Mumbai University Law of Contract Syllabus

Sub- LAW OF CONTRACT, SEM -1, Mumbai University New Syllabus – 2022-2023, Marks -75
LAW OF CONTRACT AND SPECIFIC RELIEF

MODULE 1:
Sections 1 – 9, 30 – 37 and 68 – 72 of the Indian Contract Act 1872
1.1 INTRODUCTION
History and nature of a contractual obligation Contemporary Relevance
1.2 OFFER, ACCEPTANCE AND ITS COMMUNICATION
1.3 Types of Contracts
Including – Contingent Contract, Quasi Contracts, Standard Form Agreements and EContracts
(Includes Legal Recognition to E-Contracts as per the Information Technology Act (Section 2 – 16)
Definitions, Digital Signatures, Electronic Governance, Attribution, Acknowledgment and
Dispatch of electronic records, Clickwrap and Shrink Wrap Contracts)
1.1 INTRODUCTION
History and nature of a contractual obligation Contemporary Relevance
Historical Background of Indian Contract Act 1872
The Indian Contract Act brings within its ambit the contractual rights that have been granted to the
citizens of India. It endows rights, duties and obligations on the contracting parties to help them to
successfully conclude business- from everyday life transactions to evidencing the businesses of multi-
national companies. The Indian Contract Act, 1872 was enacted on 25th April, 1872 and subsequently
came into force on the first day of September 1872.
The essence of the India Contract Act has been modeled on that of the English Common Law. It is
one of the most important legislation ever drafted by Britishers and the principles enacted therein are
nothing but the codification of the general principle governing transactional relationship because of which
it has seen seldom amendments.
Before the act was enacted , the contractual relationship was governed by the personal laws of
different religious communities like different laws for Hindu and Muslims. Now, to understand the
contract act in its present form we have to analyze the historical evolution of contract law taking into
account the practices that were prevalent before the enactment came.
Evolution of contract law different time periods

Vedic and Medeival period:
During the entire ancient and medieval periods of human history in India, there was no general
code covering contracts. Principles were thus derived from numerous references- the sources of Hindu
law, namely the Vedas, the Dhramshatras, Smritis, and the Shrutis give a vivid description of the law
similar to contracts in those times. The rules governing contracts form a part of the law called
Vyavaharmayukha.
During Chandragupta's reign, contract existed in the form of "bilateral transactions" between two
individuals of group of individuals. The essential elements of these transactions were free consent and
consensus on all the terms and conditions involved. It was an open contract openly arrived at.
• It was laid down that the following contracts were void:
• Contracts formed during the night.
• Contracts entered into the interior compartment of the house.
• Contracts made in a forest
• Contracts made in any other secret place
• There were certain exceptions to clandestine contracts such as
• Contracts made to ward off violence, attack and affray
• Contracts made in celebration of marriage
• Contracts made under orders of government
• Contracts made by traders, hunters, spies and others who would roam in the forest frequently.
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Also, the rights and duties (of a Bailee) in a Bailment, as we know it today in the form of sections 151 and
152 of the Indian Contract Act, 1872, has its root to the Katyaynasmriti containing a special provision
called the silpinyasa dealing with the deposit of raw materials with an artisan- talking about the degree of
care attached. The text laid down that "if an artisan does not return the things deposited with him during
the stipulated time, he should be made to pay its price even in the cases, where the loss is due to acts of
God or King.
The artisan, however, is not responsible for the loss of an article which was defective at the very
time of bailment, unless the loss is due to his own fault.
It is also interesting to note that there was no limitation for bringing a suit for money lent. This was
because of the rule of 'damdupat' which laid down that 'the amount of principle and interest recoverable
at one time in a lump sum cannot be more than double the money lent.'
It took into consideration the fact that debts were not necessarily recoverable from a man himself,
his descendents were also liable. Thus there was no concept of a 'limitation period' for filing a suit. The
rule of 'damdupat' is still prevalent in Calcutta and Bombay as it has been upheld to be a valid custom and
thus enjoys enforceability under the savings clause, Section 1.
Roman period:
In early Rome, the law of contracts developed with the recognition of a number of categories of
promises to be enforced rather than creation of any general criteria for enforcing promises. Thus, the
notion that promise itself may give rise to an enforceable duty was an achievement of Roman law.
Stipulation (stipulatio):
It put into force formalities and dates from a very early time in Roman law. A party could make a
binding promise called "stipulation" in which the party observed a prescribed form of question and
answer. Though the participation of both parties was required, only one party was bound.
Real Contracts:
These were those that suited to Executory exchange of promises. For example, the contract of loan, in
which the recipient's promise to restore the subject matter was binding.
Consensual Contracts:
These were more flexible and did not hold a legal basis for enforcing purely executory exchanges of
promises. They deviated from the formalities in "stipulation" and in agreement alone, without delivery,
sufficed to make the promises binding. Although they were limited to four important types of contracts-
sale, hire, partnership and mandate.
Innominate Contracts:
These were agreements under which one party was promised to give or do something in exchange for a
similar promise by the other party. Unlike both real and consensual contracts they were not limited to
specified classes of transactions and were therefore called in nominate.
The enforceability of the promise required some performance given in exchange and was called
quid pro quo (i.e. the modern concept of consideration of the contract). But these contracts were limited
because they were binding only when one of the parties had completed performance and until that
happened either party could escape liability.
Dotis dictio:
This was related to dowry agreement between bride and groom. In this contract, the father of the bride or
the bride herself set forth amount and nature of dowry to be governed to be groom and its declared in
presence of the groom. Since this was a social agreement. There was not any punishment in case of breach
of contract, the only remedy that the groom family has in case of breach is to compel the bride`s family in
fulfilling the contract.
Lex Mancipi:
This contract was equivalent to the modern day's contract of transfer of property.
Fiducia:
It was an ancillary contract to the above form of contract.
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Uadimonium:
This contract was similar to today`s contract of guarantee.
Islamic period
During the Muslim rule in India, all matters relating to contract were governed under the
Mohammedan Law of Contract. The word contract in Arabic is Aqd meaning a conjunction. It connotes
conjunction of proposal (Ijab) and acceptance which is Qabul.
A contract requires that there should be two parties to it one party should make a proposal and the
other accept it, the minds of both must agree that is there declaration must relate to the same matter and
the object of contract must be to produce a legal result.
The unlawful transactions were considered void beginning under Muslim laws:
Riba Al-Fadl:
In this case it's a contract which produced unlawful excess in exchange of counter values in a
contemporaneous transaction.
Riba Al-Nasià:
Which means contract which produced unlawful gain without completing the exchange of counter values.
Riba Al-Jahilya:
Its also called pre-historic riba. Where the lender asks the borrower whether he will settle the debt
or increase the debt.
Another type of transaction that was prohibited under Muslim laws and the same stance was taken
under the Indian Contract Act were the contract related to gambling, contingent contract or wagering
contract.
The formation of a contract according to Islamic law does not require any kind of formality, the
only requirement is that the express consent of both parties, the proposal and acceptance must be made of
the same thing in the same sense. Furthermore, the Islamic classifies as per their special features and
following are the type of contract. Alienation of property:
 for an exchange like sale
 without exchange like giving a simple gift
 to create succession namely request
Alienation of usufruct:
In exchange for property, namely Ijara, where the movable and immovable things are given for hire,
contracts for giving service like carriage for goods, safe custody of property.
Not being exchange of property like an accommodate loan(ariat) and deposit (wadiyut)
Islamic laws provide two modes for invalidation of contracts, first the right of either party to rescind the
contract unilaterally without any legal cause and the second one is to terminate the contract on the ground
of frustration.
The ground of dissolution of contracts are as follow:
 Invalidation of mutual agreement
 Cancellation of contract by death of either party or destruction of subject matter or expiry of time
period.
 Cancellation by termination by either party
 Dissolution by termination of the contract
Another thing to be noted is that under Islamic Law even marriages (Nikah) were treated as contracts
and till date the situation remains the same. Either of the parties to the marriage makes a proposal to the
other party and if the other party accepts, it becomes a contract and the husband either at the time of
marriage or after it has to pay an amount to the wife as a symbol of respect known as Mahr.
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Also the Mahommedans were the firsts to recognize the concept of divorce. This way, a party to
marriage could absolve itself of the contractual obligations under marriage. Muslim marriages are thus
considered contracts for these reasons.
Hindu period
The Jurisprudential aspect of the Hindu law is fundamentally different from that of English law's
jurisprudence. Hindu law is the result of the compilation of numerous customs and works of Smritikaras,
who interpreted and analyzed Vedas to develop the various aspect of Hindu law. Manusmriti in regarding
the contract law dealt with the incompetence to enter to contract.
It laid down the principle which is also followed in the Indian Contract Act, states that a contract
entered by a minor, or intoxicated person or an old man or the cripple is not valid contract.Regarding the
contract by minor, under Narada smriti an infant is considered is someone who is between in the stage of
an embryo to up to 8 years. After that from 8 years to 16 years the child is considered as boyhood and
after 16 years the person is competent to enter into a contract. So it can be concluded that the stage of
majority to enter into a contract is 16 years, 2 years less than what has been prescribed under The Indian
Contract Act.
British period
Before the advent of the Indian Contract Act, The English Law was applied in the Presidency Towns
of Madras, Bombay and Calcutta under the Charter of 1726 issued by king George to the East India
Company. Now, since no system can afford to make all promises enforceable, the English tried out two
assumptions:
One, the assumption that promises are generally enforceable, and then create exceptions for
promises considered undesirable to enforce.
Secondly the assumption that promises are generally unenforceable, and then create exceptions for
promises thought desirable to enforce.
But in the case where one of the parties is from either of the religion like if one party is Hindu and
other is Muslim then, in that case, the law of the defendant is to be used. This was followed in the
presidency towns, but in cities outside the presidency towns, the matter was governed by justice, equity
and good conscience.
This procedure was followed until the time the Indian Contract Act was implemented in India. In
the years 1862, the introduction of the High Courts took place in the town of Bombay, Calcutta, and
Madras and the charter of these High Courts also contained the same provision as pervious law that High
Courts to apply the personal laws of the respective religions before rendering any judgment in respect to
the contract cases.
The Advent of The Indian Contract Act

The Indian Contract Act as applied today's was drafted originally by the third Indian Law
Commission in the year 1861 in England. The Indian Contract Bill tried to defined laws relating to
Contracts, Sale of movable properties, Indemnity, Guarantee, Agency, Partnership and bailment.
The bill was not the complete law of contract, but the aim of the bill was to suffice the need of the
country for a considerable period of time and during that period, judges of the courts were taking the help
of English laws in determining the case when they failed to arrive at the judgments by considering the
justice, equip and good conscience. once a person made a promise he has to perform it the last day of your
life.
Though it may seem that a rigid principle like this would make sense, some exceptions have to be
provided or else it would be a gross injustice to the community. Even with the vice-like this, the contract
law came into effect. The drafter of the bill knew that different religious people followed personal laws and
for them it will be difficult to abide the new rules so that the special customs of the personal laws
governing any aspect of the contractual relationship would not be affected by new rules, unless or until
they are nit contrary to the new rules.
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The act came into effect in 1872 but soon afterwards amendments were made in that regard, which
repealed section 76 to 123 dealing with the sales of goods act and separate legislations were enacted
called Sales of Goods Act 1930' to govern that area. Also, section 239 to 266 dealing with partnership was
repealed and new legislation was enacted called Indian Partnership Act 1932.
Conclusion
By analyzing the development of the contract through different time periods ranging from Roman
period to Muslim period to Hindu period and then to legal sanctions in, it can be concluded that though the
technicality and the modes and means of punishment. Even the applicability of the law may vary, but the
underlying principle of all the laws remained the same, that minor cannot contract, consent should be
given by both the parties for the same manner and same sense and that certain person is disqualified from
contracting like intoxicate, old person cannot contract.
It can be further concluded that Britishers tried to codify the law to bring in uniformity but they
also tried to incorporate the personal laws of the different religious groups unless they are in contrary to
the main law, as they realized that underlying principle for personal law is similar to that of the contract
act.
Nature of a contractual obligation Contemporary Relevance

Introduction
‘Contract’ is a word having very wide connotations. We are all aware of the Rousseau’s hypothetical
social contract theory. One is a part of that contract by just being born as a human being. This social
contract helps the society to develop. This is the edifice on which some of the rights are built. Social
contract tells how to enjoy without even entering into a contract. A perfect example is your human right.
That is a right you enjoy inherently as you are born. A complete person is somebody who can enjoy his
rights and fulfil his duties.
Generally, in agreements, the rights and liabilities are chosen by the parties themselves. When the
rights and liabilities are chosen by the parties themselves, the law doesn’t have a say there. But if you want
your agreement to be enforceable, then you must enter into an agreement which is enforceable under law.
So, in other words, contract law enables you to enter into agreements which are enforceable. There are
certain criteria that the agreement has to fulfil so that it becomes enforceable under law. Thus an
agreement is regarded as a contract when it is enforceable by law.
Definition of a contract
The word Contract comes from a Latin word ‘contractus’ meaning to collect, combine or make an
agreement. In its most basic form, a contract will have two parties, coming together, wanting to enter into
a relationship where they want to create rights, liabilities and obligations. The law of contracts confines
itself to the enforcement of voluntarily created civil obligations. It does not cover the whole range of civil
obligations. There are many obligations of civil nature whose infringement may be actionable under other
branches of law like the law of torts or of trust or some other statutes. But they are outside the purview of
the law of contracts. The fundamental pre-requisite to have obligations (enforceable) in a contract is that
the contract must be valid and enforceable. Thus the obligation of the parties to a contract comes
predominantly from the terms of the contract itself.
Formation of Contracts
Proposal and Acceptance
According to H.L.A Hart, contracts are ‘created by the deliberate choice of the individual’.
Agreements that are acceptable or rather enforceable alone will be treated as contracts. Every contract is
an agreement, but every agreement is not a contract. All agreements are contracts if they are made by the
free consent of the parties competent to contract, for a lawful consideration and with a lawful object and
are not expressly declared as void. The proposal and its acceptance is the universally acknowledged
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process for making an agreement. A proposal is the starting point. When one person signifies to another
his willingness to do or 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. When a 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. So these are the norms which one needs to look into in order to determine whether there exists a
valid contract or not. And further, it can be noted that the obligations of the parties to a contract derive
from implicit or explicit promises. To be more specific, it is rooted on two factors, that is, actual choice and
actual and voluntary acceptance.
Contractual Obligations
In its cardinal level, the term contractual obligations are those duties which the parties to a contract
are responsible through the terms of the contract. So, pre-dominantly the nature of obligations of parties
to contract is dependent on the terms of the contract. Every contract is accompanied with the exchange of
a valid consideration which can be almost anything ranging from products, services, money etc. Each party
to the contract will have various obligations in connection with this exchange of consideration. If any of
the parties to the contract fails to carry out their contractual obligations in accordance with the
contractual terms, usually the end result will be the breach of the contract.
Thus, the contractual obligations mostly depend upon the specific subject matter of the contract. It
may be different for different types of contracts. However, some of the most basic forms of contractual
obligations which can be traced in almost all the contracts include payment (for which the contact can
again specify obligations regarding amounts, deadlines etc), delivery (for which the contract can specify
obligations as to the time, place and mode of delivery), quality of goods (which can again be described in
the contract) etc. These types of specific obligations can be varied or modified according to the pertinent
details of the contracts at hand. Apart from these, the parties may also be bound by certain general
principles and obligations while forming a contract. For example, every party to a contract is obligated to
deal fairly and truthfully with other parties and is also obligated to refrain from the use of force or
coercion in obtaining the consent to the agreement.
When it comes to the Indian Contract Act, 1872, Section 37 of the Act deals with the obligations of parties
to contracts. Thus, according to section 37, each party is bound to perform his obligation under the
contract, unless the performance is dispensed with or excused under the provisions of the Contract Act, or
of any other law. For example, a performance under section 37 may be dispensed by agreement under
section 62 or it may be excused under section 56 by supervening impossibility of performance.
A very important case law in this regard is the case of Syndicate bank v. R. Veeranna, where the court held
that the bank had the right under the agreement to vary the interest upwards up to a certain percentage.
The exercise of this power did not require that the borrower should have been put on notice.
Theories of Contractual Obligations

There are certain theories which help in assessing the nature of contractual obligations. Out of
which the five most commonly used theories are will, reliance, efficiency, fairness and bargain theories.
These theories are generally used to explain which commitments warrant enforcement and which do not.
These theories of contractual obligation actually exemplify three types of contract theories. Will and
reliance theories are party-based. Efficiency and fairness theories are standards-based. The bargain theory
is process-based.
However, there are existing lacunae for each of these theories. The party based theories are known for
supporting one particular party to a transaction too much. The will theory gives too much protection to
promissory whereas the reliance theory is known for its too much protection to promise. This undue
emphasis which these theories place on one single party to the transaction is identified as its main
drawback and it undoubtedly creates insoluble problems.
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Standards-based theories are those which evaluate the substance of a contractual transaction to see if it
conforms to a standard of evaluation that the theory specifies as primary. Economic efficiency and
substantive fairness are two such standards that have received wide attention. All the standard based
theories usually suffer from a fundamental problem. This fundamental problem is identifying and
defending the appropriate standard by which enforceable commitments can be distinguished from those
that should be unenforceable.
Process-based theories shift the focus of the inquiry from the contract parties and from the substance of
the parties’ agreement to the manner in which the parties reached their agreement. Such theories posit
appropriate procedures for establishing enforceable obligations and then assess any given transaction to
see if these procedures were followed. The single biggest problem associated with the process based
theories is that they place insurmountable obstacles in the way of minimizing difficulties for enforcement.
Conclusion
A contractual obligation on the parties which arose from an agreement between the parties can
thus be enforced either specifically or by giving the obligee the damages which is again stipulated more or
less by the contract itself. The cause of action arises only when the agreement and its breach is proved.
The obligation to perform the terms of the contract is the primary and antecedent obligation. The
obligation to pay the damages is only secondary and a remedial obligation.
The obligation of parties to a contract is acquired by the signing on for those particular obligations.
It must be a voluntary acceptance of a cluster of rights and duties. Thus it is plain to say that the validity of
a contractual obligation lies on the very fact that the formation of a contract involves the parties to take up
voluntarily, a morally binding promise. Since the contract is legally recognized and enforceable, the
contractual duty gives a legal effect and validity to the moral duty.
1.2 OFFER, ACCEPTANCE AND ITS COMMUNICATION

Introduction
Contracts play an important role in our everyday life ranging from insurance policies to
employment contracts. In Fact, we enter into contracts even without thinking, for example, while buying a
movie ticket or downloading an app. The contract is oral or written agreements between two or more
parties. Parties entering into a contract might include individual people, companies, non-profits or
government agencies. The whole process of entering into a contract starts with an offer by one party, an
acceptance by another party, and an exchange of consideration (something of value). Let us take a look at
the aspect of offer and acceptance.
Proposal or offer
The entire process of entering into a contract begins with the proposal or an offer made by one
party to another. The proposal must be accepted to enter into an agreement.
According to the Indian Contract Act 1872, proposal is defined in Section 2(a) as “when one person
will signify to another person his willingness to do or not do something (abstain) with a view to obtain the
assent of such person to such an act or abstinence, he is said to make a proposal or an offer.”
Features of a valid offer
The person making the offer/proposal is referred to as the “promiser” or the “offeror”. And the
person who accepts an offer is referred to as “promisee” or the “acceptor”.
The offeror must express his willingness to do or abstain from doing an act. Only willingness is not
adequate. Or just an urge to do something or not to do anything will not be an offer.
An offer can either be positive or negative. It can be a promise to do some act, and can also be a
promise to abstain from doing any act/service. Both are valid offers.
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The element of a valid offer

 Here are some essentials which make the offer valid
 There must be two parties
 There have to be at least two parties a person making the proposal and the other person agreeing
to it. All the persons are included i.e, Legal persons as well as artificial persons.
Every proposal must be communicated

Communication of the proposal is mandatory. An offer is valid if it is conveyed to the offeree. The
communication can either be express or implied. It can be communicated by terms such as word of mouth,
messenger, telegram, etc. Section 4 of the Indian Contract Act says that the communication of a proposal is
complete when it comes to the awareness of the person to whom it is made.
Example
‘A’ proposes, to sell a car to ‘B’ at a certain price. Once ‘B’ receives the letter, the proposal communication
is complete.
It must create Legal Relations

An offer must be such that when accepted it will result in a valid contract. A mere social invitation cannot
be regarded as an offer, because if such an invitation is accepted it will not give rise to any legal
relationship.
Example
‘A’ invited ‘B’ to dinner and ‘B’ accepted the invitation. It is a mere social invitation. And ‘A’ will not be
liable if he fails to provide dinner to B.
It must be certain and definite
The terms of the offer must be certain and clear in order to create a valid contract, it must not be
ambiguous.
It may be specific or general
The specific offer is an offer that is accepted by any specific or particular person or by any group to whom
it is made. Whereas, The general offers are accepted by any person.
Classification of offer
Some types of offers can be based on the design, timing, purpose, etc. Let us look at the offer’s
classification.
Express Offer
An offer may be made by express words, spoken or written. This is known as Express offer.
Example
When ‘A’ says to ‘B’, “will you purchase my car for Rs 2,00,000”?
Implied Offer
An offer may be derived from the actions or circumstances of the parties.
This is known as Implied offer.
Example
There is an implied offer by the transport company to carry passengers for a certain fare when a transport
company operates a bus on a particular route.
General Offer
A general offer is not made by any specified party. It is one that is made by the public at large. Any member
of the public can, therefore, accept the offer and have the right to the rewards/consideration.
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Example
‘A’ advertises in the newspaper that whosoever finds his missing son would be rewarded with 2 lakh. ‘B’
reads it and after finding the boy, he calls ‘A’ to inform about his missing son. Now ‘A’ is entitled to pay 2
lakh to ‘B’ for his reward.
Specific Offer
It is the offer made to a specific person or group of persons and can be accepted by the same, not anyone
else.
Example
‘A’ offers to sell his house to ‘B’. Thus, a specific offer is made to a specific person, and only ‘B’ can accept
the offer.
Difference between General Offer and Specific Offer

General Offer Specific Offer
General Offer is made to the whole world at
A specific Offer is made to some specific person.
large.
A general offer can be considered by any A specific offer can be accepted by only a specific
person. person.
Cross offer
Two parties make a cross-offer under certain circumstances. It means that both make the same offer at the
exact time to each other. However, in either case, the cross-offer will not amount to accepting the offer.
Example
‘A’ and ‘B’ both send letters to each other offering to sell and buy B’s house at the same time. This is the
cross offer made where one party needs to accept the offer of another.
Counter-offer
A counter-offer is an answer given to an initial offer. A counter-offer means that the original offer has been
refused and replaced by another. The counteroffer offers three choices to the original offerer; accept,
refuse, or make another offer.
Lapses and revocation of an offer

• An offer lapses after a defined or reasonable time.
• An offer lapse by not being accepted in the specified mode
• An offer lapses by rejection.
• An offer lapses by the offeror or the offeror’s death or insanity until acceptance.
• An offer lapses by revocation before acceptance.
• An offer lapses by subsequent illegality or destruction of the subject matter.
When communication is complete

Communication of offer (section 4)
The communication of the offer is complete when it comes to the knowledge of the person to whom it is
made.
Time of revocation of an offer

Revocation of the offer (Section 4)
A proposal can be revoked at any time before the communication of its acceptance is complete as against
the proposer but not afterward.
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Revocation of the offer by the offeror

The offeror can withdraw his offer before it is accepted “the bidder can withdraw (revoke) his offer at an
auction sale before being accepted by any auctioneer using any of the customary methods.
Example
‘A’ agreed to sell the property to ‘B’ by a written document which stated “this offer to be left over until
Friday 9 AM”. on Thursday ‘A’ made a contract to sell the property to ‘C’. ‘B’ heard of this from ‘X’ and on
Friday 7 AM he delivered to ‘A’ acceptance of his offer. Held ‘B’ could not accept A’s offer after he knew it
had been revoked by the sale of the property to C.
Acceptance
The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person to whom the
proposal is made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when
accepted becomes a promise.” An offer can be revoked before it is accepted.
As specified in the definition, if the offer is accepted unconditionally by the offeree to whom the
request is made, it will amount to acceptance. When the offer is accepted it becomes a promise.
Example
‘A’ offer to buy B’s house for rupees 40 lacs and ‘B’ accepts such an offer. Now, it has become a promise.
When an offer is accepted and it becomes promise it also becomes irrevocable. No legal obligation created
by an offer.
Types of Acceptance
Expressed Acceptance
If the acceptance is written or oral, it becomes an Expressed Acceptance.
Example
‘A’ offers to sell his phone to ‘B’ over an email. ‘B’ respond to that email saying he accepts the offer to buy.
Implied Acceptance
If the acceptance is shown by conduct, It thus becomes an Implied acceptance.
Example
The Arts Museum holds an auction to sell a historical book to collect charity funds. In the media,
they advertise the same. This says that a Mere Invitation to an Offer as per Indian Contract Act, 1872.
The invitees offer for the same. Offer is expressed orally, so the offer to buy is an Express Offer, but
by striking the hammer thrice the final call is made by the auctioneer. This is called Implied Acceptance.
Conditional Acceptance
A conditional acceptance also referred to as an eligible acceptance, occurs when a person to whom
an offer has been made tells the offeror that he or she is willing to accept the offer provided that certain
changes are made to the condition of the offer. This form of acceptance operates as a counter-offer. The
original offeror must consider a counter-offer before a contract can be established between the parties.
Legal Rules and Conditions for Acceptance

Acceptance must be absolute and unqualified
The offeree’s approval cannot be conditional.For example, ‘A’ wants to sell her car to ‘B’ for Rs 2
lakh, ‘B’ can’t come back and says that she accepts the offer but will buy the same for Rs. 1 lakh.
Acceptance must be told to the offeror

If the acceptor just accepts the offer in his head and he does not mention the same to the offeror, it can not
be called an Acceptance, whether in an express manner or an implied manner.
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Acceptance must be recommended in the following mode

Acceptance is sometimes required in a prescribed/specified communication mode.
In a reasonable amount of time, the acceptance is given

It’s very rare that an offer is always to get acceptance at any time and at all times. Therefore, the offer
defines a time limit. If it does not, it should not be acknowledged forever.
Mere silence is not acceptance

If the offeree fails to respond to an offer made to him, his silence can not be confused with
acceptance. But, there is an exception to this rule. It is stated that, within 3 weeks of the date on which the
offer is made, the non-acceptance shall be communicated to the offeror. Otherwise, the silence shall be
communicated as acceptance.
When communication is complete?

Communication of acceptance (Section 4)
Communication of acceptance is complete when it is put in the course of transmission to him as to be out
of the power of the acceptor to withdraw the same and when it comes to the knowledge of the proposer.
Time of revocation of acceptance

An acceptance may be revoked at any time, but not afterward, before the communication of the acceptance
is complete as against the acceptor.
Conclusion
Examination of offer and acceptance is a standard contract law method used to assess whether a
two-party arrangement exists. An offer is a sign of their willingness to agree on certain terms from one
person to another. If there is an express or implied agreement, a contract will then be formed. A contract is
said to come into being when the acceptance of an offer has been told to the offeror by the offeree.
The communication of the offer shall be complete when it comes to the knowledge of the person to
whom the offer is made and the communication of the acceptance shall be complete when the acceptance
is put in a course of transmission to the offeror. Therefore, offer and acceptance are the essential elements
of a contract and in either case, it should be done on the basis of one’s free will and with the intention of
concluding a legally binding agreement.
1.3 Types of Contracts

Including – Contingent Contract, Quasi Contracts, Standard Form Agreements and E-Contracts
(Includes Legal Recognition to E-Contracts as per the Information Technology Act (Section 2 – 16)
Definitions, Digital Signatures, Electronic Governance, Attribution, Acknowledgment and Dispatch of
electronic records, Clickwrap and Shrink Wrap Contracts)
Contingent Contracts under Indian Contract Act

Introduction
The word contingent means when an event or situation is contingent, i.e. it depends on some other
event or fact.
For example, making money is contingent on finding a good-paying job.
Now, the ‘contingent contract’ means enforceability of that contract is directly depends upon
happening or not happening of an event.
Section 31 of the Indian Contract Act, 1872 defines the term ‘Contingent Contract’ as follows:
‘A contingent contract is a contract to do or not to do something, if some event collateral to such
contract does or does not happen’.
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In simple words, contingent contracts, are the ones where the promisor perform his obligation only when
certain conditions are met. The contracts of insurance, indemnity, and guarantee are some examples of
contingent contracts.
Illustration:- A contracts to pay to B Rs. 20,000 if B’s house is burnt. This is a contingent.
Case laws
Chandulal Harjivandas v. CIT– In this case, it was held that all contracts of insurance and indemnity are
contingent.
How is it different from wagering agreement?
A wagering agreement is absolutely void (S.30) while on the other hand contingent contract is a
valid contract.
In a contingent contract, the future uncertain event is merely collateral whereas in a wagering
agreement the uncertain event is a sole determining factor of the agreement.
In a wager, the parties are not interested in the occurrence of the event except for winning or losing
the best amount while in a contingent contract the parties have a real interest in occurrence or non-
occurrence of the event.
All wager contracts are contingent contracts, but all contingent contracts are not by way of the
wager.
Essential elements of the contingent contract

After examining the definition of the contingent contract given under section 31 of the Act, the
essentials of the term contingent contract are as follows:
There must be a valid contract to do or abstain from doing something
Section 32 and 33 of the Act talks about enforcement of the contingent contract on the happening or not
happening of the events respectively. The contract will be valid only if it is about performing or not
performing an obligation.
Illustration 1: X makes a contract with Y to buy Y’s dog if X survives Z. This contract cannot be enforced
by law unless and until Z dies in X’s lifetime.
Illustration 2: X agrees to pay Y a sum of money if a certain ship does not return. The ship is sunk. The
contract can be enforced when the ship sinks.
Performance of the contract must be conditional[i]

The condition for which the contract has been entered into must be a future event, and it should be
uncertain. If the performance of the contract is dependent on an event, which is although a future event,
but certain and sure to happen, then it’ll not be considered as a contingent contract.
The said event must be collateral to such contract

The event on whose happening or non-happening of the event on which the performance of the contract is
dependent should not be a part of the consideration of the contract. The happening or non-happening of
the event should be collateral to the contract and should exist independently.
Illustration: X enters into a contract with Y and promises to deliver 10 books to him. Y promises to pay
Rs. 2000 upon delivery. This is not a contingent contract since Y’s obligation depend on the event which is
a part of the contract(delivery of 10 Books) and not a collateral event.
The event should not be at the discretion of the promisor

The event so considered as for contingency should not at all to be dependent on the promisor. It should be
totally a futuristic and uncertain event.
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Illustration: X promises to pay Y, Rs. 10,000 if Y leaves Delhi for London on 31st March 2019. This is a
contingent contract. Going to London can be within Y’s will but is not merely his will.
Enforcement of contingent contract

Provisions related to the enforcement of the contingent contract are given under section 32 to 36 as
follows:
Condition #1- enforcement of contract contingent on the happening of an event

The contingent contracts to do or abstain from doing something if an uncertain future event happens.
However, the contract cannot be enforced by law unless the event takes place. If the event becomes
impossible, such contracts become void.[Section 32]
Illustration: X promises to pay Y, Rs. 100,000 if he marries Z, the prettiest girl in the neighbourhood. This
is a contingent contract. Unfortunately, Z dies in a car accident. Since the happening of the event no longer
possible, the contract is void.
Condition #2- enforcement of contract contingent on an event not happening
The contingent contracts to do or abstain from doing something if an uncertain future event does not
happen can be enforced when the happening of that event becomes impossible. If the event takes place,
then the contingent contract is void.[Section 33]
Illustration: X promises to pay Y a sum of money if a certain ship does not return. The ship is sunk. The
contract can be enforced when the ship sinks. On the other hand, if the ship returns, then the contract is
void.
Condition #3- when an event on which contract is contingent to be deemed impossible if it is the future
conduct of a living person
If a contract contingent upon how a person will act at a future time, the event shall be considered
impossible when such person does anything which makes it impossible for the event to happen.[Section
34]
Illustration: X agrees to pay Y, Rs. 100,000 if Y marries Z. However, Z marries A. The marriage of Y to Z
must now be considered impossible, although it is possible that A may die and that Z afterward marry Y.
Condition #4- contracts contingent on an event happening within the fixed time
Contingent contracts to do or not to do anything if a future uncertain event happens within a fixed time.
Such a contract is void if the event does not happen and the time lapses. It is also void if before the time
fixed, the happening of the event becomes impossible.[Section 35(para 1)]
Illustration: X promises to pay Y a sum of money if a certain ship returns before 1st April 2019. The
contracts may be enforced if the ship returns within the fixed time. On the other hand, becomes void if the
ship sinks.
Condition #5- contracts contingent on an event not happening within the fixed time
Contingent contract to do or not to do anything if an uncertain event does not happen within a fixed time
may be enforced by law when the fixed time has expired, and such event has not happened, or before the
time fixed has expired, if it becomes certain that such event will not happen.[Section 35(para 2)]
Illustration: X promises to pay Y a sum of money if a certain ship does not return before 31st March 2019.
The contract may be enforced if the ship does not return before 31st March 2019. Also, if the ship burnt
before the given time, the contract is enforced by law since the return is impossible.
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Condition #6- contract contingent of impossible event void

If an agreement to do or not to do is based on the impossible event, then such agreement is void, whether
the impossibility of the event is known or not to the parties to the agreement at the time when it is
made.[Section 36]
Illustration: X promises to pay Y, Rs 500 if two straight lines should enclose a space. The agreement is
void.
Conditions when a contingent contract becomes void
Section 32- if the event on the happening of which the contract is contingent becomes impossible, the
contract becomes void.
Illustration: Mohan contracts to pay Ram a sum of Money when Ram marries Geeta. Geeta dies without
being married to Ram. The contract becomes void.
Section 35- contingent contract to do or not to do something, if a specified uncertain event happens within
a fixed time, becomes void if, at the expiration of the time fixed, such event has not happened, or if, before
the time fixed, such event becomes impossible.
Illustration: Saurbh promises to pay Servesh if a certain ship returns within the year. The contract
becomes void if the ship is burnt within the year.
Section 34- if the future event on which a contract is a contingent is the way in which a person will act at
an unspecified time, the event shall be considered to become impossible when such person does anything
which renders it impossible that he should so act within any definite time, or otherwise than under further
contingencies.
Section 36- contingent agreement to do or not to do anything, if an impossible event happens, are void,
whether the impossibility of the event is known or not to the parties to the agreement at the time when it
is made.
Illustration: X agrees to pay Y, Rs. 10,000 if Y will marry X’s daughter P. P was dead at the time of the
agreement. The agreement is void.
Commercial applications of contingent contracts

Insurance is a contract to do something if the future event occurs that will be contracted by the
parties and liability will be taken by the offeror. In all Insurance like Life Insurance, Marine Insurance, Fire
Insurance, and other Insurances, the Offeror promises to take the risk of the offeree against the incident to
do or not to do something and for that the offeree agrees to pay a certain amount of money.
The contingent contract can be used in the contract of guarantee as well as the contract of warranty.
Contingent guarantees generally are used when a supplier does not have a relationship with a
counterparty.
We can use a contingent contract in negotiation. Contingent contracts normally occur when
negotiating parties fail to reach an agreement.
We can use the contingent contract in mergers and acquisitions (M&A) as well. Depending on the
M&A deal, contingent payments such as earn-outs, Seller notes, and Buyer stock may be part of the Seller’s
proceeds. After the deal is finalized, these contingent payments will need continuous contact between
Buyer and Seller.
It can also be used in the contract of indemnity.
Conclusion
What is described as ‘contingent contract’ in this topic is familiar to English law as ‘conditional
contract’. For a contingent contract, there is a certain event which needs to be fulfilled. The term of these
contract are certain and depend on the occurrence or non-occurrence of a future event.
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Quasi-Contractual Obligations under Indian Contract Act

