The course shall comprise of the following :

(1) Purpose, Evolution and Scope of Law of Contracts

(2) Proposal and Promise Including Communication of Proposal, Acceptance

and Communication of the Revocation of Proposal and Acceptance.

(3) Consideration and Doctrine of Privity of Contract.

(4) Lawful Object and Consideration.

(5) Capacity to Contract : Minors, Persons of Unsound Mind and Others

Disqualified by Law ; Nature and Effects of Minor's Agreements; Doctrine of
Restitution.

(6) Consent and Free Consent.

(7) Standard Form of Contracts

(8) Agreements Declared Void and Voidable Under the Contract Act.

(9) Contingent Contracts

(10) Law Relating to Certain Relations Resembling those Created by

Contracts,
viz., Quasi-Contracts.

(11) Discharge of contracts with special reference to the doctrine of frustration.

1. Define Contract. What are the essentials of a valid contract?
When does an agreement become a contract?
What is an agreement? What are its essentials?
All contracts are agreement, but all agreements are not contract?
Discuss?

Ans. Definition of Contract- The term ‘Contract’ is defined as under:-

1. According to Sir Fredrick Pollock, “Every agreement and promise

enforceable by law is contract.”

2. According to Salmond, “ Contract is an agreement, creating and defining

obligations between the parties”.

3. According to Section 2(h) of the Contract Act, “A contract is an

agreement enforceable by law.”

On the basis of the analysis of the above definition of contract, it appears that
a contract is an agreement the object of which is to create an obligation i.e. a
duty enforceable by law.

For ex:-
If there is an agreement between A and B that A will paint a picture for B, and
B will pay Rs. 1000 to A, the agreement is a contract. Because as per the
agreement B is entitled to an act done viz. Painting of a picture, to be
performed by A. Similarly, if there is an agreement between A and B by way of
which A agrees to pay Rs. 1,000/- to B, if B does not bid an auction the
agreement is a contract. Thus, if an agreement enables a man to compel
another to do or not to do a particular act, it is a contract. In this way, a
contract consists of two basic elements-
i) An agreement and
(ii) its enforceability by law

According to Section 2(h), a contract is an agreement enforceable by law. In

other words, Section 10 says that an agreement becomes a contract, if it is
made by the competent parties, by the free consent of the parties for a lawful
consideration and for lawful objection and it must not have been declared to be
void by the Contract Act or any Other Act, any other legal requirement, if
necessary, must also be satisfied.

Thus, every contract is an agreement, but every agreement is not a contact.

An agreement becomes a contract only when the following conditions are
satisfied:-
1. There must be an agreement-
The first and foremost essential of a valid contract is that there must be
an agreement. According to S.2 (e) “Every promise and set of promises
forming the consideration for each other is an agreement.” The
agreement consists of two basic elements.

2. The agreement must be made by competent parties.

A contract is valid only if it has been made by the parties who are
competent to make it. According to S. 11 of the Act, the following
persona are competent to enter into a contract:-
(i) who are major
(ii) who are of sound mind
(iii) who are not disqualified from contracting by any law.

3. Agreement must be made by the free consent of the parties.

Another requirement for a valid contract is that the agreement must
have been made with the free consent of the parties. If consent is not
free, the contract becomes voidable.

The consent is deemed free as per S. 13 and S. 14 of the Act- when

a) Two or more persons are said to consent, when they agree upon
the same thing in the same sense, and
b) The consent is said to be free when it is not caused by coercion,
undue influence, fraud, misrepresentation or mistake.

4. The agreement must be made for a lawful consideration

To constitute a valid contract, it is essential that the agreement is made
for a lawful consideration. According to S. 23 of the Act, if the
agreement is not for a lawful consideration, the agreement is void.

5. The agreement must be made for lawful object-

According to S. 23 of the Act, the object or consideration of an
agreement is unlawful in the following respects and the agreement is
void:-
(i) when it is forbidden by law
(ii) if permitted it would defeat the provisions of any law.
(iii) when it is fraudulent
(iv) when it involves or implies injury to the person or property or
another
(v) when it is immoral
(vi) when it is opposed to public policy.

6. The agreement must not have been expressly declared to be void

by contract act or any other act.
 Another important element for a valid contract is that the agreement
should not be from amongst such agreements which have been
specifically declared void as per Sections 26, 27, 28, 29, 30 and 56 of
the Act. Otherwise, the agreement is void.

