DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, AP, INDIA

TOPIC:

SECTION 10 OF INDIAN CONTRACTS ACT,1872

SUBJECT:

Contracts

NAME OF THE FACULTY:

G.Sunitha

H.Simran

LLB2018034

2nd sememster

1
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to our lecturer G. Sunitha Ma’am who
have given me the golden opportunity to do this wonderful project on the topic “SECTION
10 OF INDIAN CONTRACTS ACT” which also helped me in doing a lot of research and
through which I came to know so many new things. I am really thankful to him.

2
 CONTENTS
Page no.
1) Introduction ……………………………………………………… 6

2) Agreement ……………………………………………………….. 8

3) Consideration …………………………………………………….. 10

4) Competence ………………………………………………………. 15

5) Free consent……………………………………………………….. 23

6) Lawful object……………………………………………………… 29

7) Conclusion ………………………………………………………… 30

8) Reference…………………………………………………………… 31

3
 SYNOPSIS

Topic of the Project: SECTION 10

Type of review: In the present context the method followed is both primary review as well as
secondary review. All sorts of information has been collected through them.

Literature review: The Primary Literature that has been reviewed while going through this
research topic is Books and Web sources.

Scope of the project: The scope of this project is limited to the analysis of various
components of section 10 of the Indian Contracts Act,1872. Also each component will be
discussed with relevant case laws and the changes bought out by them.

Research Methodology: Doctrinal method of research is followed.

4
 ABSTRACT

Contract is an order to conduct one's business in everyday life. The prevailing system in
ancient time was barter exchange and it was based on the mutual principle of Give and take.
However the relevancy of such a system in modern times is questioned.

Thus the Indian Contract law codifies the way we enter into a contract, execute a contract and
implement provisions of a contract and effects of breach of a contract.

The contract act has many provisions and sections to deal with various concepts. In this
project ,a miniscule part of the Act is taken and explained using case laws. The section 10 of
this act explain that how agreements become contracts that are enforceable by law. The
conditions of enforceability are stated under the section. According to the section an
agreement is a contract when it is made for some consideration, between parties who are
competent with their free consent and for a lawful object. The project throws light on each
element mentioned above. For better understanding of the components they are supported
with relevant case laws. This will provide a clear picture of what actually the section put
fourths.

INTRODUCTION

5
In this contemporary world each and every aspect that the humans are involved included
agreements and contracts. This is necessary so as to ensure that the other party must not
breach the said words by him. Most of the business and the activities that are being run on a
daily basis have the contract as the base. In our daily lives we enter into exclusive agreements
like promoting and shopping for of belongings, turning into an worker, settling disputes and
lots greater. It is visible that regularly people input into agreements without even thinking
about the vital provisions of a valid settlement, and consequently emerge as moving into an
invalid settlement and thereby stricken by loss. A contract is difficult to be enforced until it’s
phrases can be admitted by way of the events. A signed written settlement reduces the hazard
and saves the parties from entering into a settlement which they cannot later implement.Why
do we need contracts?

A agreement will help you to navigate the law

Many people find the regulation complex and difficult. A contract will help to make the law
more reachable and allow you to navigate it efficiently. It’s extremely commonplace for
businesses to fall foul of the law because they don’t apprehend it, so a agreement drafted by a
specialist will make sure that you constantly live at the right aspect of the law. Of course
there are DIY settlement templates available on-line, but those will now not reflect your
business and offer you complete protection.

A agreement helps to minimise disputes or issues

Whilst a contract received’t absolutely prevent disputes or troubles, a contract can assist to
minimise them. Should you've got a dispute for your palms a settlement can help to shield
you in many exclusive ways. It encourages your consumer to cooperate, however if this
doesn’t appear a agreement lets in you to mediate to try to clear up the hassle, instead of
paying pricey legal charges. Of path if mediation fails then the settlement is a legally
enforceable record so it's going to help you with any legal action or debt recovery.

A settlement creates certainty

Yes things may be agreed verbally, or via email, but how lots legal standing do they've? The
solution may be very little. A contract will outline the operational and sale tactics of a
enterprise and provide an explanation for how the customer or consumer can use the services.
By speaking this statistics you are developing fact – all events understand a way to act and
what is anticipated from them.

6
Section 10 of Indian Contract Act which came into force on the primary day of September,
1872 is What agreements are contracts which says that ― All agreements are contracts if
they're made by using the free consent of the parties competent to contract , for a lawful
consideration of and with a lawful object , and aren't hereby expressly declared to be void.