Introduction
If, while riding on a train, a shoe shiner comes, and without us saying anything, starts to polish our
shoes and when they’re done, they ask for some money. Are we obliged to pay them that amount? Or can
we tell them “I did not ask you to polish my shoe anyway!”. Imagine another situation, where someone
else’s Amazon package, with its payment already done, is left at your door. Do you become all excited and
say “YAY! Free Gifts!” or do you make an effort to find the owner or return the package? This blog post will
give you answers to similar questions.
There are certain obligations, specified in the Indian Contract Act, that are not actually contracts
because they miss one or the other elements of a contract, but are still enforceable in a court of law. Such
obligations are called Quasi-contractual obligations. Each of them has been talked about separately in
Sections 68 to 72 (Chapter V) of the Indian Contract Act, 1872. Let us first look where these obligations
arise from, and then discuss each of them separately.
Background
It is first important to note that a contract before it becomes so, is an agreement. Therefore, where
there is no agreement, there is no contract. Yet, there are some obligations that do not have their origin in
an agreement. The obligation not to harm another person or his property (Torts), for instance, the
judgments or orders of courts, quasi-contractual obligations, etc. These obligations are not ‘contracts’ by
definition, but they are enforceable in a court of law.
The Principle of Unjust Enrichment

Quasi-contracts are based on the principle of “Nemo debet locupletari ex aliena jactura”, which means ‘No
man should grow rich out of another person’s loss’. Therefore, liability in the case of quasi-contractual
obligations is based on the principle of ‘unjust enrichment’. It essentially means that no man should get
unjustly enriched at the cost of another person’s loss. That means no person should gain anything unjustly,
when his gaining such a thing may mean a loss for another person.
Features of a Quasi-Contract
• Their origin does not lie in the offer and its acceptance, that is, in an agreement between the
parties.
• They are rather based on justice, equity, and a good conscience and on the principles of natural
justice.
Section 68 (Claim for necessaries supplied to person incapable of contracting, or on his account)
If the “necessaries” for a person, who is incapable of contracting (for example, a minor or a mentally
disabled person) or of the dependants of such a person are taken care of by someone, he has the right to be
reimbursed from the property of such incapable person. Although the word “necessaries” has not
specifically been defined in the Act, it is impliedly clear that it means the necessaries to sustain life, basic
things like food, clothing, education, etc. These are things without which a person cannot reasonably exist.
In simple terms, if a person A supplies another person B (who is incapable of entering into a contract) or
his family or anybody else who is dependant on him, with necessaries for life, he is entitled to take his due
return from the property of person B. He is entitled only to such a reasonable amount as the value of the
goods or services he may have supplied hold.
Section 69 (Reimbursement of person paying money due by another, in payment of which he is
interested)
If a person A pays something in someone’s (a person B’s) place, that which person B is himself ‘bound by
law’ to pay, A will be reimbursed by B. Please note that the person A should be ‘interested’ in this payment.
It is a case of implied indemnity.
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For instance, Joe is a Zamindar. Annie holds one of his lands on lease in Punjab. The revenue of Joe’s land is
payable to the government in arrears. So, the land ends up being advertised for sale by the government.
According to the Revenue Law, if the land is sold, it will end Annie’s lease. To prevent this sale, Annie pays
Joe’s dues to the government. Joe is bound to pay back to Annie.
The aforementioned illustration satisfies the following conditions-
• The party paying the other party’s dues is interested in the payment.
• The party whose payment is due was in fact bound by law to pay.
Section 70 (Obligation of person enjoying the benefit of the non-gratuitous act)
When a person lawfully does something for another person (for example, delivers a good or a service)
without intending to do so ‘gratuitously’, and the other person enjoys the benefit of the delivery of that
good or service, the latter is bound to pay back to the former.
A gratuitous act is one that is done for a person by another without the expectation of a return. For
example, giving someone a gift is a gratuitous act. Here comes your Amazon package delivered to the
wrong address. A pack of chocolate chip cookies that you ate as soon as they arrived. You are liable to
compensate the actual owner of the package. The illustration of a shoe-shiner unsolicitedly polishing one’s
shoes or that of the coolie picking up one’s goods will lie under Section 70. Such acts and services are not
done gratuitously and therefore a liability to pay back arises on the part of the person on the receiving end.
Section 71 (Responsibility of finder of goods)

Simply, a person who finds goods that belong to another person shall be treated as a bailee. A bailee
is essentially a safe keeper of the goods, who is supposed to return the goods to the actual owner or
dispose them in the manner in which the actual owner may want them to. The bailee has certain duties
and rights as the ‘possessor’ or ‘custodian’ of the goods for the time being. For example, Sarah finds a
diamond lying on the floor in a shop. She picks it up and keeps it in her safe possession. Sarah makes all
reasonable efforts to find the true owner of the diamond. The diamond actually belonged to Nadia. Sarah
has the right to hold the possession of the diamond against all the world except Nadia, and is supposed to
make reasonable efforts to find her, and return it to her. In this case, Nadia will have to pay the
compensation for all the loss suffered by Sarah in finding her.
Duties of the finder of goods

• The finder has a duty to take reasonable care.
• He/she has a duty not to use the goods for his personal purposes.
• He/she has a duty not to mix the found goods with his own goods.
• He/she has a duty to make reasonable efforts to find the actual owner of the goods.
• Rights of the finder of goods
• Right to Lien– The right to retain the goods found until he receives compensation for all the
expenses suffered in finding the owner.
• Right to Sue– If the owner had announced a reward for whoever finds the good, the finder has the
right to sue the owner for such reward or retain the goods until he is compensated.
• Right to Sell– The finder of goods has the right to sell the goods in certain specific circumstances,
for example:
i) If the owner could not be found even after reasonable efforts.
ii) If the owner is found but refuses to pay compensation or the lawful charges of the finder.
iii) If the goods are in immediate danger of perishing if not used.iv) If the lawful charges of the finder
amount to two-thirds of the value of goods.
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Section 72 (Liability of person to whom money is paid or thing delivered by mistake or under coercion)
As the heading suggests, if something is delivered to a person by ‘mistake’ or under ‘coercion’, he is liable
to pay it back. For instance, Aristotle and Dante share a flat and contribute in half for the rent to be paid.
Aristotle, without knowing that Dante has already paid the due rent to the landlord in whole, pays again to
the landlord. The landlord, in this case, is liable to give back the money delivered to him by mistake. The
term mistake here can mean both mistake of fact or mistake of law.
The section also uses the term ‘coercion’. Here is an example of something delivered under
coercion- A railway company refuses to deliver goods to a certain consignee except upon the payment of a
certain illegal sum of money. The consignee pays the sum to obtain his goods. The company is liable to
return the sum of money illegally charged.
Conclusion
A contract has certain elements, like the offer, and its acceptance, that give rise to an agreement.
The agreement, if it is legally enforceable becomes a contract, that is, it can be taken care of in a court of
law in case it is not performed by either of the parties involved. Yet, there are certain situations where
even in the absence of an ‘agreement’ as such, one or the other party is obliged to perform something. Such
obligations are called quasi-contractual obligations. Chapter V of the Indian Contract Act, 1872 deals with
such obligations.
What is a Standard Form of Agreement?

A standard form of agreement is an agreement in which one of the parties to the contract
determines the terms, and the other party cannot change these terms. This agreement between two
parties is also known as a standardized contract. Mass distribution of goods and services is possible
thanks to standard contracts, which are very popular among consumers and businesses. Standard
agreements have features that distinguish them from other contract types. These features are essential
elements such as minimum bargaining rights, high trading volumes, and low risk.
A standard form of agreement can be used when a business needs to set the same terms for many
people purchasing its products.
Who Helps With Standard Forms of Agreement?

Lawyers with backgrounds working on standard forms of agreement work with clients to help. Do you
need help with a standard form of agreement?
Post a project in Contracts Counsel's marketplace to get free bids from lawyers to draft, review, or
negotiate standard forms of agreement. All lawyers are vetted by our team and peer reviewed by our
customers for you to explore before hiring.
Standard form of Contracts and the law in India

Legal system today has evolved from its past rules, evolution of law had provided a solution of the
problems in the system adhering with demand and circumstances of modern day. Evolution has also led to
the revelation of quandary in existing legal system. Envisioning within the ambience of standard form of
contract, we encounter with similar kind of aspect which is a byproduct of evolution. In this technological
age where contracts are made in thousands of numbers by a company daily. It has made difficult for the
court to come at rescue for the weaker party. As in practical aspect general consumer or a person who
signs a contract does not read terms and condition written in the contract. Even if they read it they don’t
understand most of the things about the terms and condition of the contract, so it becomes difficult to
protect the weaker party. Standard form of contract are done on national and international level, and same
problem exists everywhere in the world, it must be solved for the better evolution of the legal system.
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Standard form of contract

Standard form of contract in lay-man term means ‘take it or leave it’ kind of contract, in this type of
contract the other party is not in position to negotiate with the terms and condition laid down in the
contract, party just have the option of either enter into the contract or forget about the contract. Thus, the
fundamental right to negotiate is affected by this type of arrangement popularly these type of contract are
known as adhesion or a boilerplate kind of contract. Most common type of standard form of contracts are
insurance company contract, on purchasing a washing machine, signing up for your e-mail, social
networking sites, etc.
Legal Status of Standard form of Contract (SFC)

Indian contract system does not have any specific differentiation between SFC and general contract,
as the SFC is a kind of contract which is govern by the laws provided for general contracts in Indian
contract Act 1872. Due to heavy industrial development these kind of contract has become common and
are executed in large numbers now a days. This had led to demand of formulation of fledge rules on
standard form of contract to protect the rights of the weaker party in standard form of contract.
However, in many countries judiciary is empowered to apply the principle of natural justice and
give good justice to the weaker party as it is in Israel there are certain provisions that may be cancelled by
court of law. Apart from courts some legislature have also made laws related to this kind of contract. There
are certain rules made by the legislature which seems to be unreasonable like in U.K, sec 3 of Unfair
Contract Terms Act 1977 limits the ability of drafter on consumer or limits the provision of standard form
of contract to the Drafter.
Why people accept Standard Form of Contract?

First reason why people accept SFC, they don’t read the contract clauses thoroughly as even after
reading they don’t find it worthy of giving so much time in writing down the clauses.
In certain contracts, there are clauses like if you accept the given terms and condition then they will
tell the full terms and condition of the contract.
SFC kind of contract the party generally focus on the price mentioned in the contract; he doesn’t
really care about other different clauses which might be exploitative in nature.
Manufactured pressure on the party is created by another party to sign SFC, earlier all the
negotiation and the terms had been discussed orally and explained to them. So it becomes a kind of
bounding on the party to sign the contract.
The major point SFC’s are that they are take it or leave basis, so they don’t have any choice but to
accept the contract.
Ways to limit exploitation from SFC

It is easy to exploit the party entering into standard form of contract, there are certain rules made to
protect the interest of the weaker party. Specific procedure has been mention in order to protect the
weaker party in SFC contract.
Reasonable Notice
A reasonable notice must be given by the person delivering the document to give adequate
information about the terms and condition laid down in the contract. This principle was propounded in
the case of Henderson V. Stevenson from House of Lords. Case facts were that, a person buy a ship ticket
on face of it only boarding place and arriving place was written on it but on its back side there were
certain terms and conditions which party didn’t see nor anything was written on face of it to turn over and
look at the back of ticket. Simple reason given by court was that a person cannot agree to a term if he had
not seen it or is not told of it.
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Notice of the terms and condition should be given before or at the time of contract when it is to be signed.
As clearly said by Lord Denning it is duty of the party relying on a clause to its benefit to make it clear to
other party the terms and condition of contract in the famous case of Thornton V. Shoe Lan Parking Ltd.
Contractual Document
For a standard form of the document, there must be a contractual document signed between the
parties in order to make it enforceable in court. The basic problem lies between identifying the document
as a contract document or as a receipt. Different between these two is, if the document clearly explains the
express and implied a condition in the document then it is a contractual document if not then it is a
receipt. The contract must be signed by the person accepting the terms and conditions mentioned in the
document.
Misrepresentation, Fraud, Mischief and other elements which makes a contract void should not present in
the contract in order to make an agreement enforceable by law.
Unreasonable or Unfair terms

Pointing out unreasonable terms in the contract can be one the protective safeguard for the weaker
party. Unreasonable terms of contract can be said about those terms in the contract which contradicts the
very purpose of the contract or are against the public policy. In Lilly White V. Mannu-Swami this principle
has been clearly explained in the case. In this case the laundry receipt contained a condition that in case of
loss or destruction of cloth only 15% money of the market price of cloth will be returned these clauses
were held unreasonable from the court and was held that the clauses were against the public interest.
In an Indian financial case of Seven Day Adventists Vs. M.A Uneerikutty and Anr. MANU/ SC/3291/
2006 it says that if any consideration of several clauses mentioned in the contract is unlawful then
agreement itself is void and the decision of the court says that this type of cases are against the public
policy, if any type of clauses violating public policy that contract is void. This doctrine is not only
applicable to harmful cases but to the cases with harmful tendencies.
In the case of contract with the government certain points must be observed in order to prevent
exploitation of the other party in the contract. As the decision from the government had been taken in bad
faith. Decision is based on irrational or irrelevant consideration. Decision has been taken without
following the prescribed procedure in the system. If these things are not followed diligently contract will
be termed as irrelevant by the court and party will be protected by certain clauses against exploitation of
contracted party.
Theory of Fundamental breach

It’s one of the tools to protect the weaker party from exploitation through this theory. What
happens in theory there is a core or fundamental of the contract which is bounding on both parties to
follow them and if that is not followed then there will be a breach of contract. In the case of breach of
contract the weaker party will not be bound to follow the contract in case of breach of contract by other
party. Test of fundamental breach of contract can be done through sec 11 of 1977 unfair contract act
which says the contract will be void if it will not satisfy the reasonableness of the contract.
In case of Food Corporation of India Vs. Laxmi Cattle Feed Industries MANU/SC/8041/2006,
Supreme Court held that in case of breach of contract, the plaintiff has to prove all the essentials of breach
of contract. If the plaintiff is not able to prove, it will not be considered as breach of contract.
Exemption Clauses and Third Party

Under this clause we have to take a look at the doctrine of privity of contract which says that the
contract is between the two parties who have contracted with each other and no third party is entitled to
enjoy the right provided in the contract nor hold any liability.
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As the third party does not hold any responsibility for the irregularity in the contract, he is not entitled to
any benefit from the contract.
Ambit and authority of Contract Act

Under the Indian contract, there is no such form or condition which is binding on the parties.
Parties may agree to contract in a particular mode which is not probihited under the law. Problem that is
prevalent in the Indian context is that there is no such specific rule provided in Contract Act, different
provision has been mentioned in different kinds of Act which govern activity of contract like specific
provision of railways act, public transport control by the government. Different kinds of rules provided by
the government to contract in coffee industry, tea plantation which is entered into by workers with the
industry.
Conclusion
The standard form of contract are written in fine print with all the terms and conditions laid down
clearly in the contract. In Indian context cases are entertained under the rules provided by Indian Contract
Act, there is no any act only made to deal with standard form of contract specifically. In this type of
contract weaker party can easily be exploited and there is no specific rule for the prevention from this type
of action by dominating party.
With the evolution of legal system the courts had found different kinds of method and tools to
protect the basic right of the weaker party by applying the principles of natural justice, precedent of
different cases helping in protecting interest of weaker section. As through transformation these kind of
contract are made on daily basis in enormous number, that’s why proper scrutiny and providing a lengthy
procedure will not work best thing can be done is to provide awareness about the rule so that the parties
entering into the contract will read the clauses and try to understand and ask question on certain clauses if
they are not able to understand it.
Take it leave it as it is the nature of the contract which leads to commencement of certain cases in
court in which there is an immediate urge to provide justice to the weaker party who without knowing the
specific clauses entered into the contract.
Different types of E-Contracts

Introduction
We live in a cyber era, significant progress has been made in bringing the legal framework up to
speed with new technology and the resulting transactions via E-Contracts. Conceptually speaking the E-
Contracts are similar to paper-based contracts. It can be argued that the legal framework related to E-
Contracts in India is still in its infancy when compared to other nations. This article will help you
understand the following topics:
Meaning of E-contracts;
E-contracts under Indian laws;
Different types of E-contracts.
What is a contract?
The term “Contract” is defined under Section 2 (h) of the India Contract Act, 1872 (hereinafter
referred to as “the Act”). According to Section 2(h) of the Act, an agreement enforceable by law is a
contract. Also, as per Section 2 (j) of the Act a contract which ceases to be enforceable by law becomes void
when it ceases to be enforceable. A contract could be written formally or informally or could be entirely
verbal or in writing. Important sections (Section 10 of the Act) to considered in order to constitute a valid
contract are as follows:
• Offer and acceptance is described under Section 2(a) and (b) respectively,
• Lawful consideration is explained under Section 23 and Section 25,
• Condition to be competent for parties is stated under Section 11, and
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• Section 14 of the Act deals with free consent and factors that would deem a contract invalid.
What is an E-Contract?
Considering the situation of society due to the pandemic, an e-contract is one of the easiest options
to enter into a contract. With recent advancements in computer technology, telecommunications
technology, software, and information technology, people’s standard of living has been transformed in
unfathomable ways. Communication is no longer limited due to geographical and temporal restrictions.
More information is transmitted and received than ever before. This is where electronic commerce
provides flexibility to the business environment in terms of location, time, space, distance, and money.
All essential elements of contract law apply equally to contracts established electronically or orally.
People often question how old and conventional contract law concepts apply to new and innovative types
of technology, which creates a dilemma. However, the basics and features of e-contracts remain the same
as those of paper-based contracts as of nowadays. While the fundamentals of a paper-based contract apply
to e-contracts, the techniques for concluding the e-contract are derived from Indian Contract Law and are
nearly identical to paper-based contracts. E-commerce refers to the purchasing and selling of information,
products, and services through computer networks. It is a method of conducting business online, typically
over the Internet. It is the instrument that leads to ‘enterprise integration.’ Therefore, with the expansion
of e-commerce comes to a significant increase in the usage of e-contracts.
E-contracting is a subset of e-business. It is comparable to traditional business in that products and
services are exchanged for a certain amount of money. The only difference is that the contract is executed
using a digital method of communication such as the internet.
E-Contracts under Information and Technology Act, 2000

Section 10A of the Information Technology Act, 2000 (hereinafter referred to as “IT Act”) deals with
the validity of contracts formed through electronic means and states that the contract is legal if the
contract creation, communication, and revocation of proposal/acceptance are all represented in electronic
form or through electronic records. An e-contract will not be deemed unenforceable merely because it was
created in an electronic format or through the use of electronic means. Signatures of contract parties are
necessary to demonstrate acceptance of the terms and conditions for any contract to be legitimate. An
electronic signature is used in the case of an e-contract.
Adding further, Section 4 of the IT Act grants legal recognition to electronic records, stating that if
any legislation requires information or matter to be in a written or printed form, such need is deemed met
if the information or matter is available and accessible in an electronic form.
As per the second schedule of the IT Act, the documents that cannot be executed in electronic or
digital form and must be executed in physical form in order to be legal and enforceable in a court of law
are as follows:
Negotiable instruments except for cheques;

• Trusts;
• Power of Attorney;
• Will or Testament;
• A sale or conveyance deed of immovable property or any interest in such a party.
E-Contracts under the Evidence Act, 1872

An e-contract has the same legal impact as a paper-based agreement under the Evidence Act of
1872 (hereinafter referred to as “the Evidence Act”). It should be emphasized that the term “evidence” has
an encompassing definition under Section 3 of the Evidence Act, which includes any papers, including
electronic data, presented for the Court’s examination as documentary evidence. Section 67A of the
Evidence Act applies to loan and financing papers when, in addition to a secure electronic signature, proof
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of the subscriber’s electronic signature must be proven, which can be done by the subscriber’s own
testimony.
Types of E-Contracts
E-contracts and their types are discussed in detail as under:
Shrink-wrap agreements
Typically, shrink wrap contracts are a licencing agreement for software purchases. In the event of
shrink-wrap agreements, the terms and conditions for access to such software goods should be enforced
by the person purchasing it, with the start of the software product’s packaging. Tightening-up agreements
are just the agreements that consumers accept, such as Nokia pc-suite, at time of installing the software on
a CD-ROM. Additional terms may only be viewed after installing the programme into your computer, and if
the customer disagrees, he has the option to return the software package. The Shrink-wrap Agreement
protects the product maker by absolving the manufacturer of any infringement of copyright or intellectual
property rights as soon as the customer rips the product or the covering for the goods. However, there is
no firm decision or precedent in India regarding the legality of shrink-wrap agreements.
Click or web-wrap agreements

A Click-wrap contract refers to a web-based contract that needs approval or assent of the user via
the “I Accept,” or “OK” button. With the clickwrap agreements, the user must accept the conditions before
using a specific software. Users who do not agree with the terms and conditions will be unable to use or
purchase the product following cancellation or rejection. Someone nearly always abides by web-wrap
agreements. Before users agree to the terms of service, they must be written down. For example, online
shopping, software download or installation, to purchase airline tickets or music online, using websites,
registering an account on a social media website, etc.
Browse-wrap agreements
A browsing wrap agreement is a contract that is binding on two or more parties through the usage
of a website. In the event of a browsing agreement, an ordinary user of a particular website is required to
accept the terms and conditions of use as well as other website rules for continued usage. Such internet
contracts are very common in our daily lives. Other nations have dealt with such online agreements and
determined that both Shrink-wrap Agreements and Click-Wrap Agreements are enforceable as long as the
contract’s general principles are not breached.
E-signatures
After the parties have formed the contract to suit their interests, the stage of execution by affixing
an e-signature is the following step. The IT Act recognises two types of signatures: digital signatures
generated by an asymmetric crypto-system and hash function, and electronic signatures defined in its
second schedule, wherein the user of an Aadhar card is assigned a unique identification number via which
they can electronically sign documents via third-party forums (often through generation of a one-time-
password). Section 5 of the IT Act defines e-signatures as a broad range of ways for signing a document,
whereas a digital signature is a type of e-signature that employs cryptography.
While a lack of jurisprudence on the legal tenability and feasibility of e-signatures indicates that
acceptance of the same remains uncertain, efforts have been made to overcome these issues through
changes to the IT Act. The Information Technology (Amendment) Act of 2008 replaced the phrase ‘digital
signature’ for ‘electronic signature’ with the goal of broadening the scope of e-signatures.
E-signatures are valid if they are uniquely linked to the signatory, who must have complete control over all
data used to create the e-signature, if alterations to the e-signature or the document to which it is affixed
can be detected after the act of signing, and if a digital signature certificate is issued after the process is
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completed. With the exception of Schedule I papers, a combined interpretation of the IT Act and the
Evidence Act will give legal legitimacy and enforceability to electronic documents completed using e-
signatures.
Contracts for employment, contractors, consultants, sales and resale agreements, distributors, non-
disclosure agreements, software developer and licence agreements, and contracts for source-code escrow
are all examples of online agreements.
E-Governance
The e in e governance stands for electronic Governance refers to lawful rules for management, control and
administration. E governance is a public sector, use of information and communication technologies with
aim of improving information and service delivery encouraging the citizen to participate in decision
making process and making the government more accountable, transparent and effective.
E governance generally considered as a wider concept than E government, since it bring change in the way
of citizen, relate to government and to each other. E governance can bring the concept of citizenship. It's
objectives is to enable, engage and empower the citizen.
E governance means application of electronic means in the interaction between:

• Government and citizen
• Citizen and government
• Government and business
• Business and government
• Internal government operation
Objectives of E governance:
 E-governance is not only providing information about the various activities and organisations of
the government but it involves citizens to communicate with government and participate in
decisions-making process.
 Putting government rules and regulations online.
 Putting information relating to government plans, budget, expenditures and performances online.
 Putting online key judicial decision like environment decision etc, which is important for citizen
and create precedence for future actions.
 Making available contact addresses of local, regional, national and international officials online.
 Filing of grievances and receiving feedback from the citizens.
 Making available the reports of enquiry committees or commission online.
How E governance is different from E government?

E governance is a broader concept that deals with the whole spectrum of the relationship and
network within the government regarding the usage and application of ICT(Information and
communication technologies).
E government is a narrower discipline dealing with the development of online government services
to the citizen and buisnesses such as E tax, E transportation, E participation amongst others.
E governance under IT Act, 2000: Electronic governance dealt under sections 4 to 10A of the IT act, 2000.
Legal recognition of record (section 4):
where any law requires that any information should be in the typewritten or printed form then
such requirement shall be deemed to be satisfied if it is an electronic form. Therefore, section 4 confers
validity on electronic record.
Legal recognition of electronic signatures ( section 5):/
Where any law provides that only information or other matters shall be authenicated by affixing
the signature or any document shall be signed or bear the signature of any person, then such information
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or matter is authenticated by means of electronic signature affixed in such manner as may be prescribed
by the central government.
Use of electronic records and electronic signature in government and it's agencies (section 6):
The filling of any form, application or other documents, creation, retention or perseverance of
record, issue or grant of any license or permit or payment in government offices and it's agencies may be
done through the means of electronic form.
Delivery of services by service provider (section 6A):
For the purpose of E governance and for efficient delivery of services to public through electronic
means the appropriate government may, by notification in the official gazette authorize any service
provider to set up, maintain and perform such other services as as it may specify.
Retention of electronic records (section 7):
• The documents, records or information which to be retained for any specified period shall be
deemed to have been retained if the same is retained in the electronic form provided the following
conditions are satisfied:
• The information remains accessible so as to be usable subsequently.
• The electronic records is retained in its original format which accurately represent the information
contained.
• The detail which will facilitate the identification of the orgin, destination, dates and time of receipt
of such electronic records are available there in.
• Audit of documents etc. Maintained in electronic form (section 7A):
• where any law for time being in force contains provision for audit of documents, record or
information, then such provision shall also be applicable for audit of documents, records or
information processed and maintain in electronic records.
• Publication of rule, regulation etc in electronic gazette (section 8):
• Where any law provides that any rule, regulation, order, bye law, notification or any other matter
shall be published in official gazette, then such requirements shall be deemed to have been satisfied
if such rule, regulation, order, bye law , notification or any other matter is published in official
gazette or electronic gazette.
• No right to insist government office etc to interact in electronic form (section 9):
• No right is conferred upon any person to insist any ministry or department of central government
or state government or any authority under any law or controlled or funded by central or state
government should accept, issue, create, retain and preserve any documents in the form of
electronic records or effect any monetary transaction in the electronic form.
• Power to make rules by central government in respect of electronic signature (section 10):
The central government may prescribe:
The type of electronic signature.

 The manner and format in which electronic signature should be affixed.
 The manner which facilitates identification of the person affixing the electronic signature.
 Control processes and procedure to ensures adequate integrity, security and confidential of
electronic records or payment.
 Any other matter which is necessary to give legal effect to electronic signatures.
Some E Governance Projects In India:

In India, the main thrust for E governance was provided by the launching of NICNET in 1987- The National
Satellite Based computer Network. This was followed by the launch of district information system of
national informatics centre programme to computerized all district offices to the sate government.
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Parliament of Indian website:

Website of indian parliament carries information of the parliament, the constitution of India, various
budgets, resume of work, parliamentary debates, committee and members of the house and links to other
central and state government website.
E governance centre at haryana secretariat:

The haryana govt has set up E governance centre at the secretariat to effectively monitor information
technology in the state. /=
Bhoomi:
This project was started by the state of karnatka which involves computerization of more than 200
treasuries all over the state and it was mainly for computerization of land record system.
Communication
The information technology act, 2000 has not amended or substituted the contract act , 1872 in any
manner whatsever . In order to form a valid electronic contract one needs a promisor and a promisee. The
IT Act grantslegal recognition to communication process involving computer , computer system and
computer network by identifying attribution, acknowledgement and dispatch of electronic records as key
statutory provisions in its chapter IV section 11 to 13.
The Act identifies three parties to the electronic transmission process:-
1. Originator - section 2(1)(za)
2. Intermediary – section 2(1)(wz)
3. Addressee – section 2(1)(b)
(The categories ‘originator-intermediary-addressee facilitate end to end communication process.)

ATTRIBUTION OF ELECTRONIC RECORDS (SECTION 11)
▪An electronic records shall be attributed to the originator-A. If it was sent by the originator himself.
B. By a person who had the authority to act on behalf of the originator in respect of that electronic record.
C. by an information system programmed by or on behalf of the originator to operate automatically.
( With respect to IT At 2000, attribution of electronic records means fixing identity of sender and receiver.
Here originator is a person who sends or generates any electronic record. The receiver of electronic record
is termed as Addressee.
For example-
If ‘X’ sends an email to ‘Y’, then ‘X’ is a sender or originator and ‘Y’ is reciever or Addressee.
In normal course of communication (postal communication or paper communication), it’s very easy to
identify originator and addressee but in electronic communication it’s not the same.
The electronic record can be sent by the originator himself or by the person who has been authorized by
the originator or by an information system that the originator has authenticated.)
ACKNOWLEDGMENT OF RECEIVING OF ELECTRONIC RECORD (SECTION12)
If the originator has not specified any specific mode of acknowledgement (an act by the addressee that
he/she has received the electronic record), the acknowledgement can be given by a return mail by the
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addressee or an automated response by the addressee or an act by addressee that shows the
acknowledgement.
For example-
when a person receives an email by an estate agent, for real estate properties, the person can send
a thank u mail or can send an automatic reply or can show interest in the offer given by the agent by
visiting him. All the three option show an acknowledgement.
If the originator has specified a format and time period for sending the acknowledgement, then the
addressee must send the acknowledgement in that format and within the given time period otherwise the
originator can send a notice to the addressee stating that no acknowledgement was received.
ACKNOWLEDGMENT OF RECEIVING OF ELECTRONIC RECORD (SECTION12)

Where the originator has not stipulated that the electronic record shall be binding only on receipt
of such acknowledgment, and the acknowledgment has not been received by the originator within the time
specified or agreed or, if no time has been specified or agreed to within a reasonable time, then the
originator may give notice to the addressee stating that no acknowledgment has been received by him and
specifying a reasonable time by which the acknowledgment must be received by him and if no
acknowledgment is received within the aforesaid time limit he may after giving notice to the addressee,
treat the electronic record as though it has never been sent.
TIME AND PLACE OF Dispatch of Electronic Record (Section 13)
(1) Save as otherwise agreed to between the originator and the addressee, the dispatch of an electronic
record occurs when it enters a computer resource outside the control of the originator.
(2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic
record shall be determined as follows, namely :-
(a) if the addressee has designated a computer resource for the purpose of receiving electronic records –
▪receipt occurs at the time when the electronic, record enters the designated computer resource, or
▪if the electronic record is sent to a computer resource of the addressee that is not the designated
computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee.
(b) if the addressee has not designated a computer resource along with specified timings, if any, receipt
occurs when the electronic record enters the computer resource of the addressee.
TIME AND PLACE OF DISPATCH OF ELECTRONIC RECORD(SECTION 13)
(3) Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed
to be dispatched at the place where the originator has his place of business, and is deemed to be received
at the place where the addressee has his place of business.
(4) The provisions of sub-section (2) shall apply notwithstanding that the place where the computer
resource is located may be different from the place where the electronic record is deemed to have been
received under sub-section (3).
(5) For the purposes of this section -
 if the originator or the addressee has more than one place of business, the principal place of
business, shall be the place of business.
 if the originator or the addressee does not have a place of business, his usual place of residence
shall be deemed to be the place of business.
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 "usual place of residence", in relation to a body corporate, means the place where it is registered.
TIME AND PLACE OF DISPATCH OF ELECTRONIC RECORD (SECTION 13)
(3) Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed
to be dispatched at the place where the originator has his place of business, and is deemed to be received
at the place where the addressee has his place of business.
(4) The provisions of sub-section (2) shall apply notwithstanding that the place where the computer
resource is located may be different from the place where the electronic record is deemed to have been
received under sub-section (3).
(5) For the purposes of this section -
 if the originator or the addressee has more than one place of business, the principal place of
business, shall be the place of business.
 if the originator or the addressee does not have a place of business, his usual place of residence
shall be deemed to be the place of business.
 "usual place of residence", in relation to a body corporate, means the place where it is registered.
Execution of E-contracts
The recognition and regulation to E-Contracts is provided by various laws such as Information
Technology Act, 2000 and the Indian Evidence Act, 1872. The provisions in the I.T. Act mention about the
attribution, acknowledgement and dispatch of electronic records and secured electronic procedures.
The IT Act recognizes the basic features of the contract such as the communication of the proposals,
acceptance of proposals, revocation of proposals and acceptances, as the case may be which could be
expressed either in electronic form or by means of an electronic record.
Further, the recognition of a contract is accorded under the Indian Evidence Act, by which the term
“document” includes any information contained in an electronic record which is printed on a paper,
stored, recorded or copied in optical or magnetic media produced by a computer. Such information are in
conformity with the conditions of Section 65B of the Act which shall be admissible in any proceedings,
without any further proof or production of the original document before the concerned authority and shall
be regarded as an evidence of any content of the original or any fact stated therein of which direct
evidence would be admissible.
Conclusion
E-contracts are ideal to promote the re-building of business forms occurring at many companies,
which includes a collection of advancements, procedures, and business systems that guide the instant
exchange of data. E-contracts offer both advantages and disadvantages. From one point of view, they
decrease expenses, save time, enhance customer response, and improve administration quality by
reducing desk time, in this way expanding automation.
This is expected to increase the profitability and intensity of taking interest in businesses by
offering extraordinary access to an online global commercial centre with a large number of customers and
a broad range of products and administrations. However, with the electronic agreement, the thesis focuses
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not on individuals who make decisions on explicit transactions, but on how risk should be structured in a
mechanized realm. In this way, the article is to provide default standards for assigning a message to a
gathering in order to keep a strategic distance from any extortion and discrepancy in the agreement.
COVID-19 will also be used to drive India Inc. toward paperless and faster forms of document
execution. Nonetheless, because the IT Act expressly states that only digital signatures and e-signs from
Aadhaar are acceptable, foreign signatories who do not have digital signatures or e-signs from Aadhaar
will be unable to e-sign. Throughout this circumstance, the worldwide signatories can rely on the
signature technique at their disposal to establish their validity through evidence such as email
communication or the parties’ activities to identify the intent.
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MODULE 2:
Section 10-30
2.1 Essential Ingredients for Enforceability (Sections 10 – 30)
2.2 Competency of Parties
2.3 Free Consent
2.4 Consideration
2.5 Unlawful Object and Consideration
2.6 Void Agreements
2.1 Essential Ingredients for Enforceability (Sections 10 – 30)

Meaning of contract
In simple terms, a contract means when two parties put into writing an agreement which contains
certain obligations (promises) which are to be performed by such parties, and when such written
agreement becomes enforceable by law, it becomes a Contract. Enforceable by law means when the
agreement has acquired the force of law only for those who are a party to it and a violation of those
obligations would attract legal action, including repudiation of the entire contract.
Contract Act defines a Contract as “An agreement which is enforceable by Law”[i]. An Agreement is
a settlement between two parties, which contains obligations or promises which both parties need to fulfil.
When such an agreement is made binding by Law it becomes a Contract.[ii]
Therefore an agreement consists of reciprocal Promises which are to be performed by parties to
the contract. Promises are reciprocal when both parties have to perform something for the other.
Pollock- “Every agreement and promise enforceable by law is a contract”.
Salmond- “A contract is an agreement creating and defining obligation between two or more persons by
which rights are acquired by one or more to acts or forbearance on the part of others”.
Anson- “The law of contract is that branch of law which determine the circumstances in which a promise
shall be legally binding on the person making it’.
Now after examining the definitions of contract we can say that-

