ANSWERS

Q. 1 A wants to purchase a motorcycle belonging to B and therefore he writes a

letter to B offering to buy his Motorcycle for Rs. 80,000 stating therein that “I
shall take the motorcycle to be mine unless I hear from you”. B does not reply to
this letter but directs C (his agent), not to sell the motorbike to anyone as he (B)
wants to sell the same to A. However, C sells the motorbike to D. A seeks your
advice to file a civil Suit against C. Advice A!
ANSWER:
INTRODUCTION: To resolve the legal issue in the given case, the provisions of the Indian
Contract Act 1872 (ICA) relating to offer and acceptance are to be examined.
FACTUAL SITUATION: (State briefly)
LEGAL ISSUE: Whether there is valid acceptance by B of A’s offer by communicating to C?

VALID OFFER IS INTEGRAL TO FORMATION OF CONTRACT:

Sec. 2 (h) An agreement enforceable by law is a contract. Offer and acceptance of offer are
essentials of an agreement.

Importance of Proposal:
Sec 2 (a): Life of contract starts as a Proposal.
Sec 2 (b): once accepted it becomes a Promise
Sec 2 (d): the promises form part of consideration
Sec 2 (e) every promise or set of promises forming part of consideration is an agreement
Sec 2 (h): Agreement + Enforceability by Law = Contract

Thus, Offer + Acceptance = Agreement

Agreement + Enforceability by Law = Contract
Proposal sec. 2 (a) —> promise sec. 2 (b) — consideration 2(d)—> agreement sec. 2(e) —>
enforceable —> contract sec. 2(h)

Essentials of Proposal/offer: Sec 2(a)

1. Two persons: Parties
2. Signifies: communication : sec 3 and 4
3. Expression of Willingness
4. To do or abstain to do SOMETHING
5. Object to obtain assent of the other : lightening rod/litmus test
Harvey v. Facey (1893) AC 552
6. Definite terms
7. Intention to create legal obligation: Balfour v. Balfour

ANALYSIS:
An offer has been made from A to B and the factual situation regarding condition of refusal in offer
and acceptance is similar to Felthouse v. Bindley (1862).
Legal Issue 1: Can offer place burden of refusal?
Ideally, Offer cannot impose burden of refusal as held in Felthouse case. Acceptance cannot be
implied from silence but requires some conduct as per sec. 7 and 8.
Legal Issue 2: Can B accept the offer by communication to C?
Refer Felthouse v. Bindley (1862).
- Sec. 2 (b) When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted.
- Acceptance signifies meeting of minds as stipulated in Sec. 13.
Essentials of valid acceptance (Sec. 2(b)):
I. External Manifestation or Conduct
Sec. 3: intends + external manifestation (act or omission)
Promises may be express or implied: Sec 9
- Specific Offer: as per the conditions of the offer.
- General Offer: Lalman Shukla v. Gauri Datt (1913) XL ALJR 489 (All.) and Carlill v. Carbolic
Smoke Ball Company. Can be accepted by performing the conditions as under sec. 8. Sec 8.
Acceptance by performing conditions, or receiving consideration.
II. Acceptance has to be Absolute Sec. 7. No conditional acceptance.
II. Communication to the offeror himself
Felthouse v. Bindley
Acceptance to offeror
Communication to a stranger is not valid
Communication when complete: Sec 4
Against proposer: when it is put in course of transmission + out of power of acceptor
Against acceptor: when it comes to knowledge of proposer
In instant case, acceptance has not been communicated to the offeror but a third party.
- CONCLUSION:
Though B accepted the offer of A for a price of Rs 80,000 for the bike, the same acceptance was not
communicated to the offeror A but to a third party C. Secondly, B cannot be bound by condition of
refusal placed in the offer by A.
Thus, no contract was created.