―Nothing herein contained shall have an effect on any regulation in force in [India] and
now not hereby expressly repealed through which any contract is required to be made in
writing or inside the presence of witnesses, or any regulation regarding the registration of
documents.1

AGREEMENT

“Agreement” is defined in Section 2(e) as ‘every promise and every set of promises forming
the consideration for each other’. And a promise is defined as an accepted proposal. Section
2(b) says: ‘A proposal, when accepted, becomes a promise’. This is another way of saying
that an agreement is an accepted proposal. The process of definition comes down to this: A
contract is an agreement; an agreement is a promise and a promise is an accepted proposal.
Thus every agreement, in its ultimate analysis , is the result of a proposal from one side and
its acceptance by the other.2

Agreements are categorized into 2 categories:

1
From the
act, http://www.lawnotes.in/Section_10_of_Indian_Contract_Act,_1872#ixzz2z58J18DU , accessedon
6/04/2019 6:17 IST
2
S.M Gopal Chetty v Raman, AIR 1998 Mad 169

7
Agreements not enforceable by law – the agreements which do no longer satisfy the
essentials of a valid contract are not enforced through regulation, subsequently can not be
considered as contracts. According to phase 2(g) of the act such agreements are stated to be
void. For example, an agreement entered into via a minor is held to be void. Section 24-30 of
the act mentions about the agreements that are taken into consideration void.

Section 24- agreements are considered as void if considerations and objects are unlawful.

Section 25- settlement with out consideration is held as void except the settlement is in
writing and registered or is a promise to make amends for something completed or is a
promise to pay debt that’s barred by way of predicament regulation.

Section 26- agreement which is made in restraint of marriage is held as void.

Section 27- agreements which might be in restraint of exchange are held as void.

Section 28- settlement that is in restraint of legal lawsuits is void.

Section 29- unsure agreements are held as void.

Section 30- settlement by way of manner of guess is held as void.

Agreements enforceable by way of law– the agreements that satisfy the necessities of a valid
contracts are enforceable by law.

Thus, Sections 2(h) and 10 of the Act state about the critical factors of a legitimate
agreement. If any one of these elements isn’t pleased or is present in an settlement, it will
have an effect on the validity and could not form a legitimate contract.If we enter right into a
agreement containing prescribed phrases and situations, which is a have to beneath the statute
then that settlement becomes a statutory agreement. If a contract carries positive terms and
conditions in it, which might be statutory then, the said settlement to that extent is statutory.

When agreements becomes Contract?

An agreement is regarded as a contract when it is enforceable by law.3 In other words , an

agreement that the law will enforce is a contract. The conditions of enforceability are stated
in Section 10. According to this section, an agreement is a contract when it is made for some
consideration, between parties who are competent, with their free consent and for a lawful
object.

3
S. 2(h). Mohta Alloy & Steel Works v Mohta Finance & Leasing Co. Ltd, 1987 AIHC 1327

8
Every contract is an agreement , but every agreement is not a contact. An agreement becomes
a contract if the following conditions are satisfied.

i. There is some consideration for it.

ii. The parties are competent to contract.

iii. Their consent is free.

iv. Their object is lawful.

CONSIDERATION

Consideration has been variously defined. The simplest definition is by Blackstone:

‘Consideration is the recompense given by the party contracting to the other’.

But the most commonly accepted definition is that which was attempted in

Currie v Misa4

Case facts:

Lizardi & Co. Offered some of bills of trade to Mr. Misa, drawn from a banking firm owned
via Mr. Currie, and have been to be paid on the following day. However, Lizardi changed
into in sizable debt to Mr. Currie’s financial institution and changed into being pressed for
fee. A few days later, upon paying inside the cheque, Mr. Mirsa found out of Lizardi’s
stopped payments and outstanding debts, instructing his bankers no longer to honour the
cheque. The question arose as to whether or not the cheque became payable, specifically as to
whether or not the sale of an current debt formed sufficient attention for a negotiable safety,
on the way to render the creditor to whom it became paid, Mr. Currie, a holder for the value
of the cheque.

4
(1875) 10 Ex 153, 162

9
Ratio Decidendi:

The Court held that attention must “consist both in a few proper, hobby, earnings, or
advantage accruing to the only party, or a few forbearance, detriment, loss, or obligation,
given, suffered, or undertaken by way of the alternative.” . Thus, there can be no legal
contract unless there may be consideration within the shape of a advantage won, or detriment
suffered arrangement with the aid of the events. On the information, the Court held that the
identify of a creditor to a negotiable security resulting from a pre-existing debt and
transferred to him, bona fide, without any notice of disease of name by way of the debtor is
indefeasible. The pre-current debt did not in and of itself shape a enough consideration for the
negotiable safety. Accordingly, there was an absence of any consideration or the making or
payment of the cheque by way of Mr. Mirsa.

