Practice Question

1. Define ‘Consideration’. What are the rules to test the validity of

consideration? When a contract would be valid even without
consideration?

Consideration:
Consideration is the price for which the promise of one party is purchased by the other:
"A valuable consideration in the sense of the law may consist either in some right,
interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the other" (Currie v. Misa). Thus,
consideration is either some act, forbearance or promise, done, suffered, or made by
the promisee of the promise of the promisor. But an act, forbearance or promise is not a
consideration unless it satisfies the rules, which are laid down to the validity of a
consideration. These rules are:
(a) Consideration need not be adequate:
This means that it is not the business of the court to inquire whether the consideration in
a particular case is substantial, that is, whether the act or forbearance or promise of the
promisee is proportionate in value to the promise of the promise of the promissor. It is
enough if this is a consideration, however minute, which is otherwise valid. Thus, if A
promises to pay Tk.100 to B for an old stamp which B gives to A, it will be no defense of
A in answer to B's claim that the stamp is in actual fact of a much smaller value.
(b) Consideration must be real and not sham:
This means that the consideration must be of real value and not one, which has only an
apparent value. Thus, if A promises to pay B TK. 1,00,000.00 in consideration of B's
promise to take him to the moon, the consideration is sham and not real, as B's promise
is an absurdity/silly.
(c) Consideration must not be illegal:
A consideration is said to be illegal when it is intended to defeat the provisions of any
law or is against public policy. Thus, a promise by A to pay B TK. 10,000.00 in
consideration of B's promise to drop a prosecution for robbery instituted by him against
A, is illegal as being aimed at defeating the provisions of Law.
(d) Consideration must not be past:
Consideration may be executory or executed, but it must not be past. A consideration is
said to be executed when the promisee has already done or forborne something. Thus,
A promises to pay a sum of money to B if he paints a picture for A. B paints the picture.
B's act is the consideration for A's promise; since the act is done already it is said to be
an executed consideration. A consideration is said to be executory when we have a
promise for a promise. Thus, A promises to pay a sum of money to B in consideration of
B's promise to paint a picture for A. B's promise is the consideration for A's promise,
and since the promise has not yet it is executory. An executed consideration is a
present consideration something is done or not done by the promisee on account of the
promise, while where in an executory consideration- already done something for
another and then comes a promise from the other, that promise is unsupported by any
consideration and in this case we may say that the consideration is past. Thus, A saves
B's life. B promises to pay A TK. 1,00,0000.00 out of gratitude. Here the consideration is
past or strictly speaking, there is no consideration, because A did not do anything or
refrain from doing anything on account of B's promise.
(e) Consideration must move from the promisee:
The consideration must move from the party entitled to sue on the contract. This means
that consideration ought to proceed from the party who is entitled to sue on the contract,
for, the rule is that "No stranger to the consideration can sue on the contract." Thus, if A
promises to pay B Tk.50 if C works for him in an election the promise is not enforceable
and B cannot sue on it for he has neither done nor forborne/ suffered anything/ made
any promise in return for A's promise.
Please note: Consideration in our country differs in two important respects from that of
English Law -
(a) In Bangladesh consideration may be past, but in English law, a past consideration is
not generally recognized unless, of course, it comes under one or other of the three
exceptions.
(b) In our country consideration may move from any other person besides the promisee;
but in English Law, a consideration is unreal when it moves from any person other than
the promisee.

Essentials of valid contract:

