Question No.

1: Who is competent to contract Discuss the law relating to  minor’s agreement in

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

i) Who is major.
ii) Who is of sound mind.
      It is evident that minor’s and unsound mind person cannot make a contract. A Major person
means who has attained the age of 18 years.  The age of majority has been decided by Indian
majority act 1875.  In case of guardian appointed by the court, the age shall be 21 years.
                  “ An agreement made by a minor is void.”, from the above statement we find that the
minor is not competent to contract.  Indian contract act is silent about whether it will be void or
voidable up to 1903.  But it is decided by the Court that these are void.  Agreement by a minor is
void-ab-initio, such contract cannot be enforced by law.  Further the minor cannot authorise any
other person to do a contract.
Case Mohiri Bibi vs Dharamdass Ghosh (1903)   A minor Mr. Dharamdass Ghosh executed a
mortgage documents for Rs.20,000.00 in favour of a money lender Sh. Brahmo Dutt.  The
money lender actually paid Rs.8,000.00 to the minor.  It is important that before this transaction
the guardian of the minor informed the Attorney of Money lender that he (Dharamdass Ghosh) is
minor. Later on a suit was instituted by the minor Dharmadass Ghosh against the money lender
Sh. Brahamo dutt with the intention that the mortgage be set aside.  This suit was opposed by
Money lender by saying that the above contract being voidable, he has the right to receive the
amount of the loan under section 64 and 65 of Contract Act i.e. minor is bound to return back the
amount. 
                 Privy council held that,“ the contract is void ab-initio  which cannot be enforced.” It
was also held that the minor could not be asked to repay the loan taken by him.  It was further
held that law of estoppels cannot be applied against the minor Shri Dharmodas Ghosh being mis-
stated falsely his age because he was minor at the time of the agreement and the agreement was
void.  The law of estoppels as stand in section 115 of Indian Evidence Act was not applicable to
the present case as the plaintiff was minor at the time of making agreement, this fact was also
known to the agent of Brahmo Dutt defendant.  Under Specific Relief Act 1877 Section 38 and
41 applies where party had the knowledge of minority age gets restitute degree.  
                 A new concept of beneficial has come into existence now.  It has been held in various
cases.  A minor is bound for the beneficial contract.  The beneficial contract are those contracts
which are for the benefit of minor.  The first case was  S.Subramanyam v/s Subha Roy-1948 - In
this case transfer of inherited property of 
a minor affected by his guardian to pay off an in-herited debt was binding on him for his benefit.
Here is a list of beneficial contract 
i) Contract of Insurance Such contracts are in the benefit of minors.
ii) Contract to purchase the immoveable property Such contract are valid.
iii) Contract of service - These are for the benefit for the monors
iv) Contract of apprentice ship  Training period of any minor who is taking training from any
person, because of the training minor will case his livelihood. It is for his benefit and mono is
liable to compensate hat person.
v) Contract of Marriage   When guardian made an agreement for the marriage of the minor then
another party cannot enforce it, but minor can enforce it.  If agreement is made jointly by
guardian and minor, it can be enforced again on majority age.
vi) Contract of Necessities-  Under section 68 of the Contract Act-1872, minor is also liable for
necessaries.  Necessaries means the basic things of the life.  These are mainly,  ROTI – KAPRA-
AUR MAKAAN. If any person supplied necessaries to minor then the minor is liable o
compensate the supplier. A case Chapple  vs  Cooper   The court held that necessaries are not
only food, shelter, clothes but also education or religious and any such things which are
necessary for life, comes under the definition of necessaries. The following two conditions are
necessary for liable 
1. The supply must not be more than sufficient.
2. The supply must be according to the standard of minor.
Case  PETRESS   VS  FLEMING
The supply of a watch to a minor whose study was considered as the necessity because to have a
watch for graduate person is his necessity.
RATIFICATION OF THE MINOR’S AGREEMENT  
A  minor’s agreement being void ab-initio, it is incapable of being validated a subsequent
ratification after the minor has attained the age of majority.  Here is minor accepts the contract in
some terms is entered during minority then also he is not liable.  If a minor takes 2000.00 in
minority and Rs.3000- after getting majority age and said major give back Rs.5000- then this is
valid and with consideration.  After getting majority age if minor uses his option to be a partner,
he will be bound for all the responsibilities of minority period, which are against the firm. 
                            CONTRACT BY MINOR GUARDIANS 
1. If the agreement is on behalf of minor done by guardian.
2. With in his Power.
3. Guardian is capable to enter into contract.
4. The agreement will be in the interest of minor.
                         A case of Raj Rani  vs Prem - Father agreed with the Director of Film, and
according to this agreement Director of Film will give a role to Indrani. It was held void because
no consideration was therein.  It this agreement is with the daughter then it is void abs-intro.  If it
is with his father then it has no value even to think over it.
                               DOCTRINE OF RESTITUTION 
Restitution means if an agreement is declared void, benefit should be returned.  Under section 64
& 65 of contract Act, that section 68 is applies only on voidable agreements, Section 56 is
applies on the agreement which were valid at the time of formation but due to some
circumstances(as under sec.56) it becomes void. Under the equitable doctrine of restitution minor
has to restore back the benefit so received by him the exact things but it is applicable in case of
goods and property not in the case of money. Restitution stop where repayments begins. 
A case of Leslie vs Sheill- (1914) - It was held by the court of Appeal that the money could not
be recovered.  If there were allowed that would amounts to enforcing the agreement to repay
loan, which is void under Inflants Relief Act-1874.
Section 39(3) specific Relief Act 1877 If the court thinks he may pass an order of restitution in
any case, now a question arises whether he person did not know about the age of minor.  If minor
is also not know his age.  In this stage plaintiff does not get compensation.  If respondent
misrepresent his age on this point there are different view of court.
Case  KHARGIL VS LAKHAN SINGH -1928  LAHORE HIGH COURT.  
The court ordered a minor to refund Rs.17500- which he had taken in advance for the sale of
land. When he refused to complete the contract.  The court was of the opinion that still the
Specific Relief Act should apply whether the minor was the plaintiff or the defendant. The
doctrine of restitution should apply whether the minor had taken the goods or money. 
                
Case  Ajudhiya Parsad vs Chandan Lal – 1937
Allahabad High Court refused to following, extended view of restitution and held that a minor
who had taken money by mortgaging his home was not bound to restore the money.  Now
section 33(2)(b) added according to this section, when a plaintiff wants to dissolve the agreement
and says that at the time of agreement he is minor than he can get back all his profits.
DOCTRINE OF ESTOPPELS
According to rules contained in Sec.115 of Indian Evidence Act 1872, if you make a statement
today, which misleads another person, you are not allowed to deny the statement to-marrow
when the question of your liability arises. A question whether a minor who has made a false
representation about his age is stopped from pleading his minority, was raised, but it was not
decided in this case of Mohiri Bibi. Privy Council held that where the party knows about the age
of minor this principle could not apply.  The question arises that whether minor can be stopped
by false representation as to his age is now settled by this case.
                 A Case  Nawab Sadiq Ali Khan vs Bibi Jai Kishori- 1928 
It was held by Privy Council that if a minor makes a contract by fraudulently expressing his age
more than actual then he cannot be stopped as per the rules of estoppels that he was minor at the
time of contract.
                                    INDIAN AND ANGLO LAW  
It is difficult to differentiate between both the law in respect of contract by minor’s but generally
the difference in  both the law is -
1. Contract by minor under Indian law is void ab-initio.
2. It is voidable under English Law, such contract can be declared void on the will of minor.
If the contract is for the benefit or fulfilment of necessity of minor.  Then it shall be binding.
    
