• PRIVITY OF CONSIDERATION

• PRIVITY OF CONTRACT
• Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co. Ltd
• An agreement without consideration is void but there are few exceptions – and
agreement without consideration has been made valid and enforceable.
i. Natural love and affection – Raj Lucky Dabee v Bhootnath Mookerjee
ii. Past voluntary service – A finds B’s phone and gives it to B. B promises to pay
Rs 500 to A.
iii. Time-barred debt – A owes B Rs 1000, but the debt is barred by the Limitation
Act. A signs a written promise to pay B Rs 500 on account of the debt.
iv. Completed gift
LAWFUL OBJECT

• Legality of object and consideration is an essential requirement for a contract to be valid.

• Every agreement of which the object or consideration is unlawful is void.
• The following are the conditions wherein the object or consideration is unlawful:
• If it is forbidden by law (contract killing)
• When it would defeat the provisions of any law
• If it is fraudulent purpose
• If it causes injury to any person or property (agreement between 2 person to defame another person)
• The court regards it as immoral
• If the court regards it as opposed to public policy. (Trading with enemy. Sale of Public Office)
VOID AGREEMENTS

• Agreements without considerations are void

• Agreements in restraint of marriage is void
• Agreements in restraint of trade are void (Nordenfelt v Maxim Nordenfelt)
• Agreements in restraint of legal proceedings are void
• Uncertain agreements are void
• Wagering agreements are void
• Agreements to do impossible acts are void
PERFORMANCE AND DISCHARGE OF CONTRACTS

• Contracts creates a legal obligation and this obligation persists until the contract
is discharged.

• Discharge of a contract takes place by means of performance by the party/parties

to the contract.

• It is the primary duty of each party to a contract to either perform or offer to

perform his promise.
BY WHOM THE CONTRACT SHOULD BE PERFORMED

• The promise under a contract may be performed as the circumstances may allow,
by the promisor himself or by his agent or by his legal representative.

1. PROMISOR – a contract must be performed by the promisor himself generally

and when it is the intention of the parties and the promise then the contract shall
be performed by the promisor only.
• For example – A promises to paint a picture for B. A must perform this promise
personally.
2. LEGAL REPRESENTATIVE – in case other than personal skill is required – the legal representatives of
the deceased promisor are bound to perform it, unless an intention contrary to the contract arises from the
contract.

But their liability under the contract is limited to the value of the property they inherit from the deceased.
For Example –

A promises to deliver goods to B on a certain day, on payment of rs. 2000. A dies before that day. A’s
representatives are bound to deliver the goods to B and B is bound to pay rs. 2000 to A’s representatives.
3. AGENT – a promisor or his representative may employ
a competent person to perform the contract where the
contract is not based on personal consideration.

4. JOINT PROMISOR – when two or more persons enter into a joint

agreement with one or more persons such promise is known as joint promise
and the parties to such joint agreement are called as joint promisors.
TIME AND PLACE OF PERFORMANCE OF PROMISE

• Time for performance of promise where no time is specified - - the

engagement must be performed within reasonable time.

• The question what is a reasonable time is - in each particular case, a

question of fact.
• Time and place for performance of promise, where no specific time is specified –
The promisor may perform it at any time during the usual hours of business on
such day and at the place at which the promise ought to be performed.

• For example – A promises to deliver goods at B’s warehouse on the first January.
On that day A brings the goods to B’s ware house but after the usual hour of
closing it and they are not received. A has not performed his promise.
• Application for performance on certain day to be at proper time and place -
-it is duty of Promisee to apply for performance at a proper place and with
the usual hours of business.
• The performance of any promise may be made in any manner, or at any
time which the promisee prescribes or sanctions.
DISCHARGE OF CONTRACT

• A contract may be discharged by way of –

Performance
Impossibility of performance
Agreement
DISCHARGE BY PERFORMANCE

• A contract can be discharged by performance – when the parties to the

contract fulfil their obligations under the contract within the specified time
and manner, then the contract is said to have been discharged by
performance.
DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE

• The performance of a contract is sometimes impossible and in such

circumstances, the contract is discharged.
• Law does not recognise what is impossible, hence contracts in such
situations are discharged.
• The impossibility of performance can be categorised into 2 types –
 initial impossibility or pre-contractual impossibility
 supervening impossibility
INITIAL IMPOSSIBILITY OR PRE-CONTRACTUAL IMPOSSIBILITY