7. Other legal requirement, if necessary, must be satisfied.

For a valid contract, it is also essential that if by any law for the time
being in force, applicable on such an agreement, the agreement is
required to be in writing or to be made in the presence of witness or is
required to be registered. Otherwise, the agreement is not enforceable.
 “PROPOSAL”

Definition of Proposal-
A ‘Proposal’ is the first and foremost essential to constitute a valid contract
between the parties. In fact, the term “Proposal’ of Indian Contract Act, 1872 is
synonym of the term “offer” of the English Contract Act.

S.2(a) of Act, defines the term proposal- “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 said to make a
proposal”.

Essentials of a Proposal:-

------------------------------
Proposal and Promise Including Communication of Proposal,
Acceptance and Communication of the Revocation of Proposal and
Acceptance.
How can the communication, Acceptance and Revocation of Proposals
be Made?

Ans. S.3 provides that “The communication of proposals, the acceptance of

proposals, and the revocation of proposals and acceptances, respectively, are
deemed to be made by any act or omission of the party proposing, accepting
or revoking by which he intends to communicate such proposal, acceptance or
revocation, or which has the effect of communicating it.”

Communication need not necessarily be by words, it may be by conduct.

For ex:- no words are needed to explain the intent with which a man steps into
a tramcar, or drops a coin into an automatic weighing machine. But mental
assent, not followed either by communication or by any action, does not make
a binding contract.

Communication When Complete?- S.4 provides that how (i) a proposal, (ii) an
acceptance, and (iii) a revocation are completed. We can analyse them as
under:-

(a) Communication of Proposal, When Complete?-

According to S.4, communication of a proposal is complete when it
comes to the knowledge of the person to whom it is made. For Example-
A proposes, by letter, to sell a house to B at a certain price, the
communication of the proposal is completed when B receives the letter.
(b) Communication of Acceptance, When Complete?-

According to S. 4- Communication of an Acceptance is complete-

(i) As against the Proposer- When it is put in the course of
transmission to him, so as to be out of the power of the acceptor;

(ii) As Against the Acceptor- When it comes to the knowledge of the

proposer. For Example- B accepts A’s proposal by a letter sent by
post. The communication of the acceptance is complete-
- As against A, when the letter is posted;
- As against B, when the letter is received by A;

(c) Communication of revocation, when Complete?-

According to S.4- Communication of revocation is complete-
(i) As Against the Person who makes it- When it is put into the
course of transmission to the person to whom it is made, so as to
be out of the power of the person who makes it.
(ii) As Against the person to Whom it is made- When it comes to his
knowledge.

For Example: A revokes his proposal by a telegram. The revocation is

complete against A when the telegram is dispatched. It is complete as
against B when B receives it. B revokes his acceptance by telegram. B’s
revocation is complete as against B when the telegram is dispatched,
and against A when it reaches him.

When can a Proposal or an Acceptance be Revoked?-

A proposal may be revoked at any time before the communication of
Acceptance is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication
of acceptance is completed as against the acceptor, but not afterwards.

For Example- A proposes, by a letter sent by post, to sell his house to B.

B accepts the proposal by a letter sent by post. A may revoke his
proposal at any time before or at the moment when B posts his letter of
acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when
the letter communicating it reaches A, but not afterwards: S.5

How can a proposal be revoked?-

 According to S.6, a proposal may be revoked in one of the following
four ways-

(i) By the communication of notice of revocation by the proposer to

the other party.

(ii) By the lapse of the time prescribed in such proposal for the
acceptance, or, if no time is prescribed, by the lapse of a
reasonable time, without communication of the acceptance;

(iii) By the failure of the acceptor to fulfil a condition precedent to

acceptance; or
(iv) By the failure of the acceptor to fulfil a condition precedent to
acceptance; or
(v) By the death or insanity of the proposer, if the fact of his death or
insanity comes to the knowledge of the acceptor before
acceptance.

2. Define Consideration and explain its importance in the formation of

contract.
Ans. Definition of Consideration- The term consideration has been defined by
different jurists in a different manner as follows:

1. According to Pollock- “Consideration is the price for which the promise

of the other is bought, and the promise thus given for value is
enforceable”. Thus, consideration is the price for the promise.

2. According to Patterson- “Consideration means something which is of

some value in the eye of law ... It may be some benefit to the Plaintiff or
some detriment to the Defendant.”

