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Date: 06 April 2012

We The Group Members Are


Miratul Jannat
S.M. Saifur Rahman Tasnim Faria Anindita Islam Sabira Chowdhury Rabeya Tasnim Huq A.K.M. Mojibul Haque

o 03-10-18-029
o 03-10-19-034 o 03-10-19-027 o 03-10-18-023 o 03-10-18-011 o 03-10-19-013 o 03-09-17-055

Nahid Rijwan
Shawly Rahman Deep

o 03-09-17-033
o 03-09-16-036

Contents
Background of Law of contract in

Bangladesh Types of contract Elements of a valid contract Consideration Legality of object Parties competent to contract Dissolution of contract Remedies for breach of contract

Contents
Background of Law of contract in

Bangladesh
Types of contract Elements of a valid contract Consideration Legality of object Parties competent to contract Dissolution of contract Remedies for breach of contract

Law of contract in Bangladesh


Contract act 1872 governs the law of contract in

Bangladesh. It contains the common rules relating to contracts and differentiates them. All contracts in Bangladesh are governed basically by the contract act.
Contract means an agreement enforceable by law.

A Valid Contract
Firstly a proposal has to be accepted to be a promise; Secondly then the promise is to be considered to

form an agreement; Finally the agreement should have the enforceability of law to form a lawful contract

Scope of a contract
1. General laws relating to contract a) Laws relating to formation of contract; b) Laws relating to performance; c) Laws of remedy for a breach of contract. 2. Laws relating to some particular types of

contract
a) Contract of agency; b) Contract of indemnity and guarantee; c) Contract of bailment and pledge.

Contents
Back ground of Law of contract in

Bangladesh
Types of contract Elements of a valid contract Consideration Legality of object Parties competent to contract Dissolution of contract Remedies for breach of contract

Types of contract
Contracts depending on the mood of Creation i. Express contract
a) b)

Written contract Oral contract

ii.

Implied contract

Contracts as regards the mood of time of

performance
Executed contract ii. Executory contract
i.

Types of contract
Contracts as regards the number of parties i. Bilateral contract ii. Unilateral contract Contracts as regards the mood of enforceability and

validity
Valid contract ii. Voidable contract iii. Void contract
i.

Types of contract
Valid Contract

A contract is in law. Such a contract creates an outstanding obligation or legal liability which law steps in to enforce whenever a party to the agreement breaks it. Literally the word void means not binding in law. Accordingly the term void contract implies a useless contract which has no legal effect at all.

Void Contract

A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable [Section 2(j)]

Distinction between void and illegal contract


An illegal contract is one whose object is

declared illegal by law whereas a void contract does not get the assistance of law.

Voidable contract
An agreement which is enforced by law at the opinion of one or more of the parties thereto, but not at the opinion of the others, is a voidable contract [Section 2(i)]
Usually a contract becomes voidable when the consent of one of the parties to the contract is obtained by coercion, undue influence, misrepresentation or fraud.

Contracts which are voidable


When consent to an agreement is caused by coercion fraud or misrepresentation

When consent to an agreement is caused by undue influence or misrepresentation.


An agreement by a parson of unsound mind due to drunkenness is voidable Certain contracts by minors are voidable either during minority or within a reasonable time after the attainment of majority. When a contract contains reciprocal promises and one party of the contract

prevent the other from performing his promise, then the contract becomes voidable
When a party of the contract promise to perform certain thing within a specified time, but fails to do it then the contract becomes voidable

Unenforceable Contract
An unenforceable contract is one which is valid in itself but is not capable of being enforced in a court of law because of some technical defects such as absent of writing, registration, requisite stamps etc. or time barred by the law of limitations.

Unenforceable contracts
a contract made on account of natural love and affection

between the parties ,unless it is written and registered;


a contract made between persons whereby one agrees to repay

a time-barred debt which was originally due to the other,


a contract between parties to refer their present or future

disputes to arbitration, unless it is made in writing;


a contract made by a company, unless it is in writing;

Under the Transfer of Property Act, all mortgages, other than

equitable mortgages, where the principal money secured is Tk. 100.00 or upwards and gifts-of immovable property, unless they are in writing and registered.

