LLB 3 Y 1st Sem Contract (English)

LL.B. (3Yrs.
) Ist Semester
The Indian Contract Act 1872
Unit-I
(Syllabus) Unit – I Meaning and nature of contract, Offer/proposal: Definition, Communication,
Revocation, General/Specific offer, Invitation of treat. Acceptance: Definition, Communication, Revocation,
Provisional acceptance, Tenders/ Auctions.
Year Wise Question Paper of Lucknow University

Year – 2013
Long Question –
Q.1- state the meaning and essentials of an valid offer. What is distinction between offer and general
offer?
fof/kekU; izLrko dk vFkZ ,oa vko”;d rRoksa dks crkb,A izLrko ,oa lkekU; izLrko esa D;k vUrj gS \
Q.2- Explain the essential and legal rules for a valid acceptance giving suitable examples. A offers to sell
200 tonnes of wheat to B @ Rs. 10,000 per tone. B gives his acceptance for buying only 100 tonnes
of wheat at that rate. Is it a valid acceptance?
fof/kekU; Lohd`fr ds vko”;d rRoksa ,oa fof/kiw.kZ fu;eksa dh mi;qDr mnkgj.k nsrs gq, O;k[;k dhft,A ,0]200 Vu xsgwW ch0
dks 10]000 :0 izfr Vu dh nj ls cspus dk izLrko djrk gSA ch0 dsoy 100 Vu xsgwW [kjhnus dh Lohd`fr nsrk gSA D;k ;g
fof/kekU; Lohd`fr gS\
Short Question –
Q.1- Counter offer. izfr izLrko
Q.2- Acceptance by telephone VsyhQksu }kjk Lohd`fr
Q.3- Distinguish between agreement and contract djkj rFkk lafonk esa vUrj dhft,A
Q.4- Wagering agreement ckth djkj
Q.5- Define promise. cpu dks ifjHkkf’kr dhft,
Q.6- Time is essence of the contract. Discuss in brief. Lke; lafonk dk lkj gSA la{ksi esa le>kb,A
2014
Long Question –
Q.1- “An agreement enforceable by law is a contract.” In the light of this statement explain the essential
of a valid contract.
^^fof/k }kjk izorZuh; djkj lafonk gSA^^ bl dFku ds izdk”k es]a fof/kekU; lafonk ds vko”;d rRoksa dh O;k[;k
dhft, \
Q.2- What do you mean by proposal ? Explain the legal rules regarding a valid proposal ?
izLFkkiuk ls vki D;k le>rs gaS \ izLFkkiuk ls lacaf/kr fof/kiw.kZ fu;eksa dh O;k[;k dhft,A
Short Question –
Q.1- Revocation of acceptance izfrxzg.k dk izfrlagj.k
Q.2- General Offer lkekU; izLrko
Q.3- Invitation to offer izLrko dk vkea=.k
2015
Long Question –
Q.1- Define an offer. What are its essentials? How an offer is different from an invitation to offer?
Discuss.
izLrko dks ifjHkkf’kr dhft,A blds vko”;d rRo D;k gSa \ ,d izLrko izLrko dks vkea=.k ls fdl izdkj fHkUu
gS \ foospuk dhft,A
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Q.2- Define the term acceptance. Explain the essentials and legal rules for a valid acceptance giving
suitable examples.
^Lohd`fr* “kCn dks ifjHkkf’kr dhft,A leqfpr mnkgj.k nsrs gq, fof/kekU; Lohd`fr ds vko”;d rRoksa ,oa fof/kiw.kZ fu;eksa dh
O;k[;k dhft,A
Short Question –
Q.1- Counter offer izfr izLrko
Q.2- Acceptance by Telephone VsyhQksu }kjk Lohd`fr
Q.3- Essential of Contract lafonk ds vko”;d rRo
2016
Long Question –
Q.1- “All contract are said to be an agreement, but all agreement are not said to be contract.” In the light
of above statement define with valid elements for contract.”
ÞlHkh lafonk djkj dgh tk ldrh gS] ijUrq lHkh djkj lafonk ugha dgs tk ldrsÞ mijksDr dFku ds izdk”k esa oS/k
lafonk ds rRoksa dks ifjHkkf’kr djsAa
Q.2- When an offer is said to be communicated and when it is said to be revoked?
^dc rd ,d izLrko lalwfpr gqvk dgk tkrk gS rFkk dc bldk izfrlagj.k gksrk gS \
Short Question –
Q.1- General offer and specific offer lkekU; izLrko ,oa fof”k’V izLrko
Q.2- Essentials for valid Acceptance oS/k Lohd`fr ds vo;o
Q.3- Reciprocal promises O;frdkjh opu
2017
Long Question –
Q.1- What do you understand by general offer? What is difference between offer and invitation to offer?
Explain.
lkekU; izLrko ls vki D;k le>rs gSa\ izLrko ,oa izLrko ds vkeU=.k esa D;k vUrj gS\ O;k[;k dhft,A
Q.2- “The acceptance of an offer to be effective must fulfil certain conditions.” Explain this statement
enumerating those conditions.
ÞizLrko dh Lohd`fr ds izHkkoh gksus ds fy, dfri; “krksaZ dk iwjk fd;k tkuk vko”;d gSAÞ mu “krksZa dk mYys[k djrs gq,
bl dFku dh O;k[;k dhft,A
Short Question –
Q.1- Counter offer izfr&izLrko
Q.2- Acceptance by post Mkd }kjk Lohd`fr
2018
Long Question –
Q.1- “All agreements are not contract but all contracts are agreements.” Discuss the statement explaining
the essentials of a valid contract.
ÞlHkh djkj lafonk ugha gSa ijUrq lHkh lafonk;sa djkj gSaAÞ bl dFku dks le>krs gq, fof/kekU; lafonk ds vko”;d rRoksa dh
foospuk dhft,A
Q.2- Discuss in brief the rules regarding a lawful offer. How general offer is different from specific offer?
Explain.
fof/kiw.kZ izLrko lEcU/kh fu;eksa dh la{ksi esa foospuk dhft,A fofufnZ’V izLrko ls lkekU; izLrko dSls fHké gS\ O;k[;k
dhft,A
Short Question –
1. Acceptance must be communicated
Lohd`fr dk lalwfpr fd;k tkuk vko”;d gS
2. Acceptance by Telephone
VsyhQksu }kjk Lohd`fr
3. Reciprocal promise
O;frdkjh opu
2
College Assignment Question
Unit – I
Long Question –
Q.1- State the meaning and essentials of an valid offer what is distinction between offer and general offer?
fof/kekU; izLrko dk vFkZ ,oa vko”;d rRoksa dks crkbZ;s\ izLrko ,oa lkekU; izLrko esa D;k vUrj gS\
Q.2- Explain the essential and legal rules for a valid acceptance giving suitable example?
fof/kekU; Lohd`fr ds vko”;d rRoksa ,oa fof/kiw.kZ fu;eksa dh mi;qDr mnkgj.k nsrs gq, O;k[;k dhft,\
Q.3 What are the essential element for the formation of a contract? Explain.
Or
All contracts are agreement, but all agreements are not contract. Comment.
lafonk lEcU/k LFkkfir djus gsrq dkSu ls rRo vko';d gSa\ foospuk dhft,A
y?kq mRrj nhft,
vFkok
izR;sd lafonk djkj gS] exj izR;sd djkj lafonk ugh gksrhA O;k[;k dhft,A

Unit-I
Answers
Q.1 State the meaning and essentials of an valid offer what is distinction between offer and
general offer?
This answer shall include following points.
1. Proposal Section 2 (a)
2. Essential elements – (a) Two parties.
(b) The offer should make the proposal signifying his
willingness to do or abstain from doing anything.
(c) Every proposal must be communicated
(d) It must be made with a view to create legal relations.
(e) It must be certain and definite.
3. Important cases
(i) Lalman Shukla Vs. Guari Dutt
(ii) Bal Four Vs. Bal Four
(iii) Lady Carlill Vs. Carbolic Smoke Ball Company
4. Types of proposal
1- General Proposal
2- Specific Proposal
3- Cross proposal
Ans.-
PROPOSAL OR OFFER
The first step in the formation of contract is the making of the proposal at least two persons make a
contract a person to make the proposal and the other person to accept it.
The word “proposal” has been defined in Section 2(a) of the Indian Contract Act, 1872. It provides as
follows :
“When one person signifies to another his willingness to do or to abstain from doing anything, with a
view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
According to this definition, there are three main essentials of a valid proposal—(i) The person who
makes the proposal (called the offer) should communicate it to the person to whom it is made (i.e. the
offeree); (ii) the proposal should be made with a view to obtaining the assent of the offeree, and (iii) the
offerer should make the proposal signifying his willingness to do or to abstain from doing anything.
A proposal to be valid must contain the following essential elements :
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(i) Every proposal must be communicated.
(ii) It must be made with a view to create legal relations.
(iii)It must be certain and definite.
Besides the above essential elements, it will also be necessary and desirable to consider the
following points relating to proposal:
(1) General and Specific Offers;
(2) Offer and Invitation of Offer;
(3) Standing Offer.
We will discuss these points one by one.
Legal rules as to offer.
(1) It must be intended to create legal relations.
(2) It must be certain.
(3) It must be distinguished from (a) a declaration of intention and (b) and invitation to make offer.
(4) It must e communicated to the offeree.
(5) It must be made with a view to obtaining the assent of the offeree.
(6) It must not contain a term the non-compliance of which would amount to acceptance.
(7) Statement of price is not an offer.
Essential of valid proposal
(1) Every proposal must be communicated.
The definition of the proposal as noted above begins with the words : “When one person signifies to
another………” That is to say, a proposal must be communicated. Communication however, need not
always be express and need not always be expressed in words, for Section 9 provides:
“In so far as the proposal or acceptance of any promise is made in words, the promise is said to be
express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be
implied.”
A proposal can be accepted only when it comes to the knowledge of the person to whom it is
intended to be made. Section 4, therefore, provides that the communication of a proposal is complete when it
comes to the knowledge of the person to whom it is made. Reference may be made here to a well-known
Allahabad case, namely, Lalman Shukul v. Guari Dutt. The facts of this case are as follows:
“The defendant’s nephew having absconded from home, he sent his servant to fine out him. Later on,
he offered a reward of Rs.501 to anyone who discovered the boy. This offer came to the knowledge of the
servant only after he had already discovered the boy. In a suit filed by the servant to claim the reward, it was
held that he could successfully claim the reward only on the basis of contract and in this case there was not
communication of proposal to him. He came to know of it after he had already discovered the boy which he
was already under obligation to do by the nature of his calling.
Thus the first essentials of a valid proposal is that it must be communicated and the communication
of a proposal is complete when it comes to the knowledge of a person to whom it is made.
(2) The proposal must be made with a view to create legal relations—Intention to Contract.
It is not sufficient that the proposal is communicated. It is also essential that it must be made with a
view to create legal relations. For example, if a father while going out of station promises to his daughter to
bring a camera for her, it cannot be said to be valid proposal because he does not intend to bind himself
legally nor does he make it with a view to obtain the assent of his daughter. A valid proposal is that which is
made with a view to obtaining the assent of another and is made with a view to create legal relations. An
illustrative English case on the point is Balfour v. Balfour, In this case:
The defendant was employed in Ceylon. He alongwith his wife went to England to enjoy the leave.
At the expiry of leave when he was about to return to Ceylon, his wife was advised to remain in England on
account of her health. Before returning to Ceylon, he promised to pay $30 every moth to his wife for her
maintenance. He sent the amount for some time but subsequently he stopped it as certain differences
between them led to their separation. Since by the time of separation, the said allowance had fallen into
arrears, the wife brought an action to recover the arrears. Her action was dismissed by the Court.
3- The proposal must be certain and definite:- Besides the above two essentials, a proposal must also be
certain and definite. Its terms should not be so vague so as to prevent contract being formed.
Specific Offer: It is specific when it is made to a particular person. It can be accepted only by the
person to whom it is made.
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General Offer : General when it is made to the world at large. It can be accepted by any one. It is
based on the famous case of Lady Carlill V/s Carbolic Smoke Ball Company. 1983 I.Q.B. 256.
In this case, the defendants were proprietors and vendors of ‘Carbolic Smoke Ball.’ They advertised
a reward of $100 to any person who contacted influenza after using the Smoke Ball for a certain period
according to the printed directions. In order to show their sincerity, they also deposited $1000 in a Bank for
the same purpose. The plaintiff, a lady, used the smoke Ball according to the printed directions yet she
contacted influenza. She brought an action to claim the reward. It was held that she was entitled to claim the
reward. The Court pointed out that in advertisement cases, an offer may be made to the whole world but it
becomes a promise only when it is accepted by an ascertained person.
Cross proposal:- In this situation valid contract cannot create.
Q.2 Explain the essential and legal rules for a valid acceptance giving suitable example?
1. Acceptance Section 2 (b)
2. Elements of Acceptance –
(a) Acceptance must be communicated
(b) Communication of acceptance must be by a person who has
authority to accept.
(c) Acceptance may also be inferred from the conduct of parties.
(d) Acceptance must be absolute and unqualified and must
correspond to terms of the offer.
3. Important cases
(xvi) Felt House Vs. Bindley
(xvii) Powell Vs. Lee
(xviii) Brogden Vs. Metropolitan Railway Company
Ans. After an offer has been made, the next important, rather the most important stage, in the
formation of contract is that of acceptance. As rightly remarked by Anson, “Acceptance is to offer
what a lighted match is to a train of gunpowder. An offer creates no legal rights or duties unless it
has been accepted. It is the acceptance which converts an offer into a contract. According to Section
2 (b), a proposal when accepted, becomes a promise Acceptance has been defined in Section 2 (b) in
the following words:
“When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise.”
An acceptance to be binding must fulfill certain conditions. They are being discussed below.
Essentials of Acceptance
Acceptance must be communicated
It is clear from section 2(b), quoted above, that an acceptance to be binding must be
communicated. As remarked by Cheshire and Fifoot, an interaction to accept or even a mental
resolve to accept a proposal does not give rise to a contract. There must be some overt or external
manifestation of the intent by speech, writing or other act.
“Even if the offeree has made up his mind to a final acceptance, the agreement is yet not
complete. There must be an external manifestation of assent, some word spoken or act done by the
offeree or by his authorized agent which the law can regard as the communication of the acceptance
to the offerer.”
An illustrative English case on the point is Felthouse v. Bindley. In the case:
The plaintiff wrote a letter to his nephew offering to buy his horse for $30, 15s. He also
wrote in his letter, “If I hear no more about him I shall consider the horse mine at $30. 15s.” The
nephew did not give any reply of his letter. However, he told the defendant, an auctioneer, not to
sell the horse. Thus, he intended to reserve the horse for his uncle. But the defendant sold the horse
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by mistake. The plaintiff, thereupon, sued the defendant, the auctioneer for conversion of property.
Dismissing the action, the Court held that since the nephew did not communicate his acceptance, no
contract took place between the plaintiff and his nephew and consequently he had not right to
complain of the sale. The Court also held that the communication of acceptance must be made to
offer himself or his agent. The communication of acceptance to stranger will not be a valid
communication. For example in the instant case the communication of acceptance was made to the
auctioneer who was a stranger to the plaintiff.
Communication of acceptance must be by a Person who has Authority to accept:

A communication of acceptance to be valid, must be either by the offeree himself of by his
authorized agent. A communication of acceptance y any other person will not be valid. For example,
in Powell Vs. Lee. (1908).
The Board of Managers of a school passed a resolution selecting the plaintiff (a candidate)
for the post of Headmastership but the decision about his selection was not communicated to him.
One of the managers, in his individual capacity, informed him of the said resolution. Subsequently,
the Board of Mangers rescinded their decision and consequently the plaintiff was not appointed as
Headmaster. The plaintiff, thereupon, brought an action for the breach of contract. The Court held
that no contract was concluded because a communication of acceptance to be valid must be made by
the offeree himself or his authorized agent. A communication of acceptance from an unauthorized
person will not be valid.
Acceptance may also be inferred from the conduct of parties:
Acceptance need not always be express, it may also be implied or inferred from a conduct of the
parties. An illustrative English case on this point is Brogden v. Metropolitan Ralway Co.:
The respondents were being supplied coal and coke for their locomotives by the appellants
for sometime without any formal agreement for the same. They, therefore, decided to enter tinto a
formal agreement for the same. The respondents sent a draft agreement to the appellant leaving
some blanks so be filled and signed by the appellant. The appellant filled in the blanks, changed
certain words in the agreement and after signing and signifying his approval returned it to the
respondents. The respo9ndents agent kept it in the drawer and thus no acceptance was
communicated. The appellant, however, supplied coal on the terms and conditions of the said
agreement. Subsequently, there arose some dispute between the appellants and the respondents. The
appellant contended that since the respondents did not communicate the acceptance, he was not
bound by the terms and conditions of the agreement. The Court held that mere silence does not
constitute acceptance but it may be implied from the conduct of the parties. In the present case, the
fact that the respondents had placed order for the supply of coal and accepted the same, constituted
their acceptance and the fact that the appellant supplied coal on the terms of the agreement clearly
showed that the parties had entered into the contractual relationship on the basis of the agreement
signed by the appellant. The appellant was, therefore, held liable.
Acceptance must be absolute and unqualified and must correspond to terms of the offer.”
Yet another essential condition for a valid acceptance is that it must be absolute and
unconditional. According to section 7(1) of the Contract Act:
In order to convert a proposal into a promise, the acceptance must be absolute and
unqualified.
That is to say, acceptance must correspond to the terms of the offer. An illustrative English
case in this connection is Hyde v. Wrench.
The defendant offered to sell his farm to the plaintiff for $1,000, but the plaintiff said he
would buy it for $950 only. Later on he agreed to buy the farm for $1,000. But the defendant
refused to sell the farm. The plaintiff sued the defendant for specific performance of the contract.
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The Court dismissed his suit by holding that there was not contract for plaintiffs offer of $950 was
in fact a counter-offer which destroyed the original offer.
---------------------------------------------------------------------------------------------------------------------
Q.3 What are the essential element for the formation of a contract? Explain.
Or
All contracts are agreement, but all agreements are not contract. Comment.
1. Essential of contract
1. Legal Agreement
2. Intention to create Legal relationship
3. Competence of parties to contract
4. Lawful consideration
5. Free consent
6. Lawful object
7. Certainty and possibility of performance
8. Agreement not declared void
9. Legal Formalities
Ans.1
Everyone of us enters into various contracts in his daily life although be may seldom realise it. When
a person buys a pen, lends a book to his friends, takes a seat in a bus or goes to a restaurant and has snacks,
3. Important cases
in all these and many similar situations a contract is need. Also many contracts are entered into buy
(ix) Felt House Vs. Bindley
businessman in individual course of carrying on the business. Thus the Law of Contract is applicable not
(x) Powell Vs. Lee
only to business community but also to others. It touches every aspect of our life.
(xi) Brogden Vs. Metropolitan Railway Company
Definition of contract:
A contract is an agreement made between two or more parties which the law will enforce. According
to Sec. 2(h), a contract is an agreement enforceable by law. An agreement comes into existence by the
process of offer by one party and its unqualified acceptance by the other party.
For example A proposes to sale his car for Rs. 20,000/-. As soon as be signifies his assent that proposal, a
contract takes place between A and B.
The parties who enter into an agreement must agree upon the subject-matter in the same sense and at
the same time, i.e., the must be consensus ad idem (Sec. 13).
For example: A who owns two Fiet Cars, offer to sell one, say car "X" to B for Rs. 40,000/- B agrees to buy
the car for the price thinking that A is selling car "Y". There is no consensus ad idem hence no agreement. A
and B have not agreed to the same thing in the same sense.
An Agreement may be a social agreement or a legal agreement. A social agreement is that which
does not give rise to legal consequences. In case of its breach the parties cannot go to the Law Court to
enforce a right. A legal agreement is that which gives rise to legal consequences and remedies in the Law
Court in case of its breach.
Essentials of contract.
(1) Legal Agreement: There must be an agreement. This involves two parties, one party making the
offer and the other party accepting it.
(2) Intention to create Legal Relationship: The parties must intend to create legal relationship.
Agreement of social, moral or religious nature do not contemplate legal relations and therefore they
do not give rise to a contract. So an agreement to go to see a movie or to have lunch together does
not create any legal objection. Similarly agreements between husband and wife do not intend to
create any legal objection. In the case Balfour Vs. Balfour on leaving England for CEYLON, the
husband agree to pay £ 30 to his wife every month till she remained in England. As he failed to send
the promised amount regularly, the wife suit him the recovery amount, but her suit was dismissed on
the ground that it was an informal agreement and there was no intention to create legal relationship.
(3) Competence of parties to contract: The parties must be capable of entering into an agreement as
regards age and understanding. According to Sec. 11 every person is competent to contract who is
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the age of majority, is a sound mind and not disqualified form contracting by any law to which he is
subject thus there may be of law in capacity of parties to the contract which may be due to minority,
lunacy, idiocy or status. If a party suffer from any of these flaws and agreement which such a person
is a void and is not enforceable accept in certain cases.
(4) Lawful consideration: The agreement must be supported by consideration on both sides. Each
party to the agreement must give or promise something and receive something or a promise in return.
Consideration is the price for which the promise of the other is sought. However, this price needs not
to be in terms of money. In case the promise is not supported by consideration, the promise will be
nudum pactum (a bare promise) and shall not be enforceable at law. Moreover, the consideration
must be real and lawful.
(5) Free consent : The consent of the parties must be free and genuine. The parties must have entered
into the contract out of their own free will. Consent implies agreement upon the same thing in the
same sense and free consent implies consent which is not vitiated by coercion, undue influence,
fraud, misrepresentation or mistake. If the consent is obtained by any of the above four factors except
mistake, the agreement is violable at the option of the party whose consent is not free. The party can
either reject the contract or accept it. If the agreement is induced by mutual mistake, the agreement is
void.
(6) Lawful object: The object f the agreement must be lawful. The object would be unlawful if it is
forbidden by law, is fraudulent, or causes injury to the person or property of another, or is immoral
or opposed to public policy. If the object is unlawful, the agreement is not valid.
(7) Certainty and possibility of performance: The terms of the agreement must be certain and capable
of performance. The meaning of the agreement must be certain or capable of being made certain
otherwise the agreement will not be enforceable by law. For example if A agrees to sell to B 100
liters of oil @ Rs. 10 per litre, the agreement is not enforceable as there is nothing to show the type
of oil being sold. Not only this the act contemplated in the agreement should be capable of
performance. An agreement to do an act impossible in itself can not be enforced. This is because the
law does not compel to do what is impossible.
(8) Agreement not declared void: The agreement must not have been expressly declared as void.
Enforceability of an agreement also depends upon whether it is expressly declared void by any law in
force in the country or not. There are certain types of agreements which have been expressly declared
void by the Act like agreements in restraint of marriage, trade or legal proceedings, wagering
agreements, and agreement with uncertain meaning. In such cases even if the agreement possesses all
the elements of the valid agreement it will not be enforceable by law.
(9) Legal formalities: The prescribed legal formalities of writing, registration etc, must be observed,
wherever required. The agreement may be oral or in writing. Where it is to be in writing it must
comply with the necessary legal formalities to writing, stamping, registration and attestation. Some
of the agreements required in writing are:- contracts of insurance, arbitration agreements or those
relating to land and buildings some contracts which are required to be registered are:- Contracts
relating to immovable property, promise made without consideration out of natural love and
affection between near relations etc. If the agreement does not comply with the legal formalities it
can not be enforced by law.
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Law of Contract
IInd - Unit
(Syllabus)
Unit –II Consideration and Capacity :- Consideration: Definition, Essentials, privity of contract, Exception
section 2(d) 25, Capacity to enter into a contract; Minor’s Position, Nature/effect of minor’s agreements.
Year – 2013
Long Question –
Q.1- Define consideration. When is consideration said to be unlawful? Explain
izfrQy dks ifjHkkf’kr dhft,A izfrQy dks fof/k fo:) dc dgk tkrk gS \ O;k[;k dhft,A
Q.2- Explain doctrine of restitution and doctrine of ratification regarding minors.
vo;Ldksa ds lEcU/k esa izR;kLFkkiu ds fl)kUr ,oa vuqleFkZu ds fl)kUr dh O;k[;k dhft,A
Short Question –
Q.1- Nature of minor agreement. vo;Ld djkj dh izd`fr
Q.2- Inadequacy of consideration. izfrQy dh i;kZIrrkA
Year – 2014
Long Question –
Q.1- “An agreement without consideration is void.” Discuss. Also examine the exceptions of this general
rule.
izfrQy foghu djkj “kwU; gksrk gSAÞ O;k[;k dhft,A bl lkekU; fu;e ds vioknksa dk ijh{k.k dhft,A
Q.2- What is the nature of a minor’s contract? To what extent is the minor liable? Discuss with the help of
leading cases.
vo;Ld dh lafonk dh izd`fr D;k gS \ fdl lhek rd vo;Ld mRrjnk;h gksrk gS \ ize[q k oknksa dh lgk;rk ls foospuk
dhft,A
Short Question –
Q.1- Competent parties l{ke i{kdkj
Year – 2015
Long Question –
Q.1- Define the term “capacity to contract”. State the law relating to the competence of the parties giving
suitable example.
“kCn ^lafonk dh l{kerk* dks ifjHkkf’kr dhft,A leqfpr mnkgj.k nsrs gq, i{kdkjksa dh l{kerk ls lEcfU/kr fof/k crkb;sA
Q.2- What do you mean by consideration? State the circumstances in which a contract without
consideration is also valid. Discuss.
izfrQy ls vki D;k le>rs gSa \ mu ifjfLFkfr;ksa dks crkb;s ftuesa izfrQy ds fcuk Hkh lafonk fof/k iw.kZ gksrh gSA foospuk
dhft,A
Short Question –
Q.1- Definition of free consent Lora= lEefr dh ifjHkk’kk
Year – 2016
Long Question –
Q.1- What is the nature of minor’s contract? Up-to What extent he will liable? Discuss with the help of
decided case laws.
vo;Ld dh lafonk dh izd`fr D;k gS \ fdl lhek rd og mRrjnk;h gksxk \ fu.khZr oknksa dh lgk;rk ds foospuk dhft,A
Q.2- “A contract is a private relationship between the parties who make it and no other person can acquire
right to incur liability under it.” Explain above statement with case laws.
lafonk i{kdkjksa dk futh laca/k gS] vkSj dksbZ vU; O;fDr blds vUrxZr u gh vf/kdkj izkIr dj ldrk gS vkSj u gh vius
Åij nkf;Ro xzg.k dj ldrk gSAÞ mijksDr dFku dh O;k[;k mi;qZDr oknksa dh lgk;rk ls djsaA
Short Question –
Q.1- Definition of Consideration izfrQy dh ifjHkk’kk
Year – 2017
Long Question –
9
Q.1- Define consideration. “All agreements without consideration and void”. If there is any exception to
this rule, give them.
izfrQy dks ifjHkkf’kr dhft,A Þfcuk izfrQy ds lHkh djkj “kwU; gSaAÞ D;k bl fu;e ds dksbZ viokn gSa rks mls crkb,A
Q.2- What do you know about capacity to contract? Who are the various persons declared as incompetent
by law to enter into contract? Discuss.
Lafonk dh l{kerk ls vki D;k le>rs gSa\ os dkSu ls O;fä gSa ftUgsa fof/k }kjk lafonk djus ds fy, v{ke ?kksf’kr fd;k x;k
gS\ foospuk dhft,A
Short Question –
Q.1- Definition of consent
Lkgefr dh ifjHkk’kk
Q.2- Difference between coercion and undue influence
mRihM+u ,oa vlE;d vlj esa vUrj
Year – 2018
Long Question –
Q.1- “A man cannot acquire rights under a contract to which he is not a party.” Discuss. Are there any
exceptions to this rule? If yes, explain.
Þ,d O;fä] ftl lafonk dk i{kdkj ugha gS] ds vUrxZr dksbZ vf/kdkj vftZr ugha dj ldrkAÞ foospuk dhft,A D;k bl
fu;e ds dksbZ viokn gSa\ ;fn gk¡] rks O;k[;k dhft,A
Q.2- Who is competent to enter into contract? What is legal position of minor’s agreements in India?
Discuss.
Lafonk djus ds fy, dkSu l{ke gS\ Hkkjr esa vo;Ld ds lkFk gksus okys djkjksa dh fof/kd fLFkfr D;k gS\ foospuk dhft,A
Short Question –
1. Adequacy of Consideration
izfrQy dh Ik;kZIrrk