Q.2 A, an old lady granted her estate to her son B with the direction that he (B)
should pay an annuity of Rs 10000 to A’s brother, X. The same day B made a
promise with X that he would pay annuity as directed by his mother, A. B failed
to pay stipulated sum to X. X being aggrieved intends to file a suit against B and
therefore seeks your advice. What advice would you give him? State with the
help of judicial pronouncements on the same.
INTRODUCTION:
- Sec. 10 enumerates essentials for a valid contract includes Consideration
- 2(d) define consideration and provide ingredients of consideration
- Sec 25 ‘an agreement without consideration is void.’ Nudam Pactum = Bare promise = NO
CONTRACT
LEGAL ISSUE in the factual situation provided:
1. Is there a valid consideration to form a valid contract?
2. Will the doctrine of privity of consideration be applicable?
3. Is B liable to pay the stipulated sum to X?
ESSENTIALS OF CONSIDERATION: As per Sec. 2 (d)
1. Consideration should be given at the desire of the promisor
Durga Prasad v. Baldeo: not at desire of promisor
2. It should be given by the promisee or any other person
3. Consideration may be past, present, future
4. There should be some act, abstinence or promise
As per other sections:
5. Consideration need not be adequate, just ‘something in return.: Sec 25, Expl II
6. It must not be illegal, immoral or opposed to public policy: Sec 23
7. It must be something which promisor is not already bound to do: Lalman Shukla v. Gauri Dutt
ANALYSIS:
- As per ingredient 2: consideration may move from third person that is doctrine of constructive
consideration followed in INDIA but in English law there is privity of consideration.
- There are two concepts: PRIVITY OF CONTRACT and PRIVITY OF CONSIDERATION
- The factual situation is similar to the case of Venkata Chinnaya Rau v. Venkataramaya Garu
(1881) 1 ID 137 (Mad.) Justice Innes and Justice Kindersley clarified Indian position that there
is no privity of consideration. (Discuss the case and compare with factual situation provided)
- FACTS: Mother gifted property to daughter (defendant) by deed stipulating that she
would give annuity to plaintiff, mother’s sister. Defendant executed Ikrarnama but did not
pay.
- ISSUE was that the defendant’s promise was given to the plaintiff, but consideration was
furnished by the plaintiff’s sister. Was there a binding contract?
- CONTENTIONS (Provide contention of the parties if known)
- Defendant argued that since the plaintiff did not furnish consideration, they had no right
of action.
- Plaintiff argued that consideration can be provided by third party.
- JUDGMENT: Justice Innes and Justice Kindersley clarified Indian position that there is
no privity of consideration. The court referred to earlier cases:
1. In Dutton v. Poole (1677) Court of King’s Bench held that the consideration moved
indirectly from the plaintiff to the defendant and the action of the defendant operated
to shut out the plaintiff from a certain benefit, the plaintiff can sue, that is, doctrine
of constructive consideration.
2. Tweddle v. Atkinson (1861) LAID the foundation of privity of contract and privity
of consideration in English Law. The Indian Contract Act 1872 has not clearly
provided privity of contract, though Privy Council extended it to India in the case of
Jamna Das v. Ram Avtar.
- There is difference between Tweddle and Dutton cases: (i) consideration moved
indirectly from the plaintiff to the defendant. (ii) defendant operated to shut out the
plaintiff from a certain benefit
- Venkata Chinnaya Rau v. Venkataramaya Garu (1881)
(i) failure to keep the promise would have deprived the plaintiff of an amount which she was
already receiving
(ii) if a promise causes some loss to the promisee, that is sufficient consideration for the
promise
(iii) Not necessary that consideration should be furnished by the promisee only.
- Lord Viscount HALDANE in Dunlop Pneumatic Tyre Co. v. Selfridge & Co. Ltd. (1915)
reiterated privity of consideration and privity of contract in English Law. However, from sec
2(d) of Indian Contract Act 1872, consideration should be given by the promisee or any other
person and the judgment in Chinnaya v. Ramaya (1881), privity of consideration is not
applicable in India.
- CONCLUSION:
1. The consideration by defendant’s mother is enough to enforce the promise between the Plaintiff
and Defendant.
2. B is liable to pay annuity of Rs 10,000 to X as doctrine of privity of consideration is not
applicable in India as per Sec. 2 (d).

Q.3 Ram, a minor, falsely represent himself to be of the age of majority enters
into an agreement with Mohan, to sell his agriculture land. Mohan paid full
consideration of Rs 50 lakhs to Ram. However, later Ram refused to execute a
sale deed of his agriculture land in favour of Mohan on the plea of minority.
Mohan files a suit for breach of contract. Will he succeed? Decide the case with
the help of statutory and relevant case law.
ANSWER:
INTRODUCTION:
- Sec. 10: parties should be competent to contract
- Sec. 11: Every person is competent to contract who is of th
- age of majority according to the law to which he is subject,
- and who is of sound mind, and
- is not disqualified from contracting by any law to which he is subject.
FACTUAL SITUATION: (State briefly)
LEGAL ISSUE: (State the legal issue (s))