 
                                  
Q. No 2:- State the difference between void agreement and illegal agreement 
                                                     OR                                               
 All illegal agreements are void but all void agreement are not illegal. Comments    
Ans- INTRODUCTION  Under section 2(g) of Indian Contract Act 1872, definition of void
agreement has been given and according to it , “ Agreement in not only enforceable by law said
to be void.” For instance, an agreement by a minor has been held to be void.  Section 24 to 30 of
the Indian Contract Act 1872, make a specific mention of agreement which are void. Generally
the following agreements are not enforceable by law. 
i) Whose parties are not competent to do a contract i.e. they are not adult and are unsound mind.
ii) Whose parties do not have free consent i.e. they are under coercion, undue influence fraud &
misappropriation etc.
iii) Whose consideration and object has not been lawful
iv) Which are immoral or against public policies.
v) Which do not create valid (illegal) liabilities between the parties.
vi) Which have been declared as void by the court etc.
All above agreements are void because they cannot be enforced by law.
                                      ILLEGAL- AGREEMENTS  
Illegal agreements are such agreements whose consideration and object are not lawful i.e. they
are illegal.  Such agreements are mentioned in section 23 of the Indian Contract Act 1872.  The
following agreements are considered as illegal-
1. Which are prohibited by Law.
2. Which is of such a nature if followed would defeat the provisions of law.
3. Which is fraudulent.
4. Which is causing injury to body or property of any other person.
5. Which have been declared by the court as immoral or against public policies.
                After the definition of void and illegal agreements we have considered the following
statements -
“ That all illegal agreements are void agreements but all void agreements need not necessarily be
illegal.” It can be adjudged from the following -
i) Illegal agreements are void – ab-initio which cannot be enforced by law at any time whereas
void agreement need not be void-ab-initio, such agreements could become un-enforceable by law
later.
ILLUSTRATION   An agreement takes place between the citizen of India and Pakistan which
was enforceable by law at the time agreement, but later on in the event of war between India &
Pakistan the agreement becomes un-enforceable whereas agreement to pay money by A to B for
illegal intercourse is void ab-initio which cannot be enforced any time.” This shows the illegal
agreements are always void whereas void agreements are not always illegal.
ii) Parties of illegal agreements can be punished whereas the parties of void agreements cannot
be punished.
ILLUSTRATION - An agreement to encourage any woman for prostitution by paying her money
is punishable but an agreement by minor or without consideration is not punishable.  This also
proves the fact that every illegal agreement is void but every void agreement is not illegal
because illegal agreement is of punishable nature whereas void agreement is not.  Void
agreement does not contain the element of illegal agreement whereas illegal agreement contains
the elements of void agreement.
iii) Void agreement cannot be enforced at any time and illegal agreement is also never
enforceable by law.  Hence illegal agreement contains impliedly the element of illegal
agreement.
iv) Illegal agreement are those which are mentioned in Sec. 23 of contract act whereas void
agreements included various other types of agreement, like agreement by minor or unsound mind
persons, agreement without consideration etc.
v) Void agreements include illegal agreements which are not enforceable by law, but illegal
agreements need not contain all types of void agreement.  This shows that all illegal agreements
are void but all void agreements are not illegal.
             DIFFERENCE BETWEEN VOID AGREEMENT & ILLEGAL AGREEMENTS.
  VOID AGREEMENT                                 ILLEGAL AGREEMENT

1. All agreements are not void-ab-initio but become void later due to circumstances 
2 The reason of void agreement could be incompetency of parties, lack of consideration etc.
3 Parties of void agreements are not be punished.
4 Collateral agreement to void agreements can be enforced.
5 The area of void agreement is extremely void. It includes all illegal agreement. 1 Illegal
agreements are void –ab-initio.
2 The reasons of illegal agreement shall be those which are mentioned in sec.23 of the Contract
Act., like prohibited by law. Immoral against public policies, fraudulent etc.
3 Parties of illegal agreement can be punished.
4 Collateral agreement to the illegal agreement can also not be enforced.
5 The area of illegal agreement is comparatively narrow. It does not include all types of void
agreement.

 
Question No 3 : All contracts are agreements but all agreements are not contracts?
                                                        OR
Discuss the rule for the formation of a valid contract when a contract becomes complete?                
Introduction :  - 
i) MULLA  :-  Every agreement or promise enforceable by law is a contract.
ii) SALMOND :-Contract is an agreement creating  defining obligations between parties.
A contract is an agreement enforceable by law. An agreement is the prime stage of the contract.
If agreement is enforceable by law or if agreement is recognised by law then it will become a
contract otherwise not. It is basically based upon British Law because the Contract Act was
passed by British Indian Govt., in 1872.
         To make contract an agreement it is essential that no contract is possible without an
agreement, but we cannot say that all agreements are contracts. Section 2(y) of contract Act says
that, “ Contract is an agreement enforceable by law.” All agreement e.g. to see cinema is not
contract, if offer is accepted then it becomes promise. Promise is followed by consideration then
it becomes agreement and if an agreement is enforceable by law then it becomes CONTRACT,
see below :-
i) Proposal +      acceptance           =              PROMISE
ii) Promise  +      consideration       =             AGREEMENT
iii) Agreement+   Enforceability       =            CONTRACT 
AGREEMENT :-  Agreement 2(e) promise or set of promises forming the consideration with
each other, is an agreement.
PROMISE :-  Promise is an important part of the agreement.  A proposal when accepted
becomes promise.
PROPOSAL/OFFER :- According to section 2(a) when one person signifies to other his
willingness to do or to abstain from doing anything with a view of obtaining the assent of that
offer to such act or abstinence, he is said to make a proposal.
ACCEPTANCE:- According to section 29(b) of contract act when the person to whom the
proposal is made signifies his assent there to the proposal then it is said to be accepted.  A
proposal when accepted becomes promise.
CONSIDERATION :- Section 2(d) of contract act defines consideration. Section 2 says that an
agreement  made without consideration is void unless :-
a) Natural love and affection. Sec.25 of contract act, the parties to the agreement must be
standing in a near relationship to each other. The promise should be made by one party out of
natural love and affection for the other. The promise should be in writing and registered. 
b) Compensation for past voluntary services sec. 25(2) in case Sindha v.Abrahim-1895 Bombay :
The promise to compensate though without consideration is binding because of this exception.
The exception also covers a situation where the promise is for doing something voluntarily”
c) Promise to pay time barred debt: Sec.25(3): The promise must be to pay wholly or in part a
time barred debt i.e. a debt of which the creditor might have enforced payment but for the law for
the limitation of suit. The promise must be in writing and signed by the person to be charged
therewith. Case Gobind Das v. Sarju das-1908, Ganesh Prasad v.Mt. Rambati Bai-1942.
ENFORCEABLE BY LAW :- in Indian Contract Act 2(h) it says that contract is agreement
enforceable by law.  If an agreement is enforceable by law then it is CONTRACT, otherwise
merely an agreement.
To make an agreement a contract in Indian Contract Act section 10, the following conditions
must be fulfilled :-
1. Competent Parties :- Section 11 says, contract should be made with person who must be major
and sound mind not disqualified by law.
2. Free Consent :-  Section 14, says that consent must be free, when it is not caused by coercion,
undue influence under section 16, fraud under section 17, misappropriation under section 18 and
mistake under section 20.                                
3. Lawful consideration & object :- According to section  23, when agreements consideration  or
object are unlawful, they are void.
4. Not expressly declare as void:- The such agreements which are made without consideration or
expressly declared to be void as per section (25) are no contract, these are as under:-
i) Agreement in restrain of marriage section-26.
ii) Agreement in restrain of trade section-27.
iii) Agreement in restrain of legal proceedings section -28.
iv) Agreement which is ambitious and uncertain sec.29.
v) Agreement by way of wages section-30.
vi) Agreement to do an impossible act section-56.
    5.FORMALTIES PERFORMED IF NEEDED BY LAW:- The person by whom the contract
must be performed time and place and performance opportunity of payment.  Thus when these
conditions are fulfilled then an agreement is made contract because these are enforceable by law.
But some agreements are not made contract because they are not enforceable by law. These are :-
1.  Social Agreement :-  When agreements based only social relationship and parties, we cannot
enforce these agreements by law, for example:-
A case Jones v/s Paday
If  ‘ A’ give invitation of dinner to ‘ B ‘ and  ‘ B ‘ accept this but does not go to dinner then’ A‘
suffers damage after this.  But ‘ A ‘ cannot file a sue against ‘ B ‘ because it is Social Agreement
which is not enforceable by law.
FAMILY LAW:- Family law are not made contract as in the case of :
Balfour v/s Balfour:- In this case the defendant who was employed in Govt.,job in Ceylon went
to England with his wife on love.  For health reasons the wife was unable to return to Ceylon.
The husband promised to pay 30 ponds per month to his wife as maintenance for the period she
had to live abart.  The husband failed to pay this amount.  The wife filed a suit against her
husband for this money.  The court held that this agreement is not enforceable by law.
Case : Jones v/s Padavllon :
Where a girl left service to join legal education on the promise of her mother to stand the
expenses.  It was held to be a family matter and not a binding contract. Thus we can say that all
the agreements are not contracts but all the contracts are not agreements.  
A Case  LALMAN V/S GAURI DATT-1913 : The defendant’s nephew absconded from home.
The Plaintiff who was defendant  servant was sent to search for the missing boy. After the
plaintiff had left in search of boy, the defendant issued handbill announcing a reward of
Rs.501.00 to anyone who might find out he boy. The Plaintiff who was ignorant of this reward,
was successful in searching the boy. When he came to know of the reward, which had been
announced in his absence, he brought an action against he defendant to claim this reward. It was
held hat since the Plaintiff was ignorant of the offer of reward, his act of bringing the lost boy did
not amount to the acceptance of he offer, and , therefore, he was not entitled to claim the reward.
If a person has the knowledge of the offer, his acing in accordance with the terms thereof amount
to the acceptance of the same. In such a case, it is immaterial that at the time of accepting the
offer, the acceptor does not intend to claim the reward mentioned in the offer. 
             DIFFERENCE BETWEEN AGREEMENT AND CONTRACT  
        AGREEMENT                                                                       CONTRACT
1. Three important points for                  Two important points                                                                                
for contract
Agreement: i) acceptance                     are i) agreement  ii) enforcement 
ii) Offer iii) and consideration         by law.
2. An agreement could be legal or           2. Agreement in contract to be law-
Illegal.                                                         Ful  and enforceable by law.
3. Agreement may or may not be            3. Contract is enforceable by law.
Enforceable by law.                                4. Area of contract is limited as 
4. Area of agreement is very wide                every agreement can’t become
As it can be any type legal, moral            contract.
Etc. Any agreement even if not             5. In contract the valid liability is  
Enforceable by law remains an                  created between the parties.
Agreement.
5. The certain of valid liability is not          6. Contract requires the
Requires in all agreement like, moral        competency of parties, free 
Religious etc.                                                   Consent, sufficient consi-
6. Every agreement does not requires            duration etc.
Competency of parties, free consent,
Sufficient consideration etc., because
Agreement could be by un-enforceable
Law. 
 