Special Types of contract


Quasi contract Contingent contract

Constructive or Quasi-Contract
Contractual

obligations are generally created voluntarily. But there are obligations, which lack voluntariness such as the obligation to repay a sum of money paid under a mistake of fact. In such cases, therefore, there is no contract but, nevertheless, the law treats them as such. Such contracts, existing in Jaw but not in fact, are called quasi-contract.

Contingent contract
A contingent contract is one to do or not to do

something if some contingency happens or does not happen. "A contingent or as it is called in English law, a conditional promise"
A contingent agreement is not enforceable till the

event on which it was to depend has arisen; but when that event has occurred, the contract, for all purpose, rests on the same footing as if it had been made in case of a valid contract.

Contents
Back ground of Law of contract in

Bangladesh Types of contract Elements of a valid contract Consideration Legality of object Parties competent to contract Dissolution of contract Remedies for breach of contract

Elements of a valid contract


A contract is an agreement between two parties imposing rights and obligations which may be enforced by law. The courts need some kind of evidence of this agreement, so they look, through the eyes of a reasonable person, for external evidence of it. To help identify evidence of agreement, it is conventionally analysed into two aspects: offer and acceptance.

Offer

Acceptance

Agreement

Enforced by law
Contract

Proposal or Offer
Proposal or offer is the starting point to form an agreement. An expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed. According to Contract Act 1872, proposal or offer iswhere one person signifies to another his willingness to do or abstain from doing something with a view of obtaining the assent of that other to such act or abstinence he is said to said a proposal. If the above mentioned definition is analyzed, the following elements of a proposal or off are found: i) Signification of ones willingness; ii) Willingness is expressed to another person; iii) The willingness may be affirmative or negative; iv) It has a definite object with the intention to create a legal relation.

Proposal or Offercontd
Offers can be of two types:
Specific When a offer is made to one person or group of people. Then only that particular person or group of people can accept. General When a offer is made to the whole world (or people generally), particularly seen in the cases of rewards and other public advertisements.

Rules of a Proposal:
1. The proposer must intent to create legal relations 2. Mere expression of Intention is not sufficient 3. Offer may be made to definite person or some definite class of person or to the world at large generally 4. The proposal must be a definite one 5. Proposal may be expressed or implied 6. The offer must be definite, certain and unambiguous 7. Offer must be communicated to the offeree 8. An offer may be conditional

Communication of offer:

Communication of the offer is an essential element in a contract. To complete an offer lawfully the proposal or offer must be

communicated.
A person or entity who makes a specific proposal to another (the

offeree) to enter into a contract is called an offeror.


A person or entity to whom an offer to enter into a contract is made

by another (the offeror) contract is called an offeree.


Offer may take different forms, such as a letter, fax, email etc

Modes of Revocation:
1. 2. 3. 4. 5. 6. 7. 8.

By communication of notice By lapse of time After expiry of a reasonable time By non-fulfillment of conditions By death or insanity o f the offeror By counter-offer By refusal By failure to accept in the mode prescribed

Acceptance
Acceptance of a proposal means unconditional agreement to all the terms of that proposal. Acceptance may often be oral or in writing, but in some cases an offeree may accept an offer by doing something, such as delivering goods in response to an offer to buy. According to Contract Act, 1872, when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.

We can divide the definition at least into three constituent parts:

1. Signification of the assent; 2. Assent is signified by the person to whom the proposal was made; 3. The term thereto used in this section implies that the assent must be given to the offer as it is.

Voidable contract
An agreement which is enforced by law at the opinion of one or more of the parties thereto, but not at the opinion of the others, is a voidable contract [Section 2(i)]
Usually a contract becomes voidable when the consent of one of the parties to the contract is obtained by coercion, undue influence, misrepresentation or fraud.