3. According to S. 2(d) of Indian Contract Act, “When, at the desire of the

promisor, the promise or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or abstain from
doing, something, such act or abstinence or promise is called a
consideration for the promise.

It is to be noted that S. 2(d) does not contain any illustrations of the term
‘consideration’. These are to be found in S. 23. For Example

(i) A agrees to sell his house to B, for 10,000 rupees. Here B’s promise to
pay the sum of 10,000 rupees is the consideration to A’s promise to
sell the house, and A’s promise to sell the house is the consideration
for B’s promise to pay the 10,000 rupees.
(ii) A promises to maintain B’s child and B promises to pay Rs. 1,000
rupees yearly for this purpose. Here the promise of each party is the
consideration for the promise of the other party.

Nature of Consideration-
Consideration is an important requisite of a contract. An analysis of any
contract will show that it consists of two clearly separable parts, (i) promise on
the one hand and (ii) consideration for the promise on the other hand.

In England, a “Contract under seal is valid even in the absence of

consideration” such a contract is known as a speciality contract. All contracts
which are not under seal are simple contracts. All simple contracts require
consideration to support them.

However, this positive is different in India. Our law does not recognise
contracts under seal, which are made without consideration. However,
contracts become enforceable in India even if made without consideration, if
they are covered by Ss. 25, 63, 159 and 185 of Contract Act.

Definition of Consideration Analysed- We can analyse the definition of

consideration given under S. 2(d) as under-

1. ‘At the desire of the promisor-

It is to be remembered that the act or forbearance must be done at the

desire of the promisor. If it is done at the instance of third party, or
without the desire of the promisor, it is not consideration.

For ex: A while going to England requested B to look after his family and
B did it. A on his return promises to pay B Rs. 1,000. This contract is
perfectly valid because B looked after A’s family at the desire of the A
(Promisor) consideration of A’s promise is the B’s past services
rendered at A’s requests.

2. “The Promisee or Any other person”-

It is a well settled rule of English law that consideration must move from
the promisee alone. It means act, abstinence, or promise constituting
the consideration must be done, suffered or made by the promise
himself at the request of the promisor. But the words “promisee or any
other person” given under S. 2(d) indicate that consideration need not
move from the promisee alone but may proceed from a third person
 also. It is a settled law both in England and India that a stranger to a
contract cannot sue the promisor of a contract.

Jamuna Das vs. Ram Auttar- In this case, A mortgages his property to
B and B promises to pay A’s debt to C, C cannot file a suit against B to
enforce B’s promises as C is not a party to the contract between A and
B.

3. Consideration may Consist of An Act or Abstinence- Consideration

may consist of a positive Act or an abstinence i.e., a negative act. Thus,
an agreement between A and B under which A promises not to file a suit
against B for another two years in consideration of B promising to raise
the rate of interest from 60% to 90%, is a good contract. A’s abstinence
being the consideration for B’s promise.

4. Has Done or Abstained from Doing, Does or Abstains from Doing

or Promises to Do or to Abstain from Doing- Consideration may
consist of either something done or not done in the past or does or does
not in the present or promised to be done or not to be done in the future.
Thus, from this point of view of time the Indian Contract recognises
three kinds of consideration i.e.-
(i) Future or Executory Consideration-
(ii) Present or Executed Consideration
(iii) Past Consideration

Different between English and Indian Law of Consideration

1. Under English Law past consideration is no consideration but in

India past consideration is a good consideration.

2. Under English Law consideration should move from the promisee and
promisee alone and not from a third person. But under the Indian Law
consideration can move either from the promisee or any other person
but it must proceed at the desire of the promisor.

3. In England, a contract under seal is valid even in the absence of

consideration. In India, promise must be supposed by consideration
unless the case falls within one of the exceptions set out in Ss. 25, 63,
159 and 185.

3. Who are Competent to Contract/ Law Relating to Minor’s contract

Ans. Section 10 of Indian Contract Act declares that the parties must be competent
to enter into a contract. Regarding the competency of the parties Section 11 of
the Act says that-
“Every person is competent to contract who is of the age of majority according
to law to which he is subject, and who is of sound mind and is not disqualified
from contracting by any law to which he is subject”.

Thus, the following persons are competent to enter into a contract-

1. who are major
2. who are of sound mind
3. who are not expressly declared disqualified from contracting by any law
to which he is subject.

