“Aw hnsucion for PhICOSOPHY & LAW Marjotatin Trpenoce =» \ tes Adv. SANTHOSH UME ‘MA(Phil), MAL ‘THE LAW & JU ‘Thampanoot, Tb INDIAN CONTRACT ACT PART-1 SRMIAN CONTRACT ACT PART-1 ‘The Indian Contract Act came into force from 1* applies to the whole of Indian, except the State of Jamma deals with the general principles of contracts, It states the valid contract shall ene into being and the right and liabiliti day of September 1872. It and Kashmir, The act mostly, circumstances under which a ies’ of the parties under it. ‘The act is not retrospective, ic, it does not affect contract which were made and cmered into before the day on which it came into operation. The Act does not deal with all branches of contracts. For example, contracts relating to. cheques, bills of exchange and promissory notes, we have the special Act, viz, the ‘Negotiable Instruments Act” for Contracts relating to insurance we have the “Insurance Act’ for contracts of sale of ‘goods Wwe have the ‘Indian Sale of Goods Act; for transfer relating to immovable property, ‘The Transfer of Property Act’; the Partnership Act.deals with partnership agreements, acd so on. The Contract Act 1872 deals only with general principles of the law of contracts ::at ‘some special contracts such as those of indemnity, guarantee bailment and agency. Contracts implies by law, i, “Quasi Contracts” also come under its purview. ‘The Law of Contracts ‘The law relating to, contracts is the law that deals mainly with alia agreements, i.e. agreenient enforceable at law. Contract—Definition and meaning The word ‘contract’ is derived from the L; atin word *Contractum’ which means “drawn together’ Salmond defines a contract as, “an agreement creating and defining obligations between the paities”, ‘ Section 2(h) of the Indian Contract Act, 1872 defines the term contract as follows, “An agreement enforceable by law is Contract” Consists of two elemenis:- ‘Therefore a contract essentiallya. An agreement — b. Enforoéability’at law ® Enforceability at law means enforceable through the cotitt of law. So only these agreements, which can be enforced at law, are contracts, For example, A invites B to a dinner and B accepts the invitation. It is an agreemen: but it cannot be enforced through the court of law, Because it is only a social agreement. Similarly agreements relating to domestic affairs are not a contract. Mars. Balfour Vs. Balfour Mr, Balfour was employed in Ceylon, Mrs. Balfour owing to ill health, had to stay in England and could not accompany him to Ceylon. On the oceasion of leaving her in England for medical treatment Mr. Balfour promised to send her Rs.30 per month while he was in abroad. But M. Balfour failed to pay the amount, So Ms. Balfour files to sitit against her husband for recovering the said amount. The court held that it was @ mere domestic agreement and’énforceable. In another example, A agrees to sell his car to B for Rs. 50, 000/-. This agreement can be enforced by law. So it is a contract. Thus we can rightly say that “all agreements are not contracts, but all contracts are agreements”. In short, Contract= Agreement Enforceability at law. Essential elements of a contract ‘The essential elements of a contract are contained in the definition of contract given in section 10 of the contract act. According to Sec.10 “all agreements are contracts if they are made free consent of parties competent to contract for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.” ‘Thus the essential clements of a contract are:~ 1, Two or more parties 2. Anagreement - Consensus ad idem (identity of mind) Capacity of parties Free consent Consideration Lawful object . Not declared to be void 9. Certainty in terms 10. Possibility of performance ray aK er ayeIn order that an agreement may be enforceable at law. it is necessary that it satisfies the essentials of a valid contract. 1. Two or more parties At least two parties are essential for every valid contract. A person canaot enter into a contract with himself. The person who makes the promise is known as ue “promiso:” and the person to whom: the promise is made known as the “promisee™. As a matter 0 fact, in a contract, each party is a promisor as well as a promisee. For example, when A promises to sell his car for a sum of Rs. 50,000/- to B. Here Ais a Promisor because he has promised to sell his car while he is also a promise because there is @ promise from B to pay a sum of Rs. 50,000/- to him, applicable to B. The same is also 2. Agreement Sec.2 (e) There must be an agreement between the parties of a conttact. An agreement involves an offer by one party and an acceptance by the other party. Therefore an agreement =offert acceptance. : According to section 2 (e) 0 the Indian Contract Act, agreement is “ “every promise ans every set of promises forming consideration for each other is called an agreement”, ‘A. proposal when accepted by another party becomes a promise. Promise-offert acceptance, - For example: A offers to sell his car to B for Rs.50, 000/- B accepts the offer, Soa lawful offer (proposal) and a lawful acceptance complete an agreement, Offer or proposal (See.2 (a) Sec, 2 (a) defines proposal as (when one person signifies to another his willingness to-do or to abstain from doing anyching with a view to obtaining the assent of that other to The person making the proposal is called proposer (offeror) and the petio! ‘whom the offer is made is called the offeree. For example: when A expresses his willingness to sell his car to B for Rs. 50,000/- with a view to get B’s acceptance to this offer, A is said to make a proposal. A is called offeror and B is called offeree. Offers are generally o two kinds, specific and general,Specific offer Specific offer means offer made to some specific individual _or individuals Specific offer can be accepted only by the person or persons to whom it has been made. For example: A offers to sell his car to B for Rs.50, 000/-. This is a specific offer and it can be accepted only by B and by no one else. General Offer General offer means an offer made to the world at large. It is not made to any particular person or persons, General offer can be accepted by any person having notice of the offer. For example: A made a public advertisement that he would give Rs.100/- to anyone who brings back his missing dog. Carlill Vs Carbolic smoke Ball Co. Where a company advertised that persons using its carbolic smoke ball would become immune from influenza and similar disease and offered a reward of Rs.100/- to any person who after using it contracted influenza, The plaintiff used a carbolic smoke ball for the prescribed period of a fortnight, but still contracted influenza. She sued for the reward of Rs.100/-. The Court held that the plaintiff could recover the reward of Rs.100/-, ‘The offer was general one, and Mrs. Carlill had accepted it by acting according to the advertisement and, therefore, the company could not get away from responsibility. ~ Offer can be made either expressly or impliedly. Express offer When an offer is made by words spoken and written, is called express offer. For example: if A either tells or writes to B that he is prepared to sell his car for Rs,.50, 000/-, it is an express offer. Implied offer ‘When an offer is made by conduct or behavior, it is called implied offer. For example: A bus company runs buses between Thiruvananthapuram and Kollam, There is an implied offer from the bus company to take any person on the route thai is prepared to pay the prescribed fare.Ext ota vahd otter The following characteristics are necessary to create valid offer, ' 1. An offer must be made with an intension of creating legal obligation ‘The most important characteristic of a valid offer is that it must cre: ameng the parties. Otherwise it is not an offer in the eye of law. offer must impose. ate legal obligation On thé other had an Some legal duty on the party making it, so an offer made to a friend for a dinner Goes not create legal relationship, Case: Balfour vs. Balfour The terms of an offer must be certain and definite, so that the rights and obligations of the parties of the contract can be exactly fixed. For example: A agrees to sell B, 5 kg of oil. This is not a valid offer because the terms ‘oil’ is uncertain. Théte is nothing in the agreement to show what kind of oil was intended. Taylor vs Portington A agreed to let out his house to B for 3 years at rate of £85 per annum. B stated that he would agree to take the house for the above rent if the house was put into through repair and the drawing rooms were decorated according to present style. In this case the term “drawing rooms were decorated according to present style” is not a definite terms, because the term ‘present style’ may mean one thing to A and another to B. Hence in this case the Court held that the agreement was wijde.on the ground that the promise coulé-not be enforced. Maa 3. Offer must be communicated to the offeree An offer must always communicated to the offeree, If there is no communication Of an offer there will be no acceptance also. Section 4 lies down that the communication of an offer is complete only when it reaches the offerec, Lalmansukla vs Gauridutt G sent his servant L in search of his missing nephew. Subsequently G announced a reward for giving information relating to the boy. L before seeing the announcement hhad traced out the boy and informed G. Later on, L come to know of the reward and =laimed it. The court dismissed the claim petition and held that there can. be no 5acceptance unless there is knowledge of the offer. Here there was not communication of the offer of rewarded by G to L. 4, Offer must be made with a view to obtaining the assent of the OTHER PARTY ‘The offer to do or not to do something must be made with a view to obtaining the assent of the other party adéressed and not merely with a view to disclosing the intention of making an offer mere enquiry is not an offer. 5. An offer may be positive or negative A person may express his willingness to do something that is positive offer. For example: it may be an offer to construct a wall. A person may express his willingness to abstain from doing something negative offer. For example: It may be an offer not be construct a wall. §. Offer ma nal ‘Where any special terms are to be included in a contract, these must be duly communicated to the offeree at the time when the offer is made. Henderson vs Stevenson ‘A purchased a steamer ticket on the fact of which it was printed,’ Dublin to Whiteheaven’. On the back of the ticket, there was a term that the carrying company was not liable for losses of any kind. But there was nothing on thefice of the ticket to draw ‘A’s notice to the terms on the back of the ticket. On account or the negligent navigation on the part of the servants of the company the ship struck a rock and A lost his luggage and he sued for damages. The contention of the company was that a condition which was printed on the back of the ticket absolved them from liability. It was held that A was entitled to recover his loss on ground that the company had not taken reasonable steps to communicate the terms to A. 7. Offer should not contain a term, the non compliance cfwhich would amount to acceptance, ‘One cannot say while making the offer that if the offer ids not accepted before a certain date, will be presumed to have been accepted. For example: A writes to B, “I will sell you my car for Rs.50, 000/-. If you do not reply, I shal! assume you have accepted the offer”. This not an offer. 8. Offer must be distinguished from:1. A geclaration ofmtention, A declaration by a person that he intends to do something is not un offer. Harris Vs Nickerson Nickerson, an auctioneer, advertised in a newspaper that sale of office furniture would be held on a specified day. Harris with the intention of buying some femiture seme from a distant place to attend that auction but all the furniture was withdrawn from the sale. Harris there upon sued Nickerson for his loss of time and expenses, The Court held that a declaration of inteation to doa thing did not create a binding contract wit those who acted upon it, so that Harris could not recover. 