Types of Acceptance
Acceptance typically can come in one of three types: 1. Express: A direct and absolute outward manifestation of the agreement, such as I accept your offer.

2. Implied: The acts of the parties show that the offer has been accepted, such as when both parties to a contract begin to perform the terms of the contract. 3. Conditional: Acceptance is conditional on the happening of something, such as, I accept your offer so long as you trim my tree in the next two days. By its terms, a conditional acceptance is a counter-offer.

Rules of a valid acceptance:


1. 2.

3.
4. 5. 6.

7.
8. 9. 10. 11. 12. 13. 14.

Acceptance must be absolute and unqualified The acceptance must be unconditional Acceptance might be conditional Mere enquiries do not count as rejection The acceptance must be expressed in some usual and reasonable manner A counter-offer may become a terms of the agreement if it is accepted: The acceptance must be communicated to the offeror Silence can never amount to an acceptance The postal rule Modern methods of communication The mode of acceptance Time of acceptance Before offer The Acceptance must be made when the offer in force

Counter offer
Counter offer is an offer made in response to a previous offer by the other

party during negotiations for a final contract.


Making a counter offer automatically rejects the prior offer and requires an

acceptance under the terms of the counter offer or there is no contract.


This happens when, for example, A sends B an offer and B amends it

slightly and then send it back signed but amended. This action destroys the original offer and is not acceptance. It is a new offer entirely, called a counter-offer.

Revocation of Acceptance
Revocation or cancellation may happen before the acceptance reaches the

offeror, the acceptor can revoke the acceptance and thus prevent the contract.
Thus A makes a proposal to B. B sends his acceptance by post. The

communication of the acceptance is complete as against A when the letter is posted, and as against B when the letter is received by A.

Agreement
According to Section 2 (e) of the Contract Act, 1872, Every

promise and every set of promises, forming the consideration for each other, is an agreement.

It is also said that in the act that as agreement enforceable by law is a contract. So the term agreement is very important in the discussion of contract law. From the definition of the agreement, it is found that to be an agreement three elements are necessary-

a. it will be promise b. it will form a consideration c. the consideration will be formed for each other of the parties

Classification of Agreement

Agreement

Void

Voidable

Unenforceable

Illegal

Void Agreement
A Void agreement is one that is entirely destitute of legal effect. It confers no right on any person and creates no obligations. According to Section 2 (g) of the Act says, An agreement not enforceable by law is said to be void. For example, an agreement made by a minor, agreement without consideration (with the exception of section 25 of the Act) or the agreements against the public policy can be stated.

Voidable Agreement
A voidable agreement is one that is capable of being affirmed or rejected at the option of one of the parties, but which is binding on the other. It is binding if he chooses to affirm it and is of no effect if he chooses to reject it. The other party has no say in the manner. For example, there may be a contract into which one of the parties has induced the other to enter by means of fraud. The latter may repudiate the contract, or if he sees fit, he may waive the fraud, and hold the former to his bargain.

Unenforceable Agreement
An unenforceable contract is one that is valid, but

incapable of being sued upon or proved. A contract which is unenforceable cannot be set aside at the option of one of the parties to it. The obstacles to its enforcement do not touch the existence of the contract, but only set difficulties in the way of action being brought or proof given.

Illegal Agreement
An illegal agreement, under the common law of

contract, is one that the court will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself, however. A contract that requires only legal performance, such as the sale of packs of cards to a known gambler, where gambling is illegal, will nonetheless be enforceable.

Free consent
Section 10 of the Contract Act outlines the elements of a valid contract thus: "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be Void." Section 13 of the Contract Act defines consent thus: "Two or more persons are said to consent when they agree upon the same thing in the same sense." Section 14 of the Act says that consent is free when it is not caused by:
Mistake

Misrepresentation
Fraud Coercion and Undue influence

(1) Mistake
Section 20 of the Contract Act lays down thus: "When both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the

agreement is void". The mistake which is necessary to make a contract void must be mutual and not of one of the parties. Every mistake does not vitiate a contract. The following among others may be picked up:
a) Mistake as to the nature of transaction. b) Mistake as to the identity of the party to a contract. c) Mistake as to the subject-matter of the contract.

d) Mistake by one party as to the intention of the other does not render a contract void.

