CONTRACT-Ist

Sunit Sir
FSection-1:

Name- Indian contract act 1872;

Extent-It extends to the whole of India except state of J&K.

Enforce-It shall came into force on 1stsep1872.

EXTRA NOTES-

(A) ICA was compiled on 25april1872.

(B) It is act no.9 of 1872.
(C) The ICA is not a complete and exhaustive law on all types of contract.It lays down only
general principles of contract law.Other principles relating to contract are being given in
IPA,SGA,TPA,Company act,Railway act etc.
(D) The Purpose and Preamble of ICA is to define and amend certain parts of the laws
relating to contract.
(E) It is a civil law becoz it enacted only about damages not about punishment.
(F) Before 1855 in India there was no fixed law on contract.Parties of agreement were either
regulated by English law,Hindu law,Muslim law or by equity etc.To stop that
uncertainity IInd law commission Prepares the draft of ICA,which was later on Presented
by IIIrd law commission.But becoz of argumented situation b/w government and
commission,the draft was not fully accepted.Then James Stephen made some
amendments and it was finally enforced on 1stsep1872.Thats why credit of its making
goes to James Stephen.
(G) Its effect is not Retrospective, means it will not applicable on the contracts dated before
1stsep1872

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CHART

Proposal[S.2(a)] + Acceptance[S.2(b)]= Promise[S.2(b)]

+
Consideration[S.2(d)]

= Agreement[S.2(e)]

If Enfocable by law If not Enfocable by law

= Contract[S.2(h)] = Void Agreement[S.2(g)]

Void Conract[S.2(i)] Voidable Contract[S.2(j)]

________________

Ques: Define the word Proposal with its essentials.

Ans:Proposal/Offer[S.2(a)]--- When one person signifies to another his willingness to do or

not to do abstain from doing anything, with a view to obtain the ascent of that other to such act
or omission, he is said to make a proposal.

Example- A told B that he wants to sell his house to B in one lakh Rs.It is a proposal.

Essentials of Proposal- (A)Number of Persons- Because nobody makes a proposal to itself,

that’s why atleast two persons must be needed for proposal. Remember there is no limit on
maximum persons i.e they can be counted or countless.

(B)Offer must be made with an Intention to Legally Bind each other: A proposal must be
made with an intention to legally bind each other. If there is no such intention to legally bind
each other, the agreement will not result into a contract. Example: A invites B to a dinner party,
B promised but does not attend the dinner party. In this case A can not sue B for breach of
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contract. [Kalai Haldar Vs Sheikh]. There is no as such provision in ICA but it is a well settled
rule in English Law that the parties ought to have the intention to create a legal relationship b/w
them through the form of proposal. It must not be merely a moral or social one.

(C) The Proposal must be communicated- A proposal to be complete must be communicated

to the person to whom it is made, otherwise there can be no acceptance by him. An acceptance
to a proposal in ignorance of a proposal is not acceptance and does not create any boundation
on the acceptor.[Lalmann Shukl Vs Goridutt]

(D) Offer & Invitation to an Offer are not the same thing-

An offer should be distinguished from an invitation to an offer. An offer is definite and capable

to converting an intention into a contract. Whereas an invitation to an offer is only a circulation
of an offer. It is an attempt to induce offers and precedes a definite offer. Acceptance of an
invitation to an offer does not result contract and only an offer emerges in the process of
negotiation. An offer when accepted becomes an agreement on the other hand an invitations to
offer when accepted becomes only an offer.[Harvey Vs Faisey]

Like Railway time table, menu card of hotel, service charges table of bank, Auction, sale
with tag are various egs of invitation to an offer.

Example: A shopkeeper displays in his shop an article with a lable marking “Price Rs.500”. In
this case the person who enters his shop & demands the article is really the proposer & it is upto
the shopkeeper to accept or reject the offer. The same rule is applied to Quotations, Catalogues
& Price Lists.

(E) The Proposal must be certain,definite and not vague- If the terms of a proposal are
vague or indefinite, its acceptance cannot create any contractual relationship.

Sec.29 of ICA enacted that-“Agreement the meaning of which is not certain or capable of being
made certain,are void.

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Example- A agrees to sell to B “my white horse” for rupees 500 or rupees 1000.There is
nothing to show which of the two prices was to be given. The agreement is void.

(F)Proposal should be in the form of request and not in order-It must be remembered that a
proposer cannot make offer in the form of order so as to compel the offeree to reply to his offer
rather he must make a request to this effect. [Felthouse Vs Bindly]

(G) The proposal should be made with a view to obtaining the consent of the offeree.

(H) The proposal should not contain a term the non compliance of which would amount to
acceptance. Thus a man cannot say that if acceptance is not communicated by a certain time the
proposal would be considered as accepted.

(I)Types of proposal-

(i) Express and Implied Proposal-A proposal in oral or written form is called express one
while a proposal other than oral or written form(expressed by behavior) is called implied one.

(ii) General and Specific Proposal- When a proposal made to a specific group of
people(countable) is called specific one. Specific can be accepted only by the person to whom it
is made while when a proposal made to the whole world or a group of people is called general
proposal. Eg- Advertisement in a newspaper or a T.V. In Carlill Vs Carbolic smoke Ball Co.
Lord Justice Bowen ruled that in case of public adversiment the performance of the conditions
of advertisement is sufficient acceptance of the offer & the same need not to be notified to the
offeror.

(iii) Positive and Negative Proposal-A proposal to do anything is called positive one while a
proposal not to do anything is called negative one.

(iv) Conditional and Unqualified Proposal- A proposal with one or more conditions is called
conditional one while a proposal without condition is called unqualified proposal.

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(v)Counter & Cross Proposal- when two parties make an identical proposals to each other in
ignorance of each other proposals, the proposals are known as cross proposal. There is no
binding contract in such a case as one's proposal can't be constructed as acceptance by the other
[Case-Tenn Vs Holfmen].

while when the offere offers to qualified acceptance to the offer subject to modification and
variation in the terms of original offer,he is said to have made a counter offer(Acceptance with
variation). Counter offer amounts to rejection of the original offer and hence no contract will be
done.[Case-Hide Vs Raeinj] Example- Bargaining.

(v)Standing Proposal-A proposal is allowed to remain open for acceptance over a period of
time is known as standing(open,continuing,continous) proposal.Example- karlil Vs karbolic
smoke ball & co.

(vi)Discontinous Proposal-A proposal which can accepted only once or a proposal which when
accepted by once cannot be accepted by other is called Discontinous Proposal.Example- 
Lalmam shukl Vs.Goridutt.

_________________

Ques: Define the word Acceptance with its essentials.

Ans:Acceptance-Acceptance plays a very important role for proposal. In order to convert a

proposal into agreement an acceptance should be there.In the words of Anson- “Acceptance is
to offer what a lighted match is to a train of gunpowder” it means gunpowder remains dormant
unless it has been contracted with a lighted match similarly mere offer does not create legal
rights & obligations between the contracting parties unless it has been accepted by the acceptor.
Sec2(b) defines acceptance as "when the person to whom the   proposal  is made signifies his
assent there to the proposal is said   to be accepted. A  Propsal when accepted  become a
promise."
Promisor and Promisee—2(c)- The person making the proposal   is  called  the promisor. The
person accepting  the proposal is called  the promisee.
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Essentials of  valid Acceptance-

(A)The Proposal must be communicated- A proposal to be complete must be communicated

to the person to whom it is made, otherwise there can be no acceptance by him. An acceptance
to a proposal in ignorance of a proposal is not acceptance and does not create any boundation
on the acceptor.[Lalmann Shukl Vs Goridutt]

(B) A mere answer to a question can neither constitutes an offer nor acceptance. There must be
an expression of willingness to be bound. [Harvey Vs Faisey]

(C) Communcitaton  of an Acceptance-   An acceptance must be communicated to offeror or

his authorised agent also an acceptance can be given only by offoree or his authorised
agent.Acceptance given by other than offeree or his authorized agent will be invalid[Case-
Pawel Vs Lee.]

(D) Acceptance of an Offer is Acceptance of all its Terms: Acceptance of an offer is the
acceptance of all the terms even if the Offeree is ignorant of some of the terms of the offer.

(E) Acceptance should be absolute & unqualified- According of sec.7(1)- In order to convert
a offer in to promise acceptance must be absolute and unqualified otherwise it amounts to
revocation an of the original offer and convert in to counter offer. In Hide Vs Raeinj it was
held that when the offere offers to qualified acceptance to the offer subject to modification and
variation in the terms of original offer,he is said to have made a counter offer(Acceptance with
variation). Counter offer amounts to rejection of the original offer and hence no contract will be
done.

ii)Acceptance must expressed in prescribe and reasonable mode –According of sec.7(2)

where the mode of an acceptance is prescribed in the offer in that manner it must be accepted in
that manner. But if any mode is not prescribed it should be accepted in usual and reasonable
manner.

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(F)Mere silence is not Acceptance – Accptence should be signified by some overt or external
manifestation of the intention by speech, writing or other act. Even if the offeree has made up
his mind to a final acceptance the agreement is yet not complete. Sec.3 says that– the
acceptance of proposal are deemed to be made by any act or omission of the party accepting by
which he intends to communicate such acceptance or which has the effect of communicating it.

Acceptance has been signified either in writing or by words or by performance of some

act.Sec.9 says – when acceptance of any offer is made in words it said to be express acceptance
while acceptance is made otherwise than in words, its said to be implied. Sec.8- Performance of
the condition of a proposal, or the acceptance of any consideration for a reciprocal promise
which may be offered with a proposal, is an acceptance of the proposal. In Carlill Vs Carbolic
smoke Ball Co. Lord Justice Bowen ruled that in case of public adversiment the performance of
the conditions of advertisement is sufficient acceptance of the offer & the same need not to be
notified to the offeror.