3 11. An invitation to an offer. An offer must be distinguished from an invitation to make an offer. Display of goods by a shopkeeper in his window with prices marked on them, catalogue of goods, an advertisement for tenders, inviting applications fer job, a Prospectus of a company etc., is rot offers but merely an invitation to the public to make an offer to buy the goods. If these are considered as offers the person respondirg it can accept that offer. Thus if he accepts that offer there form a contract, If so, the eecepter can force the seller to sell the goods to him, But these are actually not offers, it is only invitations to the public to niake offer. ‘Their object is merely to circulate information of their willingness to deal with anybody, who on such information responding to them. ‘Thus the person, who responds to an invitation to an offer, makes the actual offer. The party issuing an invitation for the offers has a right to accept or not to accept them. Harvey Vs Facey Harvey sent a telegram to Facey stating, “will you sell us the estate of Bumber Hall pen. Telegraph lowest cash price”. Facey sent reply telegram to Harvey stating “lowest price for Bumper Hall Pen — £.900". Then Harvey telegraphed Facey “we agree to buy B.H.P for £.900 asked by you". But Facey did not send any reply to the last telegram sent by Harvey. Hence Harvey filed a case against Facey claiming the Bumber Hall pen estate. The court held thet there was no contract between Harvey and Facey. The reply ofFacey to the first telegram was an answer to the inquiry made by Harvey and it was not an offer. Fisher vs, Bell The shopkeeper exhibited among other things in his shop a flick knife with 2 marked price. The question was whether the exhibition of that knife constituted ‘an offer for sale. The court held that the exhibition of goods in a shop is no offer. 7Macpherson vs Appanna A offered to B, he is ready to buy B’s property for Rs.6000. B replied, ‘on’t accept less than Rs. 10000.” A agreed to pay Rs.10000. But B sold it to another person, It was held that mere statement of price by B contained no implied contract to sell it at that price. Counter offer: - If while accepting,an offer the acceptor has refused or altered any term then his acceptance operates as a counter offer. Then it cannot be said that there is an agreement between the parties. So counter offer may amount to a rejection of the original offer For example: A offers to sell his car to B for Rs.50, 000/-accepts to purchase it for Rs.40, 000/-. The acceptance is a counter offer. It is not a valid acceptance also. Cross offers: - Two offers similar in all respects, made by one party to the other, in ignorance if cach other's offer, are termed as cross offers, They shall not constitute acceptance of one’s offer by the other. + For example: - A, by letter, offers to sell his car to B for Rs.50, 000/- and likewise B, by a letter to A offers to buy the same car for Rs.50, 000. Both the letters cross each other in the postal transit, Standing offer: An offer for the continuous supply of certain goods at a certain rate over a definite period is called a standing offer. When large quantities of goods required by railways of other bodies from time to time, it is usual to call tenders for the supply of such goods. In such cases there exists standing offer, But an advertisement inviting tenders is not an offer. It is only an invitation to offer. Lapse of offer or when does an offer come to an end Sec.6 Section 6 of the Act states that a proposal is said to be lapsed on account of the fei! swing causes: 1. Revocation by communication of notice: An offer may be revoked by sending a notice of revocation to the offeree at any time before the offer is accepted by the offerec.By lapse of prescribed time: Where the offeror prescribes a time for acceptance and if there is no acceptance within that prescribed time the offer will be lapsed. Where no time is fixed it should be accepted within a reasonable time. Death of the offeror: _If the offeror or the offeree dies beore acceptance the offer will be lapsed. Insanity of the proposer: Suppose after the offer is made, the offeror becomes insane and the offeree comes to know of such insanity before acceptance, he cannot accept the offer. 5. Non fulfillment of conditions: the acceptance is not valid. If the acceptor fails to fulfil conditions in the offer Not_according to the mode prescribed: If the offeror prescribes any mode of acceptance it must be accepted according to the mode prescribed. 7. Rejection by a counter offer: The offer will be revoked if the offeree makes a counter offer. Acceptance sec.2 (b) Generally, acceptance is the expression of consent to the offer. When an offer is accepted it becomes a promise. According to section 2 (b) “when, the person. to. offer is made signifies his assent thereto, the proposal is said to be accepted.” Thus, acceptance is the consent of the party to whom the offer has been made to the establishment of legal relations between him and the offeror. It is an ascent to the terms of the offer. Acceptance can, be. given. only. by.the. person. m offer has been made. But, where the offer is general, any persons who have the notice of the offer can come forward and accept the offer. (Carlil Vs carbolic smoke Ball Company) An acceptance may be express or implied. Express acceptance: - When acceptance is communicated by words spoken or written, it is called express acceptance. Implied acceptance:- It is implied when it is to be gathered from circumstances or the conduct of the parties.For example: A bus company runs buses between Thiravananthapuam and Kollam, If a person takes a seat in the bus and is taken to the Kollam stop, Then he is impliedly accepts to pay the price of the ticket. Essentials of a valid acceptance 1. Acceptance must be absolute and unconditional The acceptance of the offer should correspond to the terms of the offer, and the acceptor should not impose any condition while accepting the offer. Acceptance must be in toto and without any condition. For example: A offers to sell his car to B for Rs.50, 000/- B accepts to purchase it for Rs. 40,000/-. This is not a valid acceptance, It is only a counter offer. 2. Acceptance must be communicated to the offeror Just as the communication of the offer, acceptance should also be communicated. The communication need not be of a particular kind but silence can never be prescribed as a mode of communication. Powel vs Lee X was a candidate for the Headmaster’s post in a High school, The board of management which was the appointing authority decided to appoint X as Headmaster, One of the members of the board, during the conversation with X, unofficially informed the news of his appointment in his individual capacity. But X did not receive any ‘communication from the board. Subsequently the resolution was cancelled. 30 X filed a suit against the board of management for breach of contract. It was held that in the absence of an authorized communication from the board of management, there was no completed contract. So the suit filed by X was dismissed. 3. tan st be made within the prescribed time Acceptance must be made within the time allowed by the offeror. prescribed, it must be made within a reasonable time. 4. Acceptance must be by the offeree When an offer is made to a specified person, it can be accepted by him alone, If not time is General offer-can be accepted by any person who has the knowledge of the existence of such an offer (Carlil vs carbolic smoke Ball Co). 105. Acceptance must be in the mode prescribed ‘ The offeror may lay down the manner of acceptance in his offer. In case the acceptance is not given in the prescribed mode, the proposer may reject the acceptance and inform the offeree within a reasonable time. Eliason vs Henshaw A sent a letter to B through a driver offering to buy 300 barrels of flour from B and requesting that the reply should be sent through the driver who brought the offer, But B sent his letter of acceptance by post instead of sending through the driver, It was held that there was no contract because the offer was not accepted in the mode prescribed. 6. Acceptance should be made before the offer lapses or revoked or is rejected, 7. Acceptance cannot precede an offer Acceptance must be made only after the offer is made. For example: In a company, shares‘are allotted to a person who has not applied for them. Subsequently when he applies for shares, he is unaware of the previous alloiment. The allotment of shares previous to the application is invalid. Communication of offer and acceptance An offer and its acceptance, to be complete, must be communicated. Communication offer sec.4 ‘The communication of an offer is complete when it comes to the knowledge of the offeree. When an offer is made by post, its communication will be complete when the offer in the letter comes to the knowledge of the offeree. Mere delivery of the letter will not make the communication of the offer by post complete. For example: - A proposes to sell his car at certain price and makes this offer by a letter sent to B. The communication of the offer will be complete when the proposal in the letter comes to the knowledge of B. Communication of acceptance Sec. 4 Communication of an acceptance is complete- a. As against the offeror when it is put in course of transmission to the offeror as to be out of the power of the acceptor to withdraw the same. . awIllustration: B accepts A‘s offer by a letter sent by post. The communication of the acceptance is complete as against A, when the letter is posted and out of B’s power to take backs it. b. As against the acceptor when it comes to the knowledge of the offeror. Ilustration: B accepts A’s offer by a letter sent by post. The communication of the acceptance is complete as against B, when the letter is received by A. Revocation of offer and acceptance Revocation means ‘taking back’ of ‘withdrawal’. Both an offer as well as an acceptance may be revoked, The communication of revocation is complete— a. As against the person who makes it, when it is put into the course of transmission to the person to who it is made so as to be out of the power of ths person who makes it to withdraw. Ulustration: A revokes his proposal by telegram. A’s revocation is complete as against A when the telegram is dispatched and out of A’s power to take back the same. ‘b. As against the person to who it is made, when it comes to his knowledge. Illustration: A revokes his proposal by telegram. A’s revocation is complete as against B when B receives it. CONSENSUS AD IDEM CAPACITY OF PARTIES- Capacity or competency to contract means the legal ability of a person to enter into a valid contract, the parties to a contract must be capable at law of entering into valid contract, Section 11 of the Contract Act proves that, “ 2ge Thus, the following persons are incapable of contracting: A minor, A person of unsound mind Persons disqualified for contracting by any other law. eee ORS According to Indian Majority Act, 1876, a person who has not completed his 18" year of age is considered to be a minor. Ifa minor is under the care and custody of the court and a guardian is appointed by the court for the minor, in such a case, the minor becomes major only on the completion of the age of 21 years. PERSONS OF UNSOUND MIND. One of the essential conditions of competency should be of sound mind. of parties to a contract is that they the purpose. of -itand of A person, who is usually of unsound mind, but occasional: make contract when he is of sound mind. y of sound mind, may 4 person, who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. ‘Thus, Idiots, Lunatics and Drunkards are not considered to be persons of sound mind. Idiot- A person who is devoid of any faculties of thinking rational judgment is called an idiot. In other words, an idiot is a person who has completely lost his mental powers. An agreement of an idiot, like that of a minor, is void. Lunatic- A person. whose mental powers are disarranged, is called a lunatic. Agreements made with lunatics, except those made during lucid intervals, (peroW! ia which he is iit his senses) are void, Drunkards- A drunken person suffers from temporary incapacity to contract, ie. at the time when he is so drunk that he is incapable of forming a rational: judement, ‘The Position of drunken person is similar to that of a lunatic. 13PERSONS DISQUALIFIED BY ANY OTHER LAWS. 1. Alien enemy. A person who is not a citizen is of India is called an alien. In case the State if alien is at peace with India, he is an alien friend; otherwise he is an alien ecemy. Contracts entered into before the declaration of war are either suspended or terminated. But during the subsistence of war no contract can be made with an alien enemy except with the prior approval from the Central Government. 2, Foreign Sovereigns and Ambassadors Etc. Foreign Sovereigns and their accredited representatives can be sued in Indian Cou:ts only with the previous permission of the Central Government. 3. Convicts. While undergoing sentence, a convict is incapable of entering into a contract. But this disability comes to an end when the period cf sentence expires ‘or when he is pardoned. 4. Corporations, A corporation is an artificial person created by law. It is competent to enter into contracts only through its agents. LAW RELATING TO MINOR’S AGREEMENTS Indian Contract Act has given a specially privileged position to a minor. He is allowed to take advantage of his acts but does not incur any kind of obligations. He cannot be held personally liable fer any of his wrongs. No legal action can be taken against him for his misbehavior or false promises. 