Prof.

Zeshaan Ahmad Page 1 of Contract Act 1872

BUSINESS LAW
Questions for Preparation of Examination
Q. 1, (i) What is a contract? Discuss essentials of a valid contract.
2, (ii) Discuss different types of contract.
3, (iii) What agreements are expressly declared void by law?
4. (iv) What is an offer? Discuss essentials of a valid offer. What are
different types of an offer?
(v) What is acceptance? Discuss essentials of a valid acceptance.
(vi) Define consideration. Discuss essentials of a valid consideration.
(vii) State exceptions to the rule “no consideration, no contract.”
(viii) Who is competent to contract? Discuss provisions of law relating to an
agreement made by a minor.
(ix) What is a quasi contract? Discuss different types of quasi contracts.
(x) Discuss various modes of discharge of contract.
(xi) What remedies are available to party aggrieved by breach of contract?
(xii) What are a contract of indemnity and a contract of guarantee?
Differentiate between these two.
(xiii) Discuss rights and duties of bailee and bailor.
(xiv) Define a contract of bailment. State essentials of a contract of
bailment. What are different kinds of bailment?
(xv) Discuss rules as to communication of proposal, acceptance and revocation.
(xvi) Discuss various modes of revocation of offer.
(xvii) What are unlawful considerations and objects?
(xviii) Discuss provisions of law relating to agreements by: (a) unsound mind person, (a)
disqualified person.
(xix) What is a contingent contract? Discuss rules as to performance of contingent contracts.
(xx) What is an agency? Discuss various modes of creation and termination of agency.
(xxi) Discuss rights and duties of agent and principal.
Q.5 (i) What is a contract of sale of goods? Discuss essentials of a contract of
sale of goods. Differentiate between sale and agreement to sell.
(ii) What is a condition and what is a warranty in a contract of sale of
goods. Explain the difference between a condition and a warranty.
When breach of a condition can be treated as breach of a warranty.
State various implied conditions and warranties in a contract of sale of
goods.
(iii) Who is an unpaid seller? Discuss rights of an unpaid seller.
(iv) What is Doctrine of Caveat Emptor. Also state exceptions to it.
(v) Define delivery of goods. What are different modes of the delivery?
(vi) Discuss rules regarding delivery of goods.
(vii) State rules regarding transfer of property from seller to buyer in a contract of sale of
goods.
(viii) Write a note on sale by non-owner.
(ix) Discuss duties and rights of buyer.
Q.6 (i) What is a negotiable instrument? Discuss its distinctive features.
(ii) What is a promissory note? Give a specimen of a promissory note.
Explain its essential features.
(iii) What is a bill of exchange? Give a specimen and essential features.
(iv) What is a cheque? Give a specimen and essential features.
(v) Differentiate between promissory note, bill of exchange and cheque.
(vi) When a banker must and when a banker may refuse to honour a
cheque?
(vii) What is meant by crossing of a cheque? Discuss different types of
crossing.
Q.7 (i) Define contract of carriage of goods. Discuss different kinds of
carriers of goods. Discuss essential features of common carrier.
Differentiate between common carrier and private carrier.
(ii) Discuss rights, duties and liabilities of common carrier.
(iii) Discuss liabilities of railway as carrier of goods.
(iv) What is a charter party? Enumerate different kinds of charter party. Discuss clauses of
charter party. State implied warranties in a charter party. Discuss effects of breach of the
terms a charter party.
(v) What is bill of lading? State features, contents and types of bill of lading. Differentiate
between charter party and bill of lading.
 Prof. Zeshaan Ahmad
Question: 1
“An agreement enforceable by law is
a contract” Sec 2 (h)
All agreements are contracts if they
are made by the free consent of the
parties competent to contract, for a
lawful consideration and with a
lawful object, and are not hereby
expressly declared void. An
agreement creating or defining
obligations between the parties (Sec
10)
An agreement enforceable by law is
a contract” Sec 2 (h)
Every promise or every set of
promises forming the consideration
for each other is an agreement. Sec 2
(e)
Page 2 of Contract Act 1872
Discuss an agreement enforceable at law is a Contract. Or
Define contract. Discuss essential elements/ requirements of a valid contract. Or
What agreements are contract? Discuss. Or
Contract is an agreement enforceable at law. Discuss. Or
All contracts are agreements, but all agreements are not contract. Discuss.
Ans:
CONTRACT:
A contract is an agreement between two or more persons to do or not to do some
particular things such agreement is enforceable at law.
Section 2 (h) of the Contract Act 1872 defines a contact as:
“An agreement enforceable by law is a contract”
DEFINITIONS:
WILLIAMANSON:
“A contract is an agreement enforceable at law made between two or more
parties, by which rights are required by one or more to act or forbearances on the
part of the otter or others”
SIR FREDERICK POLLOCK:
“Every agreement and promise enforceable at law is contract:
So, we may conclude that.
Promise = Proposal + Acceptance
Agreement = Promise + Consideration
Contract = Agreement + Enforceability
Essentials of a Valid Contract:
Essential conditions of the validity of contract are stated in Section 10 of Contract Act
1872:
According to Section 10 of the Contract Act 1872:
“All agreements are contracts if they are made by the free consent of the
parties competent to contract, for a lawful consideration and with a lawful object,
and are not hereby expressly declared void.”
The following are the main essential of a valid contract.
1. There must be an agreement.
2. Creation of legal relationship.
3. Consent must be free.
4. Parties must be competent to contract.
5. Consideration must be lawful.
6. The object of the agreement must be lawful.
7. The agreement must have not been declare void by law.
8. Certain and possibility of performance.
9. Other legal requirements must be fulfilled.
1. Agreement:
According to sec. 2(h) of contract act 1872
“An agreement enforceable by law is a contract”
According to sec. 2(e):
“Every promise or every set of promises forming the consideration for each
other is an agreement”.
Agreement is a comprehensive term including
a) Social agreements
b) Legal agreements
A social agreement is social in nature and do not enjoy the benefit of law, where as legal
agreement is the sum of
 An agreement
 An intension to create legal obligations
 Prof. Zeshaan Ahmad
Intention to create legal relationship
means, Parties know that they will
have to face legal consequences if
they fail to perform their promises.
Two or more parties are said to be
consent when they agree upon the
same thing in the same sense. (Sec
13)
Consent is said to be free when it is
not caused by,
a) Coercion (sec15)
b) Undue Influence (Sec 16 (1))
c) Fraud (sec 17)
d) Misrepresentation (sec 18)
e) Mistake (Sec 20, 21, 22)”
f) (Sec 14)
Every person is competent to
contract who;
a) Is attained the age of majority.
b) Is of sound mind.
c) Is not disqualified by law to
which they are subject.”
(Sec 11)
The consideration of an agreement is
lawful, if it is,
a) Not forbidden by law.
b) Not Fraudulent.
c) Not involve injury to the person
or property of another.
d) Not immoral.
e) Not opposed to public policy.
(Sec 23)
Page 3 of Contract Act 1872
Example:
A invites his friend B to a dinner at his house. B accepts the invitation. It is social
agreement. If A does not host the dinner; B cannot claim any compensation, as the
agreement is a social one.
2. Creation of Legal Relationship:
The parties must intend to create legal relationship. It arises when parties know that if
one of them does not fulfill his share of promise, he shall be liable for the failure of
contract.
Agreements of social and domestic nature do not create legal relations. So, there is no
contract. All commercial agreements are contracts because there is a legal relationship
between the parties.
Example:
A father promises to pay his son Rs. 5,000 per month as pocket money. Later on he
refuses to pay so son cannot recover the amount as there was no intention to create legal
relationship.
3. Free Consent:
Another essential of a valid contract is that consent of the contracting parties must be
free.
Sec. 13 states as;
“Two or more parties are said to be consent when they agree upon the same
thing in the same sense”.
Sec, 14 states as;
“Consent is said to be free when it is not caused by,
a) Coercion (sec15)
b) Undue Influence (Sec 16 (1))
c) Fraud (sec 17)
d) Misrepresentation (sec 18)
e) Mistake (Sec 20, 21, 22)”
Example:
(a) A, who has two motorcycles, purposes to B that he want to sell his motorcycle to him
Rs. 30,000. It is not a valid contract as B is not sure which one of motorcycle A want to
sell him.
(b) A, compels B to enter into a contract on the point of pistol. It is not a valid contract as
the consent of B is not free.
4. Competent to Contract:
It is also essential for a valid contract that parties must be competent to contract. Every
person is not competent to contract; Sec 11 define the capacity of the parties as follows:
Sec. 11 states:
“Every person is competent to contract who;
a) Is attained the age of majority.
b) Is of sound mind.
c) Is not disqualified by law to which they are subject.”
Example:
A, who is unsound minded person, enters into an agreement with B to sell his house for
Rs. 200000. it is not a valid a contract as A is not
5. Lawful Consideration:
Consideration means something in return. In simple words consideration is:
“The price paid by one party for the promise of the other”
According to sec 23:
The consideration of an agreement is lawful, if it is,
a) Not forbidden by law.
b) Not Fraudulent.
c) Not involve injury to the person or property of another.
d) Not immoral.
e) Not opposed to public policy.
Example:
 Prof. Zeshaan Ahmad
The object of an agreement is lawful,
if it is,
a) Not forbidden by law.