_________________

Ques-Discuss the provisions of ICA regarding revocation of an offer & revocation of an

acceptance.

Ans- According to Sec.3 -Revocation of proposal/acceptance are deemed to be made by any

act or omission of the party revoking, by which he intends to communicate such revocation of
proposal/acceptance or which has the effect of communicating it.

Sec.6 deals with types of revocation of an offer-

(1) Notice of Revocation- According to sec.6(1) an offer is revoked by the communication of

notice of revocation by the proposer to the other party.

According to sec.5- An offer may be revoked at any time before the communication of its
acceptance is complete against the proposer.

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According to sec.4- Communication of an acceptance is complete as against the proposer when
it is put in course of transmission to him so as to be out of the power of the acceptor to with
draw the same.

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

B acceptes the proposal by a letter sent by post.

Against A the communication is complete when the letter is posted by B.

So A may revoked his proposal at any time before or at the moment when B posts his latter of
acceptance , but not afterwards.

(2)Laps of Prescribed or Reasonable Time- According to sec.6(2) an offer is revoked by the

laps of time prescribed in such proposed for its acceptance or if no time is so prescribed, by the
laps of a reasonable time without communication if the acceptance. The Reasonable time will
depend upon facts & circumstances of each & every case.

(3) Not fulfilment of a condition Precedent- According to sec.6(3) an offer is revoked by the
failure of the acceptor to fulfill a condition precedent to acceptance.

(4) Death or Insanity of Proposer- According to sec.6(4) an offer is revoked by the death or
insanity of the proposer ,if the fact of his death or insanity comes to the knowledge of the
offeree before acceptance. It means if acceptor knows about the death or insanity of proposer
before acceptance the consent will be illegal otherwise legal and valid.

Revocation of Acceptance - According to Sec.3- The communication of proposal , the

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

According to Sec.5- An acceptance may be revoked at any time before the communication of
the acceptance is complete as against the acceptor , but not afterwards.

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According to Sec.4- The communication of an acceptance ,is complete against the acceptor,
when it comes to the knowledge of the proposer.

Example- A proposes by a letter sent by post to sell his house to B. B acceptes the proposal by
a letter sent by post.

The communication of the acceptance is complete as against B when the letter is received by A.

So B may revoked his acceptance at any time before or at the moment when the letter
communicating it reaches A, but not afterwards.

________________

Ques-Define the word ‘consideration’ with its essential. Also distinguish it with English
Law.

Ans- Consideration is one of the essential elements to support a valid contract. When a party to
an agreement, promises to do something he must get 'something' in return. If he does not get
something in return, the contract is not valid. This 'something' is defined as consideration.

Definition-

“Consideration is the recompense given by the party contracting to the other.”…..Blackstone

“When at the desire of the promisor,the promisee or any other person has done abstained from
doing,or does,or abstain from doing or promise to do or to abstain from doing something.Such
act or abstainence or promise is called a consideration for the promise.”…… Sec.2(d) of ICA

Consideration is based on the term ‘quid-pro-quo’ which means ‘something in return’.

When a person makes a promise to other, he does so with an intention to get some benefit from
him. This act to do or to refrain from doing something is known as consideration.

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Essentials of considereation-

1)At the Desire of the Promisor – Consideration must be offered by the promisee at the desire
or request, of the promisor. An act done at the desire of a third party is not a consideration.
[Durga Prasad Vs Baldev]

2)Consideration may move from Promisee or any other Person- Consideration may move
from Promisee or if promisor has no objection ,it may also move by any other person who is not
a party to the contract. Under the Indian Law, it is not necessary that consideration must be
given by a promisee only it may also be given by any other person. A contract is valid as long
as consideration is given, whether by the promisee or any other person.

For E.g. Chinnayya v/s Ramaya In this case 'A' transferred certain property by deed of gift to
her daughter 'B', with the condition that 'B' should pay certain annuity to 'A's brother 'C'. 'B'
agreed to pay the annuity to her uncle 'C' in writing. Later on, she denied to pay it on the ground
that no consideration had moved from 'C' to her (B). It was held that consideration might also
move from any other person. Therefore ‘C’ was entitled to maintain a suit.

3)Consideration may be Past,Present and future – The consideration may be past, present, or
future. This is clearly indicated by the words, used in the definition of consideration given in the
Act.

A)Past Consideration In order to support a promise a past consideration must be moved by a

previous request.

Example- if A request B to find out his watch & B does the same. Now if A promises B to give
100/- it will be past consideration

B)Present or Executed Consideration- In this consideration one party of contract has done his
liability and other have to fulfill his liability.Example– A pays 1000/-to B and B promises to
deliver to him a certain quantity of wheat with in a month.Here only B have to fulfill his
liability.This is Present Considertation.

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C)Future and Executor Consideration- In this consideration both the parties of contract do
promise to each other for some future act or omission,i.e both the parties have to fulfill their
liability.

Example- A agree to sell and B agrees to buy a certain quantity of rice in 1000/-Rs.A promises
to sell and B promises to buy.It is future consideration.

English law- English law deals only with present and future consideration i.e english law does
not consider past consideration as consideration.

4)Consideration must be Lawful- The consideration or object of an agreement is lawful

,unless –

its forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of
any law, or is fraudulent, or involues or implies injury to the person or property of anthor; or the
court regards it as immoral or opposed to public policy.[Sec.23]

Example- A agrees to let her daughter to heir to B for concubinage. The agreement is void
because its immoral though the letting may not be punishable under the Indian penal code.

5)Adequacy of Consideration– Consideration need not be adequate, but should be real.

Consideration need not be any particular value.It need not be approximately equal value of the
promise for which it is exchanged but it must be something which the law would regards as
having some value.

In this context explanation 2 of sec 25 states that an agreement to which the consent of the
promises is freely given is not void just because the consideration is inadequate.

Example- A agrees to sell a horse worth Rs1000/- for Rs10. A’s consent to the agreement was
freely given. The agreement is a contract, not with standing the inadequacy of the consideration.

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ii) A agrees to sell a horse worth Rs.1000/- for Rs10.A denies that his consent to the agreement
was freely given.The inadequacy of the consideration is a fact which the court should take into
account in considering whether or not A's consent was freely given.

Difference between English Law & Indian Law of Consideration-

1.Indian Law categories consideration as past, present & future while English Law in present &
future consideration i.e under English past consideration is no consideration.

2.Under English Law consideration may should from the promise & promise alone and not
from a third person while under the Indian Law Consideration may move from Promisee or if
promisor has no objection ,it may also move by any other person who is not a party to the
contract.

3.In English Law real or formal contracts need not to be supported by consideration. They
derive their validity ‘form’ while in Indian Law every promise must be supported by
consideration unless the case falls within exceptions.

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Ques- ”An agreement without Consideration is void”, discuss the exception of this rule. or

Discuss the validity of an agreement without Consideration.

Ans- Consideration is one of the essential elements to support a valid contract. When a party to
an agreement, promises to do something he must get 'something' in return. If he does not get
something in return, the contract is not valid. This 'something' is defined as consideration.
Therefore, an agreement without consideration is void and cannot become a contract.

Sec25 states the general rule is that an agreement made without consideration is void,i.e "no
consideration no contract" An agreement without consideration is called "Nudum Pactum".

Example– A agrees B to given 1000/- without consideration. Agreement is void .

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Exceptions: Following are the exceptions to the rule ‘no consideration, no contract’ i.e in the
following situations an agreement without consideration is also valid-

1)Natural Love and Affection– sec.25(1) states that– "a written and registered agreement
based on natural love and affection between the parties standing in near relation (like husband
and wife, son and father etc) to each other is enforceable even without consideration.

In Funu Biwi Vs Fyaz Baksh it was held that the ICA provides no guidance in the respect of
the word “Near Relation”. However according to judicial interpretation it includes parties
related by blood or marriage.

Example– A for natural love and affection promises to give his son B, Rs1000/-. A puts his
promise to B in to writing and registers it.This is a contract.

2)Past Voluntary Service– sec.25(2) states that– “A promise to compensate, wholly or in part,
a person who has already voluntarily done something for the promisor, or something which the
promisor was legally compellable to do.

Example 1) A finds B’s purse and gives to him.B promises to give a Rs 500.This is a contract.

2) A support’s B’s infant son.B promises to pay A’s expenses in doing.This is a contract.

3)Time Barred Debt– sec.25(3) states that– "A promises, made in writing and signed by the
person to be charged therewith or by his agent to pay wholly or in part a debt of which the
creditor might have enforced payment but for the law for the limitations of suit.

Example– A owes B Rs.1000 but the debt is barred by the limitation act.A signs a written
promise to pay B Rs500 on account of the debt.This is a contract.

4)Gift– Explantaion 1 of sec.25 states that– "No thing in this section shall affect the validity as
between the donor and donee,of any gift actually made.

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5)Sec.63- The second part of this section states that-“every promise may extend the time for the
performance of contract or may accept any satisfaction which he thinks fit instead of the whole
claim without requiring any consideration to support such an agreement.”

Example- 1) A Promises to paint a picture for B. B afterwards for bids him to do so. A is no
longer bound to perform the Promise. (Dispense)

2) A owes B ` 5,000. A pays to B and B accepts in satisfaction of his whole debt ` 2,000 paid at
the time and place at which the ` 5000 were payable. The whole debt is discharge.
5)Free Bailment– sec.148 states that– "Agreement to delivered thing as a free bailment is valid
though there is no consideration.