One of the most important and interesting point in the Act is the law as to
contract by a minor. Now, the question arises for consideration as to who is a
minor?

According to Indian Majority Act, 1875-

“A minor is one who has not completed 18 years of age, but in the case of
minors of whose person or property (or both) a guardian is appointed by the
Court of wards, the minority continues up to the age of twenty one.”

Neither the Section 10 nor the Section 11 provided it clearly that what will be
the nature of a minor’s agreement whether it will be void or voidable.
Controversy arose on this question.

In the leading case of Mohorbibi vs. Dharmodass Ghosh, Sir Lord North of
Privy Council observed that the question as to whether a contract is void or
voidable presupposes the existence of a contract within the meaning of the
Act and cannot arise in the case of an infant.

It was held that a minor cannot enter into a contract. A minor’s agreement is
void and cannot be enforced against a minor. Since the minor’s agreement is
void and there cannot have any contractual relations between the parties.

Nature and effects of Minor’s agreement.

1. An agreement with or by a minor is void ab initio.
2. If a minor has received any benefit under a void agreement, he cannot
be asked to refund the same.
3. An agreement entered by a minor by fraudulently representing his age
remains void.
4. A minor cannot be made a partner in the partnership firm. However, a
minor may, with the consent of all the partners, be admitted to get
benefits of an existing partnership.

5. Restoration of property or money:-

 Where the minor receives some money or property by falsely
representing his age, the court may direct that minor on equitable
grounds, to restore the money or property to the other property so long
as the same is traceable in his possession. It is to be kept in mind that
identical money lost or consumed cannot be recovered whereas identity
of money changed can be recovered.

6. No estoppel against minor:-

When a minor fraudulently enters into a contract, representing that he is
major, but in reality he is not, then later on he can plead his minority as
a defence and cannot be stopped from doing so.
7. No ratification on attaining majority- A major, cannot ratify an
agreement, on attaining majority which he had entered into during
minority.
8. Minor’s partners/guardians are not liable to a minor’s creditor for the
breach of contract by the minor. However, the partners/guardians are
liable where the minor is acting as an agent of the partners or the
guardians. But if the partners want to pay on moral grounds they can do
so.

CONSENT OR FREE CONSENT

The consent is deemed free as per Sections 13 & 14 of the Act when-
(a) Two or more persons are said to consent whey they agree upon the
same thing in the same sense
(b) The consent is said to be free when it is not caused by-
Coercion (S. 15)
Undue influence (S. 16)
Fraud (S. 17)
Misrepresentation (S. 18)
Mistake (S. _____)

Que. What is Quasi Contract? Explain with illustrations or

Explain the Quasi Contract Theory. Describe briefly, the cases where this
theory has been recognised under the provisions of Indian Contract Act.

Ans. Quasi contracts are exceptional kinds of contracts by which one party is bound
to pay money in consideration of something done or suffered by the other party
not based on actual promises. “Quasi-Contract arises when one person has
done something for another or paid money on his behalf to third party then the
court comes forward on the ground of ‘equity’ saying that person receiving the
benefit must make compensation to the other otherwise he would become rich
on the expenses of the other”
 For ex. A person to whom money has been paid or anything delivered by
mistake must repay or return it as if there was a contract between the parties
to that effect. Such obligations, for want of proper name, it appears, are called
quasi contracts, under the English law. They are not contracts as there is no
intention to enter into the contract but as the results resemble those of a
contract they are called quasi contracts. They are not implied contracts
because in an implied contracts also there is intention to enter into a contract.

Features of Quasi Contract-

1. It is a right to a sum of money- such a right is always a right of money and

generally, though not always, to liquidated sum of money.

2. This right is imposed by Law and does not arise by agreement of parties-
It does not arise from any agreement of the parties, but is imposed by the law,
so that in this respect a quasi contract resembles a tort.

3. This right is available only against a particular person or persons- “It is a

right which is available not, like the rights protected by the law of torts, against
all the world, but against a particular person, or person only, so that in this
respect, it resembles a contractual right.”

Provisions of Indian Contract Act regarding the Theory of Quasi Contracts-

Sections 68 to 72 deal with the cases in which no contract has been made by the
parties yet the law makes out a contract for them in the following cases:-

1 Necessaries supplied to a person incapable of contracting-

Section 68 provides that “if a person, incapable of entering into a contract, or

any one whom he is legally bound to support, is supplied by another person
with necessaries suited to his condition in life, the person who has furnished
such supplied is entitled to be reimbursed from the property of such incapable
person.” For Example-

1. A supplies B, a lunatic, with necessaries suitable to his condition in life.

A is entitled to be reimbursed from B’s property.

