CONTRACT LAW NOTES

PART II (Ss. 39-75)

Prepared by-

Prateek Tripathi

Research Scholar (Ph.D.)

Faculty of Law, University of Lucknow

Session (2019-2020)

(Disclaimer: This content is solely for the purpose of e-learning by students and any commercial use is not
permitted. The author does not claim originality of the content and it based on the references given in end
notes.)
 TIME, PLACE AND MODE OF PERFORMANCE
 By whom contracts must be performed (Ss. 40-45)
 Section 40-Person by whom promise is to be performed
 Contracts which require (personal skill), subsist (technical nature) or intended
(marrying) any act which must be performed by the promisor himself then it
must be performed by the promisor.
 In other cases, the promisor or his representatives may employ a competent
person to perform it.
 Illustrations
(a) A promises to pay B a sum of money. A may perform this promise, either by
personally paying the money to B or by causing it to be paid to B by another ; and, if
A dies before the time appointed for payment, his representatives must perform the
promise, or employ some proper person to do so.
(b) A promises to paint a picture for B. A must perform this promise personally
 Section 41-Effect of accepting performance from third person—
 When a promisee accepts performance of the promise from a third person,
 He cannot afterwards enforce it against the promisor.
 PERFORMANCE OF JOINT PROMISES
 Section 42- Devolution of joint liabilities-
 According to this section joint promisors must, during their lives, fulfil the
promise
 And if any of them dies, his representatives must, jointly with the surviving
promisors, fulfil the promise so on.
 On the death of the last survivor, the representatives of all of them must fulfil
the promise.
 This is subject to any private arrangement between the parties.
 Parties may expressly or impliedly prescribe a different rule. (Gannmani
Anasuya v P.A. Chowdhary)
 Section 43- Joint and Several
  This section lays down three rules:
 Any one compellable to perform- Firstly, when joint promise is made, and
there is no express agreement to the contrary, the promise may compel any
one or more of the joint promisors to perform the whole of the promise. For
e.g. A, B and C jointly promise to pay D 3,000 rupees. D may compel either A
or B or C to pay him 3,000 rupees.
 Right of contribution-Secondly, a joint promisor who has been compelled to
perform the whole of the promise, may require the other joint promisors to
make an equal contribution to the performance of the promise, unless a
contrary intention appears from the contract. For e.g. A, B and C jointly
promise to pay D 3,000 rupees. D recovers the whole amount from A. A may
require B and C to make equal contribution.
 Sharing of deficiency- Thirdly, if any one of the promisors make a default in
such contribution, the remaining joint promisors must bear the deficiency in
equal shares. For e.g. (i) A, B and C jointly promise to pay D the sum of 3,000
rupees. C is compelled to pay the whole. A is insolvent, but his assets are
sufficient to pay one-half of his debts. C is entitled to receive 500 rupees from
A‟s estate, and 1,250 rupees from B. (ii) A, B and C are under a joint promise
to pay D 3,000 rupees. C is unable to pay anything, and A is compelled to pay
the whole. A is entitled to receive 1,500 rupees from B.
 Nothing in this section shall prevent a surety from recovering from his
principal, payments made by the surety on behalf of the principal, or entitle
the principal to recover anything from the surety on account of payments made
by the principal.
 For e.g. A, B and C are under a joint promise to pay D 3,000 rupees, A and B
being only sureties for C. C fails to pay. A and B are compelled to pay the
whole sum. They are entitled to recover it from C.
 Section 44- Effect of release of one joint promisor-
 Where two or more persons have made a joint promise,
 a release of one of such joint promisors by the promisee does not discharge the
other joint promisor or joint promisors;
 Neither does it free the joint promisors so released from responsibility to the
other joint promisor or joint promisors.
  Contrary to English common law, according to which a discharge of one joint
promisors amounts to a discharge of all, unless the creditor expressly
preserves his right against them.
 Section 45- Devolution of Joint rights
 Devolution if Joint rights and joint liabilities follows same principle.
 When a promise is made to more than one person jointly, the right to claim
performance rests with all of them jointly. If anyone of them dies, it rests with
his legal representatives jointly, with the survivors and after the death of the
last survivor, with the representatives of all jointly. For e.g. A, in
consideration of 5,000 rupees, lent to him by B and C, promises B and C
jointly to repay them that sum with interest on a day specified. B dies. The
right to claim performance rests with B‟s representative jointly with C during
C‟s life, and after the death of C with the representatives of B and C jointly.
 Time and place for performance (Ss. 46-50)
 Section 46- Time for performance of promise, when no application is to be made
and no time is specified.—
 Where, by the contract,
 a promisor is to perform his promise without application by the promisee, and
no
 time for performance is specified,
 The engagement must be performed within a reasonable time.
 Explanation.—the question ―what is a reasonable time‖ is, in each particular
case, a question of fact.
 In situations where there is no time period specified for the performance of the
contract and the promisor has to perform the contract without any request by
the promisee, in such a case the promisor must perform the contract within a
―reasonable time‖.
 Here reasonable time means a fair amount of time that is required to do
something conveniently and as soon as the circumstances permit. Hence here
time is not important since a specified date for completion is not mentioned
but this does not mean that the promisee does not have the right to have the
contract performed by the promisor.
  Also, the term reasonable time depends on the facts and circumstances of the
case and will also depend on the nature of the transaction.
 Section 47-Time and place for performance of promise, where time is specified
and no application to be made.—
 When a promise is to be performed on a certain day,
 and the promisor has undertaken to perform it without application by the
promisee,
 the promisor may perform it at any time during the usual hours of business on
such day
 And at the place at which the promise ought to be performed.
 When the terms of the contract say that the promisor has to perform the
contract without any request by the promisee, on the place specified by the
promisee and on the exact date specified by him.
 In case no specific time is mentioned then the promisor should deliver the
goods during the usual hours of business.
 Illustration- Shyam promised to deliver goods to Mohan on an advance
payment of Rs 10,000. Ira made the payment and asked Shyam to deliver the
goods on 13th of the same month at her office at Saket court. Since the time is
not specified, she should deliver it between 10 am and 5 pm, assuming those
are the regular court timings.If Shyam attempts delivery after the business
hours, then Mohan has the right to not accept the goods and ask Shyam to
deliver again during business hours.
 When a promise has to be performed within certain time, it must be performed
on any day before the lapse of that time. (Saraswat Trading Agency v Union
of India)
 Section 48- Application for performance on certain day to be at proper time and
place.—
 When a promise is to be performed on a certain day,
 and the promisor has not undertaken to perform it without application by the
promisee,
 It is the duty of the promisee to apply for performance at a proper place and
within the usual hours of business.
  When the terms of the contract say that a performance of a contract has to be
made on a particular day but the promisor will only do so when the promisee
makes an application to the promisor on that specific day for performance.
Hence, here since it is specifically mentioned in the contract that the promisee
has to request the promisor for performance on that specific day, he must do
so at the proper place and during the usual business hours as specified by him.
 Illustration- Manu agrees to supply Nishant 50 cartons of alcohol on 3rd
November at his office. As per terms of the contract, Nishant would have to
request Manu for performance. Thus on the due date and within usual business
hours, Nishant should request Manu regarding a time and place for the supply
of goods.
 Section 49- Where no place is fixed and no application has to be made to the
promisor by the promisee-
 When the terms of the contract does not specify the place where the goods
have to be delivered and that no request has to be made by the promisee for
the performance of a contract, in such a situation it is the duty of the promisor
to request the promisee of a place reasonable to both where the goods can be
delivered and then accordingly perform the contract.
 The place for the performance of goods implies both the delivery and payment
of goods.
 Illustration- Sheela entered into a contract for supplying 100 cartons of Gram
Flour to Anu on 5th September at a specific price. On the due date of
performance, Sheela must apply or request Anu for determining a reasonable
place and also make the payment at the same place.
 Section 50- When the performance has to be made in the time and manner as
specified by the promisee-
 A contract can also exist in which the promisor agrees to perform the contract
in a manner and at a place and time prescribed by the promisee.
 Illustration- Prankur‘s son is in the hospital and needs money for his son‘s
operation. Harshil owes money to Prankur and agrees to repay him at any
place or time decided by Prankur. In this case, Prankur has the liberty to ask
for the performance of the promise in any manner and at any place or time
suited to him.
 Section 55- The consequence of failure to perform the contract at a fixed time
when the time is essential-

