Q-1 Explain The Essential Of A Valid Contract

We know that there are two elements of a contract : (1) an agreement; (2) legal
obligation. Section 10 of the Act provides for some more elements which are essential in
order to constitute a valid contract. It reads as follows :
“All agreements are contracts if they are made by 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 elements of a valid contract can be explained as
follows :
 Agreement: As already mentioned, to constitute a contract there must be an agreement. An
agreement is composed of two elements – offer and acceptance. The party making the offer is
known as the offeror, the party to whom the offer is made is known as the offeree. Thus,
there are essentially to be two parties to an agreement. They both must be thinking of the
same thing in the same sense. In other words, there must be consensusad-idem. An offer to be
valid must fulfil certain conditions, such as it must intend to create legal relations, its terms
must be certain and unambiguous, it must be communicated to the person to whom it made,
etc. An acceptance to be valid must fulfil certain conditions, such as it must be absolute and
unqualified, it must be made in the prescribed manner, it must be communicated by an
authorised person before the offer lapses. Thus, where ‘A’ who owns 2 cars ‘X’ and ‘Y’
wishes to sell car ‘X’ for Rs.30,000. ‘B’, an acquaintance of ‘A’ does not know that ‘A’ owns
car ‘X’ also. He thinks that ‘A’ owns only car ‘Y’ and is offering to sell the same for the
stated price. He gives his acceptance to buy the same. There is no contract because the
contracting parties have not agreed on the same thing at the same time, ‘A’ offering to sell his
car ‘X’ and ‘B’ agreeing to buy car ‘Y’. There is no consensus-ad-idem.

 Intention to create legal relationship: As already mentioned there should be an intention on

the part of the parties to the agreement to create a legal relationship. An agreement of a
purely social or domestic nature is not a contract.
However, even in the case of agreements of purely social or domestic nature, there
may be intention of the parties to create legal obligations. In that case, the social agreement is
intended to have legal consequences and, therefore, becomes a contract. Whether or not such
an agreement is intended to have legal consequences will be determined with reference to the
facts of the case. In commercial and business agreements the law will presume that the parties
entering into agreement intend those agreements to have legal consequences. However, this
presumption may be negatived by express terms to the contrary. Similarly, in the case of
agreements of purely domestic and social nature, the presumption is that they do not give rise
to legal consequences. However, this presumption is rebuttable by giving evidence to the
contrary, i.e., by showing that the intention of the parties was to create legal obligations.
Example: There was an agreement between Rose Company and Crompton Company,
whereof the former were appointed selling agents in North America for the latter. One of the
clauses included in the agreement was: ‘This arrangement is not…. a formal or legal
agreement and shall not be subject to legal jurisdiction in the law courts.” Held that: This
agreement was not a legally binding contract as the parties intended not to have legal
consequences (Rose and Frank Co. v. J.R. Crompton and Bros. Ltd. (1925) A.C. 445).
 Competency of parties: The parties to the agreement must be competent to contract. If either
of the parties to the contract is not competent to contract, the contract is not valid. According
to Section 11 following are the persons who are competent to contract –
 Who are of the age of majority according to the law to which they are subject; who
are of sound mind;
 Who are not disqualified from contracting by any law to which they are subject
Examples: A patient in a lunatic asylum who is at intervals of sound mind may make a
contract during those intervals. A sane man, who is delirious from fever or who is so drunk
that he cannot understand the terms of a contract, or form a rational judgment as to its effect
on his interests, cannot contract whilst such delirium or drunkenness lasts.
 Free Consent: An agreement must have been made by free consent of the parties. A consent
may not be free either on account of mistake in the minds of the parties or on account of the
consent being obtained by some unfair means like coercion, fraud, misrepresentation or
undue influence. In case of mutual mistakes, the contract would be void, while in case the
consent is obtained by unfair means, the contract would be voidable.
Examples: X has two scooters, one is blue and the other green. He wants to sell his blue
scooter. Y who knows of only X’s green scooter offers to purchase X’s scooter for Rs. 5,000.
X accepts the offer thinking it to be an offer for his blue scooter. Held, consent is not free
since both the parties are not understanding the same thing in the same sense. An old man
executed a sale deed thinking it to be a power of attorney and the deed before execution was
not ready over to him. Held, there was no free consent of the man and the contract is not
binding on him.
 Lawful consideration: All contracts must by supported by consideration. Gratuitous
promises are not enforceable at law. An agreement made for an unlawful consideration is
void. Lawful consideration requires both the presence of consideration and the lawfulness of
consideration.
Example: A promises to obtain for B an employment in public service and B promises to pay
Rs. 1,000 to A. The agreement is void as the consideration for it is unlawful.