Q. No 4 :- Discuss the meaning of consideration? When the consideration becomes unlawful?
How does the Public Policy Effect he consideration? OR
An Agreement without consideration is void.” Discuss with Exceptions ? OR
Define consideration, Past Consideration, Contract without consideration and consideration by a
person unknown to contract with suitable examples. OR
Explain consideration. In what cases the consideration of an agreement are said to be unlawful
under contract Act.? Illustrate with suitable examples.  
Answer : INTRODUCTION :   The consideration has important place in contract. It is important
part of Contract.  A valid contract requires a consideration.     Agreement without consideration
are void.  The study of consideration in respect of the subject matter is required. 
                  Section 2 (d) of the Indian Contract Act- 1872 defines consideration. It says, “ When
at the desire of the promisor, the promise or any other person has done or abstained from doing
or does or abstains from doing or promises to do or to abstain from doing-something, such act or
abstinence or promise is called a consideration for promise.”
                   In other words when a the desire of one person, another person does sense act or
abstains from doing, then it consideration for the first person.
ILLUSTATION :- ‘A’ purposes ‘B’ to buy his cycle for /rs.1000.00. ‘B’ agrees to buy that cycle
for Rs.1000/-.  Here Rs.1000/- is the consideration for cycle.
According to Pollock :- “ A party does or abstains from doing or promise to do or abstain from
doing something, is a price for which the promise is bought, the promise thus given for value is
enforceable.
According to Auson :- “ Consideration is that which is to be done abstain from doing, to be bear
or promises to do or which the promises abstains from doing in respect of promise or bears it.”
ELEMENS OF CONSIDERATION :- 
I) Consideration to be at the desire of promisor.
II) Consideration can be given by the promise or any other person.
III) Consideration may be past, future or present.
IV) Consideration must be legally adequate and valuable.
V) Consideration must be valid.
A  case : Mirahul Enterprises V/s Mrs. Vijaya Srivastav AIR 2003 : 
Delhi High Court said that a valid agreement requires the consideration to be definite.
In a Case :-Durga Parsad v/s Baldev  The Plaintiff constructed certain shops in a market at the
instance of the Collector of that place. Subsequently the defendants occupied one of the shops in
the market. Since the Plaintiff had spent money for the construction of market, the defendants in
consideration thereof, made a promise to pay the plaintiff commission on the articles sold
through their (defendant) agency in that market.  The plaintiff failed to pay the promised
commission. In an action by the plaintiff to recover the commission, it was  observed that the
consideration for the promise to pay the commission was the construction of the market by the
plaintiff.  Such construction had not been done at the desire of the defendants, but on the order of
the Collector. It was therefore held that since the consideration did not moved at the desire of the
defendants ( Promisors in this case), this did not constitute valid consideration and therefore the
defendants were not liable in respect of the promise made by them.
TYPES OF CONSIDERATION ;- There are three types of consideration which are as under :-
i) Past consideration.
ii) Present consideration.
iii) Future consideration.
Present consideration means such consideration which is paid to the promissory immediately.
Example : ‘A’ offers to ‘B’ to sell  his vehicle for Rs.50,000/-, ‘B’ pays to ‘A’ Rs.50,000/- at that
moment, and ‘A’ gives the possession of vehicle to ‘B’.  This is present consideration.
Past consideration is the consideration for the service or promise performed in past. Example :-
‘A’ at the desire of ‘B’ takes care of the family of ‘B’. After three years ‘B’ promises o ‘A’ that
he shall pay him Rs.10000/- for his services given.  Here, the services provided by ’A’ in the past
to ‘B’ shall be called past consideration. 
Future consideration means such consideration which shall be paid in future.  Example:- ‘A’
promises to sell his house for Rs.75,000/- to ‘B’ on 5th.Feb 2003, and both parties decide that
possession of house shall be delivered on 1st.Dec.2003 and on that day he payment of
Rs.755,000/- shall be made.  This is future consideration, because the contract had originated on
05.02.2003 but its consideration was to be paid on 1st December, 2003.
                             WHEN THE CONSIDERATION IS ILLEGAL  
A valid contract requires the consideration to be valid or legal contract with illegal consideration
is not enforceable. Sec.23 of Contract Act mentions those situations in which the consideration
shall be considered to be illegal. These situations are as under:-
i) When it is prohibited by law.
ii) When it is of such nature that if followed would defeat the provisions of law.
iii) When it is fraudulent.
iv) When it involves injury to the person or property of another.
v) The court regards it as immoral or opposed to public policy.
Consideration forbidden by Law:-Such agreements are void.  An agreement or act forbidden by
law is that which is not permitted by law to be followed or which is against the law. A case: Ram
Sewak v/s Ramcharan : AIR 1982 Allahabad. : The partners of a partnership firm made an
agreement for the concealment of profit for the purpose of deceiving tax. It was held illegal
consideration or an agreement forbidden by law.
Consideration to defeat the provisions of Law:- An agreement with such consideration is also
void, whose purpose is to defeat the provisions of law.  In other words, where an agreement is
done with such consideration that if applied would defeat the provisions of law, then such
consideration and agreement shall be considered void.
ILLUSTRATION : ‘A’ and ‘B’ agrees with the intention that they shall be able to take any
dispute related to a particular subject to the court, even though the limitation for it has been
determined,. This agreement defeats the provisions of Limitation Act, and is therefore void.
 IN Nutan Kumar v/s Additional District Judge, Banda (AIR 1994 Allahabad):  Allahabad High
Court held that such an agreement between landowner and tenant which is inconsistent to the
provision of Rent control Act shall be void.  Such agreements cannot be enforced through court.
Fraudulent Consideration: Agreement with such consideration which are fraudulent, are void.
For example: A, B and C agrees for the partition among themselves of the profits obtained or to
be obtained by fraud. Agreement is void because its object and consideration is against law.
Consideration to cause injury to Body or property of any other person:- Such agreement is void
whose object and consideration are illegal owing to be causing injury to body or property of any
other person. A case : K.Abdul `Qader v/s The Plantation Corporation of Kerla. AIR 1983: Kerla
High Court said that a contract made with the object to cause injury to body or property of any
other person, is void and unenforceable.
Immoral and Opposed to Public Policy:-  Agreement with consideration being immoral and
opposed to public policy are void and unenforceable.  Several decisions of court in his respect
have been made.  Several judicial decisions have considered following object and consideration
to be immoral and opposed to public policy :-
a) Agreement to lent house on rent for prostitution.  
b) Agreement to lent vehicle to be used for prostitution.
c) Agreement to provide money to have cohabitation with the wife of any other person.
d) Consideration of earlier cohabitation.
e) Agreement to give consideration for future illegal cohabitation.
A  case  of Subhash Chandra v/s Narbada Bai (AIR- 1982 of MP)   A man made agreement for
maintenance with a woman.  It was the result of an earlier cohabitation with a woman with that
man.  Court held it to be void and unenforceable.  Agreement with consideration being opposed
to public policy are also void.  The public policy does not have any universal definition, but
several judicial decisions have considered following things to be against public policy  :-
I) Insurance conscience.
II) Obstruction in freedom.
III) Elements creating restrain to trade or natural or legal rights.
IV) Against good conduct etc.
   The following agreements have been considered to be against public policy :
a) Agreement to cause injury to public service.
b) Transfer of decree for the purpose of avoiding the effect of decree to other creditors.
c) Agreement to pay money in return of marriage.
d) Agreement to bribe for adoption etc..
A case : SBI v/s Aditya Finance and Leasing co. – 1999 Delhi)  It was held that the land spotted
or embarked for residential purposes is used for commercial purposes by an agreement which
shall be void by being against public policy. Thus the agreement with such consideration that
adversely effect over the interest of common people or which are not proper in respect of public
shall unenforceable by being void.
AGREEMENT WITHOUT CONSIDERATION ARE VOID
As we have seen above that Consideration is essential for a valid contract. Agreement without
consideration cannot be imagined.  Section 25 of Indian Contract Act-1872 clearly provides that
“ Agreement without consideration is void.”
ILLUSSTRRATION :- ‘A’ promises ‘B’ to pay him Rs.2000/- without any consideration.  This
is void agreement.
Exceptions :-   But the above rule have some exceptions also i.e. an agreement without
consideration in following situation is valid  and enforceable :-
1. Agreement Under Natural Love and Affection:- Agreement without consideration due to
Natural Love and Affection are valid and enforceable provided that they are written and
registered.
ILUSTRATION : ‘A’ promise to pay his son ‘B’ a sum of Rs. 5000.00 under the Natural Love
and Affection. A writes his promise toward B and gets it registered. This is contract. Natural love
and affection includes relation between father-son husband-wife, brothers etc.  Such relations do
not require consideration for a valid agreement.  A case : Manali Singhal V/s Ravi Singhal-1999-
Delhi), It was said by Delhi High Court that where any family agreement in relation to the
amount of maintenance has been made for love and affection, family peace, harmony and
satisfaction there consideration shall not be required.  Such agreement shall be enforceable by
Court.
2. Agreement to pay compensation for past service  Where any person without the knowledge of
promisor or otherwise than his prayer, does any service or has done service and the promisor
promise to compensate him, there consideration shall not be required, with the following thing
which are necessary :-
i) An act has been voluntarily done already for the promisor
ii) At the time of commission of that act, promisor was competent to contract.
ILLUSTRATION  ‘A’ at the desire of ‘B’ does service for the relatives of ‘B’. Later ‘B’ agrees
to pay Rs.1000/- to ‘A’ for the service. This agreement been result of earlier service is valid and
enforceable.  Such consideration is also called past consideration.
3.Agreement for payment of Time Barred Debt.  Such an agreement for payment of a debt barred
by time under limitation act, is considered to be lawful because a time barred debt is also a good
consideration as the debt remains ever after the completion of time of recovery. A case: Tulsiram
v/s Samey Singh AIR-1981 Delhi  Delhi High Court held that an agreement for the payment of a
time barred debt can be made under Se.25(3) but it requires that the agreement shall mention that
consent has been given  for the payment of time barred debt.
 