In Section 2(d) of the Indian Contract Act consideration is defined as :

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

The definition of consideration in section 2(d) requires, in the first place, that the act or
abstinence, which is to be a consideration for the promise, should be done at the desire of the
promisor secondly, that it should be done by promisee or any other person and , lastly that the
act or abstinence may have been already executed or is in the process of being done or m ay
be still executory, that is to say, it is promised to be done.

“At the desire of the promisor”

An act shall not be a good consideration for a promise unless it is done at the desire of the
promisor.

In Durga Prasad v Baldeo5

Case facts:

The plaintiff, on the order of the collector of a town, built at his own expense, certain shops
in a bazar. The shops came to be occupied by the defendants who, in consideration of the
plaintiff having expended money in the construction, promised to pay him a commission on
articles sold through their agency in the bazar. He plaintiff’s action to recover the
commission was rejected.

5
Bank of Baroda v Kayenkay Agencies, 2003 1 BC 59

10
Ration Decidendi:

The only ground for the making of the promise is the expense incurred by the plaintiff in
establishing the market but it is clear that anything done in that way was not ‘at the desire’ of
the promise but of the Collector’s order.

Acts done at request

In Kedarnath Bhattacharji v Gori Mohamed6

Case facts:

It was thought advisable to erect a town hall at Howrah provided sufficient subscription could
be got together for the purpose. To this end the Commissioners of Howrah municipality set
out to work to obtain necessary funds by public subscriptions. The defendant was a
subscriber to this fund for Rs. 100 having signed his name in the subscription book for that
amount. On the faith of the promised subscriptions the plaintiff entered into a contract with a
contractor for the purpose of building the hall. But the defendant failed to pay the amount
and contended that there was no consideration for his promise.

Ratio Decidendi:

He was held liable . persons were asked to subscribe knowing the purpose for which the
money was to be applied, they knew that on the faith of their subscription an obligation was
to be incurred to pay the contractor for the work. The act of the plaintiff in entering into
contract with the contractor was done at the desire of the defendant so as to constitute
consideration within the meaning of section 2(d).

Promises of Charitable Nature.

A promise to pay subscription becomes enforceable as soon as any definite steps have been
taken in furtherance of the object and on the faith of the promised subscription.

In Doraswami Iyer v Arunachala Ayyar7

Case facts:

The repair of a temple was in progress. As the paintings proceeded, extra cash changed into
required and to elevate this cash subscriptions were invited and a subscription listing raised.
The defendant placed himself down on the list for Rs. One hundred twenty five and it become
to recover this sum that the healthy turned into filed. The plaint discovered the attention for
6
ILR (1886) 14 Cal 64
7
AIR 1936 Mad 135

11
the promise as a reliance at the promise of the subscriber that they have got incurred
liabilities in repairing the temple.

Ratio Decidendi:

The discovered choose held that there was no evidence of any request by means of the
subscriber to the plaintiff to do the temple repairs. Since, the temple repairs had been already
in development when the subscriptions were invited. The action turned into no longer brought
about through the promise to subscribe but become as an alternative unbiased of it. Hence, no
healing become allowed.

Unilateral Promises:

A unilateral promise is a promise from one side only and is intended to induce some action
by the other party. ‘ a unilateral contract refers to a gratuitous promise where only one party
makes a promise without any return promise. 8 The promisee is not bound to act, for he gives
no promise from his side. But if he carries out the act desired by the promisor, he can hold the
promisor to his promise. “ An act done at the request of the offeror in response to his promise
is consideration, and consideration in its essence is nothing else but response to such a
request”

In Abdul Aziz v Masum Ali9

Case facts:

Islam Agency Local Committee at Agra, a mosque had to be repaired and subscriptions had
been raised for the maintenance. Munshi Hafiz Abdul Karim become appointed treasurer, and
money turned into to be found out via, and deposited with, him. He himself promised to pay
Rs. 500. Another sum of Rs. 500 become promised by means of one Jan Muhammad, who
sent a cheque for the quantity to the treasurer. The treasurer despatched it for collection to the
financial institution in September, 1907, however they again it as it turned into no longer well
encouraged. It became again presented to the Bank almost a year and a 1/2 afterwards, in
January, 1909, however changed into back as being obsolete. Hafiz Abdul Karim died on the
20th of April, 1909. This in shape was delivered towards the heirs of Hafiz Abdul Earim for
the healing of this Rs. 1,000, this is, Rs. 500 promised through him, and Rs. 500, the quantity
for which Jan Muhammad had paid a cheque which was now not cashed in time, and any
8
Aloka Bose v Parmatma Devi, (2009) 2 SSC 582
9
AIR 1914 All 22; Ilr (1914) 36 All 268

12
other object the liability for which become not disputed. The courtroom below made the heirs
responsible for the Rs. 1,000. The defendants appealed to the High Court.