2. A supplies the wife and children of B, a lunatic, with necessaries suitable

to their condition in life. A is entitled to be reimbursed from B’s property.

Section 68 will apply only when the following essentials are fulfilled-
 1. If a person supplies necessaries to a person who is incapable of
contracting or to any one whom he is legally bound to support;

2. The necessary must be suited to his condition in life

3. The person who has furnished such supplies is entitled to be

reimbursed but

4. the liability of such person incapable of contracting is limited to his

property.

The term ‘Necessaries” has been used here in a technical sense. It

includes not only the bare necessities such as clothes and food but it
includes all things that may be reasonably necessary suited to the
minor’s condition in life e.g. a watch and bicycle. But the articles of
luxury are by no means necessaries.

But a minor is not personally liable for the necessaries, only “ the
minor’s property is liable for necessaries.”

2. Payment made on behalf of Another- S. 69 provides that “ a person who is

interested in the payment of money which another is bound by law to pay, and
therefore pays, it is entitled to be reimbursed by the other.

3. Obligation of person enjoying benefit of non gratuitous act-

Section 70 will apply only when the following essentials must be satisfied-
(i) A person does lawfully anything for another or delivers anything to him-
(ii) He does not intend to do so gratuitously;
(iii) Such other person enjoys the benefit thereof;
(iv) Such other person is bound to compensate the former’
For example
(i) A tradesman, leaves good at B’s house by mistake. B treats the goods
as his own. He is bound to pay A for them.
(ii) A saves B’s property from fire. A is not entitled to compensation from B,
if the circumstances show that he intended to act gratuitously.

4. Responsibility of finder of goods- Section 71 provides that “A person who

finds goods belonging to another and takes them in his custody, is subject to
the same responsibility as that of a bailee.” Since S. 71 provides that the
responsibility of a finder of goods as same as that of a bailee, it will be
necessary to see the duties of a bailee which are as follows- ie. A bailee is
under a duty-
(i) to take reasonable care of goods. (Section 151);
(ii) To return the goods “ (Section 160)
 (iii) to make the proper use of the goods bailed. (Section 153 and 154)
(iv) not to mix his own goods with the goods of the bailor (Section 155)
(v) not to question the title of bailor S. 166
(vi) to pay increase or profit from goods bailed.

Once the finder of goods belonging to another takes the goods into his
custody, he is treated under the law as a bailee and S. 71 of the Act imposes
upon him the same responsibility as that of a bailee. It would, however, be
wrong to say that the finder of goods does not get any right in respect of the
goods which he takes into his custody. A finder of goods has no right to sue
the owner for compensation for the trouble and expense voluntarily incurred by
him to preserve the goods and to find out the owner, but he may retain the
goods against the owner until he receives such compensation, and where the
owner has offered a specific reward for the return of goods lost, the finder may
sue for such reward, and may retain the goods until he receives it. (Section
168).

5. Money paid or things delivered by mistake or under coercion- “S. 72 says

“ A person to whom money has been paid, or anything delivered by mistake or
under coercion, must repay or return it.” for example

(i) A and B jointly owe 100 rupees to C. A alone pays the amount to C and
B not knowing this fact, pays 100 rupees over again to C. C is bound to
repay the amount of B.

Que. Discuss the doctrine of impossibility of the performance of a Contract.

Define and discuss fully the doctrine of frustration Or

A contract to do an act which afterwards becomes impossible or

unlawful becames void. Discuss. Support your answer with illustrative
leading cases. Or

“Frustration may be defined as that premature determination of an

agreement between the parties.” Comment.
Ans. Contract to do an act afterwards becoming impossible or unlawful- S.
56(2) provides that a contract to do an act which, after the contract is made,
becomes impossible or, by reason of some event which the promisor could not
prevent, unlawful, becomes void when the act becomes impossible or
unlawful: For example-

(A) A and B contract to marry with each other. Before the time fixed for the
marriage, A goes mad. The contract becomes void.
(B) A contracts to act at a theatre for six months in consideration of a sum
paid in advance by B. On several occasions, A is too ill to act. The
contract to act on those occasions becomes void.