UNIT – III
Question No. 5. Discuss contingent contract. Elaborate with suitable illustrations. How are such
contract is different from Agreements?
 Answer :- INTRODUCTION :  Contingent contract is special types of contract. Generally in
most contracts rights of parties are enforced immediately after the execution of contract, but
sometimes there are contracts whose enforcement depends upon happening or non-happening of
an event.
DEFINITION :-
Section 31 of Indian Contract Act  1872 defines that Contingent Contract according to it : “A
contingent contract is a contract to do or not to do something, if some event, collateral to such
contract does or does not happen.” 
ILLUSTRATION :-
‘ A’ contracts with ‘B’ that if the house of ‘B’ destroyed by fire then he shall pay Rs.10,000/- to
B.  It is contingent contract because the enforcement of contract depends on the happening or
non happening of an event.
    Thus the contingent contract depends upon the happening of a uncertain event.  If the event is
of certain nature, then it shall not be contingent contract.
ELEMENTS OF CONTINGENT CONTRACT
These are as under:-
1. The contingent contract depends upon the happening or non-happening of an event.
2. Such event shall be of uncertain nature i.e. it may or may not be happen.
3. Such event is not the part of mutual promises of parties.
4. Happening or non happening of the event does not depend on the will of the parties.
5. The future uncertain even is collateral to the main contract.
In case : Ranchoddas V/s Nathmal Hirachand and company 1951 (Bombay)
In this case the court decided and did not accepted the contention and said that reaching of cloth
to India was a method of delivery.  This cannot be said contingent contract.
                            NATURE OF CONTINGENT CONTRACT:-
Section 32 to 36 of Act mention that various forms of contingent contract like:-
i) According to Section 32 . Contingent contract to do or not to do be anything if an uncertain
event happens cannot be enforced by law unless and until that event has happened. If the event
becomes impossible such contract becomes void.
ILLUSTRATION :-   A contract to pay B a sum of money when B marries C.  C dies without
being married to B. The contract becomes void.
ii) Section 33 says  : contingent contract to do or not to do anything, if an Uncertain future even
does not happens can be enforced by law when the happening of that event becomes impossible.
ILLUSTRATION :- A agrees to pay to B a sum money if a certain ship does not return. The ship
is sunk. The contract can be enforced when the ship sinks.
iii) Section 34 says : that if future event on which a contract is contingent is the way in which a
person will act at an unspecified time, the event shall be considered to become impossible when
such person does anything which renders it impossible that he should so act within any definite
time, or otherwise than under further contingencies.
ILLUSTRATION :- A agrees to pay B a sum of money if B marries C.  C marries D.  The
marriage of B to C must now be considered impossible, though it is possible that D may die, and
that C may afterwards marry B .
iv) Section 35 says that :- contingent contacts to do or not to do anything if a special uncertain
event happens within as fixed time become void if, the expiration of the time fixed, such event
has snot happened, or if, before the time fixed, such becomes impossible.
ILLUSTRATION :- A promises to B to pay a sum of money if a certain ship returns within a
year. The contract may be enforced if the ship returns within a year, and becomes void if the ship
is burnt within the year.
v) Section 36 says that : contingent contract to do or not to do anything if an impossible event
happens, are void, whether the impossibility of the event is known or not to the parties to the
agreements at the time when it is made.
ILLUSTRATION: - A agrees to B, a sum or Rs.1000.00, if two straight lines should on close a
space.  The agreement is void.
Contingency dependent on the behaviour of the parties. It is important that if the performance of
the promise depends on the mere will and pleasure of the promisor, it is no promise at all but
promise to pay what a third party decide is valid promise.
        DIFFERENCE BETWEEN CONTINGENT CONTRACT & WAGER CONTRACT 
Contingent Contract                                              Wager contract
1. All contingent contract are        All wager contract have the element of
Not wager.                                    Contingent contract.
2. The interest of the parties         The interest of the parties is vested upon
Is vested on the happening        wining or losing sum of money.
Or non-happening of event.
3. The future event is collateral     The future event is the base of decision.
To the contract.
4. Only one party shall give             Parties give reciprocal promises.
Promise.
5. Win or loss of the parties is         One party has to win and other has to 
Not important.                                Lose.
6. Contingent contract are               Wager contract are void with few 
Valid.                                                Exceptions.