Contract = Agreement + Enforceability
Illustration: A contracted with B for purchase of 10 bags of cement of a certain quality, for Rs 1, 00,000. In
this case, B’s promise is to provide A with 10 bags of cement of that quality only for which A has
contracted and A’s promise is to duly pay B Rs.1, 00,000. In this case, both have to perform something for
the other, thus it is a case of reciprocal promise.
Charity is not a case of reciprocal promise, because a person doing charity, does not expect
anything in return.
Contracts in India is primarily governed by INDIAN CONTRACT ACT, 1872 (“Contract Act”). It
contains basic elements of a contract and several general rules which apply to contracts. It does not
impose any positive duty on the parties rather, it states various formalities regarding contracts.
Essentials of a valid contract

Section 10 states conditions which are required for a contract to be valid.
Offer: Firstly, there must be an offer from either party, without an Offer a contract cannot arise. However,
in some cases, this principle could not be applied. For instance, Mulla talks about a situation in which offer
and acceptance could not be traced, for instance, a commercial agreement reached after multiple rounds of
negotiations.[iii]
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Acceptance of the offer: Secondly, the Offer must be accepted and accepted by the person to whom it was
intended. So an offer by A to B has to be accepted by B only.
Acceptance in ad-idem: Thirdly, though acceptance is important, there must be “Consensus ad-idem”.
Consensus ad-idem means meeting of minds. It means that parties to the contract should accept the
terms of the contract in the “same sense”. Thus parties to the contract must have the same understanding
of the terms of the contract.
E.g. A contracted with B to purchase rice. Now A wanted a special type of rice, however, B thought
of it to be normal rice. In this case, although there is a valid acceptance but there lacks meeting of minds
between the parties; meeting of minds concerning the type or quality of rice.
Similarly, if A contracted with B to buy stocks. What A meant was stocks in a company, whereas B
understood it to be his livestock (farm animals). In this case, the understanding was not in a similar sense.
Parties must be competent to contract, under the laws they are subjected to i.e. they must be legally
capable to contract Consideration, for the performance of promises there must be a consideratione.
something given for performance of promise from both parties to the contract. Further, the objective and
consideration of the contract must be lawful.
 Free consent, according to section 10 of contract act” agreements are contracts if they are made by
free consent” It means that contract must be entered into out of parties own volition and without
being forced, or deceived into.
 There must be an intention to enter into a legal relationship.
 Certainty, Contract must be certain and not ambiguous and vague. (Section 29)
 A contract must not be expressly declared void. (Section 10 of Contract Act)
Offer and acceptance

Offer and Acceptance form the basis of a contract. There can be no contract unless there is an offer
and such an offer must be accepted. An Offer once accepted becomes a Promise[iv].
Offer and Proposal are used simultaneously. Offer is used in British law, whereas Proposal is used
in Indian law.
Offer
An offer is the first thing for the formation of a contract. A person making an offer is called an
“offeror”/“proposer” and a person to whom the offer is made called an “Offeree” / “proposee”.
Chitty on Contracts, defines an offer as an expression of willingness to contract made with an intention
that is to become binding on the person making it as soon as it is accepted by the person to whom it is
addressed.
According to section2 (a) of the Contract act, an offer/proposal is:

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.”
An offer simply means willingness, to do something (a positive act) or to not do something (a
negative act). It must be noted that if an offer is not made, to get the acceptance of the other party, then it
cannot be construed as an offer under the Contract Act. An offer must be made with the object of getting a
favourable response from the intended acceptor. Thus, there may be ‘positive’ or ‘negative’ acts which the
proposer may be willing to do.
Pointers on Offer
Offer must be communicated to the offeree. Mode of communication could be any but should be
reasonable. An offer must be clear, specific and capable of being understood.
 An offer should be lawful and not to do something illegal.
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 Offer can be express or implied[v]. An express offer is one which is made in words, whereas an
implied offer is inferred from the conduct of the offeror. In implied offer what matters is whether
the offeror had any intention to make an offer or not.
 An offer can be revoked at any time before it’s acceptance by the intended acceptor.
 An offer must be made with an intention to get acceptance thereto.
 A promise consists of an offer and an acceptance of that offer. Once these two conditions are
satisfied there is a promise and when both parties have to perform their respective promises, it
becomes a situation of reciprocal promise.
Contract act defines an offeror as “Promisor” and the person who is accepting the offer as
“Promisee”[vi].
Offer and Invitation to offer

There is a difference between an offer and an invitation for others to make an offer. An invitation
for others to make an offer is not an offer within the meaning of “Offer” under the Contract Act.
Sometimes a person may not make an offer to sell his goods, but makes a statement or conducts in
such a way, to make other persons make an offer to him. This is an invitation to offer.
Such situations generally include advertisements, tenders, goods on display, Expression of Interest
(EoIs) and auction. In case of an auction, when the auctioneer starts the bid by quoting a price, it is
basically for others to make him an offer with the amount in addition to the minimum price, which the
auctioneer had announced.
Similarly, when a company floats tender for construction of a building, it basically is asking others
(builders) to make them an offer by quoting the price of construction.
This is because an offer is an offer to buy and there is no offer to sell.
Acceptance
• As stated earlier, the second step in the formation of a contract is the acceptance of the offer.
• Acceptance means when the person to whom the offer was made, has given his assent to
such offer– Section 2(b) of Contract Act.
Once the offer is accepted and such acceptance has been communicated, to the offeror, the parties
are bound by their respective promises. Just like an offer, even an acceptance can be revoked before the
communication of acceptance reaches the offeror.[vii]
The most important aspect of acceptance is that performance of an offer, in ignorance of the said
offer is not an acceptance. Therefore an act done, amounting to acceptance, but acceptor being unaware of
the offer, it is not a valid acceptance.
In the case of Lalman Shukla v Gauri Dutt (1913)[viii], the defendant’s boy went missing,
accordingly, his servant-Plaintiff was sent to search for the boy, in the meantime a missing poster was
released by the defendant, promising to pay a certain sum, to the person who finds the boy. The servant,
unaware of such an offer succeeded to find the boy. Once he discovered that such an offer existed he asked
for the consideration, but the same was denied. The court ruled in favour of the Defendant, by holding that
Plaintiff was ignorant of offer and thus the performance of the promise does not amount to acceptance.
Pointers on acceptance
• Acceptance should be absolute and unqualified (unconditional), and must be made whilst the offer
is subsisting.
• Acceptance to offer can be expressed or implied i.e. conducting in a manner which implies
acceptance. Eg. If a watch is taken by someone to test it, before making the final purchase and the
person pledges it, this amounts to an implied acceptance.
• Acceptance must be communicated in a reasonable manner, or, if any, must be communicated
through a reasonable medium, like telephone, mail, WhatsApp message, automatic reply to emails,
if there are no exceptions.
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Sub- LAW OF CONTRACT, SEM --1, Mumbai University New Syllabus – 2022-2023,
2022 Marks -75
• Traditionally acceptance was made through posts or letters. If an acceptance is intended to be

made through a post, it will be deeme
deemed
d accepted when the letter of acceptance is posted and it is
out of the reach of the acceptor.
However with the advent of instant communication like telephone, offer is accepted, when the offeror
hears the acceptance on his part.
• Acceptance or communication of acceptance by a third person or a stranger is not a valid

acceptance. If a contract mentions a specific person to whom acceptance is to be communicated,
then acceptance shall be deemed to be valid if it is made to that person only.
• Acceptance
nce can be either in express words or can be implied i.e. by conducting in a reasonable
manner which signifies acceptance. Eg. A offered B to sell his watch for Rs.1000 and lends it for his
satisfaction. B, in turn, pledges it or further sells it. The act of B is conduct amounting to a valid
acceptance.
Eg. In a contract of sale, acceptance is when an act by the purchaser does an act which is
inconsistent with the ownership of the seller.
Consideration
A Contract is formed when a person, A, makes an offer to another person, B. When such Offer is
accepted by the other person, it becomes an agreement.
Consideration means value given for the performance of a promise. It need not necessarily be
money, however, it should be something which has been agreed by the parties and has some value.
Usually, a contract without consideration is void, however, exceptions to this rule are specified in
Section 25 of the Contract Act.
Consideration need not be adequate, however, it must have some value. Consideration for a promise
includes either performance of an act or non
non-performance
performance (abstinence) of a certain act. Performance of an
act also includes the act of paying money.
Pointers on valid Consideration

It has to be At the desire of the promisor, which means that it should originate from the promisor
out of his own accord and not at the instance of a third party. Accordingly, the performance of a legal duty
is thus not a consideration.
Consideration could be:
 Past Consideration, when the promisor has received conside consideration
ration before the date of the
performance of the contract by any party. Eg. Advance money paid.
 Present Consideration, when consideration is provided immediately when the contract is made or
executed. Thus it is also called “executed consideration.
 Future Consideration, when consideration is paid after making of the contract. In consideration
given for ‘construction contracts’
contracts’-Constructed
Constructed building is given after the execution of the contract.
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 It must not be illegal or void or impossible to perform.

 Consideration is not void just because it is inadequate, provided it was at the desire of the
promisor.
 It must be real, not illusionary. Consideration can be tangible or intangible-e.g. Performance of
service like teaching, labour.
 Privity of consideration
 In India, consideration for a promise might flow from the promise or any third person, who is not a
party to the contract, as long as it is at the desire of the promisor.
According to Section 2(d),” when at the desire of the promisor, the promisee or any other person does
something or abstains from doing something…” Thus Indian law does not recognise privity of
consideration, unlike under English Law, in Twiddle v Atkinson[ix] it was held that consideration must
flow from the promisee, even if it was for the benefit of the Plaintiff. English Law recognises privity of
consideration.
Free consent
According to section 10 of the contract act, a contract is valid if it was entered into by free consent
of the parties.
Section 14 of the contract act defined free consent as consent not given under coercion, undue
influence, fraud, misrepresentation and mistake.
The general averment that consent was not free is not maintainable. It must be proved that consent
was vitiated by any of the 5 elements mentioned in section 14.If consent manifests any of such elements
then the contract is voidable at the option of the party whose consent was obtained.
Coercion (Section 15)

This section defines coercion as committing any act forbidden by The Indian Penal Code 1860 or
unlawful detaining of property, or threatening to commit these acts. Coercion includes all such acts which
are forbidden by the Indian Penal Code. It also includes threatening to commit any act forbidden by the
code. Further section 15 says that it also includes unlawfully detaining the property of any person or
threatening to detain such property, which will harm the other person. Such an act would amount to
coercion only when the act has been committed with the intention to enter into an agreement.
Mere threat of bringing a criminal charge does not amount to coercion, as it is not per se forbidden
by the Penal Code. But threat of bringing a false charge with the object of making another do a thing is
coercion, because false charge is punishable under IPC.
Section 15 says that acts amounting to coercion must be to the prejudice of the other. It means that
the act of coercion must be harmful to the other person, thus some legal injury must flow in order that a
person may be said to have been prejudiced.
Illustration: A husband threatens his wife that he will commit suicide unless she releases a property. This
amounts to coercion to the prejudice of the wife. Similarly threatening to divorce or to take care of wife
and because of this she is made to sign a contract also amounts to coercion
Undue influence
According to section 16 if consent has been obtained by a person who is in a dominant position
compared to the other person, then it is undue influence. Thus one person must be able to dominate the
will of the other person for exercise of undue influence. Eg an employer-employee relationship, Doctor-
patient relationship.
16(2) makes it clear that dominant position includes situations where a person holds real authority
or apparent authority i.e. authority which is not expressly stated but can be easily inferred by a reasonable
man eg. A principal has an apparent authority over his agent. Further persons in a fiduciary relationship,
are also able to control the will of the other. (eg.doctor-patient relationship, Advocate-client relationship).
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Fiduciary relationships are those in which one person puts his confidence in the other person (who is in a
dominating position).
16(3) says that if a contract is entered into between 2 parties and one of them is in a position to
dominate the will of the other, and if he uses it to enter into the contract, then the contract will be
unconscionable.
Further it says that the person who has the ability to dominate the will of the other party has to
prove that the contract was not entered into under the influence of a dominant position. Thus it talks
about on whom the burden of proof shall fall.
First subsection defines undue influence as the use by one party to the contract of his dominant
position for obtaining an unfair advantage over the other party. Sub section 2 describes the various
situations in which one party to a contract can be said to dominate the will of another.
Sub-section 3 raises a rebuttable presumption that if such a contract takes place between parties in which
one party can dominate the will of the other, then the contract shall be unconscionable.
Fraud
It means an act done to deceive the other person whether to get any advantage from the other
person or because of ill-will or enmity towards the other party.
According to section 17, Fraud can be committed either by one contracting party or by a 3rd person
with the connivance of any contracting party or by the agent of any contracting party.
What constitutes fraud has been defined from sub-section 2 to 5.
Section 17(1) states that fraud means any false factual statement and the person making it knows it
is false. Thus deliberately making a false statement.
Eg. Making a statement that a product is of good quality, despite knowing that the product is of
substandard quality. Similarly, if a person collects money from people on the pretext of investing in them,
then it would be fraud if he does not invest in them.
Section 17(2) Fraud also includes concealing any fact by the party who is aware of the existence of
such fact. Active concealment is different from mere silence when an effort is made to ensure that the
other party is not able to know the truth.
Section 17(3) A promise made without the intention to perform it. Thus making false or empty
promises.
Section 17(4) and (5) any other act done to deceive the other party and which the law specifically
categorises as fraudulent.
The above acts will fall under the definition of Fraud if they are done intentionally. If the intention
is missing, then it would be Misrepresentation.
Misrepresentation
When false statements are innocently made without the intention to deceive, then it amounts to
misrepresentation. In misrepresentation, the person making the statement is innocent and has no
intention to deceive the other party.
Even if there be undue influence or coercion etc., but if it does not appear that it was instrumental
in making the promisor to do the act in question, the existence of coercion, etc, would be of no avail. This
means that there must be a proximate and immediate connection between coercion etc. and consent which
is not free. If a particular effect is said to be caused by a particular factor, then that effect must be a direct
outcome of that particular cause.
Where the undue influence or coercion was not instrumental in making the party do the act in
question, the existence of such factors was of no avail.[x]
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Intention to create legal relationship

Intention to create a legal relationship is one of the most fundamental aspects of the law. It is
defined as the intention to enter a legally binding agreement or contract, it implies that the parties
acknowledge and accept legal consequence in case of a breach of a contract. Intention to create legal
relations consist of readiness of a party to accept the legal consequences of having entered into an
agreement.
“Contracts must not be the sports of an idle hour, mere matters of pleasantry and badinage, never
intended by the parties to have any serious effect whatsoever”[xi].
Further Mulla writes It is essential to the creation of a contract that both parties should agree to the
same thing in the same sense. Thus if two persons enter into an apparent contract concerning a particular
person or a ship, and it turns out that each of them,misled by a similarity of name, had a different person
or ship in his mind, no contract would exist between them.[xii]
Capacity
As per, section 10 of the contract act, an agreement is a contract if it is made among other
essentials, by free consent of parties who are competent to contract. People who are of the age of majority
(i.e. above 18 years of age) and are of sane mind, and are not disqualified to contract by any law to which
such person is subjected to, are competent to contract.[xiii]
Thus a minor or a person with an unsound mind is not competent to contract or if such person has
been barred from contraction by laws to which he is subjected. In such a case the contract is void.
Minor: A contract, entered into with or by a minor is void-ab-initio, i.e. no obligation shall arise since its
inception.[xiv]
A contract during the minority age of a party cannot be subsequently ratified after attaining the age
of majority, this is because every contract needs separate consideration. However, if a contract is made for
the benefit of a minor, then it is a valid contract.
Further, a minor can plead his minority as a defence in a suit, thus the rule of promissory estoppel
is not applicable.
Doctrine of Estoppel:
Estoppel is principle in law, which prevents a person from taking a different stance, from what he
had when he had entered into a contract. Thus Promissory estoppel means when a party (A) made a
promise to B that he will purchase tomatoes grown on his farm and B accordingly grows tomatoes on the
belief that A will purchase them. Now promissory estoppel prevents A from denying that he did not
promise any such thing, or in other words it prevents him from going back on his promise and not
purchasing the tomatoes.
In the real world it applies to cases where the promisor attempts to evade any promise made by
him. For instance in the above example, if A afterward came to B and said that he would not be able to
purchase tomatoes because he got a better deal, then doctrine of promissory estoppel will stop him from
taking this stance, because B has acted on A promise.
Elements of promissory estoppel, in Indian jurisprudence can be understood from apex court’s
ruling in MP Sugar Mills Co. Ltd. V. State of Uttar Pradesh. It said that where one party (promisor) in clear
and unequivocal words or conduct, promised something which is either intended to create legal relations
or may create legal relations in future and on that promise the other party has acted upon then the
promise would be binding on the party making it and he would not be entitled to go back upon it….. and
his would be so irrespective whether there is any pre-existing relationship between the parties or not.
So in case of a minor he cannot be forced to fulfill the promise, which he made when he was in
minority and estoppels which usually prevents a promisor from going back on a promise will not apply.
This is because a minor being incompetent to contract is incapable of incurring any liability.
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Unsound Mind: According to section 12 a person is said to be of sound mind if at the time of the making of
the contract he is capable of understanding it (understanding its terms) and is capable of forming a
rational opinion about the effects thereof upon his interests(i.e. capable of understanding its
consequences).
A person need not be lunatic, he should be simply incapable of understanding the consequences of
the contract. Thus a person who does not understand a particular trade or business, and despite that
enters into a contract relating to the business, in such cases the court will hold the person to be of unsound
mind.[xv]
Disqualified to contract means a person not permitted to enter into a contract. Eg alien enemy,
convicts of a crime, an insolvent person All these conditions must be fulfilled concurrently.
Lawful object
According to section 10, consideration and object of the contract should be lawful and is an
essential element of a contract.
Accordingly, Section 23 defines unlawful consideration. Unlawful consideration and object is one
which is either,
Forbidden by law;
 or is of such a nature, that if permitted, then it would defeat the provisions of law;
 or the purpose of the contract is fraudulent;
 or involves or implies giving injury or damage to someone or to someone’s property; or
 or the court considers it as immoral or against public policy.
 If a contract shows any of these elements then it is unlawful and void u/s 23.
A contract is forbidden by law if it is either against any law, both substantive and procedural. E.g. An
agreement to sell liquor without a licence, despite the law mandating to have a licence. In a particular
case[xvi], the Plaintiff owner of a bar and having the licence to sell liquor transferred the management of
the bar and liquor sale to the defendant who had no such licence. The court held that transferring business
and sale of liquor to a person without the license, was prohibited by law and thus cannot be enforced.
If a contract circumvents a provision of any law or defeats the purpose of the law (i.e it makes the
provision irrelevant), it shall be deemed to defeat the provision of that law.
If the consideration or object of the contract is to commit fraud, the contract is void. Thus if the
object of agreement is to deceive another person, the same is void.[xvii]
Even if a part of a single consideration is unlawful, the agreement is void.[xviii]
Not expressly declared void

Apart from conditions u/s 10, contract act specifically declared a few classes of contract as void.
Section 26 to 30 deals with such contracts. There are those contacts which have been expressly declared
void by the Contract Act.
Agreements restricting a marriage (section 26)

Section 26[xix] expressly declare that an agreement which in effect prevents, either party to marry,
then it is void. Section 26 does not differentiate between partial or absolute restraint, thus any agreement
enabling the two is void.
In Abhas Khan v. Nur Khan, the bride married the groom, without the consent of the nearest male
relative, in such cases under customary Muhammadan Law, the groom has to pay a certain amount to such
relatives, called “rogha”. The Lahore high court held that enforcing such a custom is tantamount to saying
that full age women cannot marry unless the groom pays a sum, which could be impossible to do so. It
would be a custom in restraint of marriage.
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There is only one exception to section 26 i.e. an agreement in restraint of marriage of a minor. This
is because marriage with a minor is outrightly against Public policy and against section 10 of the Contract
Act.
Agreements restricting trade (section 27)

Section 27 says that every agreement by which a person is restrained from exercising a lawful
profession, trade or business of any kind, is to that extent void.
It must be noted that the contract will be void only to such extent by which a person is restrained.
Thus the entire contract will not be declared void.
Eg. If a contract contains a “non-compete clause”, which restricts a person from carrying out a trade, then
only the non-compete clause will be void and not the entire contract.
Just like the doctrine of severability in constitutional law, Blue pencil doctrine is used in contract
law, to sever the void part from the rest of the agreement.
Further, it is immaterial if the restraint is reasonable or not, under Indian law a contract in restraint
of trade or business will be lawful only if the restraint falls within a statutory or judicially created
exception. This is in contrast to English law in which a reasonable restraint may be held valid. In the case
of Superintendence Company of India v. Krishan Murgai[xx] apex court held that neither the test of
reasonableness nor the principle that the restraint is partial or reasonable applies to a case governed by
section 27 of the act unless it falls within the exception appended to the said section
Agreements in restraint of proceedings (section 28)

According to Section 28(a) an agreement by which any party to the contract is completely or
absolutely restricted in enforcing their rights (i.e. their right to move courts), by usual legal proceedings in
the ordinary tribunals, or which limits their time within which he may enforce his legal rights, is void.
Thus if a clause in a contract prevents a party to initiate a suit against the other party, then that
agreement is void. However, an agreement which provides for arbitration when a dispute arises, then that
clause is not void[xxi]. Arbitration is a method of dispute resolution recognised by courts all over the
world and helps in reducing the burden on courts. It is always advisable to have a comprehensive clause
on arbitration, to resolve the dispute as it would be favourable to both parties.
An agreement which provides that a suit should be brought for the breach of any terms of the
agreement within a time which is shorter than the period prescribed by the Limitation Act is void to that
extent. Limitation act provides for 3 years to initiate a proceeding in case of a breach.
Section 28(b) talks about those contractual terms which although does not limit the period of
limitation but extinguishes a person to claim a right or discharges any party from any liability if he does
not do so within the time period mentioned in the contract. Such contracts are also void. This is because
such a contract restricts a party from enforcing his right.
Eg. If a contract says that in case of a breach the party can ask for compensation only within 3 months
from the date of the breach, and if such compensation is not asked within 3 months then the breaching
party will not be liable to compensate. In this case, the contract discharges the breaching party from
liability.
Such common clauses found in insurance policies provide that the insurer should not be liable for
loss or damage after expiration of twelve months from the happening of loss or damage.
Agreements void due to uncertainty (section 29)

According to Section 29, a contract is said to be certain if its terms are capable of being understood,
in the sense, in which it has been intended to be understood, by the promisor, and are not ambiguous and
vague[xxii]. It should be capable of being reasonably interpreted by the courts. Certainty is achieved, when
intentions of the parties, safeguards, expectations, performances, are clear or can be objectively
ascertained.
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Illustration A: A agreeing to sell B a 100 tons of oil, but without being satisfied about the quality and kind
of oil. Such an agreement is uncertain and void.
Illustration B: A entered into a contract with B for construction of the building and it was agreed that A
would pay B the consideration within a month after the construction was completed.
In this case, the deadline for payment is uncertain. It does not specify whether he has to pay before the last
date of the month or on the last date of the month. Further, it is also uncertain, when will the said month
start- will it start after the construction is complete or when the possession is transferred to A.
How is certainty ensured?

Certainty is ensured when the terms are not vague, ambiguous (capable of two meanings),
incomplete and when there is consensus ad-idem along with an intention to create a legal relationship.
• To create a binding contract the parties must express their agreement in sufficiently certain terms.
What is needed is not absolute certainty but a “reasonable degree” of certainty. [Scammel v Ouston]
• To create a binding contract the parties must express their agreement in sufficiently certain terms.
What is needed is not absolute certainty but a “reasonable degree” of certainty. [Scammel v Ouston]
• “To create a binding contract the parties must express their agreement in sufficiently certain terms.
What is needed is not absolute certainty but a reasonable degree of certainty”[xxiii]
• This largely depends upon how the contract was drafted and the language used within the clauses
of the contract. One way to ensure certainty is not to make a clause open-ended which could lead to
different interpretations by different people.
• The parties must make their own contract. The courts will not construct a contract for the parties
when the terms are indefinite or unsettled. The court must first be satisfied that the parties have in
fact concluded a contract, before seeking to make certain its terms.
• It is not enough to show that the meaning of the contract is uncertain, it should further be shown
that it is incapable of being made certain. Mere vagueness or uncertainty which can be removed by
proper interpretation, cannot make a contract void[xxiv].
• An agreement which provides for the future fixation of price either by the parties themselves or by
a third party is capable of being made certain and is not invalid under s 29. Such a contract is not
void for uncertainty.[xxv]
Agreement of wager are void (section 30)

According to Section 30, Wagering agreements are void and no suit shall be brought to recover
anything that has been won by a wager. Further, no suit can be brought to make a person abide by the
result of any game or any other uncertain event if such an event was the subject of a bet.
Meaning
According to Sir William Anson, a wager is “a promise to give money or money’s worth upon the
determination or ascertainment of an uncertain event.”
Thus a wagering agreement is one whose outcome is based on a future uncertain event and upon
the happening of that uncertain event one party will gain and the other party will lose and the loser shall
pay the winner a sum of money or any other stake. Such parties shall not have any other interest other
than winning or losing the bet.
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It must be noted that an insurance contract is not a wagering contract, an insurance contract falls under
contingent contracts.
Conclusion
These are the most basic and elementary principles of a contract, which are to be fulfilled, however
there may be other conditions which may be laid down by a special law, or for specific types of contract.
Eg. a contract dealing with IPR has to abide by rules laid down by the laws dealing with IPR.
2.2 Competency of Parties

Relevancy of Competency of Parties To A Contract
In the ongoing phase of development and modernization, people are more aware of their
surroundings. They are particularly, in know, of the products and services that could help in their
everyday life or in many occasions products and services are acquired simply because that their colleagues
or acquaintances have acquired them.
To acquire these products or Services, the companies (Sellers) formulate a contract between the
Seller and the Buyer, which binds both the parties to perform their part of the promise. On the same side
of the discussion of a contract, comes the issue of parties who are contracting. Since, a contract is enforced
by the power of law.
It is the law that specifies the qualifications required for the parties to contract. Every party to a
contract must keep in consideration these legal requirements, if they desire enforceability, otherwise,
there will be no contract but a mere agreement. This raises the fundamental question, which this article
attempts to answer as to Who is competent to enter into a Contract?
Competency for Contract

The question of competency of parties is essential in the way that it assumes certain people to be
incapable to fulfill their part of consideration to form a contract, and hence they are declared
'incompetent' to enter into a contract, by the law. Since, people desire to enter into a contract, to bind one
another to fulfill their respective promises and to secure legal enforceability, law ensures the same and
thus, lays down certain criteria according to which, people are considered to be able to complete the
contract and hence, are competent parties to the contract.
The consideration of competency of parties is essential in the way that it very much ensures that
the people participating in a contract are sound/sane and capable to form a contract and subsequently
fulfil their promises as well. Thus, its importance arises from the fact that people come into a contract, to
secure their position by making other party act in accordance of the agreement entered into, and to get
legal enforceability.
For this, law requires the parties intending to form a contract, to make certain that each of them is
in a position where they are fully prudent to understand the terms of the contract and satisfy their
respective promises and consideration.
Factors Deciding Qualifications And Competency Of Parties:

Section 11 of the Indian Contract Act, 1872 details as to which parties are competent to contract- a
person who has attained majority, who is of sound mind and lastly, is not disqualified by the law to enter
into a contract. The subsequent sections of the act details about each of these requirements as mentioned
by the law.
The Details Of Each Of These Is As Under:

Minor's Agreement
As per the Indian Majority Act, a minor is someone who is below the age of eighteen. Hence, the law
makes a person of the majority age, i.e. age above eighteen to be qualified to enter into a contract.
However, earlier the case was that if there is an appointed guardian, majority age was fixed at twenty one
years, which eventually changed through an amendment, and majority age was fixed at eighteen years.
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The Indian Contract Act declares all agreements of minor to be void-ab-initio, i.e. void from the
beginning, as it assumes people below the majority age to be less capable of fully understanding the terms
and conditions of the contract. It is to be noted that a person cannot enforce the contract that was entered
during his minority, when he attains the age of majority, since the agreement entered earlier was itself
void from the very initial. Also, a minor's agreement cannot be ratified later, as an agreement which is void
is not capable of ratification at a later point, as there is no contract formed in the first place.
There are several cases decided, which furthers this principle of law. The first case where the Privy
Council decided upon this principle was, Mohori Bibee VS Dhramodas Ghose, wherein a minor, for the
reasons of securing a loan amount, mortgaged his property in favor of the moneylender. The court held the
entire transaction to be void, as it was entered with a minor.
There was no relief provided to the moneylender as it would mean enforcing the agreement not
recognized by the law. Nevertheless, there is an exception to this general rule, which points out that if in
an agreement entered into with a minor, he completed his part of the promise, law can enforce the other
party to abide by the contract as well. Another interesting case law named Raj Rani VS Prem Adib, involves
a promise on the part of a minor girl with a film producer to act in a film.
There was another agreement that was entered with the minor's father as an assurance to the first
agreement. The court held the first agreement to be evidently void, as it was entered with a minor.
However, the second agreement was also declared void as the father's consideration for the daughter to
act, is in itself something not recognized by the law, hence it is a situation of no flow of consideration from
one side of the party.
A contract entered into by the minor's guardian is a valid one, if it satisfies the following two
conditions:
 Guardian is a competent party
 Contract entered into, is for the minor's advantage or for their legal necessities.
In any agreement, it may be observed that the law weighs lighter for a minor as certain principles like
estoppel, do not apply on a minor. The minor can refute his earlier claim of being a major in the court.
Also, law allows minor to enter into agreements which benefit them with certain basic necessities
of life, and the person helping the minor with such goods can claim their return from the minor's property,
but not in any monetary form.
Unsoundness of Mind
Law restricts people who are not of sane mind or are lunatics to enter into a contract and declares
it void. A person with an unsound mind is not capable to fully understand the agreement in its true sense
and thus there will be no meeting of minds when one person is unaware of what the contract entails with
itself. Lunatics are people who are generally of sound mind but occasionally of unsound mind.
The duration, in which they are of unsound mind, they are restricted to enter into a contract
because of their mental conditions, which limits their understanding ability. It is on the person who is of
unsound mind to prove that he was not capable of understanding the agreement. This was established as
per the case of Sudama vs. Rakshpal Singh.
Disqualification by law
There are some classified group of people who are considered to be disqualified by the law to enter
into contracts. These include alien enemies, convicts, persons against whom insolvency proceedings are
filed and some foreign diplomats. These includes:
 Alien enemies include citizens of the country, India is at a war with. No person is permitted by law
to make agreements with an alien enemy, during the subsistence of a war, which will be declared to
be void.
 Convicts are prohibited to enter into any contract during the period of their sentence. However,
they may enter into an agreement once their sentence is completed.
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 Insolvent persons are not allowed by law to enter into contractual terms as they do not have the
assets to fulfill the terms of the contract. But a person may enter into a contract if the insolvency
proceedings against that person is pending.
 Foreign sovereigns including diplomats are immune from any suit with respect to contractual law,
till they do not surrender themselves to the Indian court's jurisdiction.
Conclusion
These are the major conditions as listed by the law, to minimize the cases of breach of contracts and
to make certain of the fact that the agreements entered by the parties are properly honored by them. This
becomes an essential step to establish contractual stability and worth of the terms of an agreement.
In this way, law makes certain of the fact that all the legal agreements to be enforceable should
pertain to some pre-decided norms, such that only competent parties engage into meaningful agreements.
2.3 Free Consent

Definition of Free Consent
In the Indian Contract Act, the definition of consent is given in Section 14, which states that “it is
when two or more persons agree upon the same thing and in the same sense”.
Example
‘A’ agrees to sell his house to ‘B’. ‘A’ owns three houses and wants to sell his house in Haridwar. ‘B’ thinks
he is buying his Delhi house. Here ‘A’ and ‘B’ have not agreed upon the same thing in the same sense.
Therefore, there is no consent and no contract afterwards.
In the case of Raffles v. Wichelhaus, two parties, ‘A’ and ‘B’, entered into a contract for the sale of 125
cotton bales by a ship named “peerless” from Bombay. There were two ships with the same name, and
while Party ‘A’ was thinking of one ship, Party ‘B’ was thinking of the other ship. The court held that there
was no meeting of minds by both parties. Hence the contract was invalid.
Vitiating factors and their effect

1. Coercion (Section 15)
Section 15 of the Indian Contract Act,1872 states that coercion is committing or threatening to
commit, any act is 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.
Coercion means forcing an individual to enter into a contract. When intimidation or threats are
used under pressure to gain the party’s consent, i.e. it is not free consent.
Coercion may involve the actual infliction of physical and psychological harm in order to enhance the
credibility of a threat. Then the threat of further harm can lead to the threatened person’s cooperation or
obedience.
Example
‘A’ went out for a walk, ‘B’ approaches ‘A’ with a stranger, pulls out his gun and asks ‘A’ to give all his
possessions. The consent of ‘A’ is obtained by coercion here.
Effect
Coercion has the effect of making the contract voidable. It implies that at the discretion of the party whose
consent was not free, the contract is voidable. The aggravated party will, therefore, determine whether to
enforce the contract or to cancel the contract.
Techniques for causing coercion

Threatening to commit any act which is prohibited by the Indian penal Code.
Detaining not as per law or even threatening to detain any property, with the sole intention of compelling
a person to enter into a contract.
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Acts forbidden by IPC

The word act prohibited by the Indian penal code makes it necessary in a civil action for the court to
decide whether the alleged act of coercion is amount to an offence. A threat of bringing a false charm with
the object of making another do a thing amount to blackmail or coercion. In the case of Ranganayakamma
v Alwar Sett, where the widow was prohibited from removing the corpse of her husband until she
consented for the adoption. The court said that her consent was not free and it was coerced. It is clear that
coercion is committing or threatening to commit any act which is contrary to law.
Unlawful Detention of property

Consent can be said to be caused by coercion if it is induced because of illegal confining of a property, or a
danger to do as such. With a specific goal of acknowledging the child’s due fine, the legislature annexed the
property both of him and his father having a place, the instalment made by the father at that stage bearing
in mind the ultimate goal of saving the property from being sold was kept to be made under coercion.
Refusal by the government to discharge a temporary worker’s instalment unless he surrenders his
demand for additional rates adds up to intimidation under the land detention class.
Burden of proof
The burden of proof lies with the party defending the coercion. The burden of proof is heavier on him. This
is because pure probability or fear is not a threat. In order to create coercion, a person must show that
there was a risk that was prohibited by law and that forced him to enter into a contract that he would not
otherwise have.
Difference between Coercion and Duress

The term ‘duress’ corresponds to coercion in English law. However, Coercion under the Indian Contract
law has a wider amplitude than duress under the English law.
Coercion Duress
Duress can be employed only against the life or liability
Coercion can be employed against
of the other party to the contract or members of his
any person
family.
Immediate violence subsequent to
Duress must cause immediate violence.
coercion is not an essential element.
Unlawful detention of goods is a kind Unlawful detention is not duress under the English
of coercion. Law.
2. Undue Influence (Section 16)

According to Section 16 of the Indian Contract Act, 1872 an influence will be considered as Undue
Influence when:
 One party to the contract is in a position of trust and controls the other party wrongfully.
 Such a person uses his dominant position to gain an unfair advantage over the other.
There are two key elements of undue influence-

 The relationship- trust, confidence, authority.
 Unfair persuasion- careful examination of the terms of the contract.
 Where one party is in a fiduciary relation to the other party
Fiduciary relationship means a relationship of trust and confidence. When a person imposes faith and
confidence on the other, he expects not to be betrayed. If the other party betrays the confidence and trust
reposed in him and gains an undue influence.
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Examples of fiduciary relationship includes:

 Solicitor and client;
 Trustee and trust ;
 Spiritual adviser and devotee;
 Medical attendant and patient;
 Parent and child;
 Husband and wife;
 Master and servant;
 Guardian and ward.
In other words, we can say that Undue influence occurs when the decision of another party to the
transaction can be influenced by one party.
Example
‘A’ sold his gold ring to his teacher ‘B’ for Rs 200 after he had been offered good grades by his teacher.
Here, A’s permission is not given freely, he was influenced by his teacher.
Effect
The effect of undue influence makes an agreement voidable at the option of the party whose consent was
caused. Any such contract can be set aside. Only a party to the contract can avoid or rescind the contract.
This right does not lie in the hands of the third party.
Burden of Proof
If the plaintiff wants to bring an action to stop a contract entered into on the grounds of undue influence,
two issues must be kept in mind. The law has been stated in the Indian Evidence Act, 1872 and Indian
Contract Act, 1872. The law states that in order for a plaintiff to prove that he was under undue influence,
two things must be established.
Not only must the defendant has a dominant position but, He must use it.
It states that it’s not enough for the plaintiff to show the possibility of undue influence that may
have been exercised by the dominant party. It must be certain that a person used his position to influence
the plaintiff. A possibility of the same is not enough for the plaintiff to avoid a contract.
Difference between Coercion and Undue Influence

Basic Coercion Undue Influence
Through coercion, by committing an
Nature of Under the undue influence, consent is
offence or threatening to commit an
Action gained by suppressing other party’s will.
offence, consent is gained.
Coercion is typically physical in
nature, in order to obtain consent, it Undue influence is immoral in nature,
Carried by
requires a physical force of violent using mental pressure to gain consent.
nature.
Coercion includes a criminal act and Undue Influence requires unlawful act
Criminal
is punishable under the IPC by a and is not punishable under the IPC by a
Action
person who commits coercion. person who has done undue influence
Undue influence can only be exerted if
Coercion does not involve a party’s
Relationship there is a relationship between two-
relationship.
party.
When coercion induces consent to When consent to an agreement is caused
an agreement, the agreement is null by undue influence, it becomes null and
Agreement
and void at the option of the party void at the discretion of the individual
whose consent is induced. whose consent has been so affected.
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3. Fraud (Section 17)

According to Section 17 of Indian Contract Act, Fraud includes any of the following acts committed
by a contracting party or its connivance or its agent in order to deceive or induce a party or its agent to
enter into the contract:
 The effective concealment of a fact by one who is aware of the fact;
 a promise made without any intention to carry it out;
 any other act fitted to deceive;
 any such act or omission as the law considers to be fraudulent.
 Mere silence as to facts likely to affect a person’s willingness to enter into a contract is not fraud
unless the circumstances of the case are such that, having regard to them, it is the obligation of the
silent person to speak or unless his or her silence is, in itself, equivalent to speech.
Example
‘A’ sells his horse to ‘B’ by auction, which ‘A’ knows to be unsound, ‘A’ tells ‘B’ nothing about the
unsoundness of the horse. This is a fraud on the part of ‘A’.
Effect
• The contract arising from fraud is a null contract.
• The misled party has the right to withdraw from the contract.
• Due to the fraudulent agreement, the party is responsible for recovering the damages.
• Evidence and Burden of proof
In a large majority of cases, fraud can not be proved by concrete and observable proof. It’s hidden in its
movement by its definition. If the evidence given is such as lead to wrongdoing, it is, therefore, appropriate
that fraud must have been committed. In most cases, the only tool for dealing with fraud issues is
circumstantial evidence. If this were not allowed, the ends of justice would be constantly, if not invariably,
defeated. Simultaneously, fraud involvement is only to be blamed on a deliberate wrongdoer. As a remedy
for restitution, any real damages arising from fraud can be recovered, even if they could not have been
reasonably foreseen subject to the defrauded party’s mitigation law. Due to contributory negligence, the
penalties would not be diminished.
4. Misrepresentation (Section 18)

As per Section 18 of the Indian Contract:
 Misrepresentation means the truth is misrepresented.
 Misrepresentation is the release of deceiving details resulting in the presumption that the other
party will enter into a deal and then lose. Nevertheless, the information provided by the guilty party
is the result of a genuine belief in the matter. Misrepresentation is said to be committed.
 Firstly, when the deceiving person declares that no justified data is misleading a person is some
way.
Secondly, there is a breach of an obligation that has caused the bias of one or the other. Lastly, a mistake
was committed by a person because of the misrepresentation of the act or information.
Example
‘A’ told ‘B’ that his radio is in good condition, because of the confidence he had in ‘A’, ‘B’ bought the radio
from him. The radio did not work properly after some time, ‘B’ thought he was misled by ‘A’, but ‘A’
believed his radio was in good condition and had no intention of deceiving him. So, here misrepresentation
is in the part of ‘A’, because he did not know that the radio is not working properly.
Effect
If the party that has suffered as a result of the misrepresentation when entering into a contract may
choose to terminate the contract, rescind the contract within a reasonable time under the Specific Relief
Act 1963.
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Kinds of Misrepresentation
There are two types of misrepresentation:
Negligent Misrepresentation
• It is considered to be a negligent misrepresentation when the misrepresentation happens due to
lack of any reasonable ground and carelessness;
• Negligent misrepresentation is only known when the representative owed a duty to representee to
handle carefully;
• An individual would only be liable if, in particular, he had ignored the duty specified;
• Even when there is no fiduciary relationship, responsibility exists between the two parties.
Innocent misrepresentation
 If the portrayal is based on a good reason to believe and there is no error and malicious motive,
then it is said to be an innocent misrepresentation.
 When a person enters into a contract with an innocent misrepresentation, he or she has the right to
withdraw from the contract but is not entitled to damages.
 Unless there are reasonable grounds, a contract will not be void. It would be enough to prove
innocence in misrepresentation to prove the fact.
 Burden of Proof
 The burden of proof is on the defendant to show that the misrepresentation was not rendered
fraudulently by showing that “He had reasonable grounds to believe that the evidence portrayed
were valid during the time when the contract was made.” The party making the misrepresentation
carries a heavy burden of proof.
The distinction between fraud and misrepresentation

Basis Fraud Misrepresentation
A fraudulent act intentionally
Misrepresentation is known as the
committed by one party to
representation of an innocent mistake,
Meaning induce the other party to enter
which persuades other parties to enter
into the contract is referred to as
into the contract.
fraud.
Section 17 of the Indian Contract Section 18 of the Indian Contract Act,
Section
Act, 1872. 1872
In order to
mislead the Yes No
other party
In misrepresentation, the party making
In fraud, the party making the
Variation in the representation considers the
representation knows that the
extent of truth statement made by him to be valid,
declaration is not true.
which later turned out to be false.
The aggrieved party is entitled The aggrieved party has no right to sue
Claim
to claim damages. for damages to the other party.
The contract is voidable even if If the truth can be found with reasonable
Voidable in usual diligence the truth can diligence, then the contract is not
be found. voidable.
4. Mistake (Section 20)

There are two forms of mistake under Indian Contract Law:
 The mistake of Fact,
 The Mistake of Law.
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Mistake of Fact
A mistake of fact arises when one or both of the contracting parties have misunderstood a term that
is essential to the meaning of the contract;
• Such a mistake may be done due to confusion, negligence or omission, etc;
• A mistake is never intentional, it is an innocent overlooking.
• Such mistakes can be either unilateral or bilateral
Bilateral Mistake (Section 21)

When both the parties to a contract are under a mistake of fact, essential to the agreement, such a
mistake is known as a bilateral mistake. Bilateral mistakes are also sometimes referred to as mutual or
common mistakes. All the parties do not agree to the same thing and in the same way, which is the concept
of consent. Since there is no consent, the contract is null and void.
Example
‘A’, agrees to buy a cow from ‘B’, but it turns out that the cow was dead at the time of the deal, although the
fact was not known to any party. The arrangement is considered invalid.
Unilateral Mistake (Section 22)

A unilateral mistake occurs when only one party to the contract makes a mistake. The contract will
not be void in such a case. It is specified in Section 22 of the Act that the contract will not be void just
because one party made the mistake. So if only one party has made a mistake the contract remains a valid
contract.
Example
‘A’ enters into an agreement with ‘B’ for the purchase of horse which he assumes to be a racing horse. ‘A’
do not confirm from ‘B’. In actual a horse is not a racing horse. ‘A’ cannot rescind the contract.
Mistake of law
The mistake may be related to the mistake of Indian laws, or it may be a mistake of foreign laws. If
the mistake applies to Indian laws, the principle is that the law’s ignorance is not a sufficiently good
excuse. This means that either party cannot claim that it is not aware of the law.
The Contract Act states that, on the grounds of ignorance of Indian law, no party can claim any
relief. This will also include an incorrect interpretation of any legal provisions.
However, similar treatment is not given to ignorance of foreign law. Ignorance of foreign law
provides some leeway, the parties are not expected to know foreign law and its meaning. Therefore, under
the Indian Contract Act, an error of foreign law is actually treated as a mistake of fact.
Conclusion
Free Consent is absolutely important to make an agreement with a valid contract. The importance
of free consent cannot be stressed enough. The Party’s consent must be free and voluntarily. It is necessary
to give consent to the contract without any pressure or delusions. It is essential that the parties consent is
free, as this may affect the contract’s validity. If the consent has been obtained or caused by coercion,
undue influence, fraud, misrepresentation or mistake, then the aggrieved person has the right to void the
agreement.
2.4 Consideration
Introduction
In a world where corporations are on the rise, one cannot ignore the concept of contracts and the
essence of their role in the corporate sector. What is a contract, you ask? Well, defined in its simplest
terms, a contract is a promise that can be enforced by the law. It is a proposal that, when accepted,
becomes a promise. The person who makes the proposal is called the promisor, and the one who accepts it
is referred to as the promisee. Delving deeper into its meaning, the law of contracts in India is governed by
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the Indian Contract Act, 1872. Section 2(h) of this very Act defines a contract as an “agreement enforceable
by law”. A contract can also be called a “promise with a consideration”. Section 2 of the Indian Contract Act
is the interpretation clause of the Indian Contract Act and lists out the essentials of a contract and defines
it exhaustively and substantively. One such essential of a contract is ‘consideration’. This term has been
defined under Section 2(d) as willingness or abstinence of the promisee to do something or making a
promise to do so, at the instance of the promisor. Keep reading to know more about this concept!
Consideration Section 2(d) of the Indian Contract Act defines the term consideration as follows-
When at the desire of the promisor, the promisee or any other person
Has done, or abstained from doing something;
Or
Does or abstains from doing something;
Or
Promises to do, or to abstain from doing something;
Then such act, abstinence or promise is called a consideration for the promise.
In short, the term consideration means ‘something in return’ i.e. ‘QUID PRO QUO’.
Pollock- “the price for which the promise of the other is bought, and the promise thus given for value is
enforceable”.
Blackstone- “the recompense given by the party contracting to the other”
In Currie v. Misa, Lush J. define the term consideration as follows-

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit
or benefit accruing to the party, or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by other”.
Illustration- A agrees to sell his car to B for Rs. 50,000. Here, B’s promise to pay the sum of Rs. 50,000 is
the consideration for A’s promise to sell the car, and A’s promise to sell the car is the consideration for B’s
promise to pay the Rs. 50,000.
Essential elements of consideration

In order to be considered a valid consideration in the eyes of the law, it is important that a
consideration meet certain essential elements. These essential elements have been explained below.
Consideration must proceed at the instance of the promisor

Any act or abstinence from an act should be done only if the promisor desires the same. If the act is
done voluntarily without the request or desire of the promisor, or if it is done at the instance of any third
party, the consideration will not be valid.
Let’s consider a simple example- if you help your friend with his homework without him asking,
and then later you ask him to pay you a certain amount for the same, it will not be a valid consideration
since you voluntarily decided to help him out with his homework.
In the case of Durga Prasad v. Baldeo (1879), Durga Prasad decided to build a few shops at his own
expense after the order of the collector. The people who then took occupation of these shops promised to
pay commission from their sales to Durga Prasad but did not perform on the promise. Durga Prasad sued
the shopkeepers. The Allahabad High Court held the consideration to be invalid since he had built the
shops on the order of the collector and not at the instance of the shopkeepers. The Court further stated
that (paste content from already published article).
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It is important to note, however, that it is not mandatory that the promisor has to benefit from the
act or abstinence; it is only necessary that it be done at his desire. This was held in the case of Kedarnath
Bhattacharji v. Gorie Mahomed (1886)
Consideration may proceed from the promisee or any other person

Another essential element is that the act or abstinence from an act which will constitute
consideration for a contract may be done by the promisee or any other person. It simply implies that, as
long as a promise carries a consideration, it is immaterial as to who has furnished that consideration. If the
promisor does not object to it, the consideration can move to a person other than the promisee as well.
This principle was held in the case of Chinnaya v. Ramayya, ILR (1876-82) 4 Mad 137, in which A
transferred some property to her daughter through a gift deed with the instruction that the daughter will
give her brother an annuity. The daughter agreed to pay the annuity and signed a written agreement in the
brother’s favour on the same day. After that, the daughter chose not to keep her word, and the brother
filed a lawsuit to get his money back. The defendant (sister) argued that because there was no
consideration from the brother’s side and because he was not a party to the consideration, he lacked
standing to file a lawsuit. It was ruled that consideration need not be moved from the promisee personally.
The brother was therefore allowed to continue the lawsuit.
However, under English law, this principle does not stand.
Consideration may be past, present, or future

The consideration of a contract may be an act or abstinence that has already been done at the
desire of the promisor, is in progress or is promised to be done in the future. On this basis, consideration
can be categorised as past, present, or future.
Past consideration
A promise for a voluntary action performed in the past that will enable the party making the
promise to pay or to do something later is referred to as a ‘past consideration.’ It indicates that future
payment is promised in exchange for an act performed without any promises from the other party. When a
promise is made because of a benefit the promisor got in the past that gave rise to a need to make
restitution, the promise is said to have been made for the past consideration. Prior to today, there had
been no consideration; nevertheless, there is now a good and valid consideration.
For example, you help your neighbour paint their balcony without any expectation of anything in return.
But that neighbour pays you Rs. 1000 for the act you have done. Their motivation to compensate you
comes from the help you provided in the past. This is known as past consideration.
Past voluntary service

This concept has been covered under Section 25(2), which provides that a promise to wholly or partly
compensate someone who has already done something for the promisor voluntarily is a valid and
enforceable consideration. A voluntary service is a service or act that was done without any request or
promise, but later a promise to pay for that act was subsequently made.
For example- someone saves a man from drowning, and later the man decides to reward the person who
saved him.
Past service at request

This concept has not been adequately covered by the Act. This is due to the fact that when a request is
made, it presupposes the promise of payment for the act. It cannot apply to an act done at request but
without any promise to pay. But this concept can include an act which has been done at request, and the
promise to pay is made subsequently. The Bombay High Court upheld this principle in the case of Sindha
Shri Ganpati Singhji v. Abraham ILR (1896) 20 Bom 755 as it laid down that services rendered to a minor
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at his request and which were continued after the age of majority at the same request, were good
consideration for his promise to pay.
Present or executed consideration

This type of consideration moves simultaneously with the consideration. An act which has already been
done in response to the promise is called ‘executed consideration.’ People often tend to confuse past
consideration with executed consideration. But they are, in fact, very distinct. Past consideration always
consists of an act done without any promise. But executed consideration means an act which has been
done in response to a positive promise.
For example, offers of rewards for finding lost items can only be accepted by finding and producing the
item to the owner, and this is also a consideration for a promise.
Future or Executory consideration

Executory consideration, also known as future consideration, refers to a promise that will be carried out at
a later time. This is future consideration since the promisor is making an offer for a later date, and the
promisee is promising to accept and execute the contract after that date. Each promise, in this particular
case, is a consideration for the other. In this instance, both parties postpone the payment of the
consideration. At a later date, both parties are liable for the obligation.
For example, X promises to sell certain goods to Y for a certain price. In return, Y promises to make
payment to X for the goods. This is an example of a future consideration.
Consideration must be of some value

Let’s suppose you promise your friend that you will give him your brand new airpods if he goes and
fetches them from your bag, which is kept in a classroom two floors up. But this act would not, under any
circumstance, qualify as a legitimate consideration for the promise. Such an act no doubt satisfies the
words of the definition, but it does not catch its spirit. This is why it is insisted that the consideration must
have some value in the eyes of the law. It has been stated by the Supreme Court in the case of Chidamabara
Iyer v. P.S. Renga Iyer (1966) that consideration “shall be ‘something’ which not only the parties regard
but the law can also regard as having some value.”
Adequacy of the value of consideration

We have established that consideration must be of some value. However, it is important to note that it is
not, however, necessary that the consideration should be adequate to the promise. The courts cannot
assume the duty to determine what would be an appropriate consideration for the parties, the parties
have to decide that between themselves. If a party gets what he has contracted for, no matter how great or
small a value, the courts will not enquire into its adequacy. The adequacy of consideration is something
which is for the parties to decide when entering into a contract, not for the court when it is sought to be
enforced.
Inadequacy as evidence of imposition

Even though the adequacy of consideration cannot be questioned, the inadequacy of consideration may be
considered by the court in order to determine whether there was free consent given by the promisor
according to Explanation 2 of Section 25. Once the court is satisfied that consent was freely given, the
agreement will be valid notwithstanding the inadequacy of the consideration.
Forbearance to sue
If a person agrees not to sue the defendant when he has a right of action against the defendant, based on a
promise by the defendant, as part of the consideration for a contract, it will always be considered valuable
consideration. It is a kind of abstinence that is so clearly recognised as good consideration in the definition
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itself. In the case of Debi Radha Rani v. Ram Dass (1941), the Patna High Court held that in a case where a
wife has a right to sue her husband for maintenance but she forebears to sue him on the promise by the
husband that he will pay her monthly allowance, the consideration is a valid one in the eyes of the law.
However, it is important to remember that there can be no real forbearance unless the claim is
immediately due.
Consideration must be real

The consideration must be real, as in, it should not be physically or legally impossible in nature. The
consideration will also not be considered real if it comes with a level of uncertainty, because if
consideration is not certain, it becomes impossible to carry it out. Given under are the instances when
consideration will become unreal and hence void in the eyes of the law.
Physical impossibility
Consideration cannot be something that is physically impossible to be carried out. For example, you
promise to do 300 pushups in 3 minutes if your friend agrees to pay you Rs. 10 lakh for it. This is
impossible to accomplish physically. Hence, such consideration is physically impossible and will not be
held valid in the eyes of the law.
Legal impossibility
A promise to do an act that is prohibited by law will be a consideration that is legally impossible. For
example, if you promise to pay Rs. 10 lakhs to your friend for murdering your enemy, the consideration
will not be valid.
Uncertain consideration
Consideration must be clearly stated and certain in nature. Otherwise, there arises ambiguity and the
consideration will be held not valid as it becomes difficult to ascertain what exactly the consideration is.
For example, if you go to the cobbler and ask him to replace the soles of your shoes, and he says he might
charge you Rs. 100 or Rs. 150, this will become an uncertain consideration because you don’t know which
amount you have to pay in exchange for him changing the soles of your shoes.
Illusionary consideration
We often hear movie dialogues in which the hero promises to bring the moon and stars to his girlfriend.
This is a classic example of an illusionary consideration. Illusionary consideration cannot stand in the
court of law because it is a promise to give something which is not real.
Consideration involving pre-existing duty

A new obligation should be fulfilled as part of the consideration. According to the law, fulfilling an existing
legal obligation is irrelevant. It ought to be something that goes above and beyond what is already
expected of a person. Furthermore, promising to pay a government employee for doing a public duty is not
an acceptable kind of consideration.
Consideration must be lawful

The consideration must be legitimate in order for the agreement to stand. The following circumstances are
prohibited by Section 23 of the Indian Contract Act from allowing consideration:
 When it involves a legally prohibited act, or
 When it harms another individual’s person or their property, or
 When the act is perceived to be immoral or against public policy.
 Except in situations when the illegal part of the agreement can be separated from the legal part, the
entire agreement will be void if any part of it is illegal.
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Exceptions to Consideration
Section 25 of the Contract Act lays down a few exceptions when an agreement made without consideration
is not void.
Exception 1- Natural Love and Affection
A written and registered agreement based on natural love and affection between near relatives is
enforceable without consideration. The expression ‘near relative’ will include parties related by blood or
marriage.
Exception 2- Past Voluntary Service
A promise to compensate a person, who has already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do, is enforceable. However, such service should
have been rendered voluntarily and without promisor’s knowledge, and for the promisor only.
For example, a promise made after attaining the age of majority to pay for goods supplied to the promisor
during minority was held to be within the exception.
Illustration:- A finds B’s mobile phone and gives it to him. B promises to give Rs. 100. This is a contract.
Exception 3- Time-barred Debt
A promise to pay a time-barred debt is enforceable.
Illustration:- X owes Y, Rs. 1,000, but the debt is barred by the Limitation Act. X signs a written promise to
pay Y, Rs. 500 on account of the debt. This is a contract.
2.5 Unlawful Object and Consideration

INTRODUCTION
In India it is said that for a contract to be understood as a valid contract two things are a must: a
lawful object and a lawful consideration. To ensure the regulation of such valid contracts in the country
naturally legal provisions have been implemented. Under Section 23 of the Indian Contract Act, 1872
certain restrictions have been imposed on an individual while indulging into any agreement and limits the
freedom of that individual and his said privileges by drawing a parallel with the contemplations of public
policies and various other provisions that have been articulated under this section.
Under Section 23 the term öbject” indicates “purpose” of that contract does not really imply
importance in a similar sense as the term ¨consideration¨. It is understood that even if the consideration of
the contract is purely legally valid but the object of that contract is found to be unlawful in nature, then the
contract would be termed an invalid contract. Similarly, if consideration, which has been defined under
Section 2(d) of the Act, is found to be unlawful, then even if the object of the contract is legally valid, the
contract would be considered an unlawful contract.
UNLAWFUL CONSIDERATION IN A CONTRACT
As discussed under section 23 of the Indian Contract Act, 1872, the legality of a consideration is
only valid if:
1. The Consideration Is Not Forbidden By Law: It is understood that if the consideration in a
contract is prohibited by law then it is considered to be an unlawful consideration and the contract
is said to become invalid. It is important to note that for an act forbidden by law to account as an
unlawful consideration it would generally include acts that are explicitly punishable by the law and
it can also include those acts that are prohibited through the medium of either rules or regulations.
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2. The Consideration Is Not Immoral In Nature: A consideration in a contract is considered to be an

unlawful one if it has been regarded as an immoral act by the honourable court. In case of an immoral
consideration the contract would end up being invalid and void.
3. In Case The Consideration Is Not Fraudulent In Nature: A contract becomes invalid or void by nature
if the consideration of the contract is fraudulent in nature. Here, it is important to understand what may
fall under a fraudulent act. To understand the term fraud better Section 17 of the Indian Contract Act,
1872, can be referred to which states that any act committed by a party to a contract with the intent to
deceive another party or to induce that party into entering into the contract.
4. The Consideration Does Not Defeat the Provisions Set Under The Law Of The Country: A
consideration is termed as an unlawful consideration of a contract, and end up making the contract an
invalid and void contract, when the said consideration aims at defeating the provision of law or the
intentions of law. In case the court finds the consideration to be in contradiction with the provisions of
the law then it can discard the contract as void.
5. The Consideration Does Not Involve Harm Or Injury To Any Other Person Or Property: A
Consideration is denied to be considered a lawful consideration of a contract if the consideration
includes an act which involves causing harm to any other person or property. It can be understood with
the simple example of a person taking money as an object and in return as a consideration killing a third
person or vandalizing a third party’s property. This type of consideration can be broadly included
under an act forbidden by law as well since the consideration includes an unlawful act.
6. The Consideration Does Not Defeat Any Rules Already In Effect: A Contract is said to become invalid
or void in nature if the consideration of that contract is against the essence of any rules already
implemented in the country or if it intends to defeat the intention of any rules in effect in the country at
that time. Such a consideration is also termed as an unlawful consideration.
7. The Consideration Does Not Oppose The Public Policies: The ultimate motive of the Indian judiciary
is to maintain the essence of natural justice in the community. In case the consideration of a contract is
oppressive of the public policy then such a consideration is said to be an unlawful consideration and the
contract becomes an invalid contract or void by nature.
It is important to understand what would fall under the term ¨public policy¨ here. Public Policy can be
understood as a very broad concept but for the purpose of consideration of a contract it is not referred to
in the wider sense but in general terms- for the good community. If the act included in the consideration is
not particularly in the favor of the good of the community but rather brings inconvenience then such an
act makes the consideration unlawful.
Various examples can be discussed under this heading to further illustrate this field, like: Trading
with the enemy of the country, or interfering with the courts, or stifling a prosecution by removing
evidence or witness and multiple other things, etcetera.
UNLAWFUL OBJECT IN A CONTRACT

As discussed under Section 23 of the Indian Contract Act, 1872, an object of a contract is not considered to
be legally valid if:
1. The Object Of The Contract Is Forbidden By The Law: It is understood that if the object in a contract
is prohibited by law then it is considered to be an unlawful object and the contract is said to become
invalid and void by nature. It is important to note that for an act forbidden by law to be counted as an
unlawful object it would generally include acts that are explicitly punishable by the law and it can also
include those acts that are prohibited through the medium of either rules or regulations in the country.
2. The Object Of The Contract Is Immoral In Nature: An object of a contract is considered to be an
unlawful one if it has been regarded as an immoral act by the honourable court. In the case of an
immoral object, the contract would end up being invalid and void. An immoral object would generally
include acts which are frowned upon in our society, like taking money to file for divorce. Here, the party
cannot file a case in case the consideration for the immoral object is not received.
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3. The Object Of The Contract Is Fraudulent In Nature: A contract becomes invalid or void by nature if
the object of the contract is understood to be fraudulent in nature. Here, it is important to define what
may fall under a fraudulent act. To understand the term fraud better one can refer to Section 17 of the
Indian Contract Act, 1872, or the definition given above under ünlawful consideration of a contract¨.
4. The Object Of The Contract Defeats The Provisions Of The Law: An object of a contract is termed as
an unlawful object if the said act under the object aims at defeating the provision of law or the
intentions of the law. In case the court finds the consideration to be in contradiction with the provisions
of the law then it can discard the contract as void.
5. The Object Of The Contract Involves Harm Or Injury To Another Person Or Property: Just as
discussed under unlawful consideration an object of a contract will be denied the status of a lawful
object of a contract if the object includes an act which involves causing harm to another person or
property. It can be understood with the simple example of a person taking money as a consideration for
the act of killing another person, which would make it the object. This type of an object can be broadly
included under an act forbidden by law as well since the object here includes an unlawful act.
6. The Object Of The Contract Defeats Any Rules In Effect: A Contract is said to become invalid or void
in nature if the object of that contract is found to be against the essence of any rules already
implemented in the country or if it intends to defeat the intention of any rules in effect in the country at
that time. Such an object is also understood as an unlawful object.
CONCLUSION
For a contract to be considered as a valid contract it is important to have a lawful object and a lawful
consideration. If either of the two is found to be missing, the contract is to be found as invalid in total. To
maintain fairness in the society it is important to follow the norms and in case of an unlawful object or
unlawful consideration, which in turn would affect the society, this purpose cannot be pursued.
2.6 Void Agreements

Introduction
Contracts and agreements are by far the most widely used legal devices and to some extent also
govern most of our social relationships. However, those agreements which are legally enforceable can be
termed as contracts whilst those which are unenforceable by law are called void agreements. These
agreements are generally those which are concerned with immoral elements or go against the public
policies of the state. Section 2(g) of the Indian Contract Act, 1872 defines void agreements. Further,
Sections 24 to 30 and 56 of the Act specify the particular kinds of agreements/contracts which are void.
Since a void agreement is meaningless in the eyes of law, it does not cause any change in the position or
relationship of the contracts.
Agreements in which a part of consideration or object is unlawful
This is mentioned in Section 24 of the Act. The basic essence of this statement is that if the
consideration, as a whole or in part is unlawful or if the end product of the agreement is illegal then the
agreement is declared void. The contract would, however, be considered valid after deleting the unlawful
clauses. For example, if there is an agreement between A and B for the exchange of drugs and medicinal
herbs for ₹5000, then the agreement stands void even though the consideration of the agreement is legal.
This is because the object of the agreement is illegal. But in this case, if we remove the drugs from the
object then the agreement would be termed valid.
Moreover, if transaction which arises out of an unlawful act is such that if they are separated from
the illegal part, then they would count as a valid agreement, then those transactions hold value in the eyes
of law irrespective of the illegality of the agreement [1].
Agreements without consideration

Section 2(d) of the Indian Contract Act, 1872, states, consideration may be furnished by ‘the promisee or
any other person’ as long as it is ‘at the desire of the promisor’. In the case of Currie v. Misa, the court
defined valuable consideration as “in the sense of the law may consist either in some right, interest,
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forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”. Section 25 of the
Act mentions that all agreements devoid of consideration would be declared void unless they fall into the
following categories:
If the agreement is made out of natural love and affection

This is the first exception mentioned under Section 25(1). In Rajlukhy Dabee v Bhootnath Mookerjee [2],
the Hon’ble court had held that “A written and registered agreement which is based on natural love and
affection between kins is enforceable without consideration”. Examples of this involve a daughter taking
care of her father [3], a brother giving away property to his siblings, etc. Essentials of an agreement like
this involve [4]:
 The agreement made out of natural love and affection;
 The agreement is registered;
 The agreement is in writing;
 Parties are in close relation to one another.
 The person has already done something voluntarily for the promisor
This is mentioned in Section 25(2) of the Act. Under this, the promisor performs the act in order to
compensate the promisee either wholly or partially for some previously performed voluntary act of the
promisee. For example, if there’s a contract between A and B where A’s expenses are taken care of by B for
taking care of his son, then, it must be noted that the service provided wasn’t voluntary as B was legally
bound to support his infant son. As per this exception, the promise must be to compensate a person who
has himself done something for the promisor and not to a person who has done nothing for the promisor
[5].
Restraint of marriage
Section 26 of the Act mentions that all agreements in restraint, either partial or full, of a marriage
except that with a minor, would be void. For example, if Ria’s father provides Amit with some incentives
only to prevent him from marrying his daughter, then such an agreement would stand void in the eyes of
the law, provided the parties involved are not minors. In the case of Shrawan Kumar v. Nirmala, the
plaintiff held that the defendant had promised to marry him and therefore her present marriage should be
injuncted by the court. This petition was dismissed by the Allahabad High Court on the grounds of
restraint of marriage. The philosophy behind this law is the fact that marriage is a sacred social institution
and nothing should be allowed to interfere with it or restrict it, until and unless it involves minors.
Therefore, an agreement in restraint of marriage of adults is void whereas the same in the case of the
minor would not be held void. But this clause doesn’t apply in case of remarriage. In the case of
remarriage, any penalty imposed upon the widow wouldn’t be counted as a restraint. This was held in the
case of Rao Rani v. Gulab Rani, where it was held that the widow will have to forego her property rights.
Restraint of trade
This is dealt with under Section 27 of the Act. The freedom to practice any form of trade and
occupation is a fundamental right guaranteed by the Constitution of India under Article 19(1). Hence, any
agreement in restraint of trade and occupation would be deemed as void. The restraint can be both partial
and complete. This was brought out in the case of Madhub Chander v. Raj Coomar, where the defendant
had proposed to pay the plaintiff a certain amount of money if the latter agreed to shut down his shop in a
particular locality. However, upon shutting down his shop, the plaintiff was denied payment by the
defendant. The court here, ruled that the defendant did not own any money to the plaintiff since the
agreement was void (as it was in restraint of trade), even though it imposed partial restraint i.e. extended
to only a particular locality.
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However, there are two exceptions to this rule:

The foundation for delegitimizing an agreement in restraint of trade lies the historical backdrop of
contention between free markets and the opportunity of agreements. Guaranteeing freedom to the
agreement would mean legitimizing agreements in limitation of trade, which would bring about parties
consenting to check competition. Under the common law, the present position is taken from the case of
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd.
In the said case, Thorsten Nordenfelt was a producer of firearms in Sweden and England. Thorsten
sold his business to an organization, which at that point moved the business to Maxim Nordenfelt. Then,
Thorsten went into a concurrence with Maxim that he would not take part in the assembling of weapons
for a period of 25 years, other than what he produces for the benefit of the organization. Afterward,
Thorsten broke his promise asserting that the understanding was not enforceable as it was in restriction
of trade. The decision of the court was in support of Thorsten. In common law, a reasonability test is
pursued. An agreement in restriction of trade is legitimate, if:
 There is a substantial interest that the party forcing the restriction is attempting to secure.
 The restriction is no more than what is important to secure this interest.
 Restriction isn’t in opposition to public interest.
General principle in India and England similar?