Exceptions

(1) Mistake (Contd.)


Bangladeshi Law
The Contract Act provides that, "where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void ".
Though a mistake of fact vitiates a contract, a mistake of law does not. Bangladeshi Relief may, however, be available in the following cases of mistake of law:

Where a mistake is so fundamental that it prevents the formation of a real agreement between the parties, it will vitiate the contract though, after all, it is a mistake of law. II. A mistake as to the existence of a private right has to be treated as a mistake of fact. III. If a contract is brought about by deliberate misrepresentation of law, it can be set aside. IV. Mistake as to any foreign law is a mistake of fact.
I.

(2) Misrepresentation
Misrepresentation is the positive assertion of something, which is not true though the person making it believes it to be true.

Condition and Warranty


Bangladeshi Law:
In Bangladeshi Law, as laid down by Section 18 of the Contract Act, misrepresentation means and includes: I. "The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true". II. "Any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him by misleading another to his prejudice or to the prejudice of any one claiming under him". III. "Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement".

(3) Fraud
Fraud has been defined by Anson as "a false representation of fact made with the knowledge of its falsehood or recklessly without belief in its truth, with the intention that it should be acted upon by the complaining party and actually inducing him to act upon it". So,
I. II. III. IV.

Fraud is a representation of fact which is false. The false statement must be made with the knowledge of Vs falsehood or recklessly. The false statement must be made with an intention to deceive. The person to whom the false statement has been made must be actually deceived.

Bangladeshi Law:
In Bangladeshi law, as laid down by Section 17 of the Contract Act, fraud means and includes any of the following acts: "The suggestion as a fact of that which is not true by one who does not believe it to be true ". "The active concealment of a fact by one having knowledge or belief of the fact". This duty to disclose is not enforceable in all cases of contract. It arises only in the following cases: Statutory obligation to disclose. Contracts uberrimae fidei.

a) b)

Explanation: silence as fraud Distinction between Fraud and Misrepresentation

(4) Coercion
Coercion or duress consists in actual or threatened violence or imprisonment. Where the consent of a party to a contract can be shown to have been obtained by coercion, it is voidable at the option of the party whose consent was so obtained.

Bangladeshi Law
Section 15 of the Contract Act defines coercion as "the committing or threatening to commit, any act forbidden by the Penal Code or the unlawful detaining or threatening to detain any property to the prejudice of any person whatever with the intention of causing any person to enter into an agreement''.

Effect of coercion on contract


An agreement vitiated by coercion is voidable at the option of the party coerced. But if he finds it profitable to uphold the contract, he can enforce specific performance of it. The party employing coercion has, however, no right under the contract.

(5) Undue influence


Undue influence is a subtle and improper pressure brought to bear upon a person to induce him to enter into a contract which, in the absence of the said pressure, he would not do.

Bangladeshi law:
Section 16(1) of the Contract Act lays down thus: "A contract is said to be induced by 'undue influence' where the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other". According to Section 16(2) of the Contract Act, "a person is deemed to be in a position to dominate the will of another": I. Where he holds real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or II. Where he makes a contract with a person, whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress.

