voidable contract The rescission of a voidable contract may be communicated or revoked in the same manner. Discharge by impossibility of performance If an agreement contains an undertaking to perform impossibility. Section 64: Consequence of rescission of voidable contract When a person at whose option a contract is voidable rescinds it. to the person from whom it was received. or ii. Lexgon cogit ad impossibilia. so far as may be. the other party thereto needs to perform any promise therein contained in which he is the promisor.Prof. what is impossible does not create an obligation. Waiver: waiver takes place when the parties to a contract agree that they shall no longer be bound by the contract. This amount to a mutual abandonment of rights by the parties to the contract.

the contract is void on the contract of mutual mistake. he shall have to compensate the promisee for any loss. Contracts entered into before the outbreak of war are suspended during the war and may be revived after the war is over. the contract was discharged (Noor Bus vs. IBS Bangalore The Contract Act. Unknown to Parties: where at the time of entering into contract. or if the state of thing which ought to have occurred does not occur. by reason of some event which the promisor could not prevent. subsequent to formation. Soujanya G K 2nd Sem. the contract is discharged. Its cancellation discharged the contract (Krell vs. A contract to do an act which. Impossibility arising subsequent to the formation of contract: impossibility which arises subsequent to the formation of contract is called post-Contractual or supervening impossibility. Held. 1872 LEOB Known to Parties: When the impossibility is known to the parties. If there is any change in the state of things which formed the basis of the contract. K knew of H’s purpose though the contract contained no reference to this. Before she could do so. she was taken seriously ill. A agreed to transport certain goods from place A to place C. or the government some power under a ordinance or special act. the contract is discharged. is destroyed with out any fault of the parties to the contract.Prof. so that the performance of the contract becomes impossible. An artist undertook to perform at a concert for a certain price. the contract was void (Taylor vs. which such promisee sustains through the non-performance of the contract. change of law takes place. to the formation of the contract. The hall was accidentally burnt down before the date of the first concert. Held. the parties are discharge form further performance of their obligations under the contract. In the case of absolute impossibility the contract is void-ab-inito. H was excused from paying the rent for the flat on the ground that existence of the possession was the basis of the contract. than such impossibility is known as absolute impossibility. the trucks of A were requisitioned by the government under a statutory power. both the parties are ignorant of impossibility. The coronation possession was cancelled due to the illness of the King. Caldwell) Non-existence or non-occurrence of a particular state of things: some times a contract is entered into between two parties on the basis of continued existence or occurrence of a particular thing. C let a music hall to T for a series of concerts for certain days. subsequently. after the contract is made. H hired a flat from K for June 26 and 27 for witnessing a coronation procession of King Edward VII. CA. becomes impossible or. the contract is discharged on the illness or incapacity or death of the party. 31 . subsequent to the formation of a contract. Henry) Death or incapacity for personal service: where the performance of a contract depends on the personal skill or qualification of a party. If. however only the promisor is aware of the impossibility of the performance at the time of entering into contract. Kalyan) Out break of war: the contract entered with an alien enemy during the war is unlawful and therefore impossible of performance. Discharge by supervening impossibility Destruction of subject matter of contract: when the subject matter of a contract. the contract is discharged. Daveson) Change in law or stepping in of a person with statutory authority: when. she was discharged due to illness (Robinson vs. Held. Held.