6)Agency- Sec.185 states that-"No consideration is necessary to create an agency.

__________________

Whether question of inadequacy of consideration can be raised in court?-

According to explanation-2 of sec.25-“an agreement to which the consent of the promisor is

freely given is not void merely because the consideration is inadequate; 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.”

Example- A agrees to sell a horse worth Rs.1000 for Rs.10.A denies that his consent to the
agreement was freely given.

The inadequacy of the consideration is a fact which the Court should take into account by in
determining whether or not the consent of the A’s was freely given.

__________________

Voidable Contract - An agreement which is enforceable by law at the option of one or more of
the parties thereto, but not at the option of the other or others, is a voidable contract [sec-2(i)]
Example- A contracts B with fraud. Contract is voidable at the option of B.
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Void Contract- A contract which ceases to be enforceable by law becomes void when it ceases
to be enforceable. [sec-2(j)]

 Example- A agrees to pay B 1000 rupees if B will marry A’s daughter C. C was dead at the
time of the agreement. The agreement is void.

Difference between Void & voidable contract-

1.Void contract is void from the very beginning while voidable contract is valid when made and
continues to remain valid till it is repudiated by the aggrieved party.

2. Void contract is void because an essential element of a valid contract is missing while voidable
contract is voidable because the consent of a party is not free.

3. Void contract is cannot be enforced by any party while voidable contract is continued to be
enforceable if the aggrieved party does not repudiate the contract.

4. Even on the expiry of a reasonable time void contract is can never become a valid contract while
on the expiry of a reasonable time voidable contract may become a valid contract if the aggrieved
party does not repudiate the contract within reasonable time.

5. In void contract the question of damages does not arise while in voidable contract the aggrieved
party can claim damages arise.

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Ques “ Each agreement is contract “.- Modify or

Every contract is an agreement but every agreement is not a contract. Discuss.or

Define contract? Discuss the essential elements of a valid contract?

Answer- An agreement not enforceable by law is said to be void[Sec.2(g)];but an agreement

enforceable by law is a contract[Sec.2(h)].In this context sec-10 states that – “ an agreement in
order to be a contract to be must satisfied the following conditions –"All agreement are contract
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if they are made by the free consent of parties competent to contract,for a lawfull consideration
and with a lawful object and not hereby expressly declared to be void."

1.There must be an agreement- The first & foremost essential of a valid contract is that there
must be an agreement. According to Sec.2(e)-“every promise & set of every promise forming
the consideration for each other is an agreement.”

2.Competent Parties for Contract – Because no body makes a contract to itself, that why
atleast 2 person must be needed for contract. Besides this the parties must be competent to
contract.In this context sec-11 states that-“every person is competent to contact who is
according to the law to which he subject to is of the age of majority:is of sound mind and is not
disqualified from contracting (like insolvent).

Age of majority- According to Indian Majority Act 1872 every citizen of India attains majority
at the completion of 18 years of age.

Sound mind – In this context Sec.12 states that-“a person is said to be of sound mind for the
purpose of making a contract if,at the time when he makes it, he is capable of understanding it
and of forming a rational judgement as to its effect upon his interest."

A person who is usually unsound mind, but occasionally of sound mind may make a contract
when he is of sound mind.

A person who is usually sound mind, but occasionally of unsound mind may not make a
contract when he is of unsound mind.

Example- 1) A patient in a lunatic asylum, who is at intervals of sound mind may contract
during those intervals.

2)A sane man,who is delirious from fever or he is so drunk that he can not understand the terms
of a contract or form a rational judgement as to its effect on his interest,can not contract while
such delirium or drunkenness lasts.

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3.Free Consent – Word “consent” is defined in Sec-13“two or more persons are said to consent
when they agree upon the same thing in the same sense.

To agree upon the same thing in the same sense is called “consensus ad idem”in English law.
Remember that only free consent should be needed for the valid contract.

In this context sec.14 states that –“consent is said to be free if it is not caused by coercion,
undue influence, fraud, misrepresentation or mistake”.

4.Lawful Objects & Consideration- Sec.23 Consideration or object of an agreement is lawful

unless –

Its forbidden by law; or

is of such a nature that if permitted, it would defeat provisions of any law; or

is fraudulent; or

involves or implies injury to the person or property of another; or

the court regards it is immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is lawful is void.

Example–1)A promises to obtain for B an employment in the public service and promise to
pay 1000 rupees to A.The agreement is void as the consideration for it is unlawful.

2)A,B and C enter in to an agreement for the division among them of gains acquired or to be
acquired by them by fraud.The agreement is void,as its object in unlawful.

3)A agrees to let her daughter to hire to B for concubinage. The agreement is void because is
immoral though the letting may not be punishable under the IPC.

Sec.24 states that “if any or any part of a consideration for one or more object or any part of any
one of sereval consideration for a single object is unlawful the agreement is void.
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Example- A promise to b superintend on behalf of B, a legal manufacturing of indigo,and an
illegal traffic in other articles.B promises to pay to A a salary of 10,000 rupees a year.The
agreement is void,the object of A‘s promise and the consideration for B’s promises being in part
unlawful.

5.Not Expressely Declared void – The following agreements are expressely declared void-

Sec.24 states that “if any part of a consideration or object is unlawful the agreement is void.”

Sec25 states that “ an agreement made without consideration is void”

Sec.26 states that-"Every agreement in restrain of the marriage of any person is void .”

Sec.27 states that-"Every agreement in restrain of trade is void.”

Sec.28 states that-"Every agreement in restrain of legal proceedings is void.”

Sec.29 states that-"Every agreement of uncertanity is void.”

Sec.30 states that-"Agreement by way of wager are void.”

Sec.11 states that-"Every agreement with minor is void ab-intio.”

Sec.20 states that-"Every agreement is void where both parties are under mistake as to matter of
fact.”

Sec.23 states that “if a consideration or object is unlawful the agreement is void.”

Sec.36 states that “an agreement contigent on impossible event is void.”

Sec.56 states that “an agreement to do an impossible act in itself is void.”

6.Other necessary lagal requirement 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 to be made in the presence of witness or is required to be registered
then such requirement must be fulfilled, otherwise is agreement is not enforceable.

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Conclusion- On the basis of above discussion we can easily say that every contract is an
agreement but its vice versa is not true.

________________
Ques-Discuss the rules regarding coercion?

Ans- Coercion- From sec-10 of Contract Act it becomes clear that for creation of valid contract
it is requires to be made with the free consent of the parties. Free consent is one of the most
essential element of a valid contract. sec.14 states that –“consent is said to be free if it is not
caused by coercion, undue influence, fraud, misrepresentation or mistake”.

Sec.15 defines coercion as – Coercion is the committing, or threatening to commit any act
forbidden by the IPC or

the unlawful detaining or threatening to detain,any property, to the prejudice of any person
whatever,with the intention of causing any person to enter in to an agreement.

Explanation- Its immaterial whether the IPC is or not in force in the place where the coercion
is employed.

Example- A on board an English ship an the high seas, cause B to enter in to an agreement by
an act amounting to criminal intimidation under the IPC.A afterwards sues B for breach of
Contract at Calcutta. A has employed coercion, although his act is not an offence by the law of
England, and although section 506 of IPC was not in force at the time when or place where the
act was done.

Elements of Coercion

1.Committing or threaten to commit any act forbidden by the Indian penal code-

The first and the foremost element is the coercion must be committing any act forbidden by Indian
Penal Code. Any act which is prohibited by Indian Penal Code, if we take help of that act and
compel a person, or threaten a person by that act and he or she enters into the contract that is

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known as contract has been entered into by the coercion. A person must be threatening to commit
any act, forbidden by Indian Penal Code. Now there are two things either we are committing an act
which is forbidden by Indian Penal Code or we are threatening to commit any act forbidden by
Indian Penal Code. There are two things we are committing an act or we are threatening to commit
an act forbidden by Indian Penal Code. Then we say the coercion has been exercised.

Example- ‘A’ forcibly kidnaps the son of the ‘B’ and asks the ‘B’ that he will kill the son of the ‘B’
if ‘B’ will not execute a promissory note of rupees one lakh in his favour. Now under this
threatening ‘B’ execute a promissory note of rupees one lakh in favour of the ‘A’. Then we can say
now ‘B’ has given this promissory note under coercion because ‘A’ has threatened to ‘B’ that he
will damage or he will kill the son of the ‘B’ if he will not give a promissory note of one lakh
rupees.

Whether threat to commit suicide may amount to coercion-

An important issue is as to whether threat to commit suicide mau amount to coercion. Such an issue
arose for consideration in the case of Amiraju Vs Seshama the defendant threatened his wife and
son to commit suicide if they did not execute a release-deed relinquishing their rights in certain
properties in favour of the defendants brother. The wife and son of the defendant executed the
release-deed and thereafter they filed suit to cancel the released –deed on the ground that their
consent was obtained by employing coercion. It was pleaded that suicide was not an act forbidden
by the IPC and therefore it should not be taken as coercion within the meaning thereof under
section 15. The majority held that such threat would amount to coercion. In the opinion of majority
a man is not punished for suicide under the Indian penal code not because such act is not forbidden
but because the law cannot reach him. The IPC punishes the person who attempts to commit
suicide. It also punishes the person who abets the committing of suicide. Therefore the intention of
the legislature is clearly to forbid such an act.

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2.Unlawfully detaining or threaten to detain any property.If a person unlawfully detains or
gives a threat to detain any property to the prejudice of any person whatever with the intention of
causing any person to enter into an agreement amount to coercion.