Unit – II
Long Question –
Q.1- Minor contracts are not voidable but void ab initio. Explain the statement with the help of decided
case laws,
vo;Ld ds }kjk dh x;h lafonk “kwU;hdj.kh; ugha cfYd izkjEHk ls “kwU; gksrh gS \ bl dFku dk fu.khZr oknksa dh lgk;rk esa
Li’V dhft,\
Q.2- An agreement made without considerations void. Are there any exceptions to this rules if so explain?
fcuk izfrQy ds djkj “kwU; gksrk gS\ D;k bl fu;e ds dksbZ viokn gS\ ;fn gkW rks O;k[;k dhft,\
Q.3 Explain Doctrine of privity of contract in India with exceptions.
Or
"A contract can't be enforced by a person who is not a party to it even though it is made for his
benefit." Discuss and explain exceptions to it, if any, with the help of decided cases?
lafonk ds xqIrrk ds fl)kUr dh O;k[;k djrs gq, mlds viokn crkb;sA
vFkok
fdlh ,sls O;fDr }kjk lafonk ykxw ugha djkbZ tk ldrh gS tks mldk i{kdkj ugha gS] Hkys gh lafonk mdls ykHk ds
fy, dh xbZ gksA** foospuk dhft, vkSj bl fl)kUr ds ;fn dksbZ viokn gkssa rks fu.khZr oknksa dh lgk;rk ls
le>kbZ,A
Answers
Long Answers:-
Q.1- “Minor contracts are not voidable but void ab initio”. Explain the statement with the help of
decided case laws.
10
1. Capacity to contract (Section 10, 11)
2. Position of Minor
3. Nature of Minor’s Agreement
4. Effect of Minor’s Agreement
5. Minor’s liability for necessaries
6. Important cases:-
i) Mohari Bibi Vs. Dharmodas Ghosh
ii) Leslie Vs. Sheill
iii) Khan Gul Vs. Lakha Singh
iv) Harimohan Vs. Dulu Miya
v) Ajudhia Prasad Vs. Chandan Lal
vi) Nazir Ahmad Vs. Jiwanda
Ans.- CAPACITY TO CONTRACT

According to Section 11 of Indian Contract Act "Every person is competent to contract who is of the
age of majority according to the law to which he is subject, and who is of sound mind, and is not
disqualified 3. Important
from cases
contracting by any law to which he is subject.
Minor. A minor is a person who has not (vi) completed
Felt House Vs. Bindley
eighteen years of age. But where a guardian has been
(vii) Powell Vs. Lee
appointed to a minor under the Guardians and Wards Act or where a minor is under the guardianship of the
Court of Wards, he attains majority at (viii)
the ageBrogden Vs. Metropolitan
of twenty-one. In the case Railway Company
of Mohari Bibi V. Dharmo Das
Ghosh - A minor executed a mortgage for Rs. 20,000 and received Rs. 8,000 from the mortgagee. He sued
for setting aside the mortgage. Mortgagee wanted refund to sum which he had actually paid i.e. Rs. 8,000.
The Privy Council held that as the minor's contract was absolutely void, no question of refunding money
arises in the circumstances. Thus Mohari Bibi's case decided the minor's agreement not only void but
absolutely void, it is nullity and nonexistent from the very beginning.
NATURE OF MINOR’S AGREEMENT