Burden of proof Contract with a Pardanashin lady

Contents
Background of Law of contract in

Bangladesh Types of contract Elements of a valid contract


Consideration
Legality of object Parties competent to contract Dissolution of contract Remedies for breach of contract

Consideration (Bangladeshi Law)


Section 2 of the Contract Act : When at the desire of the promissor, the promise or any other person, has done or abstained from doing, does or abstains from doing, promises to do or to abstain from doing something, such act, abstinence or promise is called a consideration for the promise"

Consideration Rules in English Law


Real and not sham. Must not be illegal. Must not be past. Move from the promise Need not be adequate

Contents
Background of Law of contract in

Bangladesh Types of contract Elements of a valid contract Consideration


Legality of object
Parties competent to contract Dissolution of contract Remedies for breach of contract

Legality of Object
It is essential to the validity of a contract that its

object is lawful, a contract, otherwise is void if the object of the agreement is unlawful. It can happen that the object of a contract is illegal though its consideration is perfectly lawful. Example: A takes the lease of a house belonging to B for monthly rent of Tk. 15,000. There is nothing unlawful in this. But if A intends to set up an illicit distillery in the house, the contract is void as its object is unlawful.

Unlawful objects (English law)


When the object of an agreement contravenes

provisions of any Act, the object becomes illegal. A contract the object of which is to be defraud others, becomes illegal. An object that contravenes public policy.

Unlawful objects (Bangladeshi law)


Contracts forbidden by law
Contract defeating the provisions of any law Fraudulent

Injury to property or person of another


Immoral Against Public policy

Contents
Background of Law of contract in

Bangladesh Types of contract Elements of a valid contract Consideration Legality of object

Parties competent to contract


Dissolution of contract Remedies for breach of contract

Parties competent to contract


Contracts by Minors According to the English law, a minor (called an infant) is a Hen who is below the age of 21 years.

But after the passing of the Infants Relief Act, 1874, a minor's wafts net have come to be divided into three classes:
a) Valid b) Voidable c) Void

Parties competent to contract


How far a minor be held liable for contract by suing him in an action of tort?
Minors and Estoppels

Contract by lunatics and drunken persons Married Women Corporation

Parties competent to contract


Legal Practitioners Doctors Independent Sovereign

Alien
Convicts

Contents
Background of Law of contract in

Bangladesh Types of contract Elements of a valid contract Consideration Legality of object Parties competent to contract

Dissolution of contract
Remedies for breach of contract

Dissolution of Contract
Dissolution or discharge of contract means termination of the contractual relationship between the parties. A contract may be dissolved or discharged in any of the following ways:
By Performance. By Agreement or Consent By Frustration or Impossibility of Performance By Breach of Contract. By Operation of Law

Discharge by Performance
Performance is the most natural and common mode of

discharging a contractual liability.


As soon as the parties to a contract have performed

their shares of the promises, the contract is dissolved


Must distinguish between Performance which discharges one of the two parties from his liabilities under a contract and Performance which dissolves the contract as a whole.

Tender of Performance
Tender means an offer of performance.

Contract may also be discharged by a valid tender.


Bangladeshi Law on Tender: (Section 38 of the Contract Act)

Where a promissor has made an offer of performance to the promisee, and the offer has not been accepted, the promissor is not responsible for non-performance, nor does he thereby lose his rights under the contract

Essentials of a Valid Tender


It must be unconditional It must be made at proper time and place It must be for the entire obligation as contained in the

contract The tenderer must be able and willing to perform it then and there only The tender must be made to proper person Tender of goods must be made in such a manner that a reasonable opportunity is available to the buyer to inspect the goods If there is more than one promisee, then tender may be made to any one of them

Time and Place of Performance


Section 46: When, the promissor is to perform his promise

without application by the promisee, and if no time for performance is specified, the engagement must be performed within a reasonable time. Section 47: When a promise is to be performed on a certain day, and the promissor has undertaken to perform it without application by the promisee, the promissor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.

Illustration: A promises to deliver goods at B's


warehouse on the 1st January. On that day A brings the goods after the usual hour for closing it, A has not performed his promise.

Time and Place of Performance


Section 48: If a promise need to perform on a certain day, and

the promissor has not undertaken to perform it without application by the promisee it is the duty of the promisee to apply for performance at a proper place and on certain time within the usual hours of business. "proper time and place", to be determined by reference to the facts and circumstances of the case. Section 49: When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promissor to apply to the promisee, to appoint a reasonable place for the performance of the promise, and to perform it at such place. Section 50: The performance of any promise may be made in any manner or at any time which the promisee prescribes.