Ratio Decidendi:

With regard to the subscription of Munshi Abdul Karim, it changed into a mere gratuitous
promise on his element. It became held with the aid of the Hon’ble Court that the promise
changed into not enforceable due to the fact there was no attention inside the sense of gain, as
the person who promised received nothing in return for the promise made and the secretary of
the committee to whom the promise was made suffered no determinant (legal responsibility)
as nothing had been executed to carry out the repairs. Hence the healthy was disregarded.

It changed into also held that Munshi Abdul Karim cannot be said to had been an agent of the
committee or even if he become, it's far very doubtful that he might have been held
responsible of gross negligence. His project of the office of treasurer changed into simply
gratuitous. The court docket stated that the mistake within the endorsement changed into a
herbal one and the put off in re-representing the cheque or obtaining a duplicate can be nicely
explained.

Promissory Estoppel and Govt. Agencies

In Pournami Oil Mills v State of Kerala 10 the government was not permitted to go back on its
earlier promise of wider exemption from sales tax in pursuance of which certain industries
were set up. A subsequent notification curtailing the exemption was held to be applicable to
industries established after the notification. A promise which is against public policy or in
violation of a statutory prohibition cannot be the foundation of an estoppel.

EXCEPTIONS TO CONSIDERATION

Few exceptions are laid down by Section 25

25.An agreement made without consideration is void, unless-

i) It is in writing and registered.- it is expressed in writing and registered under the

law for the time being in force for registration of, and is made on account of
natural love and affection between parties standing in a near relation to each other;
or unless

ii) Or is a promise to compensate for something done.- it is a promise to

compensate, wholly or in part, a person who has already voluntarily done
10
1986 Supp SCC 728

13
 something for the promisor, or something which the promisor was legally
compellable to do; unless.

iii) Or is a promise to pay a debt barred by limitation law.- it is a promise, made

in writing and signed by the person to be charged therewith, or by his agent
generally or specially authorised in that behalf, to pay wholly or in part a debt of
which the creditor might have enforced payment but for the law for the limitation
of suits.

COMPETENCE TO CONTRACT

Competence to contract is defined in section 11

11.Who are competent to contract- Every person is competent to contract who is of the age of
majority according to law to which he is subject, and who is of sound mind, and is not
disqualified from contracting by any law to which he is subject.

The following persons are incompetent to contract –

 Minors

 Persons of unsound mind

 Persons disqualified by law to which they are subject

MINOR

Both section 10 and 11 make it clear whether, if a minor enters into a agreement, it would be
voidable at his opinion or altogether void.

This controversy was solved in the landmark judgement:

Mohori Bibee v Dhurniodas Ghose11

Case facts:

The plaintiff, Dharmodas Ghose, while he changed into a minor, mortgaged his assets in
favour of the defendant, Brahmo Dutt, who changed into a moneylender to at ease a loan of
Rs. 20,000. The actual quantity of loan given turned into less than Rs. 20,000. At the time of
the transaction the lawyer, who acted on behalf of the cash lender, had the information that
the plaintiff is a minor.

11
(1902- 03) 30 IA 114

14
The plaintiff added an movement towards the defendant pointing out that he was a minor
while the mortgage was finished via him and, consequently, loan became void and
inoperative and the same must be cancelled. By the time of Appeal to the Privy Council the
defendant, Brahmo Dutt died and the Appeal changed into prosecuted by means of his
executors.

The Defendant, amongst different factors, contended that the plaintiff had fraudulently
misrepresented his age and therefore no comfort should receive to him, and that, if loan is
cancelled as asked by way of the plaintiff, the plaintiff need to be requested to pay off the
sum of Rs. 10,500 advanced to him.

Ratio decidendi:

The Privy Council was held that the minors contract is void and now not merely voidable on
the idea of phase 10, 11, 183, 184 and old sections 246 and 247(now segment 30 of the
Partnership Act). The combine effect of these sections and mainly phase 10 and 11 renders
the minor contact absolutely void . According to the Privy Council section eleven should be
literally construed and that best someone who is of the age of most of the people is able to
contract. A minor’s settlement is, consequently, ab initio and utterly void. In the view of the
Privy Council, this turned into also in accordance with the Hindu Notion of a minor’s
incompetence to agreement.

Effects of minor’s agreement:

i) No estoppel against Minor

If a minor misrepresenting his age induces another to contract with him, will have
no estoppel against him.

ii) No liability in contract or in Tort arising out of contract

A minor cannot be held responsible for anything which would be an indirect way
of enforcing his agreement.

In Johnson v Pye12

Case facts:

12
(1665) 1 Sid 258

15
 A minor falsely stated that he was of the age of majority and obtained a loan of
300 pounds. The defendant came to know about this can filed a suit for the
recovery of the money and damages for the deceit.