MINOR PERSONS
- Age: Not attained age of 18 years (the Indian Majority Act, 1875 (9 of 1875) or 21 years in case of
guardian.
NATURE OF MINOR’S AGREEMENT
- Not clear in sec. 10 or 11 whether void or voidable at option of minor.
- Mohori Bibee v. Dharmodas Ghose (1903) 30 I.A. 114: Void ab initio
• Facts
• Legal Issue
• Decision
- Rationale: the general presumption that every man is the best judge of his won interests is
suspended in case of children. Thus, law acts as guardian of minors and protects their rights,
because their mental faculty are not mature.
1. NO ESTOPPEL AGAINST MINOR
- Defence of Infancy?
- SEC. 115, Evidence Act
- Khan Gul v. Lakha Singh, AIR 1928 Lah. 609
2. No liability in contract or in tort arising out of contract
- Burnar v. Haggis (1863)
3. Doctrine of restitution:
- English Law: If he obtains goods or property — equity—> restore —> provided TRACE— but
sold/converted no remedy as void ab initio: Leslie v. Shell
- Indian Law: Khan Gul v. Lakha Singh, AIR 1928 Lah. 609 Justice Shahdilal
• Facts
• Legal Issue
• Decision
 • No relief under sec. 64 or 65 of ICA as minor’s agreement is absolutely void.
- Ajudhia Prasad v. Chandan Lal, AIR 1937 All. 610 Chief Justice Suleiman
• Facts
• Legal Issue
• Decision
- Doctrine of Restitution: Sec. 41 of old SRA—>Sec 33 SRA 1963 (DISCUSS)
Sec. 39 of old SRA—> Sec. 31, SRA 1963
4. Liability for Necessaries Sec. 68
Nature of Liability: Nash v. Inman
CONCLUSION
According to facts citing the case provided in the facts citing the case, the minor, Ram will not be
held liable for any breach of contract, as the contract was a void contract.

As per Sec. 33 (2) (b) incorporates Justice Shahdilal’s opinion regarding compensation and
restoring position ante-contract. A minor can be compelled to account for such portion of money or
anything else received by him as has gone to benefit him personally or his estate as ‘against his
estate’.

Q.4 Khubi and Gograj were two brothers and both were equal owners of the joint
family property. They quarreled and had fights over this property. Due to the
same, Gograj initiated criminal proceeding against his brother Khubi. Khubi
mortgaged his share of property to Vikram to defend himself in the criminal
proceedings and borrowed from him 50000 rupees at a compound interest of
26%. In 10 years, the amount borrowed multiplied more than twelve-fold i.e.,
around 6,49,000. Khubi applied for cancellation of mortgage deed. Will he
Succeed? Decide.
ANSWER:
INTRODUCTION
- SEC. 10: valid contract = free consent of parties
- Sec. 13: consensus ad idem
- Sec 14.: free consent

FACTUAL SITUATION: (State briefly)

LEGAL ISSUE: (State the legal issue (s))

UNDUE INFLUENCE: Sec. 16

- ingredients Sec. 16 (1)
1. relations subsisting
2. position to dominate the will
3. Uses position to obtain an unfair advantage
MEANING OF UNDUE INFLUENCE
- Illustrations
RELATIONS WHICH INVOLVE DOMINATION
- relations subsisting between the parties: Sec. 16 (2)
(i) real or apparent authority
(ii) fiduciary relation
(iii) mental capacity is temporarily or permanently
PRESUMPTION OF UNDUE INFLUENCE (UNCONSCIONABLE TRANSCATION)
- Sec. 16 (3) transaction appears unconscionable then the burden of proving that the contract was
not induced by undue influence is to lie upon the person who was in a position to dominate the
will of the other.
- Illustration (c) Sec. 16.
- Presumption of undue influence is raised in following cases:
1. Unconscionable bargain
- Hard bargains not necessarily unconscionable: Explanation to Sec. 16.
2. Inequality of bargaining power (economic duress)
The facts of the given case are similar to the case of Raghunath Prasad v. Sarju Prasad (1923) 51
I.A. 101:
- FACTS:
- LEGAL ISSUE:
- DECISION:
- AS PER COURT THERE ARE Three STAGES OF APPLICATION OF SECTION 16:
1. First Stage: relations between the parties to each other must be + one is in a position to
dominate the will of the other.
2. Second stage: whether the contract has been induced by undue influence- unfair advantage
3. Third Stage: onus probandi. transaction appears to be unconscionable then the burden of
proving that the contract was not induced by undue influence is to lie upon the person who was
in a position to dominate the will of the other.
Similarly, these steps were applied in later cases:
Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878
- FACTS
- LEGAL ISSUE
- DECISION
Lakshmi Amma v. T. Narayana Bhatta, 1970 (3) SCC 159
- FACTS
- LEGAL ISSUE
- DECISION
- Sec. 19 A
- CONCLUSION:
The facts of the given case are similar to the facts of Raghunath Prasad v. Sarju Prasad which laid
down three important principles for application of section 16. Khushi will not succeed even though
the bargain had been unconscionable on the face of it as a remedy under ICA is not available unless
the initial fact of a position to dominate will of the other has been established. This condition is not
fulfilled.