Performance of Reciprocal Promise


Section 51:

When a contract consists of reciprocal promises to be simultaneously performed, no promissor need to perform his promise unless the promisee is ready and willing to perform his promise.

Section 52: The order in which reciprocal promises are

to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.

Performance of Reciprocal Promise


Section 53: In case of reciprocal promises when one party prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss.

Section 54: When a contract consists of reciprocal promises, such that one of them cannot be performed or that its performance cannot be claimed till the other has been performed and the promissor of the promise last mentioned fails to perform it, such a promissor cannot claim the performance of the reciprocal promise, and must make compensation to the other party for any loss.

Discharge by Breach
Breach of contract means a breaking of the obligation

which a contract imposes. It occurs when a party to the contract, without lawful excuse does not fulfill his contractual obligation Every breach of contract by one party does not entitle the other party to rescind the contract If a contract is to be avoided on the ground of breach, the breach must relate to the essential terms of the contract.
A breach of contract may be of two kinds:

Discharge by Breach
1. An actual or present breach This happens when a party does not perform his promise in the manner and at the time stipulated by the contract. Illustration: A covenants to deliver a horse to B on or before the 3rd March, 1963, in consideration of B's promise to pay him Tk. 1,000.00. A fails to fulfill the contract. A has committed actual or present breach of the contract. This breach entitles B to rescind the contract, and also of suing him for damages.

Discharge by Breach
2. Constructive or anticipatory breach
This happens when before the time for performance a

party shows by his conduct or words his unwillingness to perform his part of the contract. It is called anticipatory breach because the contract is not yet broken but circumstances suggest beyond doubt that it is unlikely of being performed.

Illustration: A contracts to deliver to B his black horse within three months from date. One month after the contract, A sells his black horse to C. There has been anticipatory or constructive breach of the contract. This is an example of anticipatory breach by impossibility of performance.

Discharge by Agreement
A contract can also be dissolved by a fresh agreement

between the parties.


Such an agreement may take one of the following

forms:
a) b) c) d)

e)

Release Accord and Satisfaction Rescission Alteration Novation

Release or waiver
Means the surrender of a contractual right.

Thus, A who has advanced a loan of money to B gives

up, by an agreement, the right to recover the debt from B. This surrender of a right is called release or waiver. An agreement of release must be made under seal. One exception to this rule: The holder of a promissory note may waive his rights without consideration, either by writing or surrender of the note.

Accord and satisfaction


Accord : the agreement of discharge Satisfaction: the consideration moving from the discharged party to the other.
A owes to B Tk. 5,000.00. A pays B, and B accepts Tk.

2,000.00 in satisfaction of the whole debt at the time and place at which the sum of Tk. 5,000.00 was payable. The whole debt is discharged.

Rescission
Rescission: cancelling the original contract by mutual agreement And the old contract ceases to be binding on any of the parties. The contract must, be executory on both sides. Illustration: A promises to paint for B a picture in consideration of B's promise to pay Tk. 100.00. This contract can be rescinded by an agreement in which A surrenders his right to Tk. 100.00 and B to the picture promised to be painted by A.

Alteration
Alteration: substituting a fresh contract with altered or different terms from the original one.
Illustration: A agrees to supply B 1,000 Kgs of salt at

Tk. 23.00 a Kg within 3 months from date. Later on, A and B alter the agreement in the following way: A agrees to supply 800 Kgs of salt at the same rate within 2 months instead of three. The latter agreement puts an end to the former.

Novation
Novation takes place wheno A new contract is substituted for an existing one between the same parties, or o A contract between two parties is rescinded in consideration of a new contract being entered into on the same terms between one of the parties and a third party. In the second type of novation a creditor at the request

of the debtor agrees to take another person as his debtor in place of the original debtor. There must be the mutual consent of all the parties concerned.