In other words, S. 56 Clause 2 deals with the case where there is no possibility
at the outset but where the impossibility supervenes after the contract has
been made. It provides that a contract becomes void which means the doing of
an act after the contract is made (i) becomes impossible or (ii) unlawful by
reason of some event which the promisor could not prevent. The unlawfulness
and impossibility must not have arisen by reason of some event which the
promisor could prevent.

Example-
(i) A promises to sell his house to B. The agreement is perfectly valid at the
outset as A can deliver the house to B. But after the agreement house
catches fire. The accident makes the performance of the agreement
impossible and hence the agreement becomes void.
(ii) A contracts to take in cargo for B at a foreign port. As Government
afterwards declaring war against the country in which the port is
situated. The contract becomes void because the unlawfulness
supervenes.

Doctrine of Frustration- To a great extent S. 56 is based on the English

doctrine of frustration According to S. 56 the Doctrine of Frustration means the
discharge of a contract rendered impossible of performance by external
causes beyond the contemplation of the parties. It includes both-
(i) impossibility of the performance of the Contract and
(i) Impossibility of fulfilment of the ulterior purpose for which contract
was entered into.
Thus, the doctrine of frustration applies in two conditions 1. Where the
performance of contract is physically impossible and 2. where the ultimate
object of the contract has failed.

Essentials of Doctrine of Frustration

1. There must be a valid and existing contract between the parties.
2. Some part of the contract remains yet to be performed;
3. That the performance of contract becomes impossible after its
formation.
4. That the impossibility should be by reason of some event which the
promisor could not prevent.
5. That the impossibility should not be self-induced by the promisor or due
to his own negligence.

Specific Grounds of Frustration Based on Impossibilities-

Under Section 56 ordinarily impossibility may arise on account of following
reasons-

1. By change of law- A contract is discharged when its performance

becomes impossible on account of a change in the existing law. Persons
generally contract on the basis of the law existing at the time of the contract. If
this law is subsequently changed, they are not expected to honour their
obligations by committing a violation of the law. For example-

For Ex: Jagdish Prasad vs. Produce etc. (1945) Cal, 41- The Plaintiff
entered into a contract with the Defendant for the purchase of goods at a
certain price. Before the goods were delivered, an order was passed under the
Defence of India Act fixing the maximum price of those goods at the rate
lower than that fixed in the contract. The Plaintiff sued to recover the difference
between the contract price and the price fixed by the Goverment. The court
held that the contract became void when the order under the Defence of India
Act was passed making it unlawful to charge a price exceeding the price fixed
by the order and, therefore, the Plaintiff was not entitled to recover the
difference.

2. By destruction of the subject matter of the contract- A contract is

discharged if a specific thing which is essential to the performance of the
contract is destroyed.

For example. Taylor Vs. Caldwell (1863) the Defendants being the owners of
a Music Hall, agreed to lend the use of the hall to the Plaintiffs for the purpose
of giving concerts therein. Before the time came for the delivery of the hall, it
was destroyed by fire. The pals sued the Defendants for damages for the
breach of the contract. It was held that the Defendants were not liable.

3. By non occurrence of specified event.- Where a contract was made

on the basis of the happening of a particular event which does not happen
without the fault of either party the contract discharges.

Example- Krell vs. Henry, (1903) 2 KB 740, H agreed to hire the use of K’s
rooms in London on 26th and 27th June, 1902, for the purpose of seeing the
intended coronation procession. By reason of the King’s illness, no process
took place on either of these days. Here the process was the root cause of the
contract. It being rendered impossible. H is, no way, liable both under the
English as also the Indian Law.

4. By death or serious illness of the promisor- The impossibility which

discharges the parties from performing the contract may arise on account of
death or serious illness of the promisor in a contract for service discharges the
contract.
For ex: in Robinson Vs. Davision (1871); an eminent piano player who
had promised to perform at a concert was held not liable for non performance
of the promise, non performance being due to his serious illness.