Section 10 requires that the parties to a contract must be competent and section 11 say that a minor is not
competent. But neither section makes it clear whether if a minor enters into an agreement, the contract
would be voidable at minor’s instance or void as such, Thus causing a lot of confusion. This controversy
was resolved after the Mohoribibee v. Dharmodas Ghose case.
LORD NORTH observed –“The question whether a contract is is void or voidable presupposes the
existence of a contract within the meaning of the act, which cannot arise in case of a minor.”
After this judgment the principle that minor’s contract is absolutely void was laid down. This law is not
merely to protect the child from fraudulent manipulations by others but also to provide him protection
against his own ignorance and immaturity for a child may shoe poor judgment in making a particular
contract. The generally accepted doctrine that man is the best judge of his own interests is not applicable in
case of a minor.
The ruling of the Privy Council in the Mohoribibee case has been generally followed by the Indian courts
and applied both to the advantage and disadvantage of the minors. Mir Sarwarjan v. Fakhruddin Mohd.
Chowdhury case is an example where the court ruled against the minor.
Facts – A contract to purchase certain immovable property had been made by guardian on behalf of a minor,
and the minor sued the other party for recovering the possession. His action was rejected. The court held-
The manager of the minor’s estate or the guardian of the minor were not competent to bind the minor’s
estate by a contract to purchase immovable property and therefore there was no contract and so the minor
could not abstain specific performance of the contract.
But now as minors are coming to the forefront of society with the changing times the Privy Council has had
to modify its previous decision through the Subrahmanyam v. Kurra Sabha Rao that the transfer of
inherited property of a minor by his guardian pay off an inherited debt was binding on him being for his
benefit.
EFFECT OF MINOR’S AGREEMENT
11
1. Void ab-initio: It was decided in the case of Mohari Bibi Vs. Dharmodas Ghosh (1903)
minor's agreement is void ab-initio.
2. No estoppel against minor: The term 'estoppel' may be defined as prevention of a claim or
assertion by law. In other words, when someone makes another person to believe that a particular
thing or fact is true, then later on he can not be allowed to deny the truth of that thing.
It will be interesting to know that there is no such estoppel against the minor. In other
words, when a minor fraudulently enters into a contract, representing that he is a major, but in
reality he is not then later on he can plead his minority as a defence and can not be estopped (i.e.,
prevented) from doing so.'
As regards estoppel against minor, Bombay High Court reviewed the earlier authorities and made
the following observations:
"The court is of the opinion that where an infant represents fraudulently or otherwise that he is of
age, and thereby induces another to enter into a contract with him, then in an action founded on the
contract the infant is not estopped from setting up infancy".
(Gadigeppa Bhimappa Mets Vs. Balangowda Bhimangowda, AIR, 1931 Bombay 561.)
3. No liability in contract or in tort arising out of contract: Minor is not liable either for breach of
contract or for damages on account of tort of deceit (fraud). If a minor enters into an agreement by
misrepresenting his age, he can not be sued either in contract or in tort for deceit (i.e. fraud). Because if
the injured party is allowed to sue, it would be an indirect way of enforcing the void agreement. It may,
however, be noted that the minor is not liable for tort, only where the tort is directly connected with
the contract. The following observations of the Calcutta High Court in the case of Harimohan Vs. Dulu
Miya (1934) are worth nothing in this regard:
"If the tort is directly connected with the contract and is the means of effecting it and is a parcel of
the same transaction, the minor is not liable in tort".
In the case of Leslie Vs. Sheill (1914) KB the court observed that a minor can not be made
liable to repay the amount of loan in the form of damage.
If the tort of a minor is independent of the contract, then the minor is liable for damages in tort
(Burnard Vs. Haggis (1863).
4. Restitution: The term 'restitution' may be defined as the act of restoring back to the rightful
owner that which has been taken away or lost. Thus, the doctrine of restitution implies that when a
person obtains property or goods by false representation, he can be compelled to restore it to the
person from whom he has received it. This doctrine also applies to minors. However, the minor can
be compelled to restore the property or goods only so long as the same is traceable in his possession.
Leslie Ltd. Vs. Sheil in the case it was decided by the court the doctrine of restitution does not
applicable to money.
Khan Gul Vs. Lakha Singh (1928) in this case Lahore High Court ordered the restitution of
money, taken by the minor.
But the Allahabad High Court in the case of Ajudhia Prasad Vs. Chandan Lal refused to enforce
minor's contract. No relieve can be granted under the clock of restitution.
But the Law Commission has ratified the decision of the Lahore High Court and presently
Sec. 33 of specific relief act incorporates the relief or restitution.
5. Ratification: The term 'ratification' may be defined as the act of confirming or approving. The
doctrine of no ratification implies that an agreement made by a minor (during his period of
minority), can not be confirmed by him on attaining majority. This is so because minor's agreement
is void ab initio (i.e. void from the very beginning) and, therefore, can not be agreement should be
made on attaining majority. It may be noted that a new agreement will also require fresh
consideration. The consideration which was given under the earlier agreement (during minority) can not
be taken as consideration for the new agreement (during majority) also. (Nazir Ahmed Vs. Jiwanda
AIR 1938, Lahore).
For the ratification it is necessary that there should be some fresh consideration for it. Thus
where in addition to the consideration already given during minority, a further advance is made on the fresh
consideration given after minority, a promise to pay the whole of the amount becomes binding. There is
no question of ratification in such cases. (Kundan Bibi Vs. Sri Narayan).
12
6. Beneficial Contract: A minor can be a beneficiary or a promisee. In other words, if a contract is
beneficial to a minor, it can be enforced by him. However, there is no provision in the Indian
Contract Act according to which the contract for minor's benefit is enforceable. It is only on the
basis of judicial decisions that contracts for minor's benefit are held to be valid. No doubt, the law
declared by Privy Council in the famous Mohoribibi's cases that minor's agreement is absolutely
void has been generally followed. But, it has been confined to cases only where a minor is
charged with obligations, and the other contracting party seeks to enforce those obligations
against the minor.
Example:
A, a minor, advanced certain sum of money to B. B executed a mortgage of his immovable property
in favour of A. as a security of money advanced by him. In this case, the mortgage can be enforced by A as
the transaction is for his benefit. [Raghava Chariar Vs. Srinivasa (1916) Madras.
In the above case, the question involved was whether a mortgage executed in favour of a minor, who
has advanced the whole of the mortgage money, is enforceable by him or by any other person on his behalf.
Full bench of the Madras High Court held that the transaction is enforceable by or on behalf of the minor.
The court made the following observations:
"The provision of law which renders minors incompetent to bind themselves by contract was enacted
in their protection. It would be a strange consequence of his legislation, if they are to take nothing under
transfer in consideration of which they have parted with their money." Thus, a minor is capable of
purchasing immovable property.
7. The minor as a partner: The partnership of partners results from their agreement. A minor,
being incompetent to enter into a contract, can not be a partner in the firm. However, he may be
admitted only to the benefits of the firm with the consent of all other partners (Sec. 30(1)].
8. The minor as an agent: A minor can be appointed as an agent (Sec. 184 of Contract Act).
9. The minor as a insolvent: A minor can not be declared as an insolvent.
10. The minor can execute a negotiable instrument.
11. The liability of minor's parents or guardians: It may, however, be noted that the parents or
guardian can be held liable when the minor child acting as an agent of his parents or guardians.
12. Minors liability for necessaries: The liability of minor's for necessaries is contained in Sec. 68 of
the Indian Contract Act. According to this:-
If a person supplies necessaries to a person who is incapable of entering into a contract or to
anyone whom such incapable person is legally bound to support, then he can claim reimbursement
from the property to of such incapable person. It may, however, be noted that the liability of minor is not
personal (i.e. he is not personally liable). It is only the property of minor which is liable for meeting the
liability for necessaries supplied to him.
Example:
A supplied B, a minor, with necessaries suitable to his condition in life. In this case is entitled to be
reimbursed from B's property.
The minor's property is liable for necessaries if the following two conditions are satisfied:
a) The contract must be for goods reasonably necessary for minor's support in his life.
b) The minor must not have already a sufficient supply of these necessaries.
for example-
A, a minor' was amply supplied with proper clothes according to his position. He bought a number of
new dresses, including eleven fancy waist-coats from B. B could not recover the price as it was held that
these were not necessaries. (Nash Vs. Inman (1908) K.B.).
The term 'necessaries' is defined in Sec. 2 of the English Sales of Good Act, 1893, which reads as
under:
The 'necessaries' are the goods suitable to the life of infant or other person, and to his actual
requirement at the time of sale and delivery."
The above definition is also relevant for our discussion on the subject. The analysis of this definition
shows the term 'necessaries' includes the goods:
a) suitable to the position and status of a minor; and
b) which were actually required by the minor at the time of supply.
13
That the 'necessaries' will be determined keeping in view the facts and circumstances of each
individual case. The judicial decisions should also be kept in view while determining the meaning of
necessaries. However, the following cases have already been decided by the courts in connection with
'necessaries', and thus the following are included in necessaries:
1. The funds supplied to a minor for the marriage of a female minor in the family are held
necessaries. And the moneylender may get himself reimbursed from the property of a minor.
(Tikki Lal Vs. Komal Chand, AIR 1940 Nagpur).
2. The expenses incurred for performing funeral obsequies (funeral ceremonies) of father of a minor
are held necessaries. Bochu Singh Vs. Baldeo Prasad, AIR 1933 Ouch).
3. The money advanced to save minor's property from sale in execution, is 'necessaries'. (Kedar
Nath Vs. Ajudhia Prasad (1883) Punjab).
4. Certain services rendered to a minor have been held to be necessaries, e.g., education, training for
trade, medical care legal advice etc.
_______________________________________________________________________________________
Q.2 An agreement made without considerations void. Are there any exceptions to this rules if so
explain?
Ans.-
1. Consideration 2 (d)
2. Legal Rules for consideration
3. Exception of consideration
i) Ram Chandra Chintaman Vs. Kalu Raju
ii) Debi Radha Rani Vs. Ramdas
iii) Raj lukhy Vs. Bhootnath Mookerjee
iv) Durga Prasad Vs. Baldeo
CONSIDERATION
Consideration is one of the essential elements to support a contract. Consideration is the technical
term used in the sense of quid pro quo which means something in return. It is the price for which promise
3. Important cases
of the other is bought. It must result in a benefit to the promisor and/ or detriment to the promisee or both.
(xiii) Felt House Vs. Bindley
Sec. 2(d) defines it as follows: "When at the desire of the promisor, the promisee or any other person
(xiv) Powell Vs. Lee
has done or abstained from doing, or does or abstains from doing something, such act or abstinence on
(xv) Brogden Vs. Metropolitan Railway Company
promise is called a consideration for the promise.
For example: A agrees to sell his car to B for Rs. 10,000. Car is the consideration for B and price is the
consideration for A.
Legal rules for consideration:
1. It is essential to support every contract.
2. It must move at the desire of the promisor.
3. It may move from the promisee or any other person.
4. It may be past, present or future -
(i) Past consideration - When consideration by a party for a present promise was given in the
past, i.e., before the date of the promise. It is said to be past consideration.
(ii) Present consideration - When consideration is given simultaneously, with promise, i.e., at the
time of the promise, it is said to be present consideration. In a cash sale, for example,
consideration is present or executed.
(iii) Future or executory consideration - When consideration from one party to the other is to pass
subsequently to the making of the contract, it is future or executory consideration
For example: A promises to sell his car to B for an agreed sum after one month and 'B' promises to pay for
car at the time of delivery of car. Here consideration is future for both the contracting parties.
5. It need not be adequate - An agreement to which the consent of the promisor is freely given is not
void merely because the consideration is in adequate.
14
For example - A agrees to sell a horse worth Rs. 10,000/- for Rs. 100/- A's consent to the agreement
was freely given. The agreement is the contract notwithstanding inadequacy of the consideration.
However, Expl. 2 to Sec. 25 provides that "inadequacy of consideration may be taken into account
by the court in determining the question inadequacy may suggest fraud, mistake or coercion, etc.).
6. It must be real and not illusory - Consideration must be of some value. The section uses the words
"Something", which means consideration need not be adequate but it should be of some value in the
eyes of law.
7. It must not be something which the promisor is already legally or contractually bound to do - A
promise to perform a public duty by a public servant is not a consideration. In the case of Ram
Chandra Chintaman V. Kalu Raju there was a promise to pay to the Vakil an additional sum if the
suit was successful. Held, the promise was void for want of consideration. The Vakil was under a
pre-existing contractual obligation to render the best of his services under the original contract.
8. It must not be illegal, immoral or opposed to public policy. Consideration must be lawful, e.g., not
some illegal act, such as paying someone to commit a crime. If the consideration is unlawful, the
contract is void and unenforceable. It should not be immoral or opposed to public policy.
9. It may be an act, abstinence or for aberrance or returned promise - abstinence means restrain from
doing something. Forbearance to sue is good consideration. If a person, who could sue another for
the enforcement of right agrees-not to pursue his claims, this constitutes a god consideration for a
promise by the other person.
In the case of Debi Radha Rani V. Ramdas - D is ready to sue her husband for maintenance allowance.
On husband's agreeing to pay her a monthly allowance by way of maintenance, she forbears to sue. Held,
the wife's forbearance to sue amounts to consideration for the husband's agreement for payment of
maintenance allowance.
No Consideration No Contract
An agreement made without consideration is void (Sec. 25) the general rule is ex "nudo pacto
non oritur actio" i.e. an agreement made without consideration is void. The following are the exceptions
this rule, i.e., no consideration is required in case of :-
(1) A written and registered agreement based on natural love and affection between parties standing
in a near relation to each other [Sec. 25(1)]- This clause lays down four conditions for validity of an
agreement without consideration.
a. The agreement is in writing
b. It is registered
c. It is made on account of natural love and affection.
d. It is between parties standing in near relation to each others.
For Example: A, out of natural love and affection, promises to give his son B Rs. 5,000. A puts his
promise to B in writing and registers it. This is a valid contract. In the case of Rajlukhy V. Bhootnath
Mookerjee A Hindu husband, after referring to quarrels and disagreement between him and his wife
executed a registered document in favour of his wife agreeing to pay her for maintenance, but no
consideration moved from the wife. Held, the agreement was void for want of consideration.
(2) A promise to compensate, wholly or in part, a person who has already voluntarily done something
for the promisor [Sec. 25(2)] -
For example: A finds B's purse and gives it to him. B promise to give him Rs. 50. This is a contract
In order that a promise to pay for past voluntary services binding, the following conditions must be
satisfied:
a. The services should have been rendered voluntarily.