 Sometimes the parties to a contract specify the time for its performance.
Ordinarily it is expected that either party will perform his obligation at the
stipulated time. But if one of them fails to do so, the question arises what is the
effect upon the contract.
 In Bhudra Chand v. Betts(1915) the defendant promised to deliver an
elephant to the plaintiff for the capture of a wild elephant as a part of Kheda
Operations. The contract provided that the elephant would be delivered on the
1st of October, 1910, but the defendant obtained an extension of the time till
6th Oct and yet did not deliver the elephant till 11th. The plaintiff refused to
accept the elephant and sued for damages for the breach. It was held that the
plaintiff was entitled to recover damages since it was proved that time was the
essence of the contract since the defendant had tried to obtain an extension of
time.
 This section says that if it was not the intention of parties to make time of the
essence of the contract, the contract does not become voidable by the failure to
perform the contract on or before the specified time but the promisee is
entitled to claim compensation for any loss caused by the default
 Finally, the section goes on to say that if time is intended to be of the essence
by the parties but performance is accepted on some other time other than the
time agreed, compensation cannot be claimed by the promisee unless he gives
such a notice to the promisor.
 In the case of State of Kerala v. M.A Mathai(2007), it was held that if there
are any delays in the performance of reciprocal obligations by an employer,
the contractor gets the right to avoid the contract but if he does not avoid the
contract and accepts the belated performance, he cannot claim compensation
for any loss sustained to him due to delay in performance, unless he gives a
notice of the same to the delaying party.
 In Indian law, the question of whether the time is of the essence of the contract
or not is determined by the intention of the parties.
 The intention of the parties can be determined from:
(a) The express words used in the contract
 (b) The nature of the contract itself
(c) The nature of the property which forms the subject matter of the contract
(d) The surrounding circumstances
 It has been held in the case of China Cotton Exporters v. Beharilal
Ramcharan Cotton Mills Ltd (1961) that in commercial contracts time is
ordinarily of the essence of the contract.
 Thus it is ordinarily presumed that except in commercial contracts, time is not
of the essence in other contracts. This presumption can be rebutted by showing
the intention of the parties.
 For example, Time is presumed not to be of the essence in contracts relating to
immovable property, but of the essence in contracts of renewal of leases.
 However, merely specifying the time at which the contract has to be
performed does not make time the essence of the contract. In order to
determine this the terms and conditions of the agreement should be read
carefully. If the contract in its terms provides that time is the essence of the
contract, but other terms of the agreement show that the parties did not intend
time to be of the essence, the court has held that time is not of the essence.

 Reciprocal Promises
 Section 2(f)elucidates that ―the promises which form the consideration or part
of the consideration for each other, are called reciprocal promises.
 Types of reciprocal promises
 Mutual and independent
 This concept has evolved through jurisprudence. It states that the two promises
of the parties are independent of each other and they do not have to rely on
each other for performance. Suppose there is a contract where A will give
chocolates to B and B will give Pokemon cards to A.
 A can fulfil his promise even if B does not give him the pokemon cards i.e-
the absence of Pokemon cards does not make the performance of his promise
impossible. The same goes for B. Thus while the acts are binding, they are
mutually exclusive and are thus independent of each other.
 However, if the contract states the acts must be done in a certain order then
that clause should be upheld.
 Conditional
  This is when the performance is dependent upon the prior performance of the
other party. If the first party fails to perform his promise, then it will be
impossible for the second party to perform his side of the contract.
 Suppose the contract if A promises to give money to B, if B promises to buy
Maggi for A. If A defaults, i.e- he fails to pay B, then it will be impossible for
B to hold up his side of the contract as he won‘t be able to buy the Maggi if A
does not pay him. Thus, this type of contract is considered a conditional
contract.
 In M/s Shanti Builders vs. CIBA Industrial Workers’ Co-Operative
Housing Society Ltd., the defendant, CIBA alleged that they suffered losses
as Shanti builders did not do their work on time. On the other hand, Shanti
builders contested they were not given plots of land (as per payment for
construction). Since this plot of land was not given to them, they were not
able to complete construction.
 The court held in favour of Shanti Builders and stated that if the nature of the
transaction states that certain promises must be performed first before others,
then that order must be followed. They also stated that in regards to
conditional promises, the first party cannot ask for the performance of the
second party without performing their act first.
 Concurrent
 Here, parties promise to do acts that have to be performed simultaneously.
A party will be exempted from doing their promise if the other party is not
ready or willing to do their promise. Here ‗readiness‘ means financial abilities
and ‗willingness‘ is perceived through the action of the party.

 For example, P is supplying coats to R. P will only supply the coats if R

financially can and is willing to, and R will only pay if P is willing to and has
the goods.

 Rules regarding performance of reciprocal promises

 Section 51– Simultaneous performance

 Like we had discussed in concurrent promises, if the other party is not ready
or willing to perform their promise, then the other party does not need to
perform their side of the promise.
  Thus, if Ashok and Navya are in a contract, Ashok need not pay for the goods
unless Navya is willing and ready. Similarly, Navya need not give the goods
unless Ashok is willing and ready.