b) Not Fraudulent.
c) Not involve injury to the person
or property of another.
d) Not immoral.
e) Not opposed to public policy.
(Sec 23)
Following agreements are expressly
declared to be void.
a) Agreement in restraint of
marriage. (Sec 26)
b) Agreement in restraint of trade.
(Sec 27)
c) Agreement in restraint of legal
proceedings. (Sec 28)
d) Agreement by way of wager.
(Sec 30)
Agreement the meaning of which is
not certain or capable of being maid
more certain, is void (Sec 29)
An agreement to do an impossible
act is void, and if the act become
impossible to perform after the
formation of the contract, the
contract becomes void (Sec 56)
Some legal formalities are:
a) Writing
b) Witness
c) Stamp
d) Attestation
e) Registration
Page 4 of Contract Act 1872
A sells wine to B on credit of one month. B fail to make the payment. A cannot recover
the amount through court of law because agreement between A and B is not enforceable
by law on account of unlawful consideration.
6. Lawful Object:
According to sec 23:
The object of an agreement is lawful, if it is,
a)The object of a contract is lawful if it is not,
b)Forbidden by Law
c) Fraudulent
d)Not involve injury to the person or property of another.
e) Not opposed to public policy.
Example:
A promise to pay Rs. 50,000 to B. if B beats C. the agreement is illegal, as its object is
unlawful.
7. Not Expressly Declared Void:
In order to make a valid contract, an agreement must not be one of those that are
expressly declared by law to be void.
According to Contract Act 1872: following agreements are expressly declared to be
void.
a)Agreement in restraint of marriage. (Sec 26)
b)Agreement in restraint of trade. (Sec 27)
c) Agreement in restraint of legal proceedings. (Sec 28)
d)Agreement by way of wager. (Sec 30)
8. Certain and Possibility of Performance:
For the validity of contract it is necessary that the contract must be clear, definite and
certain.
According to sec 29:
“Agreement the meaning of which is not certain or capable of being maid
more certain, is void”
The performance of a contract must be possible; otherwise it will not be a contract.
According to sec 56:
“An agreement to do an impossible act is void, and if the act become
impossible to perform after the formation of the contract, the contract
becomes void”
Example:
a) A agrees with B to discover a treasure by magic. The agreement is void.
b) A contracts with B to act in his theater for 1 year in consideration of some advance
payment. On several occasion A is too ill to act. The contract to act on those occasions is
void.
9. Legal Requirements:
Though a verbal contract is valid if it can be proved in the court of law, but for
some certain types of contracts the law has specially prescribed some legal
formalities:
These are:
a)Writing
b)Witness
c) Stamp
d)Attestation
e) Registration
Example:
A verbally promises to sell his pen to B. it is not a valid contract because law
requires that contract of immovable properties must be in writing.
Conclusion:
If any one of the above essentials is missing the contract is either, void able, void,
illegal or unenforceable in the eyes of law.
 Prof. Zeshaan Ahmad
Question: 3
An agreement enforceable by law is
a contract” Sec 2 (h)
All agreements are contracts if they
are made by the free consent of the
parties competent to contract, for a
lawful consideration and with a
lawful object, and are not hereby
expressly declared void. An
agreement creating or defining
obligations between the parties (Sec
10)
An agreement which is enforceable
by law at the option of one or more
of the parties thereto, but not at the
option of other or others, is a
voidable contract”.
Sec 2 (i)
A contract is voidable at the option
of party whose consent is not free.
(Sec 19)
When one of the parties to contract
prevents the other from performing
his promise, the contract becomes
voidable at the option of the party so
prevented”.
(Sec 53)
When a party to the contract
Page 5 of Contract Act 1872
Valid, Voidable, Voed, and Unenforceable Contract
Discuss Various Kinds of Contract?
How will you examine the contract is void able?
Ans:
According to Enforceability
According to enforceability contract can be divided into five categories.
1. Valid Contract
2. Voidable Contract
3. Void Contract
4. Unenforceable Contract
1. Valid Contract:
A valid contract is that kind of contract which is enforceable by law. The object of such
contract is to create the legal obligation between the parties. It enables one party to
compel another party to do something or not to do something.
According to Sec 2 (h) of Contract Act 1872:
“An Agreement enforceable by law is a contract”.
According to Sec 10 of Contract Act 1872:
“All agreements are contracts if they are made by the free consent of the
parties competent to contract, for a lawful consideration and with a lawful object,
and are not hereby expressly declared void”
The following are the main essential of a valid contract.
1. There must be an agreement.
2. Creation of legal relationship.
3. Consent must be free.
4. Parties must be competent to contract.
5. Consideration must be lawful.
6. The object of the agreement must be lawful.
7. The agreement must have not been declare void by law.
8. Certain and possibility of performance.
9. Other legal requirements must be fulfilled.
2. Voidable Contract:
According to Sec 2(i):
“An agreement which is enforceable by law at the option of one or more of
the parties thereto, but not at the option of other or others, is a voidable
contract”.
Following are the circumstances under which a contract becomes voidable.
a) Lack of Free Consent:
According to Section 19:
“A contract is voidable at the option of party whose consent is not free”.
Example:
A compels B on gun point to purchase his car for Rs. 250000. B agrees. As consent of B
was obtained by coercion, so this is voidable contract at the option of B.
b) Prevent from Performances:
According to Section 53:
“When one of the parties to contract prevents the other from performing his
promise, the contract becomes voidable at the option of the party so prevented: and
is entitled to compensate from the other parry for any loss which he may sustain
due to non performance”.
Example:
A contract with B that he will build his house at Rs. 50000. B agrees, when A wants to
start the work, B prevent him. Now the contract is voidable at the option of A.
c) Lapse of Time:
According to Sec 55:
 Prof. Zeshaan Ahmad
promises to do a certain thing at or
before specified time, but fails to do
such thing at or before specified the
time, the contract becomes voidable
at the option of promisee.
(Sec 55)
A contract which ceases to be
enforceable by law becomes void,
when it ceases to be enforceable.”
Sec 2 (j)
If after the formation of the contract
its performance becomes impossible
due to some reasons beyond the
control of the parties, the contract
becomes void.
(Sec 56)
A contingent contract to do or not to
do anything if an uncertain future
happens become void if, the event
becomes impossible. (Sec 32)
A contract is not enforceable due to
some technical defects and these are:
i. Writing
ii. Witness
iii. Stamp
iv. Attestation
v. registration
Question 3
Page 6 of Contract Act 1872
“When a party to the contract promises to do a certain thing at or before
specified time, but fails to do such thing at or before specified the time, the contract
becomes voidable at the option of promisee.
Example:
A contracts with B that he will whitewash his house for Rs. 5000 with in a week. A fails
to do so, the contract become voidable at the option of B.
3. Void Contract:
The word Void means not binding in law. Void contract has no legal effect at all.
According to Sec 2 (j):
“A contract which ceases to be enforceable by law becomes void, when it
ceases to be enforceable.”
A contract becomes void due to following reasons:
a)Subsequent Impossibility of Performance:
According to Sec 56:
“If after the formation of the contract its performance becomes impossible
due to some reasons beyond the control of the parties, the contract becomes void.”
It may by any one of the following:
i. Destruction of the subject matter without any fault of any party to the contract.
ii. Failure of ultimate purpose of the contract.
iii. Death of incapacity of a party where performance depends on personal skills.
iv. Change of law may make the consideration of the contract unlawful.
Example:
A agrees to sell his horse to B for Rs. 5000. This horse at the time of agreement was in
another city. It was decided that the transaction would be completed next day at the spot.
When they reached there, they found the horse lying dead. The performance of contract
becomes impossible because the horse was dead. This contract will be regarded as void.
b)Recession of a Valid Contract:
A voidable contract becomes void when the party who is entitled to rescind it, cancels
the contract.
c) Impossibility of Contingent Event:
According to Sec 32 of Contract Act 1872:
“A contingent contract to do or not to do anything if an uncertain future
happens become void if, the event becomes impossible.
4. Unenforceable Contract:
“ It is contract, which can not be enforceable by law due to some
technical defects”
Following are some of the technical defects which may make a contract unenforceable,
such as:
absence of writing, registration, requisite stamp, attestation, registration etc.
Example:
A agrees to construct a house for B for Rs. 100000, but the agreement between them is
oral, now if there is any breach, no one can enforce the contract.
Define offer? Explain the essentials of valid offer: Or
 Prof. Zeshaan Ahmad
When one person signifies to
another his willingness to do or
abstain from doing anything, with a
view to obtain the assent of that
other to such act or abstinence, he is
said to make an offer. Sec (a)
If an offer is made in words, spoken or
written, it is called an express offer.
If an offer in inferred from the conduct
of the parties or from circumstances, it
is known as Implied offer.
An offer that is made without to create
legal relationship is not a valid offer.