b. The services must have been rendered for the promisor and not anybody else. Thus in the case
of Durga Prasad Vs. Baldeo, it was held that shops were built on the order of the Collector
and not at the desire of the shopkeepers. So shopkeepers were not held liable.
(3) A promise by a debtor to pay a time-barred debt if it is made in writing and is signed by the debtor or
by his agent [Sec. 25(3)] - If the debtor promises to repay a loan which had become time barred, it will
be valid if the following conditions are satisfied:
(i) The promise should be in writing.
(ii) It should be signed by the promisor or his agent.
15
(iii) The debt must be such of which the creditor would have enforced payment but for
the law of limitation.
(iv) There must be an express promise to pay. The intention should not be unexpressed.
It may be t pay whole or part of the debt.
(4) An agency (Sec. 185) - In a contact of Agency consideration is not required.
(5) A completed gift (Expl. 1 to Sec.25) - In case of a gift actually made consideration is necessary.
For example: If a receives a gift at his birthday from B, it cannot be taken back by B. It is valid in spite
of the fact that it is without consideration.
_____________________________________________________________________________
Q.3 Explain Doctrine of privity of contract in India with exceptions.
Or
"A contract can't be enforced by a person who is not a party to it even though it is made for his
benefit." Discuss and explain exceptions to it, if any, with the help of Decided cases?
Ans.-
1. Doctrine of privity of contract
i) Tweddle Vs. Atkinso
ii) Dunlop Pneumatic type Co. V. Selfridge Company
iii) Jamna Das Vs. Ram Autar
3. Exception to the Rule of Privity Contract
(i) Trust or charge
(ii) Marriage Settlement partition or family Arrangement
(iii) Acknowledgement
(iv) Assignee of Rights and benefits
(v) Contract through an agent
Privity of contract or stranger to contract:
The privity of contract means stranger to a contract. As per the doctrine of privity of contract, a
person, who is not a party to the contract, can not sue for carrying out the promise made by the parties to the
contract. The basis of the doctrine is that a contract is always a private relationship between the parties who
make it. And no other person can acquire rights or incur liabilities.
In 1861 in Tweddle Vs. Atkinso the court of Queen's Bench laid the foundation of what
subsequently came to be known as the doctrine of "Privity of contract", which means that a contract the
parties only and no third person can sue upon it even if it is avowedly made for his benefit. And this was
affirmed by the House of Lords in Dunlope Pneumatic Type Co. Vs. Selfridge & Co. (1915) There is no
provision in the Indian Contract Act that a stranger to a contract can not sue. However, it has become an
established practice and is validly applicable in India. The Privy Council extended the rule to India in its
decision in Jamna Das Vs. Ram Autar (1911).
The Supreme Court of India has expressed itself in favour the ruel in Tweddle Vs. Atkinson. In
M.C. Chalko Vs. State Bank of Travancore (1969) Supreme Court expressed that a person who is not a
party to the contract can not enforce it terms.
Exception to the Ruleof Privity contract:
In the following exceptional circumstances, a person who is not a part to the contract can enforce the
contract:-
1. Trust or charge or other arrangements:
Sometimes under contract, a benefit is given to a person who is not a party to the contract. This
benefit can be given by creating a trust or charge in favour of such person. In such cases, the beneficiary
under the trust or charge may enforce the contract even though he is not a party to it. It may however, be
noted that a strange must be clearly designated as a beneficiary, and trust or charge in his favour must also
be some specific property. A leading case on this point is Khwaja Mohammad Vs. Hussaini Begum 1910
Privy Council In this case it was held by the Privy Council that though she (respondent) not a party to the
contract, yet she was clearly entitled in equity to enforce her claim.
Other Imp. Related cases:
16
Madhav Trading Co. Vs. Union of India, AIR, 1979.
Following are the exceptions to the rule -
(1) A Trust or Charge is created in some specific immovable property in favour of him - Sometimes a
charge or other interest in some property is created in favour of some person known as beneficiary.
Such beneficiary can enforce such right though he is not a party to the contract
(2) A provision is made in a marriage settlement, partition or family arrangement for his benefit -
An agreement is sometimes made in connection with, marriage, partition or other family
arrangements and a provision is made for the benefit of some person. In such a case, such person for
whose benefit the provision is made, can enforce the agreement even though he is not a party to the
agreement. In the case of Daropati Vs. Jaspati Rai J's wife left him because of his cruelty. He then
executed and agreement with her father A. promising good behaviour and proper treatment and in
the alternative if he failed to do so, to pay her monthly maintenance and provide a house also. It was
held that wife was entitled to enforce this promise made by J to her father.
Cases: i) Rose Fernandez Vs. Joseph Gonsalves ii) Shuppa Ammol Vs. Subra Maniyam
iii) Commissioner of Wealth Tax Vs. Vijayaba, AIR 1979 S.C.
(3) There s an acknowledgement of a liability by the promisor or the promiser constitutes himself as
agent - Acknowledgement of payment or estoppel sometimes, by the terms of a contract, a party is
required to make payment to a third party, and he acknowledges it by conduct or otherwise to a third
party. Such third party can se the promisor although there is no privity of contract between the party
and third party.
Case-
1. Devaraja Urs Vs. Krishniah, AIR, 1952, Mysure.
2. dfKshiord Behari Dutta Vs. Mon Gobinda Panda.
For Example: When under an agreement between a tenant T and subtenant Y, the latter was paying
the rent directly to L the landlord, L was allowed to recover the unpaid rent from Y the subtenant.
(4) He is the assignee of rights and benefits under a contract not involving personal skill.
(5) He enters into a contract through an agent - Contract which are entered into by the agent on behalf
of the principal can be enforced by the principal even though he is not a party to the contracts. But
the agent must act within the scope of his authority and in the name of his principal.
(6) Holder in due course of a negotiable instrument: He may sue the prior parties to negotiable
instrument.
17
LL.B. (3Yrs.) Ist Semester
Unit – III
(Syllabus)
Unit –III validity, Discharge and performance of contract: Free consent, Coercion, Undue influence,
Misrepresentation, Fraud, Mistake, Unlawful consideration and object, Effect of void, voidable, valid,
illegal, unlawful and uncertain agreement/ contracts, Discharge of contracts, performance, Time and Place
of performance, Agreement, Impossibility of performance and frustration, Breach: Anticipatory & Present.
Unit – III
Year – 2013
Long Question –
Q.1- What do you mean by coercion? Explain with the help of decided case law and distinguish between
coercion and undue influence.
izihM+u ls vki D;k le>rs gS\ fu.khZr okn fof/k dh lgk;rk ls O;k[;k dhft, vkSj izihM+u rFkk vlE;d~ vlj esa vurj
dhft,A
Q.2- Explain the term “Impossible” as used under Sec. 56 of the Indian Contract Act, 1872 and with the
help of decided cases, discuss in brief, the various grounds of frustration.
Hkkjrh; lafonk vf/k0] 1872 dh /kkjk 56 esa iz;qDr ^^vlEHko^^ “kCn dh O;k[;k dhft, rFkk fu.khZr oknksa dh lgk;rk ls uSjk”;
ds fofHkUu vk/kkjksa dh la{ksi eas foospuk dhft,A
Short Question –
Q.1- What do you mean by free consent? LorU= lEefr ls vki D;k le>rs gS\
Year – 2014
Long Question –
Q.1- “Stranger to contract can not sue.” Explain. Is there any exception to this rule?
ÞvlEcU/k O;fDr nkok ugha dj ldrkAÞ Li’V dhft,A D;k bl fu;e dk dksbZ viokn Hkh gS \
Q.2- “Agreements in restraint of trade are void.” Are there any exceptions to the this ruel? Discuss.
ÞO;kikj ij vojks/k yxkus okys djkj “kwU; gksrs gSaAß D;k bl fu;e ds dqN viokn Hkh gSa \ foospuk dhft,A
Short Question –
Q.1- Void agreement “kwU; djkj
Q.2- Fraud diV
Q.3- Mistake of law fof/k dh Hkwy
Q.2- Restraint in marriage fookg vojks/k
Year – 2015
Long Question –
Q.1- “Everu agreement of which the object or consideration is unlawful, is void. “Explain and state the
cases in which the object and consideration is unlawful.
ÞizR;sd ,slk djkj ftldk mn~ns”; ,oa izfrQy vfof/kiw.kZ gS] “kwU; gSAÞ mu ekeyksa dks crkb;s vkSj O;k[;k dhft, ftuesa
mn~n”s ; ,oa izfrQy voS/k gksrk gSA
Q.2- What do you understand by a ‘wagering agreement?’ What are its essentials? How does it differ from
contingent contract?
^ckth djkj* ls vki D;k le>rs gsa \ blds vko”;d rRo D;k gsa \ lekfJr lafonk ls ;g dSls fHkUu gS \
Short Question –
Q.1- Difference between Fraud and Misrepresentation
feF;kins”ku ,oa diV esa varj
Q.2- Meaning of coercion
izihM+u dk vFkZ
Q.3- Four grounds of doctrine of impossibility of contract.
lafonk ds vlEHkork ds fl)kUr ds pkj vk/kkj
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Year – 2016
Long Question –
Q.1- “Legality of an object is very wide term it includes morality and public policy.” Explain in the light
of above statement the legality of object in contract.
Þfof/kd mn~ns”; ,d foLr`r {ks= gS ftlds vUrxZr uSfrdrk ,oa yksduhfr vkrh gSAÞ mijksDr dFku ds izdk”k esa lafonk ds
vUrxZr fof/kd mn~n”s ; ifjHkkf’kr dhft,A
Q.2- Explain the concept of frustration in the matter of contract. Up to what extent this doctrine of
frustration is applicable in mercantile Transactions?
lafonk ds ekeyksa esa uSjk”; dh ladYiuk dks le>kb;sA O;kikfjd ls O;ogkjksa esa uSjk”; dk fl)kUr dgka rd ykxw gksrk gS \
Short Question –
Q.1- Definition of Fraud with it’s essential elements diV dh ifjHkk’kk mlds vko”;d vo;oksa ds lkFk
Q.2- Difference between void and Voidable agreements “kwU; djkj vkSj “kwU;dj.kh; djkj esa varj
Q.3- Difference between contingent contract ckth dk djkj ,oa lekfJr lafonk esa varj
and wagering agreement
Q.4- Subsequent impossibility Ik”pkrorhZ vlaHkork
Q.5- Agreement in Restraint of legal proceedings fof/kd iz;ksx vojks/kh djkj
Year – 2017
Long Question –
Q.1- What is doctrine of subsequent or supervening impossibility? What are its effects and in what cases
this doctrine is not applicable?
Ik”pkrorhZ vlEHkork D;k gS\ blds D;k izHkko gSa vkSj fdu ekeyksa esa ;g fl)kUr ykxw ugha gksrk gS\
Q.2- “Every agreement of which the object or consideration is unlawful, is void. “Explain and state the
cases in which the object and consideration is unlawful.
Þ,slk izR;sd djkj ftldk mÌs”; ;k izfrQy vfof/kiw.kZ gS] “kwU; gksrk gSAÞ mu ekeyksa dks crkb, ,oa O;k[;k dhft, ftuds
mÌs”; ,oa izfrQy vfof/kiw.kZ gksrs gSaA
Short Question –
Q.1- Anticipatory breach of contract
Lkafonk dk iwokZuqekfud Hkax
Q.2- Meaning of contingent contract
lekfJr lafonk dk vFkZ
Q.3- Essentials of wagering agreement
Ckkth lafonk ds vko”;d rRo
Year – 2018
Long Question –
Q.1- Discuss the validity of the agreements in restraint of trade with the help of decided cases. Discuss the
statement giving exceptions to it, if any.
fofuf”pr oknksa dh lgk;rk ls O;kikj esa vojks/k Mkyus okys djkjksa dh fof/kekU;rk dh foospuk dhft,A blds vioknksa dk
¼;fn dksbZ gS½ mYys[k djrs gq,] bl dFku dh foospuk dhft,A
Q.2- Distinguish between a wagering agreement and a contingent contract. Discuss the rules regarding
enforcement of contingent contracts.
Ckkth djkj vkSj lekfJr lafonk esa vUrj dhft,A lekfJr lafonkvksa ds izorZu lEcU/kh fu;eksa dh foospuk dhft,A
Short Question –
1. Distinction between Fraud and Misrepresentation
diV ,oa feF;k O;ins”ku esa vUrj
2. Agreement against morality
uSfrdrk ds fo#) djkj
3. Agreement with insolvents
fnokfy;k ds lkFk djkj
4. Liability of Finder of goods
iM+h gqbZ oLrq dks ikus okys O;fä dk nkf;Ro
Unit – III
Long Question –
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Q.1- What do you mean by coercion? Explain with the help of decided case law and distinguish between
coercion and undue influence?
izihM+u ls vki D;k le>rs gS\ fu.khZr okn fof/k dh lgk;rk ls O;k[;k dhft,\ vkSj izihM+u rFkk vlE;d vlj esa vUrj
dhft,\
Q.2- Define fraud? Discuss its essential elements and also differentiate between fraud and
misrepresentation?
diV dks ifjHkkf’kr dhft,\ blds vko”;d rRoksa dk o.kZu djrs gq, diV rFkk nqO;Zins”ku esa vUrj Hkh dhft,A
Q.3 State law relating to anticipatory breach of contract? Explain the position of aggrieved party of
anticipatory breach of contract.
lafonk ds iwokZuqekfud Hkax ds rRoksa dh foospuk dhft, rFkk mlls lacaf/kr O;fFkr i{kdkjksa dh fLFkfr crkb;s lafonk ds
iwokZuqekfud Hkax esaA
Answers
Long Answers:-
Q.1- What do you mean by coercion? Explain with the help of decided case law and distinguish
between coercion and undue influence?
Ans.-
1. Coercion meaning
2. Element of coercion meaning
3. Undue Influence
4. Important Cases:
i) Bansraj Vs. Secy of State
ii) Rangnaya Kamma Vs. Alwar Setti
iii) Amminajee Vs. Seshamma
Section 13 define consent as when two or more persons agree upon the same thing in the same sense.
This means conscious ad idem.
The term Free consent is defined in Sec. 14 of the contract Act. It provides:-
"Consent is said to be free when
1. Coercion, as defined in Sec. 15.
2. Undue influence, as defined in Sec. 16.
3. Fraud, as defined in Sec. 17 or
4. Misrepresentation, as defined in Sec. 18.
5. Mistake, subject to the provisions of sections, 20, 21 and 22.
Consent is said to be (free) so caused when it would not have been given but for the existence of
such coercion, undue influence, fraud misrepresentation or mistake. It further provides that a party to a
contract whose consent was caused by a fraud or misrepresentation, may if he thinks fit, insist that the
contract shall be performed, and that he shall be put in the position in which he could have been if the
representation made had been true. Thus it is clear that a consent obtained by coercion, undue influence,
fraud, misrepresentation and mistake is not free.
Every consent is said to be free under sec. 14 unless it has been obtained by coercion, undue
influence mistake, fraud or misrepresentation. Even if both the parties have consented to the agreement,
consent of one of them may not be said to be free if the same has been obtained by coercion, undue
influence, misrepresentation fraud or mistake.
The term coercion is defined under Sec. 15 of the Indian Contract Act is provides -
"Coercion" is the committing or threatening to commit, any act forbidden by the Indian Penal Code
(45 of 1860) or the unlawful detaining, or threatening to detain, any property to the prejudice of any person
whatever, with the intention of causing any person to enter into an agreement.
Essential of coercion-
1. Act must be prohibited by Indian Penal Code 1860.
2. There must be unlawful detention or threat of such detention of property.
3. The above act is done with the intention of causing the other person to enter in to an agreement.
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Illustration - A threatens C that he will shoot his friend B if he does not execute house to him here A is
causing coercion on C.
Note:- No matter whether IPC is or not in force in the place where the coercion was employed. However
suit must be brought in the Indian Court.
Case:- Bansraj V. Secy of state In this case one person was threatens that if he will not pay fine imposed
on his son his property will be forfeited . Here it was held that coercion was caused.
In a leading case of:-
Rangnayakamma V. Alwar Setti (1860), 13 Mad. 214 the term coercion has been described. In this case,
the husband of a girl of 13 years dies and the relation of the deceased did not allow the corpse to be removed
unless she adopted a child of their choice. The Madras High Court held that since the adoption was not made
by free consent and the act was prohibited under the I.P.C., it was not binding on her.
In another case of Ammirajee V. Seshamma (1917) 41 Mad 33. A man gave a threat to his wife
and son to commit suicide if they did not execute a release bond regarding some parties which the wife and
son claims their own. By a majority of 2 to 1, the court held, the release deed was vitated by coercion with in
the meaning of Sec. 15.
Illustration:- A, on board an English ship on the high seas, causes B to enter into an agreement by an act
amounting to criminal intimidation under IPC.
‘A’ afterwards sues B for breach of contract at Calcutta.
Here A has employed Coercion.
Consent is said to be caused by coercion when its obtained by pressure exerted by either-
Effect of Coercion- Where coercion is caused in an agreement the following results will be there.
1. It will be considered that there was no free consent of the party.
2. The suffering party will be deemed to be an aggrieved one.
3. As per section 19 the contract will be voidable one.
Difference between Coercion ad Undue Influence:
Coercion Undue Influence
1. It is a physical force. 1. It is a mental force.
2. Coercion is a crime. 2. But undue influence is not a crime.
3. It can be applied by a stranger. 3. But in undue influence there should be prior
relationship.
4. In the coercion it is not necessary that to take 4. But in the undue influence it is sure that person
unfair advantages by the other party. would be taken unfair advantage against party.
5. Threat is also a coercion, it is forbidden by 5. Undue influence is also applied on Pardanashin
IPC. lady.
Both elements make a contract voidable.
____________________________________________________________________________________
Q.2- Define fraud? Discuss its essential elements and also differentiate between fraud and
misrepresentation?