 In Pushkarnarayan S. Maheshwari vs. Kubrabai Gulamali, it was held that

the burden of proof is on the Plaintiff to prove that he performed or remained
ready and willing to perform the contract.

 Section 52– A sequence of performance

 If the contract calls for an order in which the acts promised should be
performed, then the acts should be performed in that order. Otherwise, the
sequence of the order is determined by the nature of the promises.
 For example, if B cannot build a road he promised to build without providing
material, then A‘s promised act should be performed first, then B‘s.

 Section 53– One party preventing the other to perform their promise

 If one party prevents, or makes it impossible for the other party to perform
their job, then the affected party has the option of voiding the contract. They
also have the option of asking for compensations for the damages.

 For example, Ashok is willing to supply coats to Navya, but on the day of
delivery, Navya does not show up or locks Ashok in his shop; then Ashok can
void the contract or collect compensation.

 Section 54– Reciprocal and dependent promises

 When the nature of the promise is conditional, the first party (the party who
has to perform in order for the other party to perform) cannot ask the other
party to perform their promise, if they do not perform first.
 The second party can also ask for compensation if they face damages due to
the non-performance of the first party.
 A hires B‟s ship to take in and convey, from Calcutta to the Mauritius, a
cargo to be provided by A, B receiving a certain freight for its conveyance. A
does not provide any cargo for the ship. A cannot claim the performance of
B‟s promise, and must make compensation to B for the loss which B sustains
by the non-performance of the contract.
  For example, Aaryan is a carpenter and Sara provides wood. They have a
contract that Sara will provide wood to Aaryan and then he will make a table
for her. If Sara refuses to provide the wood, then she cannot expect Aaryan to
make the table. If Aaryan faces any loss due to the fact Sara failed to provide
wood, then he can ask for compensation.

 Section 55– Failure to perform in stipulated time

 If performing an act in a specific time frame is essential to the contract, and

the promisor fails to do so, then the aggrieved party or the promisee can
either void the contract or ask for compensation for losses.
 If time is not essential to the contract then the promisee cannot void the
contract, he can also ask for compensation of losses that were suffered due
to the delay.
 In M/S Citadel Fine Pharmaceuticals vs. M/S Ramaniyam Real Estates
Pvt. Ltd. and Ors. (2011), it was stated that the intentions of the parties
expressed in the contract are imperative to signal whether the time is of the
essence when the nature of the transaction does not make it very clear.
 Section 57– Reciprocal promises to do things legal, and also other things illegal

 The parties may have entered the contract to do legal acts. But after the
contract was established, under specific conditions, they agreed to do illegal
acts. In this case, the previous legal acts are valid and the preceding illegal
acts are held void.
 A and B agree that A shall sell B a house for 10,000 rupees, but that, if B
uses it as a gambling house, he shall pay A 50,000 rupees for it.
 The first set of reciprocal promises, namely, to sell the house and to pay
10,000 rupees for it, is a contract.
 The second set is for an unlawful object, namely, that B may use the house
as a gambling house, and is a void agreement.
 Section 58– Alternative promise of legal and illegal acts

 In the case of an alternative promise, one branch of which is legal and the
other illegal, the legal branch alone can be enforced.
 A and B agree that A shall pay B 1,000 rupees, for which B shall
afterwards deliver to A either rice or smuggled opium.
  This is a valid contract to deliver rice, and a void agreement as to the
opium.
 Appropriation of payments (Section 59-61)
 Appropriation means ‗application‘ of payments. In case of a creditor and a
debtor, Section 59 to 61 of the Indian Contract Act, 1872, lay down certain
rules regarding the Appropriation of payments. When a debtor pays an amount
to the creditor, the creditor is to take note of these sections before applying the
payment to a particular debt, because the creditor would be inclined to
appropriate payments to the debt which is not likely to be realized easily. In
case both parties do not specify the appropriation then the law would take the
responsibility and appropriate accordingly.
 Appropriation by debtor

 Under Section 59 of the Indian Contract Act, 1872, it is stated that if the
debtor owes several debts to the creditor, and makes a payment to any of them
and later requests the creditor to apply the payment to the discharge of a
particular debt. If the creditor agrees to this request, he is bound by such
appropriation. This section applies to several distinct debts and not to a single
debt, or to various heads of one debt. This is not applicable where the debt has
merged into a decree. The appropriation may be implied or expressed by the
creditor.
 The basic idea is that ―When money is paid, it is to be applied according to
express the will of the payer and not the receiver. If the party to whom the
money is offered does not agree to apply it according to the will of the party
offering it, he must refuse it and stand upon the rights which the law has given
him‖
 Clayton’s case-In England, it has been considered a basic rule since the case
of Devaynes vs. Noble, also known as Clayton‘s case. In this, it was held that
the debtor can request the creditor to appropriate the amount to any of the debt
in case he owes to the creditor several and distinct debts, if the creditor agrees
to it, then he is bound by it.

 Contract of guarantee
  The right to appropriate is available to the debtor and not the surety. A surety
is also bound by the creditor‘s appropriation. Also, the surety has no right to
insist on the appropriation of any payment to the guaranteed debt, unless the
circumstances of the case are such that they show such intention.

 Appropriation by creditor

 Under Section 60, the creditor is also competent for appropriation. If the
debtor makes any payment without any appropriation then the creditor can use
his discretion to wipe out any debt which is due. He may use it for the
payment of a time-barred debt or wipe out the debt which is carrying a lower
interest rate. The right of appropriation lies with the creditor until the last
moment, even when he is examined at the trial or before any act which renders
him inequitable for him to exercise this right. The creditor, in this case, has a
lot of scope for exercising his right, he can put himself in the most
advantageous position. Moreover, he need not express himself in express
terms while doing so. As long as notice has not been given in respect of the
appropriation of any amount, the creditor can change it and can appropriate
some other claim.
 As under the common law, the rule that applies is that where the principal and
interest has accrued on a debt, sums paid where interest has accrued must be
applied first to the interest. This rule is based on ―common justice‖ else it
would deprive the creditor of the benefit to which he is entitled under his
contract and would be most unreasonable for him.

 Appropriation by law

 Section 61 is applied in a situation when neither of the parties makes the

appropriation. To settle this deadlock, then the law gets the right to
appropriate. In such cases, the debt is settled in accordance with the order of
the time they have incurred. In case all the debts are of the same time then the
debts would be discharged proportionately. Under this Section not only the
express agreement but also the mode of dealing between the parties.