1, An agreement by or with a minor is void. An agreement with a minor has been held to be void ‘eb initio’. It is not only void, but is absolutely void. In Mohiri Bibi Vs Dharmodas Ghosh the court affirmed this view. MINOR’S CONTRACT VOID CONRTACT Mo tizi_Bibi_Vs Dharmodas Ghose (1903). In this case a minor mortgaged his house to secure 2 loan of RS.20,000/- out of which the mortgaged . paid the minor a sum of Rs.8,000/- Subsequently the minor sued for setting the aside thé mortgage, stating that he was under age when he experienced the mortgage. Held the mortgage was void. 144 NOrauncation The term ratification means the act of approving. ‘The principle of ‘no ratification’ indicates that a contract made by a minor, during his petiod of minority cannot be ratified by him on attaining majority. 3. Minor can be a promise ‘The contract Act does not prevent a minor fom becoming a promise. For example if a promissory note is executed in favour of a minor by the borrower, the minor can enforce his rights. 4. Minor is not bound to return the benefits received A minor is not liable to repay any money or compensate for any benefit that he might have received under a void contract, For example: A, a minor obtains a loan by mortgaging his property. He is not liable to refund the loan. Not only this, even his mortgaged property cannot be made liable to pay the debt, 5. No estoppels against a minor Estoppel is a rule of evidence by which a person is not allowed to go back upon his earlier representations. If a minor represents himself as a major and enters into contract, he will not be prevented from setting up to the defense that he was a minor at the time of contract. In other words, he can raise the defense that he is a minor and the contract will not bind him. A minor is liable for necessaries supplied. All contracts relating to the necessities of the life supplied to a minor are valid, But he is not personally liable, only his property is liable, ie., the necessaries supplied person can claim reimbursement out of the property of the minor. 7. He cannot enter into a contract of partnership. But he may be admitted to the benefits of a partnership with the consent of the other partners. 8. Minor can be an agent An agent is merely a connecting link between his principal and a third party. The Principal will be responsible to third parties for the acts of his minor agent. 15*. Minor can’t be a member of a company A minor become a member of a company since he is not competent to enter into a contract. 10.A minor cannot be declared as an insolvent. A minor cannot be declared as an insolvent because even for necessities of life he is not personally liable. 11.His pi or guardian are not liable for the contracts made by 2 minor. The parents of @ minor are not liable for agreements made by a minor, though the articles purchased may amount to necessities. 5. FREE CONSENT. sent According to Section 13 “two. or. more nersons.are. said to. consent when they agree up 1g i nse.” This means that there should be perfect identity of mind (consensus ad idem) aun the subject matter of the contract. When each party has different thing in mind or understands the thing in a different way, there is no Teal consent. Free consent When there is no consent, there is no contract, But the consent should be free. In other words, free consent is the consent which is secured by the free will of the parties. When consent is not free the contract is not binding to the parties and the same can be avoided at the option of the party whose consent is not free. According to sec.14, consent is said to be free when it s not caused by: . Coercion, or . Undue influence, or . Fraud, or Misrepresentation, or . Mistake, wAYN 16LUERCION Sec.15 The threat amounting to coercion need not necessarily proceed from a party to the contract. It may proceed even from a stranger to the contract, Likewise, it may be directed against anybody—not necessarily the other contracting party. Consent is s: ‘aid to be caused by coercion when it is obtained by: . The committing or threatening to commit any act forbidden by the Indian Penal Code. E.g. After giving a good beating to A, B makes him to agree to sign a prom'ssory note of Rs. 10,000. E.g. A threatens to shoot B if he does makes a promissory not in favor of A. 2. The unlawful detaining or threatening to detain any property. Ranganayagamma_Vs Alwar Chetty Husband of a young girl of 13 years old had just dies and his body was about to be removed for cremation, ‘The relatives of the deceased husband threatened the girl that unless she gave her consent to adopt a boy to her husband, her husband’s body could not be removed for cremation. The girl gave her consent. Subsequently she filed a suit to cancel the adoption on the ground that the consent was obtained from her by coercion. The court held that the consent was not a free one, because under Section 297 or the IPC any person who obstructed a dead body from being removed would be guilty of ‘an offence and the consent was obtained by obstructing the dead body. Muthian Chettiyar Vs Kareppan chetty_ An agent refuses to hand over the books of account relating to the agency business to his principal unless the principal released from all past transactions. The principal, because of this coercion, did give the release. It was held that the release deed was voidable at the option of the principal on the ground of coercion. ct of coercion sec.19 When the consent of a party to an agreement is obtained by coercion the contract becomes voidable at the option of the party, whose consent is so obtained. wvUNDUE INFLUENCE sec. 16 Sometimes a party is compelled ta enter into an agreement against his wi ill as a result of unfair persuasion by the other party. This happens when a special kind of relationship exists between the parties such that one party is in a position to exercise in® aence over the other. Section 16 defines ‘undue influence’ as follows: Thus, undue influence is the domination of a weak mind by a strong mind. It is an influence which compels another person to do something, which he would not have done otherwise, ‘The three ingredients in the definition of undue influence are: 1. That the relations subsisting between the parties are such that one of the parties is ina position to dominate the will of the other, 2. That the dominant party obtains an unfair advantage over thie other. That the dominant party uses his dominant position to obtain that unfair advantage. Allead Vs Skinner A woman become a nun and was naturally under the influence of the ‘mother superior. She made a gift in favor of the mother superior. Later on she left the convent and immediately revoked the gift. The court held that the relationship between the plaintiff and the defendant raised a presumption of undue influence. eZ OI IN? Gerox7OT Persons deeméd to be in a position to dominate the will of the other: In the following three cases law presumes a person to be in a position to dominate the will of the other: 1. Where he holds a real or apparent authority over the other For example: Master and servant, parent and child 2. Where hestands in a fiduciary relation to the other, (Fiduciary relation means 2 relation of trast and confidence in each other) For example: Doctor and patient, Lawyer and client, 183. Where he makes a contract with a person whose mental capacity is affected by reason of age, illness or bodily distress, Contracts with pardanashin women A pardanashin woman is one who observes complete seclusion because of the custom of the particular community to which she belongs. A contract with pardanashin women is presumed :o have been induced by undue influence. Any person who enters into a contract with a pardanashin woman has strictly to prove that no undue influence was used and that she had free and independent advice understood the contents of ‘he contract and exercised her free will. Effects of undue influence sec.19-A. An agreement caused by undue influence shall be voidable at the option of the party whose consent has been so obtained. Difference between Coercion and undue influence Coercion ‘Undue influence Section ISofIC Act Section 16 of the IC Act definition... fo Definition.....i...seccad | Physical force is exercised Moral force is used Relationship between the promisor and the [Some sort of relationship must “Zust| promisee is not necessary between the two parties. ERAUD Sec.17 Misrepresentation of facts may be intentional or innocent. Intentional misrepresentation has been termed as ‘Fraud’. Fraud means an act committed by a party to a contract with the intention of deceiving the other party. According to Section 17 fraud means and includes any of the following acts committed by a party to a contract with intent to deceive another: a, Suggestion of an untrue fact which he does not believe to be true. b. Active concealment of a fact by one is having knowledge. ©. A promise made without any intention of performing it d. Any other act fitted to deceive. e. Any such act or omission which the law specially declares to be fraudulent, © good Sarl! aalaehe oy Yule. mbites sae GbE daginede 4. Raggemer’ e ge asEssential elements of a fraud 1. The act must have been committed by a party to the contract of his connivance or by his agent. It should not have been committed by a stranger. 2. The act must have been committed with the intention of inducing deceived party to act upon it. Smith Vs Chandwick A company’s prospectus contained a statement that one Mr. P was a director of the company. A person, ‘B’ who never heard of P applied for allotment of shares to him on the basis of company’s prospectus, Asa matter of fact P was not actually on the Board of Directors of the company. B wanted to set aside the contract on the ground of misstatement in the prospectus. It was held that B could not do so because the untrue statement was immaterial to him, and it had in no way induced him to purchase shares in the company, 3. The act must have in fact deceived the other party Ifa person has committed a fraudulent act.to deceive the other party, but the other party has not been actually deceived by his act, it will not be taken as a fraud on his part. Illustration: A, owner of an unsound horse, forged a veterinary surgeon’s certificate stating the. horse to be sound and pinned it at the stable door. B came to buy the horse He did not notice the certificate and purchased the horse for a heavy price. Later on B sued for setting aside the contract on the ground of fraud. It was held that contract could not be set aside on the ground of fraud, because B had not seen the certificate and therefore he was not deceived by A’s fraud. 4. Plaintiff must have suffered. “There is no fraud without damages”, and, therefore, to constitute fraud it is necessary that the plaintiff must have suffered some loss of money or money’s worth, Silence as fraud The general rule is that mere silence without any legal duty to speak will not amount to fraud. But this has two exceptions: 1. The circumstance of the case show that there was a clear duty to speak, and 2. Silence is equivalent to speech. Duty to speak, In'the case of the following types of contracts the law requires that person knowing materials facts must speak out the facts, otherwise it will be taken as a fraud on his part. 20 | 1 |1. In the case of contracts requiring the al Agreements) law imposes upon patties luty of making a true and full disclosure of all material facts. Following contracts come within this class. a. Contracts of Insurance, It is the duty of both of insurer and the insured to reveal every material fact within knowledge. * b. Contracts for the sale of immovable properties. Section 55(1) of the Transfer of property Act requires the seller “to disclose to the buyer any material defects in the property or in the seller's title thereto, of which the seller is, and the buyer is not aware, and which the buyer could not with ordinary care discover.” In case the buyer knows 2 material fact of which the seller is ‘unaware, he must disclose it to the seller. ¢. Allotment of shares in companies. A company inviting the public to subscribe its shares must disclose all information regarding itself in the prospectus with strict accuracy, 4. Family settlement Full disclosure of all material facts is necessary when family disputes are settled by mutual agreement. ©. Contracts of marriage, Each party to a contract of marriage must disclose every material fact knowa to him and which affects other party's intention to marry. 2. Contracts of partnership, Partnership Act provides that partners must observe absolute good faith and must be just and faithful to each other. They are also required to render true accounts and full information of all things affecting the firm to any partner. 3. Contracts of guarantee In case of contracts of guarantee, the creditor must disclose material facts which are known to him about the debtor. Any guarantee obtained by him concealmé: sof material facts will not be valid. 4. Fiduciary relationshi Parties standing in a fiduciary relation to each other are duty- bound to disclose all material facts to the other party which are likely to affect his willingness to enter into a contract. Silence equivalent to speech- Silence will amount to fraud in all those cases where it shall be considered equivalent to speech. 