HB agreed to let out a boat to H (a) for viewing a naval review on the occasion of the coronation of Edward VII. therefore.. 1963 lays down that a contract should be performed with in a specified period. he is deprived of remedy of law. the contract is terminated. In other words. or the necessary raw material is available at a higher price or because of the out broke of the was or there is a sudden depreciation of the currency Impossibility due to failure of the third person: when a contract could not be performed because of the default by a third person on whose work the promisor relied. he must do it unless its performance becomes absolutely impossible. war broke out in the month of August and transport was disorganized so that A could not bring any timber for Finland.. the contract was not discharged (Herne Bay Steamboat Co. could be used to sail around the fleet. Soujanya G K 2nd Sem. The unloading of a ship was delayed beyond reasonable time.Prof. owing to the strike of the dock workers. by operation of law. 1872 LEOB Ordinarily when a person undertakes to do something. A sold a certain quantity of Finland timber to B to be supplied between July and September. it is not discharged A. Held. called period of limitation. Owing to the King’s illness the naval review was abandoned but the fleet was assembled. Hutton) Discharge by lapse of time The Limitation Act. A was liable to B for damages (Haranandrai Fulchand vs. IBS Bangalore Impossibility of Performance – not an excuse The Contract Act. the failure of one of them does not discharge contract. If it is not performed and if no action is taken by the promisee with in the period of limitation. the difficulty in getting the timber from Finland did not discharge A from performance (Blackburn Bobbin Co. Held. Pragdas) Strikes. Before any timber was supplied. The boat. This includes discharge by – 32 . a contract is not discharged on the ground of supervening impossibility: Difficulty of Performance: a contract is not discharged by the mere fact that it has become more difficult of performance due to some uncompleted events or delays. a wholesaler. the impossibility of the performance being no excuse (Budget vs. vs. lockouts and civil disturbances: events such as these do not discharge a contract unless the parties have specifically agreed in this regard at the time of formation of the contract. Held. i. the ship owners were entitled to damages. In the following cases. a manufacturer of that cloth. vs. Allen & Sons) Commercial impossibility: a contract is not discharged merely because expectation of higher profits is not realized. Held. entered into a contract with B for the sale of a certain type of cloth to be produced by C. Binnington) Failure of one of the objects: when a contract is entered into for several objects. and (b) to sail round the fleet.. Discharge by operation of law: a contract may be discharged independently of the wishes of the parties. CA. C did not manufacture that cloth.e.

the rights and liabilities passes to the legal representatives of the deceased person. which a contract imposes. By unauthorized alteration of the terms of a written agreement: where a party to a contract makes any material alteration in the contract without the consent of the other party. If time is not essence of the contract and the defaulting party expresses his willingness to perform the obligation after the appointed time. An alteration which is not material or which is made to carry out the common intention of the parties does not affect the validity of the contract. Anticipatory breach of contract It occurs when a party to an executory contract declares his intention of not performing the contract before the performance is due. the other party can avoid the contract.Prof. This is to avoid circuity of action. and the other party is discharged from the further performance of contract. 1872 LEOB By death: any contract involving personal skill or ability. CA. By rights and liabilities becoming vested in the same person: where the right and liability under a contract vest in the same person. or b) Anticipatory or constructive breach of contract Actual breach of contract: It may take place – At the time the performance is due: actual breach of contract takes place when at the time when the performance is due. one party fails or refuses to perform his obligation under the contract. During the performance of the contract: actual breach of contract may take place during the performance of contract. the other parties are discharged. By insolvency: when a person is adjudged insolvent. This refuse to perform may be by – Express repudiation: where there has been some performance of the contract and one party by his word or act refuses to perform his obligation in some essential respect. 33 . the other party may accept the performance subject to the payment of compensation for failure to perform the obligation at the appointed time. the contract is terminated on the death of the promosor. he is discharged from all liabilities incurred prior to his adjudication. A prior notice is to be given to the party in default by the party not in default if compensation is claimed. In other cases. Breach of contract may be – a) Actual breach of contract. Implied repudiation: if a party during the performance of contract makes by his own act the complete performance of contract impossible. For example when a bill gets into the hands of the acceptor. Soujanya G K 2nd Sem. It occurs when a party to the contract without lawful excuse does not fulfill his contractual obligation or by his own act makes it impossible that he should perform his obligation under it. Discharge by breach of contract Breach of contract means a breaking of the obligation. when one party fails or refuses to perform his obligation under the contract. the other party can treat the contract as no longer binding on him sue for breach of contract. the effect is as he has breached the contract. IBS Bangalore The Contract Act.