 Discharge by Agreement and Novation

  Sections 62 and 63 deal with the contracts in which the obligation of the
parties to it may end by the mutual consent of the parties.
 Contracts which Need Not be Performed (Sec.62)
 'Those who, create a thing can also put an end to it'. Adopting this principle,
Sec. 62 allows the parties the novation, rescission and alteration of contract.
"If the parties to a contract agree to substitute a new contract for it, or to
rescind or to alter it, the original contract need not be performed".
 Novation- When the parties to a contract agree to substitute the existing
contract for a new contract that is called novation. In such a case the liability
of the parties as regards the original agreement is extinguished and in its place
they become bound by the new altered agreement. Novation is valid when
both the parties agree to it. As the parties have a freedom to enter into a
contract with any terms of their choice, they are also free to alter the terms of
it by their mutual consent. When the new contract is breached, such breach
does not, by itself, revive the old contract, unless the parties so agree [R.N.
Kumar v R.K. Soral]
 Essentials of Section 62 of the Indian Contract Act
 Consensus ad idem between the parties to a contract.
 There should be a previous contract entered into between the parties.
 Substitution, recession or alteration of a contract giving rise to a valid new
contract.
 Termination of the original contract.
 The basic requirement of Section 62 was discussed by the Supreme Court in
the case of Lata Construction & Ors v. Dr. Rameshchandra Ramniklal
Shah, novation requires a complete substitution of a new contract in place of
the old one and only in that condition the original contract does not have to be
performed. The new substituted contract should rescind or completely alter the
terms of the original contract. In Ramdayal v. Maji Devdiji, the court observed
that novation takes place by introducing new terms in the contract or by
introducing new parties.

 In the case of RS Amarnath Mehra v. Union of India, the court observed that
calling of fresh rates at a lower price will not amount to a new contract. If a
 contract consists of a number of terms and conditions then it does not mean
that each term or condition is a separate contract.

 Kinds of novation of contract

 Novation is of two kinds:
 Where the obligation under a contract is replaced with a new one, and
 Where a party is replaced by another party.

 Alteration and Rescission of Contract

 'Alteration' of a contract means change in one or more of the material terms of
a contract. The parties to the contract remain the same. In novation, there may
be a change of parties also; when the parties are not changed then to be a
novation the terms of the contract must be altered substantially.
 The elements of the alteration are:
 The alteration must be done deliberately.
 The alteration must have been material.
 The alteration is not material if they merely express what was already implied
in the document or add particulars consistent with the document as it stands.
In the Pigot’s case, it was stated that the material alteration of a document by
a party to it after its execution without the consent of the other parties renders
it void and the alteration is not material.
 Rescission-A contract may be discharged by agreement between the parties that it
shall no longer bind them. Such an agreement amounts to 'rescission' or cancellation
of the contract and no new contract is substituted in its place. Rescission may, for
example, be the only advisable course, where the particulars of quantity and quality of
goods that are actually available, differ substantially from that which had been
contracted for [Syed Issar Masood v State of M.P].

 Waiver of Contractual Rights

 Sometimes, questions of waiver are raised in the context of contractual rights.
The Supreme Court has reiterated the insistence on clear evidence of waiver
[Sham Singh v State of Mysore]

 Effect of Neglect of Promisee on Performance of Contract (Sec. 67)

  Sec. 67 lays down that if any promisee neglects or refuses to afford the
promisor reasonable facilities for the performance of his promise the promisor
is excused by such neglect or refusal as to any non-performance caused
thereby.
 Thus, if A contracts with B to repair B's house, and B neglects or refuses to
point out to A the places in which his house requires repair, then A is excused
for the non-performance of the contract.
 Restoring Benefits received under Voidable/ Void Contract (Ss. 64-66, 75)
 Sec. 64 lays down that the party rescinding a voidable contract shall, if he has
received any benefit thereunder from another party to such contract, restore
such benefit, so far as may be, to the person from whom it was received.
 Thus, where a wife wanted to set aside on the ground of misrepresentation the
separation deed made with her husband, under which she had already received
some maintenance, but she was not able to restore the money, the court
allowed her relief holding that the money may be set off against costs to which
she was otherwise entitled [Hulton v Hulton]
 Section 65- Obligation of person who has received advantage under void
agreement, or contract that becomes void-
 When the parties have entered into an apparently valid contract and some
benefits have been passed under it, and subsequently the contract is either
discovered to be void or becomes void, the party who has received the
benefits must restore them to the other. The section does not apply to a
contract which the party knew at the time of making it to be void. The section
also may not apply to a case where the benefits are being passed at a time
when the contract has, though unknown to the parties, already ceased to be
enforceable. Thus, no restitution of the benefit received is allowed in the case
of expressly declared void agreements (Ss. 26-30, 36, 56). Sec. 65 also does
not apply to a case where the benefits are received after the contract has
become void.
 In Faqir Chand Seth v Dambarudhar Bania (AIR 1987 Ori 50), the plaintiff
advanced money to the defendant for supply of paddy, without knowing that
the said agreement was in violation of the Orissa Rice and Paddy Control
Order, 1965. It was held to be a case, where the agreement was discovered to
 be void, and the plaintiff was held entitled to receive the refund of the
advance paid by him. Thus, Sec. 65 will apply whether the agreement is void
by reason of law or by reason of facts. Therefore, Sec. 65 will apply in cases
where a contract is void by reason of "unlawful object", but the parties were
not aware of it.
 The second part of Sec. 65 is concerned with the agreement which becomes
void. This will cover cases where the contract was valid initially, but due to
the happening of some event the performance of it becomes impossible or
unlawful (frustration of contract).
 A contracts to sing for B at a concert for Rs.1000 which are paid in advance.
A is too ill to sing. A is not bound to make compensation to B for the loss of
profits which B would have made if A had been able to sing, but must refund
to B Rs. 1000 paid in advance [Illus. (d), Sec. 65].

 IMPOSSIBILITY OF PERFORMANCE AND FRUSTRATION- SECTION 56

If the promisor promises to do something which is impossible to do, then the contract is void.
This section, thus, deals with the ‘Doctrine of Frustration’.
 The conditions that should be satisfied in order to invoke this section are –
1) The cause should not be a result of a default of the parties.
2) The cause must be unforeseeable and inevitable.
3) The cause must render the entire contract impossible to do.
There are two scenarios which are illustrated below-
 Initial impossibility

 This is when the promisor and promisee enter into a contract to do any act
which they both know is impossible to do then the contract is void.
 If the promisor promises to do an act that he knows cannot be done, then he
is liable to pay compensation for the losses suffered by the promisee due to
his incapability to perform the act.
 A agrees with B to discover treasure by magic. The agreement is void.
 Subsequent Impossibility

i. At the time of making the contract, the act might have been possible
and lawful, but later on, it became impossible to do due to some
reasons. In this case, the contract becomes void when the act
becomes impossible to do.

ii. A and B contract to marry each other. Before the time fixed for the
marriage, A goes mad. The contract becomes void.