Q.5 A, a film producer had entered into a contract with B to exhibit the film in
B’s cinema hall on 25th April 2020. On the said day the movie could not be
exhibited due to the outbreak of corona as the cinema halls were to be kept closed
in terms of an executive order of the government. As a result, A suffered huge
losses. A has filed a suit against B. How would you argue the case of B if engaged
as his lawyer?
ANSWER
INTRODUCTION:
- Doctrine of frustration and Doctrine of supervening impossibility
Lex cogit ad impossibilia: law does not recognise what is impossible
Impossibilism nulla obligato est: what is impossible does not create an obligation
FACTUAL SITUATION: (State briefly)
LEGAL ISSUE: (State the legal issue (s))

DEVELOPMENT OF THE DOCTRINE OF FRUSTRATION

Initially, general principle of judicial non-interference as subsequent happenings do not affect a
contract already made, in English case of Paradine v. Jane (1647) K.B.
Rule is only applicable when the contract is positive and absolute in Taylor v. Caldwell (1863) 3
B & S 826 (E), Blackburn, J.
Tussle between two principles: principle of sanctity of contract which supports the principle of
absolute liability and the principle that a contract be discharged when the shared contractual
assumption is destroyed by change in circumstances.
Krell v. Henry (1903) Kings Bench, Vaugham Williams L.J.

GROUNDS:
Doctrine of frustration is applicable in TWO SITUATIONS:
Physically impossible Taylor v. Caldwell (1863)
Object that parties had in mind has failed to materialise Krell v. Henry (1903)
Sec. 56 applies to both types of frustration, SC in Satyabrata Ghose v. Mugneeram Bangur &
Co., AIR 1954 SC 44

IMPOSSIBILITY OF TWO TYPES:

1. Initial Impossibility:
The first paragraph of section 56 lays down the law in the same way as in England. It speaks of
something which is impossible inherently or by its very nature, and no one can obviously be
directed to perform such an act. [illustration (a) to Sec. 56]
(i) Known to parties: absolute impossibility
(ii) Unknown to parties
Make compensation Third Para of sec. 56 [illustration (c) to Sec. 56]
2. Subsequent Impossibility: The second paragraph of section 56 enunciates the law relating to
discharge of contract by reason of supervening impossibility or illegality of the act agreed to be
done. [illustration (b) to Sec. 56]

GROUNDS OF IMPOSSIBILITY OF PERFORMANCE IN INDIA

1. Destruction of subject-matter
Taylor v. Caldwell (1863)
West Bengal Khadi and Village Industries Board v. Sagore Banerjee (2003) 1 ICC 991 (Cal.)
2. Change of circumstances
Illustration (b) to sec. 56
Viscount Maugham in Joseph Constantine Line Ltd. v. Imperial Smelting Corpn 1942
Alopi Prasad v. Union of India AIR 1960 SC 588
- FACTS
- LEGAL ISSUE
- DECISION
Easun Engineering Co. Ltd. v. The Fertilizers & Chemicals Travancore Ltd., AIR 1991 Mad. 158
- FACTS
 - LEGAL ISSUE
- DECISION
3. Non-occurrence of Contemplated Event
Krell v. Henry (1903) 2 KB 740
4. Death or personal incapacity of the promisor
Illustration (e) to sec. 56
Robinson v. Davison (1817)
5. Government, Administrative or Legislative Intervention
Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44
- FACTS
- LEGAL ISSUE
- DECISION
Punj Sons Pvt. Ltd. v. Union of India AIR 1986 Delhi 158
- FACTS
- LEGAL ISSUE
- DECISION
6. Intervention of war
Illustration (d) to sec. 56

EFFECT OF SUPERVENING IMPOSSIBILITY

Para 2, Sec. 56
Frustration Operates Automatically => Contract VOID
Adjustment of Rights
Sec. 65: Doctrine of Restitio in Integrum
Para 3 of sec. 56

CONCLUSION: Para 2 Sec. 56, impossible to perform subsequently as executive order of gift to
keep cinema halls closed. Hence, the contract has become void.