The general principles in India and England regarding void agreements is more or less the same
which is basically that all restraints on trade, whether partial or whole, are void. The only point of
difference arises in the fact that in England, the decision on validity of restriction is taken on the basis of
reasonableness while in India restrictions would be valid only if they fall within the category of the already
stated statutory or judicial exceptions. Therefore, there aren’t any wide dissimilarities between the two
laws. The English law tends to be more flexible as the clause of “reasonableness” helps to constantly
change its ambit. As LORD WILBERFORCE remarked in Esso Petroleum Co Ltd v. Harper’s Garage
(Stourport) Ltd “the classification (of agreements in restraint of trade) must remain fluid and the
categories can never be closed”.
Exceptions to Section 27
Section 27 is basically based on public policy and applies to various cases in varying degrees. In the
case of Brahmaputra tea co ltd v. Scarth, it was held by the court that any restraint through which a person
binds himself or herself won’t be void and would be covered under the exceptions to Section 27. These
statutory and judicial exceptions are discussed below.
Statutory exceptions
Sale of Goodwill
According to this, a person who buys the business goodwill of another person is thereby privileged to
impose certain restrictions on the business activities of the latter. The restrictions include preventing the
seller from carrying out similar business within local limits only. This is done to protect the rights of the
purchaser [6]. However, the restraint should be reasonable according to the nature of the business under
consideration. In the case of Chandra v. Parsullah [7], the plaintiff and defendant both had the business of
running buses between Pune and Mahabaleswar. To avoid competition, the plaintiff bought the
defendant’s business along with its goodwill and made a contract whereby the defendant would not be
allowed to carry on business in the same locality. However, there was a breach of contract on the part of
the defendant. When brought to the court, the court ruled in favor of the plaintiff since the agreement was
valid under Section 27.
Partnership Act
There are three provisions of the partnership act that provide for restriction of business. They are [8]:
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Section 11, which states that none of the partners would carry on any business till the continuity of the
business.
Section 36, which provides the remaining partners to prevent the outgoing partner from opening any
business similar to theirs’ in the same locality subject to certain restrictions.
Section 54, which prevents all the partners from engaging in any business of similar kind after dissolution
of the firm/business.
Firm Daulat Ram vs. Firm Dharm Chand, where two ice factory owners constituting a partnership agreed
that only one factory will be worked at a time and its profits distributed among them. The restraint was
held to be justified [9].
Under judicial interpretation

Trade combinations
Trade Combination basically refers to the agreements that a set of homogenous traders come up with to
keep a check on the market. For example, if there is a group of sugar sellers in a locality, then they might
come up with specific agreements regarding fixed prices, quality of goods, controlling dealers, etc. in the
name of market regulation of the locality and to avoid unhealthy competition. Such agreements have been
declared void by the courts since there is a deprivation of trade liberty.
In the case of Kores Mfg Co Ltd v. Kulok Mfg Ltd, the two sugar mill employees had come to an agreement
wherein either of them wouldn’t employ a person who had been working in the other person’s factory in
the past 5 years, to protect trade secrets and other confidential information. The court had held this
agreement to be void since the ban was applicable to all employees irrespective of their skills and
positions held.
The Allahabad High Court, in the case of SB Fraser & Co. v. Bombay Ice Manufacturing Co. Ltd., observed
the following, “The rules of an association of traders and weigh men provided that members shall not deal
with outsiders, the penalty for breach being fine and expulsion. The legality of the association was
attacked on the ground that its object and methods were unlawful as it aimed at the creation of a
monopoly by shutting out all competition and was a defiance of the spirit of Section 23 and 27”. [10]
Thus, any agreement placing restrictions upon a trader regarding his choice of mode of business shall be
held void.
Solus or exclusively dealing agreements

This refers to trading agreements whereby the manufacturer strikes a deal with the consumer that he/she
would purchase items only from him for a fixed period of time. However, if the manufacturer produces any
surplus quantity, he/she is allowed to sell it to anybody. “As long as the negative stipulation is nothing but
an ordinary incident of or ancillary to the positive covenant, there is hardly anything obnoxious to Section
27. But the court may not countenance the agreement particularly where the buyers intend to corner or
monopolise the commodity so that he may resell at his own price or where he binds the seller for an
unreasonable period of time.”[11] This was brought out in Sheikh Kallu vs Ramsaran Bhagat.
The doctrine does not apply to ordinary commercial contracts for the regulation and promotion of trade
during the existence of the contract provided that any prevention of work outside the contract viewed as a
whole is directed towards absorption of the party’s services and not their sterilisation. Sole agencies are a
normal and necessary incident of commerce, and those who desire the benefit of sole agency must
themselves the opportunity of other agencies.
Where a contract is reasonable and fair at the beginning, but circumstances have arisen which show that it
is being enforced by one party in a manner which is prejudicial to the interest of others, the courts will
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hold the agreement to be unenforceable. Though not void or invalid. This opinion has been expressed by
the court of appeal in Shell UK Ltd v Lostock Garages Ltd.
Restraint on employees
Restraint during employment: While an employee is engaged in a business, he/she is not allowed to work
for any other business which is in direct competition with his employer. This is done for the protection of
trade secrets, customer details, plans, etc. This was established in Charlesworth v. Macdonald.
Restraint after termination of employment: An agreement to restrain a servant from competing with his
employer after the termination of employment may not be allowed by the courts. This was pronounced in
Brahmaputra Tea Co v E. Scarth, where an attempt was made to restrain a servant from competing for five
years after the period of service.
Conclusion
After thoroughly analysing the major sections related to void agreements, it can easily be deduced that the
agreements which have been declared void and the exceptions to them, are done only to protect the rights
and interests of the public at large. The restrictions assume paramount importance as agreements and
contracts are the most commonly used legal tools and directly or indirectly, affect most of our social
relations.
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MODULE 3:
Sections 36 – 67 and 73-75
3.1 Performance of Contract
3.2 Discharge of contract
3.3 Breach of Contract
3.4 Types of Damages & Remedies for Breach
3.1 Performance of Contract

Introduction
The term “offer” has been defined under Section 2(a) of the Indian Contract Act, 1872. An offer is an
expression of willingness made by a person to do or abstain from doing any act or omission with a view to
obtaining the assent of the person to whom such an offer of act or abstinence is made.
The term performance in its literal sense means the performance of a task or action. In its legal
sense “performance” means the fulfilment or the completion of the obligations which they have towards
the other party by virtue of the contract entered into by them. For example, ‘A’ and ‘B’ enter into a
contract, the terms of the contract state that A has to deliver a book to B on payment of the consideration
of five hundred rupees. Here, B pays to A rupees five hundred and as stipulated in the contract, A delivers
him the book.
Section 37 of the Contract Act talks about performance. According to the Section, there are two
types of performance which are:
Actual performance: Actual performance of the contract means the actual discharge of the liability or
obligation which a person has undertaken to perform and there remains no other task which he is obliged
to discharge under the promise. He is said to have made the actual performance of the promise.
Attempted performance: At times when the performance becomes due. The promisor is not able to
discharge his obligation or perform his duty because he is prevented by the promisee in doing so. This
situation where the promisor actually intended to perform his obligation or discharge his duty but is
prevented from doing so by an intervening disability is known as the attempted performance of a promise.
Attempted performance is also known as Tender. A tender can be of two types:
Tender of goods and services: The discharge of the contract to deliver goods and services is completed
when the goods are tendered for acceptance in accordance with the terms of contact. If the goods and
services so tendered are not accepted they are to be taken back by the offeror and he is discharged from
his liability.
Tender of money: where the debtor tenders the money which is to be paid to the creditor but the
debtor refuses to accept the money. The debtor is not discharged from the lability to pay back the money.
Therefore, a tender of money can never result in the discharge of debt.
This article exhaustively deals with the tender of performance and its different aspects, the performance of
a contract and joint promises and joint liabilities arising thereto.
Tender of performance
Section 37 to Section 39 specifically deals with the performance of the contract by the parties thereto.
According to Section 37 of the Indian Contract Act, 1872 the parties to a contract are under the obligation
to either perform or offer to perform the promises which have been agreed upon under the contract.
Section 2(b) of the Indian Contract Act defines the meaning of promise as a proposal made by the offeror
which has been accepted by the offeree. Thus, each party is under a legal obligation to perform his
obligation which has been agreed upon under the terms of the contract. Unless the terms of contract
expressly exempts or dispenses the performance of obligation upon the person.
The promises made by the parties to the contract after their death binds their representatives provided
that no contrary intention appears from the terms of the contract. For example, if there is a contract
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between two persons ‘A’ and ‘B’ in which A promises to deliver to B some goods on the payment of a
certain amount of money by B on a particular day. However, if A dies before the completion of contract, in
that case, A’s representative will be bound by the promise made by him and therefore they are under the
obligation to deliver goods to B and B is also under the obligation to pay the specified amount to A’s
representative.
However, in the case where the promise is made with regards to the personal skills and art of the person
then his representative will not be bound by the promise made by him. For example, in the case where A
promised B to make him painting on a specified day for a certain price. A dies before the performance of
the contract. Neither the representatives of A are not bound by the promise made by A nor B can compel
the representative for the specific performance of the promise made by A.
The obligation of parties to perform

The obligations in a contract are those duties by which the parties to the contract have to abide by. In a
contract, the parties to the contract usually exchange something of value in the eyes of the law. The thing
which is decided to exchange can be the product, services, money, etc. An example of contract obligations
is with the sale of a product such as an automobile. One party has the obligation to transfer ownership of
the car, while the other has the obligation to pay for it. The contract will specify the terms that regulate the
obligations, such as the method and amount of payment, and the time or place of delivery.
In the case of M. Kamalakannnan v. M. Manikanndan, there was a contract between the plaintiff and the
defendant for the sale of the property. The plaintiff, in this case, retained some part of the money which
was stipulated under the terms of the contract in order to compel the defendant for the performance of
some of the obligations like vacating the property which was occupied by the tenants and handing over the
vacant property to the plaintiff. The contention by the defendant was that non-payment of some part of the
consideration resulted in the infringement of the terms of the contract.
In Geo-Group Communications INC v. IOL Broadband Ltd, the parties to the contract signed an agreement
and they fully acted the terms of the agreements so much so that there arose no further need for the
documents to be executed any further. The agreement was described as one of the preliminary and
tentative drafts made for the purpose of discussion and deliberation only. When the contract was
challenged in the court of law, the court held that the agreement was valid and it entitles the claimant for
relief.
Submission of tender tantamount to a proposal

When in response to an invitation a lender is submitted it is considered to be a proposal to contract and
not the contract itself. In M/S Great Eastern Energy vs M/S Jain Irrigation Systems Ltd, the tender specified
the validity period for four months. The court held that after the expiry of the period of tender, no
acceptance could be made. The forfeiture of the security deposit amount by acceptance of the tender after
the expiry of its validity period and failure of performance by the tenderer was not improper.
Promises bind the representatives of the promisor

The proviso attached to Section 37 of the Act provides that in case of the death of the promisors the
representative of such promisors would be bound by the promises made by them unless a contrary
intention appears from the terms of the contract. In the case of Basanti Bai vs Sri Prafulla Kumar Routrai,
that in case a person dies without leaving behind any legal representative, then, in that case, the liability to
perform the promise on his behalf would fall upon the person who acquires interest over the subject
matters of the contract through that deceased party. The Cuttack High Court, however, held that in the
present case, the plaintiff was not able to enjoy the above mentioned legal proposition as she was unable
to prove the existence of the agreement which was alleged by her.
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Clause for renewal

The Clause for renewal is the provision by which the terms of the contract initially agreed upon are
renewed or recommenced.
In Hardesh Ores Pvt. Ltd vs M/S. Hede And Company, the terms of the contract contained a renewal clause.
The party which have the authority in accordance with the terms of the contract to renew the same
exercised it. However, the other party refused to accept the new terms caused by renewal. The Supreme
Court held that in such a case the best course of action for the party who is empowered by the terms of the
contract to renew the terms of the contract is to get the renewal declared and enforced by the court of law
or to get the declaration of renewal of contract by the court.
Tender of performance
The offeror should offer the performance of an obligation under the contract to the offeree. The offer is
made is called the “tender of performance”. It is the discretion of the promisee to accept the offer. In case
the promisee chooses not to accept the offer then neither the offeror could be held liable for the non-
performance of the terms of the contract nor he loses his rights under the terms of the contract. Therefore,
it is a settled principle that non-acceptance of the tender of performance would result in the exclusion of
the promisor from further performance of the terms of the contract and he is also entitled to sue the other
party for not performing the terms of the contract. Section 38 of the Contract Act makes it clear that a
tender of performance tantamounts to performance. Every tender of performance must fulfil a certain
essential condition:
 Section 38(1): The offer should be unconditional;

 Section 38(2): The offer must be made at a proper time and place so as to allow the party to have a
reasonable time for ascertaining that the person who is making the offer to him is competent to
enter into a contract;
 Section 38(3): If the offer to the offeree is such as to deliver some goods addressed to the offeree
then it is the duty of the offeror to provide reasonable time to the offeree in which he can ascertain
that the goods offered to him is the same by which the offeror is bound under the terms of the
contract.
 Tender of performance should be unconditional
Subsection 1 of Section 38 states that a tender to valid must be unconditional which means that it should
not be accompanied with any clause, provision or condition precedent or subsequent. In Haji Abdul
Rehman Haji Mahomed, the court, in this case, explained the situations in which the tender becomes
conditional. According to the court, when a tender does not follow the terms of the contract which were
originally drafted and agreed upon by the parties, the tender becomes conditional. The reason for making
it a necessary is because of the fact that it is not reasonable to compel a party to accept the modified or
altered terms of contract which were not initially agreed upon by the parties. For example, if A offers to
pay B a certain sum of money if B agrees to sell certain goods to him. It is a conditional tender and
therefore it is invalid. Similarly in a case where A sent a single cheque for two items, only one of which was
due at the time, while the other was payable after some time. The cheque being one and indivisible could
be accepted as whole or not at all. It was held that the promisee was within his right in rejecting cheque.
The tender of performance must be made at a proper time and place

Section 38(2) of the Act mandates that the tender of performance should necessarily be made at a
time and place and under such circumstances so as to afford the person to whom the offer is made a
reasonable opportunity to ascertain that the offeror is able and bound to do whatever he has promised
under the terms of contract to do.
In P.L.S.A.R.S., Sabapathi Chetty (Deceased) Vs. Krishna Aiyar, the court held that generally, the parties to
the tender of performance fix the time and place. The tender of performance should mandatorily be made
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at the time and place stipulated under the contract. If the performance is made within the stipulated time
and place then the promisor is under no further obligations.
In Startup v. Macdonald, the defendant purchased ten tons of linseed oil to be delivered to the plaintiff
within the last fourteen days of the month of March. The plaintiff tendered the defendant at night on the
fourteenth day. The defendant however citing the lateness of the tender rejected the acceptance of the
tender. The court, in this case, held that the defendant should be held liable for the breach of the terms of
the contract and the contention made by him that the late acceptance of the tender was made could not be
entertained because, although the acceptance was made lately still the acceptance, was made before
midnight.
In Afovos shipping co. v. R Pagnan, an international contract was entered into by the plaintiff and
defendant. The term of the contract provided that the payment which formed the consideration of the
contract should reach on the 14th day of the month, however, the defendant repudiated the contract
before the 14th day of the month. The court held that the defendant should have delayed the repudiation
of the contract till 14th of the month.
Section 138(2) of the Act also provides that the tender must be made under such circumstances so as to
allow the other party to get reasonable opportunity to ascertain that the person who is making the tender
is capable and willing to fulfil all the conditions mentioned under the contract. Section 138(3) of the Act
provides that the goods which are subjected to tender must be same as mentioned under the description
of the tender otherwise the tender will be invalid.
In Dixon v. Clark the court held that the fact that payment was tendered and refused in no ways discharges
the debtor from his liability to make good of the payment of a debt.
In Vidya Vati vs Devi Das, the principle of old standing which was given in the above-mentioned case was
endorsed. In the debtor was under the obligation of paying back his loan in order to recover the vacant
possession of his premises and his tender was also rejected. However, the court held that debtor was not
released from the obligation to pay prior to his recovery of the possession.
By whom contracts must be performed

Section 40 of the Contract Act contains provisions regarding the performance of the contract. The Section
provides that if by the terms of the contract it appears that the intention of the parties to the contract was
such that any promise contained in it must essentially be performed by the promisor himself and no other
person on his behalf can perform his promise. In all the other contracts the terms of which do not indicate
any similar intention then in the absence of the promisor for the performance of the promise any other
competent person can perform the promise on his behalf. For example where A promises to B a certain
sum of money. The money could be paid to B by A personally or by any other authorized person
authorized by A on his behalf. If in the above case A dies without authorizing the person who can make the
payment on his behalf. Then his representative will be bound to make the payment on his behalf or they
can appoint any other person to do so.
Effect of accepting performance by the third party

Section 41 of the Contract Act contains provisions regarding the effect of acceptance of performance of
promise by the third party. The Section provides that where the promisee agrees to performance of a
promise which is made to him by the offeror, by the third party. He can not at a later point of time enforce
the contract against the promisor who initially promised to perform the promise.
If the terms of the contract indicate that from the very beginning of entering into the contract the parties
to the contract intended specific performance of the promise by the promisor himself. The effect of
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reflection of such intention would be that the promise should essentially be performed by the promisor
himself and the promise can not be enforced against his legal representative nor can his legal
representatives can enforce the promise. This type of situation can usually be seen in cases which involve
the personal skills of the promisor himself.
Generally, the rules laid down under Section 37 is that the promises of the deceased promisor will bind his
representatives. Therefore, the general principle of the law of contract is that unless there appears a
contrary intention in the terms of the contract. The representatives of a deceased promisor are bound by
the promise of the deceased and the promises of the deceased are enforceable against his representatives.
In the case of Kapur Chand Godha vs Mir Nawab Himayatalikhan Azamjah, the court declared that the
English and the Indian law differs substantially on the point of performance of the contract by the
representatives of the deceased promisor, in the British law system, the rule is that the third party or the
representatives of the deceased promisor could discharge his obligations only in the cases where it is
clearly evident from the promise that it was the intention of the parties while the formation of the promise
to bind their representatives in case any of the promisors dies, in Indian law, however, the position with
respect to the performance of the promise by the representatives of the deceased on contrary to the
English law and the same could be inferred from the words of Section 41 of the Indian Contract Act, which
leave no ray of doubt that in cases where the appellants expressly declare the intention of the performance
of their promise from the third party, they can not afterwards enforce the promise against the promisor.
Joint promises
Section 42 of the Indian Contract Act talks about the joint promises. When two or more promisors
agree to perform the terms of the promise together they are said to have made a joint promise and the
people who jointly agreed to perform the promise are called the joint promisors. The section provides that
the promisors are jointly liable to fulfil the promise until the terms of the contract provide anything to the
contrary. The Section also provides that in case of death of any one of the joint promisors his legal
representatives will be bound by the obligation under which the promisor was in his lifetime.
Performance of joint promises
According to English law, in a case where one of the several joint promisors dies. The surviving
joint promisor would be bound by the rights and liabilities of the deceased joint promisors until a single
joint promisor is alive the representatives of the promisor will not acquire any rights or liabilities. This
rule is sometimes considered to put the creditor in the loss as he has no security of solvency of the
creditors. This lacuna of the rule is filled by Section 42 of the Indian Contract Act.
Devolution of joint liabilities

Section 42 of the Indian Contract Act deals with the devolution of joint liabilities. According to the Section
in case, there are several joint promisors involved in a contract by making a promise then during the joint
lives of the promisors they must fulfil the promise jointly. In case of death of any of the joint promisor, the
representatives of the deceased promisor along with the surviving promisors should strive to fulfil the
promise. On the death of the last surviving promisor, the representatives of all the deceased promisors
would be jointly liable for fulfilment of the promise. However, this legal proposition is subject to any
private arrangement between the parties to the contract.
Devolution of joint liabilities

When two or more persons enter into a joint promise then unless a contrary intention appears by the
contract all promisors during their joint lives and after the death of any of them their representatives will
be bound jointly along with the surviving promisor or promisors. After the death of all the promisors, the
representatives of all the promisors will be bound by the promise jointly entered into by the deceased
promisors.
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This Section provides security to the promisee by assuring him that the promisors would be bound by the
promise made by them during their joint life and after the death of either of the promisor, their
representatives will be bound by the promise made by the deceased promisor.
In Gannmani Anasuya & Ors vs Parvatini Amarendra Chowdhary, the court held that Section 42 shifts the
burden of the fulfilment of the promise on the representatives of the deceased promisors. However, this
liability is subject to the express or implied prescription of such provision by the promisors. Such
prescription by the promisors could be inferred expressly or impliedly.
Joint and several liability

Subsection 1 of section 43 of the Indian Contract Act contains the important facets of the joint promises.
According to the Section when two or more persons jointly make a promise. The promisee has the
authority to compel any of such joint promisors in the absence of the contract expressly prohibiting the
promisee to do so.
Each promisor may compel contribution

Subsection 2 of Section 43 provides that each of the promisors in a joint promise may compel the other
promisors to contribute equally with him in the performance of the promise unless a contrary intention
appears from the terms of the contract.
Sharing of loss by default in contribution

Subsection 3 of Section 43 provides that in the case where any two or more joint promisors makes default
in making a contribution in the promise, then the burden of loss must be borne by the remaining
promisors and should make good the loss suffered by the other party by contributing in equal shares.
The explanation attached to the Section provides that nothing contained under Section 43 of the Indian
Contract Act shall prevent the surety, from recovering the money which he has paid on behalf of the
principal nor the Section empowers the principal from recovering anything from the surety on account of
the surety’s payment made on behalf of the principal.
Illustrations
Below are the different illustrations provided under Section 43 of the Indian Contract Act:
A, B and C jointly promised D to pay him 3000 rupees. D has the authority to compel either A, B or C to
make payment of 3000 rupees to him.
A, B and C jointly made a promise to D to pay him 3000 rupees. D compels C to make complete
payment of 3000 rupees. Initially when A, B and C made the promise jointly each of them was liable to pay
D 1000 rupees. However, in the event of the complete payment by C, C is entitled to recover from the other
joint promisors, the amount which he paid to D. here in this case, A is insolvent but he is capable of making
payment of half of what he was liable to pay to D therefore, A is obliged to pay 500 rupees to C whereas B
would be liable to pay C, the share which was stipulated under the promise which was 1000 rupees and
half of the sum which was defaulted by A that is half of 500 rupees. Therefore, B has to make payment of
rupees 1250 to C.
A, B, and C jointly promise to D to pay him 3000 rupees. A is compelled to pay the entire sum of
3000 to D. C is not in the position to pay anything to A in order to make him recover the sum which he
alone has to pay to D. in this case B has to pay the amount of sum which he was under the obligation to pay
to D along with that B also has to pay half of the sum which C has defaulted to pay A, that is why B has to
pay to A rupees 1000 and rupees 500 which equals to rupees 1500.
A, B, and C jointly promise to pay D rupees 3000. A and B are the sureties to C, in case of inability of
C to pay D which he owed to him, A and B made the payment on his behalf. Here A and B can recover the
amount paid by them on behalf of C.
Section 43 of the Indian Contract Act lays down the following three rules:
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 Rule 1: When a joint promise without any express agreement to the agreement, the promisee has
the discretion of specifically making only one of the joint promisors to pay the amount which was
jointly promised by the promisors to pay him. A, B, and C jointly promise to pay D rupees 3000. A
can compel either of the three promisors to pay him the amount stipulated in the promise.
 Rule 2: Where a specific joint promisor was compelled to pay the entire promised sum. Then he
may compel the other joint promisors to pay him the amount which they were obliged to pay to the
person to whom they had promised to pay the stipulated amount.
 Rule 3: Where one of the joint promisors due to his inability to make payment defaults in making a
contribution to pay the stipulated amount, the remaining joint promisors must bear the cost in
equal shares. For example, A, B and C promise D to pay him rupees 3000. In case C is unable to pay
anything to D then the amount owed by C must be borne in equal share by A and B. in case C is able
to pay half of what he is obliged to pay to D, the remaining amount must be paid by A and B in equal
shares to the person whom they promised to pay the amount.
Release of one joint promisor

Section 44 of the Contract Act grants the Right to release to the creditor under which he may release either
of the joint promisors from liability. The section provides that where the creditor has released either of the
joint promisors from the liability. The other joint promisors are not discharged from their liabilities and
they are still bound to fulfil the promise which they have made to the person. The release of the promisor
from his liability towards the promisee, however, does not result in his release from the liability which he
has towards the other joint promisors.
Section 44 of the Indian Contract Act marks a departure from the common law principle in which the
release of one of the promisors from liability tantamounts to the release of the other promisors from their
liability towards the promisee. Unless the promisee expressly provides for the preservation of rights
against them.
Conclusion
The term “offer” has been defined under Section 2(a) of the Indian Contract Act, 1872. An offer is an
expression of willingness made by a person to do or abstain from doing any act or omission with a view to
obtaining the assent of the person whom such an offer of act or abstinence is made.
The term performance in its literal sense means the performance of a task or action. In its legal
sense performance means the fulfilment or the completion of the obligation of the parties which they have
towards the other party by virtue of the contract entered into by them. For example, A and B enter into a
contract the terms of the contract states that A has to deliver a book to B on payment of the consideration
of five hundred rupees. Here, B pays to A rupees five hundred and as stipulated in the contract, A in return
delivers him the book. Section 37 of the Contract Act talks about performance.
3.2 Discharge of contract

Introduction
A contract is a legally binding agreement between two or more parties, where one agrees to do or refrain
from doing something in exchange for consideration. Discharge of contract means terminating the
contractual relationship between the two or more parties who entered into the contract previously. When
the rights, obligations and duties of the parties come to an end it is known as the discharge of contract.
Discharge of contract also ceases the legally binding power of the contract. Therefore, once a contract has
been discharged the parties are no more obligated to each other and the contract becomes void. The
various ways a contract can be discharged are stated in the article below.
Various modes of discharge of contract
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Discharge by performance
A contract can be discharged by performance and it is the most common form of discharge of contract. A
contract will be discharged if the duty stated in the contract has been fulfilled by the parties. If only one
person in a contract performs the promise which is mentioned then he alone is discharged. There are two
types of discharge of a contract by performance.
For example; A and B enter into a contract that A will pay B Rs 1,000 if B delivers a package to C’s house. B
does the agreed part specified in the contract and upon doing it A pays B the mentioned amount in the
contract. Thus, the contract is discharged by performance since both parties performed the specified task
in the contract.
Actual performance
In this case both the parties in a contract must perform their promises. Unless the Indian Contract Act,
1872 or any law at the time being prohibits the parties from performing their promises. In case either
party dies or is unable to fulfil the promise then the representatives of such party shall be liable to perform
the promise laid down in the contract.
Attempted performance
When the promisor offers to give his performance under the contract, but the promisee refuses to accept
the same, then it amounts to discharge by attempted performance.
Discharge by mutual agreement

In this case, the parties to a contract do not perform the promise stated in the contract if they arrive at a
mutual agreement. This requires substituting or altering the existing contract with a new one.
Illustration: ‘P’ owes a certain sum of money to ‘Q’ under a contract, but they arrive at a mutual agreement
that henceforth ‘R’ will pay back the money owed to ‘Q’. This results in a mutual discharge of the contract
between ‘P’ and ‘Q’ and a new contract is formed between ‘R’ and ‘Q’.
Novation
It occurs when a contract is substituted for the old contract between the same or new parties. In order to
enforce novation, the following conditions must be followed. It is laid down in Section 62 of the Indian
Contract Act, 1872.
There must be a valid reason for substituting the contract.
 Consent of all the parties is required.
 The old contract must be substituted before the expiry or breach of the contract.
In the case of Manohur Koyal v. Thakur Das(1888), the defendant failed to pay the agreed upon sum to
the plaintiff on the due date stated in the contract. However, the defendant promised to pay Rs. 400 to the
plaintiff and to execute a fresh kistibundi bond. The plaintiff agreed to this but the defendant failed to pay
that amount consequently, the plaintiff sued the defendant. The Calcutta High Court stated that since the
new bond was created after the breach of the original contract, therefore the contract cannot be
discharged by novation but by breach of contract.
Remission
Remission occurs when parties to a contract accept a lesser amount or lesser degree of performance than
what was initially agreed upon in the contract. Section 63 of the Act states that a party may;
 Remit the performance stated wholly or in part.
 Extend the time for performance.
 Accept any other kind of performance apart from the one mentioned in the contract.
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Illustration: Paul owes 10 lakh rupees to Peter but due to some unforeseen circumstances Paul can only
repay 6 lakh rupees to Peter within the stipulated time period. But if Peter agrees to accept the amount
which could be paid by Paul and settle the debt then, Peter’s act of remission discharges the contract.
Alteration
It means changing one or more contract terms, thereby discharging the old contract and forming a new
one. Alterations to a contract must take place with the consent of all the parties to the contract. In the case,
United India Insurance Co. Ltd v. M.K.J. Corporation(1996), the Supreme Court held that utmost good faith
must be observed by the contracting parties and the duty of good faith is of a continuing nature even after
the completion of the agreement no material alterations can be made to the contract without the mutual
consent of the parties.
Rescission
Rescission takes place when the parties in the contract agree to dissolve the contract. In this case, the old
contract stands discharged and no new contract is formed.
Waiver
The term waiver means the abandonment of a right. A party to a contract may have their rights specifically
stated under the contract which also helps to release the other party from the contract and the contract is
discharged.
Merger
When an existing inferior right of a party, in respect of a subject matter, merges into a newly acquired
superior right of the same person, in respect of the same subject matter, then the previous contract
conferring the inferior right stands discharged by the way of merger.
Discharge by lapse of time

A contract will be discharged if the performance is not completed within the given time period. This might
also result in a breach of contract. In that case, a person might file a suit under the court of law stating that
his rights have been infringed and also claiming to enforce his rights. The individual whose rights have
been breached can file a suit under the Limitation Act, 1963.
For example; A had to deliver fresh fruits to B’s storehouse within a period of two days but due to A’s
irresponsibility, he delivered the fruits after two weeks. Therefore, in this case, the contract will be
discharged as the required performance was not completed within the specified time.
Discharge by operation of law

This mode of discharge of contract does not allow the fulfilment of the promise laid down in the contract
by the provisions of law. Situations such as death, insolvency, merger, etc. do not enable the fulfilment of
the promise, hence it results in the discharge of the contract.
Discharge by supervening impossibility

Discharge of a contract by supervening impossibility is a contract that has become impossible or illegal to
perform. In these cases the contract becomes void. It is also known as the doctrine of frustration.
Frustration occurs when it is established that due to subsequent changes in circumstances, the contract
has become impossible to perform or it has been deprived of its commercial purpose. The ways in which it
occurs are mentioned below;
On the destruction of subject matter, a contract will be discharged and no party will be held liable.
If the performance of the promise mentioned in the contract becomes unlawful then the contract will be
void.
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A contract tends to be discharged on accounts of death or personal incapacity.

When the circumstances surrounding a contract change then it will be discharged.
Discharge by breach
When a contracting party refuses or fails to perform or disables himself from performing or makes the
performance of the promise stated in the contract impossible by his conduct, then the contract is said to be
discharged by breach. A party to a contract may discharge it by actual breach or anticipatory breach.
When a default is committed by a party on the due date of performance it amounts to an actual breach and
when the party commits a default before the due date of performance it amounts to an anticipatory
breach.
Suit for specific performance

In this case, where the damage or loss suffered cannot be measured in terms of money the court, in such
cases directs the defaulting party to perform the contract specifically where the ordinary remedy by a
claim for damages is not adequate compensation. It is a discretionary remedy. The instances where the
court orders discretionary remedy:
 Where the act in itself is such that monetary consolation for its non-performance is not adequate.
 Where it is not probable that monetary compensation will be available.
 Where no standard is available to ascertain the value of the actual harm caused by non-
performance.
Suit for quantum meruit

In the legal sense, the term quantum meruit means ‘payment in proportion to the work done’. In other
words, quantum meruit means that a person can recover compensation in proportion to the work done or
service rendered by him. It is known as a quasi-contractual remedy. The claim on quantum meruit arises
in the following cases:
• When a party performs a part of the contract, but the other party breaks it in between, then the
injured party can claim compensation for the work done or the service rendered.
• When something has been done non-gratuitously.
• Where some work has been done and accepted under a contract that is subsequently discovered to
be void, then in such case, the person who has performed the part of the contract is entitled to
recover the payment for the work done.
• Exceptional cases when a contract is not discharged
The doctrine of frustration or supervening impossibility does not apply to the following cases mentioned
below.
• When in any case a situation arises that makes the performance of the certain promise mentioned
in the contract very difficult to be performed, then in that situation, it makes the promise
challenging to be fulfilled but the contract is not discharged.
• Commercial hardships make the contract unprofitable but it does not discharge a contract.
• Strikes, lock-outs, civil disturbances and riots do not discharge the contract unless there is a clause
in the contract specifying that in such event the contract will be terminated.
• A contract is not discharged due to the self-induced incapacity of the parties to a contract.
• In a contract where performance is relied upon by a third party, it will not be discharged due to the
failure or default of the third party.
• Difference between discharge, rescission and termination of a contract
• Discharge of contract takes place when the parties to a contract have fulfilled and performed their
obligations as stipulated and negotiated in the contract. It is an ideal course of action as the parties
to the contract have attained the obligations and performed the agreed upon duties.
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When a contract is formed under fraudulent circumstances, the party who was defrauded will not be
expected to fulfill the obligations stated in the contract. The fraud may involve overt, intentional fraud, a
misrepresentation of facts or circumstances, or a material omission. Despite the type of fraud, the party
may end the contract without any consequence. This kind of termination of a contract is known as
rescission.
A contract can be terminated by discharge or rescission however, certain circumstances outlined in the
contract may enable the parties to a contract to terminate the said contract even if all the duties and
obligations stated in the contract have not been fulfilled. Further, sometimes a contract can be terminated
due to a change in circumstances thus making it impossible to fulfil.
Conclusion
Thus we can understand that discharge of contract refers to the contractual relationship coming to
an end when the obligations and duties have been fulfilled by the parties to a contract. In this case, the
parties are free from the obligations of the contract. As mentioned earlier there are various modes of
discharging a contract but the best way to do it is by performing the promise within the stipulated time
stated in the contract as the other modes are quite unpleasant ways to release the parties from duties
because it leads to damages.
3.3 Breach of Contract

Introduction
A breach of contract is any violation of a contractual contract’s agreed-upon terms and conditions.
A breach might range from a late payment to a more serious offence like failing to deliver a promised item.
A contract is legally binding and will hold up in court. It is essential to be able to establish that a contract
breach occurred in order to effectively pursue a breach of contract claim. When one party to a legally
binding agreement fails to deliver according to the terms of the agreement, it is called a breach of contract.
A contract violation can occur in both written and oral contracts. In the event of a contract violation, the
parties may address the matter among themselves or in a court of law. A minor or material violation, as
well as an actual or anticipatory breach, are examples of contract breaches. The article aims to discuss
types of contracts and additional information related to the same.
Understanding the concept of breach of contract

Anyone who enters into a legal arrangement runs the risk of a breach of contract. If you deal with a
lot of agreements, from employment contracts to vendor and customer agreements, you are bound to
encounter one that doesn’t meet all of the parties’ expectations. Fortunately, because contracts are legally
binding agreements, there may be recourse if one party fails to satisfy their contractual commitments. A
breach of contract occurs when this happens, and recognizing that a breach has happened is the first step
towards reclaiming your contractual rights.
When one party violates the conditions of a contract between two or more parties, it is called a breach of
contract. This encompasses situations where a contractual obligation is not met on time, such as when you
are late with a rent payment, or when it is not met at all, such as when a renter vacates their flat owing six
months’ back rent. The procedure for dealing with a contract violation is sometimes spelled out in the
original contract. For instance, a contract could include that if a payment is late, the offender must pay a Rs
5000 charge in addition to the missed payment. If the penalties for a specific breach are not specified in
the contract, the parties may resolve the matter among themselves, which may result in a new contract, or
by means of adjudication, or another sort of settlement.
It is also possible that a violation of a contract is in the best interests of society as a whole, even if it doesn’t
benefit the parties to the contract. If the entire net cost of violating a contract to all parties is less than the
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total net cost of sustaining the deal, then breaching the contract can be economically efficient, even if one
(or more) parties to the contract are hurt and left worse off economically.
Ingredients of breach of a contract

The elements that must be present in order for a party to a contract to claim damages over a breach of
contract are:
The fact that a contract exists: In order to show the court that the contract was valid, it must be
shown that there was an offer, acceptance of the offer, and consideration involved in accepting the offer.
Plaintiff’s performance or some reason for non-performance: Take, for instance, even if the contract’s
provisions were not carried out exactly as requested, the defendant obtained services that were basically
as requested. The defendant is obligated to pay at this time. For example, if a person painted a room but
the receiver didn’t like the color clarity, he or she will be obligated to pay, even if not the whole sum, at
least something. If the color was a key term in the contract, he or she may refuse to sign it.
The defendant’s failure to execute the contract: The defendant cannot claim that the plaintiff is not
entitled to compensation because of his or her own fault. The plaintiff will not be held liable if he or she
was unable to fulfill specific tasks because the defendant made them impossible to complete. He or she has
the right to make a claim.
The plaintiff’s damages as a result of the defendant’s failure to perform as per their contractual
terms: Each party’s pledge should be included in the contract they have entered into. The quality of the
contract’s preparation will determine whether or not there is a breach of contract. Therefore, before
signing into a contract, having an attorney analyse it is quite beneficial.
Reasons behind the breach of a contract

It is the court that will determine if the violation of a contract had a legal justification or not. The
defence, for example, may argue that the contract was fraudulent because the plaintiff misrepresented or
suppressed key facts.
The defendant might also claim that the contract was signed under duress, claiming that the
plaintiff used threats or physical force to compel it to sign the agreement.
In other circumstances, both the plaintiff and the respondent may have committed mistakes that led to the
breach.
What are the types of breaches of contract

A contract violation might be classified as minor or material. When you don’t obtain an item or
service before the due date, it is referred to as a minor breach. One may, for example, bring a suit to your
tailor for custom fitting. The tailor guarantees (in an oral contract) that the altered garment would be
delivered in time for your essential presentation, but it arrives a day later.
When you obtain something that differs from what was specified in the agreement, it is referred to as a
material breach. Take for example your company hires a vendor to supply 200 copies of a bound
handbook to a convention in the car sector. However, when the boxes arrive at the conference venue, they
are filled with gardening brochures.
Furthermore, a breach of contract can be classified as either an actual breach (when one party refuses to
completely implement the contract’s obligations) or an anticipatory breach (when one party declares in
advance that they will not be delivering on the contract’s terms).
Material breach of contract