All contracts are agreements but all agreements are not contracts. According to Section
10 of Contract Act all agreements are contracts if they are made by the free consent of
competent parties for a lawful consideration, with lawful object and are not expressly
declared to be void by the Contract Act. In short an agreement in order to be a contract
should fulfill the following requirements:
(a) The agreement must be made by free consent.
(b) The parties to the agreement must be competent to contract.
(c) The agreement must be for a lawful consideration.
(d) The object of the agreement must be lawful.
(e) The agreement must not be expressly declared to be void by the Contract Act.
Please note: A contract may contain all the above elements; but still it may be void if it is
against the provision of any law or against public policy.
Rules regarding offer / proposal:
(a) A person is said to make an offer when he signifies to another his willingness to do
or to abstain from doing anything with a view to obtaining the assent of the person to
whom it is made. But a mere statement of intention is not an offer. Thus, A says to B in
course of conversation that he intends giving Tk. 1000 to anyone who marries his (i.e.
A's) daughter with his consent. B marries A's daughter with A's consent. Held that there
is no contract between A and B, because A's statement is not an offer.
(b) The proposal / offer must be made with the intention of creating legal relations,
otherwise there will be no agreement. If A invites his friend B to a party, which B
accepts, there is no agreement, in as much as here the parties do not obviously intend
to create a legal relationship and this is why if B fails to join the party A has no legal
remedy against B. HenceSocial engagements are not contracts.

(c) Every offer / proposal must be communicated - either by wards or conduct. An offer
is not therefore open to a person who is ignorant of it; nor an ignorant compliance with
the terms of an offer means an acceptance of it. Thus, an offer of reward could not be
claimed by a person who was ignorant of it. However, the role that every offer must be
communicated to offeree does not mean that there cannot be a general offer. As a
matter of fact, an offer may be made to the public at large, but the offer can only be
accepted by a definite person. Thus, an offer of a reward for a lost ring though made to
the public can only be accepted by the finder of the ring. An offer of a reward for a
particular information can be accepted by the first
informant.
(d) Every offer / proposal remains open for a reasonable period after which it lapses, i.e.
it loses its legal efficacy. What is a reasonable time is a question of fact and it varies
with different kinds of contract. An offer does not by itself create any legal right, it ripens
into a contract by acceptance. F offered by letter to buy B's horse for Tk.5000 adding "If
I hear no more from you, I shall consider the horse mine at Tk.5000". No answer was
given by B. Here there is no contract as the offer was not accepted by B. The offer of F
lapses because of silence on the part of B. Death or insanity of the offeror causes an
offer to lapse provided the fact of death or insanity comes to the knowledge of the
acceptor before acceptance. Failure to accept an offer, according to the manner
prescribed, also causes an offer to lapse; if the offeree does not accept in the manner
prescribed by the offeror, a duty is cast upon the offeror to inform the offeree once again
that his offer must be accepted in the manner prescribed. If he fails to inform the offeree
he is presumed to have accepted his acceptance.
(e) An offer must be revoked before acceptance and revocation must be brought to the
knowledge of the offeree before acceptance. An acceptance is not complete as against
the acceptor unless and until the letter of acceptance reaches the offeror, though it is
complete, as against the offeror as soon as it is put in course of transmission to the
offeror so as to be out of the power of the acceptor. Thus, A makes an offer to B on the
1st of January. The offer reaches B on the 3rd January; on the 2nd January A sends a
letter of revocation. On the 3rd January B accepts the offer by posting a letter of
acceptance. The contract is complete, as against A, as soon as the letter is posted. It
matters little that a letter of revocation is on the way but the contract or rather the
acceptance is not complete as against B unless and until the letter reaches A. Hence
after posting the letter of acceptance B can revoke the acceptance by a telegram or by
a letter provided it reaches the offeror earlier than the letter of acceptance. But once the
letter of acceptance reaches A, B cannot revoke the acceptance.

2. Discuss the nature of contract.

It is quite difficult to define a very generalized concept like that of ‘Contract’ . It is
perhaps an oversimplification to say that a contract is a ‘legally enforceable agreement’
, but looking at some standard definitions, one might say that this is, in fact, a common
theme.
To quote few noteworthy definitions-
"A contract is an agreement giving rise to obligations which are enforced or recognized
by the law. The factor which distinguishes contractual from other legal obligations is that
they are based on the agreement of the contracting parties". (Treitel)
"We may provisionally describe the law of contract as that branch of the law which
determines the circumstances in which a promise shall be legally binding on the person
making it." (Anson)
A contract is "a promise or set of promises which the law will enforce". (Pollock)
“A contract is a promise or a set of promises for the breach of which the law gives
remedy or the performance of which the law in some way recognises as duty”.
[American Restatement of the Law of Contract, 1978]

3. Define contract and differentiate it from a simple agreement. In short,

explain the essentials of a valid contract in terms of The Contract Act, 1872.