2Mlustration: B says to A—“If you do not deny it, I shall assume that the horse is sound”? A-+-ysnothing. Here A’s silence is equivalent to speech. Effects of Fraud Sec. 19 The affected party has the following rights. 1. He may avoid the contract or 2. He can insist on the performance of the contract on the condition that he shall be put in the position in which he would have been if the representation made had been true, Or 3. He can sue for damages MISPEPRESENTATION Sec.18 Misrepresentation is a false representation made innocently without any intention of deceiving the other party. It may include two things: 1. Wrong statement of a material fact not known to be false or 2. Non-disclosure of facts where there is a legal duty to disclose without any intention to deceive According to section 18 mistepresentations means and includes: 1. By positive statement, If a person makes an absolute and eplict statement of fact, which is not trae though he believes it to be true, it will be said that he is guilty of miscepresentation. Illustration: A says to B without having examined the records that in his factory 100 tonnes of cement is manufactured every month. A believes that his assessment is very correct, B, thereupon, buys the factory. The actual production of the factory is found to be only 85 tonnes, A is guilty of misrepresentation. 2. By breach of duty. If a person commits a breach of duty on account of which he gains something, while the other party loses, it will be termed as misrepresentation if it has not been done with the intention of deceiving the other party. Ilustration: A when approached by a life insurance agent for insuring his life, states his age to be 25, believing it to be true. His actual age is 27. The LIC issues a policy in his favour charging a rate of premium lower than what is should have charged for the actual age of A. There is misrepresentation by A 22>. Causing mistake by innocent Misrepresentation: Tf an account’: of aa mistepresentation of a fact, che other party commits a mistake about something which is essential to the contract, it will be said chat mistepresentation has been committed. Mlustration: A says to B an intending purchaser of a house that his house is in perfect coadition not knowing that the foundation of the house is very weak and some of the walls have got big cracks. B, thereupon, buys the house. A is puilty of misrepresentation, Effects of misrepresentation The aggrieved party has the following two rights: 1, He can avoid the contract. 2. He can claim damages. MISTAKE Sec.20 to 22 Section 13 says that “Two or miore persons are said to consent when they agree upon the same thing in the same sense”. But when there is a mistake or error in consenting minds of the parties, the consent is not said to be free. Such mistake may be happen in one party or both. Generally mistake may be of two kinds: 1. Mistake of fact 2. Mistake of law. —_—_—7 Mistake of Fact spoviehe, bye a me Saseiy Se Pieete Tt may be: a. Bilateral mistake or b. Unilateral mistake. Bilateral Mistake According to section 20 “where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, there is a bilateral mistake. In such @ case, the agreement is void.” There are two conditions to be fulfilled for the application of Sec.20. These are as follows. 23ences es SRI Jt f 1, The mistake must be mutual ie, it should be committed by both the parties. . For example: A agrees to buy from B a certain horse. It turns out that the horse was deaé i at the time of the bargain, though neither party was aware of the fact. This agreement is i void. ; 2, Itshould relate to a matter of fact essential to the agreement. The mistake must elate to a matter of fact and not to a matter of law, expectations or opinion etc. all vs Galloway A and B believing themselves to be married, made a separation agreement in which A agreed to pay B £ la week. It was later discovered that they were not duly married. B claimed the promised payments. The agreement was held to be void as there was mistake of fact on their part which was material to the existence of the agreement. Bilateral mistake may be: 1. Common mistake: when both the parties have made the same mistake; or s¢ 2, Mutual mistake: where both parties make a different mistake. Again, bilateral mistake of fact may be: 1. Mistake as to subject matter. 2. Mistake as to possibility of performance. Mistake as to subject matter Mistake as to subject—matter may be of the following types: 1. Regarding existence of the subject—matter: If both the parties believe the subject—matter of the contract to be in existence, which in fact at the time of the contract is non- existent, the contract is void. For example: A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain though neither party was aware of the fact. The agreement is void. 2. Regarding identity of the subject—matter:_ It usually arises where one party intends to deal in one thing and the other intends to deal in another. Raffles vs Whichelhaus — W agreed to buy from R cargo of cotton, “to arrive ex- peerless from Bombay”. There were two ships of that name sailing from Bombay, 24one sailing in October and the other in December. W meant the former ship but R meant the latter. Held that there was a mutual mistake and there was no contract, Regarding quality of the subject-matter: There is no contract, if the subject matter is something essentially different from what the parties thought it to be. Nicholson & Venn vs Smith Mariott_At an auction sale table napkins were sold by this description, “With the crest of Charles I and the authentic property of that monarch.” Actually the napkins were Georgian, but both the parties were ignorant of it, It was held that the agreements were void, 4. Regarding quantity of the subject- matter: The agreement is void and there is no contract if the parties concerned are under a mistake as to quantity of subject- matter. Cox Vs Pi ice - A silver bar was sold under a mistake as to its weight. There wes a difference in value between the weights of the bar as it was and as it was supposed to be. Held; the agreement was void. 5. Regarding title to the subject-matter: If the seller is selling a thing which he is not entitled to sell and both the parties are acting under a mistake, the agreement is void. a Cooper Vs Phibbs- A agreed to take a lease of fishery from B. It was unknown to both the parties that fishery actually belong to A. Held, that the agreement was void, 6. Regarding price of the subject-matter: If there is a mutual mistake as to the price of the subject-matter, the agreement is void. Ilustration: A contract of lease of a house was agreed at a rent of £. 230 but in the written contract the figure was put as £.130 by mistake. Held, that the contract was void. Mistake as to the possibility of performance: Where the agreement is impossible to perform but the fact of impossibility is unknown to both the parties, the agreement is void, The impossibility may be. 1. Physical impossibility Griffith Vs Brymer (Coronation ci A hires a room for B for watching the coronation procession of King Edward-VII. Unknown to both the parties the procession had already been cancelled. The contract is void. 252. Legal impossibility- A contract is void where it provides that something should be done which cannot legally be done. For example: A person cannot take loose o7 his own land. Unilateral mistake In this mistake, only one of the parties is mistaken, but the other is aware of it. According to Section. 22 For example: A sells his house to B for an intended of Sum Rs, 44, 000/-. By mistake he makes an offer in writing of Rs. 40,000 B accepts that offer. The contract cannot be avoided by A. But to this rule there are certain exceptions: 1. Mistake as to the nature of the contract A contract shall be void if a party to the contract without any fault of his own makes a mistake about the very nature of the contract. For example: In, milliterate old man signed a bill of exchange believing that it was a guarantee. This was held to be void. to the identity of the party contracted with The mistake about identity occurs when one o the parties represents himself to be some person other than he really is or where a party enters into an agreement with some person believing him to be some other person For example: In Boulton Vs Jones- It was held that the contract was vitiated by a mistake. Where W intended to contract only with X but entered into a contract with Y believing him tobe X. Mistake of Law. Mistake of law may be of two kinds: 1. Mistake as to Indian Law. 2. Mistake as to foreign Law. Mistake as to Indian Law ‘Ignorantia Juris non excusat’ is a well settle of rule of law. This means that ignorance of Law is no excuse, A mistake as to Indian law will not make a contract 26 pnt te SST SEvoidable. This because eve ry person in this country is expected to know the law of this > country. istake as to en La Mistake as to a Foreign Law has the same effect as a mistake of fact, and, therefore, the contract can be avoided. CONSIDERATION Consideration is one of the essential elements to su; ipport a contract. An agreement made without consideration is void. ‘quid pro.quo’ {.e., something in rerum), When a party to an agreement promises to do something, he must get “Something” in return, This ‘something” is called consideration. Broadly speaking, it is the price paid by the promiseg for the obligation of the promisor. For example, A agrees to sell his car to B for Rs, 50,000/-. Here, A’s Consideration is Rs.50, 000/- and B’s consideration is the car. ce Definition of consideration Sec. 2(d) mM ¢. desire. J” abstained from doing or does or doing. promise,” the. of. promise. is. called. a, consideration for. the For e.g.: A agrees to sell his car to B for a sum of Rs, 50,000. For A’ 's promise the consideration is a sum of Rs. 50, 000 while or B’s prom ise consideration is the car. Essential elements of consideration 1, Consideration must move at the desire of the promisor Itis essential that promisee should perform his part of the promise only at the desire of the promisor. If it is done without the desire of the promisor, it will not be a good consideration. 2. Consideration may moye from the promisee or any other person. 27Under the Indian Law, consideration may move from the promisce or if the promisor has no objection, from any other person. But under the English Law, consideration must move from the promisee. 3. Consideration may be either negative or positive Consideration may be a promise to do something or abstain from doing something. 4. Consideration may be past, present or future, Past Consideration: Where the promisor had received consideration before the date of the promise, the consideration is termed as past consideration. agrees to pay a sum of Rs.100 for his service. For the promise of B, the Illustration: A painted a picture of B at B’s request. Two years later B | services of A will be taken as past consideration, | Present consideration: When the promisor receives consideration simultaneously with his promise, the consideration is termed as present consideration. Illustration : A agrees to sell his car to B for a sunt of Rs. 50,000. B pays money to A at the time of making of the contrat. Consi¢eration will be taken as ‘present’ for A. Future consideration: Where the promisor has to receive consideration in future for his promise, the consideration is said to be future consideration. Illustration: On 1* of January, A promises to sell his car to B for a sum of Rs. 50,000afte 10 days. Price and car both are to be delivered on a future date and, therefore, consideration is future for both the parties. % i ion need nc lequate Consideration for a promise need not be adequate to the promise but it must be of some value in the eye of law. Ilustration: A sells his car worth Rs. 50,000/- to B. The consideration, though inadequate, will not affect the validity of the contract. 6. Consideration must be lawful, It should not be forbidden by law of immoral or opposed to public policy. 287. Lt must be real and not illusory Mlusory means it seems to be present ‘Sut absent in act, 8. Consideration must not be uncertain, impossible ‘or ambiguous Consideration must not be uncertain, impossible, and ambiguous. A contract withont consideration is void’ Exceptions OR Exception to the mle ‘No consideration, no contract? OR The general rule is that contraets without consideration are void. However, following circumstances a contract without consideration will be perfectly valid. 1, Promise made on account of natural love and affection- Sec. 25(1) If the following conditions are sanctified a promise without consideration is in the valid, a. The agreement should be in writing b, It should be registered ¢. It should be made an account of natural love and affection and d. The parties should stand in a near relation to each other. 