BUSINESS LAW Unit 1

BUSINESS LAW (105)
Unit 1 Indian Contract Act

1872
Prof. Samarth Singh
Assistant Professor
BBA Department
DIMS, Meerut
Unit 1
• Indian Contract Act: Offer, Acceptance, Agreement and Contract;
• Capacity of parties;
• Essentials of Contract; 4Performance of Contracts;
• Termination of Contract,
• Consequence and Remedies for Termination of Contract.

Introduction to Business Law
• Business : Business is an economic activity, which is related with continuous and regular
production and distribution of goods and services for satisfying human wants.
• Law : Law maybe defines as “the system of rights and obligations which the state might
enforce”
• Law in its legal sense, as distinguished from other uses of the term, means those rules
and principles that governs and regulate social conduct and observance of which can be
enforced in courts. It operates to regulate the actions of the persons in respect to one
another and in respect to entire social group or society.
• Meaning and Definitions of Business Law
• “It is a special branch of law which deals with the rights and duties arise from mutual
agreements of the parties or merchants.”
• OR
• “Business Law refers to the law that apply to business entities such as partnership and
corporations.”
• OR
• Business Law or Commercial Law is the body of law that governs business and
commercial transactions. It is often considered to be a branch of civil law and deals with
issues of both private law and public law.
• OR
• Business Law is also known as commercial law is that branch of law that deals with the
legal rights, duties, liabilities of parties involved in any kind of business transactions. It is
the branch of civil law includes public as well as private law.
Features of Business Law
• i) Regulates industry, trade and commerce.
• ii) Regulates every business activity of business
community.
• iii) It has no watertight demarcation with the
other branches of law.
• iv) Promotes rights and interest of business
community.
• v) This is the most important means to create
positive environment for the prosperity of
business.
Importance of Business Law
• a) Protection of economic right.
• b) Regulation and Systematization of business.
• c) Commencement and development of
business.
• d) Enforcement of business Contract.
• e) Delivery of Justice.
Agreement = Offer + Acceptance
Contract = Agreement + Enforceable by law
UNIT – 1 INDIAN CONTRACT ACT, 1872
Meaning and Definition of a Contract
• According to Section 2(h) of the Indian Contract Act, 1872
defines a contract as “An agreement enforceable by Law is
a Contract.”
• According to A.J Salmond: "An agreement creating and
defining obligation between two or more parties is a
contract.
• According to Sir F. Pollock, “Every agreement and promise
enforceable by law is a contract.”
• According to Sir William Anson, “A contract is a legally
binding agreement between two or more persons by which
rights are acquired by one or more to acts or forbearances
(abstaining from doing something) on the part of the
others.
Agreement = Offer + Acceptance
Contract = Agreement + Enforceable by law
• In short the contract includes the following:

- Two or more parties
- An agreement on the ground of free consent
- Exchange of promise by meeting the minds
- Enforceable by law.
From the several definitions, we find that a contract
essentially consists of two elements:
• Agreement: According to Section 2(e) in The Indian Contract Act, 1872
• “Every promise and every set of promises, forming the consideration for each other, is
an agreement.”
• Promise : According to Section 2(e) in The Indian Contract Act, 1872
• “When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise
• Other Definitions of Agreement
• “An agreement between two or more parties creating mutual obligations enforceable
by law. “
• “A meeting of minds with the understanding and acceptance of reciprocal legal rights
and duties as to particular actions or obligations is known as Agreement.”
• Enforceability by Law(legal obligation) : An agreement is said to be enforceable by law
if it creates some legal obligation. In other words, the parties to an agreement must be
bound to perform their promises and in case of default by either of them, must be
intend to sue, e.g., in case of social or domestic agreements; the usual presumption is
that the parties do not intend to create legal relations.
Essentials/Formation of a Valid Contract
1. Agreement: To constitute a contract there must be an agreement, and there must
be a ‘lawful offer’ and a ‘lawful acceptance’ of the offer. The adjective ‘lawful’
implies that the offer and acceptance must satisfy the requirements of the
Contract Act in relation thereto.
2. Intention to create legal relationship: Parties enter into a contract must intend to
constitute legal relationship. If there is no such intention, there can be no contract
between them. An agreement to dine at a friend’s house is not an agreement
intended to create legal relation and is not a contract. But an agreement to buy
and sell goods are intended to create some legal relationship and therefore
contracts.
For Example : M promises his wife N to ge her a saree if she will sing a song. N
sang the song but M did not bring the saree for her. N cannot bring an action in a
court to enforce the agreement as it lacked the intention to create legal relation.
3. Lawful Consideration: The most important element is the presence of
consideration which can be said to be the price for the promise. The consideration
must be lawful. An agreement made without consideration and the lawfulness of
considerations.
4. Capacity of parties: The parties to an agreement must be competent to

contract, otherwise it cannot be enforced by a court of law. In order to be
competent to contract the parties must be of the age of majority and of sound
mind and must not be disqualified from contracting by any law to which they
are subject (Section 11).
For example: Ramesh, a minor borrowed 4,000 from suresh and executed
mortgage of his property in favour of the lender. This was not valid and the
money advanced to minor could not be recovered.
5. Free consent: There must be free consent to the parties to the contract.
According to section 14, consent is said to be free when it is not caused by :
(i) Coercion.
(ii) Undue influences.
(iii) Fraud.
(iv) Misrepresentation.
(v) Mistake.
If the consent of the parties is not free then no valid contract comes into
existence.
For Example : X threatens to kill Y if he does not sell his house to X. Y agrees to
sell his horse to X. In this case, y s consent has been obtained by coercion and
therefore, it cannot be regarded as free.
6. Lawful objects : For the formation of a valid contract, it is also necessary

that the parties to an agreement must agree for a lawful object.
Accounting to Section (23) the object for which the agreement has been
entered into must not be fraudulent or illegal or immoral or opposed to
public or must not imply injury to the person or property of another. If the
object is unlawful for one or the other of the reason mentioned above the
agreement is void.
7. Writing and registration : According to the Indian contract Act in Section
(25) a contract may be oral or in writing. But in certain special cases it lays
down that the agreement to be valid must be in writing and registered.
8. Certainty : Section 29 of the contract Act provides that “Agreements, the
meaning of which is not certain or capable of being made cartain are void.
“in order to give rise to valid ascertain the meaning of the agreement, for
otherwise, it cannot be enforced.
For Example : A agree to sell ‘B’ a hundred tons of oil”. There is nothing
whatever to show what kind of oil was intended. The agreement is void for
uncertainty.
9. Possibility of Performance or Doctrine of Frustration : Yet another

essential feature of a valid contract is that it must be capable of
performance. Section 56 lays down that “An agreement to do an act
impossible in itself is void.” If the act is impossible in itself, physically or
legally, the agreement cannot be enforced at law.
The doctrine of frustration applies when, after a contract has been
entered into, some supervening event occurs that makes performance of
the contract radically different from what the parties had contemplated
when they entered into the contract.
10. Agreement not Declared Void or Lawful Agreement : The Agreement
must not be one, which the law declares to be either illegal or void. A void
agreement, which is without any legal effects. Illegal agreement is an
agreement expressly or impliedly prohibited by law.
For Example : Agreement is restraint of trade, marriage; legal proceedings,
etc., are void agreements. Those agreements prohibited by the Indian
Penal Code, e.g., threat to commit murder or publishing defamatory
statements or agreements, which are opposed to public policy, are illegal
in nature.
Classification of Contract
On the Basis of On the Basis of On the Basis of On the Basis of