3.To the prejudice of a person Section 15 requires that there is committing or threatening to
commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to
detain, any property, to the prejudice of any person whatever, with an intention of any person to
enter into an agreement.

It means that the act causing coercion should not necessarily be directed against the contracting
party, it is enough that the act is to the prejudice of any person whatever, and with the intention of
any person to enter into an agreement. If, for example, A unlawfully detains B’s friend C, in order
to coerce B to enter into agreement, the case would be covered within this section.

Consequences of Coercion Under Sec-19, when a contract is brought about by coercion, it is

voidable at the option of the party, whose consent was so caused. The aggrieved party has the
following options-

 have the contract set aside, or

 refuse to perform it and defend it on the ground of coercion, or
 Abide by the contract, if he so desires and insist on its performance by other party.
 Under Sec.72, if a person has paid money or delivered anything to another person, by mistake or
under coercion, that money must be repaid or the thing received must be returned to him.

Difference between English Law and Indian Law regarding coercion- An act which is called
coercion in India is known to be ‘Durres’ in English Law. Following are the differences between
the two-

1.Nature:-Coercion may be against of body or of property or of both while duress can be against
only of body.

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2.Scope: - Coercion may be proceeding from or against a third person while duress can be
proceeding from or against either party to be contract or their agents.

3.Violence: - Immediate violence is not an essential part of coercion while it plays an important
role in duress. ________________

Ques- Define Undue Influence & explain its effect on the validity of a contract.

Ans- Undue Influence: From sec-10 of Contract Act it becomes clear that for creation of valid
contract it is requires to be made with the free consent of the parties. Free consent is one of the
most essential element of a valid contract. sec.14 states that –“consent is said to be free if it is
not caused by coercion, undue influence, fraud, misrepresentation or mistake”.

According to Sec-16(1) of the Contract Act “a contract is said to be induced by undue

influence where the relations between the parties are such that one of the parties is in a position
to dominate the will of the other & uses that position to obtain an unfair advantage over the
other”.

Sec-16(2) presumes some relationship where undue influence may be exercised:

1. When one party holds a real or an apparent authority over the other party(Like the
relationship between employer and employee).

2. Where one party stands in a fiduciary relation(a relationship of mutual trust and confidence)
to the other party to the contract (Like Parents and children, guardian and ward, solicitor and
client)

3. Where a person makes a contract with another person, whose mental capacity is temporarily
affected by a reason of age, illness, or mental or bodily distress.

Example – A having the advanced money to his son B during his minority,upon B’s coming of
age obtains,by misuse of parental influence,a bond from B for greater amount than the sum due
in respect of the advance.A employs undue influence.

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b)A,a man enfeebled by disease or age,is induced by B‘s influence over him as his medical
attendant to agree to pay B an unreasanble sum for his professionals services.B employes undue
influence.

Sec-16(3) states that-“Where a person who is in a position to dominate the will of another enters
in to a contract with him and the transaction appears,on the face of it or the evidence adduced to
be unconscionable,the burdon of proving that such contract was not induced by undue influence
shall lie upon the person in a position to dominate the will of the other.”

Example –A, a being in debt to B, the money lender of his village, contracts a fresh loan on
terms which appear to be unconscionable. It lied on B to prove that the contract was not induced
by undue influence.

Consequences of Undue Influence: According to Sec-19(A)-“An agreement which is caused

by undue influence shall be voidable at the option of the party whose consent has been so
obtained. Such an agreement may be set aside absolutely or if the party, who was entitled to set
aside the contract, has received any benefit, the court may set it aside upon such terms and
conditions as may appear to be just.”

According to sec.64 ”when a person at whose option a contract is voidable rescinds it,the other
party there to need not perform any promise there in contained in which he is promise. The
party rescinding a voidable contract shall if he have received any benefit there under from
another party to such contract restore such benefit,so for as may be to the person from whom it
was received.”

________________
Ques-Discuss the rules regarding Fraud?

Ans- Fraud- From sec-10 of Contract Act it becomes clear that for creation of valid contract it
is requires to be made with the free consent of the parties. Free consent is one of the most
essential element of a valid contract. sec.14 states that –“consent is said to be free if it is not
caused by coercion, undue influence, fraud, misrepresentation or mistake”.
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Sec.17 states that-"Fraud means and includes any of the following acts committed by a party to
a contract,or with his connivance,or by his agent,with intent to deceive another party there to,or
his agent,or induce him to enter into a contract –

1) The suggestion,as a fact of that,which is not true,by one whose does not belife it to be
true;
2) The active concealment of a fact by one having knowledge or belief of the fact;
3) A promise made without any intention of performing it;
4) Any other act fitted to deceive;
5) Any such act or omission as the law specially declares to be fraudulent.

Example- A sells,by auction to B horse which a know to be unsound,A says nothing to B about
the horse‘s unsoundness. This is not fraud in A.

When mere silence not amounts to Fraud- The first two lines of Explanation of Sec-17
states that-“ Mere silence as to fact likely to affect the willingness of a person to enter in a
contract is not fraud.”

Example- A and B being trader,enter upon a contract.A has private information of a change in
prices which would affect B’s willingness to proceed with the contract.A is not bound to inform
B.

When mere silence amounts to Fraud-The last two lines of Explanation of Sec-17 states
that-“Mere silence constitutes fraud when the circumstances of the case are such that, regard
being had to them it is the duty of the person keeping silence to speak or unless his silence is in
itself, equivalent to speech.”

Example B is A’s daughter and has just come of age. Here the relation between the parties
would make it A’s duty to tell B if the horse is unsound.

b)B says to A – "if you don’t deny it,i shall assume that the horse is sound.”A says nothing.
Here’s A’s silence is equivalent to speech.

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Consequences of Fraud:

According to Sec-19-“An agreement which is caused by fraud shall be voidable at the option of
the party whose consent has been so obtained. ________________

Ques-Discuss the rules regarding Misrepresentation?

Ans- Misrepresentation – From sec-10 of Contract Act it becomes clear that for creation of
valid contract it is requires to be made with the free consent of the parties. Free consent is one
of the most essential element of a valid contract. sec.14 states that –“consent is said to be free if
it is not caused by coercion, undue influence, fraud, misrepresentation or mistake”.

sec.18 states that - Misrepresentation “means and includes-

1)The positive assertion,in a manner not warranted by the information of the person making
it,of that which is not true, though he belives it to be true;

2)Any breach of duty of which,without an intent to deceive, gains and advantages to the person
committing it,or any one claiming under him,by misleading another to his prejudice,or to the
prejudice of any one claiming under him.

3)Causing, however innocently, a party to an agreement to make a mistake as to the substance

of the thing which is the subject of the agreement.

Consequences of Misrepresentation:

According to Sec-19-“An agreement which is caused by misrepresentation shall be voidable at

the option of the party whose consent has been so obtained.

Difference between Fraud & Misrepresentation-

1.In case of fraud the person who makes the assertion does not believe it to be true while in case of
misrepresentation the person who makes the assertion believe it to be true while in fact it is not
true.

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2.In case of fraud one party intentionally deceives the other party knowingly while In
misrepresentation the intention of one party is not to deceive another party.

3.In case of fraud the aggrieved party can avoid the contract and claim damages while in case of
misrepresentation only the contract can be broken but no damages can be claimed. ___________

Ques-Discuss the provisions regarding void agreement?

Ans- Agreement is the first stage of contract it means every contract consists a agreement.
According to sec-2(e) “every promise and every set of promises, forming the consideration for
each other, is an agreement” & According to sec-2(g)-“an agreement not enforceable by law is
said to be void”.

Provisions regarding void agreement are as follows-

(1) Sec.24 states that “if any or any part of a consideration for one or more object or any part of
any one of sereval consideration for a single object is unlawful the agreement is void.

Example- A promise to b superintend on behalf of B, a legal manufacturing of indigo,and an

illegal traffic in other articles.B promises to pay to A a salary of 10,000 rupees a year.The
agreement is void,the object of A‘s promise and the consideration for B’s promises being in part
unlawful.

(2) Sec25 states that “An agreement made without consideration is void, unless –

(a) "a written and registered agreement based on natural love and affection between the parties
standing in near relation (like husband and wife, son and father etc) to each other is enforceable
even without consideration.

(b) a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do.

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(c) a promises, made in writing and signed by the person to be charged therewith or by his agent
to pay wholly or in part a debt of which the creditor might have enforced payment but for the
law for the limitations of suit.

(3) Sec.26 states that-" Every agreement in restraint of the marriage of any person, other than a
minor, is void..”

(4) Sec.27 states that-" Every agreement by which any one is restrained from exercising a
lawful profession trade or business of any kind is to that extent void except saving of
agreement not to carry an business of which good will is sold.”

(5) Sec.28 states that-" Every agreement–

a)By which any party there to is restricted absolutely from enforcing his right under or in
respect of any contract,by the usual legal proceedings in the ordinary tribunals or

b)Which extinguishes the right of any party there to or discharge,any party there to for any
liability under or in respect of any contract on the expiry of a specific period so as to restrict any
party from enforcing his right,is void to the extent. ”

(6) Sec.29 states that-" Agreement the meaning of which is not certain or capable of being
made certain,are void.

Example- A agrees to sell to B “my white horse” for rupees 500 or rupees 1000.There is
nothing to show which of the two prices was to be given. The agreement is void.”

(7) Sec.30 states that-"Agreement by way of wager are void.”