Ratio Decidendi:

It was held that the minor cannot be asked to repay the loan by bringing an action
for deceit against him.

In Burnard v Haggis13

Case facts:

There a minor hired a mare. It was expressly agreed that the mare will be used
only for riding and not “for jumping and larking.” The mare was made to jump
over a fence, she was impaled on it and killed.

Ratio decidendi:

It was held that the minor was liable for negligently killing the mare as his act was
totally independent of the contract made by him.

iii) Doctrine of restitution

If an infant obtains property or goods by misrepresentation 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 equitable doctrine of restitution. If the infant has obtained the
goods he can be asked to return the same but this doctrine wouldn’t be applied
where he had obtained cash.

Leslie ® Ltd v Shelli14

Case facts:

An infant succeeded in deceiving some money lender by telling them a lie about
his age, and so got them to lend him 400ppounds on the faith of this being an
adult. They claimed for the return of money.

Ratio decidendi:

Their claim for the principal and the interest amount failed. Their claim failed as
the doctrine of restitution was not applicable.

13
(1863) 4 328
14
(1914) 3 607

16
 iv) Minor seeking relief, compellable to restore.

However, where the infant invokes the aid of the court for the cancellation of his
contract, the court may grant the relief subject to the condition that he shall restore
all the benefits obtained by him under the contract, or make suitable compensation
to the other party.

Khan Gul v Lakha Singh. 15

Case facts:

The defendant , while still a minor, by fraudulently concealing his age, contracted
to sell a plot of land to the plaintiff. He received the consideration of Rs. 17500
and then refused to perform his part of the bargain. The plaintiff prayed for the
recovery of possession or refund of consideration.

Ratio Decidendi:

The court held that there could be no question of specific performance , the
contract wholly void. It held that the infant cannot take the advantage of his own
fraud. Therefore was asked for the refund of the consideration.

CONTRACTS BENEFICIAL TO THE MINORS

A minor’s agreement is absolutely void has been generally followed, but it has been
growingly ‘confined to cases where a minor is charged with obligations and other
contracting parties seek to enforce those obligations against the minor” it was observed by the
Madras High Court that what is meant by the "proposition an infant is incompetent to
contract for that his contract is void is that the law will not enforce any contractual
obligations of an infant". Accordingly a minor is allowed to enforce of contract which is of
some benefit to him under which he is required to bear no obligation.

In Raghav Charia v Srinivasan

Case facts:

Minor gave a amount to a person on mortgage. The minor asked for the principal amount
along with interest. Then the person claimed that the contract with minor is void and thus he
wouldn’t pay the amount.

Ratio decidendi:

15
1928 609

17
The provision of law which renders miners in competent to buy themselves by contract was
enacted in their favour and for their protection and it would be a strange consequence of this
legislation if they are to take nothing under transfer in consideration of which they have
parted with their money.

This is proceed on the principle that the minor has already given the full consideration to be
supplied by him and there is nothing that remains to be done by him under the contract. He is
now am a promisee and praise the code for recovering the benefit stipulated. But where the
contract is still executory or the consideration is still to be supplied the principle of the
Mohori Bibi case will thwart.

In Raj Rani v Prem Adib

Case facts:

The plaintiff, a minor was allotted by the defendant, a film producer, the role of an actress in
a particular film. The agreement was made with her father. The defendant subsequently
allotted that roll to another Artist and terminated the contract with plaintiff's is father. The
father sued for the breach.

Ratio Decidendi:

It was held that neither she nor her father could have sued on the promise. If it was a contract
with the plaintiff, if she being a minor, it was nullity. If it was a contract with her father it
void for being without consideration.

Liability for necessaries

68. Claim for necessaries supplied to person incapable of contracting, or on his account. - if a
person incapable of entering into a contract, or any one whom he is legally bound to support ,
is supplied by another person with necessary 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.

Meaning of Necessaries:

The liability is only for necessaries but there is no definition of the term necessaries in the
Act.

18
“Things necessary for those without which an individual cannot reasonably exist. In the first
place, food, raiment, lodging and the like. About these there is no doubt.”

In Chapple v Copper16

Case facts:

A minor widow did the funeral of her husband in a particular cemetery. When she was asked
for the payment she claimed that she was a minor and wasn’t liable to pay the amount. The
undertaker used for the payment.