Enforceability Formalities Performance Obligation
Express Executed Unilateral

Valid Contract
Contract Contract Contract
Executory Bilateral
Void Contract Implied Contract
Contract Contract
Void Agreement Quasi-Contract
Voidable
Contract
Illegal Contact
Unenforceable
Contract
Classification of Contracts
1. On the Basis of Enforceability :
a. Valid Contract : An agreement is a valid contract if it fulfills all the essential requirements of
a contract given under Section 10. A valid contract is enforceable by law.
An agreement which satisfied all the essential of a contract and which is enforceable through
the court is called valid contract.
b. Void Contact : Section 2(j) says that a void contract is “a contract which ceases to be
enforceable by law.”
A void contract is a contract which is not enforceable by law. As a matter of fact, a void
contract is not at all a contract, as it is without any legal effect.
Example: Where both parties to an agreement are under a mistake of fact, (Section 20),
when the consideration or object of an agreement is unlawful, (Section 23), an agreement
made without consideration, (Section 25), etc., are instances of void contract.
c. Void Agreement : Section 2(g) says that, “an agreement not enforceable by law is void.”
An agreement which is failed to satisfied all or any of the essential element of a contract and
which is not enforceable by the court is called void agreement. An agreement not
enforceable by law is said to be void. A void agreement has no legal fact. It confers no right
on any person and created no obligation.
Example: An agreement made by a minor.
d. Voidable Contract: An agreement which is enforceable by law at the open of one or more
parties of the contract but not at the open of the other or others is a void able contract.
A void able contract is one which can be avoided and satisfied by some of the parties to it.
Until it is avoided, it is a good contract.
Example: contracts brought about by coercion or undue influence or misrepresentation or
fraud.
e. Illegal Contract : An illegal contract is a contract that was made for an illegal purpose and,
consequently, violates the law. Contracts are illegal if the performance or formation of the
agreement will cause the parties to engage in activity that is illegal.
Example : A contract to complied murder.
f. Unenforceable Agreement: An Unenforceable contract is one which cannot be enforcing in a
court for its technical and formal defect.
An unenforceable contract is a contract which cannot be enforced in a court of law. This
could happen because the terms of the contract are ambiguous, if one party has a
voidable contract or if the Statute of Limitations has expired.
Example: (1) An Contract required by law to register but not resisted. (2) An Contract with
not satisfied stamped.
2. On the Basis of Formation :
a) Express contract: A contract in which the terms are stated by parties in words, written or
spoken.
Sec 9 of the Indian Contract Act contains this provision which reads as under: “So far as
the proposal or acceptance of any promise is made in words, the promise is said to be
express”.
Thus, a promise made in words is called an express promise. And the express promises
result in express contracts.
b) Implied Contract : An implied contract is one for which the proposal or acceptance is
made otherwise than in words. Where the proposal or acceptance of any promise is
made otherwise than in words, the promise is known as implied promise. Implied
contracts are inferred from the circumstances of the case and conduct of the parties.
For example, when A takes a cup of milk in a hotel, there is an implied contract.
c) Quasi – Contract : A quasi-contract is one, which is created by law. In the quasi-contract,
there is no intention on either side to make a contract. In a quasi contract, rights and
obligations arise not by an agreement but by operations of law.
For example, where certain letters are delivered to a wrong addressee, the addressee is
under an obligation to return the letters.
3. On the Basis of Performance :
a. Executed Contract: A contract in which both the parties performed their
respective promises. When a contract has been completely performed, it
is termed as executed contract, i.e. it is a contract where, under the terms
of a contract, nothing remains to be done by either party. A contract may
be executed at once i.e. at the time when it is made.
For example, in case of cash sales, the contract is executed at once. It may
become executed in some future date when the terms of the contract are
carried out.
b. Executory contract: A contract in which the promises of both the parties
have yet to be performed. Thus, executory contract is that where under
the terms of a contract something remains to be done by the parties.
In other words, where one or both the parties to the contract have still to
perform their obligations in future, the contract is termed as executory
contract.
4. On the Basis of Obligation :
a. Unilateral Contract : It is also called as one-sided contract. In a unilateral
contract, only one party has to satisfy his obligation at the time of the
formation of it, the other party having fulfilled his obligation at the time of
the contract or before the contract comes into existence.
For example, A takes a public auto to go to Mount Road. A contract comes
into existence as soon as A was dropped in Mount Road. By that time,
auto man has fulfilled his obligation, only A has to fulfill his obligation i.e.
paying the auto- man.
b. Bilateral Contract : A contract is said to be a bilateral contract where the
obligations of both the parties to the contract are pending at the time of
formation of the contract. In this type of contract, a promise on one side is
exchanged for a promise on the other.
For example, A promises to stitch a blouse and 0 promises to pay Rs.30.
Here A promises to stitch the blouse and 0 promises to pay. Thus each
party is both a promisor and a promisee.
Offer and Acceptance
Meaning and Definition of Offer
Section 2 (a) of Indian Contract act, 1872, “When person signifies to another his
willingness to do or to abstain from doing anything; with a view to obtaining the
assent of the other to such act or abstinence, he is said to make a proposal”.
For Example: An offer may require a unilateral act or an acts by two or more parties.
Thus if X gifts Y his horse, it is an offer of unilateral acts as Y has to do nothing or
pay nothing to X in return of the gifts of X. But in case of offers of bilateral acts or
requiring actions by two or more persons, then the offeree is supposed to act or
respond in a specified manner. Now suppose X offers to sell his horse for Rs. 1000
to Y then here Y also is expected to pay Rs. 1000 to X. It is only the second type of
offers about which we are concerend in the Indian Contract Act.
Determination of an Offer (Test of an offer)
Every proposal made by an offeror is not legally regarded as an offer. Three tests are
applied to determine whether or not an offer has actually been made:
1. Does the offer show a clear intenton on the part of the offeror to be bound by it.
2. Whether the proposal is definite?
3. Whether the offer is communicated to the offeror?
Essential Elements of a Valid Offer
1. Offer must disclose an intention to create legal relations: If the offer does not contemplate to give
rise to legal relationship, it is no offer in the eyes of law, e.g. invitation to a dinner which has no
intention to create legal relationship. An offer must impose some legal duty on the party making it.
2. Offer must be Certain and Definite and Not Vague: The terms of the offer must be definite,
unambiguous, clear and certain and not lose and vague. The offer must not be based on a
condition which is uncertain or incapable of performance. Though the proposer is free to lay down
any terms and conditions in his offer, but they should be certain and legal, otherwise its
acceptance will amount to a vague agreement which the courts will not enforce. But, where an
agreement contains its own machinery for clarifying vague term, the agreement will not be vague
in Law. (Foley V. Classque Coaches Ltd.) (1934). In some circumstances, the courts might imply a
term based upon the presumed, intention to the parties.
Examples:-(a) A says to B “I will sell you my car:. A owns four different cars. The offers is not valid
because it is not definite.
(b) A made a contact with B and promised that if he was satisfied with him as a customer he would
favourably consider his application for the renewal of the contract. The promise is too vague to
create any legal relationship.
3. Offer must be Expressed or Implied: An offer may be made either by words or conduct. An offer
which is expressed by words, spoken or written, is called an ‘express offer’ and the one which is
inferred from the conduct of a person or the circumstances of the case is called an ‘implied offer’.
For Example: M says to N that he is willing to sell his motorcycle to him for ₹20,000. This is an
expressed offer.
4. Offer must be distinguished from an invitation to offer: An offer and invitation to offer are two
different terms, which must not be confused with one another. An offer is a proposal while
an invitation to offer (treat) is inviting someone to make a proposal.
So, in an invitation to offer, the offeror, does not make an offer, rather invites other parties to make an
offer. Hence, before simply responding to an offer, one must know the difference between offer
and invitation to offer, because that makes a difference in the rights of parties.
Example: A advertises to sell his house, B, C and D offer to purchase the house at a certain price. A
refuses to accept all the offers. A can do so, as the advertisement issued by A is not an offer but
an invitation to an offer. It is B, C, and D who actually offer and it is for A to accept the same or
not.
5. Offer may be general or specific: An offer may be made to definite person or persons or to the
world at large. When it is made to some specific person or persons it is called a specific offer.
When it is made to the world at large it is called a General offer. A specific offer can be accepted
only by the person to whom the offer has been made and in the manner, if any specified in the
terms of the offer.
But a general offer can be accepted by any persons having notice of the offer by doing what is
required under the offer. The most obvious example of such an offer is where a reward is publicity
offered to any about that object, who will recover a lost object or will give some information,
there the party claiming the reward has not to prove anything more than that he has performed
the conditions on which the reward was offered. The time table of railways is a general proposal
to run trains according to the table, which is accepted by an intending passenger tendering the
price of the ticket.
6. Offer must be communicated: The offer, to be valid must be communicated to the
offeree. An offer becomes effective only when it has been communicated to the
offeree so as to give him an opportunity to accept or reject. An acceptance of the offer,
in ignorance of the offer, is no acceptance and, therefore, no valid contract can arise.
7. Offer must be made with a view to obtaining the consent of the Offeree: The offer
must be made with a view to obtain the consent of the other party and not merely
with a view to disclosing the intention of making an offer. A proposer cannot also
dictate terms under which the offer can be refused. At best, he can lay down the mode
of acceptance.
8. Offer may be Conditional: Though an offeror is free to lay down any terms and
conditions in his offer, but it is the responsibility of the offeror to bring all the terms of
the offer to the notice of the other party, the acceptor is bound only for those
conditions which (i) have expressly communicated to him or (ii) have so clearly been
written that he ought to have known them or (iii) have reasonable notice of the
existence of those terms. He will also be bound by the conditions if he knew of their
existence, though they are in a language unknown to him. It is his duty to get them
explained.
9. Offer should not contain a term the non-compliance of which would amount to
acceptance: The offer should not contain a term the non-compliance of which would
amount to acceptance for example a person cannot make such an offer that if the
acceptance of the offer is not received upto Monday, the offer would be presumed to
have been accepted.
Classification of Offer
1. General Offer: A general offer is one that is made to the public at large. It is not made any specified parties. So any
member of the public can accept the offer and be entitled to the rewards/consideration. Say for example you put
out a reward for solving a puzzle. So if any member of the public can accept the offer and be entitled to the
reward if he finishes the act (solves the puzzle.)
2. Specific Offer: A specific offer, on the other hand, is only made to specific parties, and so only they can accept the
said offer or proposal. They are also sometimes known as special offers. Like for example, A offers to sell his horse
to B for Rs 5000/-. Then only B can accept such an offer because it is specific to him.
3. Cross Offer: In certain circumstances, two parties can make a cross offer. This means both make an identical offer
to each other at the exact same time. However, such a cross offer will not amount to acceptance of the offer in