Other Provisions-

(8) Agreement with Minor- According to Sec-11 -“ every person is competent to contract who
is of age of majority ,is of sound mind and not is disqualified from contracting by any Law to
which he is subject. Sec-10 requires that the parties to a contract must be competent & sec-11
declares that a minor is not competent, but neither section makes it clear as to whether if a
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minor enters into an agreement would it be voidable at his option or altogether void. in 1903 by
the Privy Council in Mohori Bibee V. Dhurmodas Ghose ,where in Sir Lord North observed
that after looking sec-10, 11, 183 & 184 it is clear that agreement made by minor will be not
void neither voidable in fact it will be void-ab-intio.
(9) Sec.20 states that-"Every agreement is void where both parties are under mistake as to
matter of fact.”

Example– A agrees to buy from B a certain horse.It turns out that the horse was dead at the
time of the bargain though neither party was aware of the fact. The agreement is void.

(10) Sec.23 states that “if a consideration or object is unlawful the agreement is void.”

Example– A,B and C enter in to an agreement for the division among them of gains acquired or
to be acquired by them by fraud. The agreement is void, as its object in unlawful.

(11) Sec.36 states that “Contingent agreements to do or not to do anything, if an impossible

event happens, are void, whether the impossibility of the event is known or not to the parties to
agreement at the time when it is made.”

 Example- A agrees to pay B 1000 rupees if B will marry A’s daughter C. C was dead at the
time of the agreement. The agreement is void.

(12) Sec.56 states that “an agreement to do an impossible act in itself is void.”

 Example- A agrees with B to discover treasure by magic.The agreement is void.

________________
Ques-Define wagering contract and explain its essentials. Distinguish between wagering and
contingent contract.

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Ans- According to Sec-30-“agreements by way of wager are void; and no suit shall be brought
for recovering anything alleged to be won on any wager, or entrusted to any person to abide the
result of any game or other uncertain event on which may wager is made”.

Example- A contract between A and B is such that if it rains on a particular day, A will pay
Rs.500/- to B and if it does not rain B will pay the same amount to A.

Essentials of Wager-

1.The event must be uncertain- The first and foremost essential of a wager is that the performance
of the bargain must depend upon the determination of an uncertain event. A wager generally
contemplates a future event, but it may relate to an event which has already happened in the past,
but the parties are not aware of its result or the time of its happening.

2.There must be mutual chances of gain or loss – The second essential is that upon the
determination of the contemplated event each party should stand to win or lose. If there are no such
mutual chances of gain or loss, there is no wager.

3.The happening of the event must be beyond the control of the parties – Thirdly, neither party
should have control over the happening of the event in one way or the other. “If one of the parties
has the event in his own hands, the transaction lacks as essential ingredient of a wager.”

4.The parties must have no other interest in the event except to pay the difference of the
amount of bet – Lastly, neither party should have any interest in the happening of the event other
than the sum or stake he will win or lose.

Exceptions to the Wagering Contract-

1.Horse Race- The section does not render void a subscription or contribution, or an agreement to
subscribe or contribute, towards any plate, prize or sum of money, of the value or amount of
Rs.500/- or upwards to the winner or winners of any horse races.

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2.Crossword Competitions & Lottery - “If skill plays a substantial part in the result and prizes are
awarded according to the merits of the solution, the competition is not a lottery. Otherwise it is.”

Effect of Wagering agreements- Section-30 declares an agreement by way of wager as void. It

further states that “no suit shall be brought for recovering anything alleged to be won on any wager,
or entrusted to any person to abide the result of any game or other uncertain event on which any
wager is made.”

In Gerulal Parakh Vs Mahadeodas it was held that though a wagering agreement is void and
unenforceable, it is not forbidden by law under Section 23 of the Contract Act.Thus agreements
collateral to wagering agreements are not void.

Contingent Contract- According to Sec-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."

Example - A contracts to pay B ` 10,000 if B's house is burnt. This is contingent contract.

Difference between Wagering Contract & Contingent Contract-

1. All wagering contracts are contingent contracts while all contingent contracts are not

wagering contracts.

2. Wagering contracts are void while contingent contracts are not void unless they are dependent on
an impossible event.

3. In a wager, the uncertain event is beyond the power of both the parties while in a contingent
contract, the event may be within the power of one of the parties.

4. In a wager, the parties are not interested in the occurrence of the event, apart from the money
earned or lost while in a contingent contract, they are so interested e.g; A ensures the life of B; the
transaction is a wager, if A has no interest in B’s life.

5.In a wager, the future event is the sole determining factor of the contract while in a contingent
contract the future event is merely collateral or incidental.
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_________________

Anticipatory Breach of contract-According to Sec-39 - "When a party to a contract has

refused to perform or disabled himself from performing his promise in its entirety the promise
may put an end to the contract unless he had signified by words or conduct, his acquiescence in
its continuance."

Example A, a singer enters into a contract with B, the manager of a theatre, to sing at his
theatres two nights in every week during the next two months, and B engaged to pay her ` 100
for each night's performance. On the sixth night A willfully absents herself form the theatre.
With the assent of B, A sings on the seventh night. B is has signified his acquiescence in the
continuance of the contract and cannot now put an end to it; but is entitled to compensation for
the damages sustained by him through A's failure to sing on the sixth night Under this section.

Sec-75 states that - "A person who rightfully rescinds a contract is entitled to a compensation
for any damage which he has sustained through the non-fulfillment of the contract.

Example - A, a singer enters into a contract with B, the manager of a theatre, to sing at his
theatres two nights in every week during the next two months, and B engaged to pay her ` 100
for each night's performance. On the sixth night A willfully absents herself form the theatre. B
is at liberty to put an end to the contract. If B rescinds the contract than B is entitled to
compensation for the damages which he has sustained through the non fulfillment of the
contract under Sec-75.

Section 65 states that - "When an agreement is discovered to be void, or when a contract

becomes void, any person who has received any advantage under such agreement or contract is
bound to restore, it, or to make compensation for it, to the person from whom he received it."
(Doctrine of Quantum Merit)

Example A, a singer enters into a contract with B, the manager of a theatre, to sing at his
theatres two nights in every week during the next two months, and B engaged to pay her ` 100
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for each night's performance. On the sixth night A willfully absents herself form the theatre, and
B continuance, rescinds the contract, B must pay A for the five nights on which she had sung
under this section.
_________________

Recipocal Promises- According to sec-2(f) Promises which form the consideration or part of
the consideration for each other, are called reciprocal promises”.

Performance of Recipocal Promises- According to sec-51 When a contract consists of

reciprocal promises to be simultaneously performed, no promisor need perform his promise
unless the promisee is ready and willing to perform his reciprocal promise.
Example- A & B contracts that A shall deliver goods to B to be paid for by B on delivery. A
need not deliver the goods unless B is ready and willing to pay for the goods on the delivery. B
need not pay for the goods unless A is ready and willing to deliver the goods on payment.

According to sec-52 Where the order in which reciprocal promises are to be performed is
expressly fixed by the contract, they shall be performed in that order, and where the orders is
not expressly fixed by the contract, they shall be performed in that order which the nature of
transaction requires.

Example- A & B contracts that A shall build the house for B at a fixed price. A’s promise to
build the house must be performed before B’s promise to pay for it.

_________________

Ques-Explain what is the effect of failure to perform the contract within the stipulated time?
or

“Time is the essence of contract”.What are the rules as to time, place & manner of the
performance of the contract? Explain. Or

Discuss provisions regarding Time Contract under Contract Act.

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Ans-Time Contract-Generally time is the essence of each & every contracts but there are some
situations where time is not so important.Sec-55 enacts the provision regarding both the
situation as follows-

Effect of failure to perform at fixed time, in contract in which time is essential- According
to 1st paragraph of sec-55-“When a party to a contract promises to do a certain thing or
certain things at or before a specified time and fails to do such things at or before a specified
time, the contract or so much of it as has not been performed, becomes voidable at the option
of the promisee, if the intention of the parties was that time should be of essence of the
contract”.

In Orissa Textile Mills Ltd Vs Ganesh Das it was held that time is generally considered to be
the essence of the contract in the following conditions-

(a) Where the parties have expressly agreed to treat it as of the essence of the contract;
(b) Where delay operates as an injury;
(c) Where the nature & the necessity of the contract requires it to be so constructed.

Effect of such failure which time is not essential According to 2nd paragraph of sec-55-“If,
In case of a contract voidable on account of the promisor's failure to perform his promise at the
time agreed, the promisee accepts performance of such promise at any time other than agree,
the promisee cannot claim compensation of any loss occasioned by the non-performance of the
promise at the time agreed, unless, at the time of acceptance, he give notice to the promisor of
his intention to do so”.

Effect of acceptance of performance at time other than that agreed upon- According to 3rd
paragraph of sec-55-“If it was not the intention of the parties that time should be of the
essence of the contract, the contract does not become voidable by the failure to do such thing at
or before the specified time; but the promisee is entitled to compensation from the promisor for
any loss occasioned to him by such failure.”
_________________
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Novation, rescission, and alteration of contract - According to Sec-62-“if the parties to a
contract agree to substitute a new contract for it, or to rescind or alter it, the original contract
need not be performed."

Example - A owes money to B under a contract. It is agreed between A, B and C, that B shall
thenceforth accept C as his debtor. Instead of A, the old debt of A to B is at an end, and a new
debt from C to B has been contracted.
_________________

Ques-What is ‘Quasi contract’? Explain with illustration. Or

Explain the Quasi contract theory. Describe briefly the case where this theory has been
recognised under the provision of Indian contract Act.