2. Agreement to pay compensation for past voluntary services — Sec.25(2) Ifa person has already voluntarily done something for the promisor and the promisor agrees to compensate, who agreement is valid even though it is without consideration. For example: A find B’s purse and gives it to him. B promises to give A Rs. 100. This will be a contract valid without any formal consideration, The difference between S.25(1) and $.25(2), In the case of Sec. 25(1) services are rendered at the request of the promisor while in Sec.25(2) where the services are rendered voluntarily, 3, Promise to pay a time barred debt. S. 25(3) ‘When a debtor makes written promise under bis signature to pay a.sime bared debt no fresh consideration is required for this fresh promise. 29Lassa sls SS st RA NS For example: A borrows Rs. 100 from B. Under the Limitation Act 1963 B must take steps to recover the amount within 3 years from the date of loan, But A did not do so. Hence the debt is barred by the Limitation Act. After 3 years, A promises B by writing to pay the said debt of Rs. 1000. It is a-valid contract, even though the fresh promise has no consideration. #, Contracts of Agency. Sec. 185 According to section 185 of the Indian Contract Act consideration is not required to create an agency. 5. Completed gifts. Absence of considerations shall also not affect the validity as between the donor and donor of any gift actually made. Thus, gifts once made cannot be recovered on the ground of absence of consideration. Privity of Contract or stranger to a contract A stranger to contract is a person who is not a party to the contract, Such a party neither makes nor accepts any offer. Absence of an offer or an acceptance means that thes is no agreement. So there is no contract also. Such a stranger to contract does not acquire any right under the contract. So a stranger cannot sue upon a contract even though the contract is for his benefit. This rule is known as privity of contract. Dunlop pneumatic Tyre Co. Vs selridge &Co. S bought tyres from the Dunlop Co. and sold them to D, Sub-dealer, who agreed with § not to sell below Dunlop's list price and to pay the Dunlop Co. £.5 as damages on every tyre D undersold. D sold 2 tyres at less than the list price end thereupon the Dunlop Co. sued him for the breach. Held, the Dunlop Co. could not maintain the suit as it was a stranger to the contract. Exceptions: The following are the exceptions to the rule that a ‘stranger to a contact cannot sue’; 1. Trust When a trust is created the beneficiary can enforce his rights under the trust though he is hot a party to the contract, 30For example: A established a trust for the benefit of B and appoints C, D, and E as trustees. B can sue for benefits available to him under trust though he is not a party to the contract, 2. Provision made for the marriage or maintenance of a female In case provision is made for at the marriage or maintenance of a ferule member of the family on the partition of a Hindu undivided family, the female member can enforce the promise though she may be a stranger to the contract, 3. Contracts entered into through an agent Contracts, which are entered into through an agent, can be enforced by the principal, 4. By acknowledgement of liability When a party to the contract admits liability to a third party such third party can enforce his rights on the principle of estoppels. 5. Charge is made in favour of a person When a charge on a specific immovable property is creating in favour df a person such a person can enforce the charge. 31VII. LAWFUL OBJECT If an agreement is to be enforced in a court of law, both consideration as well as i object of the agreement must be lawful. | According to Section 23 the objects and the consideration of an agreement shall be unlawful in the following cases: 1, Ifit is torbidden by law If the object or consideration of an agreement is forbidden by law, the agreement is void. For example: A agrees to sell certain goods to B. A knows that the goods are to be smuggled out of the country. ‘The contract is void. 2. When it defeats the provisions of law Where the enforcement of a particular agreement is of such a nature that it would defeat the provisions of any statutory law, the agreement is void. For example: An agreement to extend the period of limitation lay down by the Limitation Act. 3. Ifitis fraudulent ‘An agreement which is made for a fraudulent purpose is void, “42 Injury to the person or property If the object of a agreement is to cause injury to the person or property of another, it is unlawful, 5. Ifit is immoral or opposed to public policy For example: A agrees to let her daughter on hire to B for concubinage. The agreement is unlawful, being immoral. Illegal agreements and unlawful agreements Illegal agreements Some agreements which are criminal in nature and may affect the moral sentiments of the society. The effects of an illegal agreement is, that it renders not only the transaction between the immediate parties void, but also renders collateral transaction void. 32For example, A borrows Rs.500 from B and enters into a contact with C for the purpose of manufacturing bombs. B knows the purpose and lends the amount, As the ‘manufacture of the bombs is declared illegal, the agreement between A and C is void and this illegal agreement renders the agreement between A and B also void, ‘ Agreements for prompting corruption in public life, agreements with immoral elements for sexual purposes, agreements interfering with the course of justice are some other examples of illegal agreements. Unlawful agreements Some agreements which are not criminal in nazure and will not affect the public morals but they are disapproved by law on some ground of public policy. Such agreements are called unlawful agreements. The effect of such an agreement is, that it renders the transactioa between the immediate parties void, but does not affect collateral transaction, For example, A borrows Rs. 500 from B for the purpose of betting with C. Betting is unlawful. The contract between A and C is void, but B is entitled to recover the loan whether he knows the purpose of the loan or not, ‘VIL. Not declared to be void All agreements may not necessarily be enforceable by law. Agreements, which fulfil all the essentials of valid contract and have not been expressly declared, to be void by law alone can be enforced. i.., if any agreement, that is expressly declared as void by any law in force in the country, it cannot be enforceable, The contract Act specifically declares certain agreements to be void, Such agreement does not give rise to any legal consequences and is void ab initio. They’are following: Agreements made by incompetent parties (Sec. 11) Agreements made under a matual mistake of fact (See: 20) Agreement, the consideration or object or which is unlawful (Sec.23) Agreements, the consideration or object of which is unlawful in part (Sec.24) Agreements made without consideration (Sec. 25) Agreements in restraint of marriage unless one of them in minor (Seo, 26) Agreements in restraint of trade (Sec.27) SI AWW SE Agreements in restraint of legal proceedings (Sec.28) 33 SERf 9, Agreements the meaning of which is uncertain (Sec.29) 10. Agreements by way of wager (Sec.30) “1, Agreements to do impossible acts (Sec. 56, para 1) ents in restraint of marriage Sec.26 Every agreement in restraint of marriage of any person, other than a minor, void. This is because, freedom of choice in marriage has been guaranteed to ever person who is major in age, Restrictions en the freedom of people shall be against public policy and, therefore, void. For example, A promised to marry B only and non else and to pay B a sum of Rs.1000 if he married someone else. A married C. Held, B could not recover the sum as the agreement was in restraint of marriage. Agreements in restraint of trade Sec.27 Section 27 of the Contract Act provides that “Every agreements by which any one is restrained from exercising a lawful profession trade or business of any kind, is to that extent void.” Freedom of trade is one of the fundamental rights conferred on the citizen of Indie, by the constitution of India. So any person can choose any business whenever he likes, it is lawful. Any agreement which interferes with this liberty is called an agreement in restraint of trade. An agreement restraining a person from carrying of a lawful trade or profession shall be opposed to public policy and cannct be forced by law. Madub Chander Vs Raj Coomar A and B were rival shop-keepers in a locality in Calcutta. B agreed to pay A, a sum of money if he would close his business in that locality. A did so but B refused t0 Pay him the money. Held, the agreement was void, and therefore, money could not be recovered. Exceptions. The following are the exceptions to the rule that ‘an agreement in restraint of trade is void’. 1. Sale of goodwil In the case of sale of goodwill the seller may agree not to carry on similar business within specifies local limits or within a specified period. 34sunder partnership Act: ¥ & According to Sec. 11(2) of the partnership Act, an,agreement between, part that none of them shall carry on any business other than that of the firm while he is a partner, is enforceable. b. According to section 36(2) of the partnership Act, an outgoing partn with his partners rot to carry on a business similar to that of the specified period of within specified local limits. may agree im within a According to Sec. 54 of the partnership Act, partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or witnin specified local limits. According to See. $5(3) of the Partnership Act, any partner may, upon the sale. of ggodwill of a firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified period or within specified local limits. reements j Legal lings. Sec. 28 a. Agreements restricting enforcement of right: z If the object of an agreement is to restrain an court of law for redress and relief, such an agreement is void, b. Agreements curtailing period of Limitation Agreements which curtail the period of limitation prescribed by the Law of Limitation are void because their object is to defeat the provisions of Law. Agreements the meaning of which is uncertain Sec.29 An agreement the meaning of which is not certain is void, If there is ambiguity in the wording of contract, it is not possible to read the exact intention of t} 1c | Gontract. Where the term in an agreement is vague and may be, interpreted in many ways, the agreement is void because of uncertainty. For example, A agrees to sell B “100 kg oil”, There is nothing in the agreement to \ show what kind of oii was intended. The agreement is void for uncertainty. @ vror owt werk ago gerertee. on ayphemont mat We sae apeus perk ene yo on WS yrrwanye Beflers BeSady my fe, poreuitel 35/ \) ~/ Agreements by way of wager Sec.30 ce Wager, simply, means ‘bet’. A wager is an agreement between two parties by which one promises to pay money or money’s worth on the happening of some uncertain event in consideration of the other party's promise to pay if the event does not happen. For example, Thus, if A and B enter into an agreement that A shall pay to B Rs/100 if it rains on Monday, and that B shall pay to A the same amouat if it does not rain, Wagering agreement is void but not illegal. eri agre 1. Promise to pay money or money’s worth. 2, The promise must be conditional on an event happening or not happening. That the event must be uncertain, Each party must stand equally to win or lose ‘The gain of one party must be the loss of the other Neither party should have control over the happening of the event. ae x Neither party should have any material interest in the happening of the event other than the sum, Agreements do impossible acts Sec. 56 An agreement to do an act impossible in itself is void. ‘The performance of the contract may be impossible either physically legally. For example, A agrees to pay Rs,1000 to B if B brings his son who died last yeer. This is an impossible act, so it is void. J Serer reac eee wutingenteontracts: fy, 27 fy 36 A contract may be —-- a. An absolute contract, or b. Acontingent contract. 36 seanAn absolute contract is one in which the promisor binds himself to performance in any event without any condition, A contract is said to be contingent when its performance depends upon the happening or non-happening of a future event, For example, A agrees to sell his car to B for Rs.50, 000, if he (A) gets a new ver within one month. This is a conditional executory contract. ‘The performance of A depends on his getting a new car. If he gets it within one month he shall perform the contract otherwise not. ‘There are 3 essential characteristics of a contingent contract: 1. Its performance depends upon the happening or non-happening in future of some event. 