The Contract Act, 1872 defines that “an agreement enforceable by law is a contract”.
[sec 2. (h)]. The definition requires that in order to have a contract, firstly, there must be
‘an agreement’ in between the parties intending to have a contract and secondly, the
agreement must be enforceable in law. When a person conveys to another his
offer/proposal and the other person assents thereto (accepts the offer) there is said to
be an agreement between them. But all agreements do not amount to a contract, unless
the parties have the intentions to create a legal relationship between them at the time of
making the agreement. Such agreements (where no intention to create legal
relationship exists) are social engagements (i.e. simple agreement which can not be
enforced in the court of law). Therefore, in our day-to-day life we go on making
agreements between us and many of them are simple agreements only and not
contracts, simply because in such agreements the parties had no intention at all to
create a legal relationship between them. Such agreements (where there is no intention
to create a legal relationship) are not enforceable against any of the parties in the
agreement, since they are not contracts. Thus, one may say that all contracts are
agreements but all agreements are not contracts.

Please note: A contract is an agreement whose object is to create an obligation or

obligations, but there are other transactions which are based on agreements and which
also create obligations but are not called contracts, for example Marriage, Trust, Sale
etc. The difference between such transactions and a is (a) A contract is generally
executory. It is a promise to do something, but marriage / trust / sale and similar
agreements are executed. They are complete in their operations as soon as entered
into. There is nothing more to be done by either party in furtherance of the agreement.
(b) The contents of the contractual agreements are determined by the autonomous
authorities of the party concerned but in such agreements the contents of the
obligations are determined by law, and the parties have very little option in the matter. A
husband, for example, has no more option to maintain his wife then his option to
maintain his children and he is not free to avoid such obligations. However, this is not
the case with a where obligations are created, modified or distinguished according to
the sweet will of the parties concerned.

4. Define ‘Consideration’. What are the rules to test the validity of

consideration? When a contract would be valid even without
consideration? AI based answer
Consideration is a legal term that refers to something of value given or promised by one
party to another in exchange for a contract. Consideration can be money, goods,
services, promises, or anything else that has legal value. Consideration is essential for
a contract to be valid and enforceable by law.

There are some rules to test the validity of consideration, such as:
Consideration must be bargained for by both parties. This means that each party must
agree to give or do something in exchange for the other party’s promise or performance.
Consideration must not be past or illusory. This means that the consideration must be
given or performed at the present or in the future, not in the past. It also means that the
consideration must be real and definite, not vague or uncertain.
Consideration must not be illegal, immoral, or against public policy. This means that the
consideration must not violate any laws, moral principles, or social norms.
There are some exceptions to the rule of consideration, where a contract can be valid
even without consideration. These are:

Natural love and affection. This is when a person makes a promise out of love and
affection to a near relative, such as a spouse, parent, child, or sibling. The promise must
be in writing and registered under the law.
Compensation for voluntary services. This is when a person makes a promise to pay for
services that were voluntarily rendered by another person without any expectation of
payment.
Time-barred debt. This is when a person makes a written promise to pay a debt that is
no longer enforceable by law due to the lapse of time.
Completed gift. This is when a person makes a gift of something and delivers it to the
recipient without any condition or obligation.

5. What is a contract? AI based answer

A contract is a legal document that states and explains a formal agreement

between two or more parties, or the agreement itself. A contract can involve the
transfer of goods, services, money, or promises of any of those. A contract is
essential for creating and enforcing rights and obligations between the parties.

To be valid and enforceable, a contract must have the following elements:

Mutual assent: This means that both parties must agree to the terms of the
contract. Mutual assent is usually expressed by a valid offer and acceptance.
Consideration: This means that each party must give or do something of value in
exchange for the other party’s promise or performance. Consideration can be
anything that has legal value, such as money, goods, services, or promises.
Capacity: This means that both parties must have the legal ability to enter into a
contract. Capacity can be affected by factors such as age, mental status,
intoxication, or coercion.
 Legality: This means that the contract must not violate any laws, moral principles,
or public policy. Legality can be affected by factors such as fraud, duress,
mistake, or unconscionability.
If any of these elements are missing or defective, the contract may be void,
voidable, or unenforceable.