Ans- Quasi Contract(Ss.68-72) - Generally proposal, acceptance, consideration requires to form a

contract, but when in the absence of proposal etc, law presumed a relation resembling those created
by contract, such contract are known as Quasi Contract. (Fictious Contract)

Basis of Quasi Contract- The theory of quasi contract based on the following two doctrines-

1.Theory of Unjust Enrichment- Lord Mansfield who is considered to be the real founder of
quasi contractual obligations explained it in Moses Vs Macferlan on the principle that law as
well as justice should try to prevent “Unjust Enrichment” that is, enrichment of one person at
the cost of another. For example a person in whose home certain goods have been left by
mistake is bound to restore them.

2.Theory of Implied Contract- In Sinclair Vs brougham House of Lords held that the basis
of quasi contract is not theory of unjust enrtichment rather it is based on the doctrine of implied
contract.

Provisions regarding Quasi Contract in ICA- Following are the provisions regarding quasi
contract in ICA-

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According to Section 68 - "If a person, incapable of entering into a contract, or anyone 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 supplies is entitled to be reimbursed from
the property of such incapable person."

Example- A supplies B, a lunatic with necessaries suitable to his condition in life. A is entitled
to be reimbursed from B's property.

According to Section 69 - "A person, who is interested in the payment of money which another
is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other."

According to Section 70 - "Where a person lawfully does anything for another person, or
delivers anything to him, not intending to do so gratuitously, and such another person enjoys the
benefit thereof, the letter is bound to make compensation to the former in respect of, or to
restore, the thing so done or delivered."

Example- 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.

According to Section 71 - "A person who finds goods belonging to another, and takes them
into his custody, is subject to the same responsibility as a bailee."

According to Section 72 - "A person to whom money has been paid or anything delivered, by
mistake or under coercion, must repay or return it."

Example-1) 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 to B.
(Mistake)

2) A railway company refuses to deliver up certain goods to the consignee except upon the
payment of an illegal charge for carriage. The consignee pays the sum charged in under to

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obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.
(Coercion)
_________________

Ques-Describe the law relating to Minor’s Agreement with the help of Mohori Bibee V.
Dhurmodas Ghose Case or

Explain the term ‘Minor’? Explain the legal rules regarding agreement by a minor?
(Or)

What is the legal effect of a minor’s misrepresentation of his age while entering into an
agreement?

Ans- For a valid contract it is essential that parties to contract should be competent to
contract. In this reference Sec-11 states that-“ Every person is competent to contract who is of
age of majority ,is of sound mind and not is disqualified from contracting by any Law to
which he is subject.
Age of Majority- According to sec- 3 of Indian Majority Act-1875 every person domiciled
in Indian attains majority on the completion of 18 years of age but where a guardian of a
minor’s person or property is appointed under the Guardian and wards Act, 1890 the age of
majority is 21 years.

Nature of Minor’s Agreement- Sec-10 requires that the parties to a contract must be
competent and sec-11 declares that a minor is not competent. But neither section makes it
clear as to whether , if a minor enters into an agreement would it be voidable at his option or
altogether void? These provisions had therefore quite naturally given rise to a controversy
about the nature of a minor’s agreement. This controversy was finally settled in 1903 by the
Privy Council in Mohori Bibee vs Dharmodas Ghose ,where Sir Lord North observed
that minor’s agreement will be void ab initio.

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Legal rules & Effects of Minor’s Agreement: All the rules related to minor's agreement are
based on the fundamental that ‘ Law always protects the minors’.A minor is incompetent to
contract u/s 11of the Indian contact act, 1872. Minor’s incompetence is not a punishment but
it is a protection given to minors by law. The law becomes the guardian of minors to protect
their rights because their mental capacity is not well developed. The following are the legal
rules & effects regarding minor’s agreement –

1.No liability in contract or in Tort arising out contract- In Johnson vs Pye it was held
that an infant who obtains a loan of money by falsely representing his age can’t be made to
repay the amount of the loan in the form of damages for deceit.
The court pointed out that if infants were held liable on their contract by means of action in
tort, all the infants would be ruined.

But in Burnard vs Haggis it was held that where a tort is independent of the contract, the
mere fact that a contract is also involved, will not absolve the infant from liability.

2.Liability for Estoppel- In Mohori Bibee vs Dharmodas Ghose it was held that the infant
is not estopped from setting up the defence of infancy. There can be no estoppel against
statute.

3.Liability for Restitution- In Stokes Wilson it was held that an infant obtains property for
good by misrepresenting his age, he can be compelled to restore it, but only so long as the
same is traceable in his possession.This is known as the equitable doctrine of restitution.
Where the infant has sold the goods or converted them, he can’t be made to repay the value
of the goods, because that would of amount to enforcing a void contract. Again this doctrine
it is not applied where the infants has obtained cash instead of goods.

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4.Liability for Retification- In Nazir Ahmed vs Jevan Das it was held that an agreement
with a minor is void ab initio and therefore, it can’t be ratified by the minor after attaining
the age of majority,
But in Kundan Bibi vs Shree Narayan it was held that where a minor has received some
consideration during minority and in addition to it he receives a further or fresh consideration
after attaining the age of maturity and he promises after being major, to pay the whole of the
amount, the promise will be binding.

5.Liability for Specific Performance- In Subramanyam vs Subba Rao it was held that if
the contract entered into by the guardian of the minor on his behalf is within the competence
and it is for the benefit for the minor, it will be valid and enforceable.
In Durga Thakurani vs Swain a trustee of a deity made a contract for the sale of property of
the deity under legal necessity. The contract was held to be valid or enforceable.

________________

Ques-What is mistake of fact and mistake of law? What is the effect of mistake of fact and
mistake of law on the contract?

Ans- Mistake- Mistake means erroneous belief concerning material fact about a contract.
From sec-10 of Contract Act it becomes clear that for creation of valid contract it is requires
to be made with the free consent of the parties. Free consent is one of the most essential
element of a valid contract. sec.14 states that –“consent is said to be free if it is not caused by
coercion, undue influence, fraud, misrepresentation or mistake”.

Mistake is not defined in Indian Contract Act, but its classification and their effects are given.

Mistake

Mistake of fact Mistake of Law

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Bilateral(Sec-20) Unilateral(Sec-22) Indian Law(Sec-21) Foreign Law(Sec-21)

Mistake is classified under two heads i.e mistake of fact and mistake of law. Generally
mistake of fact is not considered to be as much serious as mistake of law. In this context a
following maxim is famous – “Ignorantia facti excusot ignorantia juris non excusot.” i.e
mistake of fact is excusable while mistake of law is not.

Bilateral mistake of fact & its Effects-

According to Sec-20 “Where both the parties to an agreement are under a mistake as to a
matter of fact essential to the agreement the agreement is void.”

Example-A agrees to buy from B a certain horse. It turns out that the horse was dead at the
time of the bargain, though neither party was aware of the fact. The agreement is void

Essential element of sec 20-

1.Mistake should be Bilateral- it is clear from sec-20 that only bilateral mistake of parties
effect as void agreement i:e unilateral mistake of party will not effect as void agreement.
According to sec-21 “a contracts is not voidable because it was caused by a mistake as to any
law in force in India.”

2.The Mistake should be as to some exiting fact- Under sec-20 agreement will be void only
if it was based on some exiting fact not on any future act.

3.The mistake should be essential to agreement Under sec-20 agreement will be void only
if it was based on some exiting & essential fact. The words “essential facts” used in sec-20
not defined neither in sec-20 nor in Contract Act. These words depends upon each & every
fact & circumstances but the following facts always consider as essential fact-

a)Fact regarding identification of parties

b)Facts regarding subjects matter
c)Facts regarding nature of transaction

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Exception of section 20- According to explanation of sec-20 “an erroneous opinion as to
the value of the thing which forms the subject-matter of the agreement, is not to be deemed a
mistake as to a matter of fact.”

Mistake of Law & its Effect- According to sec-21 “A contract is not voidable because it
was caused by a mistake as to any law in force in India”

Example- A and B make a contract grounded on the erroneous belief that a particular debt is
barred by the Indian Law of Limitation; the contract is not voidable."

________________

Ques-Describe the law relating to privity of contract & privity of consideration with
relevant cases.or

“Only parties to contract can sue or can be sued”-Discuss with relevant cases and
exceptions.

Ans-The doctrine of privity in contract law provides that a contract cannot confer rights or impose
obligations arising under it on any person or agent except the parties to it.
This seems to make adequate sense, in that only parties to contracts should be able to sue to
enforce their rights or claim damages as such. However the doctrine has proven problematic due to
its implications upon contracts made for the benefit of third parties who are unable to enforce the
obligations of the contracting parties.

English Law- Under English law, there privity of consideration is well recognized – consideration
must move from the promisee and the promisee only. In Dutton vs. Poole (1677) 83 LR523 X
was prepared to cut down timber on his estate to provide a marriage portion to his daughter, Y. His
son, Z, promised to give a certain sum to his sister on her marriage if X did not cut down the
timber. When Z failed to pay the amount, Y sued him for the amount. The suit was held
maintainable on grounds of the close relationship between X and Y as father and child; the
relationship made Y a party to the consideration though if she was a stranger to the contract.
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English law recognizes the rule of ‘privity of contract’. Thus, a contract cannot be enforced by a
person who is not a party to it even if the contract is made for his benefit. A stranger to the
contract cannot claim any rights under it.

The doctrine was introduced in 1861 though Tweddle vs. Atkinson (1861) 1 B&S 393. The father
and father-in-law of a groom agreed in writing to pay the groom a certain sum of money.
However, the contracting parties died without having made their share of the specified payment.
The groom sued the executors of his father-in-law for the payment of the amount due. The
principle of near relationship of the contracting parties (as in Dutton vs. Poole case) was held not
applicable. The groom was not allowed to sue because he was a stranger to the contract though the
contract sought to benefit him.