1. Fraud (Section 17)
2. Element of fraud
3. Mere silence as to facts likely to effect the willingness of a person enter into a
contract is not fraud.
4. Misrepresentation
5. Distinction between Fraud and misrepresentation
6. Important Case
i)_Shri Krishna Vs. The Kurushetra University Kurukshetra
Ans.- The term fraud is defined under Sec. 17 of the Indian Contract Act it provides that - "Fraud" means
and includes any of the following acts committed by a party to a contract, or with this connivance, or by his
agent, with intent to deceive another party thereto or his agent, or to induce him to enter in to a contract.
(i) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true,
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(ii) The active concealment of fact by one having knowledge or belief of the fact;
(iii) A promise made without any intention of performing it.
(iv) Any other act fitted to deceive.
(v) Any such act or omission as the law specially declares to be fraudulent.
Mere silence as to facts likely to effect the willingness of a person inter into a contract is not fraud-
False impression in ordinarily conveyed by deliberate misstatement of fact. But it may also be done
by active concealment of material fact. Ordinarily of course, mere silence is no fraud, even if it result is to
conceal. A contracting party is under no obligation to disclose the whole truth to the other party or to give
him the whole information in his possession affecting the subject matter of the contract. It is under this
principle that a trader may keep silent about change in price. A seller who puts forth an unsound horse for
sale, but says nothing about its quality, commits, no fraud. A candidate who had full knowledge of the fact
that he was short of attendance, did not mention this fact in his examination from. This was held to be no
fraud, it being the duty of the University to scrutinize forms and to call for verification or information in
case of doubts. The university having failed to do so, was stopped from canceling the examination of the
candidate.
So according to the above matter, it shows that silence, is n fraud because this is depend on the
situation that may be it was necessary for that time.
In the case of Shri Krishna V. The Kurushetra University, Kurushetra AIR 1976 SC 376, the
candidate of the appellant had been cancelled by the Kurushetra university Earlier the university had
allowed the appellant to appear at the LLB (Part II) examination. The appellant was required to submit
requisite permission from his employer to join law classes.
The S.C. held that - If neither the Head of the department nor the university authorities took care to
scrutinize the admission from, then the question of the appellant committing a fraud did not arise. It is well
settled that where a person on whom fraud is committed is in a position to discover the truth by due
negligence, the fraud is not proved.
Fraud is defined under Section 17 of the Indian Contract Act. It provides:
‘Fraud’ means and includes any of the following acts committed by the party to a contract, or with
the connivance or by his agent, with intent to deceive another party thereto or his agent, or to induce him to
enter into the contract—
1. The suggestion, as a fact, of that which is not true by one who does not believe it to be true;
2. The active concealment of a fact by one having knowledge or belief of the fact;
3. A promise made without any intention of performing it;
4. Any other act fitted to deceive;
5. Any such act or omission as the law specially declares to be fraudulent.”
Besides this, explanation to Section 17 provides that:
“Mere silence as to facts likely to affect the willingness of a person to enter into contract is not fraud,
unless the circumstances of the case are such that regard being had to them, it is the duty of the
person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.”
Under Section 17 of the Contract Act, the elements of fraud are following:
Intention to deceive or to induce a contract by—
1. a suggestion, as a fact, of that which is not true by one who does not believe it to be true;
2. the active concealment of a fact by one having knowledge or belief of the fact;
3. a promise made without any intention of performing it;
4. any other act fitted to deceive;
5. any such act or omission as the law specially declares to be fraudulent.”
Distinction between Fraud and Misrepresentation:
According to Pollock and Mulla, “The principal difference between fraud and misrepresentation is
that in the one case the person making the suggestion does not believe it to be true and in the other he
believes it to be true though in both the cases it is a main statement of facts which misleads.” It has been
pointed out, the three points of difference between fraud and misrepresentation are the following. In the
first place, fraud is intentional wrong but the same is not necessary in case of misrepresentation.
Secondly fraud not only renders the contract voidable but also gives rise to a cause of action in tort for
damages. Ordinarily misrepresentation is not a tort but section 75 of the Act entitles a person rightfully
rescinding a contract to compensation for any damages which he has sustained through the non-
22
fulfillment of the contract. Thirdly, under Section 19, a defence against misrepresentation is that the
contract will not be voidable if the party whose consent was caused had the means of discovering the
truth with ordinary diligence. This will not be a defence in case of fraud, except of course fraud by
silence.
Q.3 State law relating to anticipatory breach of contract? Explain the position of aggrieved
party of anticipatory breach of contract.
Ans.
1. Breach
a) Anticipatory Breach
b) Actual Breach
2. Consequences of Breach
3. Remedies
4. Important Case
i)_Hochester case
ii) Avery Vs. Bowden
Breach: When a party to a contract renounces his liability in regard to performance, then it is called breach
of contract. Breach of contract is of two types:
1. Anticipatory Breach: Premature breach of contract is known as anticipatory breach of contract, which
occurs before the date of performance (as fined by the parties) arises.
2. Actual Breach: It occurs when after the date of performance, contract is not performed.
Sec. 39 of the Act incorporates the principle of anticipatory breach.
Where a party to a contract has refused to perform, or has disabled himself form himself from
performing, his promise in its entirely, the promisee may put an end to the contract, unless he has signified,
by words or conduct, his acquiescence in its continuance.
Consequences of Breach:
1. The party who has refused to perform or has disabled himself from performing is excused from
further performance of contract.
2. It entitles the promisee (injured party) to sue immediately for damages or either to wait for
performance.
Where the aggrieved party does not opt for immediately bringing action form damages and either
by words or conduct signifies his acquiescence in its continuance, he can not put an end to contract
but can sue for compensation for damage caused to him. (Illustration 'b' of Sec. 39).
Remedies: Injured party has following relief:
1. Prohibitory Relief: Prohibitory relief is available in cases where-
a) an employee is required not to leave the job before a specified period in contract.
b) divergence of trade secret is required,
c) it is required to be prohibited that a party should not carry similar business or compete.
2. Declaratory Relief: Declaratory relief is available under sec. 34-37 of SR Act.
3. Compensation.
Hochester Vs. De La Tour (1853):
That the anticipatory breach give an immediate right of action was recognized as early as 1853 in
this case.
Lord Campbell, C.J. said, "that where as party to the contract has renounced an obligation under
contract, then it is not uncommon to the aggrieved party to treat it as anticipatory breach.
Fact: The plaintiff was a courier. He was engaged by the defendant to accompany him on a tour to
commence on 1, June, 1852. Nearly a month before this date the defendant wrote to plaintiff that he has
changed his mind, and declined his services. The plaintiff sued him for breach.
The defendant's counsel very strongly contended that there could be no breach of agreement before
the day when the performance was due. But the court negatively his contention ruled that anticipatory
breach gives an immediate cause of action.
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Lord Campbell gave some illustrations:
1. Where a man promises to marry a women on a future day, but before that day marries to another
women, he is instantly liable for breach of promise of marriage.
2. If a contracts to execute a lease to B on and from a future day but before that day executes lease to
C, A may be immediately sued for breaking the contract.
3. A contracts to sell and deliver some specific goods to B on a future day, but before that day sells
goods to C, A may immediately be sued for breach of contract.
Contingent Contracts: Doctrine holds goods even in cases of contingent contract.
Frost Vs. Knight (1872). The defendant promised to marry the plaintiff on the death of his father.
The father still living, the defendant announced his intention of not fulfilling his promise on his father's
death. The plaintiff immediately brought an action for the breach. The defendant contended that a breach
could arise only on the happening of the contingency. But the court ruled that the case comes within the
perview of Hochester's case. "where a contracting party announces his intention not to fulfill his part,
contract should be treated as broken, as all its incidents of damages consequent on non-performance are
assessed on earlier moment. Many of the injurious effect of such non-performance may possibly be averted
to mitigated." - Cockburn, CJ To hold the aggrieved party must wait, until the time fixed for marriage
arrives, would have the effect of the aggravating the injury. Because by presenting the party from farming
any other union and by reason if advancing age would render the possibility of such a union constantly less".
Where the aggrieved party does not accept the repudiation and leaves the contract alive, following
consequences will follow.
1. Party repudiating the contract may choose to perform the contract and the promisee will be bound
to accept the same.
2. If while the contract is subsisting, and any supervening event occurs which discharges the contract
(e.g. by frustration under sec. 56) the promisor would also be entitled to take the advantage of
changed circumstances.
Avery Vs. Bowden (1855).
Facts: The defendant chartered the plaintiff's ship and agreed to load it with a Cargo at Odessa within 45
days. On arrival of the ship there, the defendant told the captain that he had no cargo for him and requested
him to go away. However, captain stayed in the hope that the contract would be fulfilled. But before expiry
of 45 days, a war broke out which rendered the performance illegal. Plaintiff then brought an action for
breach.
Held: The court ruled that contract has ended by frustration and not by beach.
Damages for breach: Where the aggrieved party brings a case for damages, the case falls within Sec. 73.
Remedies for breach of contract:
CH-VI Sec. 73-75 of Act deals with consequences of breach of contract.
Sec. 73 Compensation : Heading of Sec. 73 runs: "Compensation for loss or damage caused by breach of
contract".
Nature of Sec. 73: Sec. 73 uses the word "compensation" that itself suggest its nature that is compensatory
and not penal in nature. Purpose of Sec.73 is to place the aggrieved party in a situation, as far as money can
do, had the contract been performed.
"Any loss:: The compensation is recoverable for any loss or damage caused to aggrieved party by breach.
Sec. 73 divides losses in two categories:
1. which neutrally arose in the usual course of things from such breach.
2. which the parties knew, when they made the contract, to be likely to result from the breach of it.
Knowledge - Actual knowledge
Imputed knowledge or contemplated (Parties my be supposed to
now).
First rule is "Objective" as it makes the liability to depend upon reasonable man's foresight of the loss that
will naturally result from the breach loss that will naturally result from the breach of contract and damages
awarded under this rule are called "General Damages".
Second rule is "Subjective" as according to it, the content of liability depends upon the knowledge
of the parties at the time of the contract.
_______________________________________________________________________________________
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LL.B. (3Yrs.) Ist Semester
Unit – IV
(Syllabus)
Unit –IV Remedies and Quasi Contracts: Remedies- Damages, Kinds, Remoteness etc., Injunction, Specific
Performance, Quantum Meruit, Quasi Contract (Section 68-72), Act: Indian contract Act, 1872
Year – 2013
Long Question –
Q.1- In the light of judgement given in the case of Hadley vs. Baxendale and the provisions of the Indian
Contract Act, 1872 discuss the rules by which remoteness of damage is determined in case of breach
of contract.
gSMys cuke cSDl.Msy ds okn esa fn, x, fu.kZ; ,oa Hkkjrh; lafonk vf/k0] 1872 ds izko/kkuksa ds izdk”k esa mu fu;eksa dh
foospuk dhft, ftuds }kjk lafonk Hkax dh fLFkfr esa {kfr dh nwjLFkrk fu/kkZfjr dh tkrh gSA
Q.2- What do you understand by the doctrine of quantum meruit? State the cases in which a claim for
quantum meruit arise.
DokW.Ve esfj;V fl)kUr ls vki D;k le>rs gS\ mu ekeyksa dks crkb, ftuesa DokW.Ve esfj;V dk nkok mRiUu gksrk gSA
Short Question –
Q.1- Quasi contract. dYi lafonkA
Year – 2014
Long Question –
Q.1- Discuss the doctrine of impossibility of performance of a contract. Illustrate your answer with the
help of decided cases.
Lkafonk ikyu dh vlEHkO;rk ds fl)kUr dh foospuk dhft,A vius mRrj dks fu.khZr oknksa dk mnkgj.k nsrs gq, fyf[k,A
Q.2- Discuss the principles on which damages ought to be awarded in case of breach of contract?
Illustrate your answer with cases.
mu fl)kUrksa dh ppkZ dhft, ftuds vuqlkj lafonk Hkax dh fLFkfr esa izfrdj fu/kkZfjr fd;k tkrk gSA fdu ifjfLFkfr;ksa esa
lafonk Hkax gksus ij fo”ks’k {kfriwfrZ nh tk ldrh gS \ vius mRrj dks oknksa dh lgk;rk ls mnkgj.k nsrs gq, fyf[k,A
Short Question –
Q.1- Standard form contract ekud lafonk
Q.2- Anticipatory breach izR;kf”kr [k.Mu
Year – 2015