Differentiate between an agreement and a contract. If an ‘Offeree’ accepts

an offer not as it is, would there be a contract? Argue in support of your
contention.

An offer must be accepted before there can be an agreement. An offer by itself creates
no obligation. An accepted offer is an agreement. An agreement may have one or more
obligations.
(a) Every offer must be accepted as it is. Acceptance of an offer with conditions and
reservations are not accepted at all. Thus, an offer to sell a house for Tk. 20,000 is not
accepted when the offeree says that he is ready to buy it for Tk.15,000. It is only a
counter offer.Similarly, an offer once refused, it cannot be accepted, unless it is
renewed.
(b) Acceptance must be communicated. Mental assent is no acceptance. The acceptor
must do or say something to indicate his readiness to accept the offer. An offer is not
communicated unless it is brought to the knowledge of the offeree; but an acceptance is
sufficiently communicated, even though the offeror may be ignorant of the acceptance.
Thus, In contract by post, A makes an offer to B by a letter. The offer is communicated
to B when he gets the letter. If B wants to accept the offer he must not remain silent and
he is expected to do something to inform A of his acceptance of the offer. Thus if B
posts the letter of acceptance it is sufficient or if he sent a telegram or a messenger with
the letter of acceptance it is also quite sufficient. But it is not necessary that the offeror
must actually know the acceptance of the offer. Thus, in the above case if B merely
posts the letter of acceptance, the acceptance is sufficiently communicated to A though
the letter may not reach A at all. (This has been settled in the case of Household Fire
Insurance Co. V. Grant). Here the letter of acceptance was lost in the course of
transmission to the offeror; but it was held by the highest Court of Appeal in England
that the acceptance had been sufficiently communicated and that there was a binding
contract.
(c) A conditional assent to an offer does not amount to acceptance. For example, where
the offeree accepts all the terms of the offeror "subject to the contract", the assent is
conditional and hence it does not amount to acceptance.
(d) In a tender for the purchase or sale of goods or the supply of services, the person
asking for tenders normally makes an invitation to treat. The offer comes from the
person making the tender; the other party can accept or reject the tender.
Please note: In Bangladesh a valid acceptance must fulfill two conditions: (1) The
acceptance must be absolute and unqualified. (2) The acceptance must be expressed
in some usual and reasonable manner, unless the proposal prescribes the manner in
which it is to be accepted. Where the proposal prescribes the manner of acceptance,
and the acceptance is not made in such manner, the proposer may after the
communication of acceptance, insist that the proposal must be accepted in the
prescribed manner; if he fails to do so he accepts the acceptance. (Sec. 7 of Contract
Act). Section 8 of Contract Act provides that performance of the conditions of a proposal
is an acceptance of the proposal. For instance, where a reward is declared for the
recovery of a lost article, the offer of reward is accepted by the recovery of the lost
article, and the person who recovers can claim the reward.

6. Why is a contract without considerations is invalid generally? Explain the

exception to the above general principle.
When a contact even without consideration is valid?
According to S. 25 of the Contract Act an agreement made without consideration is void
except in the following:

(1) A gratuitous promise is binding if it be in writing and registered and if it be made on

account of natural love and affection between the parties standing in near relation to
each other.
(2) A gratuitous promise is also binding when it is a promise to compensate wholly or in
part, a person who has already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do.
(3) A promise to pay a time-barred debt is enforceable provided the promise is in writing
and is signed by the promisor or his duly authorized agent.

(i) Valid Contract :

A contract is said to be valid when it creates in favor of one party a legal obligation
binding upon the other. A valid contract is enforceable at law, because it satisfies all the
requirements prescribed by law for the validity of a contract.
 7. A) Define consideration. “No consideration, no contract”- explain. Is there
any exception to the above rule? If so, what? AI Based Answer

Consideration is a legal term that refers to something of value given or promised by one
party to another in exchange for a contract. Consideration can be money, goods,
services, promises, or anything else that has legal value. Consideration is essential for
a contract to be valid and enforceable by law.