Ratio Decidendi:

The court docket held that the service, changed into a “necessary provider”. The court docket
noted, obiter that, when thinking about whether goods or offerings were necessaries, “articles
of mere luxury might always be excluded, though highly-priced articles of application are in
a few instances allowed”

Nash v Inman17

Case facts:

A tailor supplied a cambridge undergraduate with “eleven fancy waistcoats”. When the tailor
sued for the cash, it was claimed by means of the daddy that the settlement could not be
enforced, as he became a minor (at that time 21 yrs become the age of majority)

Ratio Decidendi:

Although the goods were appropriate to the young guy’s situation in lifestyles (he became the
son of an architect of excellent position), it did now not fulfill the 2nd situation of “real
requirements”, as the son already had sufficient waistcoats and there was no need for more.
The settlement therefore could not be enforced.

UNSOUND MIND

In India, on the other hand, the agreement of a person of unsound mind is, like that of a
minor, absolutely void.

According to section 12 of the act,

16
(1844) 13 252
17
(1908) CA

19
12. What is a sound mind for the purpose of contracting – 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 interests.

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

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

Disability at the time of agreement

A character who lacks intellectual potential can void, or have a father or mother void,
maximum contracts (besides contracts for necessities). In most states, the standard for
intellectual ability is whether the celebration understood the which means and effect of the
words comprising the settlement or transaction. This is known as the "cognitive" check.
Some states use what's called the "affective" take a look at: a contract can be voided if one
birthday party is unable to behave in a reasonable way and the alternative party has purpose
to understand of the situation. And a few states use a third degree, referred to as the
"motivational" check. Courts in these states measure potential by using the individual's ability
to judge whether or not or no longer to go into into the agreement. These exams may produce
varying outcomes when carried out to mental conditions consisting of bipolar sickness.

In Indar Singh Vs.  Parmeshwardhari Singh18

Case facts:

A property worth Rs. 25000 was agreed to be sold by a person for Rs.7000 only. His mother
claimed for the recovery of the property as at the time of making the agreement the person
was not in sound mind.

Ratio Decidendi:

The person entering into the contract must be a person who understands what he is doing and
is capable to form a rational judgment so as to whether what he is about to do is to his interest
or not. Here the person at the time of contract was of unsound mind and also the same was
proved by his mother. Hence the contract was to be held void.

INSOLVENTS

18
AIR 1957 491

20
If an settlement is made with someone who does not have the prison capacity to go into a
contract, that settlement or agreement is said to be voidable. This approach that the individual
that lacks legal capacity is said to have misrepresented herself, even supposing by chance.
The different celebration to whom the misrepresentation changed into made may additionally
void the settlement and all of its terms and conditions. This is called rescinding the
agreement. The courts may additionally rescind or void a settlement if prison potential is not
met. Once the settlement is voided, it's miles now not binding, and the courtroom will try to
restore the parties to the location they had been in earlier than the agreement become made.
This way returning money and property wherein in any respect viable.

FREE CONCENT

According to segment thirteen of the act or extra men and women are stated to consent to a
common factor when they agree upon the identical element within the identical feel. A
consent is regarded because the most fundamental thing of a contract. The subsequent phase
talks about unfastened consent that's crucial for a legitimate agreement.
Free consent is defined in section 14 of the act
14. “Free consent” defined – Consent is said to be free when it is not caused by:
 COERCION
 UNDUE INFLUENCE
 FRAUD
 MISREPRESENTATION
 MISTAKE
Where consent to an agreement is caused by the above mentioned causes, the agreement is a
contract voidable at the option of the party whose consent was caused. It is a contract which
is enforceable at the option of only one of the parties, namely, the party whose consent was
not free.
Giving the meaning of the Voidable contract, Section 2(i) says that, “ an agreement which is
enforceable by law at the option of the parties thereto, but not at the option of the other or
others, is a voidable contract.

COERCION
Section 15 - "Coercion" is the 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

21
prejudice of any person whatever, with the intention of causing any person to enter into an
agreement. (45 of 1860.)

Coercion can be done in the following ways:

I. Committing or threatening to commit any act for bidden by the Indian Penal
Code;or
II. Unlawfully detaining or threating to detain the property.

Acts forbidden by IPC

It is clear that coercion as thus defined implies a committing or threating to commit some act
which is contrary to the law.

In Chikham Amiraju v Chikham Seshamma19

Case facts:

The respondents, in this case, are mom and son, while the appellants are younger brothers of
plaintiff’s husband. The respondent’s husband threatened to dedicate suicide if the mom and
son do not execute a release deed in recognize of reversionary rights in sure lands, which the
respondent’s mom had offered.

The respondent has filed a fit in decrease courts alleging coercion on a part of the husband.
The decrease courts held that the consent changed into no longer unfastened and it was due to
threats running of their minds that they carried out the deed. The appellant aggrieved by way
of this approached to the high courtroom.