In essence, a material breach takes place when “all the circumstances are wholly or partly remediable and
are, or are likely to become, serious, in the wide sense of having a serious effect on the benefit which the
aggrieved party would otherwise derive from the performance of the contract in accordance with its
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terms.” ‘The scale of the breach’ is strongly tied to the word ‘material.’ The scale of a breach in a business
contract might be presumed to relate to the commercial repercussions of the breach if it is not corrected.
Justice Colman had analysed the terminology ‘material breach’ while referring to “a serious violation of
any of the guilty party’s responsibilities,” enabling termination of the contract if the remedy of such breach
had not been initiated within seven days, in National Power plc v. United Gas Company Ltd. (1998). The
judge ruled that the fact that a material breach could be remedied was the factor responsible for
distinguishing it from a repudiatory breach and that a clause restricting the innocent party’s common law
rights in relation to a repudiatory breach made no commercial sense, so ‘material breach’ must refer to a
non-repudiatory breach.
Application of a material breach of contract

When one party obtains considerably less advantage or a significantly different result than what was
stipulated in the contract, it is considered a serious breach. Failure to execute the contract’s
responsibilities or a failure to perform are examples of material breaches. A good application of the breach
is when someone is looking to buy a property. A substantial breach of contract occurs when a buyer
completes the necessary documentation and pays the seller before closing, but the seller suddenly decides
not to sell or refuses to hand over the deed and keys to the house.
Difference between breach and material breach of contract

A contract violation might be classified into ‘material’ or ‘non-material’ breaches. The less serious of the
two is a non-material violation.
A non-material violation is one that involves a minor or peripheral contract element. A non-material
violation might arise, for example, if a homeowner and an electrician agreed that the electrician should
wire the residence with yellow wire but the electrician instead used blue wire, the same results in a non-
material violation since it has nothing to do with the contract’s core terms. Although the wire’s insulation
has a different color, this is only a tiny difference that has no bearing on the wire’s operation. Furthermore,
because the cables are buried within the home’s walls, the color difference isn’t even evident.
A material breach of contract is a more serious sort of contract violation. A major breach reduces the
contract’s worth and is deemed a failure to execute a contract’s fundamental part. Take, for example, there
was an agreement between a house owner and an electrician to install copper wire since it is more reliable
and durable. However, in order to save money on materials, the contractor opts for aluminum wire, which
is more prone to failure and requires extra attention if future electrical work is carried out. Thus the same
results in a material breach of the contract since the deficiency in the performance of the same affects the
electrical system’s performance, longevity, and safety, or put simply, the ‘heart of the matter.’
Legal implications of a material breach of contract

When a material breach of contract occurs, the non-breaching party may be excused from completing their
contractual obligations, and may even be forced to stop doing so as soon as a breach is detected. They may
also file a lawsuit against the other party to collect any damages.
Termination of a material breach of contract

When there is a genuine basis to terminate the contract before the performance has been finished, it is
regarded as a legal termination of a contract. The most fundamental way to end a contract is to terminate
it. A contract can be legitimately cancelled by providing justifiable grounds, under the Indian Contract Act,
1872, for instance, by means of frustration, a violation of contract, or a prior agreement. If termination is
deemed as unjust, it might be considered a breach of contract in and of itself.
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Minor breach of contract

A minor breach of contract, also known as a partial breach of contract or an immaterial breach of contract,
occurs when the contract’s deliverable is eventually received by the other party, but the party in breach
fails to fulfil some element of their commitment.
The UK Court of Appeal had decided in Rice (t/a the Garden Guardian) v. Great Yarmouth Borough Council
(2000), that a clause stating that the contract could be terminated “if the contractor commits a breach of
any of its obligations under the contract” should not be taken literally. It was deemed contrary to business
common sense to allow any breach, no matter how minor, to be grounds for termination.
Material vis a vis minor breach of contract

A minor breach of contract happens when one of the contracting parties fulfils the majority of the
contract’s conditions. The party may breach a minor contract provision that has no substantial impact on
the other contract conditions.
A material breach of contract, on the other hand, is deemed a serious violation of the contract’s provisions.
A minimal violation of contract normally does not prohibit the deal from being completed in a timely and
satisfactory way. A major breach, on the other hand, makes achieving a satisfying result difficult or
impossible.
Anything less than complete performance is considered a significant breach of contract in some countries.
Any breach in such jurisdictions releases the non-breaching party from the contract. In other words, the
contract’s non-breaching party has no further performance obligations and may claim for damages.
However, some states’ laws require a judge to decide whether a minimal breach of contract has occurred
and if any remedies are necessary. Even if there was a slight breach of contract, damages may or may not
be given if the non-breaching party obtained the same result, as was guaranteed by the contract. Also, the
non-breaching party will be compelled to fulfil the contract’s requirements.
Anticipatory breach of contract

When one party thinks that the other party is not going to keep their half of the bargain, the same is
termed as an anticipatory breach. This is usually demonstrated by a firm refusal to fulfil a contract, doing
an action that makes it impossible to finish the contract, or when the contract’s subject matter becomes
unavailable. In certain cases, the ‘non-breaching’ party has the option to terminate the contract. An
anticipatory breach of contract is an activity that indicates a party’s intention to break its contractual
obligations to another party. The counterparty’s responsibility to execute its obligations is terminated in
the event of an anticipatory breach. The counterparty can start legal action after demonstrating the other
party’s intent to violate the contract. Put simply, an anticipatory breach, also known as repudiation, occurs
when one party fails to satisfy its contractual commitments to another. If parties seeking compensation in
court assert an anticipatory breach, they must make every effort to limit their own damages. To qualify as
an anticipatory breach, the purpose to violate the contract must be a complete unwillingness to perform
the obligations. It is worth noting that by claiming an anticipatory breach, the counterparty can take legal
action right away rather than waiting for the contract’s provisions to be violated.
Take for example the case of a real estate developer who hires an architecture company to design
blueprints for a new building by a certain date. It is not sufficient to establish an anticipatory breach if the
developer demands regular updates on the project and is dissatisfied with the current outcomes. While
working on the project, the architects may be behind schedule. Even in this situation, the architects may be
able to make their deadline provided remedial measures are adopted. An anticipatory breach would occur
if the architects took activities that made meeting the deadline difficult. For instance, the architects may
put the first project on hold and devote all of their energies on a new project with a different developer.
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Explicit and implicit repudiation

Explicit repudiation occurs when a party expressly breaches a contract by openly refusing or being
hesitant to carry out his or her portion of the deal before the contract’s real date.
Implicit repudiation occurs when a party does not expressly refuse to carry out his or her commitment.
Rather, his or her failure to execute the promises before the contract’s due date is implied by his or her
words or behavior or the current situation.
Need for compensation consideration in anticipatory breaches

If parties seek compensation before a court asserts an anticipatory breach, they must make every effort to
limit their own damages. This might include suspending payments to the party responsible for the breach
and promptly investigating measures to mitigate the incident’s impact. It might also involve enlisting the
help of a third party to carry out the tasks stipulated in the original contract.
The requirements for an anticipatory breach

To qualify as an anticipatory breach, the purpose to breach the contract must be a complete unwillingness
to perform the obligations. The anticipated breach must only be founded on the presumption that the
other party would fail to fulfill his or her duties.
How to determine an anticipatory breach

The two key elements which are used to assess if a case of anticipatory breach of contract exists are
provided hereunder:
When a party has made it apparent that they will not perform or fulfil a part of their responsibility,
and that performance is at the heart of the contract, renunciation or refusal to execute the contract cannot
be subject to any circumstances or conditions. The aversion would then be absolute.
The perspective of a sensible and prudent person would be considered in assessing the position of
the aggrieved party and also the decisions about the refusal to be clear and absolute when determining the
magnitude of suitable refusal of performance of the responsibilities pursuant to the contract.
Judiciary’s take on anticipatory breach of contract

The Supreme Court of India while deciding the case of Food Corporation v. J. P Kesharwani (1994),
had observed that if one party made unilateral modifications without informing the other and
subsequently cancelled the contract, this amounted to a violation (repudiation). It can also be plainly
stated that any sort of contract can be judged to be violated if one of the parties is unwilling or unable to
fulfil their contractual obligations, regardless of when the performance is due to take place. A repudiation
to enter into a contract is defined as an unqualified rejection or refusal to enter into a contract.
The respondent in the case of Aslhing v. S. John (1983), was a party to an ongoing contract with the
government to enlarge the road, and he addressed a letter to the executive engineer informing him that
the contract had been cancelled. The appellant claimed that the letter’s substance had no bearing on the
contract’s cancellation, the same was maintained as well. However, it was clear from the letter’s
specifications that the contractor unilaterally terminated the contract and notified the appropriate
authorities, as well as resigning from the PWD Manipur contractor list. Thus, following this message, the
contract was repudiated and recognition by the authority of the message was insufficient for the
termination of the contract, although the breach may give rise to a suit for damages.
Actual breach of contract

An actual breach of contract refers to a breach that has actually happened, indicating that the breaching
party has either refused to fulfil their responsibilities by the due date or has executed their duties badly, or
has left them incomplete. When a breach occurs, the opposite party has numerous options for resolving
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the situation. Take for example on July 21, 2018, Mr. X signs a deal with Mr. Y, pledging to deliver 50 bags
of jute to him. However, he fails to provide the same on the designated day. This is a clear case of an actual
breach of contract.
Types of an actual breach of contract

Actual breach of contract due to late performance
This occurs when one of the parties fails to meet contractual duties and obligations within the specified
time period for conformance. In such cases, the other party is not obligated to fulfil their obligations and
can hold the defaulting party liable for the breach of contract. The defaulting party, on the other hand, may
show a willingness to continue with the contract’s performance. In such a case, the decision to enable the
defaulting party to complete the contract would be based on whether the contract’s crux was time or the
duration. If time is a critical factor, failing to meet contractual duties by the deadline will be considered a
breach of contract; however, if time is just a minor factor, or if time is not an important requirement, the
aggrieved party may accept performance and seek damages for late delivery.
Actual breach of contract during the course of performance

It refers to a party’s failure or reluctance to carry out their contractual duties during the course of their
performance. It can also happen if a party fulfils its responsibilities but refuses or fails to comply with the
contract’s key terms and conditions.
Actual breach of contract and its supported case laws

In Bishamber Nath Agarwal v. Kishan Chand (1989), the Allahabad High Court had opined that
when an agreement specifies that a specific activities relating to a contract must be completed within a
certain period or manner, it must be performed in that manner or period only, and the parties do not have
the ‘right’ to perform it in their own way or time.
In the case of Haryana Telecom Ltd. v. the Union of India (2006), the Delhi High Court had observed that
even if one of the contracts’ provisions stated that exchanges made after the delivery period had expired,
the same did not disenfranchise the party’s right to liquidated damages and that an examination of all the
clauses revealed that time was the essence of the contract.
Anticipatory vis a vis actual breach of contract

When one party fails to execute his or her portion of the deal by the due date or performs incompletely,
this is referred to as an actual breach. When one party declares his or her intention to not execute his or
her share of the deal ahead of the due date for performance, an anticipatory breach takes place.
The entire contract is rejected or cancelled in the event of an anticipatory breach of contract. The breach
might be of a condition, guarantee, or an indefinite term in an actual breach of contract.
In an anticipatory breach of contract, the aggrieved party can rescind or cancel the contract and file a
lawsuit for damages without having to wait until the contract’s due date, or they can wait until the
contract’s due date and then file a lawsuit against the defaulting party for contract breach. In the event of
an actual breach of contract, the injured party has no choice but to file a lawsuit.
Remedies for a breach of contract

Under Section 73 of the Indian Contract Act, 1872, when a contract is broken, the party who is aggrieved
by the breach is entitled to receive compensation for damages, from the party who has broken the
contract. The damages must have naturally arisen in the normal course of things from the breach or which
the parties knew when they made the contract to be likely to result from the breach. The damage is only
payable if the loss was caused by the breach, according to Section 73 of the Indian Contract Act, 1872.
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There are no damages if there is no loss as a result of the breach. No loss from the breach automatically
leads to any damages. Compensation is not paid for any remote or indirect loss or damage sustained
because of the breach.
The Section also adds that ‘in assessing the damage or loss resulting from the breach of contract, the
inconvenience caused by the non-performance of the contract must also be taken into consideration’. The
difference between the market price and the contract price at the time of the breach is the measure of
damages for a breach by the buyer at the time of the breach.
The repercussions of a contract violation are determined by the laws of the state to which the promisor
belongs. If you reside in a state where a minor violation of contract does not result in the agreement being
voided, your choices and remedies for breach of contract may be restricted. However, if the other party
breaches the agreement materially, you may have the legal right to stop performing your responsibilities
and claim for damages. It is essential to contact an experienced contract attorney near you before filing a
breach of contract lawsuit. The aggrieved party necessarily doesn’t want to be held liable for failing to
execute their responsibilities due to a minor contract violation that does not result in the contract
becoming invalid.
Potential legal remedies for breach of contract cases vary depending on different states’ laws and the facts
of one’s case, but they may include, but are not limited to:
 Rescission (releases the non-breaching party from performance obligations).
 A court orders the breaching party to perform the terms of the agreement (specific performance).
 Compensatory damages (monetary damages for losses caused by the breach of contract).
 Punitive damages (typically only awarded in cases involving fraud).
 Restitution (returning the injured party to the position it was in before signing the contract).
 Conclusion
In an ideal world, business contracts would be signed, both parties would earn profit and be satisfied with
the outcome, and there would be no disagreements. However, in the actual world of business, delays,
financial troubles, and other unforeseen occurrences might obstruct or even block the execution of a
written contract, leading to one party suing the other. Therefore, the concept of breach of contract holds
relevance in the everyday world.
3.4 Types of Damages & Remedies for Breach

FOUR TYPES OF DAMAGES AVAILABLE IN A BREACH OF CONTRACT
Usually, when two parties enter into a business contract, both intend to uphold their end of the deal.
However, sometimes circumstances arise that make the terms of the contract less appealing or even
impossible to uphold. If someone breaches their contract with your business, it can leave you in a lurch,
financially, practically, or both.
Sometimes, it is possible to take your breach of contract case to court and receive compensation for your
losses. Today, we’re looking into four types of damages you may be able to receive in a breach of contract
case.
1. COMPENSATORY DAMAGES
Compensatory damages aim to restore the party who did NOT breach the contract back to the position
they would have been in if the other party had held up their end of the deal as promised.
2. PUNITIVE DAMAGES
Punitive damages go beyond compensatory damages. The breaching party must not only restore the non-
breaching party, but also give them more money beyond that. This is intended to punish the breaching
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party for the damage they have inflicted. It is rare for punitive damages to be awarded in business contract
cases.
3. NOMINAL DAMAGES
Nominal damages are symbolic and usually not a lot of money. They are awarded in cases where perhaps
the non-breaching party was not severely, if at all, impacted by the breach but still want to hold the other
party accountable.
4. LIQUIDATED DAMAGES
Sometimes a contract lists certain, specific damages that can be collected in case of a breach. These are
referred to as liquidated damages. Usually the only liquidated damages that qualify to be collected in a
business contract case are those that are reasonably calculated estimates of what losses would have (and
did) occur as a result of a breach.
At Pence Law Firm, P.C. we understand the importance of business contracts and how much stress it can
cause when you start incurring losses because someone you trusted didn’t do what they said they were
going to do. That’s why we’re passionate about handling business litigation matters, including breach of
contract. We find peaceful resolution whenever possible and fight for you in court when necessary. If you
are a business owner in or around Jenks, Oklahoma and would like to learn more about our services, we
encourage you to contact us today. We look forward to hearing from you soon!
Remedies for Breach

Remedies for Breach of Contract
What is a contract?
Section 2(h) of the Indian Contract Act, 1872 simply defines a contract as:
An agreement which is enforceable by law.

In other words, a contract is an agreement, the object of which is to create an obligation. So, when an
agreement enables a person to compel another to do something or abstain from doing something, it is
called a contract.
What is a breach of contract?

A contract can be said to be breached or broken when either of the parties fails or refuses to perform his
obligations, or his promise under the contract. Therefore, it can be said that when a binding agreement is
not honored by one or more parties by non-performance of his promise, the agreement can be said to be
breached.
Introduction
Parties to a contract are legally expected to perform their respective obligations, so naturally, the law
frowns upon a breach by either party. Therefore, as soon as one party commits a breach of the contract,
the law grants to the other party three remedies. He may seek to obtain:
 Damages for the loss sustained, or
 A decree for specific performance, or
 An injunction.
The laws relating to damages are governed by the Contract Act, whereas the laws relating to injunctions
and specific performance are governed by the Specific Relief Act, 1963.
Damages for the loss sustained

Section 73 of the Indian Contract Act 1872 lays down four important rules governing the measure of
damages.
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First Rule: Section 73(1)

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 damage caused to him:
Which naturally arose in the usual course of things from such breach, or
Which the parties knew, when they made the contract, to be likely to result from the breach of the
contract.
An uncommonly known fact is that Section 73 is based on a case law, i.e. Hadley v. Baxendale (1854) 9 Ex.
354
The well-known rule in this case was stated by the Court as follows:
“Where two parties have made a contract which one of them has broken, the damages which the other
party ought to receive in respect of such breach of contract should be either such as may reasonably and
fairly be considered as arising naturally, i.e. according to usual course of things, from such breach of
contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at
the time they made the contract as the probable result of the breach of it.”
Second Rule: Section 73(3)

The second rule of measuring damages deals with remoteness of damage. It states,
“Such compensation is not to be given for any remote and indirect loss or damage sustained by the reason
of the breach.”
Damages are measured by the loss actually suffered by the party. The loss must naturally arise in
the usual course of things from the breach; or it must be such as the parties knew, when they made the
contract, to be likely to result from the breach of it. Therefore, it follows that a party is not liable for a loss
too remote, i.e. which is not the natural or probable consequence of the breach of the contract.
In Madras Railway Company v. Govinda (1898) 21 Mad. 172, the Plaintiff, who was a tailor, delivered a
sewing machine and some clothes to the defendant railway company, to be sent to a place where he
expected to carry on his business in an upcoming festival. Due to mistakes made by the company’s
employees, the goods were delayed and were not delivered until some days after the festival was over. The
plaintiff had not given any notice to the railway company that the goods were required to be delivered
within a fixed time for any special purpose. On a suit by the plaintiff to recover a sum of his estimated
profits, the Court held that the damages claimed were too remote.
Third rule: Explanation to Section 73

The third rule is to be found in the Explanation to Section 73, which provides as follows:
“In estimating the loss or damage arising from a breach or contract, the means which existed of
remedying the inconvenience caused by the non-performance of the contract must be taken into account.”
Therefore, if a railway company, having contracted with a passenger to take him to a particular
station fails to do so, the passenger is entitled to damages for the inconvenience of having to walk and any
reasonable expense which he incurs, like staying at a motel, and he may get some other conveyance, and
charge the railways with that expense if it is a reasonable thing to do so in that particular circumstance.
What is not reasonable is for him to charter a special train to save himself for waiting and charge the
railway company with the expenses.
Fourth Rule: Section 73

It is to be noted finally, that damages payable for the breach of a quasi-contract are exactly the same as
those payable for any other contract. To rephrase, all the above rules apply to quasi-contracts in the same
manner.
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It should be noted that when no loss arises from the breach of contract, only nominal damages are
awarded. Damages are given by way of restitution and compensation only, and not by way of punishment.
The aggrieved party can therefore recover the actual loss caused to him as compensation.
A decree for Specific Performance

According to Section 10 of the Specific Relief Act, 1963, there are seven cases when specific performance
of a contract may be allowed by the Court. They are:
When there is no standard for ascertaining actual damage

When it is impossible to quantify the actual damage caused by the non-performance of the act agreed to be
done, the Court may, in its discretion, grant a decree of Specific Performance of that act.
Duke of Somerset v. Cookson, 1935, 3 P Wins. 390

Art, paintings, old furniture, antiques, etc. have a special value to the contracting party, although such
articles may not have much monetary value. For example, an idol which has been passed down from
generation to generation of a family has immense value to that family, even if it means nothing to someone
else. No amount of damages can compensate for the loss to the members of the family, even if the Court
makes an attempt to assess the damages payable instead of the idol. Therefore, an order will be passed for
specific delivery of that idol, not for damages.
In Vijaya Minerals v. Bikash AIR 1996 Cal. 67, the Hon’ble Calcutta High Court has observed that since
manganese and iron ore are not ordinary items of commerce, if a contract for sale of iron and manganese
ore from a mine has been made, specific performance of such an act would be allowed.
When monetary compensation would not afford adequate relief

When the act agreed to be done is such that compensation offered in money for its non-performance
would not afford adequate relief. However, until the contrary is proved, it is to be presumed that:
 The breach of a contract to transfer immovable property cannot be adequately compensated by
payment of money.
 The breach of a contract to transfer movable property can be so compensated, except in the
following cases:
 Where the property is not an ordinary article of commerce or is of special value or interest to the
plaintiff, or consists of goods which are not easily obtainable in the market;
 Where the property is held by the defendant as the agent or trustee of the plaintiff.
Usually, the Courts are entitled to presume that in case of breach of contract to transfer of immovable
property, mere compensation is not adequate relief, whereas specific performance is adequate relief,
whereas in the case of movable property, compensation is the ordinary relief and specific performance is
exceptional. However, it must be noted that these presumptions are rebuttable.
In Bank of India v. Chinoy, AIR 1949 PC 90, it was held that if shares are freely available in the market, then
specific performance would not be granted. If shares of a particular company, for instance a private
company are not readily available in the market, specific performance would be granted.
Suits for enforcement of a contract to execute a mortgage

In a suit for the enforcement of a contract to execute a mortgage or furnish any other security for the
repayment of any loan which the borrower is not willing to pay at once, specific performance may be
allowed. However, where only part of the loan has been advanced by the lender, he must be willing to
advance the full amount of the loan.
 Contracts for the purchase of any debentures of a company.
 Suits for the execution of a formal deed of partnership.
 Suits for the purchase of partner’s share.
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Suits for the enforcement of a building construction contract or any other work on land, provided the
following 3 conditions are fulfilled:
 The building or other work has been described in the contract in a reasonably precise manner, so
as to enable to Court to decide the exact nature of building or work;
 The plaintiff has substantial interest in the performance of the contract, and the interest is such that
financial compensation for non-performance of the contract would not be adequate relief; and
 After the contract, the defendant has obtained possession of the whole or any part of the land in
question.
It is important to remember that specific performance is an equitable remedy, and is therefore left to
the discretion of the Court, rather than to the right of a person by law.
An injunction
Under Section 36 of Specific Relief Act 1963, an injunction is defined as an order of a competent court,
which:
 Forbids the commission of a threatened wrong,
 Forbids the continuation of a wrong already begun, or
 Commands the restoration of status quo (the former course of things).
 Clauses i and ii deal with preventive relief, whereas clause iii deals with an injunction called
mandatory injunction, which aims at rectifying, rather than preventing the defendant’s misconduct.
Under Sections 36 & 37 of the Specific Relief Act 1963, there are two types of injunctions – temporary and
perpetual, whereas Section 39 governs mandatory injunctions.
Temporary or interim injunctions are governed by Order 39 of Civil Procedure Code 1908 and are those
injunctions that remain in force until a specified period of time, e.g. 15 days, or till the date of the next
hearing. Such injunctions can be granted at any stage of the suit.
Permanent or perpetual injunctions, as under Sections 38 to 42 of the Specific Relief Act, 1963 are
contained in the decree passed by the Court after fully hearing the merits of the case. Such an injunction
permanently prohibits the defendant from committing an act which would be contrary to the plaintiff’s
rights.
Q: When are perpetual injunctions granted?

A: Under Section 38 of the Specific Relief Act 1963, whenever the defendant invades, or even threatens to
invade the plaintiff’s right to enjoyment of property or right to property itself, the Court may grant to the
plaintiff a perpetual or permanent injunction in the four cases as follows:
 Where there is no standard for quantifying the actual damages caused, or likely to be caused, to the
plaintiff, by the invasion of his rights;
 Where invasion of the plaintiff’s rights is such that any compensation in money would be
inadequate relief;
 Where the defendant is a trustee of the property for the plaintiff;
 Where the injunction is necessary to prevent multiplicity of judicial proceedings.
Mandatory injunctions are granted in cases where in order to prevent the non-performance of an
obligation, it is necessary to compel the performance of certain acts which the Courts are capable of
enforcing. Thus, the Court may at its discretion grant an injunction to prevent such non-performance and
also to compel performance of the required acts. This injunction is applicable to the breach of any
obligation. It may be permanent or temporary, although temporary-mandatory injunctions are rare.
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Damages instead of, or in addition to injunction:

 Section 40 of the Specific Relief Act 1963 states that a plaintiff may claim damages either in
addition to or in substitution for suing for perpetual or mandatory injunction, and if the Court
deems fit, it may even grant such damages.
 It is worth emphasizing that damages and injunction are not alternate remedies. Both may be
allowed at the discretion of the Court.
 However, damages cannot be granted unless the plaintiff has claimed damages in the plaint. In the
event that the plaintiff has not claimed damages in the plaintiff itself, he should be allowed to
amend the plaintiff, at any stage of the proceedings, on such terms as may be just in the
circumstances of the case.
To conclude, it is thus evident that there are several remedies available in case of breach of a contract,
none of which are very simple. One would have to overcome an abundance of challenges and rebuttals to
prove a case of breach of contract.
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MODULE 4:
4.1 Origin of Specific Relief as Equitable Relief
4.2 KINDS OF RELIEF IN Specific Relief Act 1963
4.2.1 Possessory Remedies
4.2.2 Specific Performance of Contracts
4.2.3 Contracts that cannot be specifically performed
4.2.4 Substituted Performance of Contract
4.2.5 Rectification of Instruments
4.2.6 Recession of Contract
4.2.7 Cancellation of instrument
4.2.8 Declaratory Decree
4.2.9 Injunctions
4.1 Origin of Specific Relief as Equitable Relief

What is Equitable Relief?
Equitable relief, also referred to as an equitable remedy, is a type of court-ordered relief for an aggrieved
party that is used when ordinary legal remedies – such as awarding damages – are considered inadequate
justice for the suffering party.
Equitable relief is a part of common law that has been used for centuries, beginning with the Chancery
Courts of England, whose jurisdiction was civil matters, as opposed to criminal legal matters.
Equitable relief is most commonly applied in relation to contracts, where a situation arises in which one
party either has suffered or will suffer in an extremely specific manner that makes monetary
compensation alone inadequate as a remedy.
For example, if the subject of a contract is unique and irreplaceable, or in a situation where irreversible
harm may occur, then equitable relief may be considered by a court to be the only fair legal remedy.
Forms of Equitable Relief
Equitable remedies are often granted along with traditional legal remedies such as monetary
compensation. In such cases, the equitable relief granted is supplemental to the more typical remedies
applied by courts.
Equitable relief orders issued by a court may take a variety of specific forms, but usually fall under two
general categories of orders – either a specific performance order that requires a person or entity to
perform an action, such as fulfilling the terms of a contract, or an injunction, which is a court order for a
person or entity to refrain from doing some specific action.
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Listed below are the most commonly used forms of equitable relief:
1. Specific Performance
Court orders for specific performance, where the court orders one party to perform a specific action that
benefits another party, are typically only used where the court has the ability to monitor and verify the
actions taken.
An instance where a court might order a specific performance could be one where a concert venue has
booked a certain performer to appear, but the performer seeks to avoid fulfilling their obligation. If the
performer is a particularly popular star, then a court might determine that nothing other than the
performer doing the contracted concert can adequately compensate the concert venue.
2. Rescission
Rescission refers to the cancellation of a contract. Such a type of equitable relief may be granted when a
court determines that one party to the contract is guilty of bad faith or misrepresentation and that it
would, therefore, be unjust to require the other party to fulfill their contractual obligations. The remedy of
rescission may also be applied when a court determines that one party entered into the contractual
agreement under duress.
3. Injunction
An injunction, which legally bars someone from doing something, is commonly used when a court believes
that allowing the person to commit the act the injunction is issued against, may result in irreparable harm
to another person.
For example, a court may issue an injunction preventing the publication of a book or an article that may do
irreparable damage to someone’s reputation or career.
4. Rectification
Rectification is a court order that essentially alters the terms of an existing contract to more accurately
reflect the original intentions of both parties entering into the contract.
5. Account of Profits
An “account of profits” is considered a form of equitable relief even though it involves monetary
compensation for the complaining party. When someone with a fiduciary duty to the complainant is found
to have breached that duty, the court may order the fiduciary to return to the complainant all the money
they lost, or all the profits illegally gained by the fiduciary.
Practical Example
To better understand the concept of equitable relief, let us look at a situation where a court might consider
an equitable remedy the only adequate legal remedy for a complaining party.
Assume that Bob, an antique dealer, has agreed to sell a unique treasure, such as a one-of-a-kind piece of
antique jewelry, to Richard, for an agreed-upon price. However, Bob subsequently sells the piece to
another person who offers him a higher price.
In a situation such as the one above, a judge may reasonably determine that the only adequate remedy is a
specific performance order requiring Bob to sell the piece of jewelry to Richard as originally agreed. It is
because the piece of jewelry is a unique item. Therefore, merely awarding monetary damages to Richard
would not suffice, as he is unable to buy a duplicate piece of jewelry elsewhere.
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Summary
Equitable relief is a legal remedy applied by a court when remedies such as monetary damages are
considered inadequate to rectify the situation.
Equitable remedies may be used either instead of ordinary legal remedies or in addition to them.
Orders for equitable relief typically require someone to either perform or refrain from performing, a
specific act.
4.2 KINDS OF RELIEF IN Specific Relief Act 1963
Introduction
As the main objectives of the Act have been vested in the very title of this statute i.e. Specific Relief,
due to which we can have a basic understanding that the Specific Relief Act is a legal statute dealing
with reliefs or recovery of the damages of the injured person. This Act was enacted in 1963
following the approach that when a person has withdrawn himself from the performance of a
particular promise or a contract with respect to another person, the other person so aggrieved is
entitled to a relief under Specific Relief Act, 1963. This Act is considered to be in one of the
branches of the Indian Contracts Act, 1872.
Important definitions
 Section 2 of the Specific Relief Act, 1963 deals with some important definitions which are as
follows:
 Section 2(a) deals with obligations which are duties imposed on a person by the law or the legal
body.
 Section 2(b) deals with the settlement that means delivery of the movable or immovable property
to their successive interests when it is agreed to be disposed of.
 Section 2(c) deals with the word “trust” which has the same meaning as defined in section 3 of the
Indian Trusts Act, 1882.
 Section 2(d) deals with the word “trustee” which means the person holding trust in the property.
All other definitions which have not been explained herein are the same as referred to the definitions of
the Indian Contracts Act, 1872.
Specific relief
Section 4 of this act explains that this Act grants special relief for the enforcement of individual rights and
not for imposing penal laws. The enforcement under this Act only bases itself on the individual civil right
and the substantive nature must be established for that fact. To be understood in a simpler way specific
relief is related to providing relief for the infringed civil rights of the individual. Its main objective is to
focus on the rights and if there is any penal nature of the case, it may have to be established for proving the
same.
Recovering the possession
The recovery of possession of this Act is provided under two heads: recovery of the immovable property
and recovery of the movable property. The law of Specific Relief Act,1963 works on a basic principle that
“Possession is itself a prima facie evidence of the ownership”.
Recovery of the possession of immovable property

Section 5 explains the remedies available to a person when he is disposed from his property. If a person
has been removed through the line of possession or wants to recover what lawfully is his property, then
that person can do so through the recovery procedure provided by the Code of Civil Procedure, 1908 and
in which the person will prove that the title belongs to him.
Section 6 of this Act details that if a person has been dispossessed or divested from the property against
the nature of law, then that person can file a suit for recovery of possession. This section is not only a mere
legal rule but also has a wide practical approach. There are certain essential requirements for fulfilment of
recovery under this section that are as follows:
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 The person suing for dispossession must be in possession of that property.

 The person must be dispossessed from the property and such divest from the property must be
unlawfully done or must be carried out against the nature of law.
 The dispossession must be without the consent of the person suing.
 Section 6 sub-clause (2) explains that no suit can be bought by a person after the expiry of 6
months from the date of dispossession.
 Section 6 sub-clause (2) also explains that no suit by a person can be brought against the
government.
If the person has not filed any suit in the prescribed time period (section 6) then the only relief open to
him is that of section 5 i.e to prove his title of the property in a better way. Section 6 has certain limitations
which explains that if any order or decree has been directed by the court in regards to section 6 then, no
appeal or review shall lie against such order or decree but such order is open to revision.
Recovery of the possession of movable property

Section 7 explains that when a person wants to recover the possession of the movable property, they can
follow the procedure expressed by the Code of Civil Procedure,1908. section 7 has further two sub-clauses
which further details that a trustee may file suit against the beneficial interest he was entitled to and the
other sub-clause explains that the ownership of the property can also be expressed with the presence of a
special right given to the person suing; which would be enough as an essential to file a suit.
Essentials of section 7 are as follows:
• There must be a presence of movable property which is capable of being delivered or disposed of.
• The person suing must have the possession of the property in question.
• There may be an existence of a special or temporary right on the property.
• Section 8 of the Specific Relief Act,1963 explains that when a person is in the possession of the
article to which is he is not the owner, shall be compelled to deliver such article to the person who
will have its immediate possession in following cases:
• When the article is held by the defendant as the trustee of a person who has the immediate
possession.
• When compensation in money is not an adequate relief.
• When it is difficult to ascertain actual damage caused to the person.
• When the possession of the article has been wrongfully transferred from the person so entitled.
Specific Performance of contracts

Section 10 includes in what condition-specific performance of the contract may be enforceable, specific
performance usually depends upon the discretion of the court but there are certain conditions for
performance which are mentioned as follows:
When the damages or loss occurred due to the non-performance of the contract cannot be ascertained.
When money as compensation is not an adequate relief due to the non-performance of the contact.
Until the contrary is proved it is presumed by the court that (i) that the breach of contract of immovable
property cannot be adequately fulfilled by money (ii) the breach of contract of movable property can be
relieved except in the cases of a) where the property is not an ordinary article of commerce, b) where the
property is kept by the defendant as a trustee for the property.
Contracts that cannot be specifically enforced

Section 14 mentions certain contracts which cannot be specifically enforced which are as follows:
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 When there is a non-performance for the act, and money is adequate compensation.
 .A contract that is full of many details and its nature is personal to the parties, these can not be
specifically enforced.
 The contract requires continuous work for which the court cannot supervise.
 The court whose nature is determinable.
 Persons against whom the contracts can be specifically enforced
Section 15 deals with the person against whom the contracts can be specifically enforced:
• Any party to contract or any party to suit.
• Representative in interest or principal, which holds certain important ingredients-
• Any special skill, or any qualification.
• The principal in interest shall be not be entitled to specific performance.
• Where the contract is for settling a marriage or to compromise the situation between the family
members.
• When a contract has been entered into by a tenant over a property for life.
Enforcement of awards
Section 21 deals with the power to award compensation; in various cases, compensation can be done
through the court to the aggrieved person. There are certain cases which are as follows:
 When there is a suit filed for specific performance of the contract due to its breach the aggrieved
person may also demand compensation in addition.
 When according to the court the specific performance may not be granted but there has been a
breach of contract, the court accordingly will order for compensation to be given to the aggrieved
party.
 When the court thinks that in this case specific performance of the court shall be granted but it will
not be an adequate relief so, compensation in money can be ordered.
No compensation shall be awarded when the relief for money is not itself mentioned in the plaint.
Rectification of instruments.
Section 26 deals with the ways in which instrument can be rectified:

When through fraud or mutual mistake the parties do not show their real intention then:
• Either party or representative in interest may file a suit for rectification of the instrument,
• The plaintiff in his plaint may plead for rectification of instrument,
• The defendant in his defence may claim for rectification of instrument.
• The court can direct rectification of instruments in cases where the party through fraud does not
show their real intention to prevent violation of rights to the third party.
Requirement for rectification

The party who wants to rectify the instrument firstly must give them in writing and then mention them in
their pleading. No relief shall be granted when the rectification is not specifically mentioned.
Recession of Contracts
Section 27 deals with the recession of the contract, in law, recession means withdrawing of the contract or
in simpler terms: cancellation of the contract. It brings the party in a situation as if the contract did not
happen i.e status quo ante meaning in its original state.
Recession when cancelled

A contract can go through the recession by the pleading of any party except there are some cases in which
recession may be cancelled. Recession can be cancelled in certain ways: a) where the contract has been
terminated or “has been deemed” voidable by the plaintiff, b) when the contract is unlawful.
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Cancelling the contracts through recession

A contract may be cancelled through the recession in cases:
a) where the plaintiff has himself given consent to the contract,
b) where the third party has gained interest in the contract and where their rights come into question,
c) where only a portion of the contract is to be cancelled but it is in such a position that the faulty portion
cannot get separated from the contract.
Cancellation of the contracts

Cancellation is one of the remedies which is available to parties against injuries in a contract; section 31 to
33 deals with cancellation of instruments through the court.
Section 31 explains that when an instrument is void or voidable against a person then he can get that
instrument if it may cause damage to it.
Section 32 deals when a contract can be partially cancelled; for example in cases where there are certain
rights and obligations connected with some parties through that contract, then the court accordingly may
cancel the faulty portion and let the other in motion.
Section 33 has two heads in it i.e powers to aggrieved party after cancellation and orders to the defendant
after cancellation.
Power of aggrieved party

When the contract has been successfully cancelled, the aggrieved party may receive all the restoration of
benefit and compensation to ensure justice.
Orders to the defendant after cancellation

When the suit has been proven voidable against the defendant, he is required to restore every benefit to
the plaintiff which the defendant may have received during the contract.
Declaratory decrees
Section 34 and 35 deal with declaratory decrees which are declared through the courts to the parties to
suit or contract.
Section 34 deals with that when any person has a certain right or obligation over the property and he has
been denied that right by any party, then the aggrieved party may file a suit for the enforcement of the
right over the property which has been denied to him. The Court will give a declaration after looking over
the case that the aggrieved party has a right over the title of such property and so a declaratory decree will
be passed. Such declaratory decree will not be passed by the court when the plaintiff demands something
more than the title over that property.
Section 35 deals with the effect of the declaration which explains that this decree will be binding to only to
those which are the parties to suit, the decree will be binding to only the parties to suit and the trustees at
the time of suit if any.
Preventive relief
Preventive relief is considered to be any relief which abstains a party from doing any act; a relief from the
court which details that the party should not perform certain acts for which the relief shall be prescribed.
Such reliefs can be imposed in the form of injunctions.
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Injunctions
Injunctions are a specific order under which a party must abstain from performing any act. Injunctions
under the Specific Relief Act,1963 may be divided into different types namely temporary, perpetual and
mandatory. Injunction is mentioned from section 36 to 44.
Perpetual injunctions
Perpetual injunctions are known as permanent injunctions. They can only be imposed after hearing the
parties on the merits of the case in which the defendant has enjoyed an assertion of the right and by
affecting the plaintiff on the contrary. The perpetual injunction may be granted to the plaintiff to prevent
the breach of an obligation and imposing rights in his favour. When the defendants invade the plaintiff’s
right to enjoyment, a perpetual injunction may be applied in certain cases where:
• The defendant is the trustee of the property.