• Such impossibility exists at the time of making a contract and can further categorised into known
impossibility and unknown impossibility
a) Known impossibility – this means that one or both parties to the contract have the knowledge that the
promise is impossible to perform even though they enter into an agreement. Ex. A agrees with B to
bring a dead man to life.
b) Unknown Impossibility – this means that both the parties genuinely believe that the performance of the
promise is possible but it is impossible to perform. Ex. A agrees to sell certain goods to B, supposed to
be on their way from Mumbai to Kolkata on a certain ship. Unknown to both the parties, the ship had
already sunk in the deep sea and the goods ceased to exist at the time of contract. The contract becomes
void when the impossibility of performance is discovered.
SUPERVENING IMPOSSIBILITY/DOCTRINE OF FRUSTRATION

• The contract becomes void on account of the subsequent impossibility only

if the following conditions are satisfied –
a) The act should have become impossible after the formation of the
contract
b) The impossibility should have been caused by a reason of some event
which was beyond the control of the promisor
• The principle of frustration of contract or of impossibility of performance is
applicable to different types of contracts. The following are some of the specific
grounds of frustration-
Destruction of Subject matter
Death or incapacity of party
Government administrative or legislative intervention
Intervention of war
Non-happening of contemplated event.
• If and when there is frustration the dissolution of the contract occurs
automatically.
• Frustration should not be self induced.
DISCHARGE BY AGREEMENT

• Although contracts need to be performed, there are some contracts which

do not require performance. The following are the conditions when the
contracts are not required to be performed:
1. By novation, rescission and alteration – when the parties to the contract
enter into new contract, agree to change or rescind the contract, the old
contract ceases to be performed.
• For example – A owes B rs 1000. A, B and C agree that C will pay B and he will
accept rs 1000 from C in lieu of the sum due from A. A’s liability shall come to an
end, and the old contract between A and B will be substituted by the new contract
between B and C.

2. By waiver or remission – when the promisor is waived from the performance of

the contract by the promisee, the promisor is not required to perform his promise.
DISCHARGE BY LAPSE OF TIME

• A contract is required to be performed within a specified period or stipulated

time.
• If it is not performed and no action is taken by the promisee within the specified
period of time, then the promisee is deprived of the remedy under the law.
• For example –
• If a creditor does not file a suit against the buyer for recovery of the price within
3 years, the debt becomes time-barred and hence irrecoverable.
DISCHARGE BY OPERATION OF LAW

• A contract is discharged by the operation of law under the following circumstances:

1. Death – the contract is discharged on the death of the promisor where the contract
requires personal skill
2. Insolvency – the insolvent is discharged from all liabilities on all the contract entered
into by him up to the date of insolvency.
3. Merger –when 2 parties to a contract enter into another contract which confers superior
rights to the other party, the contracts are said to be merged and the inferior rights are
not required to be enforced. For example – lessee becomes owner of property.
DISCHARGED BY BREACH

• Breach of contract means the failure of a party to fulfil or perform his

obligations or promise under the contract.
• It discharges the aggrieved party from performing his obligations.
• Breach of contract is of 2 types –
Anticipatory breach of contract
Actual breach of contract
ANTICIPATORY BREACH OF CONTRACT

• When the party to the contract or the promisor refuses to perform his/her
obligation or promise under the contract or inform his/her willingness
before the time of performance has arrived, it is referred to as anticipatory
breach of contract.

• The amount of damages in such breach of contract differ from case to case.
• For example – A agrees to employ B from 1 March and on 25 February he writes to B that
he need not join the service. The contract has been expressly repudiated by A before the
date of performance. This is anticipatory breach of contract.

The consequences of anticipatory breach of contract are –

 the aggrieved party can rescind the contract and claim damages for the breach of the
contract without waiting until the due date of performance.
 The aggrieved party may treat the contract as operative and wait until the due date for
performance and claim damages if the promise still remains unperformed.
ACTUAL BREACH OF CONTRACT

• Actual breach of contract occurs when one of the parties to the contract refuse to
perform the obligation or promise under the contract on the due date of the
performance of the contract.
• When party refuses to perform his promise and breach of contract takes place the
other party is liable to obtain the rights to claim damages or compensation.
• A agrees to deliver 100 bags of sugar to B on 1 February 2018. On the said date
he failed to supply 100 bags of sugar to B. this is actual breach of contract.
• The consequences of actual breach of contract are –
 When time is the essence of contract – the contract is voidable at the option of the
aggrieved party and he can claim the compensation for the loss of non- performance..
However, the aggrieved party cannot claim compensation when he accepts delayed
performance, such acceptance may be express or implied.

 When time is not the essence of contract – the contract is not voidable but the aggrieved
party can claim compensation for any loss caused by the non-performance.
REMEDIES FOR/ARISING OUT OF BREACH OF CONTRACT

• Suit for damages

• Rescission of contract
• Suit for specific performance