Ratio Decidendi:

The court docket held in choose of the respondents and dismissed the appeal. The court
docket agreed with the contention of Mr.Venkataramaih that forbidden act is a wider term. It
held that suicide and try to commit suicide are both punishable, but suicide is not punishable
as it's far not possible to reach that individual.The courtroom found that during definition, the
words “to prejudice to any character in anyway” are blanketed. The respondents will not
execute this type of deed until they have been prejudicially affected by the threat of the
husband.

19
(1918) 41 36

22
This case does not fall beneath the undue have an impact on because the husband become not
a party to the agreement.The threat via the husband amounted to coercion and the
enchantment with the aid of the more youthful brothers of the husband become, therefore
disregarded.

To the threating a criminal prosecution is not per se an act forbidden by the Indian Penal
code. Such an act could be one forbidden by the Code if it amounted to a threat to file a false
charge.

In Askari Mirza v Bibi Jai Kishori

Case facts:

A minor, having borrowed on two mortgage deeds, agreed to a compromise decree although
the mortgages were void. Subsequently he pleaded that he entered in to the compromise
because he was threatened with the prosecution for falsely representing his age and that
amounted to coercion.

Ratio Decidendi:

As the court below recorded no finding as to the truth or falsity of the charge, the case was
referred back for re-trial. The plea was the he plaintiff was dispossessed of the promises
forcibly under treat that he would be arrested and detained under the maintenance of internal
security act.

Detention of property

Where any person unlawfully detains, or threatens to detain any property to the prejudice of
any person for the purpose of getting the consent of a party to a contract, such an act amounts
to coercion and the contract is voidable at the option of the party not at fault.

In Essar Steel v Union of India20

Case facts:

A company entered into a contract with Government company (GAIL), for the purchase of
gas. The buyer company constructed the pipeline for the carriage of the gase and was also
responsible for its maintenance. Even then GAIL demanded from the company transportation
charges.

20
2006 1 609

23
Ratio Decidendi:

It was held that GAIL was acting dehors the Government pricing order and, being an agency
of the government, it should not have done so. It should not have acted in a commercial and
arbitrary manner. GAIL had incurred no cost in transportation.

UNDUE INFLLUENCE

Undue influence have an impact on in agreement law is the inappropriate pressure (or the
illegal intensity of persuasion) implemented through a depended on, more powerful party on
a trusting, less powerful birthday party to enter into (or refrain from moving into) a legally
binding settlement (written or oral) towards their will, which falls slightly short of duress.

16. ‘Undue influence’ defined.— A contract is said to be induced by ‘undue influence’

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

In Williams v Bailey 21

Case facts:

A son cast his father’s signature on promissory notes and gave them to their bankers. At a
assembly of all the parties on the financial institution, one of the bankers stated to the father:
“If the bills are yours we're all proper; if they may be no longer, we've got best one path to
pursue; we cannot be events to compounding a felony.” The bank’s solicitor said it was a
serious depend and the daddy’s own solicitor added, “a case of transportation for existence.”
After in addition dialogue as to the son’s financial liability the financial institution’s solicitor
said that they could handiest appearance to the father. The father then agreed to make an
equitable mortgage to the bank in attention of the return of the promissory notes. The father
succeeded in an action for cancellation of the agreement.

Ratio Decidendi:

It became held via Lord Westbury that the safety given for the debt of the son via the father
under such instances, became not the security of a man who acted with that freedom and
energy of deliberation that need to be considered as important to validate a settlement to offer
security for the debt of some other.

21
(1866) LR 1 HL 200
24
FRAUD

Thus, wherein a false declaration is made deliberately, with the know-how that it is fake, on
the way to deceive the alternative birthday celebration and thereby inducing him into getting
into the agreement – it's called fraud .

Section 17 of the Act defines fraud as – “Fraud” means and includes any of the following
acts committed by a party to a contract, or with his connivance, or by his agents, with intent
to deceive another party thereto his agent, or to induce him to enter into the contract.

In Sri Krishna v Kurukshetra university

Case facts:

Shri Krishan, a candidate for the L.L.B. part1 exam, who was short of attendance, did not
mention the fact in the admission form for the examination. Neither the head of the law
department nor the university authorities made proper scrutiny to discover the truth. After the
exam, the examination department held the exam invalid upon knowing the truth.

Rati Decidendi:

It was held by SC that there was no fraud by the candidate and the university had no power to
withdraw the candidate on that account.

MISREPRESENTATION

Section 18 of the Indian Contract Act, 1872 defines misrepresentation as under:

Misrepresentation means and includes-

 The positive assertion, in a manner not warranted by the information of a person

making it, of that which is not true, though he believes it to be true.

 Any breach of duty which, without any intent to deceive, gains an advantage to the
person committing it, or anyone claiming under him, by misleading another to his
prejudice or to do the prejudice of another claiming under him.

 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.