Discharge by Frustration
By frustration is meant impossibility of performance.

A contract to do an impossible thing, such as to bring

a dead man back to life, is void as the object of the contract is impossible to be performed. The rule is based on the following maxims:
o the law does not recognize what is impossible, and o what is impossible does not create an obligation.

Supervening Impossibility
A common circumstance is that parties to a contract

agree to perform certain things which are not impossible at the time when the contract is made but which become impossible to be performed subsequently due to causes beyond their control.
In such case, the contract is discharged as having

become void.

Supervening Impossibility [cont.]


It may arise in the following ways: o Impossibility arising due to change of law. o Impossibility due to the destruction of a specific thing essential for the performance of a contract. o Impossibility arising out of the death or incapacitating illness of one of the parties to the contract. o Impossibility due to the absence of a fundamental condition. A condition is said to be fundamental to a contract when the whole contract rests on it.

Bangladeshi law
Section 56: a contract to do an act which, after the contract

is made, becomes void when the act becomes impossible or unlawful. supervening impediments must not have arisen by reason of some event which the promissor could prevent. In such case, compensation may be obtained against the person who is unable to perform it. Section 65: when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it or to make compensation for it to the person from whom he received it.

Discharge by Operation of Law


A valid contract may be discharged by the operation of law. A contract can be discharged by the operation of law in the

following ways:
Merger: It means the assimilation of a smaller contract by a

larger one by reason of the fact that they meet and coincide in one and the same person. Insolvency: When an insolvent is discharged by the Insolvency Court, he is released from all his debts provable under the Bankruptcy. Alteration: When a written contract is altered by way of addition or erasure in a material part, it is dissolved. Such alteration must be affected without the consent of the other party.

Contents
Background of Law of contract in

Bangladesh Types of contract Elements of a valid contract Consideration Legality of object Parties competent to contract Dissolution of contract

Remedies for breach of contract

Breach of Contract

What Follows the Breach?


Waiver of Breach Defective Performance Accepted with Reservation of Right to Damages Contractual Limitations of Remedy or Provision for Liquidated Damages
Contract Continues as Though There Were No Breach Contract Continues as Modified Contract Performed but at Reduced Price or, in Suit for Full Price, Counterclaim for Damages Remedy Specified in Contract Action for Damages Action for Recession Action for Specific Performance

Breach of Contract

Action for Injunction

Parties involved in breach of contract


Committing breach Parties involved in breach of contract

Guilty party

Suffered for breach

Aggrieved party

Remedies for breach of contract

Suit for damages


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 party to accept responsibility for any such loss of the aggrieved party and compensate him adequately.

Types of damages (entitled to plaintiff)


Keeping the view of the provision of Sec 73 off the act and the court judgments

General Damages
Which can be seen as arising naturally and directly out of the breach in the usual course of the things..

They would be unavoidable and logical consequences of the breach.

An aggrieved partys right to damages applies most naturally for the direct or general losses. There can be no damages for indirect or remote losses.

General Damage- Example


Company A delivered the wrong kind of furniture to

Company B. After discovering the mistake later in the day, Company B insisted that Company A pick up the wrong furniture and deliver the right furniture. Company A refused to pick up the furniture and said that it could not supply the right furniture because it was not in stock. Company B successfully sued for breach of contract through general damages.
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Special Damages
Special damages (also called consequential damages) cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable.