An ambiguous offer, if accepts by the
offeree shall not result in a valid offer.
Page 7 of Contract Act 1872
Define Proposal? Explain essentials of a valid proposal. Or
Define Proposal/ offer? Explain its various types. Explain legal rule of a valid
proposal/offer.
Ans:
Introduction:
The first essential in the formation of a binding contract is agreement. This is usually
evidenced by offer and acceptance. An offer is a definite promise to be bound on specific
terms. An express or implied statement of the term in which the maker is prepared to be
contractually bound if it is accepted unconditionally.
According to Sec 2 (a) of the Contract Act 1872:
“When one person signifies to another his willingness to do or abstain
from doing anything, with a view to obtain the assent of that other to such act or
abstinence, he is said to make an offer”
The offer may be made to one person, or a class of persons, or to the world at
large, and only to the person or one of the person to whom it is made may accept it.
(Carlill v carbolic smoke ball co. 1893)
Parties to an Offer.
There are two parties to a proposal:
1. Proposer or Offerer:
The person who makes a proposal is known as promisor , perposer, offerer.
2. Proposee or Offeree:
The person to whom the offer is made is known as offeree, offeree.
Example.
A, offers to sell his horse for Rs 50,000 to B. And B, agrees to buy it at the stated price.
It is an offer made by A and accepted it by B.
An offer must be distinguished from mere supply of information and invitation to
treat and statement of intention.
Essentials of a valid offer:
Following are the essentials of a valid offer:
1. IT MAY BE EXPRRESS OR IMPLIED:
An offer may be made either by words or by conduct. Law recognizes both offers as
valid.
Express Offer:
If A says B, that he will sell his house to him for Rupees 5,000,000, As this offer made in
words there for it is called an Express offer
Implied Offer:
A railway coolie carries the luggage of B without being asked to do so and B allows him
to do so. It is an implied offer.
2. IT MUST CREATE LEGAL RELATION;
It is essential for a valid offer that it must be made with the intention of creating legal
relationship otherwise it will be only an invitation.
Example:
A, invites B to dinner and B accepts the invitation. It does not create legal relation, so
there is no legal offer.
3. IT MUST BE DEFINETE & CLEAR:
According to Sec 29:
“Agreement the meaning of which is not certain or capable of being maid more certain,
is void”
Offer should be certain, clear, understandable and simple. It may not create any
 Prof. Zeshaan Ahmad
Where a party invites the other party to
negotiate a deal, it is an invitation to
offer and not an offer.
An offer that is made to a particular
person or a group of persons is called a
specific offer.
When an offer is made to general
public it is called a general offer.
An offer is affective only when it
comes to the knowledge of offeree.
An offer should not contain a term the
noncompliance’s of which would be
considered as acceptance.
In a proposal the proposer may express
his willingness to do or not to do an
act.
A proposal can not be cancelled after it
is accepted.
The acceptance of cross offer dose not
results in complete agreement.
QUESTION: 4
Page 8 of Contract Act 1872
confusion in the mind of the promise.
Example:
A has two motorcycles. A offers B to sell one motorcycle to B for Rs. 40,000.It creates
confusion in the mind of B that which motorcycles A want to sell.
4. IT IS DIFFERENT FROM INVITATION TO OFFER;
Proposal is different from invitation. For example tender, price list of goods and
quotation ate only invitation and not the offer.
Example:
Display of goods in an auction sale is not an offer rather it is an invitation to offer.
5. IT MAY BE SPECIFIC or GENERAL OFFER;
When proposal is offered to general public, it is called general offer and when it is made
to specific person, it is called specific offer. Law requires both offers as valid.
Example:
(a); A announces in a newspaper that he will give a reward of Rs. 1000, who will return
his lost bicycle. It is a general offer.
(b); A makes an offer to B to sell his bicycle for Rs.1000, It is a specific offer.
6. IT MUST BE COMMUNICATEDTO THE OFFEREE;
An offer is effective only when it is communicated to the, offeree, if an offer is not
communicated to the offeree. It cannot be accepted. Thus an offer which is not
communicated is not a valid offer.
Example:
Without knowing that a reward has been offered for the arrest of a particular criminal, A
catches the criminal and informs the police; A cannot recover the reward, as he was not
aware of it.
7. IT SHOULD NOT CONTAIN NEGATIVE CONDITIO:
It is assumed that an offer should not contain a condition the non-compliance of which
may be treated as an acceptance.
Example:
A offers B to purchase his book for Rs, 100 and if he will not reply within a week, the
offer would be presumed to have been accepted. It is not a valid offer because there is
negative conditions attach with it.
8. OFFER MAY CONSIST OF AN ACT OR ABSTINENCE::
In a proposal the proposer may express his willingness to do an act or it may be an
expression of willingness by the proposer to abstain from doing an act.
Example:
A offer to sell his car to B for Rs. 600,000. This is an expression of willingness to do an
act.
9. OFFER MAY BE CANCELLED BEFORE ITS ACCEPTANCE:
An offer may be revoked before its acceptance. If a proposal is accepted by offeree then
it can not be cancelled. Following are various reasons of revocation of offer:
Communication of notice of revocation by the offerer Sec 6(1)
Leaps of time. Sec 6(2)
Failure to fulfill the condition Sec 6(3)
Death or insanity of the parties Sec 6(4)
10. IT MUST NOT CROSS OFFER;
When two parties make similar offer to each other in ignorance of each other offer, such
offer are called, cross offer, The acceptance of cross offer, does not result in complete
agreement.
Example:
A wrote to B to sell 100 tons of iron at Rs. 10,000 per ton. On the same day B wrote to
A to buy 100 tons of iron at Rs 10,000 per ton. There is no agreement between A and B
because the offers were similar and make in ignorance of the other.
What do you understand by the term ACCEPTANCE? What are the essentials of a
 Prof. Zeshaan Ahmad
When the person to whom the
proposal in made signifies his assent
thereto, the proposal is said to be
accepted. Sec 2 (b)
Acceptance can only by made by the
person to whom proposal is made.
The acceptance may be express of
implied. Law recognized both offer as
valid offer.
The acceptance must be absolute and
unqualified.
If time limit is specified then
acceptance must be given within that
period.
An acceptance is valid only if it
communicated to the offeree.
An acceptance is valid only when it is
given with the knowledge of proposal.
If a particular mode of communication
of acceptance is prescribed, the
acceptance must be given in prescribed
mode.
Acceptance must be given before the
offer is revoked.
Page 9 of Contract Act 1872
valid acceptance?
What is acceptance? Discuss valid rules of a valid offer.
Ans:
ACCEPTANCE:
According to Sec 2(b): of the Contract Act 1872,
“When the person to whom the proposal in made signifies his assent thereto,
the proposal is said to be accepted. A proposal when accepted becomes a promise”
ESSENTIAL OF A VALID ACCEPTANCE:
Following are the essentials of a valid Acceptance:
(1) IT MUST BE GIVEN BY THE OFEEREE:
An offer may be accepted by the person to whom it is made.
Facts:
The claimant was appointed to a post as a headmaster. Without authorization, he was
informed of the appointment by one of the managers in his individual capacity. Later, it
was decided to give the post to someone else.
Held: communication of offer was unauthorized. (Powell Vs Lee, 1908)
(2) IT MAY BE EXPRES OR IMPLIED:
Acceptance can be made expressly or implied.
Example:
A, board a local bus. It is an implied by A to pay the fare for the travel.
(3) IT MUST BE ABSOLUTE AND UNCONDITIONAL:
The acceptance must be absolute and unqualified. If there is variation in the acceptance,
then the acceptance is not an acceptance but a counter proposal in itself.
Example:
A offer to sell his house to B for Rs.5000 in cash, B reply that he can buy it with Rs.2000
in advance and remaining amount will payable in monthly installment of 1000 each.
(4) IT MUST BE GIVEN WITHIN RESONABLE TIME:
If time limit is specified then acceptance must be given within that period.
EXAMPLE;
A offer to B to purchase his house for Rs.100, 000 and if B want to purchase it he must
give his intention within a week. If replies after a week then it is not valid.
(5) ACCEPTENCE MUST BE COMMUNICATED TO THE OFFEROR:
When acceptance comes to the knowledge of proposer, it become irrevocable and it
become a valid acceptance.
Example:
The manager of a Railway company received a draft agreement for the carriage of coal.
The manager approved and signed the agreement but did not return it to offerer.
Held: there was no contract as the acceptance is not completed. (Brogden Vs
Metropolitan Co 1877)
(6) IT MUST BE GIVEN WITH THE KNOWLEDGE OF THE OFFER:
An acceptance is valid only when it is given with the knowledge of proposal. If a person
perform an act with the ignorance with the offer it is not consider as offer.
Example:
A offers a reward for an act and B dose the act in ignorance of the offer. Now B can not
claim the reward when he becomes aware of its existence.
(7) IT MUST BE IN A PRESCRIBED MANNER:
Acceptance must be given according to the particular manner prescribed in the offer. If it
is not given according to that then it can be rejected by the offeror.
Example:
A makes an offer to B and write if you accept the offer send your acceptance by telegram
B send his acceptance by registered post it is not a valid acceptance.
(8) ACCEPTANCE BEFORE REVOCATION OF OFFER:
Acceptance must be given before the offer is revoked. An offer stands revoked in the
following cases:
1. Communication of notice of revocation by the offerer. [Sec 6 (1)]
Prof. Zeshaan Ahmad Page 10 of Contract Act 1872