2. The event must be uncertain 3. The event must be collateral ic., incidental, to the contract. Contracts of insurance, indemnity and guarantee are the commonest instance of a contingent contract, Rules regarding the performance of the contingent contracts » Continent contracts dependent on the happening of an uncertain future event cannot be enforced until the event has happened, §.32 For example, A agrees to pay Rs.1000 when B marries C. C dies without being married to B. The contract becomes void, 2, Where a contingent contract is to be performed if a particular event does not happen, it cannot be enforced if the event happens. $33. For example A agrees to pay B Rs.1000 if a certain ship does not return. The ship returns, then the contract becomes void, 3. Where a person promise to perform something within a fixed time provided an uncertain event happens, then the person is bound to perform it, if such particular event happens within that time For example, A agrees to pay B Rs.1000 if a certain ship retums within a year. The contract may be enforced ifthe ship returned within the year, 37 se may b wera, evan: Repents pon Come of 4 fedyler powss wn does, gos, nh etann 208° Hi FE cee » Det to be peste Wt, We Short ack @ Mm Whig pmb +4, Where a person promise to perform something within a fixed time an uncertain event does not happens, then the person is bound to perform it if such event does not happen within the fixed time. For example, A agrees to pay B Rs.1000 if a certain ship does not return within a year. The contract may be enforced if the ship does not return within a year. uw Contingent agreements to do or not to do anything, if an impossible event bappens, are void, whether or not the act is known to the parties. $.36 For example, A agrees to pay Rs. 1000 to B if two parallel straight lines meet, The agreement is void. ‘Wagering contracts Contingent contracts 1, Consists of reciprocal promises May not contain reciprocal promises 2, Agreement is void Agreement is valid 3. Neither party intends to perform the contract itself Parties intend to perform their respective obligation 4, Future event is the sole determining factor Future event is only collateral 3. Parties have no other interest in : the subject matter of the agreement except the winning of losing of the alternate wager This is not so. Tract att A contract creates legal obligations to both the parties to the contract. For example, A agrees to sell his car to B for Rs.50, 000/-. Here A’s obligation is to deliver pa car to B and B’s obligation is to pay the pric: E. sligations. 38 Is. urying out of In_other words, when. the terms..of..a.contract are. fulfilled by the 1 contract takes place.‘or example, A agrees to sell his car to B tor Rs. 50, 000. The contract will be said to be performed when A delivers his car to B and B pays Rs.50, 000 to A. Who must perform the contract? 1, Promisorhimself - Gow y If there is something in the contract to show that it was the intention of the parties that the promise should be performed by the promisor himself, such promise ‘must be performed by the promisor (sec. 40 para 1). This means coritract® which Involve the exercise or personal skill and diligence (For instance, a contract to paint or sing), or which are founded on personal confidence between the parties (for instance, a contzet to marry must be performed by the promisor himself, 2. The agent Where the personal skill of the promisor is not necessary and the work canld be done by any one, the promisor may employ a corapetent person to perform it, $40 Para 2. 3, Legal Representatives: A contract which involves the use of personal skill or is founded on personal considerations comes to an end on the death of the promisor. As regards any other contract, the legal representatives of the deceased promisor are bound to perform it unless a contrary intention appears from the contrac: (S.37 para 2) 4. Third person ‘When a promisee accepts performance or the promise from a third person, he cannot afterwards enforce it against the promisor. (S.41) 5. Joint promisors a. When two or more persons have made a joint promise all such persons must jointly fulfil the promise. If any of them dies, his legal representatives must, 6 jointly with the surviving promisors, fulfil the promise. This may vary if there » is an agreement against it, NS When two or more persons make a joint promise the promise may compel any onie or more of the joint promisors to perform the whole of the promise, This may vaty if there is an agreement against it. 39©. When a joint promisor has been compelled to perform the whole of the promise, he may compel the other joint promisors to contribute equally with himself to the performance of the promise. This may vary if there is an agreement against it. For eg: A, B and C are unde a joint promise to pay X Rs.300. A is compelled to pay the whole amount to X, A may recover Rs.100 each from BandC, 4. If any of the joint promisors makes a default in making his contribution, the remaining joint promisors must bear the loss arising from such a default in equal shares. For e.g. A, B and C are under a joint promise to pay X Rs.300. C is unable to pay anything and A is compelled to pay the whole. A is entitled to receive Rs.150 from B. Who can demand performance? 1. Promisee ‘The performance can be demanded only by the promisee. A third party cannot demand performance of the contract even if it was made for his benefit, 2. Legal representative In case of death of the promise, his legal representatives can demand performance. : Sete hee EE sees 40CLASSTICATION OF CONTRACTS, Contracts may be classified as follows. 1. On the basis of enforceability Valid contracts Void contracts Voidable contracts Illegal contracts Unenforceable contracts see gP n On the basis of mode of creation a. Express contracts b. Implied contract 3. On the basis of the extent of execution a. Executed contracts b. Executor contracts 1. Classification of contracts on the basis of enforceability a. Valid contract: Contracts which satisfy all the essential elements of a valid contract as lay down by Section 10 are enforceable in a court of law. Such contacts are termed as valid contracts, b. Void contracts: An agreement may be enforceable at the time when it was made but later on, due to certain reasons, it may become void and unenforceable. Such agreements are known as void contracts. Illustration: On 1 January, A agrees with B to sell him his horse for a sum of Rs, 1,000 on 1" February. The horse dies on 20" January. The performance of the agreement was possible at the time when it was made, but now its performance becomes impossible on account of supervening impossibility. It is, therefore, a void contract, a¢. Voidable contract: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or other is a voidable contact. (Sec. 2 (i)). The contract shall remain valid so long as it is not repudiate or avoided by the party entitled to do so. Agreements induced by coercion, undue influence, fraud or misrepresentation are voidable at the option of the party whose consent has been so | obtained, | d. Illegal contracts: A contract, which is criminal in nature or which is immoral or against public policy, such contracts are considered illegal contracts, Illegal | contracts cannot be enforced by law. | All illegal agreements are void but all void agreements are not necessarily illegal. For example, an agreement with a minor is void but not illegal. In an illegal agreement even collateral transactions are also void, For example, A promises to pay Rs.100 to B if B gives a good beating to C. B gives a good beating to C and A borrows from D, Rs.100, in order to pay B. D knows the purpose for which money has been borrowed from him, The agreement between A and B being illegal, the collateral transaction between A and D will also be illegal. ¢, Unenforceable contracts: An unenforceable contract is one which cannot be enforced in a Court of Law because of some technical defect sucki as absence of writing, attestation, registration etc. Some of them can be enforced if the technical defect is removed. For exemple, if a document embodying a contract is under stamped, the contract is unenforceable, but if the requisite stamp is affixed (if allowed), the contract becomes enforceable. 2. Classification of contracts on the basis of mode of creation a. Express contracts: Contracts entered into between the parties by words spoken or written, are termed as express contracts. In such contracts, parties make oral or written declaration of their intentions and of the terms of the transaction. Ilustration: A writes to B, “I am prepared to sell my horse for Rs, 1,000.” B accepts A’s offer by a telegram. The conttact is termed as express contract. b. Implied contracts: An implied contract is one which is inferred from the acts or conditet of the parties or course of dealings between them. It is not the result of any exptess promise by the parties but of their particular acts. 2tuustraon: A takes a seat ina bus. ‘here is an implied contract that he will pay the prescribed fare for taking him to his destination, Classi n of contracts on the basis of the extent of execution Classification of contracts on the basis of the extent of execution a, Executed contracts: Where both the parties to the contract have fulfilled their respective obligations, contract is said to be executed. In other words, an exenuicd contract is one where nothing remains to be done by either party, Ilustration: A sells a car to B for Rs. 50,000. B pays the price. Both the partiés have performed their respective obligations, and therefore, it is an executed contract. b. Executory contract: Where one or both the parties to the contract have still to perform certain things in future or under the term of the contract something remains to be done, the contract is termed as an executory one, Example: delivery of goods has been given but price has not been paid or both the delivery of goods and payment of price have to be made at to a future date. Executory contract may be (j) Unilateral contracts and (ii) Bilateral contracts, (1. unilateral contracts: (one-sided contract) A unilateral contract is one in which only one party has to fulfill his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence. Ilustration: A permits a railway coolie to carry his luggage and places it in a carriage. A contract comes into existence as soon as the luggage is place in the carriage. But by that time the coolic has already performed his obligation, Now only A has to fulfill his obligation, i.e., pay the reasonable charges to the coolie. i). Bilateral contracts: A bilateral contract is one in which the obligations on the part of both the Parties to the contract are outstanding at the time of the formation of the contract, Ilustration: A promises to sell his car to B after 10 days. B promises to pay the price on the delivery of the car. Se ee eee meek eoececeer eee seeebekees 43QUASI CONTRACT ‘Quasi’ means ‘as if. Quasi contracts are not contract in the strict sense because the essential elements of a contract like offer, acceptance, consensus ad idem etc, are sufficiently absent in them. Under certain circumstances, although there is no contract 0: agreement between the parties, they are put in the same position as if there were a contract between them. So, quasi contracts are referred to in Indien law, as “tel: resembling ated. by. Even though quasi contract is not, they are recognized by courts of law on Principles of ‘equity’ and they are enforceable in the courts of law. Equity principle says that, ‘a pe t9.enrich himself unjustly. at the. expense of another’ ‘A -suasi contract is not intentionally entered into, But create certain obligations. Th obligation thus created between the parties is treated as contractual by law, These Obligations are therefore implied by law. So quasi contracts are also called ‘implied contracts” or constructive contracts. Different kinds of quasi contracts 1. Necessaries supplied to a person in capable of contracting, 2. Payment by an interested person 3. Liability to pay or non-gratuitous acts 4. Obligation of a finder of goods 5, Payment by mistake or under coercion 1, Neeessaries supplied to a person incapable of contracting Sec. 68 Generally the contracts by minors, unsound persons, who are the persons incapable of entering into a contract, ate void. According to Sec. 68, if a person who supplies the necessaries to an incompetent person, is entitled to be reimbursed from the property of such incompetent person even if there is no contract between them, For example, A supplies B, a lunatic, with necessaries suitable to his condition in life, is entitled to be reimbursed from B's property. 2, Payment by an interested person, Sec, 69 A person, who is interested in the payment of money which another is bound by Taw to pay, and who therefore pays it, is entitled to be reimbursed by the other. 44untam Vs Kallapiram B holds land in Bengal, on a lease granted by A. The revenue payable by A to the Government being an arrear, his land is advertised for sale by the Government. B, to prevent the sale pays to the Government the sum due from A. The B is entitled to be reimbursed by A. 3. Liability to pay non-gratuitous acts, Sec,70 When a person lawfully does anything for another person, or delivers anything to tim, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former. Example: A, a trade's man, leaves goods at B’s house by mistake. B treats the goods as his own, He is bound to pay for them to A. Example, A saves B's property from fire, A is not entitled to compensation from B, if the circumstances show that he intended to act gratuitously. 