 
Question No.6 :  Define Fruad? Distinguish between Fraud and Misrepresentation. Whether
silence amounts to fraud?    
OR
 2. What are the factors which vitiate consent and make the Agreement                                                                  
Void or voidable?  
OR
3. What is consent? When is consent said to be free under Indian Contract Act?    
OR
Distinguish between coercion and undue influence.

Answer : INTRODUCTION :-   
An agreement becomes contract if it fulfils the conditions of /section 10. According to sec. 10 for
an agreement becomes contract with law full object and consideration.  It means free consent is
not free then the contract is invalid.  But it is voidable not void. Voidable means a contract which
can be declared void by the court at the option of other party.
 under sec.2(1). Section 198, 10(a) also deines the term voidable.
Section 13 : Consent : According to Indian Contract Act 1872:-  “ Two or more persons are said
to consent when they agree upon something in the same sense.” 
In the above definition it shows that (i) At least two persons are must (ii) for the same thing and
same sense. 
ILLUSTRATION :  At least two persons are must:- A agrees to sell his house to B for
Rs.50,000/- B accepts this proposal.
For same thing and same sense:- ‘ A’ have two cars; one Maruti and the other is Fiat. He agree to
sell to B.  A might be thinking to sell Maruti car while B might be thinking to purchase fiat car.
In this example A & B do not agree upon the same thing in the same sense, hence there is snot
contract in this case.
A Free Consent :- under sec.14 Consent: is said to be free when it not caused by : i)  Coercion
Sec. 5.15 (ii) Undue influence sec..16 (iii) Fraud sec..17  (iv)         Misrepresentation .18 (v)
Mistake 5.20.
In other words consent is free if it is not affected by coercion, undue influence, fraud  and
misrepresentation. In case of consent taken by mistake the consent shall be void.
1.                                     COERCION  ( 5.15) :
Coercion means by force or compulsion. Coercion is a method of doing consent. This method is
against the law.  When any person by doing an illegal act gets the consent of any other person on
an agreement it is called coercion. It means:
Explanation : It is immaterial whether the IPC-1860 is or is not in force in the place where the
coercion is employed.
(a) Threading to commit any act forbidden by IPC:   If consent obtained by threat of committing
act forbidden by SC it called is coercion. Example : A kidnapped a son of B, A says you give me
your scooter in Rs.50/- then I will give you your child. B agreed, it is a coercion. Case : Masjidi
v/s Ashiya 1880: It was held that it cannot be simple upon these facts that the consent of such
person was caused by coercion.
Case:- Raganayaswami V/s Alyar Sette A Madrasi man died leaving behind a widow.  The
relative of the dead threaded the widow to adopt a boy otherwise they will not allow her to
remove the dead body of her husband.  The widow adopted the boy and subsequently applied to
cancel the adoption.  The court held the adoption is not valid.
    