• Actual damage cannot be ascertained.
• Money as compensation would not be adequate relief.
• Injunctions are necessary to prevent multiplicity of judgments.
Landmark Judgments
Geeta Rani Paul v. Dibyendu Kundu
It was held by the Hon’ble Supreme Court that when the plaintiff files suit regarding the dispossession, it is
enough if he proves that he is entitled over the title of that property. Once the title is proved other details
like being divested from the property or other things are not required to be proved.
N.P. Thirugnanam v.Dr. R.J. Mohan Rao

It is held by the Court that when in a case it is observed that the plaintiff itself did not perform his portion
in the contract or neither does he want to perform, so the decision regarding specific performance act will
be issued under this favour.
Prem Singh vs. Birbal

The Court, in this case, held that when a contract is valid no doubt of it being cancelled arises and when it
is void ab initio (meaning no existence in the law from the starting ) then no also no option of cancelling it
arises as it is not present in the eyes of law. When a contract has no existence no action is enforced on it.
Conclusion
The Specific Relief Act, 1963 has a set of reliefs given to the parties to suit. They have different reliefs and
enforcing rules which focus on providing enough compensation to all. This legal statute’s main aim is that
no person shall live with the damages and losses and those who have caused such a situation must be in a
position to restore all unlawful benefits received by them. This act focuses on providing justice to all and
not inequitable favoring a single party.
4.2.1 Possessory Remedies

Possession
The term possession expresses the physical relation of control exercised by a person over a thing.
Salmond says, “the continuing exercise of a claim, to the exclusive use of a thing constitutes the possession
of it”. Maine defines possession as “physical detention coupled with the intention to hold the thing
detained as ones own”. Pollock on the other hand has given a new meaning to the word possession. He
says that “in common speech a man is said to possess or be in possession of anything which he has the
apparent control, or from the use of which he has the apparent power of excluding others”. The Supreme
Court has opined in the case of Superintendent v Remembrance R that, “possession is a polymerphous
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term which may have different meaning in different contexts. It is impossible to work out a completely
logical definition of possession uniformly applicable to all situations in context of all statutes.”
Why Possession Is Protected:

The general problem which has always exercised the minds of jurists is why possession is protected by the
law when the possessor is also an owner. Kant, Rousseasu and the Masachussetts Bill of Rights agree that
all men are equal and one or the other branch of that declaration has afforded the answer to the question
why possession should be protected. Kant and Hegel start from freedom. Possession is to be protected
because a man by taking possession of an object has brought it in within the sphere of his will. He has
extended his personality into that object.
There are many reasons for the protection of possession:

Protection of possession aids the criminal law by preserving the peace. According to Savigny, the
protection of possession is a branch of protection to the person. Possession is protected in order to obviate
unlawful acts of violence against the person in possession. Interference with possession leasds to
disturbance of peace. Order is best secured by protecting a possessor and leaving the true owner to seek
his remedy in a court of law. According to Ihering, possession is ownershipof the defensive. The possessor
must be protected and must not be asked to prove his title. Possession is the evidence of ownership.
Possession is protected as a part of the law of Torts. Law protects possession not only from disturbance by
force but from disturbance by fraud.
According to the philosophical school of jurists, possession is protected because a man by taking
possession of an object has brought it within his will. The freedom of will is the essence of personality and
has to be protected so long as it does not conflict with the universal will which is the State. Possession is
protected as he has projected his personality over the object of possession. Possession is the embodiment
of the will of man. Possession is the objective realization of free will and the will of a person as expressed
in possession must be protected.
Possession is protected as a part of the law of property. According to Cairns, “possession was originally
protected to aid the law of crime as well as tort. In the early stages of the development of the law of
property when proof title to property was difficult, it was considered unjust to cast on a person whose
possession was disturbed the burden of proving a flawless title. Thus the law assumed that the possessor
was the owner unless some superior title was shown in someone else. In this way possession came to be
protected by law.”
The view of Salmond is that distinct possessory remedies are not required and the punishments of
criminal law as well as that of the law of torts are sufficient to prevent the evils of self help. An owner who
has dispossessed a trespasser need not be required to deliver possession to the trespasser and recover it
back in an independent proprietary action. As for assistance rendered to the law of property, the modern
law of evidence can adjust the burden of proof suitably and avoid the duplication of possessory and
proprietary remedies.
While these considerations are entitled to suitable weight, expediency requires that as such possession
must be protected. In India a compromise has been made between proprietary and possessory remedies. If
the dispossessed owner promptly brings his suit within 6 months he is allowed to succeed merely om
proof of possession as against the true owner. If he brings his suit after the stipulated period, he is non
suited if the defendant proves a superior title to himself.
Possessory Remedies:
Possessory remedies are those which exist for the protection of possession even against ownership. In
many legal systems possession is a provisional or temporary title against the true owner. Even a wrongful
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possessor who is deprived of his possession can recover it from any person whatsoever on the ground of
his possession. Even a true owner who retakes his own must frost restore his possession to the wrongdoer
and then proceed to secure possession on the ground of his ownership.
There is a strong necessity for possessory remedies to be recognised. The reason for this is:
Possession often amounts to evidence of ownership. A finder of goods becomes its owner against the
whole world except the true owner. This is on the ground that he is in possession of it. If a person is in
adverse possession of a property for 12 years or more he becomes the legal owner of that property and
the right of the original owner is extinguished.
The evils of violent self help are very serious and in all civilised countries, those are prohibited. In order
that force should be avoided by the owners and that lawful means are used there should always be
protection of possessory rights.
Another reason for possessory rights is to be found in the serious imperfection of early proprietary rights.
Those were cumbersome, dilatory and efficient. The position of the plaintiff was a very difficult one and no
person was to be allowed to occupy the advantageous position of the defendant. It was under these
circumstances that it was provided that the original state of affairs must be restored first. Possession must
be given to him who had it first and then alone the claims of other persons can be settled.
Another reason for possessory remedies is that it is always more difficult to prove ownership than to
prove possession. Hence it is unjust that a person who has taken possession of property by violence
should not be allowed to transfer the heavy burden of proof from his own shoulders to that of the
opponent. He who takes a thing by force must restore it and he is free to prove that he is the owner.
Possessory Remedies Under Indian Law:

The Indian legislators have taken care of providing possessory remedies and it is reflected in
various statutes. Some statutory provisions are as follows:
v Specific Relief Act, 1963: S. 5 of the Act deals with action for recovery of possession of specific
immovable property based on title. The essence of this section is that whoever proves that he has a better
title in a person is entitled to possession. The title may be on the basis of ownership or possession. The
purpose of this section is to restrain a person from using force and to disposses a person without his
consent otherwise than in the due course of law, S. 6 states he or any person claiming through him may by
suit recover possession thereof.
S.5 & 6 give alternative remedies and are mutually exclusive
v Code of Criminal Procedure, 1973: S.145 lays down a procedure where a dispute concerning land or
water is likely to cause breach of peace. The Supreme Court has observed that the object of the section no
doubt is to prevent breach of peace and for that end to provide speedy remedy by bringing the parties
before the court and ascertaining who of them was in actual possession and to maintain status qup until
their rights are determined by a competent court. S. 456 of the Act provides that when a person is
convicted of an offence attended by criminal force or criminal intimidation any person has been disposed
of any immovable property the court may within one month after the due date of conviction order that
possession of the same be restored to that person.
v Sale of Goods Act, 1930: S. 47 of the Act provides for sellers lien, lien is a right to retain possession of
goods until certain charges due in respect to them are paid. The unpaid seller has a right to retain the
goods until he reserves that price. S. 47 provides that the unpaid seller of goods who is in possession of
them is entitled to retain his position until payment of the price in the following cases:
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1) where the goods are being sold without any stipulation as to credit
2) where the goods are being sold on credit but the term of credit has expired.
3) Where the buyer becomes insolvent.
S.48 provides for part delivery where an unpaid seller has delivered a part of the goods he may exercise
his lien on the remainder.
v Indian Contract Act, 1872: S. 168 of the Act provides for right of finder of goods. Section 168 provides
that the finder of goods has no right to sue the owner for compensation for trouble and expense
voluntarily incurred by him to preserve the goods and to find out the owner but he may retain the goods
against the owner until he receives such compensation and where the owner has offered a specific reward
for the return of goods lost, the finder may claim such reward and retain such goods till the reward is
given.
S. 169 provides that when a thing which is commonly the subject the sale is lost, if the owner cannot with
reasonable diligence be found or if he refuses upon demand to pay the lawful charges of the finder, the
finder may sell it:
1) When the thing is in the danger of perishing or losing the greater part of its value.
2)When the lawful charges of the finder in respect of the thing found amounts to two thirds of its value.
V Adverse Possession: Adverse possession is wherein by physically occupying it for a long period of time.
One may acquire property without the consent of the actual title holder if one possesses it long enough
and meets the legal requirements. Adverse possession is one kind of involuntary transfer of ownership
rights in real property. Under the doctrine of adverse possession, the true owner of a piece of real
property cannot bring an action to eject someone who has actually possessed the property for a certain
period of time.
Possessory Remedies And Doctrine Of Jus Tertii: Possessory remedies have been rejected by
English law but other provisions have been made to protect possession, there are three rules in this
connection, prior possession is prima facie proof of title, he who is in possession first in time has a better
title than the one who has no possession, a defendant is always at liberty to rebut that presumption by
proving that he has a better title. A defendant who has violated the possession by the plaintiff is not
allowed to set up the defence of jus tertti, which means that he cannot plead that – though neither the
plaintiff nor he has the title, some third person is the true owner but the plaintiff is not. English law
considers jus tertii as a good defence under the following circumstances,
1) when the defendant defends the action on behalf of and by the authority of the true owner.
2) When he committed the act he complained of, by the authority of the true owner.
3) When he has already made satisfaction to the true owner by returning the property to him.
4.2.2 Specific Performance of Contracts

Introduction
The Law of Specific Relief in India was originally codified by Specific Relief Act, 1877. The provision of this
enactment was considered by the Law Commission in its Ninth Report which was later replaced by the
present act of 1963. The Specific Relief Act, 1963 deals with the remedies granted at the discretion of the
court for the enforcement of individual civil rights. In case of breach of contract, the general remedy
available to the aggrieved party is compensation or damages of loss suffered. For this, a civil suit is filed
against the guilty party who had made the default in performance of its duty or obligation as per the terms
of contract under the statutory provision of Section 73-75 of Indian Contract Act 1872. However,
sometimes pecuniary compensation does not satisfy the plaintiff so he may ask for specific relief. For
example if somebody unlawfully dispossess a person without his consent having peaceful possession over
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the property then specific relief may enable him to have the possession of same property instead of
claiming pecuniary compensation.
THE ACT PROVIDES THE FOLLOWING KINDS OF SPECIFIC RELIEF

 Recovery of possession of property
 Specific performance of contracts
 Rectification of instruments
 Rescission of contracts
 Cancellation of Instruments
 Declaratory decrees
 Injunction
Specific Performance of Contracts
Specific performance means enforcement of exact terms of the contract. Under it the plaintiff claims
for the specific thing of which he is entitled as per the terms of contract. For example, if A agrees to sell
certain shares to B of a specific company which are limited in number and after the payment made by B, if
A refuses to sell the shares then B is entitled to recovery of those shares.
According to Section 10 of Specific Relief Act 1963 in the following conditions specific performance
of the contract is enforceable:
When there exist no standard for ascertaining actual damage: It is the situation in which the
plaintiff is unable to determine the amount of loss suffered by him. Where the damage caused by the
breach of contract is ascertainable then the remedy of specific performance is not available to the plaintiff.
For example, a person enters into a contract for the purchase of a painting of dead painter which is only
one in the market and its value is unascertainable then he is entitled to the same.
When compensation of money is not adequate relief: In following cases compensation of money would not
provide adequate relief:
 Where the subject matter of the contract is an immovable property.
 Where the subject matter of the contract is movable property and,
Such property or goods are not an ordinary article of commerce i.e. which could be sold or purchased in
the market.
• The article is of special value or interest to the plaintiff.
• The article is of such nature that is not easily available in the market.
• The property or goods held by the defendant as an agent or trustee of the plaintiff.
In Case of Ram Karan v. Govind Lal [1], an agreement for sale of agricultural land was made & buyer had
paid full sale consideration to the seller, but the seller refuses to execute sale deed as per the agreement.
The buyer brought an action for the specific performance of contract and it was held by the court that the
compensation of money would not afford adequate relief and seller was directed to execute sale deed in
favour of buyer.
Similarly, it was held by the court where the part payment was paid by plaintiff and defendant admitted
that he had handed over all documents of title of property to the plaintiff. Sale price in an agreement is not
low and defendant had failed to establish that said document was only a loan transaction then the
agreement is valid and defendant is liable to perform his part (M. Ramalingam v. V. Subramanyam)[2].
Contracts which cannot be specifically enforced
According to Section 14 of Specific Relief Act 1963, there are certain contracts which cannot be specifically
enforced and these are:
Where compensation in money is an adequate relief: Here the court will not order specific
performance of contract as it is expected that the plaintiff will bank upon the normal remedy for breach of
contract i.e. remedy of compensation. For example contract of mortgage of immovable property (Rambai v.
Khimji)[3], contract of sale of goods (Bharat v. Nisarali) [4], contract of repair of premises etc.
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Where a contract runs into minutes or numerous detail: These contracts includes contract which
depends upon the personal qualification or the violation of the parties or is of such nature that the court
cannot enforce specific performance of its material terms. In Robinson Davison [5], it was held by the
court that the contract to perform in concert depends upon the personal kill of defendant’s wife, and the
contract cannot be specifically enforced due to her illness. The other example is construction contract
where the detailed terms of contract are not explained.
Contracts of determinable nature: Determinable contract means a contract which can be
determined or revoked or put to an end by a party to the contract. For example in case of partnership at
will any partner can retire by giving notice in writing to other partners and can dissolve the firm.
Contracts which involve the performance of continuous duty which court cannot supervise: Earlier under
Specific Relief act, 1877 the continuous duty which court cannot supervise is considered over a period of 3
years which was omitted under Specific Relief Act, 1963 and no time limit restricted for the performance
of a continuous duty. These include contract of appointment of employees for continuous service or
contract to execute sale deed every year. In Central Bank v. Vyankatesh [6], the defendant was required to
execute deed every year for the period of 25 years and contract is held to be specifically unenforceable.
Contract of arbitration: According to Section 14(2), a contract to refer present or future differences to
arbitration shall not be specifically enforceable.
However, Section 14(3) contains certain exception and the following kinds of contract are specifically
enforceable
 A contract to execute a mortgage or furnish other security for repayment of any loan which the
borrower is not willing to repay at once, the court would grant specific performance to execute
mortgage or to give any other security.
 A contract to take up and pay for any debentures of a company.
 A contract to execute a formal deed of partnership at will when the business has already
commenced.
 A contract for the construction of any building or the execution of any other work on land if;
 Detailed or the terms of the contract has been sufficiently explained & the court can determine the
exact nature of building or work.
 The plaintiff has a substantial interest in performance of the contract and compensation in money
is not an adequate relief.
 The defendant has in accordance with the contract, obtained possession of whole or part of the land
on which the building is to be constructed or other work is to be executed.
4.2.3 Contracts that cannot be specifically performed

There are some contracts which cannot be specifically enforced due to potential restrictions and issues
with the legality of the contract itself.3 min read
There are some contracts which cannot be specifically enforced due to potential restrictions and issues
with the legality of the contract itself. For example, let’s assume that John enters into a contract with Mary
to render personal services to her, such as creating a portrait of her dog. Mary cannot enforce performance
under the contract, as courts will simply offer compensation for any money that Mary paid to John before
he performed the job. Furthermore, any contract that requires some sort of skill or knowledge, i.e. singing,
playing an instrument, etc., cannot be specifically enforced.
There are several other reasons as to why courts will not enforce contracts, and therefore, it is important
to be mindful of such contractual issues so that you are aware of your rights before attempting to bring a
lawsuit for “specific performance,” which is the court’s requirement that the breaching party perform
what is required of him or her in the contract.
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Unenforceable Contracts
The following types of contracts cannot be enforced:
 A contract for the nonperformance (breach) in which compensation is proper relief

 A contract that becomes too complex with too much detail involved
 A contract that involves personal skill or knowledge (as mentioned above)
 A contract that has uncertainty
 A contract that is revocable
 A contract that is made by a trustee who has no authority to enter into the contract
 A contract involving a corporation or public company that is created for special purposes
 A contract that involves the performance of continuous duty in which the court cannot possibly
supervise on an ongoing basis
Compensatory Relief
If the injured party can be made whole again by receiving compensation for the non-performing party’s
breach, then the court will not enforce the contract. Some examples of this could be a contract for the
mortgage of immovable property, the contract for the sale of goods, and a contract for the repair, i.e. repair
of appliance, television, flooring, etc. Therefore, if the breaching party doesn’t properly deliver the goods
to the buyer, then the buyer can simply receive his or her money back. Furthermore, if the breaching party
doesn’t repair the broken item, then the injured party can earn his or her money back, and subsequently
hire another professional to repair the broken item.
Complex Contracts
An example of this could be a construction project, in which the contract has conflicting information. In
this case, the court cannot possibly enforce such a contract, as the details identified in the contract are
either conflicting or are otherwise too complex for a court to enforce.
Personal Skill or Knowledge

If the contract involves the personal skill or knowledge of one party, then the contract cannot be enforced.
As previously noted, some examples of this include performance (acting, singing, instrumental), creating
illustrations (drawings, paintings, etc.), or something similar.
Uncertainty in Contracts
If a contract has any uncertain provisions, then the court will not enforce it. This could include a contract
that is not detailed enough, and doesn’t properly identify the scope of work to be done.
Revocable Contract
If a contract is revocable, then the court cannot enforce it. For example, if the parties explicitly agreed in
the contract that it is revocable at any time, then the court will not acknowledge the contract or require
specific performance.
Trustee with no Authority

If a trustee enters into a contract when he or she has no authority to do so, then the contract will be
deemed invalid, and the court will not allow it nor will it grant specific performance.
Special Purpose Contract

If a contract is entered into by or on behalf of a corporation or other public entity, and is created for a
special purpose, then it cannot be enforced by the court, particularly if those entering into the contract on
behalf of the corporation don’t have the authority to do so.
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Continuous Duty of Performance

If the duty of performance is to continue for more than three years, then the court will not enforce the
contract or require specific performance. Some courts won’t require specific performance even if the
length of time is less than 3 years. An example of this would be the execution of a sale deed every year.
4.2.4 Substituted Performance of Contract

Substituted performance of contract.-- (1) Without prejudice to the generality of the provisions contained
in the Indian Contract Act, 1872 (9 of 1872), and, except as otherwise agreed upon by the parties, where
the contract is broken due to non-performance of promise by any party, the party who suffers by such
breach shall have the option of substituted performance through a third party or by his own agency, and,
recover the expenses and other costs actually incurred, spent or suffered by him, from the party
committing such breach.
(2) No substituted performance of contract under sub-section (1) shall be undertaken unless the party
who suffers such breach has given a notice in writing, of not less than thirty days, to the party in breach
calling upon him to perform the contract within such time as specified in the notice, and on his refusal or
failure to do so, he may get the same performed by a third party or by his own agency:
Provided that the party who suffers such breach shall not be entitled to recover the expenses and costs
under sub-section (1) unless he has got the contract performed through a third party or by his own
agency.
(3) Where the party suffering breach of contract has got the contract performed through a third party or
by his own agency after giving notice under sub-section (1), he shall not be entitled to claim relief of
specific performance against the party in breach.
(4) Nothing in this section shall prevent the party who has suffered breach of contract from claiming
compensation from the party in breach.]
4.2.5 Rectification of Instruments

Introduction
Let us first understand the Specific Relief Act,1963. It means an act which provides remedies for persons
whose civil or contractual rights have been violated. Whenever there is a breach of contract, compensation
or damages are provided for the same, but when the damages or compensation are not of adequate relief
then, in that case, the specific relief or preventive relief is provided. Now understand about these terms:
Specific relief: – it means when a person does a breach of contract and when monetary compensation
fails to complete contractual obligation then specific relief is granted.
Preventive relief: – it means when a person is prevented to do an act, which is not validly liable to do.
Legal instrument is a legal term that is used for any legal written document that is a legally enforceable act,
process, obligation, contractual duty, right or obligation.
So basically in simple terms, an instrument is a document by which any rights or liabilities are to be
created, transferred, limited, or extended.
The term rectification means the correction of an error which here is in the form of instrument.
‘Rectification of instrument,’ means correcting the errors, here instrument means contract. Rectification of
instruments under specific relief act is a fair or an impartial remedy that is granted by the Court when
facts are not according to the intention of the parties.
The Specific Relief Act,1963

The Specific Relief Act, means an act which provides relief, that relief is of two types: –
1. Section 5 to Section 35 deals with the specific relief provisions. Specific relief provides recovery from
immovable property or movable property or many defences regarding the suit.
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Let us take an example to understand it well. ‘X’ is having a property of ‘Y’ and with that property, Y is very
much attached because it’s his grandparent’s property due to which ‘Y’ asked ‘X’ to give his property at any
cost, ‘X’ agrees to do so and Y give him a cheque of rupees 50 lakhs as an advance payment but ‘X’ refuse to
give him the property and he breaches the contract due to which ‘Y’ ask the court to grant him the specific
relief and the court grant him.
2. Section 36 to section 42 deals with the preventive relief provisions. Preventive relief is granted at the
discretion of the court by the injunction, temporary, or perpetual.
Let us understand with an example, ‘A’ a film actor signs for doing a film. After shooting half of the movie
till 3 months, ‘A’ stopped working for that film. The film director sues him and said before the court that
damages and compensation are not an adequate relief for him, so the court gives the preventive relief in
which ‘A’ cannot sign another film till the months he works in the previous film.
Rectification of Instruments
Section 26 of the Specific Relief Act talks about rectification. Let us understand in more clear terms.
Rectification’ means correction and here ‘instrument’ means any legal document/contract.
So rectification of instruments means correction or changes in the contract. Under Section 26 of the
Specific Relief Act,1963, it is provided that when any contract may be rectified:
1. When there is a fraud or when there is a mutual mistake by both the parties. Now the person who is
entitled for the rectification of instrument are as follows: –
Either party or his representative can file.
The plaintiff in any suit can file if any rights arising under the rectification of instruments.
Defendants can file in any suit as mentioned in sub-clause (B).
2. If in any case in which a contract or instrument is to be rectified under clause (1), the court finds that
contract is done by fraud or by mutual mistake of the parties, then the court has discretionary power to
rectify it.
3. If parties claim for rectification and the court thinks fit, then it will be specifically enforced.
4. No relief shall be granted until the parties specifically claim for rectification of the instrument.
Modes of Rectification of Instrument

Chapter three of the Specific Relief Act, 1963 deals with the rectification of instruments and Chapter five of
the Specific Relief Act, 1963 deals with the cancellation of instruments. Under section 26 of the specific
relief act, the modes of rectification of instrument are: –
Fraud
Whenever someone intentionally misrepresents the other regarding the contract, there is a way of
rectification of the instrument. Fraud means, when:
 A person suggests a fact which is not true.

 A person hides a fact, which he already knows about.
 A person made a promise without any intention of performing it.
Mutual mistake of parties

The term ’mutual mistake’ means the common mistake on the part of both the parties to contract. A party
who wants rectification of the instrument has to establish that there was a prior complete agreement that
was reduced to writing in accordance with the common intention of the parties and by reason of mistake
the writing did not express the real intention of the parties. If the mistake is not from both the parties but
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from the scribe then it will not be rectified. A mutual mistake can be established by any parties to a
contract. On the basis of unilateral mistake not amounting to fraud, there cannot be rectification.
Real Intention of the Party

The rectification of the instrument always involves the real prior agreement between the parties and the
absence of such facts in the agreement of the document as a result of fraud or mutual mistake.
The court has also the responsibility to see whether the parties do have a real intention or they are
framing the instrument and further the court has to ascertain for the same.
Requirements For Rectification of Instrument Under Section 26

There are certain requirements under Section 26 of the specific relief act.
Existence of fraud or mutual mistake: – for the rectification of instrument, one has the proof regarding the
fraud and the mutual mistake. The intention must be truthful which is owing to fraud or common mistake.
‘Fraud’ means an act done by any party through a contract to deceive another party to enter into a
contract.
‘Common mistake’ means when the mistake in any contract or in any deed done by both the parties.
‘Real intention of the parties’ means it’s not only the party to prove fraud or mutual mistake but also the
court has to find out and further the court has to also ascertain the real intention of the parties.
The burden of proof lies on the person who wants rectification of the instrument.
Parties To Rectification of Instrument

Either party to a contract or their legal representative in interest can take action for the rectification of the
instrument under Section 26. Any other person does not have any right to maintain a suit for its
rectification. Proper parties can apply for the same. ‘Proper parties’ are those parties when a case is
brought for rectification of sale deed at that time the other parties who are affected by it are called proper
parties.
Effect of rectification of Instrument

A deed can only be rectified by the court so as to confirm the true intention of the executing party at the
moment of execution. After the execution the written agreement does not continue to exist with a parol
variation, it is to be read as if it had been originally drawn in its rectified form. When the court rectifies a
deed of transfer it becomes a conveyance and so no further conveyance is required. The order should be
declared that the deed ought to be rectified, point out the way in which it should be rectified and direct an
endorsement of the order on the conveyance.
Cancellation of instrument
Section 31 of the specific relief act, 1963 provides the cancellation of the instrument. Cancellation may be
ordered when:-
The person against whom a written instrument is void or voidable and has reasonable cause that such an
instrument is causing serious injury to him/her. In that case, the court has the discretion, so it is declared
to be true and orders it to be delivered and cancelled.
If the instrument has been registered under the registration act, the court shall send a copy of the order to
that officer in whose office that instrument has been registered and that officer shall not of the copy of the
instrument contained in his books for the cancellation.
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Cases for rectification

There are several cases regarding the rectification of instruments.
Sartaj And Another vs Ayub Khan (2019)

In this case, it was held that the appellant filed a civil suit with the allegation that the plaintiff purchased
property (land) from the defendant by registered sale deed for valuable consideration but due to
inadvertent mistake and misunderstanding in the sale deed they are taking undue advantage for the same.
In the judgment it was held that the appeal is liable to be allowed and the judgment passed by the lower
appellate court is liable to set aside and the judgment and decree passed by the trial court are liable to be
restored.
Noordin Esmailji Kurwa vs Mahomed Umar Subrati (1939)

The case began with an agreement between the Nevitia Floor Mills and Sardar Haji Badloo Subrati. The
land has been divided into six parts. And the dispute regarding the land began. At last, it was held that a
suit for rectification of deed on grounds of mutual mistake if the rights of third parties have not
intervened. The date of the notice of the mistake is the date from which time runs.
Manik Lal And Ors. vs Rajaram And Anr. (2003)

In this case, it was held that case was filed by the Rajaram and Laxminath on the grounds that plaintiff is
co-owner and joint holder of the agriculture lands, before filing the complaint the defendant entered in the
field of plaintiff and threatened plaintiff as defendant doesn’t have any right regarding the land. The
appellant also said that all heirs do have a right on the land. Lastly, it was said that appeal is allowed.
Joseph Johan Peter Sandy vs Veronica Thomas Rajkumar & Anr (2013)
In this case, it was held that the appellants are the son and daughter of late B.P Sandy, he transfers his two
houses in favour of his youngest son and daughter but the house which was given to his daughter, ought to
have been given to his son and the house which was given to the son, ought to be given to his daughter. At
the end, the court held that it is applicable only where it is pleaded and proved that through fraud or
mutual mistake of the parties and considered that appeals are devoid of any merit.
Shamim Ahmed Siddique vs Society Ltd. And Ors. ( 2008)

In this case it was held that rectification of an instrument under 31, it must be proved that it was through
the mutual mistake of the parties that the instrument in question did not truly express the intention of the
parties. And it must be proved that there has been a mistake in framing the instrument, and it must
ascertain the real intention of the parties in executing the instrument. If the court is satisfied by these are
the two conditions, the court has the discretionary power to rectify it.
Conclusion
According to me, the rectification of an instrument is necessary, as because of this section parties can be
saved from being in any kind of fraud or if there is any mistake occurs in a contract by the parties then
with the help of section 26 one can complain in the Court regarding the same. As there are certain
provisions within which if the court does not find it justified then the rectification may not be enforced.
4.2.6 Recession of Contract

Introduction
The word rescind means an express cancellation of the contract by one party. The recession must be
communicated in the same manner as to offer. It is available where consent is caused by fraud,
misrepresentation, coercion and undue influence. The right to rescind the contract in the case of undue
influence is given under Section 19A of The Indian Contract, 1872.
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What are the different modes of recession?

Recession by notice
No form is required by Section 19 of the Indian Contract Act, 1872 for recession. It is sufficient under
Section 66 that the communication is communicated in the same manner and is subject to the same rule as
if it were a proposal. Notice of recession to an agent is notice to the principal. A declaration of recession
before commencing any proceedings is not necessary as a matter of law, though, generally speaking, the
prudent course is to repudiate as soon as possible after knowing the facts and rights to rescind else, the
contract remains valid, and may expose such party to damage for breach of contract.
Setting aside by the contract
The process of recession is essentially the act of the party rescinding, and not of the court, although, it is
common to speak of a court ‘setting aside’ or rescinding a contract. A decree of recession brings a suit to
set aside the contract. A decree of a recession may become essential where a property has been
transferred on the execution of a deed. The Specific Relief Act, 1963 provides Section 27 to Section 30 for a
recession by the court.
Recession as a defence
The will to rescind may also be declared by way of defence to an action brought on the contract. If a suit is
brought by a party to enforce a contract, the defrauded party can pray for avoiding the contract in his
written statement being well within the period of limitation, and it is not necessary for him to bring the
suit to avoid the contract. His defence cannot be defeated by lapse of time. The innocent party may raise
the defence of entitling him to recession in a suit for specific performance, which is enabled by Section 9 of
the Specific Relief Act.
Who can rescind the contract?

The option of avoiding a contract is mentioned under Section 19 and Section 19A of the Indian Contract
Act, 1872. Once affirmed by the person entitled to rescind the contract, it cannot be questioned by a third
party.
Guilty Party
If only one party acts fraudulently, he cannot be allowed, as plaintiff or defendant,to plead, or adduce
evidence in support of his fraud. Where one party forms an agreement erroneously, and the other party,
knowing of the error, acts fraudulently, the latter cannot be allowed to take advantage of the error and
enforce it. Where both the parties have acted fraudulently, the courts will refuse to enforce the fraudulent
transaction. Here, the plaintiff’s suit will be dismissed; and the defendant who suppresses the fraud,
cannot plead and prove it to defeat the plaintiff’s claim.
Recession of part of the contract

A person entitled to rescind a contract cannot rescind a part only. When he decides to repudiate it all
together. Section 26(2)(d) of the Specific Relief Act 1963 gives the power to the court to rescind the
contract if only a part is sought to be rescinded, and such part is not severable from the rest of the
contract. This appears to suggest that the recession of a part of the contract can be severed from the rest of
the contract. This would be a power with the court, and not the right of a party. The High Court of Australia
has also decided that equity permits a court to order partial rescission of a contract induced by fraudulent
misrepresentation.
In contrast, under the UNIDROIT principles, where the ground of avoidance affects only individual terms
of the contract, the effect of avoidance can be limited to individual terms of the contract, unless it would, in
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the circumstances, be reasonable to uphold the remaining contract. The test is not just of severability but
also of reasonableness.
What are the grounds for rescission of contract?

The recession may take place only after the contract has been fully established and thus no legal
agreement has been entered into if a party is not aware of or intended, and recession is, therefore, neither
necessary nor possible. Recession is a complete cancellation of the contract, which means all provisions
will be terminated. Contracts are cancelled on a variety of grounds. Common withdrawal reasons include:
Mutual Consent
If the parties agree to rescind the contract, a separate written document should indicate their intent and
consent. In cases where only one party wishes to withdraw from the contract, it must give the appropriate
written notification of the legal ground on which the withdrawal will be requested and a court may have to
determine if the withdrawal can be done.
What is the process for rescinding a contract?