5. By declaration of war- So far as the effect of war on contracts is

concerned, one has to consider two possibilities viz, contracts entered into
between enemy States (i) before war and (ii) During war.
(i) Before war- The general rule with regard to contracts between the
citizens of different warring States entered into before the outbreak of the
possibilities between their respective states, is that they are not dissolved by
the outbreak of the war, but suspended until the war is over. But this is not a
hard and fast rule. Court invariable inclined in favour of dissolving such
contracts
(ii) During war- during war, no performance of the contract is permitted, nor
will any action in it be entertained. All contracts entered into during war
between India citizens and citizens of state which is at war with India are illegal
and can never be enforced. Transactions with enemies during a period of war
are void ab initio, so when peace returns they are still void and of no effect.
 STANDARD FORMS OF CONTRACT

It is to be noted that a proposal when accepted becomes a promise. Thus, according to

the provisions of Indian Contract Act an accepted proposal is an agreement and an
agreement enforceable by law is a contract. In other words, it is seen that every person
is free to make or not to make a proposal. Similarly, the person to whom the proposal is
made, may or may not accept it. But now a days, a revolutionary change came in this
respect with the appearance what is known as “Standard Form of Contracts”. Now a
days, in many cases, the contracts are already written and printed at the instance of the
proposer and the other party i.e. the promisee has no choice but to accept it as they are.

It is to be noted that in order to protect the interest of the weaker party the courts &
legislature evolved the following rules:-

1. There should be a contractual document-

It is to be noted that both the parties are bound if the terms are contained in a
contractual document.

2. There should be no misrepresentation-

It is to be noted that if a person signs a document containing certain terms but
there is found to be a different oral misrepresentation about the contents of the
document, the document would not be a binding one.

3. There should be a reasonable notice of the contractual terms-

In order that the terms of a contract become binding, it is necessary to draw the
attention of the other party to those terms by the party who has pre-drafted the
terms of the contract.

4. Notice should be contemporaneous with the Contract- It is to be noted that if a

party to a contract wants to have exemption from liability he must give a notice
about the exemption while the contract is being entered into and not thereafter.

5. The terms of the contract should be reasonable-It must also be remembered that
not only the terms of the contract have been brought to the knowledge of the other
party by a sufficient notice before the contract is entered into, it is also necessary
that the terms of the contract themselves should be reasonable. If the terms of the
contract are unreasonable and opposed the public policy, they will not be
enforced they were printed on the reverse of the bill or have been expressly or
impliedly agreed upon between the parties.

6. Liability towards Third parties- It is to be noted that in case A and B enter into a
contract under which B tries to exclude his liability by an exemption clause, such a
clause would not exempt any other person, say C, from liability because of the
rule, that C is a stranger to the contract and he cannot take advantage of the
contract between A and B.
 DOCTRINE OF PRIVITY OF CONTRACT

The general rule under the India law as well as English law of contract is that only a party
to a contract can sue on it and enforce it. The stranger to a contract i.e. a third party is
not entitled to enforce the contract even if it is made for his own benefit. In other words, a
person who is not a party to a contract has no right under it. Thus, were under a contract
between two persons one of them agrees to pay a sum of money to a stranger and no
more circumstances appear, the person who was to receive that sum of money from the
contracting party, cannot sue the person, who has taken the liability to pay money. This
principle is called Doctrine of Privity of Contract. In other words, the principle that only
the parties to a contract are entitled to sue or be sued upon it is known as the “Privity of
Contract”.

In Dunol Pneumatic Tyres Co. Ltd. Vs. Selfridge and Co. Ltd., it was observed by the law
of England that certain principles are fundamental. One is that “only a person who is
party to a contract can sue on it”. In this case, A, a manufacturer of motor tyres, sold a
large quantity of tyres at a certain price to B, a wholesale dealer, on B’s entering into a
covenant that not to sell the tyres below the price sanctioned in a price list supplied to
him by A. B has supplied tyres to C, a retail dealer, by an agreement between B & C. A
sued C. It was held that A could not sue C because in this case A was not a party to the
contract between B & C.

It is to be noted that there are two different aspects of this doctrine i.e.
i. Acquisition of right by a Third party; and
ii. Imposition of liabilities upon a Third party;

I. Acquisition of right by a Third Party-

1. Where the contract creates a trust in favour of the Stranger-

Where under a contract one of the parties constitutes himself a trustee for a third
party, the third party may sue to enforce the trust in his favour and there will no
objection on the ground of his being a stranger in the contract.
2. Where money is due to a stranger under a marriage settlement, partition or other
family arrangement-
…………………….
3. Law relating to negotiable instruments- Law relating to negotiable instruments is
also an exception to the doctrine of privity of contract. For Ex: A has an account in
Central Bank. A draws a cheque of Rs. 1,000/- in favour of B. B goes to bank to
encash the said cheque. Although there is no contract between the Bank and B,
yet the bank will be liable to pay Rs. 1,000/- to B. B may also endorse the cheque
to C and then C will be entitled to receive RS. 1,000/- from the bank although
there is no privity between bank and C.
4. Where a stranger is entitled to Sue under certain enactments-
A person who is not a party to a contract can file a suit if he is so authorized by
statute. Thus, under the insurance Act, a stranger to the contract may recover
from the insurance company in case third party risks are covered by the insurance
policy.