Long Question –
Q.1- What does you understand by the doctrine of ‘Quantum Meriut”? State the cases in which a claim for
quantum meriut arise?
^DokUVe esfj;V* fl)kUr ls vki D;k le>rs gSa \ mu ekeyksa dks crkb;s ftuesa Dok.Ve esfj;V ds fy, nkok fd;k tk
ldrk gS \
Q.2- “Quasi contracts are not contracts in the strict sense of the term. There are only obligations created
by Law.” Explain stating the provisions of Indian Contract Act.
ÞdYi lafonk,a lgh “kCnksa esa lafonk,a ugha gSaA ;s dsoy fof/k }kjk l`ftr ck/;rk,a gSaAß Hkkjrh; lafonk vf/kfu;e ds micU/kksa
dks crkrs gq, bldh O;k[;k dhft,A
Short Question –
Q.1- Special damages
fo”ks’k {kfriwfrZ
Q.2- Anticipatory breach of contract
lafonk dk izR;kf”kr Hkax
Q.3- Difference between liquidated damages and Penalty
ifjfu/kkZfjr {kfriwfrZ ,oa “kkfLr esa varj
Year – 2016
Long Question –
25
Q.1- There is no offer no acceptance, but a contract stick with you for the fulfillment of contain legal
obligations. Do you agree with this above statement? Explain it.
u izLrko Lohd`fr ijUrq ,d lafonk vkids Åij vf/kjksfir gks tkrh gS dqN fof/kd mios/kksa dk ikyu djus gsrqA mDr dFku
ls vki lger gS \ o.kZu dhft,A
Q.2- Discuss the principle according to which the damages for breach of contract are accessed.
mu fl)kUrksa dh foospuk dhft, ftuds vuqlkj lafonk Hkax dh fLFkfr esa izfrdj fu/kkZfjr fd;k tkrk gSA
Short Question –
Q.1- Remoteness of damages {kfr dh nwjFkZrk
Year – 2017
Long Question –
Q.1- Discuss the provisions of Indian Contract Act, 1872, relating to quasi contract. What is difference
between quasi contract and a contract?
dYi lafonk ls lEcfU/kr Hkkjrh; lafonk vf/kfu;e] 1872 ds micU/kksa dh foospuk dhft,A dYi lafonk ,oa lafonk esa vUrj
dhft,A
Q.2- What do you understand by doctrine of “Quantum Meruit”? State the cases in which a claim for
quantum meruit arises.
ÞDokUVe esfj;VÞ fl)kUr ls vki D;k le>rs gSa\ mu ekeyksa dks crkb, ftuesa DokUVe esfj;V ds vk/kkj ij nkok fd;k tk
ldrk gSA
Short Question –
Q.1- Special damage
fo”ks’k {kfriwfrZ
Q.2- Distinction between liquidated damages and penalty
Ifjfu/kkZfjr uqdlkuh ,oa “kkfLr esa vUrj
Year – 2018
Long Question –
Q.1- State in brief the principles on which the damages are awarded for breach of contract.
mu fl)kUrksa dks la{ksi esa crkb, ftuds vk/kkj ij lafonk Hkax dh n”kk esa {kfriwfrZ dk fu/kkZj.k fd;k tkrk gSA
Q.2- Discuss in brief the remedies available to an aggrieved party for breach of contract.
Lkafonk Hkax gksus ij ihfM+r i{kdkj dks miyC/k mipkjksa dh la{ksi esa foospuk dhft,A
Short Question –
1. Subsequent impossibility
Ik”pkrorhZ vlEHkork
2. Damages for mental pain
Ekkufld d’V ds fy, {kfriwfrZ
Unit – IV
Long Question –
Q.1- What do you mean by quasi contract? Discuss the provisions relating to quasi contract under Indian
contract act 1872?
lafonkdYi ls vki D;k le>rs gS\ Hkkjrh; lafonk vf/kfu;e 1872 ds vUrxZr lafonk dYi ds izko/kkuksa dh foospuk dhft,\
Q.2- Define damages? Aggrieved party entitled to two kinds of damages from defaulter in case of breack
of contract? Discuss with reference to the provisions of Indian contract Act 1872 and decided cases?
{kfriwfrZ dks ifjHkkf’kr dhft,\ lafonk Hkax dh n”kk esa ihfM+r i{kdkj pwddrkZ ls nks izdkj dh {kfriwfrZ ikus dk gdnkj gksrk
gS\ Hkkjrh; lafonk vf/kfu;e 1872 ds micU/kksa vkSj fu.khZr oknksa dh foospuk djsaA
Q.3 Explain with the help of decided cases the Law relating to determination of damages in case of
breach of contract.
lafonk Hkax ds ekeyksa esa {kfriwfrZ dh ek=k ds fu/kkZj.k dh fof/k dk ijh{k.k fu.khZr oknksa dh lgk;rk ls dhft,A
Answers
Long Answers:-
Q.1- What do you mean by quasi contract? Discuss the provisions relating to quasi contract under
Indian contract act 1872?
26
1. Quasi Contract Meaning
2. Important points of Quasi Contract
3. Provision under Indian Contract Act
i. Necessaries supplied to a person incapable of contracting
ii. Payment by Interested person which another is bound by law to pay.
iii. Obligation of a person enjoying the benefits of non gratuitous Act
iv. Responsibility of Finder of Goods.
v. Liability of a person to whom money has been paid or anything delivered
by mistakes or under coercion.
4. Important Case
i)_Vaikuntam Vs. Kallapiram
ii) Somashtri Vs. Swami Rao
iii) Domodar Muddlior Vs. Secretary of State of India
Ans.- Basis of Doctrine- NEMO DEBET LOCUPLATARI EX LIENA JUSTUA (No man must grow
rich out of another persons costs):
Lord Mansfield explained the Quasi contract in Moses Vs. Mcpherson "Las as well as justice
should try to prevent unjust enrichment". In certain circumstance on e person becomes accountable to any
other person as if the other person has incurred certain liability in the contract though there is no agreement
between the parties. These relations constituted contract without being the real contract between the parties.
Therefore such relations have been termed as Quasi Contracts. They are not contracts in fact but are
enforceable as contracts on the ground of natural law and equity. Quasi contract means relations like
contracts. It is not the formal contract but an implied contract which comes into existence in special
circumstances.
Important point of Quasi Contract:
Quasi contract comes into existence because of the existence of certain circumstances in which one
person is accountable of another, because the first person has received some benefits at the cost of another
person. It is based on the principle of unjust enrichment.
In Quasi Contract obligations are imposed by law.
Quasi Contract is based on equity, justice and principles of natural justice.
Provision under Indian Contract Act- Chapter 5 of the Indian Contract Act deals with certain
relations resembling those created by a contract. Act does not use the word Quasi Contract, but Section 68 to
72 contain those provision which are related to Quasi Contractual obligations. The act provides following
five types of relations resembling to those of contracts:
(1) Necessaries supplied to a person incapable of contracting or on his Account - According to
Section 68 if a person incapable of entering into contract or anyone whom he is legally bound to support is
supplied by an other person with necessaries suited to his conditions in life, the person who has supplied
such necessaries is entitled to be reimbursed from the property of such incapable person.
Mohri Bibi Vs. Dharmo Das Ghosh (1903, 30 Cal. 5391), has decided that minors and lunatics are
incapable of entering into a contract. Section 68 applies on such persons.
Necessaries must be such articles which are necessary to the conditions suited to his life. Act does
not use words necessaries. Therefore under this section if a person has supplied to a incompetent person
such things which are necessary to his life he may recover the price thereof.
In Nash Vs. Innaman, the tailor supplied 11 waste coats to a Cambrige University student while he
was already having enough clothes. Court held that supplied cannot beheld necessaries.
In Chappel Vs. Cooper, it was held that the things necessary are those without which an individual
cannot reasonable exist.
In Watkinson Vs. Dhunnu Babu, the minor was supplied with money for successful defence of
property. It was held the money was supplied for necessaries.
In Takki Lal vs. Kamal Chand, it was held that if a minor is supplied money for the marriage of his
minor sister, it will be treated as necessaries.
27
Remedies- Section 68 provides that supplies can be reimbursed from the property of such incapable
person, if the incapable person is having a property then and then only the suppliers can get his money back,
minor is not liable personally.
2. Payment by interested person which another is bound by law to pay:
Section 69 provides that a person who is interested in the payment of money which another is bound
by law to pay, and therefore pays it, is entitled to be reimbursed by the other.
A suit under this section will be valid when following conditions are satisfied:
(i) A person paying the money must have interest in the payment being made. The term interested
inclusive apprehension of any kind of loss or in conveyance. For example in Vaikuntam vs.
Kallapiram, Kallapiram refused to perform the marriage of his diceased brother's daughter. The
family was a joint Hindu Family. The mother of the girl performed the marriage and incurred an
expenditure. It was held that Kallapiram was liable to pay.
(ii) Obligation may be contractual or statutory. Section 69 provides that a person must be bound by
laws to pay. The law includes contractual law and statutory law both. For example in Somashstri
vs. Swami Rao. A made a gift of some part of his property to B. Consequently he transferred his rest
of the property to C. C. was liable to pay tax in relation to the property. C did not pay the tax on the
property. B paid, and later on sued C for its recovery, it was held that B is entitled for the reimbursement.
(iii) Payment must be made to another person. Section requires that payment must be made to another
person, and then only such payer can reimburse money. Therefore,, it could not recovered from the
Zamindar under section 69.
(iv) The payment must be made bonafide.
(3) Section 70- Obligation of a person enjoying the benefit of non gratuitous act- According to Section
70 of Indian Contract Act, where a person lawfully does anything for any other person or delivers anything
to him not intending to do so gratuitously and such other person enjoys the benefit, he is bound by law to
make compensation to the former in response or to restore the so thing done or delivered. In Kishore Lal vs.
State of M.P. Rajasthan High Court held that in order to attract Section 70, following conditions must be
satisfied:-
(i) The thing must be done lawfully.
(ii) It must be done by a person not intending to act gratuitously.
(iii) The person for whom act is done must enjoy the benefit paid to him.
In Damodar Mudaliar vs. Secretary of State for India, it was held that a person enjoying the
benefit of Non-gratuitous act by another person done lawfully must compensate for it. In this case the
government repaired tanks which irrigated 11 villages. Some of the villages belonged to Zamindar which
enjoyed the benefit of the said repair. It was held the Zamindar was liable to pay contribution for the repairs
of the tanks.
Section 70 of the Indian Contract Act enables a person who actually supplies goods or renders some
service not intending to do gratuitously to claim for compensation from the person who enjoys the benefit of
the supply made or service rendered, it is the liability which arises on equitable grounds even though express
agreement or contract may not be proved. In State of West Bengal vs. B. K. mandal, it was held that
Section 70 applies to the Government contract also.
(4) Responsibility of Finder of Goods (Section 71)- According to Section 71 a person who finds
goods belonging to other and takes them in his custody, is subject to the same responsibility as a Bailee. the
finder must try to find out the real owner of the goods and deliver the goods to him on demand. The finder
of goods may restrain the goods as against the real owner until he receives the compensation of the delivery
expenses voluntarily incurred by him on behalf of goods and finding out the owner but he will have no right
to sue for compensation. However he has the right to sue for the reward if any has been offered by the real
owner for finding out the goods and retain the possession of the goods until he receives the reward. The
finder may sell the goods of perishable nature or his lawful charges amount to more than 2/3 of value of the
goods found. Finder of goods is also entitled to the possession of goods as against every on except the true
owner.
Liability of a person to whom money has been paid or any thing delivered by mistakes or
under coercion (Section 72):- Under Section 72 a person to whom money has been paid or anything
delivered by mistake or under coercion must repay or return it. For Example A & B jointly borrow Rs. 100
from C. A pays the amount of C and B not knowing this fact later on pays Rs. 100 to C. C is bound to repay
28
the amount to B. Coercion under this section has been used in general and ordinary sense. Mistake may be
either of fact or of law but it must be material to the transaction
_______________________________________________________________________________________
Q.2- Define damages? Aggrieved party entitled to two kinds of damages from defaulter in case of
breack of contract? Discuss with reference to the provisions of Indian contract Act 1872 and
decided cases?
1. Meaning of Damages
2. Measure of Damages
3. General Damages
4. Special Damages
5. Duty to mitigate the losses
6. Important Case
i) Hadley Vs. Baxendale
Ans.- Breach of contract means failure of the party to perform his or her part of obligation under the
ii) Dominion of India Vs. AIR Ltd.
contract. When a contract is broken the party entitled for the following remedies - Rescission of contract,
damages, quantum of merit specific performance of contract and injunction. Damages are the value of the
loss incurred by the plaintiff which are paid by the defaulting party to the injured party.
Measures of Damages - In order to establish the right to claim damages the first thing the plaintiff
must show the loss which he sustained because of breach of contract. The law will not force the defendant to
be liable for all the losses, because certain losses may be too remote, for which the plaintiff may not be
entitled to receive. The court will force the defendant to pay only those damages which arise in the usual
course of things. He cannot be held liable for all the probable, possible and remote damages.
Therefore, for the assessment of the damages for the breach of a contract following principles are to
be followed:
Remoteness of Damages - The principle regarding remoteness of damages was established in
Hadley vs. Baxendale. In this case plaintiff's Mill was stopped, due to breakage of Crank Shaft. Defendant
the common carrier was entrusted with the delivery of this machine part for taking it to its maker. Defendant
did not have any information that delay in carrying the machine would result in loss of profits. The delivery
was delayed beyond reasonable time by some negligence on the part of the defendant. Plaintiffs claimed
from defendant compensation for the wages of workers and the depreciation charges which were incurred