2. Leaps of time [Sec 6 (2)].

3. Failure to fulfill the condition [Sec 6 (3)].
4. Death or insanity of the parties [Sec 6 (4)]
5. Rejection of proposal by the proposee.
6. Counter proposal by the proposee.
7. Destruction of subject matter.
8. Subsequently illegality.

Question: 5
Define Consideration. Also discuss its Essentials:
 Prof. Zeshaan Ahmad Page 11 of Contract Act 1872

INTRODUCTION
Consideration is one of the essential elements of a valid contract. An agreement made
without consideration is void and not enforceable at law. In simple words an
agreement is enforceable only when both the parties get something and give
something.
Consideration is the
According to POLLOCK
price for which the
“Consideration is the price for which the promise of the another is bought.”
promise of another is
bought.”
Consideration:
Section 2 (d) the Contract Act 1872 defines Consideration as follows:
“When at the desire of a promisor, the promisee or any other person has
done or abstained from doing, or does or abstain from doing, or promises to do or
to abstain from doing, something, such act or abstinence or promise is called a
consideration for the promise.”
Consideration is an essential part of the contract. It is what each party brings to
the contract.

Essentials of a Valid consideration:

Following are the essentials of a valid contract:

1.IT MUST MOVE AT THE DESIRE OF THE PROMISOR:

Acts done voluntarily or at The act or the abstinence, which is to form consideration for the contract, must be done
the desire of third party at the request of the promisor. Acts done voluntarily or at the desire of third party are not
are not valid as valid as consideration.
consideration.
Illustration:
A, on the request of collector of town, built at this own expense certain shops in a
market. B, one of the businessmen in those shops, promised to pay some commission on
the goods sold through his shop in consideration of A’s having expended money for the
construction.
Held: A could not recover the commission, as the shops were not built at Bs request.
(Durga Prasad Vs baldev.1880).