The rule of “no consideration, no contract” means that a contract cannot exist without
consideration. This rule is based on the principle that a contract is a bargain between
two or more parties, and each party must give or do something in exchange for the
other party’s promise or performance. Without consideration, there is no bargain, and
therefore no contract.

However, there are some exceptions to the rule of consideration, where a contract can
be valid even without consideration. These are:

Natural love and affection. This is when a person makes a promise out of love and
affection to a near relative, such as a spouse, parent, child, or sibling. The promise must
be in writing and registered under the law.
Compensation for voluntary services. This is when a person makes a promise to pay for
services that were voluntarily rendered by another person without any expectation of
payment.
Time-barred debt. This is when a person makes a written promise to pay a debt that is
no longer enforceable by law due to the lapse of time.
Completed gift. This is when a person makes a gift of something and delivers it to the
recipient without any condition or obligation.

B) Write down the essential elements of valid Contract. AI Based Answer

The essential elements of a valid contract are the following:

Offer and acceptance: This means that one party must make a clear and definite
proposal to another party, and the other party must agree to the terms of the
proposal without any modifications or conditions.
Consideration: This means that each party must give or receive something of
value in exchange for the promise or performance of the other party.
Consideration can be money, goods, services, promises, or anything else that
has legal value.
 Intention to create legal relations: This means that both parties must have a
genuine and serious intention to enter into a legally binding contract, and not just
a casual or social agreement.
Legality and capacity: This means that the contract must not violate any laws,
moral principles, or public policy, and that both parties must have the legal ability
and authority to enter into a contract. Factors that can affect legality and capacity
include age, mental status, intoxication, coercion, fraud, duress, mistake, or
unconscionability.
Certainty: This means that the contract must be clear and complete in all its
terms and conditions, and that there must be no ambiguity or uncertainty about
the rights and obligations of the parties. The contract must also be possible and
feasible to perform.
These are the basic elements of a valid contract, but there may be other factors
or requirements depending on the type and nature of the contract. For example,
some contracts may need to be in writing or registered under the law to be valid.

8. Discuss the agreements which expressly declared void under the law.
Agreement Expressly Declared Void under the Law:
In order to make a valid contract, an agreement must not be one of those that are
expressly declared by law to be void. The agreements that are expressly declared void
are:
(1) Agreements in restraint of marriage:
Every agreement in restraint of the marriage of any person, other than a minor, is void
because they are injurious to the moral welfare of the people. (Sec. 26)
(2) Agreements in restraint of trade:
An agreement, the object of which is to deprive a person of his right to exercise a lawful
profession, occupation, trade or business of any kind, is to that extent void. (Sec. 27)
However under English Law if a restraint is reasonable it is valid; but the law in
Bangladesh does not recognize any restrain of trade except as mentioned under the
provisions of Sec. 27 (Contract Act, 1872), Sec. 11(2), 36(2), 54 and 53(3) of the
Partnership Act, 1932.
Please note: Agreements merely restraining freedom of action in the exercise of a
business are not void, e.g., a stipulation in an agreement whereby one party agrees that
he would not sell to others for a certain period any goods of the same description as he
was selling to the other party is not in restraint of trade. Similarly an agreement, which
limits competition to keep up price is not void. Again an agreement of service by which
an employee binds himself, during the term of his agreement, not to compete with his
employer directly or indirectly is not in restraint of trade.
(3)Agreements in restraint of legal proceedings:
Every agreement, by which any party thereto is restrained absolutely from enforcing his
rights under or in respect of any contract, which limits the time within which he may thus
enforcing his rights is void to that extent (Sec. 28). However, there are to exceptions (a)
this section shall not render illegal any contract whereby the parties agree that if any
dispute arises between them in respect of any subject, it shall be referred to arbitration
and (b) this section does not render illegal any contract in writing by which two or more
persons agree to refer to arbitration any question between them which has already
arisen or does not affect any provision of any law in force.
(4) Agreements involving uncertainty:
Agreements, the meaning of which is not certain, or capable of being made certain, are
void (Sec. 29).
(5) Agreements to do impossible acts:
An agreement to do an act, which is impossible in itself from its very inception, is void.
So, also a contract to do an act which, after the contract is made, becomes impossible
(by destruction of the subject-matter or by an act of God), or by reason of some event
which the promisor could not prevent, unlawful becomes void when the act becomes
impossible or unlawful (Sec. 56).
(6) Agreements in Writing or Registered:
It is essential for the validity of a contract that it must be in writing, attested by witnesses
and registered, if so required by any other law in force in Bangladesh. Thus, under the
provisions of Transfer of Properties Act, 1882 contract of sale, mortgage, lease or gift of
immovable properties are required to be in writing and registered under the law of the
land otherwise the same will be void.