4, Obligation of a finder of goods. Sec. 71 A person, who firds goods beloriging to another and takes them into his custody, is called a finder of goods. He is subject to the same responsibility as a bailee, But he is entitled to receive compensation for trouble and expenses voluntarily incurred by him, to preserve the goods and find out the owner. 5, Payment by mistake or under coercion Sec. 72 A person whom money has been paid, or anything delivered under mistake of fact or under coercion must repay or return it. Example: A and B jointly owe Rs.100 to C. A alone pays the amount to C and B, not knowing this fact later on also pays Rs.100 to C. C is bound to repay the amount to B, aw r When a debtor owes several distinct debts to a creditor and makes a payment which is insufficient to discharge his whole amount due, a question arises: To which debt should the payment be appropriated. For example, A has borrowed from B, 3 loans, namely Rs.100, Rs.200, and Rs.300. A pays R8.50 to his creditor, B, without any indication to which debt they said payment should be credited. In such a case question naturally arises as to which debts, the said payment of Rs. 50 is to be appropriated. 45Section 59 to 61 lay down the following 3 rules in this regard; 1. Where the debtor intimates Sec.59 Ifthe debtor expressly intimates at the time of actual payment that the payment should be applied towards the discharge of a particular debt, the creditor must dos so. If there is not express intimation by the debtor, the creditor should lock into the circumstances under which the payment is made. In the example cited above, A repays Rs.50 to B with an express intimation that the said amount should be appropriated t the second loan of Rs. 200. In suca a case B should appropriate the said payment to the second loan only. Where the amount paid is the exact amount of one of the debts due, law presumes that the payment was in discharge of that particular debt. If A repays Rs.100 without any intimation, law presumes that the payment is in discharge of the first debt i.e. Rs.100 2. Where the debtor does not intimate Sec.60 Where the debtor does not expressly intimate or where the circumstances attending on the payment do not indicate any intention, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor. 3. Where the debtor does not intimate and the creditor fails to appropriate Sec.61 Where the debtor does not intimate and where the creditor has also not made any appropriation, then according to law, the payment made by the creditor has to be applied in discharge of the earliest debt in the order if time. SHH ebereES ernie 46assignment orcomracts // oy Assignment of contract means transfer of contractual rights and liabilities under the contract to a third party. It may take place by 1. The act of the parties, or 2. Operation of law _/A-Assignment by the act of the parties (a). Assignment of contractual obligations i. Contractual obligations involving personal skill or ability cannot be assigned (Sec.40) E.g.: a contractual obligation by a singer to sing or by a film actor to act in a film or a contract to marry or paint a picture etc. ii, Contractual obligations cannot be assigned by the promisor to third parties without the consent of the promisee. (b). Assignment of contractual rights (i). The rights and benefits under a contract can be transferred F For example, A owes Rs.100 to B, B, the creditor, transfers his right to C to recover the amount from A. Accordingly C can recover the amount from A. ii). An actionable claim (e.g. Promissory note) can be assigned. But it must be affected by an instrument in writing and notice of such assignment must also be given to the debtor. / 2.-Assignment by operation of Law !~ This is taken place in the following two cases: Death: Upon the death of a party to a contract his rights and liabilities under the contract(except in the case of contracts requiring person skill or service) degolve upon his hairs and legal representatives. ii Insolvency: In case of insolvency to a person, his rights and liabilities ineu-ed previous to adjudication pass to the Official Receiver or Assignee, as the case may’be. 47DISCHARGE OF CONTRACTS Discharge of contract means termination of the contractual relationship between the parties. A contract is said to be discharged when the rights and obligations created by it come to an end. A contract may discharge in any one of the following ways: 1. By performance of the contract 2. By agreement or consent (S) 3. By lapse of time 4. By operation of law 5. By subsequent impossibi 6. By breach 1. Discharge by performance Performance of a contract is the most usual mode of discharge of contract. Discharge by performance takes place when the parties to a contact fulfill their obligations arising under the contract within the time and in the manner prescribed, In such a case, the parties are discharged and the contract comes to an end. But if only one Party performs his promise, he alone is discharged. Such a party gets a right of action against the other party who is guilty of breach. y of the performance Illustration: A agrees to deliver his car to B and B promises to pay Rs.50, 000/- on delivery. The contract will be said to be discharged when A delivers his car to B and B bays Rs.50, 000 to A. 2.Discharge by agreement or consent As contract emerges from an agreement, it may also be terminated by the agreement. The rule of law in this regard is as follows: “Eodem modo quo quid constituitur, eodem modo destruitur’, ie. a thing may be destroyed in the seme manner in which it is constituted. The various cases of discharge of a contract by mutual agreement are as follows: a. Novation Substitution of a new contract in place of the old existing one is known az ‘novation of contract’. Sometimes the contracting parties may agree to substitute a new contract in the place of the original contract between themselves and different parties. Thus novation crates a new contract in the place of the original contract, Novation may take either of the two forms. 1, A new contract is substituted for an existing one between the same parties , or 48be inere 1s a cnange ot parties, the contract remaining the same, For example: (i) A promise to deliver his car to B on a certain date. Before the date of performance A and B mutually agree that A will deliver his scooter instead of his.car. Gi).A owes Rs.100 to B. It is agreed that, by assignment, C will pay the Rs. 100 to B, Rescission Rescission is the cancellation of the agreement. A contract can be rescinded in any of the following ways. i. ili, ce By mutual consent: Parties may enter into a simple agreement to rescind the contract. For example: A promises to deliver his car to B for Rs. 50, 000. Before the date of performance A and B mutually agree that the contract will not be performed. By the agerieved party: Where a party has committed a breach of contract, the aggrieved party can rescind the contract. For example: A and B enter into a contract that A shall deliver his car to B and B shall pay the price on the first of next month, A does not delivers his car. B can rescind the contract and need not pay the price. By the party whose consent is not free: In case of a voidable contract, the party whose consent is not free can rescind the contract. E.g. Coercion, undue influence etc. By alteration Alteration of a contract occurs when the terms of a contract are varied by mutual consent of the parties to the contract. For example: A agrees to deliver 100 bags of sugar to B. Subsequently they naturally agree to deliver only 50 bags of sugar instead of 100 bags. a By remission Remission of a contract indicates the acceptance of a lesser sum than what was contracted for. For example: A owes Rs. 5, 000 to B. A paid Rs. 4, 000 to B and B accepted in fall satisfaction. In this case A is discharged from his liability of Rs. 5, 000/- 49e. By waiver When both parties, by mutual consent, agree to abandon their respective rights, _ the contract need not be performed. For example: A agrees to deliver his car to B, B in return, agrees to pay Rs.50, 000/-. Subsequently both A and B agree to abandon their respective rights, 3. Discharge by lapse of time The Limitation Act, 1963, lies down that a contract should be performed with specified period, called period of Limitation. If it is not performed, and if no action is taken by the promisee in Law Coutt, within the period of Limitation, the contract is terminated. For example: A borrows Rs. 1,000 from B through a promissory note, If A does not pay any amount, B must file a suit to recover the amount in a court of law within 3 years from the date of the execution of the promissory note. If no action is taken by B within 3 years, the promissory note is completely barred by limitation and B cannot recover the amount from A. 4. Discharge by Operation of Law a. Death In case a contract is of a personal nature, the death of the promisor will discharge the contract, In other cases, the rights and li person shall pass to his legal representatives. b. Byinsolvency ‘When a person is adjudicated insolvent, he is discharged from all liabilities incurred prior to his adjudication, c, Bymerger Sometimes both parties, who have already entered into a contract with inferior rights, may enter subsequently a new contract and the new contract creates superior rights. Now the previous contract with lesser rights is said to be merged with subsequent contract with superior sights. Illustration: A is holding to property under lease. He subsequently buys that Property. A’s tight as a tenant is inferior to his right as an owner of the property. The right as a tenant and*right as an owner have coincided and met in one person ive, A. Therefore A’s rights as a lesson will terminate. 50G. By complete loss of evidence If the evidence of a contract is completely lost, enforced. . By unauthorized alteration of the terms of a written agreement Where a party to a contract makes any material alteration in the contract without the consent of the other party, the other party can avoid the contract. 5. Discharge by. subsequent Impossibility the contract shall not be Impossibility which arises subsequent to the formation of a contract (which could be performed at the time when the contract was entered into) is called ‘supervening impossibility’. In such a case, the contract becomes void, For example: A and B contract to many each other. Before the time fixed for the marriage, A goes mad. The contract becomes void. The supervening or subsequent impossibility may arise due to any of the following reasons. a. By the destruction of the subject matter When the subject-matter of a contract, subsequent to its formation, is destroyed without any fault of the parties to the contract, the contract is discharged. Taylor Vs. Caldwoll A music hall was let for a series of concerts on certain days. The hall was accidentally burnt down before the date of the first concert. The court held, , the contract was void. zs b. By death or personal incapacity of the promisor Where the performance of a contract depends on the personal skill of a party, the contract is discharged on the illness or incapacity or death of that patiy. Robinson Vs. Davison An artist undertook to perform at a concert for a certain price. Before she could do so, she was taken seriously ill. Held, she was discharged due to illness. c. Change of law When, subsequent to the formation of a contract, change of law takes place, the performance of the contract becomes impossible, the contract is discharged, 51d. Outbreak of war An agreement entered into with an alien enemy during the war is unlawful and, therefore, void ab initio. Contracts made before the outbreak of war are either suspended or declared void by the Government. If they are suspended, they may be performed after the termination of the war. 6. Dinchatee by Breach of Contract Breach means failure of a party to perform his obligation under a contract. When a promisor has failed to perform his part of contract he has committed a breach of contract. Breach of contract may arise in two ways: 1, Actual breach 2. Anticipatory breach. ‘Actual Breach Actual breach means breach committed either. i, At the time when the performance of the contract is due, or. ii, During the performance of the contract. Example: A agrees to supply B, 10 bags of sugar on the I may. In this case performance is due on 1* May. On the 1* May he fails to supply sugar. This is actual breach of contract at the time when the performance is due. Example: A agrees to sell and deliver to B 10 bags of sugar, A actually delivered 5 bags. But subsequently B refuses to take any more bag of sugar. Here breach takes place during performance. Anticipatory Breach When a party to a contract refuses to perform his obligation before the due date of performance, it is called anticipatory