At the time of making contract, a part may place before the other party some information about some special circumstances affecting him and also communicate the consequences for not meeting it. To obtain damages for this type of loss, the nonbreaching party must prove that the breaching party knew of the special circumstances or requirements at the time the contract was made

Punitive Damages
Generally, punitive damages, which are also

termed exemplary damages in the United Kingdom, are not awarded in order to compensate the plaintiff, but in order to reform or deter the defendant and similar persons from pursuing a course of action such as that which damaged the plaintiff.
Unjustified dishonor of cheque Breach of promise of marriage Failure of vendor of real estate to make title

CASE: Jackson v Horizon Holidays [1975]

Nominal Damages
If the breach of contract causes no loss to the

aggrieved party, no damages need to be awarded to him. However, in order to record the fact of breach of contract by guilty party, the courts may award nominal or token of damages, i,.e. compensation of Tk.50. they would be called nominal damages

In Charter v Sullivan case (1957) 2 QB 117, the buyer repudiated a

contract to buy a Hillman Minx, which was then sold by the dealers to another customer. The dealers manager admitted that could sell all of the Hillman Minx cars they could get, and the court of the Appeal held that they were entitled to nominal damages only since they could not show any profit or loss account.

Liquidated damages and penalty (sec 74)


Liquidated damages, i.e. a sum payable as damages the amount of which determined by the parties beforehand, instead of being left to the court by a fair and honest estimate of probable losses likely to be caused by the breach

A penalty, i.e. a sum which has no relation to probable loss which may arise and which has been stipulated by the parties ad in terrorem i.e. for the purpose of penalizing a party for not performing the contract.

Illustration
Dunlop sued its tyre retailer, New Garage, for

breaching an agreement to not resell Dunlop tyres at a price lower than that listed in the contract. The agreement then said if that did happen, New Garage would pay 5 per tyre by way of liquidated damages and not as a penalty. The judge held the 5 sum was liquidated damages and enforceable. The Court of Appeal held the clause was a penalty and Dunlop could only get nominal damages. Dunlop appealed.

Rescission of contract
Strictly speaking the equitable right to rescind an agreement is not a remedy for breach of contract, it is a right which exists in certain circumstances, such as where a contract is voidable due to misrepresentation, duress and undue influence

When one party to the contract breaches the contract, the other party need not perform his part of the obligations. The aggrieved party may rescind the contract.

In such cases, the injured / aggrieved party can either cancel the contract of file a suit for damages. It is possible if the parties can restore their original contract.

Suit for Quantum Meruit


as much as earned . In implies a payment deserved by a person for the reason of actual work done

When a party has done some work under a contract, and the other party rejected 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 meruit
In order to successfully recover under a quantum meruit theory, the plaintiff generally must demonstrate to the court
the performance of the services in good faith, the acceptance of the services by the person to whom they are rendered,

an expectation of compensation for those services, and


the reasonable value of the services.

Suit for specific performance


In certain cases of breach of contract,

damages may not an adequate remedy. Then the Court may direct the party in breach of carry out his promise according to the terms of contract. But in general, Courts do not wish to compel a party to do that which he has already refused to do. CASE: Ryan v Mutual Tontine Westminster Chambers Assoc [1893]

Cases where specific performance may be ordered:


Where there exist no standard for ascertaining the actual damage caused to the aggrieved party by the non-performance

Where monetary compensation will not be adequate relief.

Where plaintiffs property is held by the defendant in the capacity of his agent or trustee

Where the act to be done is in performance of trust

Cases where specific performance may NOT be ordered:


Where monetary compensation is adequate relief Where contract in made by the agent or trustee in violation of his powers

Where the contract is of personal nature


Where cannot supervise the performance of promise as it involves performance of a continuous duty Where the contract is in nature revocable Where the contract is made by a company in excess of its powers as laid down in its Memo of Association

Suit for injunction


An aggrieved party can sue for an injunction i.e., an order of the court

restraining the wrong doer from doing or continuing the wrongful act complained of. Injunctions are usually granted to enforce negative stipulations in cases where damages are not adequate relief. Injunction is a preventive relief. It is particularly appropriate in cases of anticipatory breach of contract. Example: N, a film actress agreed to act exclusively for Warner Bros for one year. During the year she contracted to act for X. It was held that she could be restrained by an injunction from acting for X. [Warner Bros. v. Nelson. (1937) I.K.B. 209J.