9. Explain how a contract can be dissolve “by frustration.”

A contract may also be dissolved by frustration. By frustration we mean the impossibility

in the fulfillment of the purpose of the parties in entering into a contract. Every contract
is made with a purpose. This purpose may be baffling in several ways. When a party is
so baffled in the fulfillment of the purpose of the contract, he may say that since he
cannot achieve the object for which he made the contract, he is no longer interested in
its performance. In early English law when a person promises to do a thing, he must do
it, or pay damages for its non-performance. His promise is absolute and not dependent
on the fulfillment of the purpose for which he made the promise (Paradine V. Jane). But
this uncompromising attitude of early common law has been given up in favour of a
more rational view of the matter and a very large number of exceptions are:
(a) A contract is discharged if a specific thing which is essential to the performance of
the contract is destroyed. In Taylor V. Caldwell the defendants being the owners of a
music hall agreed to lend the use of the hall to the plaintiffs for the purpose of giving
concerts therein. Before the time came for the delivery of the hall, it was destroyed by
fire, so that the concert had to be abandoned after the plaintiffs had incurred
considerable expenditure for its preparation. The plaintiffs sued the defendants for
damages for breach of the contract. It was held that the defendants were not liable.
(b) A contract of personal service is discharged if the performance of the contract is
rendered impossible on account of death or incapacitating illness of one of the parties
to the contract. In Robinson V. Davidson the plaintiff made a contract with the
defendant that at a concert to be given by the plaintiff on a specified day, the
the defendant's wife would play the piano. On that day the lady was unable through
illness to attend the concert. It was held that her failure to do so gave no cause of
action to the plaintiff.
(c) A contract is discharged when the fulfillment of the purpose of the contract becomes
impossible. In Krell V. Henry the defendant agreed to hire the plaintiff's flat for June
26th and 27th, on which days it was assumed that the coronation procession of King
Edward VII would take place and would pass by the flat. The contract contained no
express reference to the procession or to any other purpose for which the flat was
taken. The purpose of the contract was known to both the parties. The procession was
postponed and the defendant did not occupy the flat of the plaintiff. The plaintiff
sued for rent. It was held that the contract was to be read subject to the implied
condition that the procession would take place on the appointed days and that this
implication could be inferred from the circumstances of the case known to both the
parties, although there was no basis for it in the terms of the written contract.
(d) A contract is discharged if, on account of supervening circumstances over which the
parties had no control, its performance becomes impossible within the time or in the
manner contemplated by the parties. In Metropolitan Water Board V. Dick, Kerr & Co., a
contract to construct a reservoir for the Metropolitan Board was dissolved by the act
of the Ministry of Munitions in ordering the contractor to discontinue and suspend
the erection of the work under the authority conferred on that Ministry during the
war with Germany.
(e) A contract is discharged when its performance becomes impossible on account of a
change in the existing law - Persons generally contract on the basis of the law existing
at the time of the contract. If this law is subsequently changed, they are not expected
to face the consequence of the violation of the law by performing the contract. In Baily
V. De Crespingy, A gave a long lease of land to B covenanting as lessor that neither he
nor his assigns would erect on the adjacent land which he retained, any but ornamental
buildings. A railway company under parliamentary powers took the adjacent land and
built a railway station thereon. It was held that the lessor was discharged from his
covenant.
Please note: Under Section 56 of the Contract Act, 1872 it has been provided inter alia
that a contract to do an act which after the contract is made, becomes impossible, or, by
reason of some event which the promisor could not prevent, unlawful, becomes void
when the act becomes impossible or unlawful. This provision of Section 56 is known as
the Doctrine of Frustration. The Doctrine of Frustration cannot avail a defendant, when
the non-performance of a contract is attributable to his own default. The essential idea
upon which the Doctrine of Frustration is based is that of impossibility of performance of
the contract; in fact, impossibility and frustration are often used as interchangeable
expressions.