II. Imposition of liabilities upon a Third Party.

It is to be noted that as a general rule, two persons, entering into a contract

between themselves cannot impose contractual liabilities on a third party.
 CONTINGENT CONTRACT

Contingent Contract-

According to S. 31- “A contingent contract is a contract to do or not to do something, if

some event collateral to such contract does or does not happen”. For Ex: A contracts to
pay B Rs. 10,000/-, if B’s house is burnt, this is a contingent contract.

A contract creates a relations between the parties to it and rights arise out of that
relation, but it does not mean that every contract creates a right immediately
enforceable. The right created may be one which, the parties agree, shall be
enforceable only on the happening of some future event as to which neither of the
parties makes any promise, and which is, therefore collateral to the contract. Such
contracts are termed “Contingent Contract”. The event upon which such contract are
contingent may be wholly beyond the power of the parties, or it may be more or less
within the power of one of the parties.

Essentials of contingent Contract: The following are the essentials of a contingent

Contract.
1. There must be some uncertain and future event-
The enforceability depends upon the happening of an uncertain and future event.
A contingent contract is a kind of conditional contract and the condition is of
uncertain nature. A contract which is subject to a certain or absolute type of
condition cannot be regarded as a contingent contract.
For Ex; A contract to pay a sum of money on the expiry of time or on the death of
a person is not a contingent contract because these events are certain in nature.
A contract to pay a sum of money on the destruction of a premises by fire, is a
contingent contract. From this point of view, all contracts of insurance are
contingent contracts.

2. Such event or contingency must be collateral to the contract-

The section emphasis that the event contemplated by the contract must be
collateral to the contract. It means that the contract has already arisen or a
subsisting contract is there, but its performance cannot be demanded unless the
conditions is first fulfilled.
For Ex: An offer to pay a sum of money on the discovery of a missing dog is not a
contract at all. It becomes a contract only when the dog is searched out and then
it is no more contingent.

3. The happening of such event may be wholly beyond the power of the parties or it
may be more or less within the power of one of the parties- As a general rule, the
happening of the collateral event is wholly beyond the power of the parties or it
may be more or less within the control of one of the parties.
For ex. A contracts to pay B a sum of money when B married C. C dies without
being married to B. The contract becomes void. Here B could marry C during his
life time.
Similarly, A agrees to pay B a sum of money if B married C. C marries D. The
marriage of B to C must now be considered impossible, although it is possible that
D may die and that C may afterwards marry B. If later B does actually marry C, as
D’s widow, it will not revive the old obligation of A to pay the sum, for that came to
an end when C married D.
 DISTINCTION BETWEEN WAGERING AND CONTINGENT CONTRACT

WAGERING CONTINGENT

1. According to S. 30, a “wager is a 1. According to S. 31, “A contingent

promise to pay money or money’s contract is a contract to do or not to
worth on the happening or not do something, if some event
happening of an uncertain event.” collateral to such contract does or
does not happen”

2. All wagering contracts are 2. All wagering contracts are not

contingent contracts. contingent contracts.

3. Wagering contracts are void. 3. Contingent contracts are not void

unless they are dependent on
impossible events.

4. In a wager, the uncertain event is 4. In a contingent, the uncertain event

beyond the control of both the may be within the power or control
parties. of one of the parties.

5. In a wager, the parties are not 5. In a contingent contract, they are so

interested in the occurrence of the interested.
event, apart from the money earned
or lost.

6. In a wager, the future event is the 6. In a contingent, the future event is

sole determining factor of the merely collateral or incidental.
contract.

7. The basis of wagering contract is 7. In a contingent contract, there is no

mutual chance of loss and gain of chance of loss or gain of any party.
both the parties.

8. For Ex. If there is a contract 8. For Ex: A contracts to pay B Rs.

between A & B that if it rains on a 10,000/-, if B’s house is burnt, this is
particular day A will pay Rs. 100/- to a contingent contract.
B and if does not rain B will pay the
same amount to A.
WAGERING CONTRACT