25
In With v O’Flanangan
Case facts:
A doctor was practicing and earned 2000 pounds. Another practioner came can asked for this
goodwill. The 1st doctor accepted and made a contract for sale of goodwill. The 1 st doctor was
affected with an ailment and lost his practice. But his fact was not revealed. During the
contract he had no intention to deceive. Now the 2 nd doctor refused to buy the goodwill. Now
the case is filed against him.
Ratio Decidendi:
The court held that it was a constructive fraud. Here the innocent part can rescind the
contract.

MISTAKE

According to section 20, Mistake may work in two ways:

1. A mistake in the minds of parties is such that there is no genuine agreement at all.
There may be no consensus and idem i.e. the meeting of two minds, i.e. there may
be absent of consent. The offer and acceptance do not coincide and thus no genuine
agreement is constituted between the parties.

2. There may be a genuine agreement, but there may be a mistake as to a matter of fact
relating to that agreement.
In Ravi Kumar v Behboob Baksha
Case facts:
There was partition of the land. A and B are the parties. A asked B to sell his land. The
partition made wasn’t clear. B sold his land and A built a house. After building the house
he came to know that a part of the land was his and he bought he own land again. A filed
a case.
Ratio Decidendi:
The court held that contract was made without knowing the private right and was thus
asked to pay compensation by B.

26
 LAWFUL OBJECT
According to Section 23 of the Indian Contract Act, the subsequent issues and objects
aren't considered as lawful:

If it is forbidden by way of regulation,

If it's miles against the provisions of other regulation,
If it's miles fraudulent,
If it damages anyone’s individual or property,
If it is in the opinion of court docket, immoral or against public coverage.
Thus any contract which incorporates such illegal provisions are not taken into
consideration as a valid contract.

Certainty and possibility of overall performance

The phrases of the settlement should be positive and not indistinct. If with the aid of any
way it isn't always possible to examine the meaning of the agreement, it cannot be
enforceable with the aid of regulation. An agreements to do any impossible act can never
be enforced. For instance, agreement to bring stars from the sky cannot be considered as a
valid contract as it's far an impossible act.

27
 CONCLUSION

A settlement is taken into consideration as a legally binding settlement or a dating that exists
among two or extra men and women to do or abstain from doing an act, which the law will
put into effect. If a contract desires to be formed a suggestion must be subsidized by using
recognition of which there need to be a few attention. Both events to a agreement ought to
intend to create some criminal relation upon each different of which the party if fails to fulfill
the situations of the agreement may be punished below law. Social contracts or agreements
between households do no longer put into effect the agreements and do no longer intend to
create any felony relation, consequently can not be considered as a valid agreement. An
settlement is a form of cross reference among special events which can be oral, written and
lies upon the respect of the parties for its achievement as opposed to being in any manner
enforceable. All contracts are agreements because there basically ought to be a mutual know-
how among the events for a settlement to be fashioned. The events need to agree and cling to
the offer of the agreement. In the cases of an invitation to a proposal a contract is formed
most effective whilst the offer is commonplace with the aid of the opposite birthday party and
the party giving the provide has information of the popularity, in which all of the terms of the
offer is frequent. The maximum essential part of a valid contract is a lawful settlement, as
illegal contracts have no valid repute i.E. They may be taken into consideration as void inside
the eyes of law. Therefore it could be stated that every one agreements are not contracts, the
agreements which are framed below the law of the settlement, may be treated as legitimate
contracts. Mostly the phrases ‘agreement’ and ‘agreements’ are used interchangeably, but
they're not exactly the same element. Black’s law dictionary considers an settlement as “a

28
mutual understanding among parties approximately their relative rights and responsibilities.”
It defines a agreement as “An settlement among events creating responsibility which can be
enforceable by way of the law.” Therefore coming in a mutual agreement with a person,
positioned it in writing, however if it doesn’t fulfill the requirements of an enforceable
settlement, it can't be enforced by using regulation. The agreement need to be supported via
attention from each aspects. Each party moving into the settlement should give or promise to
give something and receive some thing or a promise in return. Consideration is the price for
which the promise of the other is sought. However, this charge want not always be in phrases
of cash. In instances in which promise isn't supported by using consideration, the promise
will by means of nudum pactum (a naked promise), which is not enforceable at regulation.
The object of the settlement ought to be lawful and not one which the law disapproves.

REFERENCE

BOOKS:

Dr R K Bangia, Contract I, 2012, Allahabad Law Agency

Avatar Singh, Contract and Specific Relief, 2013, Eastern Book Company

WEBSITES:

 https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/agreements-
without-consideration/
 https://blog.ipleaders.in/analysis-section-10-indian-contract-act-1872/
 https://www.pbookshop.com/media/filetype/s/p/1350093260.pdf

29
30