2.IT MAY MOVE FROM PROMISEE OR ANY OTHER PERSON:

The act, which is to form
consideration for the
contract, may be done by the
promisee himself or by any
other person on his behalf.
The act, which is to form consideration for the contract, may be done by the promisee
himself or by any other person on his behalf. The law recognizes a consideration moving
from a person other than the promise as valid.
Illustration: Facts: A, an old lady, gifted some property to her daughter R on the
condition that she should pay certain amount annually to As sister S. R put the promise
with S in writing, subsequently R refused to pay the annuity on the ground of ab
sence of consideration from S.
Held: S could recover the amount, as consideration from any other person is effective.
(Chinayya Vs Ramayya, 1881)

3.IT MAY BE AN ACT OR ABSTINENCE:

It may be an Act or The consideration may be doing of an act or it may be abstinence from doing an act.
Abstinance Illustration:
1. A agree to construct a house for B Rs. 4 lakh. The consideration for Bs promise
to pay Rs. 4 lakh is an act to be done by A.
2. A agree to not to sue B if B pays Rs. 4 lakh as compensation. The consideration
for B,S promise to pay Rs 4 lakh is an abstinence on the part of A.
The consideration may be 4.IT MAY BE PAST, PRESENT, OR FUTURE:
past present or future. The consideration may be past present or future.

a) Past consideration:
When the act or abstinence has already has done and subsequently a promise is made to
pay remuneration to pay for that, the consideration to pay the promise is past.
 Prof. Zeshaan Ahmad Page 12 of Contract Act 1872

b) Present consideration:
It may takes place at the present time. In the contract of sale of goods the consideration is
present if the price is paid at the same time when the goods are delivered.
c) Future consideration:
Future consideration is a promise given for in return of a promise. If customers orders
goods which a shopkeeper undertakes to obtain from manufacture, the shopkeeper
promise to supply the goods and the customers promise to accept and pay is an example
of future consideration.

5.IT NEEDS NOT TO BE ADEQUATE:

The long established rule is that consideration need not to be adequate but it must be
sufficient.
It is presumed that each party is capable in serving of his own interest. It is for the
The long established rule is parties to consider when they are entering into the contract and not for the court to
that consideration need not to consider it at the time when the contract is sought to be enforced. Only the question to
be adequate but it must be take into account regarding the consideration is that whether the consideration has been
sufficient. freely given.
Illustration: A agrees to sell his house worth Rs. 500,000 for Rs. 350,000 only and
his consent is free. The agreement is valid contract not withstanding the inadequacy of
the consideration.
The contract is valid.

6. IT MUST BE REAL:
The consideration is not real, and invalid if it is:
a) Physically Possible: A promise to discover the treasure by magic.
b) Legally impossible: A promise to beat a person.
c) Illusory/Unreal: The promise to pay the police officer to Rs 100,000 if the catch
The consideration is not real, the thief is unreal, because he is already under the duty to catch the thief.
and invalid if it is not Illustrtion: Facts: C received summons to appear as a witness on behalf of G. G
physically, legally possible promised him a sum of money for his trouble. On default by G, C filed the suit for the
and must be real. recovery of promised sum.
Held: It was held that ‘C’ being under a public duty to give evidence, there was no
consideration for the promise and so the promise is unenforceable.
CASE LAW: (COLLINS VS GODEFROY)

7.IT MUST BE LAWFUL:

According to Sec 23:
Consideration of a contract must be lawful if it is not:
a) Forbidden by law:
b) Defeats the provision of any law:
Consideration of Contract c) Fraudulent:
must be Lawful if it is in d) Involves injury to the person or the property of another:
accordance with the Sec 23. e) Immoral:
f) Opposed the public policy: (SEC.23)

CONCLUSION:
Consideration is something in return. It must be legal, real, certain and physically
possible. “Consideration is the price paid by one party for the promise of other.

Question: 6
Define consideration. Briefly explain the exception to the rule No Consideration, No
 Prof. Zeshaan Ahmad Page 13 of Contract Act 1872

Contract. Or
What is legal position of an agreement without consideration? Or
Describe the Agreements that are regarded valid without consideration.

Exceptions to consideration:
Subject to certain In order to make a valid contract it is necessary that there must be lawful consideration
exceptions, agreements for both of the parties. However there are certain exceptions of the rule, No
without consideration are Consideration No Contracts .These exceptions are given below:
void” Sec25
According to Section 25:

“Subject to certain exceptions, agreements without consideration are void”

1.CONTRACTS ON ACCOUNTS OF NATURAL LOVE AND AFFECTIONS:

According to section 25 (1) of the Contract Act 1872:
“An agreement made without consideration is a valid contract if it is made
a) In writing.
b) It is registered.
c) It is made on account of natural love and affection between the parties
d) The parties stand in near relation to each other. “
Illustration:
A, on account of natural love and affection, promises to give her daughter B Rs 100,000.
A puts the promise in writing and gets it registered; the agreement is a valid contract.
Facts: B, a husband due to dispute with his wife, through registered documents drew
in R’s favor promise to pay some amount for maintenance. Later B refused to pay. R
sued for recovery.
Held: It was held that the agreement was void.
CASE LAW (Raj Lakhi Devi vs. Bhootnath)

2.CONTRECT TO COMPANSATE VOLUNTARY SERVICES:

Acts done voluntary or at the desire of a third party are not valid as consideration for a
“A promise to compensate contract.
voluntarily services is a valid But 25(2) states:
contract. “A promise to compensate voluntarily services is a valid contract if following conditions
Sec25(2) are fulfilled:
a) The voluntarily services should have been rendered for the promisor.
b) The intention of the promisor should be to compensate the promise.”
Illustration:
i. A, an architect, provides some professional services voluntarily to B. afterwards
B promise to pay Rs 10,000. For the services. This is a contract.
ii. A finds Bs purse and gives it to him. B promises to give A Rs 500 for this
service. This is a contract.

3.CONTRECT TO PAY TIME BARRED DEBT:

A time barred debt is one which is overdue for a period of more than three years but no
An agreement to pay a time barred suit has been filed to recover the debt, and as such according to the limitations Act 1908
debt is a valid contract: the recovery cannot be enforced through a court of law:
Sec 25 (3) According to sec 25 (3) of the Contract Act 1872:
An agreement to pay a time barred debt is a valid contract if:
a) The promisor was himself liable for the debt;
b) The agreement is in writing; and
c) It is signed by the debtor or by his authorized agent:

4.CONTRECT OF GIFT:
According to Sec 25 (Explanation):
A gift in orders to be valid does A gift in orders to be valid does not require any consideration, provided that:
not require any consideration, a) Offer of the donor had been accepted by the donee, and
b) Possession of the gift has been delivered.
Illustration:
A presents a watch to B on his birthday; A cannot demand his watch back on the ground
that there is no consideration for A.
 Prof. Zeshaan Ahmad Page 14 of Contract Act 1872

5.CONTRECT TO REMIT:
Section 63 of the Contract Act 1872 provides that:
“If a promise agrees to remit, wholly or in part, the performance of promise
made to him, or agrees to extend the time for such performance, the agreement is a
valid contract even if there is no consideration.”
Illustration:
A owes B Rs 5000.A pays Rs 2000 to B, and B accepts, in satisfaction with the whole
debt. Whole of debt is discharge.