Such relationships are termed quasi contract. As per the provision of Section 39 the promisee may – a) Treat the contract as discharged b) Take legal action for breach of contract Quasi contract Under certain circumstances. Section 69: Reimbursement of person paying money due by another. or disabled himself from performing. even though there is no contract between the parties. that this enrichment is at the expense of the plaintiff Thirdly. because. or anyone whom he is legally bound to support. the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. P paid the rent to obtain the release of carriage. a person may receive a benefit too which the law regards another person as better entitled. by words or conduct.Prof. The principle of unjust enrichment requires: First. P could recover the amount from D (Exall vs. Soujanya G K 2nd Sem. Held. Quasi contracts rests on the ground of equity that a person shall not be allowed to enrich himself unjustly at the expense of another. or on his account If a person. is supplied by another person with necessaries suited to his condition in life. the promisee may put an end to the contract. and who therefore pays it. that the retention of the enrichment is unjust Strictly speaking a quasi contract is not a contract at all. in payment of which he is interested A person who is interested in the payment of money which another is bound by law to pay. but in this case the contract into existence by operation of law. or for which the law considers he should pay to the other person. since the contract is entered into by the willingness of the parties to it. his acquiescence in its continuance. Partrige) Section 70: Obligation of person enjoying benefit of non-gratuitous act 34 . Essential requirements of Section 69 are as follows: a) The payment should be bonafide for the protection of ones interest b) The payment should be a voluntary one c) The payment must be such as the other party was bound by law to pay P left his carriage on D’s premises. 1872 LEOB a) By expressly renouncing his obligation under the contract b) By doing some act so that the performance of his promise becomes impossible Section 39: Effect of refusal of party to perform promise wholly When a party to a contract has refused to perform. Section 68 to 72 of the act deals with the kinds of quasi contracts: Section 68: Claim for necessaries supplied to person incapable of contracting. CA. although there is no contract or agreement between the parties. incapable of entering into a contract. his promise in its entirety. unless he has signified. is entitled to be reimbursed by the other. D’s landlord seized the carriage as distress of rent. IBS Bangalore The Contract Act. there are put in the same position as if there were a contract between them. the defendant has been enriched by the receipt of a “benefit” Secondly.

by mistake or under coercion A person to whom money has been paid. he is liable for wrongful conversion of the property. is subject to the same responsibility as a bailee. The finder of the goods is bound to take as much care of the goods as a man of ordinary prudence would. by mistake or under coercion. or anything delivered. amount to two-third of the value of the thing found Section 72: Liability of person to whom money is paid. under similar circumstances. 1872 LEOB Where a person lawfully does anything for another person. CA. IBS Bangalore The Contract Act. or thing delivered. must repay or return it to the person who paid by mistake or coercion. in respect of the thing found. the finder of the goods can retain the goods the goods as his own against the whole world. He is bound to pay for them to A. the letter is bound to make compensation to the former in respect of. Section 72 does not draw any difference between a mistake of fact and a mistake of law. quantity and value. If he does not. The finder of the goods can sell the goods in the following conditions: a) When the thing found is in danger of perishing b) When the owner of the goods. or to restore. with reasonable diligence. leaves goods at B’s house by mistake. Soujanya G K 2nd Sem. not intending to do so gratuitously. a tradesman. cannot be found out c) When the owner is found out. and such another person enjoys the benefit thereof. 35 . but refuses to pay the lawful charges of the finder d) When the lawful charges of the finder. B treats the goods as his own. or delivers anything to him. and takes them into his custody. Section 71: Responsibility of finder of goods A person who finds goods belonging to another. the thing so done or delivered. Essential requirements of Section 70 are as follows: a) The thing must have been done lawfully b) The person doing the act should not have intended to do it gratuitously c) The person to whom the act is done must have enjoyed the benefit A.Prof. Until the owner of the property is not found. take of his own goods of the same bulk.