either case.
For example, both A and B send letters to each other offering to sell and buy A’s horse for Rs 5000/ -. This is a cross
offer, but it will be considered as acceptable for either of them.
4. Counter Offer: There may be times when a promise will only accept parts of an offer, and change certain terms of
the offer. This will be a qualified acceptance. He will want changes or modifications in the terms of the original
offer. This is known as a counteroffer. A counteroffer amounts to a rejection of the original offer.
5. Standing, Open or Continuing Offer: An offer, which is allowed to remain open for acceptance over a period of
time, is known as a standing, open or continuing offer. Tender of supply of goods is a kind of standing offer.
6. Express offer and Implied offer: When an offer is expressed by words, spoken or written it is termed as express
offer.
Implied offer means an offer made by conduct.
For Example: A bus company runs buses from Anand Vihar, Delhi to Meerut. There is an implied offer from the bus
company to take any person on the route who is prepared to pay the prescribed fare. The offer will be accepted by
a passenger as soon as he takes seat in the bus.
Lapse of an Offer
1. By Revocation: An offer may be revoked by the communication of the notice of
revocation. It may be revoked only before its acceptance is complete as against the
offeror. The acceptance is complete as against the offeror when the letter of
acceptance is put in transmission to him. Notice of revocation will take effect only
when it comes to the knowledge of the offeree.
2. By lapse of time: If time is mentioned in the offer for its acceptance, it is revoked
by the lapse of time. If no time is mentioned then it lapses on the expiry of
reasonable time.
Example: M applied for shares of a company in June. Allotment was made in
November held; the offer had lapsed, because period of five months was not a
reasonable time. So M could not be treated as shareholder of the company.
3. By the death or insanity of the Offeror or Offeree: The death of the offeror puts an
end to the offer, provided the fact of death or insanity comes to the knowledge of
the acceptor before acceptance. If the proposer dies after the acceptance of the
offer, the legal representatives of the proposer shall be bound by the contract. The
acceptance of an offer in ignorance of the death or insanity of the proposer is
valid. But according to English Contract Law, no notice of death is required to the
offeree. An offer shall automatically stand revoked in the case of death or insanity
of the proposer.
Lapse of an Offer
4. By failure of the acceptor to fulfill a condition precedent to the acceptance: An offer lapses if
the offeree fails to fulfill a condition precedent to the acceptance.
Example: An offer to sell his car to B for a sum of Rs. 10,000 provided B sends an advance of
Rs. 500 with his acceptance. B accepts the offer but does not send the advance. The offer
may be taken as revoked.
5. By Counter offer: A counter offer also amounts to a rejection of the original offer. Counter
offer means making a fresh offer instead of accepting the original offer.
6. By not accepting in the Prescribed Mode or Usual Mode: If an offer is not accepted according
to the mode prescribed it will lapse provided the offeror gives notice for the offeree that the
acceptance is not according to the prescribed mode.
7. By Rejection of Offer by Offeree: An offer lapses if it is rejected by the offeree. An offer is said
to be rejected if the offeree expressly rejects it or accepts it subject to certain conditions. It
may be noted that once an offer is rejected, it cannot be revived subsequently.
8. An offer lapses by subsequent illegality or destruction of subject matter: An offer lapses if it
becomes illegal after it is made, and before it is accepted. Thus, where an offer is made to sell
10 bags of wheat for Rs. 6,500 and before it is accepted, a law prohibiting the sale of wheat
by private individuals is enacted, the offer comes to an end. In the same manner, an offer
may lapse if the thing, which is the subject matter of the offer, is destroyed or substantially
impaired before acceptance.
Meaning and Definition of Acceptance
Essential Elements of a Valid Acceptance
According to section 2(b) of the Indian Contract Act, 1872, “A proposal is said to be accepted
when the person to whom the proposal is made signifies his assent thereto. A proposal is
when accepted becomes a promise”.
1. Acceptance must be Absolute & Unconditional: In order to convert the offer into an agreement the
acceptance must be absolute and unconditional. If the offeree imposes any condition in his
acceptance it is not a valid acceptance but a counter offer.
Example: An offer to sell his watch to B for Rs.500 and B replies that he can buy it only for Rs.300
thee is a material variation in the acceptance. Therefore, there is no agreement as the acceptance
is not absolute and unconditional.
2. Acceptance must be given within the time prescribed or within a reasonable time: Sometimes, the
time limit is fixed within which an acceptance is to be given. In such cases, the acceptance must be
given within the fixed time limit. In case, no time is prescribed, the acceptance should be given
within a reasonable time. The term ‘reasonable time’ depends upon the facts and circumstances of
each case.
3. Acceptance must be Communicated to the Offeror: In order to form a contract, the acceptance must
be communicated to the offeror in a clear manner by the offeree or his authorized agent. Mere
expression of intention to accept an offer is not a valid acceptance.
Mental Acceptance is No Acceptance: A decision in the offeree’s mind to accept the offer does not
by itself become acceptance. It must find an external expression.
Example: A proposes by letter to purchase B’s house. B expresses his intention to sell it to A but
does not send a reply to him. The house is sold to C despite B’s intention. A has no legal remedy
against B.
Meaning and Definition of Acceptance
Essential Elements of a Valid Acceptance
4. Acceptance must be in a Prescribed Manner: If the offeror in his offer has prescribed any particular manner of
acceptance it must be given according to all that particular manner. If no particular manner is prescribed in the
offer then acceptance should be made in a reasonable manner.
Example: A makes an offer to B and writes “if you accept the offer send your acceptance by telegram.” B sends
his acceptance by registered post. It is not a valid acceptance. But A should inform B that it is rejected because
its not in the prescribed manner.
5.Acceptance must be made by the person to whom the offer is made: An offer can be accepted only by the
person to whom it is made. It cannot be accepted by any other person without the consent of offeror. If
anyone attempted to accept it no contract with that person arises.
Example: A sold his business to B without disclosing the fact to his customers. J sent an order for the supply of
goods to A by name. B received the order and executed the same. It was held that there was no contract
between B and J because J never made any offer to B.
6. Acceptance may be Express or Implied: When an acceptance is given by words spoken or written, it is called
express acceptance. When it is given by conduct, it is called implied acceptance. Sometimes the proposal
instead of being made to a definite person is made to the public.
Example: A wrote a letter to B to sell his cycle for Rs.2,000. B accepted his offer and sent a letter of acceptance
to A. It is an express acceptance.
7. Acceptance must Succeed the Offer: Acceptance must be given after receiving the offer. It should not precede
the offer. If the acceptance precedes an offer, it is not a valid acceptance and does not result in a contract.
8. Offer once Rejected cannot be accepted: Offer once rejected cannot be accepted again unless a fresh offer is
made.
Communication of Offer and Acceptance
Now we have seen previously that an offer cannot be revoked after the offeror has communicated it to the offeree.
Then the offer becomes binding, it creates legal relations between the two parties. So when is the
communication complete? Effective communication of the offer and a clear understanding of it is important to
avoid misunderstanding between all the parties.
If the parties are talking face-to-face this is not a problem. The communication happens in real time and the
offer and acceptance will be communicated on the spot, creating no confusion. But often times in business the
communication occur via letters and emails etc. So, in this case, the timeline of the communication is
important.
1. Communication of Offer: The section 4 of Indian Contract Act 1872 says that the communication of the offer is
complete when it comes to the knowledge of the person it has been made to. So when the offeree (in case of a
specific offer) or any member of the public (in case of a general offer) becomes aware of the offer, the
communication of the offer is said to be complete.
So when two people are talking, face-to-face or via telephone etc, the communication will be complete as
soon as the offer is made. Example if A tells B he will fix his roof for five thousand rupees, the communication
is complete as soon as the words are spoken.
Let us take the same example. A writes to B offering to fix his roof for five thousand rupees. He posts the letter
on 2nd July. The letter reaches B on 4 th July. So the communication is said to complete on 4 th July.
2. Communication of Acceptance:
Mode of Acceptance
In this case of communication of acceptance, there are two factors to consider, the mode of acceptance and
then the timing of it. Let us first talk about the mode of acceptance. Acceptance can be done in two ways,
namely
Communication of Acceptance by an Act: This would include communication via words, whether oral or written. So
this will include communication via telephone calls, letters, e-mails, telegraphs etc.
Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer through some
action of his, or by his conduct. So say when you board a bus, you are accepting to pay the bus fare via your
conduct.
Timing of Acceptance
The communication of acceptance has two parts. Let us take a look
As against the Offeror: For the proposer, the communication of the acceptance is complete when he puts such
acceptance in the course of transmission. After this it is out of his hand to revoke such acceptance, so his
communication will be completed then. So, for example, A accepts the offer of B via a letter. He posts the letter
on 10th July and the letter reaches B on 14 th For B (the proposer) the communication of the acceptance is
completed on 10th July itself.
As against the Acceptor: The communication in case of the acceptor is complete when the proposer acquires
knowledge of such acceptance. So in the above example, A’s communication will be complete on 14th July,
when B learns of the acceptance.
3. Communication of Revocation: Revocation means “taking back” or “withdrawal”. It may be a
revocation of offer or acceptance.
A: Revocation of Offer
The Indian Contract Act lays out the rules of revocation of an offer in Section 5. It says the offer may
be revoked anytime before the communication of the acceptance is complete against the
proposer/offeror. Once the acceptance is communicated to the proposer, revocation of the offer
is now not possible.
Let us take the same example of before. A accepts the offer and posts the letter on 10 thJuly. B gets
the letter on 14th July. But for B (the proposer) the acceptance has been communicated on
10th July itself. So revocation of offer can only happen before the 10th of July.
B: Revocation of Acceptance
Section 5 also states that acceptance can be revoked until the communication of the acceptance is
completed against the acceptor. No revocation of acceptance can happen after such a date.
Again from the above example, the communication of the acceptance is complete against A
(acceptor) on 14th July. So till that date, A can revoke his/her acceptance, but not after such a
date. So technically between 10th and 14th July, A can decide to revoke the acceptance.
Consideration
According to Section 2(d) of the Indian Contract Act, 1872 defines consideration as follows, “When at the desire of
the promisor, the promise or any other person has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a
consideration for the promise”
“Consideration is some act, done or promised to be done, at the desire of the promisor. The Act simplifies the
matter by saying that any kind of act or abstinence which is done or undertaken to be done at the desire of the
promisor is a sufficient consideration.”
Meaning of Consideration:
Consideration is necessary for the one formation of a contract. It means "something returns". It is the price
paid for contract. It must be Lawful. A contract without consideration is void.
Example: Sale of Car. In a contract for sale of a car is consideration for one party, while the price is
consideration for the other party.
Definition of Consideration
(a) Pollock :
According to Pollock Consideration is the price for which the promise of the offer is brought, and the promise
thus given for value is enforceable.
(b) Blackstone:
According to Blackstone consideration is the recompense given by the party contracting to the other. It is the
price of the promise.
(c) Justice Peterson:

According to Justice Peterson consideration means something which is of some value in the eyes of law. It may
be some benefit to the plaintiff or some detriment to the defendant.
Essentials of Valid Consideration
1. It must move at the desire of the promisor: In order to constitute legal consideration the act or abstinence forming the
consideration for the promise must be done at the desire or request of the promisor.
Example: A saves B’s house from the fire without being asked to do so. A cannot demand payment for his services because A
performed this act voluntarily and not at the desire of B.
2. It may move from the Promisee or any other person: The second essential of a valid consideration is that consideration
may move from the promisee or from a third person on his behalf. In other words the act which is to constitute
consideration may be done by the promise or any other person.
Example: A, an old lady, gifted her property to her daughter R on the condition that she should pay certain amount annually
to A’s brother C. On the same day R, entered into an agreement with her Uncle C to pay the amount. Afterwards she
refused to fulfill her promise. C filed a suit. It was held that C was entitled to recover the amount as the consideration on
his behalf had moved from her sister A.
3. It may be past, present or future: It is clear from the definition of consideration that it may be past present or future. It
means that the consideration is an act, which has already been done at the desire of the promisor, or in progress or is
promised to be done in future.
A) Past Consideration: When the consideration for a present promise was given before the date of the promise it is called a
past consideration. It is not a valid consideration.
Example: 1. A has lot his pure and B a finder, delivers it to him. B cannot demand payment for his services because of past
consideration.
2. A teaches the son of B at B’s request in the month of January and in February B promises to pay A sum of Rs.2,000 for his
services. The services of A will be past consideration.
B) Present Consideration: When consideration is given simultaneously by one party to another at the time of contract, it is
called Present Consideration. The act constituting the consideration is wholly or completely performed.
Example: A sells a book to B and B pay its price immediately it is a case of present consideration.
C) Future Consideration: When the consideration on both sides is to be given at a future date, it s called future consideration
or executory consideration. It consists of promises and each promise is a consideration for the other.
Example: X promises to deliver certain goods to Y for Rs.1500 after a week upon Y’s promise to pay the agreed price at the
time of delivery. The promise of X is supported by promise of Y and the consideration is executory on both sides.
4. It need not be Adequate: It is not necessary that consideration should be adequate to the value of the promise.
The law only insists on the presence of consideration and not on its adequacy. It is for the parties to the
contract to consider the adequacy of consideration and the courts are not concerned about it.
Example: A agrees to sell his car worth Rs.200,000 for Rs.50,000 only and his consent is free. The agreement is valid
contract.
5. It must be Real: It is necessary that consideration must be real and competent. Where consideration is physically
impossible illegal uncertain or unreal it is not real and therefore shall not be a valid consideration.
A) Physically Impossible: A promise to do something which is physically impossible.
Example: A, promise to put life in B’s dead brother on B’s promise to pay him Rs.1 Lac.
B) Legally Impossible: A promise to do something which is illegal.
Example: A promise to pay Rs.1 Lac to B on his promise to beat C.
C) Uncertain Consideration: A promise to do something, which is too unclear and uncertain.
Example: An employs B for a certain work and B promises to pay A.
6. Consideration must be something which the promisor is not already bound to do:
The following is not a good consideration to demand a return promise by the other party, when the promise to do
what one is already bound to do is either –
By general law – legal duty
Under an existing contract – contractual duty
Performance of an existing legal duty is no consideration –In order to constitute a valid and proper consideration
there should be a promise to do something more than what a person is already bound to do under law. Doing
of something which a party to the contract is already legally bound to do is no consideration. In such a case the
promise of the promisor can be avoided – that is, need not be performed / fulfilled.
7. Consideration must not be illegal, immoral or opposed to public policy:
The consideration to a promise must be lawful. If the consideration is unlawful, the courts do not allow an action
on the contract. The consideration to an agreement is unlawful, if:-
(i) It is forbidden by law; or
(ii) It is of such a nature that, if permitted, it would defeat the provisions of any law; or
(iii) It is fraudulent; or
(iv) It involves or implies injury to a person or property of another; or
(v) The court regards it as immoral or opposed to public policy every agreement of which the consideration is
unlawful is void.
8. Consideration may be an act, abstinence or forbearance or a return promise:

Forbearance to sue: It means that the plaintiff has a certain right of action against the defendant. But upon a
certain promise being made by the defendant, he refrains or abstains from bringing the action.
Example: Withdrawal of a pending suit by a wife against her husband was held to be good consideration for his
promise to pay her maintenance. This was held in the case of KASTURI DEVI vs. CHIRANJI LAL.
Compromise of a Disputed Claim: The Parties acknowledge that this is a compromise and settlement and that this
Severance Benefit is to provide severance compensation to Executive and to avoid the potential expense and
inconvenience of litigation, and that neither party admits any liability with respect to the foregoing, and in
fact, each party expressly denies liability with respect thereto. In no event shall anything contained herein be
construed as an admission of liability on the part of any of the parties hereto or any other persons released
from liability herein.
Exception to the Rule ‘No Consideration No
Contract’
1. Agreement made on account of natural love and affection [Sec. 25 (1)]: An agreement made without
consideration is enforceable. If it is
(i) Expressed in writing
(ii) Registered under the law for the time being in force for the registration of documents
(iii) Is made on account of natural love and affection
(iv) Between parties standing in a near relation to each other.
Thus there are four essential requirements which must be complied with to enforce an agreement made without
consideration, as per Section 25 (1).
Let us now study some illustrations in this behalf
(a) A promises, for no consideration, to give to B Rs 1,000. This is a void agreement
(b) 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.
(c) A registered agreement, whereby an elder brother, on account of natural love and affection, promised to a the
debts of his younger brother, was held to be valid and binding an the younger brother cause the elder brother
in the event of his not carrying out the agreement (Venkatasamy vs Rangasami)
It should, however, be noted that mere existence of a near relation between the parties does not necessarily
import natural love and affection. Thus where a Hindu husband, after referring to quarrels and disagreement
between him and his wife, executed a registered document in favour of his wife, agreeing to pay for separate
residence and maintenance, it was held that the agreement was void for want of consideration because it was
not merely out of natural love, and affection. (Rajlakhi Devi vs Bhootnath)
Exception to the Rule ‘No Consideration No
Contract’
2. Agreement to compensate for past voluntary service (Sec.25 (2)].
A promise made without consideration is also valid, if it is a promise to compensate, wholly or in part, a person who has
already voluntarily done something for the promisor,’ or done something which the promisor was legally compelled to
do.
Illustrations/Example:
(a) A finds B’s purse and gives it to him. B promises to give A Rs 50. This is a contract.
(b) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract. (Note that B was legally bound to
support his infant son).
(c) A rescued B from drowning in the river, and B, appreciating the service that had been rendered, promises to pay Rs
1,000 to A. There is a contract between A and B.
3. Agreement to pay a time-barred debt (Sec. 25 (3)]. Where there is an agreement, made in writing and signed by the
debtor or by his authorised agent, to pay wholly or in part a debt barred by the law of limitation, the agreement
is valid even though It is not supported by any consideration. A time barred debt cannot be recovered and therefore a
promise to repay such a debt is without consideration, hence the importance of the present exception.
4. Completed gift. A gift (which is not an agreement) does not require consideration in order to be valid “As between the
donor and the done any lift actually made will be valid I and binding even though without consideration” [Explanation
1, to Section 25]. In order to attract this exception there need not be natural love and affection or nearness of
relationship between the donor and done. The gift must, however, be complete.
5. Contract of agency. Section 185 of the Contract Act lies down that no consideration is necessary to create an agency.
6. Remission by the promisee, of performance of the promise (Sec. 63). For compromising a due debt, i.e., agreeing to
accept less than what is due, no consideration is necessary. In other words, a creditor can agree to give up a part of his
claim and. there need be no consideration for such an agreement. Similarly, an agreement to extend time for
performances of a contract need not be supported by consideration (Sec.63).
7. Contribution to charities. A promise to contribute to charity, though gratuitous, would be enforceable, if on the faith
of the promised subscription, the promisee takes definite steps in furtherance of the object and undertakes a liability,
to the extent of liability incurred, not exceeding the promised amount of subscription.
Kinds of Consideration
Consideration may be:
Past Consideration, Executed Consideration or Present Consideration, & Executory Consideration or Future
Consideration.
1. Past consideration. When something is done or suffered beforethe date of the agreement, at the desire of the
promisor, it is called ‘past considera-tion.’ It must be noted that past consideration is good consideration only if
it is given by the promisee, ‘at the desire of the promisor.
Under law, past consideration is no consideration. In India sec 25(2) adequately covers a past voluntary service.
Let us discuss some examples of this.
Illustrations
(a) A teaches the son of B at B’s request in the month of January, and in February B promises to pay A a sum of
Rs 200 for his services. The services of A will be past consideration.
2. Executed or Present consideration. Consideration which moves simultaneously with the promise, is called
‘present consideration’ or ‘executed consideration’.
For example, A sells and delivers a book to B, upon B’s promise to pay for it at a future date. The consideration
waiting from A is present or executed consideration since A has done his act of delivering the book
simultaneously. with the promise of B.
3. Executory or Future consideration. When the consideration on both sides is to move at a future date, it is called
‘future consideration’ or ‘executory consideration’. It consists of an exchange of promises and each promise is
a consideration for the” other.
For example, X promises to sell and deliver 10 bags of wheat to Y for Rs 6,500 after a week, upon Y’s promise to pay
the agreed price at the time of delivery. The promise of X is supported by promise of Y and the consideration is
executory on both ides.
Capacity of Parties
Section 11 of the Contract Act deals with the competency of parties and provides that "every person is competent
to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind
and is not disqualified from disqualified from contracting by any law to which he is subject."
It follow that the following person are incompetent to contract:

(a) minor
(b) person of unsound mind, and
(c) Person disqualified by any law to which they are subject.
Contract entered into by the persons mentioned above are void.
Every person is competent to contract:
(a) Who is of the age of majority.
(b) Who is of sound mind.
(c) Who is not disqualified from making a contract.