 Lawful object: The object of an agreement must be lawful. Object has nothing to do with
consideration. It means the purpose or design of the contract. Thus, when one hires a house
for use as a gambling house, the object of the contract is to run a gambling house. According
to Section 23, the object is said to be unlawful if –
 it is forbidden by law;
 it is of such nature that if permitted it would defeat the provisions of any law;
 it is fraudulent;
 it involves an injury to the person or property of any other;
 The court regards it is immoral or opposed to public policy.
Examples: A, B and C enter into an agreement for a division among them of gains acquired,
or to be acquired, by them by fraud. The agreement is void, as its object is unlawful
(Illustration (e) to Sec. 23).
A promises to obtain for B an employment in the public service, and B promises to pay Rs.
1,000 to A. The agreement is void as the consideration for it is unlawful (Illustration (f) to
Sec. 23).
 A promises B to drop a prosecution which he has instituted against B for robbery, and B
promises to restore the value of the things taken. The agreement is void, as its object is
unlawful (Illustration (h) to Sec. 23).

 Agreements not expressly declared void: The agreement must not have been declared to be
expressly void. Agreements mentioned in sections 24 to 30 have been expressly declared to
be void.
Under these provisions, agreement in restraint of marriage, agreement in restraint of
legal proceedings, agreement in restraint of trade and agreement by way of wager have been
expressly declared void.
Examples: A makes a contract with B that he will marry nobody except B, and if he marries
somebody else, he will pay a certain sum of money to B, the contract is void; because there is
no promise of marriage on either side and the agreement is purely restrictive (Lowe v. Peers).
An agreement made by a married man that after the death of his wife, he will marry the
plaintiff is void; because it interferes with the security of marriage. Where X and Y enter into
an agreement which provides that if England’s cricket team wins the test match, X will pay Y
Rs.200, and if it loses, Y will pay Rs.200 to X. Nothing can be recovered by the winning
party under the agreement as it is by the winning party under the agreement as it is a
wagering contract. Where A and B enter into a wagering agreement and each deposits Rs.200
with C instructing him to pay or give the total sum to the winner, no suit can be brought by
the winner for recovering the bet amount from C, the stake-holder. Further, if C had paid the
sum to the winner, the loser cannot bring a suit, for recovering his Rs.200, either against the
winner or against C, the stake-holder, even if C had paid after the loser’s definite instructions
not to pay.
 Certainty and possibility of performance: The terms of the contract must be precise and
certain. It cannot be left vague. A contract may be void on the ground of uncertainty. Thus a
purported acceptance of an offer to buy a lorry ‘on-hire-purchase terms’ does not constitute a
contract if the hire-purchase terms are never agreed. (Scammell (G) and Nephew Ltd. v.
Ouston (1941) A.C. 251). Similarly an agreement ‘subject to war clause’ is too vague to be
enforceable. (Bishop and Barber Ltd. v. Anglo Eastern Trading and Industrial Co. Ltd. (1944)
K.B. 12). The terms of the agreement must also be capable of performance. An agreement to
do an impossible act cannot be enforced.

 Legal formalities: An oral contract is a perfectly valid contract, except in those case where
writing, registration etc. is required by some statute. In India writing is required in cases of
sale, mortgage, lease and gift of immovable property, negotiable instrument; memorandum
and articles of association of a company, etc. Registration is required in cases of documents
coming within the scope of Section 17 of the Registration Act. All the elements mentioned
above must be present in order to make a valid contract. If any one of them is absent the
agreement does not become a contract.

Q-2 Write: Exception to the rule an Agreements without Consideration is void.

 Every agreement to be enforceable at law must be supported by valid consideration. An agreement
made without consideration is void and unenforceable.
 Except in certain cases. Section 25 specifies the cases where an agreement though made without
consideration will be valid. These are as follows:

 Natural love and affection (Sec. 25(1): An agreement though made without consideration will be
valid if it is in writing and registered and is made on account of natural love and affection between
parties standing in a near relation to each other. An agreement without consideration will be valid
provided :
 it is expressed in writing;
 it is registered under the law for the time being a force;
 it is made on account of natural love and affection; and
 it is between parties standing in a near relation to each other.
All these essentials must be present to enforce an agreement made without consideration. The
presence of only one or some of them will not suffice. Thus, the mere registration of document in the
absence of nearness of relationship or natural love and affection will not suffice.
Example: A for natural love and affection, promises to give his son B, Rs. 1,000. A puts his promise
to B into writing and registers it. This is a contract.

 Compensation for services rendered (Sec. 25(2): An agreement made without consideration may be
valid if 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. To apply
this rule the following essentials must exist:
 The act must have been done voluntarily;
 The promisor must be in existence at the time when the act was done;
 The promisor must agree now to compensate the promisee.
Example: A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.

 Time-barred debt (Sec. 25(3): A promise to pay a time-barred debt is also enforceable. But the
promise must be in writing and be signed by the promisor or his agent authorized in that behalf. The
promise may be to pay the whole or part of the debt. An oral promise to pay a timebarred debt is
unenforceable.
The clause does not apply to promises to pay time-barred debts of third persons. It is restricted to the
promisor who is himself liable for the debt. So, where a Hindu son agrees to pay his deceased father’s
time-barred debt, there is no personal liability for the son, for it is only the joint-family property in his
hands that will answerable for the debt.
The debt must be such which the creditor might have enforced in law for recovery of the payment. A
person under no obligation cannot, therefore, promise to pay. An insolvent finally discharged is under
no obligation to pay any debt. So any promise to pay by him is not a debt as there is no consideration
for such a promise.
Example: D owes P Rs.1,000 but the debt is barred by the Limitation Act. D signs a written promise
to pay Rs.500 on account of the debt. This is a contract.
The promise to pay referred to in Section 25(3) must be an express one. Thus, a debtor’s letter to his
creditor ‘to come and receive’ what was due to him, was held to disclose no express promise. But
where a tenant in a letter to the landlord referred to the arrears of time-barred rent and said, “I shall
send by the end of December”, it was held that the document contained an express promise as
required by Section 25(3).