First, it must be determined whether the contract can be rescinded. This can be done by reviewing the
contract and its clauses to see if it contains rescission instructions. If there is no such clause in the
contract, the person seeking recession should contact an attorney or check the statutes in their state.
If the contract cannot be rescinded under state or federal law, the person may attempt to negotiate a
rescission with the other party. Any contract may be rescinded by mutual agreement, even if it is not
allowed by the contract itself.
The rescinding party must determine whether there are legal grounds for rescission, such as error, fraud,
or coercion. Finally, a written rescission notice must be given to the other party, after which the parties
may negotiate a mutual rescission, or either party may file a civil lawsuit.
What are the problems faced in contract formation?

.All agreements shall be concluded by legal means and under legal conditions. No consent may be obtained
by force or intimidation. All parties must understand clearly what they have entered. Problems with
contract formation may include issues such as:
Mistake
If a party has entered into the agreement on the grounds of reliance on or belief in an erroneous fact or a
mistake of law, a contract may be rescinded. Rescission based on the error of fact may be permitted if the
effect of the error causes a change in the intent of the contractor, making the enforcement of the contract
unconscionable.
Rescission from an error of law may be granted if a party is aware of the true facts of the contract, but is
mistaken as to the legal ramifications of those facts. There is an error of law only if
all parties believe that they know the law as it relates to the contract but are mistaken, or
one party misunderstood the law at the time it is entered into the contract and the other party fails to
correct the other party’s misunderstanding.
Fraud
Some types of fraud support a recession and the fraud can be real or constructed. Real fraud occurs where
one party misrepresents something to mislead the other party. Constructive fraud occurs when one party
engages in misleading behavior without attempting to defraud the other party. When fraud of either type
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occurs, the innocent party may terminate the contract as it enters into the contract on the basis of facts
that were not true.
Duress, Coercion, or Undue Influence

An individual can not be forced under threat of harm, coercion, or other hostile influence to enter into a
contract. When considering whether to grant a rescission on the basis of force, coercion or undue
influence, the adequacy of the consideration granted to the rescinding party shall be taken into account.
A contract is valid until avoided

Rescission may take place if one of the contracting parties lacks the ability to legally enter into a contract.
For instance, when a party is under 18 years of age, intoxicated, mentally incompetent, or ill, a party
cannot enter into a contract.
The judgment of the Madras High Court, on the contrary, held in SNR Sundara Rao v Income Tax
Commissioner[1] that the invalid contract, when avoided in the case of the party affected by it, took effect
from the date of the transaction and not when it was avoided, was not in the case of a contract involving
third party rights. The question under the Income Tax Act 1961 was whether tax was payable from the
date on which the father’s trust deeds as a Karta of joint properties were declared void by a court decree
or from the date on which the transaction took place. It was held that from the later stage it was so. An
alienation that is perfect until it is set aside.
What is the effect of the recession of the contract?

The election of the party rescinding relieves the other party from any further obligation under the contract
and enables both the parties to make arrangement for the future on the footing that the contract has been
once for all broken and is at an end.
There is a substitution by implication of law for the primary obligation of the party in default, which
remains unperformed, where there is a secondary obligation to pay monetary compensation to the other
party for the loss sustained by him in consequence of non-performance in the future. The unperformed
primary obligation of the other party is discharged.
Under the Contract Act, a voidable contract, when avoided, has been held to become void. When a voidable
contract is rescinded, the other party need not perform his outstanding obligation under the contract. The
party rescinding the contract must restore the benefit received under the contract to the other party. Any
party receiving anything under the contract is liable to restore it or make compensation for it to the other
person from whom it has been received.
Damages and Rescission

Under the English law, a person induced to enter into a contract by a fraudulent misrepresentation is
entitled to rescind the contract or claim damages, or both; and the measure of damages is applicable under
the law of torts. Under The Misrepresentation Act 1967, in force there, damages can also be claimed in a
similar manner for negligent misrepresentation.
Under this Act, the party is entitled to avoid, but insisting on performance, can be awarded damages, in
lieu of performance or enforcement and is entitled to restitution under Section 65, if he elects to rescind it.
It does not expressly provide for damages on a recession unless the provisions of Section 75 are
interpreted to extend the contracts voidable under Section 19 and 19A, but damages have been awarded
under the law of torts.
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When is recession not available?

There are situations where rescission as a remedy is not available and the decision is at the court’s
discretion as an equitable remedy. A judge may deny rescission on the basis of certain facts, including:
 One party has substantially fulfilled its part of the contract

 A third party has already received some benefit from the contract
 The requesting party has committed some mistake in relation to the contract (referred to as
“unclean hands”)
 The requesting party has unnecessarily delayed the request for rescission, resulting in some
prejudice to the other party
 The requesting party has already requested damages.
 After requesting a monetary award, a contract withdrawal cannot be obtained.
Conclusion
The other party is legally entitled to have the contract terminated between two or more persons when
there is a misrepresentation by one party. A contract can be rescinded either by release or by agreement.
Certain provisions of the Specific Relief Act, 1963 provide the aggrieved party with a mode of judicial
redress against the opposite party. Rescission is fundamentally a method of undoing the injustice to a
party.
4.2.7 Cancellation of instrument

Introduction
The legal system in India provides for certain duties and obligations which are to be performed by each
party to a contract. A party found in breach of any such duty or obligation is punishable under law. Along
with these duties, the laws also provide for certain reliefs to the parties to a contract, in cases where a
contract can be held questionable under law. One such relief is the Cancellation of Instruments, which has
been mentioned under the Specific Relief Act, 1963. This article would help the reader understand the
different issues associated with the Cancellation of Instruments under the Specific Relief Act, 1963.
Cancellation of instruments
In simple language, cancellation of instruments means the nullification of a written document which is
proof of a transaction between the parties that are part of the transaction. An instrument being every
document by which any right or liability is, or purports to be created, transferred, limited, extended or
extinguished as per the Indian Stamps Act, 1899.
Cancellation of documents is dealt with under Sections 31, 32 & 33 of the Specific Relief Act, 1963. If there
is an instrument, which is void or voidable due to some reason and a party to such an instrument has
enough reasons to believe that the said instrument has the potential to act against him and may even cause
serious injury to him, then such a person can file a suit with regards to the cancellation of such an
Instrument. This is a discretionary relief and the reason behind such is defined in the later stages of this
article.
Cancellation of Instruments can be done in two ways, as follows:
Complete cancellation where the court decides to cancel the whole instrument.
Partial cancellation where only a part of the instrument is cancelled out. These types of cancellations are
mentioned under Section 32 in the Specific Relief Act and have been further explained later in this article.
Main requirements for cancellation
The cancellation of an instrument can be done by the Civil Courts on request of a party to a
transaction only after considering certain requirements. A suit for cancellation of an instrument filed by a
party, shall be entertained only if any of the following requirements are met:
 If the instrument against which the cancellation suit is filed by the party is void.
 If the instrument against which a cancellation suit is filed by the party is voidable.
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 If the instrument against which a cancellation suit is filed has the potential to cause injury/harm to
the party filing the suit.
 If the party who has filed a suit for cancellation of an instrument is under reasonable apprehension
of an injury being caused to him/her due to the performance of the instrument.
When the instrument whose cancellation is requested by the party has already caused enough
damage/injury to the requesting party.
In the view of all the circumstances of the case, the Court must be satisfied that such cancellation of
an instrument is reasonable and would serve justice to the parties coming to the courts for such claims.
If any of the above conditions/requirements are satisfied, then a person may successfully proceed with a
suit for the cancellation of an instrument.
When cancellation is ordered

The Specific Relief Act, 1963 under Section 31 tells us about when the cancellation of an instrument may
be ordered by a court. To begin with, this Section under its first clause tells us that any person who is
aggrieved by the performance of a particular instrument and feels that such an instrument has become
void or voidable, or believes that the instrument has the potential of causing injury/harm to him if such a
transaction is continued may file a suit at a Civil Court to have such an instrument declared to be void.
Once such a suit is filed it is upon the Court to decide whether such an instrument should be declared void
or not. The Court has complete discretion in such matters. Thus, the Court can order for the cancellation of
such an instrument if the above-mentioned requisites are fulfilled.
The second clause of Section 31 tells us that if an instrument which has been put up in front of the Court
for cancellation is a document which has been registered under the Indian Registrations Act, 1908, then a
copy of such a decree containing details about the cancellation of the instrument is required to be sent to
the officer under whom the instrument/document had been registered. Such a decree is sent for the
convenience of the officer and to keep his register updated. Upon receiving the instructions/decree from
the court, the officer is required to mark the copy of the documents as “cancelled” in his register.
Partial cancellation of instruments

The process of partial cancellation of instruments is mentioned under Section 32 in The Specific Relief Act,
1963.
This section says, that when a particular part of an instrument is up for a question of cancellation in front
of the court or when such an instrument has several rights and obligations required under it, the court
upon its discretion may cancel only a part of that instrument and let the rest of it stay as it is. Partial
cancellation basically means that a part of the instrument which is inconsistent, void or voidable shall be
cancelled by the court and such cancellation shall not have any effect upon the performance of the other
rights and obligations associated with the instrument.
Power to require benefit or compensation

The provisions with regards to the power of the Court, to require restoration of benefits received and fair
compensation which are supposed to be made when an instrument is cancelled are provided under
Section 33 in the Specific Relief Act, 1963. The primary aim of this section lies in serving justice to the
participants of a particular instrument/contract in case such is cancelled by the court.
This Section firstly tells us that when the court decides to cancel an instrument either completely or
partially, then the party towards whom such relief is granted is required to either restore/claim any
benefits which he/she may have received from the other party or to make the required amount of
compensation for it. Such conditions are put forth by the act with an intention to deliver justice to the
parties, as a court is a place that is responsible for delivering justice to the people who approach it.
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This Section also provides/states/lays the conditions under which, a defendant to a suit for the
performance of an instrument/contract may claim for the cancellation of such an instrument/contract.
The conditions mentioned in Section 33 are as follows:
 When a plaintiff files a suit to enforce a contract against a defendant and the defendant tries to
resist the contract by claiming such a contract to be voidable. In such a case if the court is also of the
opinion that the contract/instrument under consideration is voidable, then the court may order for
the cancellation of such an instrument/contract.
 When a plaintiff files a suit to enforce a contract against a defendant and the defendant tries to
resist the contract by claiming such contract to be void because of the defendant not being
competent to participate in a contract under Indian Laws. Competence to enter into a contract is
defined under Section 11 in the Indian Contracts Act, 1872. Competence to enter into a contract can
be judged by conditions such as age, soundness of mind, etc. In such a case the instrument/contract
shall be cancelled by the court.
 With regards to the above-mentioned conditions if an order of cancellation is passed by the court
with regards to an instrument, then the defendant shall have to restore the benefits he/she has
received from the other party while the performance of such contract/instrument and the
defendant shall also be asked to compensate the other party i.e. the plaintiff accordingly, to satisfy
the purpose of the court in serving justice.
Case laws for cancellation

These provisions with regards to the cancellation of an instrument under the Specific Relief Act 1963 can
be better understood by the decisions given with regards to the cancellation of an instrument by the
Indian Courts. A few interpretations of the judgements given by the Indian Courts are given below.
Vellayya Konar and another v. Ramaswami Konar and another

This case is relevant to our topic as in its Judgement, his lordship Wordsworth.J. has distinguished
between the cancellation of an instrument and a declaration that the instrument is not binding on the
plaintiff.
This judgment tells us that a suit for cancellation of an instrument can only be filed by parties who are a
part of such a transaction and such a suit can be held for cancellation at the discretion of the court. If a
third party who shares concerns regarding a transaction/instrument i.e. if such third party feels that
he/she is unfairly treated because of the performance of the obligations of such an instrument by the
parties to it, then such third party cannot file a suit for the cancellation of the instrument. The court said
that in such a case the concerned third party would have to sue for declaration decree and not cancellation
of an instrument.
Jeka Dula v. Bai Jivi (1937)

This case helps us to understand the importance of Court intervention with regards to the cancellation of
an instrument as well as the logic used by the courts for such cancellations. The judgement talks about the
importance of justice to be served by the court. Justice to be served by the court is hence linked with the
aspect of cancellation of an instrument.
If an instrument is being used unfairly by any of the parties to a transaction, which is causing harm or is
intended to cause harm to the aggrieved party who has approached the court, then such an instrument
should be cancelled at the discretion of the court for the purpose of serving justice.
The cancellation of an instrument is a protective measure under the Specific Relief Act, 1963 for the
protection of such parties who are at a fear of being harmed by the other party through the performance of
an instrument of which they are a part of.
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Ram Karan v. Bhagwan Das

The Hon’ble Court, in this case, interpreted the consequences of misrepresentation or fraud on the
cancellation of a document. The Hon’ble Justice considered misrepresentations in a particular
document/instrument to obtain certain benefits to be an act which makes the performance of the
obligations of the document/instrument/contract voidable and not void. The court, in this case, has said
that since the obligations of the contract were voidable. The defendants to the case should have sought
relief under the provisions with regards to Cancellation of an Instrument under the Specific Relief Act,
1963 and such a claim shall be instituted within the period of Limitation for such claims as mentioned
under the Limitation Act, 1963.
Prem Singh & Ors v. Birbal & Ors. (2008)

The Hon’ble Supreme Court, in this case, has talked about Section 31 in the Specific Relief Act, 1963. The
Hon’ble Court was of the opinion that cancellation of an instrument can be entrusted upon when either the
document is a void document or a voidable document.
The Hon’ble Court held that as far as void documents are considered the aggrieved party may not be
required to file a suit for cancellation of an instrument/document under Section 31 in the Specific Relief
Act, 1963. Though when a similar concern is raised with regards to a voidable document/instrument then
a suit for such shall be required to be filed under Section 31 in the Specific Relief Act, 1963 for the purpose
of cancellation of the instrument.
Conclusion
The purpose of cancellation of instruments by the courts in India under the Specific Relief Act of 1963 has
always been with an intent to serve justice to the parties who are in a fear of being harmed or are actually
being harmed by the other party due to the performance of such instrument/contract. The court serves
justice in such situations by way of cancellation of the instrument/contract. Thus it can be said that
provisions with regards to the cancellation of instruments under the Specific Relief Act, 1963 is
commendable and falls in line with the purpose of Courts to serve justice.
4.2.8 Declaratory Decree

Introduction
If you’ve ever wondered why the Concept of ‘declaratory decree’ emerges and for whom it comes into the
picture, here’s everything you need to know. This whole article deals with the concept of ‘declaratory
decree’ and what are the essentials of filing declaratory suit, whether the court can exercise its discretion
in the case of the declaratory decree and if yes, under what circumstances. This article also deals with
other aspects of ‘declaratory decree’.
Declaratory decrees
The declaratory decree is the edict which declares the rights of the plaintiff. It is a binding declaration
under which the court declares some existing rights in favour of the plaintiff and declaratory decree exists
only when the plaintiff is denied of his right which the plaintiff is entitled to. After that specific relief is
obtained by the plaintiff against the defendant who denied the plaintiff from his right.
According to Section 34, of the Special Relief Act, 1963, any Person entitled to any legal character, or to any
right as to any property, may institute a suit against any person denying, or interested to deny, his title to
such character or right, and the court may in its discretion make therein a declaration that he is so entitled,
and the plaintiff need not in such suit ask for any further relief.
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Declaratory decree provisions bring out to merely perpetuate and strengthen the Plaintiff in case of an
even adverse attack so that the attack on the Plaintiff can not weaken his case and it is mentioned in the
case of Naganna v. Sivanappa. And by the arguments made in this case, it encourages the plaintiff to come
forward to enjoy the rights which they are entitled to and if any Defendant denied the Plaintiff from
providing any rights for which the Plaintiff is entitled, then it gives them the power to file the suit and get
special relief.
Discretion of court as to declaration of status

As in the Section 34 of Special Relief Act, 1963 the condition mentioned for the declaration of status or
right i.e. (1) the plaintiff at the time of suit was entitled to any legal character or any right to any Property
(2) the defendant had denied or was planning or interested in denying the rights of the plaintiff (3) the
declaration asked for should be same as the declaration that the plaintiff was entitled to a right (4) the
plaintiff was not in a position to claim a further relief than a mere declaration of his rights which have
been denied by the defendant. But, it is not compulsory that even after the fulfilment of all the four
essential conditions required for declaration, the specific relief will be provided through a declaration to
the plaintiff. It is totally on the discretion of the court whether to grant the relief or not to the plaintiff. The
relief of Declaration or specific relief cannot be asked as a matter of right, it is a total discretionary power
which is in the hands of the court.
In the case of Maharaja Benares vs. Ramji khan, it was declared that if the suit is filed and the necessary
party is absent then the court will dismiss the suit for the declaration. So, it is necessary that both parties
should be available. There is no specific rule to decide whether the discretionary power of the courts
should be granted or not, the discretionary power of the court is being exercised according to the case and
there are no specific criteria to decide in which cases the court will exercise its discretionary power.
Essentials of a declaratory suit
There are a total of four essential elements considered for a declaratory Suitor for the valid suit for
Declaration and all the four elements are mentioned below.
 The plaintiff at the time of suit was entitled to any legal character or any right to any Property.
 The defendant had denied or was planning or interested in denying the rights of the plaintiff.
 The declaration asked for should be the same as the declaration that the plaintiff was entitled to a
right.
 The plaintiff was not in a position to claim a further relief than a mere declaration of his rights
which have been denied by the defendant.
Requisites
According to the Section 34 of the Special Relief Act, 1963 it put forward certain conditions which are to be
fulfilled by the plaintiff to file a valid suit for declaration for the rights which is denied by the defendant. In
the case of the State of M.P. vs. Khan Bahadur Bhiwandiwala and co., The court observed that in order to
obtain the relief of declaration the Plaintiff had to fulfil the four conditions as mentioned above.
The object of Section 34 of the Special Relief Act, 1963 to provide a perpetual bulwark against adverse
attack on the title of the Plaintiff and to prevent further litigation by removing the existing cause of
controversy. If any of the essential elements are missing then the court will not provide any relief of
declaration. The Plaintiff has to prove that the defendant has denied or is interested in denying to the
character or title of the Plaintiff and the Plaintiff has to establish that there must be some present danger
to his interest. The denial must be communicated to the Plaintiff in order to give him a cause of action. The
court must exercise their rights while granting declaratory decree and only in proper cases, this legal
remedy should be granted so as to avoid multiplicity of suits and to remove clouds over legal rights of a
rightful person.
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Legal Character
We have talked about the requisites that a person should be entitled to the legal character. So, what we
mean about the Legal Character. Legal character is attached to an individual’s legal status which shows the
person’s capacity. Legal character by names itself denotes character recognized by law. In the case of
Hiralal v. Gulab, it was observed that variety of status among the natural person, can be referred to the
following listed causes i.e. Sex, minority, rank, caste, tribe, profession any many more list.
Person Entitled to any Right to Property

The second condition which is to be fulfilled by the Plaintiff for the successful relief of Declaration or we
can just say that for getting Special relief which should be related to Plaintiff Right to Property. A person
seeking special relief has a condition that they must have a right to any property, only then they can go for
special relief under Special relief Act, 1963. The Bombay High Court has made a distinction in ‘Right to
Property’ and ‘Right in Property’ and it has been held that to claim and go for a declaration the Plaintiff
need not show the right in Property. The Plaintiff only has to show that he has Right to Property from
which he has been denied.
Declaration asked should be the same as the declaration that the plaintiff entitled.
The third condition is to be fulfilled by the Plaintiff for the Declaration and for Special relief. This is
considered as essential because it is very necessary to look that the Plaintiff asking for the declaration
from the Court should be the same as the declaration to which the Plaintiff is entitled under the right to
any Property.
Plaintiff should claim only for mere Declaration

The fourth and the last one which is to be fulfilled by the Plaintiff is that the suit filed by the Plaintiff
should claim only for mere declaration and he is not entitled to more than that. Excess relief seeking suits
will not be entertained by the court in any manner and there is no restriction or any hard and fast rule to
entertain such cases where the suit filed is seeking relief more than just mere declaration.
When suit for declaration is not maintainable

A suit for the declaration will not be maintainable under some circumstances which are to be mentioned
below.
• In the case of a declaration that the Plaintiff did not infringe the defendant’s trademark.
• For a declaration that during the lifetime of the testator, the will is invalid.
• No one can ask for a declaration of a non-existent right of succession.
• A suit by a student against a university for a declaration that he has passed an examination.
• If any person is seeking for a mere injunction without seeking for any declaration of title to which
the Plaintiff is entitled so, then the suit will not be maintainable and will not be laid down within its
ambit. In the case of P. Buchi Reddy and Others vs. Ananthula Sudhakar, it was held that the
Plaintiff’s suit for a mere injunction without seeking a declaration of the title is not maintainable.
‘Suit for a bare injunction’ is a condition where the suit is not maintainable because in the case of the bare
injunction, Plaintiff and Defendant both are claiming the title on which effective possession cannot be
proved. And the suit for bare injunction is not maintainable under Section 41(h) of the Specific Relief Act,
1963.
‘Suit for a bare injunction’ is a condition where the suit is not maintainable because in the case of the bare
injunction, Plaintiff and Defendant both are claiming the title on which effective possession cannot be
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proved. And the suit for bare injunction is not maintainable under Section 41(h) of the Specific Relief Act,
1963.
Effect of declaration
Before going into an in-depth analysis of what is the effect of the Declaration, first, we should look at what
it is according to Section 35 of the Special Relief Act, 1963. According to this Section, a declaration made
under this section is binding on both the parties to the suit and the persons claiming through them
respectively and, where any of the Parties are trustees, on the persons for whom, if in existence at the date
of declaration, such parties would be trustees.
Lets understand how the effect of the declaration is being in process with the help of an illustration i.e.
Ram, a Hindu, in a suit to which Komal, his alleged wife, and her mother, are defendants, seeks a
declaration that his marriage was duly commemorated and an order for the restitution of his conjugal
rights. The court makes the declaration and order. Shumbham claims that Komal is his wife, then sues Ram
for the recovery of Komal. The declaration made in the former suit is not binding upon shubham.
Case laws
There are several case laws related to the declaratory decree under the Special relief Act, 1963 in which
several aspects of the Declaratory decree has been covered up and Judgment have been declared on that
and were setting precedents to be followed up in the new cases of Declaratory Decree.
Some of the Cases are mentioned below with their judgment related to Declaratory decree for the sake of
convenience of Reader.
Tarak Chandra Das vs. Anukul Chandra Mukherjee, it was held that the court had absolute discretion
to refuse the relief if considered the claim to be too remote or the declaration if given, would be ineffective.
In this same case, it was observed that the term mentioned above in this article ‘Right to Property’ showed
that Plaintiff should have an existing right in any property, not the mere interest in that property would
lead to special relief.
Ram Lal vs. Secretary of Staten this case was held that by virtue of section 35 of Special relief Act, 1963,
a judgment is binding only upon the inter partes, which is not in rem and does not operate as res-judicata.
No other party who is not the party of the suit does not come under the ambit of Section 35 of Special relief
Act, 1963.
Conclusion
Declaratory decree is a provision which focuses on the rights of the Plaintiff and gives immense power to
the Plaintiff to deal effectively against the defendant. How the court uses their discretionary power under
what circumstances and other aspects analysis helps the reader also to analyse and understand the
Declaratory decree concept in the simplest way. According to my opinion and analysis, Declaratory decree
is a concept which is to be wider and covers more aspects than it currently does and the main thing
according to my opinion should be amended in a long-term is that there should be a limitation on the use
of discretionary power by the different courts and fixation should be done in which cases or in which type
of cases, the discretion of court can be used.
4.2.9 Injunctions
Introduction
The term ‘injunction’ has been the subject of various attempts at a definition. It has been defined by Joyce
as, “An order remedial, the general purpose of which is to restrain the commission of some wrongful act of
the party informed”.
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Burney defined injunction as, “a judicial process, by which one who has invaded or threatening to invade
the rights of another is restrained from continuing or commencing such wrongful act”.
The most expressive and acceptable definition is the definition of Lord Halsbury. According to him, “An
injunction is a judicial process whereby a party in an order to refrain from doing or to do a particular act
or thing”.
Injunction acts in personam i.e. it does not run with the property. For instance, ‘A’ the plaintiff gets an
injunction against ‘B’ forbidding him to erect a wall. ‘B’ sells the property to ‘C’. In such a case, the sale does
carry an injunction with it. An injunction may be issued against individuals, public bodies or even the
State. Disobedience of the order of an injunction is punishable as contempt of court. There are three
characteristics of an injunction. They are as follows.
 A judicial process.
 The relief obtained is restraint or prevention.
 The act restrained is wrongful.
 Comparison of English and Indian Law
The nature of discretion and the rules of guidance for issuing orders of an injunction are the same in both
English and Indian Law. Under English law damages in substitution for an injunction may be given if:
 The injury to the plaintiff’s legal rights is small;
 The injury is one which is capable of being estimated in money;
 The injury can be adequately compensated by a small payment; and
 The case is one in which grant of an injunction would be oppressive to the defendant.
 In India also some of these rules are incorporated in sections of the Specific Relief Act, 1963.
Types of an Injunction
There are basically two types of injunction as provided by section 36 of the Specific Relief Act,
1963. Section 36 of the Specific Relief Act with the head ‘Preventive relief how granted’ reads as,
“Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual”. As per
provisions of section 36 injunctions are either temporary (interlocutory) or perpetual.
Temporary and perpetual injunctions are defined under Section 37 of the Specific Relief Act which reads
as:
“(1) Temporary injunctions are such as to continue until a specified time, or until further order of the
court and they may be granted at any stage of a suit, and are regulated by the Code of Civil Procedure,
1908.
(2) A perpetual injunction can only be granted by the decree made at the hearing and upon the merits of
the suit, the defendant is thereby perpetually enjoined from the assertion of a right, or from the
commission of an act which would be contrary to the rights of the plaintiff”.
Temporary Injunctions
The procedure for granting temporary injunctions is not governed by the Specific Relief Act, 1963 but
governed by the rules laid down in Order XXXIX, Rules 1 and 2 of Civil Procedure Code which reads as
follows.
“A temporary injunction may be granted in the following cases:
For the protection of interest in the property

This category will cover the following cases
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(a) That property in dispute is in danger of being wasted or alienated by any party to the suit or
wrongfully sold in execution of a decree; or
(b) That the defendant threatens to remove or dispose of his property with a view to defraud his creditors;
and
(c) That the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in
relation to any property in dispute in the suit.”
The court may by the order grant an interlocutory injunction to restrain such act or make such order for
the purpose of staying and preventing the damage of wasting, alienation, sale or disposition of the
property as the court thinks fit until the disposal of the suit.
Injunction to restrain, repetition or continuance of breach

(1) In any suit for restraining the defendant from committing a breach of contract or other injury, of any
kind, whether compensation is claimed in the suit or not, the plaintiff may at any time after the
commencement the suit and either after or before judgement, apply to the court for a temporary
injunction to restrain the defendant from committing the breach of contract or an injury complained of, or
any breach of contract or injury arising out of same contract.
Discretionary Relief
It is to be noted that grant of an injunction is at the discretion of the court i.e. it is not the right of an
individual to get the injunction. Section 36 expressly lays down that, “Preventive relief is granted at the
discretion of the court by an injunction, temporary or perpetual”. Therefore the court will grant a
temporary injunction if the following conditions are satisfied by the case:
• The plaintiff must be able to establish a prima facie case. He is not required to establish the clear
title but a substantial question that requires to be investigated and that matter should be preserved
in the same status as it is until the injunction is finally disposed of.
• An irreparable injury may be caused to the plaintiff if the injunction is refused and that there is no
other remedy open to the applicant by which he could protect himself from the feared injury.
• The balance of convenience requires that the injunction should be granted and compensation in
money would not serve an adequate relief.
• It is to be noted that it is a settled principle of law that if in a suit where there is no permanent
injunction sought for in the final analysis, ordinarily a temporary injunction cannot be granted. So,
the principles that govern the grant of a perpetual injunction would govern the grant of a
temporary injunction also.
In Ishwarbhai v Bhanushali Hiralal Mohanlal Nanda case where in a suit for specific performance,
there was no prayer for a decree of perpetual injunction restraining the defendant from transferring the
suit land by way of sale till the disposal of the suit. But the plaintiff in a suit prayed for a temporary
injunction which was not granted because of the settled principle.
Perpetual Injunction
Section 37(2) of the Specific Relief Act, 1963 lays down that a permanent injunction can only be granted by
a decree at the hearing and upon the merits of the case. In simple words, for obtaining a permanent
injunction, a regular suit is to be filed in which the right claimed is examined upon merits and finally, the
injunction is granted by means of judgement. A permanent injunction therefore finally decides the rights
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of a person whereas a temporary injunction does not do so. A permanent injunction completely forbids the
defendant to assert a right which would be contrary to the rights of the plaintiff.
Section 38 of the Specific Relief Act, 1963 specifies certain circumstances under which permanent
injunction may be granted. Section 38 with the head ‘Perpetual injunction when granted’ reads as,
“(1) Subject to the other provisions contained in or referred to by this chapter, a perpetual injunction may
be granted to the plaintiff to prevent the breach of an obligation existed in his favour or by implication.
(2) When any such obligation arises from the contract, the court shall be guided by the provisions and
rules contained in chapter II (specific performance).
(3) When the defendant invades or threatens to invade the plaintiff’s right to, or enjoyment of, property,
the court may grant the perpetual injunction in the following cases, namely-
Where the defendant is the trustee of the property of the plaintiff.

 Where there exist no standards for ascertaining the actual damage caused, or likely to be caused by
an invasion.
 Where the invasion is such that compensation in money would not afford adequate relief.
 Where the injunction is necessary to prevent multiplicity of judicial proceedings.”
Requirements of Applicability
The conditions pre-requisite for the application of this section are-
• There must be an expressed or implied legal right in favour of the plaintiff;
• Such a right must be violated or there should be a threatened invasion;
• Such right must be an existing one;
• Should fall within the sphere of restraining provisions (referred to in section 41 of the specific relief
act).
Illustrations
‘A’ lets certain land to ‘B’ and ‘B’ contracts not to dig sand and gravel. ‘A’ may sue for an injunction to
refrain ‘B’ from digging in violation of the contract.
Where the directors of the company are about to pay a dividend out of capital. Any of the shareholders
may sue for an injunction to restrain them.
Section 38 expressly states that where an obligation arises from contract, the court shall be guided by the
rules and principles given in connection with the specific performance of contracts. Thus, a perpetual
injunction will be granted to prevent a breach of contract only in those cases where the contract is capable
of specific performance (section 41(e)).
However, section 42 says that where a contract compromise of a positive agreement to do something and
negative agreement not to do a certain act, whether expressly or impliedly, the fact that positive part is not
capable of specific performance will not prevent the court from of enforcing the negative part by means of
an injunction.
The crux of this section is that where an agreement contains both affirmative and negative agreement, the
court may enforce the negative agreement if a positive agreement is incapable of specific performance and
may restrain a party from committing a breach of the negative part.
The court may grant a permanent injunction where the defendant invades or threaten to invade the
plaintiff in the following cases:
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Where the defendant is a trustee of the property for the plaintiff.

• Where there exists no measure to ascertain the loss or actual damage caused. For example, ‘A’
pollutes the air with smoke so as to interfere with the physical comfort of Band C, who carries on
business in the neighborhood. ‘B’ and ‘C’ may sue for an injunction to restrain ‘A’ from polluting the
air.
• Where the invasion is such that compensation in terms of money is not an adequate relief. For
example, ‘A’ a professor deliver lectures to his students, being his own literature composition he
does not communicate them to the whole world. These lectures are the property of the professor
and he is entitled to restrain the students from publishing without his contents.
• Where it is necessary to prevent a multiplicity of judicial proceedings.
Mandatory Injunctions
Section 39 of the Specific Relief Act, 1963 with the head ‘Mandatory injunctions’ reads as, “When to
prevent breach of an obligation it is necessary to compel the performance of certain acts which the court is
capable of enforcing, the court may in its discretion grant an injunction to prevent the breach complained
of, and also compel the performance of requisite acts.”
Two elements have to be taken into consideration when a mandatory injunction is granted. The two
elements are:
• The court has to determine what acts are necessary to prevent the breach; and
• The requisite acts must be as such as the court is capable of enforcing.
Disobedience of Injunction
Rule 2-A of Order 39 and Section 94(c) of the Civil Procedure Code provide for consequences of
disobedience of an injunction. Section 94(c) provides that, “In order to prevent the ends of justice from
being defeated the Court may if it is so prescribed grant a temporary injunction and in case of
disobedience commit the person guilty thereof to the civil prison and order that his property is attached
and sold.”
Rule 2-A of Order 39 provides that,
“(1) In case of disobedience of any injunction granted under Rule 1 and Rule 2 or breach of any of the
terms on which injunction was granted, the court granting the injunction or making the order, or any court
o which the suit or proceeding is transferred, may order the property of the person guilty of such
disobedience or breach to be attached and may also order such person to be detained in the civil prison for
a term not exceeding three months, unless in the meantime the court directs his release.
(2) No attachment made under this rule shall remain in force for more than one year, at the end of which
time if the disobedience continues, the property attached may be sold.”
Conclusion
There are cases in which the nature of agreement does not admit specific performance, nor damages likely
to serve the purpose. In such cases, the court may restrain the party threatening the breach by way of an
injunction. Further, it should be noted that an interim injunction can only be granted when a perpetual
injunction is prayed for in a suit.
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Sub- LAW OF CONTRACT, SEM -1, Mumbai University New Syllabus – 2022-2023, Marks -75

LAW OF CONTRACT AND SPECIFIC RELIEF

Evolution of contract law different time periods

The Advent of The Indian Contract Act

Nature of a contractual obligation Contemporary Relevance

Theories of Contractual Obligations

1.2 OFFER, ACCEPTANCE AND ITS COMMUNICATION

The element of a valid offer

Every proposal must be communicated

It must create Legal Relations

Difference between General Offer and Specific Offer

Lapses and revocation of an offer

When communication is complete

Time of revocation of an offer

Revocation of the offer by the offeror

Legal Rules and Conditions for Acceptance

Acceptance must be told to the offeror

Acceptance must be recommended in the following mode

In a reasonable amount of time, the acceptance is given

Mere silence is not acceptance

When communication is complete?

Time of revocation of acceptance

1.3 Types of Contracts

Contingent Contracts under Indian Contract Act

Essential elements of the contingent contract

Performance of the contract must be conditional[i]

The said event must be collateral to such contract

The event should not be at the discretion of the promisor

Enforcement of contingent contract

Condition #1- enforcement of contract contingent on the happening of an event

Condition #6- contract contingent of impossible event void

Commercial applications of contingent contracts

Quasi-Contractual Obligations under Indian Contract Act

The Principle of Unjust Enrichment

The aforementioned illustration satisfies the following conditions-

Section 71 (Responsibility of finder of goods)

Duties of the finder of goods

What is a Standard Form of Agreement?

Who Helps With Standard Forms of Agreement?

Standard form of Contracts and the law in India

Standard form of contract

Legal Status of Standard form of Contract (SFC)

Why people accept Standard Form of Contract?

Ways to limit exploitation from SFC

Unreasonable or Unfair terms

Theory of Fundamental breach

Exemption Clauses and Third Party

Ambit and authority of Contract Act

Different types of E-Contracts

E-Contracts under Information and Technology Act, 2000

Negotiable instruments except for cheques;

E-Contracts under the Evidence Act, 1872

Click or web-wrap agreements

E governance means application of electronic means in the interaction between:

How E governance is different from E government?

The central government may prescribe:

The type of electronic signature.

Some E Governance Projects In India:

Parliament of Indian website:

E governance centre at haryana secretariat:

The Act identifies three parties to the electronic transmission process:-

1. Originator - section 2(1)(za)