      Muthiah Chettiar V/s Karupan Chettiar
A was an agent of B.  A at the end of his services denied to give account to other agent. He said
to B to release him from liabilities otherwise he shall not give the account book. It held by
coercion.
(b) Threat to commit suicide: It comes under sec.15.
Case: Ammiraja V/s Seshamma
A person held out a threat to commit suicide to his son and wife, if they refused to execute a
release deed in his favour.  They executed the deed in his favour. It was held by the court that
this coercion. According to old filled J threat to commit suicide no body can be punishable under
IPC, and suicide itself not a crime under IPC, because after suicide no body can be punished.
Only attempt to commit suicide is punishable.
(c) Un lawful detaining of any property : According to sec.15 coercion could also be caused by
unlawful detaining or threatening to detain any property to the prejudice of any person
whatsoever with the intention of causing any person to enter into an agreement. Property may be
moveable or immovable. If one person detains unlawfully, it is coercion.
(d) To Prejudice of a person : Coercion may be against a party as well as against any person.
(e) Legal Threatening not coercion:- A commits accident with B.  B says you give me Rs.500
otherwise I shall sue against you. It is not coercion.
(f) Place of coercion: coercion may be committed at any place. It may also be committed even
outside India.
(g) Burden of proof on Plaintiff:
(h) Remedies: Voidable or restitution.8
Andhra Sugar Ltd. v/s State of Andhra Pradesh – 1968 : It was held that the agreement cannot be
said to be by lack of free consent.
2. UNDUE INFLUENCE : SEC.( 16)
Undue influence means unreasonable influence or improper or not right influence. When consent
is taken by way of unreasonable influence or improper way then it is not free. The consent can be
declared void on this ground. Section 16 says that when any person has such position over the
other person as to dominate his will, the person who dominates the will of the other must have
superiority over the other. This is done under the following conditions. 
1. Relationship superior or inferior may be real or apparent relationship as 
(a) Money lender or borrower.
(b) Income Tax Officer and shopkeeper.
(c) Income Tax Officer and assessee.
(d) Police and thief.
Case :- J.R.Bhatt v/s State of U.P. Pt. Was employed in the court of UP.  He wants a leave.
Registrar said leave can be granted on the condition if you will not come in service after the end
of leave. He wrote it. It was held by servant under undue reference influence.
(B) Fiduciary Relationship  :- 1. Advocate & Client. 2. Master & Servant. 3. Guru and chela    4.
Father and children  5. Teacher & student. 6.Doctor & Patient. 7. Creditor and Debtor.  8.
Trustier and benefishes. Case :  Manu Singh v/s Umadat Pandey : An old Hindu woman gifted
the whole property to her religious guru to get peace in heaven. It held undue influence .
 Parda-Nashin women : contract with parda-nashin women is presumed to have been induced by
undue influence. She can avoid the contract unless he other party can show that it was her
intelligent and voluntary act, A case : Ismiel v/s Amir Bibi 1902 : It was held that the women
does not become parda-nashin women.
Mental sickness:-If one party is not in position to think his interest due to mental sickness. Case :
Rani Annpurna v/s Swami Nath. A widow who did not have any mental fitness went to creditor,
she got Rs.1500/- or 100% interest. It was held voidable because she was not in a position to give
free consent. The Party attempted to influence the will of other party.   A state of mental fear is
not undue influence. If a party is in a position to influence other’s will it is not undue influence
whether other party gets damaged.
2. Real Damage :- If no damage is done to the Pt. Then it will not be undue influence.
Remedies : 1. Voidable u/s 19.2. Restitution u/s 64 3.damages u/s 73.  The court under section 19
can declare the whole agreement as void or the court may be declared it void on reasonable
condition.
Burden of Proof. : Pt. Will have to prove that the def. Was in a position to dominate the will of
the pt. Thus if such relationship is proved by the pt. The court will presume the undue influence.
Now burden to disprove this presumption comes on defendant, that there was no undue
influence. He should prove that he did not try to dominate other’ will.
•  He paid sufficient consideration to aggrieved.
• That the plaintiff had opportunity to take free advice. 
• Effect of Undue Influence:- Section 19A says when consent to an agreement is caused by
undue influence, the agreement is a contract, voidable at the option  of the party whose consent
was so caused.
                                           FRAUD UNDER SECTION (17):-
 Section 17 defines that “ Fraud “ includes any of the following act committed by a party to a
contract or with his connivance or by his agent with intent to deceive another party there or his
agent or to include him, to enter into the contract( whenever a person obtains any material
advantage from another by unfair and wrongful means.  It is said that he has committed fraud.
Fraud is the wilful representation made by a party to contract with the intent to deceive the other
party or to induce such party to enter into a contract. 
ESSENTIALS OF FRAUD :- (1) To give a suggestion that a fact is true, while it not true: (false
suggestion) such suggestion, which is not true.  
Case : Mithu Lal v/s LIC of India :- In this case the court held that Devlata committed fraud.
i) Active concealment of a fact which is in the knowledge of the person: Every body has the duty
to disclose the defects in the material or the property while entering to the contract, if it is not
done then the agreement is based on fraud.
Example :- ‘A’ agrees to transfer his land to B but the land is already mortgaged  to C, A does
not disclose this fact. It is a fraud.
ii) To do such promise without intention of perform(false promise )   
iii) Any other act fitted to deceive.
iv) Any act which is declared by law as fraudulent : such as in slavery act for companies it has
been specified that certain type of transfer of property is fraud.
v) Fraud committed  by partner or agent of the firm: such as River silver mining v/s Smith AIR
1869: The court held that this act was done by the Agent of company u/s liabe.
vi) There must be a false representation i.e. A shopkeeper tells B that these goods are fresh. It is
A option to reject it.  It will not be fraud.
vii) Representation must have been made by the Party or by his agent: The representation must
have been made knowing that it is false without knowing its truth. In both cases it will be fraud.
viii) The representative must have been an intention to deceive.
ix) Mere silence is no fraud: under sec.17: A contracting party is not obliged to disclose each and
everything to the other party. Merely because a person does not disclose the defects in the goods
sold by him, there is no fraud. Shri Krishan v/s Kurukshetra University- 1976 : It was held that
there was no fraud by the candidate and the University has no power to withdraw the candidature
of the candidate on that account.
x) There are two exceptional cases where mere silence may amount to fraud :-
1. Duty to speak : when the circumstances of the case are such that, regard being had to them, it
is the duty of the person keeping silence to speak. Keeping silence in such case amounts to fraud.
Case : Srinivasa Pillai v/s LIC of India, AIR-1977 : It was held that the claim is not maintainable
against the insured corporation.
2. Duty to disclose changes :- If a statement is true when made, but subsequently becomes false
by the change of circumstances, there is duty to disclose the change before the other party acts
upon it.
xi)       Ratification : When even after the knowledge committing fraud party ratifies agreement
now he cannot repudiate. Damage, Restitution.
                                        Prof of Fraud
Fraud is essentially a question of fact and has to be proved by the person who alleges that the
fraud was done on him.
        

MISREPRESENTATION (UNDER SEC. 18)

When a false statement is made with the knowledge that it is false and also with the intention to
deceive the other party and make him enter into a contract on that basis, it is known as Fraud,
                    But when the person making a false statement believe the statement to be true and
does not intend to mislead the other party to the contract, it is known as “Misrepresentation” it is
somewhat different from fraud.  example : ‘A’ while selling his watch tells ‘B’ that his watch is
made in Switzerland, A does not know that the watch is not made in Switzerland. It is fraud
because the watch is made in India. A is guilty of misrepresentation.
                    It includes :- 1) The positive assertion, in a manner not warranted by the information
of the person making it of that which is not true, though he believes it to be true. 2. Any breach
of duty which without an intention to deceive gains an advantages to the person committing it.
ESSENTIALS
1. The positive assertion of material fact: When one party believes that his statement is true but it
is not true, it is called misrepresentation. Case: The Ocean steam Navigation comp. v/s
Sunderdas Dharmsay: ‘A’ sold ship telling it is of 28 tons but it was of less tons. ‘A’ did not
know about it. It held misrepresentation.
2. Any Breach of duty : When on Party without intention of committing fraud breaches duty and
if he also takes benefit from the agreement it will be misrepresentation. Case : Bamarsi Dass v/s
New India Assurance : Actually one liability of party released in that deed held
misrepresentation. There was the duty of the party to disclose the fact of deed. B could not read it
but he did not.  It means he trusted on A and it is his false statement, which held then it is
Misrepresentation.
3. Innocent Misrepresentation: When false statement is made innocently then it is
Misrepresentation. Smith v/s Land  & House Property Corp.: A sold a hotel and said that all rent
holders are gentleman. Actually they it all were defaulters. It held misrepresentation. Case :
Derry v/s Peek(1889) it was held that the management of the company was guilty of
misrepresentation, and not for fraud. Another Case : Noor-ud-din v/s Umerao Bibi 1998: A sale
deed was challenged on this ground that it was executed under fraud and misrepresentation seller
was a blind person. He was also not paid sufficient consideration. The possession of property
was also transferred to the buyer, court declared such sale deed to be set-aside.
DIFFERENCE BETWEEN FRAUD & MISREPRESENTATION
                    FRAUD                                            MISREPRESENTATION
1. Fraud contains the intention        It does not contain any such intention.
To deceive.
2. The facts are altered with the     No such thing in misrepresentation. Any
Intention to deceive the other    is presented as such presented as such 
Person.                                            Whereas it does not came out to be true
3. The guilty person has the            The guilty person has no knowledge of 
Knowledge of truth.                      Truth.
4. Fraud is a type of tort and           It does not come under tort.
So punishable.
5. Contract by fraud can be             Contract by misrepresentation can only 
Rescinded to demand                   be rescinded not demand compensation
Compensation.
6. The guilty person can not            Such defence could be availed.
Take the defence that the 
Victim person as plaintiff
Could have find out the 
Truth.
                              MISTAKE (Section: 20-22)
The fifth element defecting the consent is   MISTAKE, contract by mistake are either void or
voidable. It is not a free consent. One or both of the parties may be working under same. 
                                      Mistake is of three kinds :-
1. Mistake in the mind of the parties is such that there is no genuine agreement at all.  There is no
meeting of minds or consensus ad idem. 
2. There may be mistake as to a matter of fact relating to that agreement.
3. The mistake essential to the agreement as to the subject matter.
                  