In Beswick vs. Beswick (1960) 3 All ER 1 CA, a man transferred his business to his nephew on
the condition that the latter maintain the man till his death and his widow thereafter. After the
death of the man, the nephew did not keep up his end of the bargain and the widow sued him. It
was held that the widow was suing not only as beneficiary under the contract but also as the heir of
her deceased husband who was a party to the contract.

Indian Law-There is no provision in the Indian Contract Act, 1872 either for or against the rule of
‘privity of contract. Section 2(d) of the Act says that ” 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”

It is clear from this section that the consideration for a contract can proceed from any person and
not necessarily the parties to the contract. A promise is enforceable if there is some consideration
for it and it is quite immaterial whether it moves from the promisee or any other person. However
there is no specific provision in the Act which either for or against the Doctrine of Privity of
Contact. It is through a series of case laws that the Doctrine has evolved.

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In the case of Jamna Das vs. Ram Avtar, (1911) 30 IA 7 X mortgaged some property to Y and
then sold it to Z who agreed with X to pay the mortgage debt to Y. Y sued Z for the recovery of
the mortgage money. It was held that Y could not succeed as he was not party to the agreement
between X and Z.

In M.S. Chacko vs. State Bank of Travancore (1969) 2 SCC 343X Bank was indebted to the
State Bank of Travancore under an overdraft. A was the manager of the said X Bank and his father
–B, had guaranteed the repayment of the overdraft. B gifted his properties to the members of his
family. The gift deed provided that any liability under the guarantee should be met by A either
from the bank or from the share of the property gifted to him. The State Bank of Traven core
sought to hold a liable on the basis of the gift deed. It was held that the State was not a party to the
deed and could not enforce it.

Exceptions to the ‘Privity Rule’

A person who is not a party to a contract may sue upon it in the following cases:

1.Trust or Charge- Where a trust is created for the benefit of a person, he can sue upon the
agreement to create the trust even if he is not a party to it.

In case of, the father and father-in-law of X, entered into an agreement where for the consideration
of X marrying Y, the father in law would pay her Rs 500 per month for perpetuity as betel leaf
expenses. Certain immovable property was specifically charged for the payment of these expenses.
After marriage, X and Y separated. X bought a suit for the recovery of arrears of annuity. It was
held that X could enforce the promise in her favour and that she was claiming as beneficiary under
such settlement to provide for her.

In the case of Baksh Singh vs. Jang Bahadur, AIR 1938 PC 245 X was appointed successor by
his father and put in possession of his estate. In consideration, X agreed with the father to pay a
certain sum of money and property a – illegitimate son of his father upon on his attaining majority.

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When A asked for his share upon attaining majority, X refused. It was held that a trust was created
in favour of A for a specific amount and property and the suit was maintainable.

2.Family Arrangement- If a contract under a family arrangement is intended to secure a benefit to

third party, he may sue in his own right as a beneficiary.

In Rose Fernandez vs. Joseph Gonsalves ILR (1924) 48 Bom 673 X entered into an agreement
for his daughter’s marriage to A. It was held that the girl could sue A for damages for breach of
the promise of marriage. A’s plea that she was not a party to the agreement did not hold ground.
Similarly, in the case of Rakhmanbai, there was provision made for the marriage expenses of a
female member of a Joint Hindu Family. When partition of the family property took place, the
woman sued for her marriage expenses. It was held that she was entitled to sue for the same.

3.Acknowledgement or Estoppel- If a contract requires a party to pay a third party and he

acknowledges it to the third party, he will incur a binging obligation. The acknowledgement may
be express or implied

Example- X receives Rs 1000 from Y for paying Z. X acknowledges the receipt of funds to pay
him. Now, Z can sue X for the recovery of the sum.

In Devaraja Urs vs. Ram Krishniah, AIR 1952 Mys. 109 X sold his house to Y and a specific
sum was to be paid to A out of the sale price due from Y. Y made a few payments to A but not the
whole amount. It was held that A could recover the balance because Y had acknowledged his
liability by conduct.

4.Assignment of a Contract A benefit under a contract may be assigned either by an act of the
parties or by operation of law (in cases of death and insolvency) and the assignee can sue upon the
contract for the enforcement of his rights. However, in another case it was held that a mere
nominee, the person for whose benefit the deceased insured his or her life, cannot sue on the
policy because such person is not an assignee.

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5.Covenants running with the land In Tulk vs. Moxhay (1919) 88 LJKB861 it was held that a
person is bound by obligations attached to a land via a contract when he purchases the said land
with the notice that the agreements affecting the land bind him though he was not a party to such
contract or agreement.

 Conclusion-The Act does not specifically provide for the doctrine of Privity of Contract; however
through a series of case laws the doctrine as laid down in Tweddle v Atkinson is now applicable in
India along with various exceptions.

With reference to consideration of a contract the position in India and England are somewhat
different. Under the English law only a party to the contract alone can pay the consideration. If he
doesn’t pay the consideration he becomes a stranger to the contract. Under the Indian Law, it is not
necessary that consideration should be moved from the promisee alone.Even a Stranger can
enforce am contract if the contact was made avowedly for his benefit albeit not a party to the
original contract.

________________

Public Policy- The words public policy is not defined neither in sec-23 nor in Indian
Contract Act. First time we can see these words under sec-23.According to sec-23
Consideration or object of an agreement is unlawful if the court regards it is opposed to public
policy. Generally public policy means some beneficial act for the public. The scope of these
words are very wide and therefore it is not possible to define it in a definite words. In the case
of Richardson v. Mellish "...It is a very unruly horse, and when once you get astride it you
never know where it will carry you."

______________

Ques-Discuss the doctrine of impossibility of the performance of a contract. Or

Define and discuss fully the doctrine of frustration. Or

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A contract to do an act which afterwards becomes impossible or unlawful becomes void.
Discuss. Support your answer with illustrative leading cases. Or

“Frustration may be defined as the premature determination of an agreement between the

parties”. Comment.

Ans-Doctrine of Frustration of Contract Sec-56 is concerned with the impossibility of the

performance of Contract. The impossibility of performance of Contract is way to discharge of
Contract. When it becomes Impossible to perform the Contract then the contract becomes
void and parties to the contract are discharged from the liabilities of performing the Contract
sometimes the Contracts made are impossible to perform at the time it is made. For example,
A enters into an agreement with B that he will bring a dead man to life. This is impossible
act. When the performance of a agreement is impossible since its inception then it is called
initial impossibility. In reality, in such condition because of the parties intention to perform
an impossible act, the agreement entered into between them does not reach up to the stage of
Contract and as a result in such a condition it will be better to say that the agreement entered
into between the parties is void. (First para of sec-56)

There may also arise a second situation when an agreement is possible to perform at the time
of its making but subsequently its performance becomes impossible or illegal due to the
occurrence which happening cannot be prevented by the promisor of certain event. This is
called subsequent impossibility. The contract is void in such a situation also. For example, A
and B contracts to marry each other. Before the time fixed for marriage, A and B contracts to
marry each other. Before the time fixed for marriage, A and B contracts to marry each other.
Before the time fixed for marriage, A goes mad. The contract becomes void. In this situation
both the parties were of sound mind while entering into the contract and thus, contract was
valid at the time of its creation but afterwards A goes mad and so the contract becomes void.
(Second para of sec-56)

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It is to be noted that the doctrine of frustration lies not in the first paragraph of Sec-56 but it is
included in the second paragraph.

Impossibility – its extent- It is important to note that the word “impossibility” is not
confined only to physical or literal or theoretical impossibility and thus, if to do something
promised is possible theoretically but seeing the intentions of the parties it seems to be futile
or impractical to do that act then it shall be treated as impossible to be performed by the
promisor and the promisor shall be discharged from performing that act.

Thus if the basis of contract is destroyed because of the change of circumstances due to
happening of some events and on performing the contract the object of parties can not be
achieved then in such circumstances the performance of contract will be taken as impossible
and the parties will be discharged from the obligation of performance of contract.(Satyabrat
Ghosh v. Mugnee Ram)

This is called the doctrine of frustration in English Law. The Indian Supreme Court has
approved this doctrine in the case of Satyabrat Ghosh v. Mugnee Ram. Para second of
Section 56 of the Indian Contract Act applies in the circumstances of failure of frustration
and lays down Indian Law on this subject.

As stated above that under “impossibility” not only physical or literal impossibility is
included but under it such circumstances are also included when the performance of contract
becomes illegal or worthless or impracticable. But on the ground of difficulities for
performance of the contract or on the ground of more expenses it cannot be said that the
performance of contract are relieved form its performance.

Grounds of Impossibility or Frustration- In the following condition the performance of

contract is deemed impossible and consequently discharged-

1.Death or incapacity of party of contract-If a contract is based on the promisor`s personal

skill or ability, then the promisor is bound to make performance of that contract personally
and if the promisor dies or suffers from illness and due to this he becomes incapable or
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unable to make performance of the contract personally, then contract is discharged and he is
relieved from performances of the contract.