breach. It may express repudiation or the act of the party. It may express repudiation or the act of the party. Illustrations: A agrees to deliver his car to B and B promises to deliver Rs.50, 000 to A on the I" Match. But before this date A informs B that he is not going to supply the car, This is express repudiation, 52.ii. A agrees to marry B. But before the agreed date A marries C. The contract hhas been repudiated by A by his conduct before the due date of its t performance. JEDY Remedies for breach of contract Following are the remedies available to the aggrieved party (i.e, the party who is not-in breach) in the event of the breech of a contract. Rescission of the contract Suit for damages Suit upon Quantum meruit Suit for specific performance of the contiact 5. Suit for injunction. ~ Rescission Pe NS When a contract is broken by one party, _-Sontract as rescinded and refuse further performat all his‘obligations under the contract? the other party may sue to treat the nce. “In such a case he is freed from For Example: A agrees to deliver his car to B, and B promises to Pay a certain “sum of money to A on a certain date, A does not supply the car, B is discharged from liability to pay the price. Damages When there is a breach of contract by one party, the injured party is entitled to an action for damages. Damages are a monetary compensation allowed to the jured party by the Court for the loss or injury suffered by him, © Damages may be:- a. Ordinary damages ~ Special damages a, Ordinary damages- Damages arising from the breach of contract which are necessary to compensate the injured party for the loss sustained by such a breach. Ordinary damages are usvally assessed on the basis of the actual s suffered,For example: A Contracts to sell and deliver 10 pens to B at Rs. 45 per pen, the price to be paid at the time of delivery. The price of pen rises to Rs.50 per pen and A refuse to sell the per. B claim damages at the rate of Rs. 5 per pen b. Special damages: These damages results from the breach of the contract under special circumstance. Thus if there are any special circumstances which would resulf in a special loss in case of breach of a contract, such special circumstances must be brought to the notice of the other party so that if there is breach of the Contract, special damages cari be claimed. For example, A, a builder, contracts to erect and finish a house for B by the 1* January, in order that B may give possession of it at that time to who B has contracted to let it. A is informed of the contract between B and C. A does not build the house before the 1" January. In consequence, B loses the rent w. he was to have received from C and is obliged to make compensation to C for the breach of his contract. Then A must make compensation to B or the rent lost and for the compensation made to C. c, Exemplary or Vindictive damages: These damages are awarded with a view to punish the defaulting party. ‘These damages are awarded only in the following cases:- : i. Breach of a contract to marry ii, Dishonor of a customer’s cheque by the bank without any proper reason, 4, Nominal Damages: The plaintiff claims these damages only with a view to establish his right.” In such a case, the court awards only a small amount, Here the plaintiff has not in fact suffered any loss by reason of the breach of contract. 3. Suit upon Quantum meruit A right to sue on a quantum meruit arises where a contract, partly performed by one party, has become discharged by the beach of the contract by the other party. Literally speaking, the words ‘quantum meruit’ mean ‘as much as merited’ or ‘as much as earned’, The party who has performed the work can claim remuneration for a work he has already done. Example: Under a contract A agrees to do a certain piece of work for B for a lump sum of Rs. 1000 which is payable on its completion, When A has done 50% of the work, B repudiates the contract. In such a case A can claim ‘quantum meruit’ i.e, Rs.500 being the reasonable remuneration of 50% of the work done. 544. Suit for specific performance In certain cases of breach of contract, damages are not an adequate remedy. The court may, in such cases, direct the party in breach to carry out his promise according to the terms of the contract. This is a direction by the Court for specific performance of the contract. For example: A agrees to sell his land to B, If A subsequently refuses to sell the land, B car file a suit for specific performance and the court can compel A to sell and to execute the sale deed in favour of B in respect of the land agreed to be sold. 5. Suit for injunction Injunction is an order of the court restraining or preventing a person from doing a particular act. Where a party in contract is in breach of a negative term of a contract (i.e. promise not to do) the court may in its discretion. Issue an order to the defaulting party restraining him from doing what he promised not to do. Lumby Vs Wagner A contracts with B to’sing for one year at B’s theatre and further agrees that he will not sing in any other place during that period. Subsequently A entered into a contract with C to sing in C’s theatre and refused to sing in B’s. Now B can file a suit and obtain an order of injunction restraining or preventing A from singing in C’s theatre. The order of the Court preventing A from singing C’s theatre is called an order of injunction, 55.ib wot id aboittio fe ; 5 Prematine ducia ommbin of Cotta Doctrine@Frustration — — yy Cantengiate by da paces Frustration is a way of discharging the obligation under a contract by the impossibility of performance. The old rule was that a man must do his contract or die. In other words in the case of absolute contract, though the promisor failed to enjoy the benefit o the contract, he must perform his part. This was laid down in Pardine V janz in 17" century, In this case the Suit of Jane against paradine or rent on lease was allowed even though Paradine pleaded that he could not take the profit because of the interveation of war and the enemy invaded the property ad out stead him from possessing the leased property. In the middle of the 19" century the injustice of this rule was felt by the court and they discovered a new way of escape. In Taylor V Coldwell, it was established that where the performance is made impossible by the destruction of a specific thing essential to the performance of the contract, the parties are discharged from the obligation under the contract or other words, the contract is discharged where there is frustration of the object of the contract and hence it is called discharge by frustration, According to Lord Simon frustration is the premature determination of an’ agreement between parties lawfully entered into and during to the occurence of an intervening event or change of circumstances so fundamental as to strike at the root of the agreement and entirely beyond the contemplation of parties at the time of entering the agreement. Limitations of the doctrine 1. Doctrine o frustration is not applicable, if the frustrating events occur due to the fault of either party. 2. Frustration due to supervening illegality can’t discharge a contract if performance which has become illegal is only one of the many possible ways of performance. 3. The doctrine can be entirely excluded by express provision against the frustrating event, Effects of frustration The effect of frustration is to discharge the contract forthwith. The contract is not tendered void ab initio but it comes to an end only from the time of frustration. In India this doctrine comes within the provision of Sec.56 of Indian contract Act. Farting Golda 56Short Question 1 Doctrine of Accord and Satisfaction If a party who is forced to do a thing under a contract, instead of doing the original promise does some other acts with the promisee’s consent, and the promisee accept the same, this the contract stood discharged. This is called the doctrine of Accord and Satisfaction, Accord is the agreement by which the obligation is discharged and the satisfaction is the consideration which makes the agreement operative. This doctrine is only applicable in bilateral agreement, This rule is not applicable to the discharge of an obligation created by a negotiable instrument. 2.Doctrine of Severability or Blue Pencil Test Were a contract consists of two separate parts one of which is legal and the other illegal, the legal parts can be separated from the illegal by courts by blue pencil test ie. by cutting of the offending words by drawing a blue peneil across and thus make the contract legal and enforceable regarding the legal part. But if the contract is inseparable then the contract is void in toto. h 3.Acqum et bonum This maxim means unjust benefit or enrichment, This principle means that a person who has been unjustly enriched at the expense of another is required to make restitution to the other (refer quasi contract) 4.Agency classificati Agents may be classified into merchantile Agents arid non-merchantile Agents. Merchantile Agents includes 1. Factor:- A factor is a merchantile agent entrusted with the possession of goods for sale and who has authority to sell or otherwise deal with goods or merchantiles or to raise money or their security. He has possession of the goods and also the discretionary power to sell them in his own name. Broker:- A broker is another class of mechantile agent. He is employed to make bargains and contracts in all matters of trade for a commission called brokerage. 37fe is agent appointed by the seller to sell the goods by public auction for remuneration in shape of a commission. He is primarily considered to be the agent of the seller(tender) 4, Commission Agent: A Commission agent is an agent employed to buy or sell goods or transact business for a remuneration called the commission. 5. Banker:- Banker is an agent of the customer. The relationship between the Banker and the customer is the relation between creditor and the debtor. The Banker acts as trustee, bailee, agent etc, 6. Del credere agent: A del credere agent is one who in consideration of extra remuneration called the del credere commission guarantees. to his principal that third persons with whom he enters into contract shall perform their obligations. He undertakes to indemnify the loss to the principal in case of a breach by the other party. Principal is not liable to the third party. Non commercial agents may be commission agents, estate agents, house agents, aw agents, election agent exe. 7. CALF contract: - The three letters C.LF stands for cost, insurance and freight. The forms of contracts arise whén the seller and buyer happen to live at distant places. Where the buyer orders the goods from a foreign merchant, the seller having insured the goods, delivers them to a common carrier, then the seller sends the bill of landing with the insurance policy to bank; and the buyer pays the price of the goods and receives the document from the bank, The buyer can obtain the goods from the common carrier by showing these documents. 8. FOB and FOR contracts: - Free on board and Free on Rail. In these contracts the seller has only put the goods on board at his cost and the responsibility there after will be the buyers, Property passes with the boarding of the goods and the seller is not bound to effect insurance provided he gives notice to the buyer. Specific Relief Act It is a remedial statue. It provides certain relief to an aggrieved person on the basis of equity. The expression ‘Specific relief? means relief in specific. This act provides the following seven specific reliefs 584, Kecovery of possession of property v Specific performance cfcontract Rectification of documents scission Contracts Ca vee lation of instrument x Declaratory decrees 7. Injunction A. Recovery of possession of property (See.6 &7 - 6 provides recovery o possession of immovable ssession of movable property, of possession of Immovable property Sec. 6 provides that if any person “dispossessed without his consent of immovable property otherwise than in due’ course of law he may, by suit, recover Possession thereof from the dependent without refer rence to any question of title, Tue object ofthis section is to prevent persons taking the law into their own hands. Property & Sec.7 provides Ingredieace: ‘The plaintif? was in possession He has beea dispossessed (without the consent) The dispossession tookplace without his consent twas done otherwise than in due course of law The suit must be fi 2 Soe led within 6 months from the date of dispossession. b. Recovery of possession of movable property See. 7 provides for the recovery of movable property. Possession of specific movable property may recover it in the code of civil procedure, Under this section a trustee, who having special or temporary right to possess th. recovery of possession, A person entitled + ‘tanner provided by the bailee, finder of goods, pawance e movable can also file a suit for 59a dl daar Bowl be 2. Specific performance of contract

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