TYPES OF MISTAKE :-
Mistake when there is no consensus ad idem:  According to sec.13: two or more persons are said
to consent when they agree upon the same thing in same sense. If there is no meeting of minds or
consensus ad idem, there arises no contract which could be enforced.
Section 20 requires that:- Mistake of both the parties : The agreement is void if there is mistake
on the part of both the parties. A case Ayekam Angahal Singh v/s Union Bank Of India, AIR-
1970: It was held that since the mistake was unilateral, the contract was not affected thereby and
the same could not be avoided.
According to Sec.21 of the Contract Act which lays that mistake of law of country is not
excusable i.e. any contract is done under a mistake of law being followed in India then such
contract shall not be voidable, but if contract is under a mistake of foreign law that i shall be
void, i.e. Mistake of Foreign Law and Mistake as to individual rights. Case : Cooper v/s Phibbs-
1867: The court held that the mistake related to general ownership shall the same effect what the
mistake of fact would have. Mistake of fact is not excusable. 
ILLUSTRATION :- ‘A’ agrees to buy horse from ‘B’ at the time of agreement, the horse had
already died but both the parties had no knowledge of it such, agreement is void.
The following points are important in respect of Mistake of Fact :-
1. Mistake must be mutual. Case: Courturier v/s Hastie: 1856: It was held that the agreement was
void because of the mutual mistake as to existence of the subject  matter.
2. Mistake must relate o any substantive fact, like mistake as to identity of the parties, identity of
subject matter identity of nature of transaction etc.
3. Mistake must relate to present or existing fact.
Case : Raffles v/s Wichellehaus – 1864 : It was held that owing to mistake as to the identity of
subject matter of contract, such contract was void.
4. Mistake as to Promise:- If a mistake because of which the promise does not reflect the real
intention which was there in the proposed agreement, such an agreement would be void. Case
:Hartog v/s Colins& Shields: 1939 It was held that there had arisen no contract in this case
because the buyer could have noticed the mistake.

 
Q.No. 7:- Explain the law relating to agreement in restraint of trade with reference to Indian Law
along-with exceptions.
Answer :-INTRODUCTION :  Section 25 to 30 of the Indian Contract Act-1872 mentions that
those agreement which are void. Void agreement are defined in sec. 2(g) of the act.  According
to it :- “An agreement not enforceable by law is said to be void.” Thus sec.25 to 30 of the act
mentions following agreements to be void :-
                     AGREEMENT IN RESTRAINT OF TRADE
Section 27 of the act mentions that all such agreements shall be void which creates restraint or
partial restraint in any type of occupation, trade or business of a person. In simple language,
agreements creating restraint in lawful trade, occupation or business are void.
Indian constitution provides every person the freedom to trade, occupation or business.  This
freedom cannot be interfered except in certain situation. Freedom of trade, occupation or
business is in accordance to public policy. This is the reason that this provision has been
mentioned in sec.27 of the act. But it is important that a reasonable restraint on trade, occupation
or business shall not make an agreement void. The requirement is that restraint shall be
reasonable. 
Case : Northernfelt v/s M.N.Felt Guns and Ammunition Co. Ltd. 1894: It was held that before
declaring agreement in restraint of trade to be void, the reasonability of restraint shall be
examined and the examination shall consider mainly that whether it is reasonable or not for
parties or public interest.
Illustration : If two neighbouring land owner agrees that they shall not organise market for cattle
on their lands on the same day then such agreement shall not be void because it is in the interest
of both.
Case : Ms.S.Dey Forments Industrial Ltd v/s Ravindera Nath S.Kamath 1999:  It was held that
where any person is appointed in a company as an advisory and a condition is laid that he shall
not act anywhere during his service, there such an agreement shall not be void.
The above rules does have few exceptions which are under :-
1. Sale of Goodwill : Where the goodwill of any trade, occupation or business is sold, there the
buyer shall have an agreement with the seller that the seller shall not do any such business within
the local limits for a specific time which shall be done by the buyer with that goodwill. Four
things are necessary for the exception:
i) Trade is similar.
ii) Within specified local limits.
iii) Buyer is doing such business.
iv) The restraint is reasonable in the eye of court.
Case : Gujrat Bottling Co. Ltd. v/s Coca Cola Co. 1995: It was held that provisions related o
agreement in restraint of trade shall not apply in such matters in which are prohibited only for the
time of existence of contract. If they are applied even after the termination of contract, then i
shall be void.
2. Partnership Agreements : Where there is an agreement between partners at the time of
formation of firm that any partners shall not carry a similar or otherwise any trade during the
existence of partnership, then such an agreement is not considered to be creating restraint.
3. Dissolution of Partnership :- If any agreement is made between the partners at the time
dissolution of partnership or a partner shall not carry a business similar to that of firm for a
specific time, then such agreement shall not be void provided that it is reasonable.

 
Question No.8 : What do you understand by ‘Quasi-contract? State its essential features.    OR
Quasi-Contract are in law but not in fact. Explain.   OR
Quasi- contract is not the product of an agreement entered into parties but a creation of law on
the basis of equitable principles.” Discuss the above statement and state the quasi contract
relations recognised by the India in Contract Act.?   OR
What do you understand by Quasi-contracts? Explain some relations which are resembling to
those created by contracts as incorporated under the Indian Contract Act 1872.
Answer :- INTRODUCTION: For a valid contract there must be offer, acceptance and
consideration with some other requirements. But sometime the position comes when there is
neither offer not acceptance still there is contract. Such position is put under the category of “
Quasi- Contract” or relation resembling to those contract.
      The term Quasi Contract generally means half or ‘semi’. It means Quasi contract is half or
semi contract.  But this meaning does not fulfil our aim. It is a confusing term. However we can
say that ‘quasi contract’ means the contract, which is equal to that of a valid contract. Chapter 5
of the Indian Contract Act deals with such situations under the heading of certain relations
resembling to those created by contract. The chapter avoids the word ‘quasi-contract’.
Generally the contracts or agreements are the result of acts of parties. Parties agree to do or not
to do something but several times there is no agreement between the parties, but still the
liabilities arise between the parties such liabilities are called by, Quasi-Contract. 
Definition :  Indian Contract act  does not define the Quasi-contracts. It only mentions that,
certain relations resembling those created by contract. However the various jurists have defined
the Quasi-contract as under:-:According to Wharton’s Law Lexicon: “ An act which has not
strict form of a contract but has the effect of it, is an implied Contract.”
According to Desai : Quasi contract or implied contracts are exceptional kind of contracts by
which one party is bound to pay money in consideration of something done or suffered by the
other party.  They are not founded on actual promises but arise when one party so conducted
himself that he must be deemed as if had made promise although he has not,”
According to Pollock:- “Quasi contracts are contracts in law but not in fact.” In other words it
can be said that Quasi contracts is not a product of an agreement entered into parties but a
creation of law on the basis of equitable principles.
Basic of Quasi-Contract : Lord Mansfied is considered as the father of this contract. According
to him, ‘Natural justice demands that one should not get unjust profit at the cost of another unjust
loss. This order has been laid down in the case of :-  MOSES v/s  MACFERLAN : Such action
lies for money paid by mistake or upon a consideration which happens to fail or for money got
through imposition or extortion or oppression or for an undue knowledge taken of the pt’s
situation. Country to the law made for protection of persons under those circumstances of the
case. It is obliged by lies of natural justice and equity o refund the money.
Under section 68 to 72 It has been recognised by Indian Contract act under the heading of ,
Certain relations resembling to those contracts.
            