 In the first well-known English case of Paradine v Janeit was pointed out
that subsequent happenings should not affect a contract already made. There
the defendant had taken an estate on lease from the plaintiffs. The defendant
was dispossessed of it by alien enemies for some time and, therefore,
refused to pay the rent for the period of dispossession. It was held that
"when the party by his own contract creates a duty, he is bound to make it
good."
 In the subsequent case of Taylor v Caldwellit was laid down that the above
rule was only applicable when the contract was positive and absolute and
not subject to any conditions express or implied.
 The defendants had agreed to let the plaintiffs the use of their music hall
between certain dates for the purpose of holding a concert there. But before
the first day on which a concert was to be given, the hall was destroyed by
fire without the fault of either party.
 The plaintiffs sued the defendants for their loss. It was, held that the
contract was not absolute, as its performance depended upon the continued
existence of the hall. In this case the performance of the contract had
become physically impossible because of the disappearance of the subject-
matter. But the principle is not confined to physical impossibilities. It
extends also to cases where the performance of the contract is physically
possible, but the object the parties had in mind has failed to materialise.
 The well- known coronation cases of which Krell v Henry is one, illustrates
this. The defendant agreed to hire from the plaintiff a flat for June 26 and
27, on which days it had been announced that the coronation procession
would pass along that place. A part of the rent was paid in advance. But the
 procession having been cancelled owing to the King's illness, the defendant
refused to pay the balance.
 It was held that the real object of the contract, as recognised by both
contracting parties, was to have a view of the coronation procession. The
taking place of the procession was, therefore, the foundation of the contract.
The object of the contract was frustrated by non-happening of the
coronation and the plaintiff was not entitled to recover the balance of the
rent.
 Commercial Hardship
 The alteration of the circumstances must be such as to upset altogether the
purpose of the contract. Some delay or some change is very common in all
human affairs and the contract would not be frustrated merely because, on
account of an uncontemplated turn of events, the performance of the contract
may become onerous (or difficult). A situation like this has been described as
one of "commercial hardship" which may make the performance unprofitable
or more expensive or dilatory, but it is not sufficient to excuse performance,
for it does "not bring about a fundamentally different situation such as to
frustrate the venture." The nature and terms of the contract may help in
deciding whether the performance has become impossible, or merely
commercially difficult.

 Specific grounds of frustration

 "The principle of frustration of contract or of impossibility of performance is
applicable to a great variety of contracts," but the following grounds of
frustration have become well established.
1. Destruction of subject-matter
The doctrine of impossibility applies with full force "where the actual and specific subject-
matter of the contract has ceased to exist". Taylor v Caldwell is the best example of this
class."

2. Change of circumstances
A contract will frustrate "where circumstances arise which make the performance of the
contract impossible in the manner and at the time contemplated". This happens when the
change of circumstances has affected the performance of the contract to such an extent as to
make it virtually impossible or even extremely difficult or hazardous.
 3. Non-occurrence of contemplated event
Sometimes the performance of a contract remains entirely possible, but owing to the non-
occurrence of an event contemplated by both parties as the reason for the contract, the value
of the performance is destroyed. [Krell v Henry]

4. Death or incapacity of party

"A party to a contract is excused from performance if it depends upon the existence of a
given person, if that person perishes" or becomes too ill to perform. Where the nature or
terms of a contract require personal performance by the promisor, his death or incapacity puts
an end to the contract. [Robinson v Davison]

5. Government or legislative intervention

A contract will be dissolved when legislative or "administrative intervention has so directly
operated upon the fulfilment of the contract for a specific work as to transform the
contemplated conditions of performance". A well-known English authority is [Metropolitan
Water Board v Dick Kerr & Co Ltd andSatyabrata Ghose v Mugneeran Bangur & Co.]

 DISCHARGE BY BREACH
 A breach of contract occurs when a party thereto renounces his liability under
it, or by his conduct makes it impossible that he should perform his obligations
under it or totally fails to perform such obligations.
 Breach is of two kinds: 1. Anticipatory breach and 2. Present breach
 Section 39 of the ICA gives expression to the doctrine of anticipatory breach.
 Section 39- Effect of refusal of party to perform promise wholly.—When a
party to a contract has refused to perform, or disabled himself from
performing, his promise in its entirety, the promisee may put an end to the
contract, unless he has signified, by words or conduct, his acquiescence in its
continuance.
 Illustrations
a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at
his theatre two nights in every week during the next two months, and B
engages to pay her 100 rupees for each night‘s performance. On the sixth night
A wilfully absents herself from the theatre. B is at liberty to put an end to the
contract.
 b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at
his theatre two nights in every week during the next two months, and B
engages to pay her at the rate of 100 rupees for each night. On the sixth night,
A wilfully absents herself. With the assent of B, A sings on the seventh night.
B has signified his acquiescence in the continuance of the contract, and cannot
now put an end to it, but is entitled to compensation for the damage sustained
by him through A‟s failure to sing on the sixth night.
 An anticipatory repudiation occurs when, prior to the promised date of
performance, the promisor absolutely repudiates the contract.
 Innocent party excused from further performance.
 It entitles the injured party to an option either to sue immediately or to wait till
the time the act was to be done. (Hochester v De La Tour)
 Breach in entirety- the party in default must have refused altogether to
perform the contract and the refusal must go to the whole of the contract,
otherwise the other party would not be justified in putting and to the contract.
(Rash Behary Shaha v Nrittya Gopal Nundy)

 Breach of the terms of the contract

 Strictly speaking, a breach of contract occurs if any of the terms are broken.
Not all terms are literally adopted, however, an order for a complaint to be
brought to a standing, an infringed contract has to in fact be regarded as
―substantial infringement‖ and detract from the value of the contract.
Alternatively, the contract infringement has to change the result of the contract
so fundamentally that the aggravated Party has the right to terminate the
contract (a ‗substantial infringement‘).
 Actual breach or Present breach

 If a party fails, by the due date, to do what the terms say it will be an actual
breach of a contract.
 Anticipatory breach

 If one party ceases to fulfil its portion of the contract, which suggests that the
agreement remains incomplete. For example, refusal of payment, lack of a
product ordered, or the fact that one or more parties can not or will not fulfil
 their part of the deal. The violator may be sued and the other party may
conclude the contract.
 Case laws

 Revelations Perfume and Cosmetics Inc. v. Prince Rogers Nelson

 The company Revelations Perfume and Cosmetics sued the famous musician
―Prince‖ and his music label in 2008, seeking $100,000 in damages for
reneging on an agreement to help market their perfumes. In his 2006 album
―3121,‖ the flamboyant pop star promised personal promotion of a new
fragrance named by the company, and to allow the packaging of its name and
likeness, Prince of the Nation.
 Revelations asked the court to award more than $3 million in lost profits as
well as punitive damages in its breach of contract complaint. However, the
judge did not find any evidence that the pop star was acting with malicious
intent and ordered him to pay almost $4 million in out of pockets for the
cosmetics company. Revelations‘ petition has been denied for damages to
punitive and loss of profit.
 REMEDIES: DAMAGES