Minor
• An infant or a minor is a person who is not a major. According to the Indian Majority Act, 1875, a minor is one
who has not completed his or her 18th year of age. A person attains majority on completing his 18th year in
India.
In the following two cases, a person continues to be a minor until he completes the age 21 years.
•
1. Where a guardian of a minor' person or property has appointed under the Guardians and Wards Act, 1890;
or
2. Where the superintendence of a minor's property is assumed by a court of wards.
An amendment to this Act was made by Indian Majority (Amendment) Act 2000 which fixed uniform age of
majority as 18 years irrespective of the fact whether any guardian has been appointed but president's assent
to kid has yet to be obtained.
• To deal with the problem the law provides the following two approaches:
1. In case of contracts relating to ordinary merchantile transactions, the age of majority is to be determined by
the law of place where the contract is made.
2. In case of contracts relating to land, the age of majority is to be determined by the law of the place where
the land is situated.
• Example: A, 18 years old-domiciled in india, endorsed certain negotiable Instrument in Ceylon, by the law of
which he was a minor. Therefore, he was held not to be liable as endorser.
Minor’s Agreements
1. Agreement with or by a minor is void:
An agreement with or by a minor is void and inoperative ah initio [Moltri Bihi vs. Dharomdas Chose]. These
agreements are considered to be nullity and non-existent in the eyes of law. These cannot be enforced against
a minor.
2. Minor can be a promisee or a beneficiary:
In competency of a minor to enter into contract means incompetency to bind himself by a contract. There is
nothing which debars him from becoming a beneficiary, e.g., a payee [SharafatAli vs. Noor Mohd.], an
endorsee or a promisee in a contract.
ADVERTISEMENTS:
Such contracts can be enforced at his option, but not at the option of the other party. Thus, the law does not regard
him as incompetent for accepting a benefit.
3. Minor’s agreement cannot be ratified by him:
An agreement by a minor cannot be ratified by him on attaining the age of majority. They term ‘ratification’ may be
defined as the act of confirming or approving. The doctrine of no ratification’ implies that an agreement made
by a minor (during the period of minority), cannot be confirmed by him on attaining majority.
This is so because minor’s agreement is voidable initio (i.e., void from the very beginning) and, therefore, cannot be
made valid by ratification. However, if the minor wants to carry out the agreement, a fresh agreement should
be made on attaining majority, it may be noted that a new agreement will also require fresh consideration.
Minor
4. No estoppel against minor:
The term ‘estoppel’ may be defined as prevention of a claim or assertion by law. In other words, when someone
makes another person to believe that a particular thing or fact is true, then later on he cannot be allowed to
deny the truth of that thing.
It will be interesting to know that there is no such estoppel against the minor. In other words, when a minor
fraudulently enters into a contract, representing that he is a major, but in reality he is not, then later on he can
plead his minority as a defence and cannot be stopped (i.e. prevented) from doing so.
5. No specific performance of the agreements:
There can be no specific performance of the agreements, entered into by minors as they are void ab initio. A
contract entered into on his behalf by his parent /guardian or the manager of his estate, can be specifically
enforced by or against minor provided that the contract is:-
ADVERTISEMENTS:
(a) Within the scope of the authority of the parent /guardian or manager, and
(b) For the benefit of the minor.
6. No compensation by minors:
If a minor has received any benefit under a void agreement, he cannot be asked to compensate or pay for it. Sec 65,
which provides for restitution in case of agreements found to be void, does not apply to a minor.
7. Minor’s property liable for necessaries:
Sometimes, a person supplies necessaries to a minor. In such cases, the supplier of necessaries can claim
reimbursement from the property of minor.
Minor
8. Minor as a partner:
The partnership of partners results from their agreement. A minor, being incompetent to enter into a contract,
cannot be a partner in the firm. However, he may be admitted only to the benefits of the firm with the consent
of all other partners [Sec 30(1) of the Indian Partnership Act, 1932].
9. The Minor as an agent:
An agent is merely a connecting link, between his principal and third person. Therefore, a minor can be appointed
as an agent. But he will not be personally liable for his acts as an agent [Sec. 184].
It may, however, be noted that the principal will be liable to the third persons for the acts of the minor agent which
he does in the ordinary course of dealings.
10. Minor as an insolvent:
A minor cannot be declared as an insolvent. This is so because all agreements with a minor are absolutely void.
Moreover, the minor is not personally liable for any debt incurred during the period of his minority.
11. The minor can execute a negotiable instrument:
According to Sec 13(1) of the Negotiable Instruments Act, 1881, the term ‘negotiable instrument’ means and
includes a promissory note, a bill of exchange and a cheque. The minor is competent to draw, negotiate or
endorse the negotiable instruments.
It may, however, be noted that the minor will not incur any personal liability under such instruments. But, the
negotiable instruments executed in favour of the minor can be enforced by him.
12. The liability of minor’s parents or guardians:
As a matter of fact, the minor’s contracts do not impose any liability on his parents or guardians even if the
contracts are for ‘necessaries’. The parents or guardians of the minor may pay money borrowed by him just
out of moral obligations.
But there is no legal obligation to make such payments. It may, however, be noted that the parents or guardians can
be held liable when the minor child is acting as an agent of his parents or guardians.
Persons of Unsound Mind
As explained earlier, as per Section 11 of contract Act, for a valid contract each party to the contract must have a
sound mind. Contract made by person of unsound mind are void. The reason is that a contract requires assents
of two minds but a person of unsound mind has nothing which the law recognize as a mind.
Section 12 deals with the question as to what is a sound mind for the purpose of entering into contract. It lays
down that, "A person is said to be of sound mind for the purpose of making a contract if, at the time when he
makes it he is capable of understanding it and of forming a rational judgement as to its effects upon his
interest."
Unsoundness of mind may arise from:
(a) Idiocy: An Idiot is a person with no intervals of saneness. He is in capable. His mental powers of
understanding even ordinary matters are absent because of lack of development of brain. The agreement with
an idiot is void.
(b) Lunacy or Insanity: It is disease of brain. A lunatic loses the use of his reason due to some mental strain or
disease. He may have Lucid Intervals of sanity. He can enter into contract during that period when he is of
sound mind.
(c) Drunkenness: It produces temporary incapability till the man is under the effect of intoxication creating
impotence of mind. He stands on the same footing as a lunatic.
(d) Hypnotism: It also produces temporary incapability till the person is under the impact of artificially induced
sleep.
(e) Mental decay: It is on account of old age etc.
So, an agreement with person of unsound mind is void. But under Section 68, the property of such person is
always liable for necessaries supplied to him or to anyone whom he is legally bound to support.
Disqualified Persons
The third type of incompetent persons, as per section 11, are those who are “disqualified from contracting by any law to which they
are subject.”
Who are disqualified Persons
1. Alien enemies. An alien (citizen of a foreign country) living in India can enter into contracts with citizens of India during
peace time . only, and that too subject to any restrictions imposed by the government in that respect. On the
declaration of a war between his country and India, he becomes an alien enemy and cannot enter into contracts. “Alien friend
can contract but an alien enemy can’t contract.” Contracts entered into before the declaration of the war stand suspended and
cannot be performed during the course of war, of course, they can be revived after the war is over provided they have not already
become time- barred.
2. Foreign sovereigns and ambassadors. One has to be cautious while entering into contracts with foreign sovereigns
and ambassadors, because whereas they can sue others to enforce the contracts entered upon with them, they cannot be sued
without obtaining the prior sanction of the central Government. Thus they are in a privileged position and are ordinarily
considered incompetent to contract.
3. Convict. A convict is one who is found guilty and is imprisoned. During the period of imprisonment, a convict is incompetent (a)
to enter into contracts, and (b) to sue on contracts made before conviction. On the expiry of the sentence, he is at liberty to
institute a suit and the law of limitation is held in abeyance during the period of his sentence.
4. Married women. Married women are competent to enter into contracts with respect to their separate properties provided
they are major and are of sound mind. They cannot enter into contracts with respect to their husbands’ properties. A
married woman can, however, act as an agent of her husband and bind her husband’s property for necessaries supplied to her, if
he fails to provide her with these.
5. Insolvent. An adjudged insolvent (before an ‘order of discharge’) is competent to enter into certain types of contracts i.e. he can
incur debts, purchase property or be an employee but he cannot sell his property which vests in the official receiver. Before
‘discharge’ he also suffers from certain disqualifications e.g. can’t be a magistrate or a director of company or a member of local
body but he has the contractual capacity except with respect to his property. After the order of discharge,’ he is just like an
ordinary citizen.
6. Joint-stock company and corporation incorporated under a special act. A company/ corporation is an artificial person created by
law. It cannot enter into contracts outside the power conferred upon it by its memorandum of association or by the provisions of
its special act, as the case may be. Again being an artificial person (and not a natural person) it cannot enter into contracts of a
strictly personal nature e.g. marriage.
Free Consent
In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is
when two or more persons agree upon the same thing in the same sense”.
So the two people must agree to something in the same sense as well. Let’s say for example A
agrees to sell his car to B. A owns three cars and wants to sell the Maruti. B thinks he is buying
his Honda. Here A and B have not agreed upon the same thing in the same sense. Hence there is
no consent and subsequently no contract.
Now Free Consent has been defined in Section 14 of the Act. The section says that consent is
considered free consent when it is not caused or affected by the following,
1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake
Free Consent
1] Coercion (Section 15)
Coercion means using force to compel a person to enter into a contract. So force or threats are used
to obtain the consent of the party under coercion, i.e it is not free consent. Section 15 of the Act
describes coercion as
committing or threatening to commit any act forbidden by the law in the IPC
unlawfully detaining or threatening to detain any property with the intention of causing any person
to enter into a contract
For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B
sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion.
Now the effect of coercion is that it makes the contract voidable. This means the contract is voidable
at the option of the party whose consent was not free. So the aggravated party will decide
whether to perform the contract or to void the contract. So in the above example, if B still
wishes, the contract can go ahead.
Also, if any monies have been paid or goods delivered under coercion must be repaid or returned
once the contract is void. And the burden of proof proving coercion will be on the party who
wants to avoid the contract. So the aggravated party will have to prove the coercion, i.e. prove
that his consent was not freely given.
Free Consent
2] Undue Influence (Section 16)
Section 16 of the Act contains the definition of undue influence. It states that when the relations
between the two parties are such that one party is in a position to dominate the other party, and
uses such influence to obtain an unfair advantage of the other party it will be undue influence.
The section also further describes how the person can abuse his authority in the following two ways,
When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary
relationship with the other person
He makes a contract with a person whose mental capacity is affected by age, illness or distress. The
unsoundness of mind can be temporary or permanent
Say for example A sold his gold watch for only Rs 500/- to his teacher B after his teacher promised
him good grades. Here the consent of A (adult) is not freely given, he was under the influence of
his teacher.
Now undue influence to be evident the dominant party must have the objective to take advantage of
the other party. If influence is wielded to benefit the other party it will not be undue influence.
But if consent is not free due to undue influence, the contract becomes voidable at the option of
the aggravated party. And the burden of proof will be on the dominant party to prove the
absence of influence.
Free Consent
3] Fraud (Section 17)
Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false
statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly
without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent.
So according to Section 17, a fraud is when a party convinces another to enter into an agreement by
making statements that are
suggesting a fact that is not true, and he does not believe it to be true
active concealment of facts
a promise made without any intention of performing it
any other such act fitted to deceive
Let us take a look at an example. A bought a horse from B. B claims the horse can be used on the
farm. Turns out the horse is lame and A cannot use him on his farm. Here B knowingly deceived A
and this will amount to fraud.
One factor to consider is that the aggravated party should suffer from some actual loss due to the
fraud. There is no fraud without damages. Also, the false statement must be a fact, not an
opinion. In the above example if B had said his horse is better than C’s this would be an opinion,
not a fact. And it would not amount to fraud.
Free Consent
4] Misrepresentation (Section 18)
Misrepresentation is also when a party makes a representation which is false, inaccurate, incorrect etc. The difference here is the
misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true. Misrepresentation can
be of three types
A person makes a positive assertion believing it to be true
Any breach of duty gives the person committing it an advantage by misleading another. But the breach of duty is without any i ntent to
deceive
When one party causes the other party to make a mistake as to the subject matter of the contract. But this is done innocently and not
intentionally.
5] Mistake (subject to be the provisions of Sections, 20, 21 and 22):
A mistake is an erroneous belief that is innocent in nature. It leads to a misunderstanding between the two parties. Now when talking
about a mistake, the law identifies two types of mistakes, namely
A Mistake of Law
A Mistake of Fact
Mistake of Law
This mistake may relate to the mistake of the Indian laws, or it can be a mistake of foreign laws. If the mistake is regarding Indian laws,
the rule is that the ignorance of the law is not a good enough excuse. This means either party cannot simply claim it was una ware
of the law.
The Contract Act says that no party shall be allowed to claim any relief on the grounds of ignorance of Indian law. This will also include
a wrong interpretation of any legal provisions.
However, ignorance of a foreign law is not given a similar treatment. Ignorance of the foreign law is given some leeway, the parties are
not expected to know foreign legal provisions and their meaning. So a mistake of foreign law is in fact treated as a mistake of fact
under the Indian Contract Act.
Mistake of Fact
Then there is the other type of mistake, a mistake of fact. This is when both the parties misunderstand each other leaving them at a
crossroads. Such a mistake can be because of an error in understanding, or ignorance or omission etc. But a mistake is never
intentional, it is an innocent overlooking. These mistakes can either be unilateral or bilateral.
Free Consent
Bilateral Mistake
When both parties of a contract are under a mistake of fact essential to the agreement, such a mistake is what we call a
bilateral mistake. Here both the parties have not consented to the same thing in the same sense, which is the
definition of consent. Since there is an absence of consent altogether the agreement is void.
However, to render an agreement void the mistake of fact should be about some essential fact that is of importance in a
contract. So if the mistake is about the existence of the subject matter or its title, quality, quantity price etc then it
would be a void contract. But if the mistake is of something inconsequential, then the agreement is not void and the
contract will remain in place.
For example, A agrees to sell to B his buffalo. But at the time of the agreement, the buffalo had already died. Neither A nor
B was aware of this. And so there is no contract at all, i.e. the contract is void due to a mistake of fact.
Unilateral Mistake
A unilateral mistake is when only one party to the contract is under a mistake. In such a case the contract will not be void.
So the Section 22 of the Act states that just because one party was under a mistake of fact the contract will not be void
or voidable. So if only one party has made a mistake of fact the contract remains a valid contract.
However, there are some exceptions to this. In certain conditions, even a unilateral mistake of fact can lead to a void or
voidable agreement. Let’s see a few of these exceptions via some examples and case studies.
When Unilateral Mistake is as to the Nature of the Contract: In such a case the contract can be held as void. Let us see the
example of Dularia Devi v. Janardan Singh. Here an illiterate woman put her thumb impression on two documents
thinking they were the same. She thought the document was to gift some property to her daughters. But the other
document was a Sale deed to defraud the women out of more of her property. This contract was held void by the
courts
When the Mistake is regarding the Quality of the Promise: There was an auction being held by A to sell hemp and tow. B
thinking the auction was only for hemp, mistakenly bid for a tow. The amount bid was on par for hemp but very high
for a tow. Hence the contract was held as voidable.
Mistake of the Identity of the Person contracted with: For example, when A wants to enter into a contract with B but
mistakenly enters into a contract with C believing him to be B.
Performance of Contracts
Performance of Contract means the fulfillment of legal obligations created under the contract by both the promisor
and the promise. When a Contract is duly performed by both the parties to the contract, the contract comes to
an end. The various rules regarding the performance of contracts are as under:
Performance of a Single Promisee:

Who can demand performance?
It is only the promise who can demand performance of the contract. There is a rule that a person cannot
acquire right under a contract to which he is not a party. A third party cannot demand performance of the
contract even though it was made for his benefit. In case of death of the promise, his legal representatives can
demand performance.
Example:
1. A promises B to pay C a sum of Rs.1000. The person who can demand performance is B and not C. In case of
death of the promise, his legal representatives can demand performance.
2. A draws a cheque for Rs.100 in favour of C the banker makes a mistake regarding A’s balance and refuses
payment. Bank is liable to A ad not to C because C is not a party to contract.
Who may perform?
1. By The Promisor Himself:
As a general rule, a contract may be performed by the promisor, either personally or through any other competent
person.
But in case of contract involving personal skill, taste or diligence e.g. a contract to paint a picture a contract of
agency or of service; the promisor himself must perform the contract of agency or of service; the promisor
himself must perform the contact. In case of death or disablement of a promisor, a contract will be discharged
and the other party would be freed from liability.
Example: A promise to paint a picture for B. A must perform the promise himself.
2. The Promisor or His Agent:

Where personal skill is not necessary and the work could be done by any one, the promisor or his representative
may employ a competent person to perform it. In case of a contract to sell goods, the promisor himself or his
agent may perform the contract.
Example: A promise B to sell goods. A may perform this promise himself or ask his agent for performance.
3. The Legal Representative:
In case of death of the promisor before performance, the liability of performance falls on his legal representatives
of a deceased promisor are not bound to perform the contract. But in case of a contract of impersonal nature
the legal representative are bound to perform the contract. They are not personally liable.
Example:
A) Promises to paint a picture for B on a certain day at a certain price. A dies before the day. The contract cannot be
preformed. A’s heirs are not liable for the contract as in this case the personal skill of A was involved.
B) Promises to deliver goods to B on a certain day on payment of Rs.1000. A dies before that day. A’s
representatives are bound to deliver the goods to B and B is bound to pay the settled sum of Rs.1000 to A’s
representatives.
4. The Third Person:

If a promise accepts performance of the promise from a third person, he cannot afterwards enforce it against the
promisor. Once the third party performs the contract, and that is accepted by the promise there is end of the
matter and the promisor is then discharged.
Example: A promise accepted lesser amount from a third party in full satisfaction of his claim; it was held that he
could not enforce the promise against the promise against the promisor for the remainder.
Performance of Joint Promises:
Joint promises may take any of the following shapes:
1. Where several joint promisor make a promise with a single promise, e.g. A, B C jointly promise to pay Rs.3,000 to
D, or
2. Where a single promisor makes a promise with several joint promises e.g. P promise to pay Rs.3000 to Q and R
jointly, or
3. Where several joint promisor make a promise with several joint promises, e.g. A, B and C jointly promise to pay
Rs.3000 to P, Q and R jointly. The following are the rules regarding performance in this case.
Who can demand Performance of joint promises?