CHARACTER/SKETCHES OF QUASI-CONTRACTS
1. These agreement are never made by parties but imposed by law.
2. One party is bound to pay money to other party.
3. Such contract gives right to one party. Again the other party in not against world.
4. Only money can be obtained not the liquidated damages.
KINDS/ESSENTIAL OF QUASI-CONRACT
1. Necessaries supplied to a person of contracting: Sec. 68 says that if a person who is incapable
to enter into a contract is supplied necessaries, then he is bound to compensate the suppler.
Incapable means, who are not capable under sec. 11 and 12, Minor is insane or disqualify by law.
If basic necessities are supplied to this, it will be deemed quasi contract and its price can be
recovered through medical aid, clothes, food, marriage of minor’s sister etc., that is depending
upon him. Minor’s marriage is not a basic necessity. The ingredients of sec.6 are as under :
i) Necessaries supplied to a person not competent to make contracts.
ii) These goods must be for the basic needs.
iii) The goods must be according to the status of minor.
iv) The supplier can recover the price against the property of minor. It is not personal liability.
Case : Chapple v/s Cooper: 1844: It was held the things for necessities shall be considered those
without which it is not possible to live. The food, clothing, shelter, medicine etc., are the
necessaries to minor or lunatic. But it must not be more than sufficient. 
2. PAYMENT BY AN INTERESTED PERSON : Section 69 of act is provides that a person
who is interested in the payment of money which another is bound by law to pay, and who
therefore pays it,  is entitled to be reimbursed by other.
ILLUSTRATION :  ‘B’ holds land in Bengal, on a lease granted by A, who is a zamidar.  The
revenue payable by A to the government being in Wlaw, the consequences of such sale will be
the annulment of  B’s lease. B prevent the sale and consequent annulments of his own lease, pays
to the government the sum due from A.  A is bound to make goods to B the amount so paid.
i) Person is legally bound to pay money.
ii) The person paying has the interest in such paymen.
iii) Payment is t o be made to another person.
Case : Govind Ram Gordhan dass Sekajri  v/s State of Himachal : Where Maharaja, having sold
mills without paying the overdue municipal taxes was sued by the buyer, who had to pay to save
the property from being old. The Privy Council held that he was bound by law to pay without the
meaning of the sec. Where a person is only morally bound and is not legally compellable to pay
he will not bound to pay.
3. LIABILITY TO PAY FOR NON-GRATUITOUS ACT: - 
When any person lawfully does any act for another person not gratuitously and the other person
has enjoyed the benefit of that act  then he is bound to compensate him.
ILLUSTRATION:- ‘A’ is a trade man leaves goods at B’s house by mistake. B treats the goods
as him own. He is bound to pay ‘A’ for them. A Case : Subramanyam v/s Thaippa 1961: A
contractor did more build more that what was required by the contract and did not intended act
gratuitously. Court held that the contractor was entitled to compensation for extra work.
Essential conditions of section 70:-
i) One person legally works for other
ii) The act is done voluntarily.
iii) He gets some benefit for this work.
iv) To whom it is done takes benefit of that act.
v) Act has been done not gratuitously.
A case : Kanhiya Lal v/s Inder chand: The court held that section 68 does not apply because she
was a minor at sec.70 also does not apply because she did not get any benefit. Because it was not
a quasi-contract as his friend having no interest in this payment.
4. Responsibility of Finder of Goods:- Section 71 of the Act  provides that a person who finds
belonging to another there will be a quasi contract . If bailment between two looses all the rights
and duties of bailer and balee will be presumed under section 165 & 169( rights and Duties of
bailee).
5. MISTAKE OF COERCION:- Section 72 of the act says that, “ when anything is delivered by
way of mistake then it is the duty of the person to return that things to the concern person or to
compensate him.”
A case :-  Sales Tax Officer Banaras v/s Kanhayya Lal : In this case it was held that the
transactions is to be ultra-wires. The firm was allowed to recover back the tax which he had paid.
 Similarly if any person takes any thing from another person by coercion i.e. by way of force
under this petition also the person is bound to return the goods to the concerned person under
quasi-contract obligation.
For example :- A at the point of pistol takes some gold rings from ‘B’. Here ‘A’ is bound to
return the gold rings to ‘B’ under quasi contract obligation.  The word coercion is same as
defined in sec.15 and the word mistake is same as defined under sec.20.  There are the provisions
with regard to quasi-contract.
CONCLUSION
Thus, in all above matters there is no agreement between the parties but the conduct and actions
of parties show that an agreement has originated between them and get binding in similar way as
like a contract. This is called Quasi-Contract.  

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

Generally contract based on personal qualifications shall be performed by the promisor himself.
For example, ’A’ promise to paint a picture for B. The performance of contract requires it to be
done by the promisor himself because painting in personal skill of ‘A’. Whereas the contract of
sale of property can be performed by promisor himself or by some other person.
Promisor can perform a contract by himself in the following conditions :
a. Where the intention of parties was that the contract shall be performed by the promisor only.
b. Where the performance depends upon personal skill of promisor. Such contracts get
terminated on death.
c. By Agent :- If the performance of contract does not depend upon personal skill, then such
contract can be performed by the agent of promisor. Generally such contracts are contracts for
the sale of property.
d. By Legal Representative : Where the promisor dies before the performance of contract and the
performance does not depend upon personal skill of promisor, there such contracts shall be
performed by the legal representatives of deceased promisor, but only up to that limit to which
the legal Representative had the interest in the property of deceased.
e. By Third Person:- Where promises accepts the performance from a third person, there such
promise can be performed by that third person. In such mattes, promise cannot enforce
performance from promisor under section  41 of the Indian Contract Act.
                          PERFORMANCE OF JOINT PROMISES
There are provisions in the Indian Contract Act in this respect:- 
i) Under section 42 of the act when two or more persons have made a joint promise, all such
persons must jointly fulfil the promise.
ii) When any one of joint promisor dies, his legal representatives shall perform the promise.
iii) Under section 43 of the act when two or more persons make a joint promise, the promise may
compel any of such joint promisors to perform the whole promise.
iv) Section 44 of the act says that where two or more persons have made a joint promise, a
release of one of such joint promisor, by the promisee does not discharge the other promisor of
joint promisors neither does it free the joint promisor so released from responsibility to the other
joint promisor or joint promisors.
   WHO CAN DEMAND FOR THE PERFORMANCE OF CONTRACT. 
The following persons can demand for the performance of the contract :-
a) The first right for the performance of contract is with the promisee. He can demand for the
performance of contract.
b) If the contract is not of personal nature then on the death of promisee his legal representative
or representatives can demand the performance.
c) Where there is joint promise, there all the joint promisors can jointly demand.
d) Where any one of the joint promisee dies, then the legal representative of such deceased shall
demand for the performance. 
e) Where are promisee dies, then their legal representatives can demand the performance.
          ANTICIPATORY BREACH OF CONTRACT:
Section 39 of the Act provides for the Anticipator Breach of Contract which means :-
“ That before the performance of the contract, any party to contract refuse to perform the
promise or contract or makes itself disable for performance is breach of contract.
ILLUSTRATION :- A singer enters into a contract with B the manager of theatre to sing at his
theatre for two nights in every week during the next two months and B agrees to pay her
Rs.1000/- for each night’s performance. On the sixth night A wilfully absents herself from the
theatre. B is at liberty to put an end to the contract. In such cases promisee can cancel the
contract.
The base of section 39 is “ when a party to a contract has refused to perform or disable himself
from performing his promise in its entirety, the promisee may put an end to the contract, unless
he has signified by words or contract his acquiescence in its continuance. 
                         REMEDIES :
The following remedies are available against the anticipatory breach of contract :-
1. The promisee can file a suit for the breach of contract considering it to be actual breach.
2. The promisee shall wait till the actual date of performance and then file the suit.
3. Specific performance and Injuction : sometimes a party to the contract instead of recovering
damages for the breach of contract may have protection to the alternative remedy of specific
performance of the contract.
4. Damages : Remedy by way of damages is the most common remedy available to the injured
party. This entitles the injured party to recover compensation for the party who causes the
breach. Sec.73 to 75 incorporate the provisions in  this regard. A case : Hadley V/s Baxendale-
1854: It was held that the special circumstances were not communicated by the plaintiffs to the
defendants. The plaintiffs were therefore not entitled to recover the loss.
Victoria Loundry Ltd. v/s  Newman Industries Ltd. 1949.
It was held that the defendant had the knowledge of the fact. The case was referred to official
Referee to determine the damages payable in this case. 
5. Quantum Meruit:-  When the injured party has performed a part of his obligation under the
contract before the breach of contract has occurred, he is entitled to recover the value of what he
has done under this remedy.
6. Measure of Damages :- That after certain result of the breach of contract in nearest time is to
be compensated. Damages are therefore, to fix amount of that basis if a party takes security
deposit from the other for the due performance of the contract.
A case : State of Kerla  V/s K.Bhaskaran  1985.
It was held that generally 10% profit is taken as an element in the estimation of the contract and
the contractor was entitled to claim compensation on that basis.