 Section 73 provides compensation for loss or damage caused by the breach of

contract. When a contract has been broken, the party that suffers from such
infringement is entitled to receive compensation for any loss or damage
resulting from such infringement. Such compensation shall not be given for
any remote and indirect loss or damage sustained as a result of the breach.
 Compensation for failure to discharge obligations similar to those created by
the contract.
 If an obligation similar to what was created in the contract has not been
discharged, any person who fails to discharge is entitled to receive the same
compensation from the party in default as if that person had contracted to
discharge it and had broken his contract.
 Damages are compensatory not penal.
 Explanation-In estimating the loss or damage resulting from the breach of a
contract, consideration must be given to the means that existed to remedy the
inconvenience caused by the non-performance of the contract.
  Illustration-‗A‘ contract to repair B‘s house in a certain way and receive the
money in advance. ‗A‘ repairs the house, but not according to the contract. ‗B‘
is entitled to recover the cost of making the repairs conform to the contract
from ‗A‘.
 ‗X‘, the owner of a boat, contracts with ‗Y‘ to take a cargo of jute to Mirzapur
for sale at that place, starting on a given day. The boat does not start at the
appointed time because of some unavoidable cause, whereby the arrival of the
cargo at Mirzapur is delayed beyond the time it would have arrived if the boat
had sailed under the contract. After that date, the price of jute falls and before
the cargo arrives. The measure of the compensation payable to ‗Y‘ by ‗X‘ is
the difference between the price ‗B‘ could have obtained for the Mirzapur
cargo at the time it was delivered in due course and its market price at the time
it actually arrived.

 KINDS OF DAMAGES

 General and special damages

 Difference between general and special damages are:

General Damages Special Damages

General damages refer to those damages Special damages are those that do not, of course, arise
which arose naturally during the normal from the breach of the defendant and can only be
course of the events. recovered if they were in the reasonable consideration
of the parties at the time they made the contract.

In relation to the pleadings, the complained It refers to those losses that must be specifically
of is presumed to be a natural and probable pleaded and proven.
consequence with the result that the

In relation to proof, it refers to those losses, It refers to those losses that can be calculated
usually but not exclusively non-pecuniary, financially. It represents the exact amount of pecuniary
which in monetary terms are not capable of loss that the claimant proves to have suffered from the
precise quantification. set of pleaded facts.

 "The object of damages is to put the suffering party in the same position as if
the contract had been performed. Hence, loss of profits can be awarded, as part
of damages" [A. T. Brij Paul Singh & Bros, v State of Gujarat AIR 1984 SC
1703].

 Mental Pain and Suffering-

 In Hayes v Dodd (1978) 10 Build LR 19, it was observed that where the

contract which has been broken was itself a contract to provide peace of mind

(comfort or pleasure) or freedom from distress, the mental pain and suffering

to be taken into account.

 Nominal damages

 If the defendant is found liable for breach of contract, the plaintiff is entitled to
nominal damages even if no actual damage is proven. Nominal damages are
awarded if there is an infringement of a legal right and if it does not give the
rise to any real damages, it gives the right to a verdict because of the
infringement.

 In the following circumstances, nominal damages are awarded to the plaintiff:

 The defendant committed a technical breach and the plaintiff himself did not
intend to execute the contract;
 The complainant fails to prove the loss he may have suffered as a result of the
contract breach;
 He has suffered actual damage, not because of the defendant‘s wrongful act,
but because of the complainants‘ own conduct or from an outside event;
 The complainant may seek to establish the infringement of his legal rights
without being concerned about the actual loss. Where there is no basis for
determining the amount.
 Nominal damages have been defined as a sum of money that can be spoken of,
but which does not exist in terms of quantity.
  In State of M.P. v Recondo Ltd. (1989 MPLJ 822), a Government contract was
terminated before the expiry of the notice period in circumstances which did
not entitle the contractor to recover loss of profit, but he was allowed nominal
damages.
 Aggravated and exemplary damages

 In certain circumstances, by taking into account the motives or behavior of the

defendant, the court may award more than the normal measure of damages.
Such damage may be:

Aggravated Damages Exemplary Damages

Aggravated damages that compensate a victim for
mental distress or injured sensations in circumstances
where the injury was caused or increased by the
manner in which the defendant committed the wrong
or the defendant‘s behavior following the wrong.
Exemplary damages are intended to give the
punishment to the defendant an example they
are punitive and not intended to compensate
the defendant for loss, but rather to punish
the defendant. No place in contract law.

It is compensatory in nature. It is punitive in nature.

 Liquidated and unliquidated damages

 Damages are said to be liquidated once agreed and fixed by the parties. It is the
sum agreed by the parties by contract as payable on the default of one of them,
Section 74 applies to such damages. In all other cases, the court quantifies or
assesses the damage or loss; such damages are unliquidated. The parties may
only fix an amount as liquidated damages for specific types of a breach, then
the party suffering from another type breach may sue for unliquidated damages
resulting from such breach.

 REMOTENESS OF DAMAGES:

 The term remoteness of damages refers to the legal test used to determine
which type of loss caused by contract breach can be compensated by awarding
damages. It has been distinguished from the term measure of damages or
 quantification which refers to the method of assessing the money compensation
for a particular consequence or loss which has been held to be not too remote.

 How to test the remoteness?

 In deciding whether the claimed damages are too remote, the test is whether
the damage is such that it must have been considered by the parties as a
possible result of the breach. If it is, then it cannot be considered too remote.
The damage shall be assessed on the basis of the natural and probable
consequences of the breach. Actual knowledge must be demonstrated that mere
impudence and carelessness is not knowledge.
 Hadley v. Baxendale-The principle governing the remoteness of damages was
elaborated in the landmark case of Hadley v. Baxendale. The rules stated in
this case were that a party injured by a breach of contract could recover only
those damages which were either to be considered ―reasonably as arising
naturally, i.e., according to the usual course of things‖ from the breach, or
could reasonably have been considered by both parties at the time they entered
into the contract as the likely result of the breach. This is the basis for
understanding special damages. In this case, the Court acknowledged that the
defendant‘s failure to send the crankshaft for repair was the only cause for the
plaintiffs‘ mill to stop, resulting in loss of profits.
 An uncommonly known fact is that Section 73 is based on a case law, i.e.
Hadley v. Baxendale (1854) 9 Ex. 354
 The well-known rule in this case was stated by the Court as follows:
 ―Where two parties have made a contract which one of them has broken, the
damages which the other party ought to receive in respect of such breach of
contract should be either such as may reasonably and fairly be considered as
arising naturally, i.e. according to usual course of things, from such breach of
contract itself, or such as may reasonably be supposed to have been in the
contemplation of both parties at the time they made the contract as the probable
result of the breach of it.‖
 In Madras Railway Company v. Govinda (1898) 21 Mad. 172, the Plaintiff,
who was a tailor, delivered a sewing machine and some clothes to the
defendant railway company, to be sent to a place where he expected to carry on
 his business in an upcoming festival. Due to mistakes made by the company‘s
employees, the goods were delayed and were not delivered until some days
after the festival was over. The plaintiff had not given any notice to the railway
company that the goods were required to be delivered within a fixed time for
any special purpose. On a suit by the plaintiff to recover a sum of his estimated
profits, the Court held that the damages claimed were too remote.