during the period the Factory was closed for the delayed delivery and for the loss of profits which might
have been made if the factory would be working. The first two claims were allowed because those were
natural result of breach of contract.
Loss or profits was disallowed as it was the remote loss which could be, it means the rule in Hadley
vs. Baxendale, can be summarized in the following two part:
(i) The first part deals with the damages as may traily and reasonably be considered either arising
naturally i.e., according to the usual course of things. In short we may say it general damages.
(ii) The second part deals which damages "as may reasonably be supposed to have been in
contemplation of both the parties at the time they made the contract as the probable result of the breach of it.
In short we can term it as special damage. General Damages are thus damages which are the result of usual
course of thing.
Special damages- The second part of the rule established in Hadley vs. Baxendale explains the
principle regarding special damages. Special damages can be claimed when they are such as may reasonable
be supposed to have been in the contemplation of both the parties at the time they made contract, provided
than the both cases there should be the probable result of the breach.
Law in India - Section 73 of the Indian Contract Act provides that "when a contract has been
broken, the party who suffers by such breach is entitled to receive from the party who has broken the
contract, compensation for any loss or damages caused to him thereby, which naturally arose in the usual
course or things from such breach, or which the parties knew, when they made contract, to be likely to result
from the breach of it." However, Section 73 contains a number of illustrations to make the rule clear.
Secondly, the word 'Compensation' has been used in the section deliberately. Moreover, Indian Contract
Law is condified whereas the English Contract Law is governed by the principles laid down in the decided
29
cases. As in England, in Indian also, general damages and special damages are awarded. In Dominion of
India vs. AIR Ltd. the defendant sent a parcel of books to themselves as consignee, three volumes of books
were lost in transit by the Railways. Due to this loss whole set of books became useless. It was held that
Railways were liable for the loss of three volumes only as they did not know this fact that the volumes in
question comprised of a single set and loss of three volumes in question would make the whole set useless.
Measures of Damages - After the remoteness or loss is determined, it is to be evaluated in terms of
money. In this regard two principles must be considered:
(i) Compensatory nature of damages, and (ii) Duty to mitigate the losses.
(i) Compensatory nature of damages- The nature of damages in contract is compensatory and not
penal. While the court awards damages, it tries to put the part whose rights have been voilated or who has
suffered the losses in the same position so far as money can do so as if the contract has been fulfilled or as if
his rights have been observed. When this is done the primary object of law of damages has been fulfilled. If
the injured party had not suffered any loss due to breach of contract, the court shall not award anything for
the breach of contract.
In Karshan Dass Thakkar vs. Saran Engineering Company Limited, there was no difference
between the contract price and the market price of the iron scrap as it was a controlled commodity, the court
held there was no loss, therefore no quantum of damages was awarded to the appellant.
Duty to mitigate the losses - Another principle for the measurement of damages is that, it is the duty
of the injured party to mitigate the loss as much as possible. Since the damages are compensatory, therefore,
he who has suffered the loss from the breach of contract must take every reasonable step available to him to
mitigate the extent of the damages caused by the breach.
Therefore, the general principle, deducted from the various judgments of the High Courts and
Supreme Court are as follows:
(i) As far as possible the injured party, who has proved the breach of contract is to be placed so far as
money can do it, in a position as if the contract had been performed.
(ii) It is the statutory duty of the plaintiff who has proved the breach of contract to take reasonable
steps to mitigate the loss before coming to the court.
(iii) If the plaintiff fails to prove that he took all reasonable steps to mitigate the loss on the breach of
contract, he will be debarred from claiming damages to the extent he could have mitigated the same by
taking such steps.
Q.3 Explain with the help of decided cases the Law relating to determination of damages in case of
breach of contract.
1. Meaning of Breach of Contract
2. Measure of Damages
3. Remoteness of damage
4. Liquidated Damages and penalty
5. Important Cases:
i)_Karshan Dass Vs. Sarab Engineering Company Limited
ii) Ford Motors Company Vs. Armstrong
iii) Dunlop Tyre Company Vs. New Garage and Motor company Limited
Ans. Breach of contract means failure of the party to perform his or her part of obligation under the
contract. When a contract is broken the party entitled for the following remedies - Rescission of contract,
damages, quantum of merit specific performance of contract and injunction. Damages are the value of the
loss incurred by the plaintiff which are paid by the defaulting party to the injured party.
Measures of Damages - In order to establish the right to claim damages the first thing the plaintiff
must show the loss which he sustained because of breach of contract. The law will not force the defendant to
be liable for all the losses, because certain losses may be too remote, for which the plaintiff may not be
entitled to receive. The court will force the defendant to pay only those damages which arise in the usual
course of things. He cannot be held liable for all the probable, possible and remote damages.
30
Therefore, for the assessment of the damages for the breach of a contract following principles are to
be followed:
Remoteness of Damages - The principle regarding remoteness of damages was established in
Hadley vs. Baxendale. In this case plaintiff's Mill was stopped, due to breakage of Crank Shaft. Defendant
the common carrier was entrusted with the delivery of this machine part for taking it to its maker. Defendant
did not have any information that delay in carrying the machine would result in loss of profits. The delivery
was delayed beyond reasonable time by some negligence on the part of the defendant. Plaintiffs claimed
from defendant compensation for the wages of workers and the depreciation charges which were incurred
during the period the Factory was closed for the delayed delivery and for the loss of profits which might
have been made if the factory would be working. The first two claims were allowed because those were
natural result of breach of contract.
Loss or profits was disallowed as it was the remote loss which could be, it means the rule in Hadley
vs. Baxendale, can be summarized in the following two part:
(i) The first part deals with the damages as may traily and reasonably be considered either arising
naturally i.e., according to the usual course of things. In short we may say it general damages.
(ii) The second part deals which damages "as may reasonably be supposed to have been in
contemplation of both the parties at the time they made the contract as the probable result of the breach of it.
In short we can term it as special damage. General Damages are thus damages which are the result of usual
course of thing.
Special damages- The second part of the rule established in Hadley vs. Baxendale explains the
principle regarding special damages. Special damages can be claimed when they are such as may reasonable
be supposed to have been in the contemplation of both the parties at the time they made contract, provided
than the both cases there should be the probable result of the breach.
Law in India - Section 73 of the Indian Contract Act provides that "when a contract has been
broken, the party who suffers by such breach is entitled to receive from the party who has broken the
contract, compensation for any loss or damages caused to him thereby, which naturally arose in the usual
course or things from such breach, or which the parties knew, when they made contract, to be likely to result
from the breach of it." However, Section 73 contains a number of illustrations to make the rule clear.
Secondly, the word 'Compensation' has been used in the section deliberately. Moreover, Indian Contract
Law is condified whereas the English Contract Law is governed by the principles laid down in the decided
cases. As in England, in Indian also, general damages and special damages are awarded. In Dominion of
India vs. AIR Ltd. the defendant sent a parcel of books to themselves as consignee, three volumes of books
were lost in transit by the Railways. Due to this loss whole set of books became useless. It was held that
Railways were liable for the loss of three volumes only as they did not know this fact that the volumes in
question comprised of a single set and loss of three volumes in question would make the whole set useless.
Measures of Damages - After the remoteness or loss is determined, it is to be evaluated in terms of
money. In this regard two principles must be considered:
(i) Compensatory nature of damages, and (ii) Duty to mitigate the losses.
(i) Compensatory nature of damages- The nature of damages in contract is compensatory and not
penal. While the court awards damages, it tries to put the part whose rights have been voilated or who has
suffered the losses in the same position so far as money can do so as if the contract has been fulfilled or as if
his rights have been observed. When this is done the primary object of law of damages has been fulfilled. If
the injured party had not suffered any loss due to breach of contract, the court shall not award anything for
the breach of contract.
In Karshan Dass Thakkar vs. Saran Engineering Company Limited, there was no difference
between the contract price and the market price of the iron scrap as it was a controlled commodity, the court
held there was no loss, therefore no quantum of damages was awarded to the appellant.
Duty to mitigate the losses - Another principle for the measurement of damages is that, it is the duty
of the injured party to mitigate the loss as much as possible. Since the damages are compensatory, therefore,
he who has suffered the loss from the breach of contract must take every reasonable step available to him to
mitigate the extent of the damages caused by the breach.
Therefore, the general principle, deducted from the various judgments of the High Courts and
Supreme Court are as follows:
31
(i) As far as possible the injured party, who has proved the breach of contract is to be placed so far as
money can do it, in a position as if the contract had been performed.
(ii) It is the statutory duty of the plaintiff who has proved the breach of contract to take reasonable
steps to mitigate the loss before coming to the court.
(iii) If the plaintiff fails to prove that he took all reasonable steps to mitigate the loss on the breach of
contract, he will be debarred from claiming damages to the extent he could have mitigated the same by
taking such steps.
Liquidated damaged and penalty:
Sometime contracting parties determine the amount of compensation payable in case of breach of
contract According to English Laws a sum so fixed may be either liquidated damages or penalty.
Liquidated Damages- When the amount of compensation fixed by agreement between contracting
parties, which is to be paid in case of breach of contract, which is a pre estimation of probable damages such
amount is called liquidated damages. Liquidated damages are, therefore, genuine, and pre- estimated
damages. It is the assessment of that amount which is known to the contracting parties as equivalent to the
probable loss which may occur in case of breach of contract.
Liquidated damages are to be granted in full irrespective to the extent of loss which were greater or
less within the estimate of the parties. In liquidated damages the court has no power to reduce or increase the
amount.
Penalty- On the other hand when the amount which was named in the contract at the time of the
formation of the contract, is disproportionate to the loss likely to occur in the case of breach, it will be
termed as penalty. This penalty is not the actual loss or damage which occurs due to breach. It is a sort of
coercion that the party uses to prevent him from breaching the contract. A sum is a penalty, if it is
extravagant and unreasonable, unconscionable in comparison with the greatest loss which may occur from
the breach.
In Dunlop Tyre Company vs. New Garge and Motor company Limited, the manufacturer of tyres
supplied types to a dealer on the condition that he will not sell them below the price cost and if he does so,
he would have to pay £ 5 for every tyre sold in breach of contract. The dealer committed breach. The
question before the court was whether the stipulation in the contract was genuine compensation for loss or
penalty. The House of Lords held it to be liquidated damages as the amount to be paid in case of breach is
reasonable and equivalent to the loss which may be suffered by the injured party.
On the other hand in Ford Motors Company vs. Armstrong, the defendant received from the
plaintiff, cars and parts and agreed not to sell any item below listed price, and if there is breach of contract,
the sum of £ 250 was to be paid by the defaulting party. When breach occurred the court of appeal held that
the amount stipulated was a penalty as it might happen that the parts sold in breach were of the lesser price
than the damages payable.
_______________________________________________________________________________________
The End
32

LLB 3 Y 1st Sem Contract (English)

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Year Wise Question Paper of Lucknow University

The Indian Contract Act 1872

Communication of acceptance must be by a Person who has Authority to accept:

College Assignment Question

Ans.- CAPACITY TO CONTRACT

NATURE OF MINOR’S AGREEMENT

This answer shall include following points.

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