6.CONTRACT OF AGENCY:
According to sec 185 of the contract act 1872:
No consideration is necessary “No consideration is necessary to create an agency.”
to create an agency.”(Sec 185) Illustration:
A authorized B to sell As land on his behalf and for that B is receive no remuneration. B
agrees to it. This is a valid contract of agency.

where on the faith of
promised donation, the
promise has incurred some
expenses or has taken up
some liability: the promise is
enforceable to the extent of
such amount.
7.CONTRACT TO DONATE:
Generally a promise to donate is not enforceable due to absence of consideration. But
where on the faith of promised donation, the promise has incurred some expenses or has
taken up some liability: the promise is enforceable to the extent of such amount.
Illustration:
G Promised to donate Rs 100 for the construction of a town hall. K depending on the
promise entrusted the work to a contractor and promised to pay. Subsequently, G refused
to donate on the ground of absence of consideration,
Held: K can recover the amount as he has taken up a liability on the faith of the promise.
(kadar nath Vs Gori Muhammad, 1886)

Facts: M promises to donate Rs.500 for the repair of mosque. ‘A’ did nothing for the
repair. M refused to pay. A filed a suit.
Held: It was held that M is not liable because it did not result in any loss to the
promisee
CASE LAW (Abdul Aziz vs. Masum Ali)

CONCLUSION:
It can be said that a contract without consideration can be made in some
exceptional circumstances as mentioned in law. Otherwise a contract without
consideration is not a valid contract.
Prof. Zeshaan Ahmad
A party is said to be breach
if the contract where,
without lawful excuse, he
does not perform his
contractual obligation.
When a party commits
breach of the contract, the
other party may treat, the
contract as rescinded and
become entitle to recover
damages.
Damages are monetary
compensation for loss caused
by the breach.
Ordinary damages are
granted to compensate
direct loss caused by the
breach.
Special damages can be
recovered only if the
promisor was made aware of
such damages.
The court may award nominal
amount as damages, e.g. Rs.
10, where promisee has
suffered no loss due to breach.
Liquidated damages can be
defined as a fixed or
ascertainable sum agreed by
the parties at the time of
contracting, payable in the
Page 15 of Contract Act 1872
Breach of Contract
Question: 7 What is Breach of Contract? Discuss the
remedies available to an aggrieved party on the Breach of
the contract. Or
What is Breach of Contract? Discuss its Consequences.
Ans:
BREACH OF THE CONTRACT:
As we know a contract is usually discharged by
complete and exact performance:
A party is said to be breach if the contract where,
without lawful excuse, he does not perform his contractual
obligation.
REMEDIES OF BREACH OF THE CONTRACT:
Following remedies available to the aggrieved party:
1. RECESSION OF THE CONTRACT:
When a party commits breach of the contract, the
other party may treat, the contract as rescinded he must restore
any benefit received by him under the contract to the person
from whom such benefit was received.
Illustration: A promises to deliver certain goods to B on 15 of
June and B promises to pay the price on 18 June. A fails to
supply goods to on specified date. B needs not to pay the price
on 18 June the contract is redesigned.
2. SUIT FOR DAMAGES:
Damages are the common law remedy. It is monetary
compensation awarded to the injured party for the lost caused to
him for the breach of the contract. Damages are of following
kinds;
a) ORDINARY DEMAGES:
Ordinary damages are granted to compensate direct loss caused
by the breach.
b) SPECIAL DEMAGES:
If there are some special circumstances which would result in a
special loss (indirect loss or abnormal loss) to aggrieved incase
of breach of the contract and these circumstances are known
to the promisor at the time of entering into the contract,
then in case of breach of the contract the aggrieved party may
claim also special damages or damages for indirect or abnormal
loss.
Note: The defendant is only liable if he knew of the special
circumstances from which the abnormal consequences of
breach could arise:
c) NOMIAL DEMAGES:
The court may award nominal amount as damages. Nominal
damages are awarded where the plaintiff has proved a breach of
the contract but has not suffered any loss due to the breach.
d) LIQUIDATED DAMAGES:
Liquidated damages can be defined as a fixed or ascertainable
sum agreed by the parties at the time of contracting, payable in
the event of breach. For example: An amount payable per day
of failure to complete the building on time.
Prof. Zeshaan Ahmad
event of breach.
A contractual term designed
as a penalty clause is to
discourage breach is void
and not enforceable.
Exemplary damages are
awarded with a view to
punish the guilty party.
Specified performance may
be defined as an order of the
court directing a person to
perform an obligation.
The court may issue
Injunction order restrains
the guilty party from doing
what he promised not to do.
Page 16 of Contract Act 1872
Note: There should be a genuine attempt to per-estimate the
likely loss the court then only will enforce payment.
If the amount specified in the contract as damages
exceeds fair value of the probable loss, then the excess amount
is called penalty.
A contractual term designed as a penalty clause is to discourage
breach is void and not enforceable because it is against principle
of Equity.
e) EXEMPLARY DEMAGES:
Exemplary damages are awarded with a view to punish the
defendant, and are not as a rule, granted in cases of contract.
Courts awards exemplary damages in following two cases:
a) A breach of promise to marry.
b) Bankers wrongful refusal to honour a cheque.
3. SUIT UPON QUANTUM MERIUT:
The phrase Quantum Meruit means “how much it is worth” it
is measured the value of contractual work which has been
performed.
Quantum Meruit is likely to be sought where one party
has already performed part of his obligation and the other party
then repudiates the contract.
Facts: Carven was emplolyed as MD in a company. After 3
months it was found that directors were not authorized to
appoint him.
Held: C could recover amount for work done. (Carven Ellis Vs
Canon Ltd).
4. SUIT FOR SPECIFIED PERFORMANCE:
Specified performance may be defined as an order of the court
directing a person to perform an obligation.
Specific performance may be granted in the following cases:
1. Where compensation of money is not an
adequate relief.
2. Where the damages caused by the breach cannot
be calculated.
3. Where compensation in money cannot be
recovered.
Illustration:
A contracts to sell his factory to B. But afterwards, A commits
breach, B may sue for specific performance of the contract.
5. SUIT FOR INJUNCTION:
An injunction may be made by the court to enforce a contract of
personal services for which an order of specific performance
would be refused.
Facts: C, a singer, contracted with D to sign exclusively for D,s
theatre for two years. During this period she also contracted to
sing at another theatre.
Held: C was restrained from doing so. (Lumby Vs Wanger
1852)
Discharge of Contract
Prof. Zeshaan Ahmad
It’s general rule that the
contractual obligations are
discharged only by complete
and actual performance.
If the entire obligation and
the conditions of the
contract fulfilled then a
contract is discharge by
actual performance.
If one party wants to
perform and the other
prevented him to perform it
will be am attempted
performance.
Notation means replacement
of contract by new contract.
Alternation change in terms
of conditions.
Recession means to forgive
the claim.
Page 17 of Contract Act 1872
Question: 8 What do you understand by the term discharge
of contract? Explain various modes of discharge of a
contract. Or
What are the circumstances in which a contract may be
discharged?
Ans:
Discharge of Contract:
A contract is usually discharge by performance. There are
number of exception to the principle that the performance must
be complete and exact. In order to ensure that the interest of
both the parties are protected.
METHODS OF DISCHARGE OF CONTRACT:
1. Discharge by Performance:
Every party fulfills or performs his contractual
obligations and the agreement is then ended. It’s general rule
that the contractual obligations are discharged only by complete
and actual performance.
Performance may be Actual or Attempted:
a) Actual performance:
If the entire obligation and the conditions of the contract
fulfilled then a contract is discharge by actual performance.
b) Attempted performance:
If one party wants to perform and the other prevented him to
perform it will be am attempted performance. The promisor is
then excused from contract and he may sue the promisee for
damages.
Facts: The claimant had agreed to write a series of book for
defendant. He was to receive 100 on completion. He did some
research and wrote part of the book. The defended then
abandoned the series.
Held: The claimant was entitled to 50 as reasonable
remuneration on a Quantum meruit basis. (Planche v
Colburn 1831.)
2. DISCHARGE BY AGREEMENT:
Discharge by agreement may take place in any one of the
following place.
a) NOVATION:
When parties to the contract agree to substitute a now contract
for the contract, It is called novation. The novation may
involve: (Major terms have changed)
1. Change of term of the contract. or
2. Change of parties to the contract. or
3. The both.
b) ALTERATION:
If the parties to a contract make a change only in the terms of a
contract, (Minor terms have changed e.g. Interest, place of
delivery)
c) RECESSION:
Recession means cancellation. It takes place in the following
two cases:
1. Where consent of the parties is not free, he may
rescind the contract.
2. Where the party to the contract fails to perform
his obligation, the other party may treat then
contract as rescinded.
Prof. Zeshaan Ahmad
Remission means to forgive
the claim.
Waiver means intentional
abandonment of rights.
(Sec 56). If the act becomes
impossible after the
formation of the contract the
contract is discharged.
A contract become
terminate after the expiry of
time limit prescribed by the
Limitation Act 1908.
It includes discharged by:
Death
Insolvency
Merger
Unauthorized alteration
After the breach aggrieved
party is absolved from his
obligation.
When a party fail to
perform his promise at the
time when performance is
due.
In anticipatory breach one
party declare in advance
that he will not perform his
obligation.
CAPACITY OF PARTIES:
Page 18 of Contract Act 1872
d) REMISSION:
Remission means to forgive the claim. A person who has right
to demand the performance of the contract may:
1. Remit wholly or in part, or
2. Extend the time of the performance, or
3. Accept any other satisfaction.
e.g. Government has decided to recover only 40% of the
amount due. (Hari Chand Madangopal Vs State of Punjab)
e) WAIVER:
Waiver means intentional abandonment of rights. Here a party
of a contract agrees to forgo a right available to it under the
contract. (Creditor releases the debtor to pay debt because of
debtor serious illness).
3. DISCHARGE BY IMPOSSIBILITY:
An agreement to do an impossible act is void ab initio. (Sec
56). If the act becomes impossible after the formation of the
contract the contract is discharged.
4. DISCHARGE BY LAPSE OF TIME:
The limitation act 1908 prescribed time limits during which the
contract must be enforced. At the expiry of that time the
contract become unenforceable and as such it terminates.
Illustration:
If a creditor does not take action for the recovery of the amount
within three years the debt lapse.
5. DISCHARGE BY OPERATION OF LAW:
It includes discharged by:
1. Death
2. Insolvency
3. Merger
4. Unauthorized alteration
6. DISCHARGE BY BREACH:
Where a party fails to perform the contract their takes place a
breach and the contract is discharged.
The breach my any of the following of the following kinds:
a) Actual Breach:
When a party fail to perform his promise at the time when
performance is due.
b) ANTICIPATORY BREACH:
In anticipatory breach one party declare in advance that he will
not perform his side of bargain when the time the time of the
performance arrives.
It may be explicit or implicit, a party may break a
condition of contract and declare in advance that he will not
perform the contract it is explicit breach or by some other action
which makes further performance impossible this is called
implicit breach.
Prof. Zeshaan Ahmad Page 19 of Contract Act 1872