 Section 73 deals with: Mitigation of Losses

 It explains that the means which existed of remedying the inconvenience
caused by the non-performance of the contract must be considered while
calculating the damage or loss for breach of the contract. [M.Lachia Setty &
Sons Ltd v. Coffee Board Bangalore, AIR 1981 SC 162, 168]

 Section 74 – Penalties in regard to breach of contract

 The party to the contract may agree at the time of contracting that, in the
occurrence of breach,the party in default has to pay a stipulated sum of money
to the other, or may agree that in the event of breach by one party any amount
paid by him shall be forfeited. If this sum is genuine pre-estimate of damage
likely to flow from the breach is called ‗liquidated damages‘ .If it is not
genuine pre-estimate of the loss, but an amount intended to secure
performance of the contract, it may be called ‗penalty‘.
 Section 74 provides for the measure of damages in two classes: (a) where the
contract names a sum to be paid in case of breach; and (b) where the contract
contains any other stipulation by way of penalty(Fateh Chand v. Balkrishna
Das,[1964] 1 SCR 515).
 Essence of penalty and liquidated damage
 Penalty is a payment of money to a non –defaulting party, which puts the
other party in fear and enforces the other party to perform its promise under
the contract .The penalty is deterrent in nature.
 A liquidated damage is a genuine and reasonable pre-estimate of damage.
Liquidated damages means it shall be taken as the sum which the parties have
by the contract assessed as damages to be paid whatever may be the actual
damage.
 Section 75 – Compensation to the party rightfully rescinding the contract-

 A person who rightfully resides the contract is entitled to compensation for

any damage which he has sustained through non fulfilment of the contract .A
party to a contract is entitled to rescind the contract in circumstances given in
Section 39, 53, 55, 64 and 65 of the Contract Act .The claim for
compensation under Section 75 is maintainable when the right of repudiation
of the contract has been exercised either of the Section 39, 53, 54 and 55 of
the Contract Act.( Mirza Javed Murtaza v. UP Financial Corpn. Kanpur,
AIR 1983 Alld. 235.)

 Nature of remedy of damage

 The principle behind awarding damage for breach of contract to the party,
who has suffered the loss, is to place that party in the same position in which
it would have been had that contract not been broken. The damages must
commensurate with the loss suffered .Where the contract is broken by one
party, contract is discharged, and the obligations under the contract come to
end; a new obligation arises for the payment of damages.

 A decree for specific performance

 According to Section 10 of the Specific Relief Act, 1963, there are seven
cases when specific performance of a contract may be allowed by the Court.
They are:
 When there is no standard for ascertaining actual damage
 When it is impossible to quantify the actual damage caused by the non-
performance of the act agreed to be done, the Court may, in its discretion,
grant a decree of Specific Performance of that act. [Duke of Somerset v.
Cookson, 1935, 3 P Wins. 390]
 Art, paintings, old furniture, antiques, etc. have a special value to the
contracting party, although such articles may not have much monetary value.
For example, an idol which has been passed down from generation to
generation of a family has immense value to that family, even if it means
nothing to someone else. No amount of damages can compensate for the loss
to the members of the family, even if the Court makes an attempt to assess
 the damages payable instead of the idol. Therefore, an order will be passed
for specific delivery of that idol, not for damages.
 When monetary compensation would not afford adequate relief

1. Where the property is not an ordinary article of commerce or is of special

value or interest to the plaintiff, or consists of goods which are not easily
obtainable in the market;

2. Where the property is held by the defendant as the agent or trustee of the
plaintiff.

 Suits for enforcement of a contract to execute a mortgage

 An injunction

 Under Section 36 of Specific Relief Act 1963, an injunction is defined as

an order of a competent court, which:

i. Forbids the commission of a threatened wrong,

ii. Forbids the continuation of a wrong already begun, or

iii. Commands the restoration of the status quo (the former course of
things).

 Clauses i and ii deal with preventive relief, whereas clause iii deals with
an injunction called mandatory injunction, which aims at rectifying,
rather than preventing the defendant‘s misconduct.

 Under Sections 36 & 37 of the Specific Relief Act 1963, there are two
types of injunctions – temporary and perpetual, whereas Section 39
governs mandatory injunctions.

 Temporary or interim injunctions are governed by Order 39 of Civil

Procedure Code 1908 and are those injunctions that remain in force until
a specified period of time, e.g. 15 days, or till the date of the next hearing.
Such injunctions can be granted at any stage of the suit.
  Permanent or perpetual injunctions, as under Sections 38 to 42 of the
Specific Relief Act, 1963 are contained in the decree passed by the Court
after fully hearing the merits of the case. Such an injunction permanently
prohibits the defendant from committing an act which would be contrary
to the plaintiff‘s rights.

 QUANTUM MERUIT
 Ordinarily if a person, having agreed to do some work or render some
services, has done only a part of what he was required to do, he cannot claim
anything for what he has done. When a person agrees to complete some work
for a lump sum, non-completion of the work does not entitle him to any
remuneration even for the part of the work done. But the law recognises an
important exception to this rule by way of an action for 'Quantum meruit'.
Under it, when a party has in the performance of his contract done some work
or rendered some service and the further performance has been made useless
by the other party, he may recover reasonable compensation for the work or
service. It is so called because the compensation can be recovered on the basis
of the quantity of work done under the contract.
 It may be noted that this action is not an action for compensation for the
breach of contract by the other side. It is an action which is alternative to an
action for the breach of contract. This action in essence is one of restitution,
putting the party injured by the breach of contract in a position in which he
would have been had the contract not been entered into. It merely entitles the
injured party to be compensated for whatever work he may have already done
or whatever expense he may have incurred [De Bernardy v Harding (1853) 3
Ex. 822]. For instance, if A agrees to deliver B 500 bags of wheat and when A
has already delivered 100 bags, B refuses to accept any further supply, A can
recover from B the value of wheat which he has already delivered.
 In order to avail of the remedy under quantum, meruit, and the original
contract must've been discharged by the defendant in such a way as to entitle
the plaintiff to regard himself as discharged from any further performance and
 he must have elected to do so. While the remedy by way of 'quantum meruit' is
restitutory (as noted above), a claim for 'damages' is a compensatory remedy
aimed at placing the injured party, as near as may be in the position which he
would have been in, had the other party performed the contract [Puran Lal v
State of U.P. AIR 1971 SC 712].