10. How damage can be a remedy for breach of contract? Discuss with case
examples.

It is the universal remedy for the breach of a contract. It can be claimed in every case.
Damages may be nominal or substantial. A nominal damage is generally granted by
way of vindication of a right. Thus, A makes a contract with B. The contract is
afterwards broken by A, but B suffers no damage on account of the breach, still he is
entitled to some damage, however trifling, it may be by way of vindication of his right.
Substantial damage, on the other hand, is measured by the loss actually suffered by the
party. Such loss must naturally arise in the usual course of things from such breach, or
which the parties knew, when they made the contract, to be likely to result from the
breach of it. It follows, therefore, that a party is not liable for loss which is too remote,
i.e., which is not the natural and probable consequence of the breach of the contract.
Thus, A contracts to sell and deliver 50 maunds of saltpetre to B at a certain price to be
paid on delivery. A breaks his promise. B is entitled to receive from A by way of
damage, the sum, if any, by which the contract price for which B might have obtained 50
maunds of saltpetre of like quality at the time when saltpetre ought to have been
delivered. X delivers to Y, a common carrier, a machine, to be conveyed, without delay
to X mills , informing Y that his mill is stopped for want of the machine. Y unreasonably
delays the delivery of the machine and X, in consequence, loses a profitable contract
with the Government. X is entitled to recover from Y, by way of compensation the
average amount of profit which would have been made by the working of the mill during
the time that delivery of it was delayed, but not the loss sustained through the loss of
the Government contract, because it is too remote. When a party has done some work
under a contract and the contract is brought to an end by repudiation of the other, the
party who has performed the work may sue either for damages for breach of the
contract or for quantum meruit, i.e., for the value of so much as he has already done.
Thus, A places an order with B for the supply of 100 chairs to be delivered by
installments. B delivers 20 chairs when A informs him that he will require no more. In
this Case A s repudiation discharges B from the obligation to supply the remaining
chairs. He can sue A for the breach of the contract or for the value of 20 chairs already
supplied. It is to be seen that a claim for quantum meruit is not based on the original
contract, because the original contract is at an end by the repudiation. It is a new
implied contract arising from the offer and acceptance of the service.

11. What is specific performance? How it can be a remedy for breach of

contract? Not important.
When damage is not an adequate remedy the Court may by its discretion grant the
specific performance of the contract, i.e., compel a party to do what he promised to do.
But unlike damage, specific performance cannot be claimed as a matter or right.
However, unless and until the contrary is proved, the Court shall presume that the
breach of a contract to transfer immovable property cannot be adequately relieved by
compensation in money, and that the breach of a contract to transfer movable property
can be thus relieved. (Sec. 12 Specific Relief Act, 1877).

12. Write down the discharge of contract by operation of law.

Discharge of contract by operation of law may occur in any one of the following ways:
(a) by merger, (b) by insolvency and (c) by alteration of a written document.

(a) Merger: Merger means the sinking or drowning of a lesser estate in a greater, by
reason that they both coincide and meet in one and the same person. Thus, if a party
makes an oral contract and afterwards makes the identical contract underwriting the
oral contract is merged or lost in the formal / written contract.
(b) Insolvency: When an insolvent person obtains an order of discharge from a Court of
competent jurisdiction, he is released from all debts payable under the Bankruptcy.