Q.6 X, who was a cloth manufacturer had entered a contract with ABC Transport Co.
to deliver cloth at Jaipur where he was expected to carry on his business at high
profits by the reason of a forthcoming festival. X had only mentioned that the cloth
must be delivered at the specified address. Because of the fault of ABC Transport Co.
goods were delayed and delivered much after the conclusion of festival. A claim
projected losses, that is, the loss of profits that he might have earned had the goods
been delivered at the right time. Will A succeed? Discuss the law and precedent in
this regard.

INTRODUCTION: Sec. 37 provides that parties to contract must perform or offer to perform the
promises. Sec. 39 provides repudiation when either party refuses to perform or makes it impossible
to perform his part of contract. In such case, the consequences of breach of contract is provided in
Sec. 73 and 74.
1. Damages
2. Quantum Meruit
3. Rescission
4. Specific performance and
5. injunction
FACTUAL SITUATION: (State briefly)
LEGAL ISSUE: (State the legal issue (s)) Can profits be claimed as damages?

DAMAGES
• Meaning: compensation in terms of money for the loss suffered by the injured party.
• Burden lies on the injured party to prove his loss.
• Every action for damages raises two issues:
1. Remoteness of damage
2. Measure of damages

I. REMOTENESS OF DAMAGES
Hadley v. Baxendale, ALDERSON B: Contemplation of parties
- FACTS
- LEGAL ISSUE
- DECISION
1. General Damages: knowledge parties are presumed to have= IMPUTED KNOWLEDGE
Horne v. Midland Railway Company (military shoes)
2. Special Damages: reasonably in contemplation of parties= ACTUAL KNOWLEDGE
• No recovery of special damages when special circumstances not known: Horne v. Midland
Railway Company
• Special circumstances already within knowledge of contract breaker, formality of communicating
them is not necessary: Simpson v. London and North Railway Company (exhibition at
Newcastle)
• Victoria Laundry (Windsor) Ltd. v. Newman industries Ltd: Asquith, L.J.: Reasonably
foreseeable or within ‘Reasonable man’s foresight’ ie TEST OF FORESEEABILITY. This is
principle in law of tort also, hardly any distinction remained between tort and contract principles
relating to remoteness of damages.
• The distinction was restored by again laying emphasis upon ‘contemplation of parties’ in the case
of Heron II, the Koufos v. C. Czarnikov Ltd 1969 AC (Form a single general principle) by LORD
REID.
• TEST = CONTEMPLATION OF PARTIES

- SECTION 73
- Incorporates rules of Hadley v. Baxendale OF SPECIAL DAMAGES AND GENERAL
DAMAGES.
- Sec. 73, para 2: not remote or indirect loss: Illustration (n)

TYPES OF DAMAGES
1. General or ordinary Damages
• AKAS Jamal v. Moolla Dawood, Sons & Co. (1915) XX C.W.N. 105: date of breach
• Illustrations a, b and c
2. Special Damages
• Simpson v. London and North Railway Company
• Victoria Laundry (Windsor) Ltd. v. Newman industries Ltd: Asquith, L.J.
• Illustrations I, j, k and l, generally d to r
• Karsandas H. Thacker v. M/s. The Saran Engineering Co. Ltd
- FACTS
- LEGAL ISSUE
 - DECISION
3. Nominal Damages
4. Damages for mental pain and suffering and exemplary damages
• Unjustified dishonour of cheque
• Breach of a promise of marriage
• Failure of a vendor of a real estate to make title
• Ghaziabad Development Authority v. Union of India, AIR 2000 SC 2003

Relate to factual situation.

II. MEASURE OF DAMAGES

1. Compensatory Nature of Damages
Victoria Laundry (Windsor) Ltd. v. Newman industries Ltd
2. Duty to mitigate the loss
• Explanation, Sec. 73
• AKAS Jamal v. Moolla Dawood, Sons & Co. (1915) XX C.W.N. 105
- FACTS
- LEGAL ISSUE
- DECISION
• Murlidhar v. Harishchandra 1962 SC
• S.S. Shetty v. Bharat Nidhi Ltd AIR 1958 SC
For purpose of remedy, no distinction between contracts and quasi-contracts (Sec. 73, para 3)
Karsandas H. Thacker v. M/s. The Saran Engineering Co. Ltd: illustration (k) — compare with
(l)
3. Sec. 74 Measure of damages in two classes of cases:
Where the contract names a sum to be paid in case of breach
Where the contract contains any other stipulation by way of penalty
(Fatehchand v. Balkrishnan Das)

Relate to factual situation.

CONCLUSION
Both parties must be in contemplation of special damages. Hence, A is not entitled to claim
projected profits as loss of profits during the period of delay as request was not in contemplation of
parties at the time of the contract.