 Completed gifts Explanation 1 to Section 25 provides that the rule ‘no consideration, no contract’
shall not affect validity of any gifts actually made between the donor and the donee. Thus if a person
 gives certain properties to another according to the provisions of the Transfer of Property Act, he
cannot subsequently demand the property back on the ground that there was no consideration.
 Agency: There is one more exception to the general rule. It is given in Section 185 which says that no
consideration is needed to create an agency.

Q-3 what do you understand by the expression specific relief? Discuss those principle upon
which specific relief is granted.

Specific Relief: - Specific Relief may be defined as relief in `specie'. It is a remedy by which
an obligation or the specific performance of a contract is fulfilled. According to Pollock and
Mulla :
"The law of specific relief is in its essence, a part of the law of procedure, for, specific
relief is a form of judicial redress. It is called `specific' because under its procedure, the
suitor gets his relief in specie i.e. the very thing which the other party was bound to
perform or to forbear."

 History and Object of ‘Specific Relief Act’

A mature legal system endeavours to provide not merely a remedy for every right infringed,
but also an adequate remedy. It was in this process of a search for effective remedial action
that Specific Relief emanated from the Equity Courts in England. The principles built up by
successive Chancellors of England in this branch of law have been borrowed by the Indian
Courts and have served to enrich the Indian Law. This fertilisation of Indian Law by the
Equity Jurisprudence of England produced wider course of the Specific Relief Act of 1877. It
was modelled on the draft New York Civil Code of 1862 and embodied in it the relevant
doctrines evolved by the Courts of Equity in England. The Act of 1877 was not exhaustive.
The jurisdiction of Courts in India to grant specific performance of contracts, for instance,
existed independently of the Specific Relief Act. In localities to which that Act had no
application, cases were governed by the ordinary rules of justice, equity and good conscience.
For decades this Act was subjected to judicial interpretations which revealed many
deficiencies and lacunae. Accumulated mass of case-law required a thorough overhaul of the
provisions of the Act. The Law Commission appointed by the President of India after the
advent of the new Constitution addressed itself to this task at its very first meeting. The
recommendations of the Commission were embodied in its Ninth Report which was
forwarded to the Government of India on 19th July, 1958. On the recommendations of the
Law Commission a Bill was introduced in the Parliament on 23rd December, 1960 which
lapsed on its dissolution. Again in 1962 the Specific Relief Bill, 1962 was introduced in the
Parliament.
 Object - Specific Relief Act has been enacted to define and amend the law relating to certain
kinds of specific relief. It refers only to the specific reliefs obtainable in civil courts. Specific
Relief is a kind of procedural. law In a way it is a supplement to the Code of Civil Procedure.
 Principles upon which the Specific relief is granted - The Specific Relief Act is based on
the rules and practice of the English Law. In England the equitable jurisdiction grew up
 because of the deficiency of Common Law. The Courts of Equity, in England, exercised their
equitable jurisdiction when there was no relief at Common Law or the relief granted by the
Common Law Courts was inadequate. Where pecuniary compensation was no adequate relief
for the non-performance of the contract, the Court granted specific performance. In India too,
the same principle is being followed while granting specific relief.
But it should be noted that the Specific Relief Act refers to the specific reliefs obtainable in
Civil Courts only and does not provide for reliefs obtainable in revenue or Criminal Courts.
Thus the Hon'ble Supreme Court has held that Specific Relief Act 1963 does not consolidate
the whole law on the subject. Although a matter on which the Act defines the law it might
generally be exhaustive, the Act as a whole cannot be considered as exhaustive of the whole
branch of the law of specific performance.
Again, it should be noted that the granting of specific performance is a discretionary remedy.
The Court will refuse to grant specific performance where pecuniary compensation is an
adequate relief.
 Modes of Specific Relief - The following modes of specific relief are provided under
Specific Relief Act -
i. By recovering possession of property. (sections 5 to 8)
ii. By compelling a party to do the very act which he is under any obligation to do, i.e. Specific
performance of contracts. (sections 9 to 14)
iii. By rectifying the instrument. (section 26)
iv. Recession of contracts. (sections 27 to 30)
v. Cancellation of instruments. (sections 31 to 33)
vi. By declaring the rights of the parties otherwise than by an award of compensation, i.e.
declaratory decrees. (sections 34-35)
vii. By granting injunction to prevent a party from doing that which he is under an obligation not
to do. (sections 36 to 42)
viii. By granting damages in lieu or in addition to injunction. (Section 40)