For example, the contract for singing at a concert or writing book or painting a picture or
acting as an actor in a film, etc. is a contract which depends on personal skill or ability or of
the promisor and consequently if the promisor dies or becomes incapable to perform it then
the contract will be discharged and parties will be relieved from the obligation of performing
the contract.(Robinson V Davison)

2.Destruction of subject-matter of the contract- On the destruction of subject matter of the

contract, the contract is frustrated because its performance becomes impossible.
Consequently the parties of the contract are relieved from the obligation of performance of
contract. (Taylor V Coldwell)

3.Non-happening of a particular event-If contract is based on happening of a particular

event and non-happening of that particular event the performance object of the parties can not
be achieved and having regard to their object its performance becomes worthless.The
contract is discharged and parties are relived from performance of contract.Literaly the
performance may not be impossible.For this its is necessary that event is a basis of contract.
(Krell V Henry)

4.Change in law and interference of the Government- If the contract is valid at the time of
its making but later on it becomes invalid by the reason of change in law, then in such a
situation it is deemed that the performance of the contract is not legally possible, and
therefore the contract is frustrated and the parties are relive from performance of it. Thus if
any person makes agreement to sale a land to another person but before execution of sale due
to the change in law he does not remain the owner of the land than the contract shall be
frustrated and the parties of contract shall be relived from its performance. (Metropolitian
Water Board V Dick Kerr & Co.Ltd)

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But it is to be noted that temporary intervention of the government due to which basis of
contract is not destroyed, does not frustrate the contract. (Satyabrat Ghosh v. Mugnee Ram)

5.War- Such contracts which ere made in pre war time among the citizen of the belligerent
states, become suspended during war time and after the war is over, the right and obligations
of parties are revived except the following conditions when contracts after war are not
revived and ceased to exists-
(1) if these contracts give help to enemy
(2) If the contract are of such nature that they can not be suspended.
Limitation-

1)Self induced frustration- For application of the doctrine of frustration, the frustration
should not be induced by any party. This doctrine does not apply if the act or omission due to
which the performance has become impossible must not have been done wilfully with the
object that the contract be frustrated or its performance be made impossible. If the act or
omission has been with a said object the doctrine of frustration can not be applied to
discharge the party from the obligation to perform the contract. (Maritime National fish
Ltd. V Dean Trawlers Ltd.)
2)Executed contract- The principle of frustration applies to executory contract and not to the
executed contract. The executory contract means such contract any part of which remains to
be performed. Executed contract means that contract no part of which remains to be
performed i.e which is fully executed, like contract of lease.
3)Contract being illegal due to the event which promisor could prevent-It has been made
clear in the second paragraph of sec-56 that if performance of contract is possible at the time
of creation of contract but after its performance becomes impossible or unlawful due to the
happening of some events which cannot be prevented by the promisor then the contract will
be void. If the happening of some events could be prevented by the promisor then he cannot
protect himself from the consequence of non-performance of contract and thus he will be
liable for the breach of contract.

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4)Commercial Difficulty-Mere commercial difficulty (i.e difficulty in finding the goods
which are to be supplied under the contract or increase in the prices of the goods to be
supplied or increase in the cost of the work etc.) is not sufficient to hold the contract,
frustrated or worthless.(Alopi Prasad V Union of India)

Consequences of frustration of contract- When the performance of contract becomes

impossible or unlawful, it is held to be frustrated and parties are discharged from the
obligation from performing it. However, if before the contract being frustrated any money is
given then the money will be refunded to the party which has been given it under Section 65.
_______________

_____________

Ques-State the principle according to which damages for the breach of contract are
assessed. Or

What are the rules regarding the measurement of damages in case of breach of contract?
Explain your answer with the help of leading cases.

Ans-Damages in case of Breach of contract- (Section 73-75)

Damages mean monetary compensation payable by the defaulting party to the aggrieved
party in the event of the breach of a contract. The object of providing damages is to put the
aggrieved party in the same position, so far as the money can do, in which he would have
been, had the contract been performed. The provision relating to the damages may be
discussed under the following headings.
Unliquidated Damages (Sec-73)
Sec-75 applies when parties of agreement have not specified or stated in the contract as to
how much amount will be given to the other party committing the breach. Thus when parties

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have not mentioned in the agreement that in case of committed the breach of contract how
much amount shall be payable by the parties who has broken the contract.
The provision of sec-73 is as follows: - When a contract has been broken, the party who
suffers by such breach is entitled to receive, from the party who has broken the contract,
compensation for any loss or damage caused to him thereby, which naturally arose in the
usual course of things from such breach, or which the parties knew, when they made the
contract, to be likely to result from the breach of it.
Compensation for failure to discharge obligation resembling those created by contract.
When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had contracted to discharge it and
had broken his contract.
Example-
a) A contract to sell and deliver 50 mounds of saltpeter to B, at a certain price to be paid on
delivery. A breaks his promise. B is entitled to receive from A, by way of compensation, the
sum, if any, by which the contract price falls short of the price for which B might have
obtained 50maunds of saltpeter of like quality at the time when the saltpeter ought the have
been delivered.
b) A hires B’s ship to go to Bombay, and there takes on board, on the first of January, a cargo,
which A is to provide, and to bring it to Calcutta, the freight to be paid when earned. B’s ship
does not go to Bombay, but A has opportunities of procuring suitable conveyance for the
cargo upon terms as advantageous as those on which he had chartered the ship. A avails
himself of those opportunities, but is put to trouble and expense in doing so. A is entitled to
receive compensation from B in respect of such trouble and expense.
The foundation of the claim for damages rests in the celebrated case of Hadley v. Baxendale
In the course of the judgment it was observed:
"Where two parties have made a contract which one of them has broken, the damages which
the other party ought to receive in respect of such breach of contract should be such as may
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fairly and reasonably be considered either arising naturally, ie., according to the usual course
of things from such breach of contract itself, or such as may reasonably be supposed to have
been in the contemplation of both parties at the time they made the contract as the probable
result of the breach of it. Now, if the special circumstances under which the contract was
actually made were communicated by the plaintiffs to the defendants and thus known to both
the parties the damages resulting from the breach of such a contract which they would
reasonably contemplate, would be the amount of injury which would ordinarily follow from a
breach of contract under these special circumstances so known and communicated. But, on
other hand, if these special circumstances were wholly unknown to the party breaking the
contract, he at the most could only be supposed to have had in his contemplation, the amount
of injury which would arise generally and in the great multitude of cases not affected by any
special circumstances from such breach of contract. For, had the special circumstances been.
Known, the parties might have specially provided for the breach 6f contract by special terms
as to damages in that case and of this advantage it would be very unjust. to deprive them.

Types of Damages
a)Ordinary Damages- Damages which arise in the ordinary course of events from the
breach of contract are called ordinary damages. These damages constitute the direct loss
suffered by the aggrieved party. They are estimated on the basis of circumstances prevailing
on the date of the breach of the contract. Subsequent circumstances tending to change the
quantum of damages are ignored.
Example: X agrees to sell to Y 100 quintals of Kalyan wheat at Rs. 335 per quintal, the price
to be paid at the time of delivery. The price of wheat rises to Rs. 350 per quintal and X
refuses to sell the wheat. Y can claim damages of Rs. 1,500 i.e. at the rate of Rs. 15 per
quintal.
b)Special Damages-Special damages are those which result from a breach of contract under
some special circumstances. If special loss is likely to be sustained as a result of the breach,
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this should be communicated to the other party; otherwise special damages will not be
awarded. Thus, these damages do not directly arise due to a breach of contract, i.e., remote or
indirect loss. Such damages can be claimed, if both the parties reasonably contemplated or
expected that such damage will arise. For example, a taxi driver gave his taxi for repair to a
mechanic informing him that unreasonable delays will result in loss of income of Rs 80 per
day. The mechanic unreasonably delays the repair of the taxi. The taxi driver is entitled to
recover loss of income at the rate of Rs. 80 per day.
c)Vindictive or Exemplary Damages or Punitive Damages- These damages are the
exceptions to the rule that damages are not to be in the nature of punishment, but only
compensation for the loss sustained. These damages will be awarded:

 In suit for breach of promise of marriage and the amount will depend upon the extent of
injury to the lady's feeling,

 In suit against bank for wrongfully dishonoring customer's cheque. The customer, through he
has sustained no pecuniary damage, may recover substantial damage for injury to his credit.
d)Nominal Damages-These damages are quite small in amount, e.g., a rupee. They are never
granted by way of compensation for the loss. In such cases, usually the actual loss is very
negligible. They are awarded simply to recognize the right of the party to claim damages for
the breach of the contract. The Delhi High Court, in a recent case, had held that no damages
can be allowed under section 73 of the Contract Act, unless the aggrieved party has suffered
some loss. The facts of the case are being given in the following illustration.
Liquidated Damages (Section 74)
Sec-74 provides that for compensation in that circumstance when amount of compensation
has been stated in those circumstances when amount of compensation has been stated in the
contract by the parties.
According to sec-74 “When a contract has been broken, if a sum is named in the contract as
the amount to be paid in case of such breach, or if the contract contains any other stipulation
by way of penalty, the party complaining of the breach is entitled, whether or not actual
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damage or loss is proved to have been caused thereby, to receive from the party who has
broken the contract reasonable compensation not exceeding the amount so named or, as the
case may be, the penalty stipulated for.”
Explanation — A stipulation for increased interest from the date of default may be a
stipulation by way of penalty.
Party rightfully rescinding contract, entitled to compensation (Sec-75)-A person who
rightfully rescinds a contract is entitled to compensation for any damage which he has
sustained through the non-fulfillment of the contract.
Example-"A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for
two nights in every week during the next two months, and B engages to pay her 100 rupees
for each night’s performance. On the sixth night, A willfully absents herself from the theatre,
and B, in consequence, rescinds the contracts. B is entitled to claim compensation for the
damage which he has sustained through the non-fulfillment of the contract."

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CONTRACT-Ist
Sunit Sir

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