 QUASI-CONTRACT

 The obligation arising out of a quasi-contract was first recognized by the

English law. The Indian Contract Act, 1872 also follows the same elements
which are followed by the English Contract Act.
 In the case of a quasi-contract, certain relations are created which are very
similar to contracts. But quasi-contract can be defined as a set of rights and
liabilities between the parties even when there is no formal contract. The law
creates this obligation to maintain justice and fairness between the parties. The
law does not allow one person to enrich himself at the expense of the other. If
the rights and obligations are not created (quasi-contract) one party would be
unjustly enriched. Going by this, it can be said that a quasi-contract is kind of
a remedy instead of being a pure contract.
 Formation of a quasi-contract allows the aggrieved party to recover the benefit
which the enriched party has taken at his expense. Since a quasi-contract is a
law made by law, there is no statement of consent between the parties. The
obligation and rights which are placed on the shoulder of the parties are rather
by law than by assent.
 In quasi-contracts the liability imposed is based on the doctrine of unjust
enrichment.
 The Principle of unjust enrichment
 Quasi-contracts are based on the principle of ―Nemo debet locupletari ex
aliena jactura‖, which means ‗No man should grow rich out of another
person‘s losses. Therefore, liability in the case of quasi-contractual obligations
 is based on the principle of ‗unjust enrichment‘. It essentially means that no
man should get unjustly enriched at the cost of another person‘s loss. That
means no person should gain anything unjustly, when his gaining such a thing
may mean a loss for another person.
 Section 68 (Claim for necessaries supplied to person incapable of contracting, or
on his account)
 If the ―necessaries‖ for a person, who is incapable of contracting (for example,
a minor or a mentally disabled person) or of the dependants of such a person
are taken care of by someone, he has the right to be reimbursed from the
property of such incapable person. Although the word ―necessaries‖ has not
specifically been defined in the Act, it is implicitly clear that it means the
necessaries to sustain life, basic things like food, clothing, education, etc.
These are things without which a person cannot reasonably exist. In simple
terms, if a person A supplies another person B (who is incapable of entering
into a contract) or his family or anybody else who is dependent on him, with
necessaries for life, he is entitled to take his due return from the property of
person B. He is entitled only to such a reasonable amount as the value of the
goods or services he may have supplied hold.
 Section 69 (Reimbursement of person paying money due by another, in payment
of which he is interested)
 If a person A pays something in someone‘s (a person B‘s) place, that which
person B is himself ‗bound by law‘ to pay, A will be reimbursed by B. Please
note that the person A should be ‗interested‘ in this payment. It is a case of
implied indemnity.
 For instance, Joe is a Zamindar. Annie holds one of his lands on lease in
Punjab. The revenue of Joe‘s land is payable to the government in arrears. So,
the land ends up being advertised for sale by the government. According to the
Revenue Law, if the land is sold, it will end Annie‘s lease. To prevent this
sale, Annie pays Joe‘s dues to the government. Joe is bound to pay back to
Annie.
 The aforementioned illustration satisfies the following conditions-
 The party paying the other party‘s dues is interested in the payment.
 The party whose payment is due was in fact bound by law to pay.
 Section 70 (Obligation of person enjoying the benefit of the non-gratuitous act)
 When a person lawfully does something for another person (for example,
delivers a good or a service) without intending to do so ‗gratuitously‘, and the
other person enjoys the benefit of the delivery of that good or service, the
latter is bound to pay back to the former.
 A gratuitous act is one that is done for a person by another without the
expectation of a return. For example, giving someone a gift is a gratuitous act.
Here comes your Amazon package delivered to the wrong address. A pack of
chocolate chip cookies that you ate as soon as they arrived. You are liable to
compensate the actual owner of the package. The illustration of a shoe-shiner
unsolicitedly polishing one‘s shoes or that of the coolie picking up one‘s
goods will lie under Section 70. Such acts and services are not done
gratuitously and therefore a liability to pay back arises on the part of the
person on the receiving end.
 Section 71 (Responsibility of finder of goods)
 Simply, a person who finds goods that belong to another person shall be
treated as a bailee. A bailee is essentially a safe keeper of the goods, who is
supposed to return the goods to the actual owner or dispose them in the
manner in which the actual owner may want them to. The bailee has certain
duties and rights as the ‗possessor‘ or ‗custodian‘ of the goods for the time
being. For example, Sarah finds a diamond lying on the floor in a shop. She
picks it up and keeps it in her safe possession. Sarah makes all reasonable
efforts to find the true owner of the diamond. The diamond actually belonged
to Nadia. Sarah has the right to hold the possession of the diamond against all
the world except Nadia, and is supposed to make reasonable efforts to find
her, and return it to her. In this case, Nadia will have to pay the compensation
for all the loss suffered by Sarah in finding her.
 Section 72 (Liability of person to whom money is paid or thing delivered by
mistake or under coercion)
 As the heading suggests, if something is delivered to a person by ‗mistake‘ or
under ‗coercion‘, he is liable to pay it back. For instance, Aristotle and Dante
share a flat and contribute in half for the rent to be paid. Aristotle, without
knowing that Dante has already paid the due rent to the landlord in whole,
 pays again to the landlord. The landlord, in this case, is liable to give back the
money delivered to him by mistake. The term mistake here can mean both
mistake of fact or mistake of law.
 The section also uses the term ‗coercion‘. Here is an example of something
delivered under coercion- A railway company refuses to deliver goods to a
certain consignee except upon the payment of a certain illegal sum of money.
The consignee pays the sum to obtain his goods. The company is liable to
return the sum of money illegally charged.

 Distinction between a contact and a quasi-contract

 A quasi-contract can be considered as a constructive contract or an implication
of law. It is just a fictitious contract, aimed towards providing a remedy to the
aggrieved party, which is not the case in an express contract. In the case of
quasi-contracts, the intention of the parties is not considered, but in the case of
an express contract, the intention of the parties is very crucial as, without the
intention to enter into an agreement, there would be no contract at all. In the
case of an express contract, the duty of the parties defines the contract, which
forms the terms of the contract. But on the other hand, in the case of quasi-
contract, the duties are defined due the formation of a contract.

(Disclaimer: This content is solely for the purpose of e-learning by students and any commercial use is not
permitted. The author does not claim originality of the content and it based on the following references.)

 REFRENCES:
Statutes-
1. The Indian contract act, 1872
2. Specific Relief Act, 1963
Books-
1. Avtar Singh, Contract and Specific Relief
2. A.K. Jain, Law of Contract
Internet Sources-
1. blog.ipleaders.in