Q 10 : What do you understand by capacity of parties to contract?

INTRODUCTION:
For a valid contract, it is necessary that the parties to the contract must
be competent to contract:

Sec. 11 states:
“Every person is competent to contract who;
d) Is attained the age of majority.
e) Is of sound mind.
f) Is not disqualified by law to which they are subject.”

PARTIES INCOMPETENT TO CONTRACT

Minor Unsound Mind Disqualified person

Now we shall discuss each of the above to see their position in a contract:

A. MINOR

DEFINITION OF MINOR:
Sec.3 of the Majority Act 1875:
“A minor is a person who has not completed 18 years of age.”

Note:
Where a guardian of minor’s property or person has been appointed
under the ‘Guardian & Wards Act’, a minor will attain the age of majority
after 21 years of age.

NATURE OF MINOR’S AGREEMENT:

The law regarding a minor’s agreement may be explained as under:

1. VOID AGREEMENT
A minor’s agreement is absolutely void because a minor has no legal
capacity to enter into a contract. Especially where the minor is under
contractual obligation to perform any liability.

Facts: Ram Piayari a minor sold her shop to Shamlal. The amount was paid
to Ram Piayari but the sale deed could not be registered as Ram Piayari was
a minor.
Held: It was held that as Ram Piayari was a minor, so the agreement was
void ab-initio. (SHIAM LAL vs. RAM PIARY 1910)

2. MINOR & RATIFICATION (make it legal after formation)

Principle of Ratification will not be applicable on minor because
minor’s agreement is void ab-initio has no validity in the eye of law. It
cannot be ratified by the minor, on his attaining the age of majority.
Prof. Zeshaan Ahmad Page 20 of Contract Act 1872

Facts: Sukhu Akhir a minor borrowed some money & executed a

promissory note for it. After attaining majority Sukhu Akhir
executed a second promissory note in settlement of the first.
Held: it was held that the second promissory note was void for want of
consideration. (Suraj Narain vs. Sukhu Akhir 1928)

3. MINOR AND ESTOPPEL

The term estoppel means when someone makes other believe that a
particular thing or fact is true, and then later on he cannot be allowed to
deny the truth of that thing.

The rule of estoppel does not apply on minor. A minor who who make
the other party believe that he is a minor cannot later be made liable on
such inducement.
Facts: A, a minor represents fraudulently that he is of full age and enters
into a contract with B, to sell his house. A, refuses to perform the
contract on the ground that he is a minor.
Held: It was held that B, has no right to take action against A, because the
rule of estoppel does not apply to minor. (Sadiq Ali Khan vs. Jai Kashore)

4. MINOR AND EQUITABLE CONSIDERATION

Generally, a minor cannot be forced to pay back the money received by
him but the court may force the minor to restore the amount to the other
party if minor is in procession of money. But, if minor has lost the property
or money, then he cannot be made responsible to pay.

Court has ordered that the Minor will only take the procession of his
property back if he restores the money received. (Jgennath Vs Lalta Parsad)

5. MINOR & NECESSARIES

A person who supplies necessaries to minor is entitled to recover
reasonable value of such goods from the property of a minor. If a minor
owns no property, the supplier will lose the price of necessaries

Facts: A minor purchased 11 coats. At that time he had sufficient clothes.

Held: It was held that the coats were not necessaries of life & minor was not
liable to pay for them. (Nash vs. Inman)

6. AGREEMENT BY GUARDIAN ON BEHALF OF MINOR

A contract made on behalf of minor, by his guardian is binding on the
minor provided the contract is (not for sale of Minor’s property) and:
a) Within the authority of the guardian
b) It is for the benefit of the minor.

Facts: Guardian on behalf of minor entered into a contract for the sale of
minor’s immoveable property.
Held: It was held that it is not a valid contract. (Gujoba Tulsi Ram Vs
Nikanath 1958).

1. MINOR CAN BE A PROMISEE

2. Law does not consider a minor incapable of accepting benefit.
Any contract that is for the benefit of minor and under which the minor
is not required to bear any obligation is valid.
Prof. Zeshaan Ahmad Page 21 of Contract Act 1872

A promissory note executed in favor of minor is valid and can be

enforced in court. (Sharafat Ali vs. Noor Muhammad 1924)

8. MINOR AS AN AGENT
A minor can be an agent. If a minor works as an agent he can make his
principal responsible to third parties for his acts. But he cannot be held
personally liable for negligence or breach of duty.

9. MINOR AS PARTNER
According to sec: 30 of partnership act 1932. A minor may be admitted to
the benefit of the partnership with the consent of all the existing partners.

10. Surety for a Minor

Where in a contract of guarantee, an adult can become surety for a minor,
the adult is liable under the contract, but the minor is not answerable.