When a promise is made with several persons jointly, then, in the absence of any agreement to the contrary all the
promisees jointly have a right to claim compensation and a single promisee cannot demand performance.
In case of death of any one promise, the legal representatives of deceased persons jointly can demand
performance with serving promises.
When all the promisees are dead, the legal representatives of all jointly can demand performance.
Example: A borrows Rs.5000 from B and C. A promises B and C jointly t return the sum with interest B dies. B’s
representative with C jointly can demand performance. On the death of C the representative of B and C jointly
can demand performance.
Who may perform?
1. All Primisors must Jointly Fulfill the Promise:
When two or more persons make a joint promise the, unless a contrary intention appears from the contract, all such
persons must jointly fulfill the promise. When any one of the joint promisor dies his legal representative must fulfill the
promise, jointly with the surviving promisors. On the death of all the original promisors the legal representatives of all
of them jointly must fulfill the promise.
The above rule is of course subject to the following usual conditions:
A) The contracts involving personal skill e.g. to paint a picture; come to an end on the death of any of the joint promisor and
the liability of performance does not fall on the legal representatives.
B) The legal representatives are not personally liable. Their liability is limited to the assets inherited by them.
Example: A, B and C jointly promise to pay D Rs.3,000. D may compel either A or B or C or all or any two of them to pay him
Rs.3000.
2. Each Promisor may Compel for Contribution:
If one of the joint, Promisors is compelled to perform the whole contract, he can ask for equal contribution to the others,
unless a contrary intention appears from the contract.
Example: If A is compelled to pay the entire amount of Rs.3000 he can recover from B and C Rs.1000 each.
3. Sharing of Loss by Default in Contribution:
If any one of the joint promisors makes a default in making contribution, if any, the remaining joint promisors must bear the
loss arising out of such default in equal shares.
Example: If A is compelled to pay the whole Rs.3000 and C is unable to pay anything. A is entitled to receive Rs.1500 from B.
If C’s estate is able to pay one half of his share, A is entitled to receive Rs.500 from C’s estate and Rs.1250 form B.
4. Effect of Release of One Joint Promisor:
In case of a joint promise, if one of the joint promisors is released form his liability by the promise, his liability to the
promise ceases but his liability to the other promisors to contribute does not cease.
Example: A, B and C are under a joint promise to pay Rs.3000 to X. X may release C from liability, but A & B remain liable to
pay to X. C is not released from the debt.
Discharge or Terminal of Contract
Meaning:
“Discharge of contract means termination of contractual relationship between parties. A contract is said to be
discharged when it ceases to operate, i.e., when the rights and obligations created by it comes to an end”.
When the rights and obligations arising out of a contract come to an end, the contract is said to be discharged or
terminated. A contract may be discharged in any of the following ways:
1. Discharge by performance.
2. Discharge by Agreement.
3. Discharge by subsequent impossibility.
4. Discharge by lapse of time.
5. Discharge by operation of law.
6. Discharge by breach of contract.
1. Discharge by Performance:
Performance is the natural mode of discharge. When the parties to a contract perform their shares of the promises,
the contract is discharged. If only one of the several parties performs the promise, he alone is discharged.
Performance may be:
(a) actual performance; or
(b) offer of performance or tender.
2. Discharge by Agreement:
A contract can also be discharged by the fresh agreement between the same parties. A contract may be terminated by agreement in
any of the following ways:
A) Novation: Novation of contract means replacement of an existing contract by another contract. In novation the parties may change.
If the parties are not changed then the material terms of the contract must be altered in the new contract because a mere
variation of some of the terms of a contract is not novation but alteration.
Example: A is indebted to B and B to C. By mutual agreement B’s debt to C and B’s loan to A are cancelled and G accepts A as his
debtor. There is novation involving change of parties.
B) Alteration:
Alteration of a contract takes place when one or more of the terms of the contract are changed. If a material alteration in a written
contract is made with the consent of all the parties the original contract is discharged by alteration and a new contract takes its
place. An alteration may be a change in the amount of money, the rate of interest, or the names of the parties. Alteration re sults
in the discharge of the original contract.
The difference between “novation and “alteration” is that in case of novation there may be a change of parties but in case of alteration
parties remain the same and only the term o the contract are changed.
Example: A agrees to supply B. 1000 mounds of salt at Rs.50 a mound within 3 months from date. Later on, A and B alter the
agreement in the following way: A agrees to supply 800 mounds of salt at the same rate within 2 months instead of three. The
latter agreement puts an end to the former.
C) Rescission: Means cancellation of contract by mutual consent. A contract may be cancelled ‘by agreement between the parties at
any time before it is discharged by performance. The cancellation of agreement releases the parties form their obligation ari sing
out of the contract.
Example: A promises to deliver certain goods to B on a certain date. Before the date of performance, A and B mutually agree that the
contract will not be performed. The parties have cancelled the contract.
D) Remission: Remission means the acceptance of lesser sum than what was due from promisor. According to the section 63, a person
who has a right to demand the performance of a contract may:
1. Remit or give up the whole or part of a debt.
2. Extend the time for performance.
Where a promise remits a part of the debt and gives a discharge for the whole debt on receiving a smaller amount, such discha rge is
valid.
Example: A owes B Rs.5,000. A pays to B and B accepts in full satisfaction Rs.2000. The whole debt is discharged.
3. Discharge by Subsequent Impossibility:
Initial Impossibility: According to section 56, “An agreement to do impossible act is void ab-initio.” It means agreement which is
obviously impossible cannot be binding, e.g., an agreement to discover treasure by magic is void agreement.
Subsequent Impossibility: Sometimes, a contract capable to be performed after formation becomes impossible or unlawful and as a
result void.
A) Destruction of Subject Matter:
When the parties make a contract for a particular subject matter, the contract is discharged if the subject matter is destroyed without
the fault of the promisor or promise.
Example: A, let out a music hall to B for a number of concerts on certain days. The hall was destroyed by fire before the dat e of first concert. The
plaintiff sued the defendant for damages. It was held that the contract has become void and the defendant was not liable.
C) Deat or Personal in Capacity:
Where the performance of a contract depends upon the personal skill, or qualification or the existence of a given person, the contract
is discharged on the illness or incapacity or the death of that person.
In other words the death or illness of a particular person whose action is necessary for the promised performance discharges the duty
to render that performance.
Example: 1. A and B contract to marry each other. Before the time fixed for the marriage, A dies. The contract becomes void.
2. An artist undertook to perform at a concert for a certain price, but before he could do so, he met with an accident and lo st his right arm. Held
the artist was discharged due to disablement.
D) Change of Law:
Contracts, which are lawful when made but become unlawful later due to change in law, become impossible to be performed. A
subsequent change in law may render the contract illegal and in such cases the contract is deemed discharged. Impossibility
created by law is valid excuse for non-performance.
Example: A sold to B 100 bags of wheat at Rs.150 per bag. But before delivery the government banned the sale and purchase of wheat by private
traders. The contract was discharged by subsequent change in law.
E) Declaration of War:
A contract entered into with an alien enemy during war is illegal and void abinitio. Contract entered into before the commencement of
war is suspended during the war. However, such contracts may be revived after the war is over if the nature of the contract s o
permits.
Example: A contract to take in cargo for B at a foreign port. A’s Govt. afterwards declared war against the country in which the port is
situated. The contract becomes void.
4. Discharge by Lapse of Time:
A contract is discharged by lapse of time. The Limitation Act, 1908 laws down that a contract should be performed within a specified
period. If the contract is not performed and no legal action is taken by the promise within the period of limitation, he is deprived
of his remedy at law, the contract is terminated in such a case.
Example: A owes Rs.5000 to B. The last date for the repayment of the loan has expired and B does not file a suit against A for
three years. B loses the rights to recover the money back.
5. Discharge by Operation of Law:
A contract terminates by operation of law in the following cases:
A) Insolvency:
The insolvency Act provides for discharge of contracts under particular circumstances. Where the court declares a person as i nsolvent,
the rights and duties of such person are transferred to the officer of court, know as Official Receiver, After the order of the court
such person is discharge from his liabilities incurred before his insolvency.
Example: A promises to sell his car to B for Rs.2 lac. Before the performance of the contract A is declared insolvent by court. The
contract between A, & B is discharged.
B) Merger:
Merger takes place when an inferior right available to a party merges into a superior right available to the same party under, some
other contract. As a result of merger the former contract stands discharged automatically.
Example:1. Where a man holds property under a contract of tenancy buys the property. His rights as a tenant are merged into the
rights of ownership and the contract of tenancy stands discharged by operation of law.
2. Where a part-lime lecturer is made full time “lecturer, the contract of part time, lectureship is discharged by merger.
C) Unauthorized Material Alteration:
Where a party to the contract makes any material alteration in the contract, without the consent of the other party, the contract can
be avoided by the other Party. A material alteration is one, which changes the legal identity or character of the contract or the
rights and duties of the parties to the contract. An alteration which is not material or which is authorized will not affect the
validity of the contract. An alteration even by a stranger will entitle the other party to avoid the contract, but where the alteration
is unintentional, contract cannot be avoided.
Example: A executes a promissory note in favour of B for Rs.3,000. B by alteration exceeds the amount from Rs.3,000 to 30,000. A may
refuse to pay Rs.3,000.
6. Discharge by Breach of Contract:
A contract must be performed according to its terms. But where the Promisor fails to perform the contract
according to the terms of the contract, there is a breach of contract by him. Breach of contract may be of two
kinds:
1. Actual Breach
2. Anticipatory breach
1. Actual Breach:
It occurs when a party fails to perform a contract, when performance is due. But, if a party, who has failed to
perform the contract at the appointed time, subsequently expresses his willingness to perform, he can do so
after paying compensation, if time is not essence of contract.
Example: A degrees t o deliver 5 bags of wheat on 1s t March He does not deliver the wheat on the day. There is
a actual breach of contract.
2. Anticipatory Breach:
An anticipatory breach of contract occurs before the time fixed for performance has arrived. It may happen in two
ways:
A) Express Breach:
In this case a party to the contract communicates t the other party, his intention not to perform the contract,
before the due date of performance has arrived.
Example: A contracts with B to supply 100 bags to wheat for Rs.15,000 on 1s tMarch. On 15th February, A
informs B that he will not be able to supply the wheat. The is express rejection of contract.
B) Implied Breach:
In this case a party to the contract does an act, which makes the performance of the contract impossible.
Example: A promises to sell his horse to B on 1 s t June and before that date he sells the same horse to C.
Remedies for Breach of Contract
Whenever contract is breached by one of the Party in a contract, the other party comes across some
suffering. Therefore, contract act has given certain rights to such suffering party.
Contract, being a fountainhead of a correlative set of rights and obligations for the parties, would be
of no value, if there were no remedies to enforce the rights arising there under. The party
committing breach of contract is called the ‘guilt party’ and the other party is called the ‘injured’
or ‘aggrieved’ party.
In case of breach of contract, the aggrieved party would have one or more, but not all, of the
following remedies against the guilty party.
The remedies are:
1. Suit for rescission,
2. Suit for damages,
3. Suit for quantum merit,
4. Suit for specific performance,
5. Suit for injunction.
1. Suit for rescission:
The breach of contract no doubt discharges the contract, but the aggrieved party may sometimes need to approach
the court to grant him a formal rescission, i.e. cancellation, of the contract. This will enable him to be free from
his own obligations under the contract.
At times, the suffering party may sue for recession for contract.
Example: A contract has got formed between A and B on 1st January. According to their contract A has to supply
100 pairs of readymade dresses to B, on 1st April on 28th March strike by transport companies is announced
which will be called off on 3rd April. It should be noted that A cannot supply on 1st April. But B is in need of
those dresses only on 1st April. Hence B can sue for recession on contract.
2. Suit for damages:
The word ‘damages’ means monetary compensation for loss suffered. Whenever a breach of contract takes place,
the remedy of ‘damages’ is the one that comes to mind immediately as the consequence of breach.
A breach of contract may put the aggrieved party to some disadvantage or inconvenience or may cause a loss to
him. The court would desire the guilty part to accept responsibility for any such loss of the aggrieved party and
compensate him adequately.
Types of Damages (Sec.73)
When the aggrieved party claims damages as a consequence of breach, the court takes into account the provisions
of law in this regard and the circumstances attached to the contract. The amount of damages would depend
upon the type of loss caused to the aggrieved party by the breach.
The court would first identify the losses caused and then assess their monetary value.
Sec.73 of the Act lays down the basic guidelines for identifying the losses.
Keeping in view the provisions of Sec. 73 of the Act and the court judgments, the aggrieved party would be entitled
to one of following types of damages, depending upon the circumstances of the case:
1. General or ordinary damages.
2. Special damages.
3. Exemplary or vindictive damages.
4. Nominal damages.
5. Liquidated Damages.
Exception to Sec. 74
Sec. 74 has also provided an exception to the main rule. The exception implies that the rule of Sec. 74 will not apply in some cases and
the total amount stipulated in the contract as damages from guilty party shall be payable to the aggrieved party without any
assessment of the loss suffered.
The exception to Sec. 74 applies in the following situations:
a. Where a person has executed a bail bond, recognizance etc. before court.
b. Where a person has made a contract with any government authority to perform a public duty by executing a bond. Public duty will
imply any act that adds to public welfare, like provision of drinking water in an area or construction of road in a remote area.
In the application of this exception, the following points need to be noted:
(i) It applies one way only i.e. on the promisor only and not on the government authority
(ii) Ordinary commercial contracts with government don’t involve performance of public duty.
Rules Regarding Award of Damages
(i) Compensation not penalty: The fundamental purpose of awarding damages is to compensate the aggrieved party for any loss
suffered and not to punish the guilty party for causing breach.
(ii) Limited damages: The aim of the courts, in awarding damages, would be to place the aggrieved party, as far as money can do it, in
the same position in which he would have been, had the contract been properly performed.
(iii) Damages for attributable losses: Damages are awarded for the losses which can be attributed to the breach.
(iv) Mitigation of losses: The aggrieved party is expected to make sincere efforts to minimize the losses that are resulting out of breach
of contract.
(v) Damages in case of contracts of sale of goods: The basic idea in this context is that in case a party breaks a contract f or sale of
goods, the aggrieved party must take a quick action to protect itself.
(vi) Stipulation for liquidated damages or penalty: Sometime, the parties to contract may themselves stipulate an amount in the
contract to be payable by the guilty party to the aggrieved party as damages for breach of contract. This stipulation of the
amount may be by way of liquidated damages or by way of penalty.
(vii) Cost of suit: The breach of contract by a party forces the other to initiate legal action against the guilty party. Thi s necessarily
entails expenditure. This cost of suit can be recovered from the guilty party only at the discretion of the court.
3. Suit for quantum merit:
The term quantum merit means ‘as much as earned’. It implies ‘a payment deserved by a person for the reason of
actual work done’.
Whenever a party performs the contract partially and then the other party breaches the contract, Suit can be filed
claiming proportionate remuneration. It is called suit for quantum merit.
A case on this point is Flanch Vs Karlbarn. In this case A is editor of a magazine and B is a writer. According to their
contract B has to supply story to A`s magazine for certain number of weeks for a particular consideration. B
supplies story for some weeks and there after A closes down his magazine. B sue`s for proportionate
remuneration and it is allowed by court.
Suit for specific performance:
When a party has done some work under a contract, and the other party repudiates the contract or somehow the
full performance of the contract becomes impossible, then the party who has done the work can claim
remuneration for the work under a suit for quantum merit.
Likewise, where one party has expressly or impliedly requested another to render him a service without specifying
any remuneration, but the circumstances of the request imply that the service is to be paid for, there is implied
a promise to pay quantum merit.
Even in the case of where the person who has done the work is the one who is guilty of breach of contract, he too is
entitled to be paid quantum merit. But there is an exception – such a contract must have involved work that
was indivisible and it must not have been a contract for lump sum remuneration.
At times the suffering party may file a suit claiming specific performance form the party which has breached the
contract. But this type of suit very rarely becomes successful. The following are some circumstances where suit
for specific performance will not be taken into consideration.
Example 1: When performance depends upon personal talent and the party has list Such talent.
Example 2: When court thinks that it is just and equitable to arrange for compensation.
5. Suit for injunction:
‘Injunction’ is a court order or decree to a person asking him to refrain from doing a contemplated
act or from continuing an ongoing act. Such an order of injunction becomes a remedy for the
aggrieved party when the court orders the guilty party to refrain from doing precisely that which
is causing the breach of contract.
In a way, injunction is a mode of securing the specific performance of the negative terms of a
contract. But for the performance of the positive terms of the contract, the aggrieved party may
seek other remedies like damages.
The order issued by court restrict in a person from doing a particular thing is called injunction order.
Upon breach of contract the suffering party may proceed legally for injunction order.
A case on this point is Barner Bros.Vs Nelson. In this case a contract gets formed between A and B
according to which B has to conduct his dance programs at A`s theater only for certain period.
But B breaches the contract and arranges his programs at other theaters also before expiry of
agreed period. A`s sues for injunction order. Then court issues injunction order saying that B
should not conduct his programs at other theaters before expiry of agreed period.

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BUSINESS LAW (105)

Unit 1 Indian Contract Act

• Essentials of Contract; 4Performance of Contracts;

• Consequence and Remedies for Termination of Contract.

• In short the contract includes the following:

4. Capacity of parties: The parties to an agreement must be competent to

6. Lawful objects : For the formation of a valid contract, it is also necessary

9. Possibility of Performance or Doctrine of Frustration : Yet another

On the Basis of On the Basis of On the Basis of On the Basis of

Express Executed Unilateral

Void Agreement Quasi-Contract

(c) Justice Peterson:

8. Consideration may be an act, abstinence or forbearance or a return promise:

It follow that the following person are incompetent to contract:

Every person is competent to contract:

(a) Who is of the age of majority.

(b) Who is of sound mind.

(c) Who is not disqualified from making a contract.

Performance of a Single Promisee:

2. The Promisor or His Agent:

4. The Third Person:

Who can demand Performance of joint promises?

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