(c) Alteration of written document: When a written contract is altered by way of addition
or erased in a material part, it is dissolved. It is to be remembered that such alteration
must be effected without the consent of the other party, otherwise it will be a new
contact. The effect of alteration of a contract is dealt with in Sec. 62 of the Contract Act,
1872 which says inter alia that if the parties to a contract agree to alter a contract, the
original contract need not be performed.

13. Discuss coercion.

Coercion:
It is the committing or threatening to commit any acts forbidden by the Penal Code or
the unlawful detaining or threatening to detain any property to the prejudice of any
person whatsoever, with the intention of causing any person to enter into an agreement.
Also note, A threat to prosecute a man or to file a suit against him does not constitute
coercion because it is not forbidden by the Penal Code. Compulsion of law is not
coercion, under influence, fraud, misrepresentation or mistake [Andha Sugers Ltd. v.
State of A. P. (1968) AIR SC 599]. It is also not coercion to charge high prices or high
interest rates because such acts are not forbidden by the penal code. A threats to
commit suicide - Consent to an agreement may be obtained by threatening to commit
suicide e.g. by a fast to death. The Madras High Court has held that this amounts to
coercion. (Amiraju v. Seshamma (1917) AIR).
It was, however, argued by Oldfield J, one of the judges of the Bench which decided this
case, that Section 15 must be constructed strictly and that an act which is not
punishable under the Penal Code cannot be said to be forbidden by it. Suicide is not
punishable by the penal Code; only the attempt to commitsuicide is punishable.
Therefore, suicide is not a crime and the threat to commit suicide is not coercion.

14. Discuss fraud.

Fraud:
Fraud is a false representation of fact, made with a knowledge of its falsehood or
recklessly without belief in its truth, with the intention that it would be acted upon by the
other party and actually inducing him to act upon it.
Does silence amount to fraud? Mere silence as to facts likely to affect the willingness of
a person to enter into a contract is not fraud; but silence amounts to fraud in the
following cases: (a) when the circumstances of the case are such that, regard being had
to them, it is the duty of the person keeping silent to speak or (b) when silence is in itself
equivalent to speech. For example: (a) A sells by auction to B, a horse which A knows
to be unsound. A says nothing to B about the horse's unsoundness. This is not fraud in
A. (b) B says to A, "If you do not deny it, I shall assume that the horse is sound. A says
nothing. Here A's silence is equivalent to speech.
Please Note: It is to be noted that mere commendation or praising of one's own goods is
not a fraud. Traders and manufacturers are inclined to speak optimistically to their
products. Example: X products are the best in the market or a soap powder which
washes whiter than white. Such statements do not amount to fraud, unless a clear
intention to deceive is proved.

A party who has been induced to enter into an agreement by fraud has the following
remedies open to him (Sec 19). He can avoid the performance of the contract. He can
insist that the contract shall be performed and that he shall be put in the position in
which he would have been if the representation made had been true. The party can also
sue for damages. Fraud is a civil wrong / tort, hence compensation is payable.

Quasi Contract

A quasi-contract is a legal obligation that is imposed by a court, not by an agreement

made by the parties to the contract. Quasi-contracts are created by the court when no
official agreement exists between the parties, in disputes over payments for goods or
services. The goal of the court’s creation of these contracts is to prevent unjust
enrichment to any party.
Contractual obligations are generally voluntarily created; but there are some obligations
which are not contractual, but which are treated as such by law. Such contracts are
called quasi-contracts. A quasi-contract is thus not a contract in fact, but it is so in the
contemplation of law. The principle of quasi-contract is based on unjust benefit or unjust
enrichment. A person who has received a benefit from another person must pay for it.
Otherwise, it would be unjust for him to retain such benefits. Law does not support
unjust benefit or unjust enrichment at the cost of another person.
In summary, a quasi-contract is a legal obligation imposed by a court to prevent unjust
enrichment when no official agreement exists between the parties involved in a dispute
over payments for goods or services.

15. Write down contract which cannot be specifically enforced. Not important.