11. Minor as Member of a company

A minor cannot become Member unless shares of company are fully paid
and his liability is limited.

12. Minor and Insolvency

A minor cannot be declared insolvent. Even for necessaries supplied to
him, he is not personally liable, only his property is liable.

13. CONTRACT BY MINOR AND ADULT JOINTLY

Where a minor and an adult jointly enter into an agreement with
another person, the minor is not liable but only adult would be liable.

14. POSITION OF MINOR’S PARENTS

The parents of minor are not liable for agreement made by a minor. But the
parents can be held liable if the minor acts as an agent of the parents.

15. MINOR AND NEGOTIABLE INSTRUMENTS:

A minor can make, draw, endorse, and deliver bills of exchange,
promissory notes and cheques in order to bind the other parties except
himself.

II- PERSONS OF UNSOUND

According to Sec. 11 of Contract Act 1872 for a valid contract it is necessary that
each party to a contract must have a sound mind.

WHAT IS SOUND MIND?

"A person is said to be of sound mind for the purpose of making contract if at
the time when he makes it, is capable of understanding it and of forming a
rational judgment as to its effects 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 contract when he is of unsound mind.
Prof. Zeshaan Ahmad Page 22 of Contract Act 1872

A property worth for 25,000 was agreement to be sold for 7,000. His mother
proved that he was Congenital idiot. So the contract is void. (Inder Singh Vs
Parmeshwar Singh 1957)

III- DISQUALIFIED PERSONS

According to Sec.11, the third party of incompetent person is that, who is
is disqualified from contracting due to political, professional or legal status such
as:
1. Joint Stock Company
The contractual capacity of director of the company is Limited. It can’t
enter into contracts outside the powers given to it by:
a) Memorandum of Association
b) Provisions of Companies Ordinance

2. Independent Sovereigns & Ambassadors

One should be careful while making contracts with sovereign &
ambassadors because they can sue others but cannot be sued without
permission of the Government.

3. Foreigner:
A contract with foreigner is void and illegal. But if a foreigner is resident
in Pakistan with the government, he can make a contract within the country.

4. Insolvent:
An insolvent cannot enter into a contract with anyone about the property
which will be in the contract of official receiver. After the order of discharge, he
can enter into a contract.

5. Convict
A convict is person who has been imprisoned by a court of law. During
the period of sentence, he is incapable of entering into contract.

Q # 11: What is Contract of Sale of Goods? What are its essentials?

Also differentiate between Sale and Agreement of Sale.
Prof. Zeshaan Ahmad
A contract whereby seller:
1) transfer
2) agrees to transfer
Seller means a person who
sells or agrees to sell goods
A person cannot sell his
goods to himself, therefore,
buyer is considered
necessary to make a
contract of sale.
Transfer of procession dose
not amount to contract of
sale, It is necessary that
goods must be transferred to
the buyer.
Every kind of moveable
property, other then
actionable claims and
money.
Price means money
consideration for a sale of
goods. Where goods are
being exchanged for
goods, the transaction is
not a sale but barter.
A Contract of sale must
possess all elements of a
valid contract.
DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL:
Following are the difference between sale and agreement to sell:
Page 23 of Contract Act 1872
CONTRACT OF SALE OF GOODS:
Sections 4(1) of the sale of goods act 1930:
“A contract whereby seller transfer or agrees to transfer
property of the goods to buyer for a price”
SALE:
Sec 4 (3) define sale as:
“Where under the contract of sale the property in the
goods is transfer from the seller to the buyer, the contract is
called a sale”
AGREEMENT TO SELL:
Sec 4 (3) defines an agreement to sales as:
“Where transfer of property in the goods is to take
place at a future time or subject to some condition thereafter
to be fulfilled, the contract is called an agreement to sell”.
ESSENTIALS OF A CONTRACT OF SALE:
A person cannot sell his goods to himself, therefore, buyer is
considered necessary to make a contract of sale.
1) SELLER:
One of the parties to a contract of sale is seller. Seller means a
person who sells or agrees to sell goods: {(Sec 2 (14)}
2) BUYER:
The other party to a contract of sale is buyer. Buyer means a
person who buys or agrees to buy goods. {Sec 2 (1)}.
3) TRANSFER OF PROPERTY:
In order to constitute a sale the seller must transfer or agrees
to transfer property in the goods to the buyer. Where only
possession of goods is being transferred, it is not a contract of
sale.
4) GOODS:
Subject matter of a contract of sale of goods must be good.
According to sec 2 (7) Goods means:
“every kind of moveable property, other than actionable
claims and money, and includes electricity, water, gas, stocks
and shares, growing crops, grass and things attached to or
forming part of land which are agreed to be severed before
sale”.
5) PRICE:
Price means money consideration for a sale of goods {sec 2
(10)}. Consideration in a contract of sale must be price.
Where goods are being exchanged for goods, the transaction
is not a sale within the meaning of Sales of Goods Act 1930.
However, where the goods are being exchanged partly for
goods and partly for money, the transaction is a sale.
6) OTHER FORMALITIES:
In order to be valid, a contract of sale must also possess all
essential elements of a valid contract e.g. free consent,
competent parties, lawful consideration, lawful object, etc.
Prof. Zeshaan Ahmad
SALE
1. TRANSFER OF PROPERTY:
In the sale property is transferred from
seller to the buyer at the time when the
contract is made.
2. RISK OF LOSS:
Risk of loss of goods passes to the buyer
with the property in the goods. In case of
sale because property in the goods
transferred to the buyer, therefore, if the
goods are destroyed, the buyer bears the
loss even if the goods are still in possession
of the seller.
3. BREACH OF THE CONTRACT:
As property is goods is transferred the
buyer, therefore, if the buyer commits
default .i.e. he fails to pay the price, the
seller can sue him for the price and for the
damages, even if the goods are still in
possession of the seller.
4. BREACH OF THE CONTRACT BY
THE SELLER:
If the seller refuses to deliver the goods, the
buyer, being owner of the goods, can sue
him for recovery of the goods, and for
damages.
5. RIGHT OF RESALE:
In case of sale, because ownership of the
goods has passed to the buyer, therefore,
seller cannot resell the goods.
6. INSOLVENCY OF THE SELLER:
If the seller, who is in possession of goods
after the sale, becomes insolvent, the buyer
can recover the goods from official receiver
of seller because ownership of the goods has
passed to the buyer.
7. NATURE OF THE OCNTRACT:
Sale is an executed contract.
Page 24 of Contract Act 1872
AGREEMENT TO SELL
In an agreement to sell transfer of property
takes place at a future time after the contract
is made.
In case of an agreement to sell because
property in the goods is still with the seller,
therefore, seller bears the risk of loss, if the
goods are lost, the loss shall be born by the
seller even if the goods are in possession of
the buyer.
As property in the goods is still with the
seller, therefore, if the buyer commits default
i.e. he fails to pay the price at the stipulated
time, the seller can sue him only for the
recovery of damages and not to recover the
price, even if the goods are in possession of
the buyer.
If the seller refuses to deliver the goods, he
buyer can sue him only to recover damages
for the breach of contract. Te buyer cannot
recover the goods because seller is owner of
the goods.
In case of an agreement to sell, as ownership
of the goods is still with the seller, therefore,
he can resell the goods.
If the seller, who is in possession of goods
after an agreement to sell, become insolvent,
the buyer cannot recover the goods from
official receiver of the seller, because
ownership of the goods is still with the seller
Agreement to sell is an executory contract.