LEGAL ASPECTS OF BUSINESS

Consideration
• Pollock ‘price for which promise of the other is bought,
and the promise thus given for value is enforceable.’
• Consideration is an important requisite of an agreement…
an agreement consists of two clearly separable parts:
promise on the one hand and the consideration for the
promise on the other hand.
• Sec. 2(e): Every promise and every set of promises,
forming the consideration for each other, is an agreement.
• Consideration is a necessity to the validity of a contract….
Law insists on existence of consideration.
• Ex nudo pacto non oritur actio. Law will not enforce a
promise given for nothing. Consideration is absolutely
essential to support a promise. Out of naked pact, no
cause of action arises
Prof. Rajkumar Bagadia
 Consideration
• Parties come together to exchange benefits and the
benefit each party promises the other is called
Consideration.
• Abdul Aziz vs. Masum Ali (1914): The secretary of a
Mosque Committee filed a suit to enforce a promise
which the promisor had made to subscribe Rs.500/- to
the rebuilding of a mosque.
• Held, the promise was not enforceable because there
was no consideration in the sense of benefit, as the
person who made the promise gained nothing in return
for the promise, and the secretary of the Committee to
whom the promise was made, suffered no detriment as
nothing had been done to carry out the repairs. Hence
the suit was dismissed.
Prof. Rajkumar Bagadia
 Kedarnath v. Gauri Mohammad -
Calcutta [1886]
• A promise, though gratuitous, would be enforceable if, on the
faith of the promise, the promisee suffers a detriment or
undertakes a liability.
• The facts of this case were almost similar to those of the
previous case, but the secretary in this case incurred a liability
on the strength of the promise. G promised to give a donation
for construction of a Town hall. K, on the faith of the promise,
called for plans and appointed contractors and agreed to pay
them. Held, the amount could be  recovered, as the
promise resulted In a sufficient detriment/loss to Kedarnath.
• The promise could, however, be enforced only to the extent
of the liability (detriment/loss) incurred by the secretary.
• In this case, the promise, even though it was gratuitous,
became enforceable because on the faith of the promise the
secretary had incurred a detriment (loss).
Prof. Rajkumar Bagadia
 Consideration: Definition Analyzed
• At the desire of the promisor: the act or forbearance must
be done at the desire of the promisor…. A voluntary act is
not a consideration.
• Chinnaya v. Ramaya:
• the promisee or any other person: Consideration can be
furnished by the promisee or any other person, it may
move from the promisee or a third party (stranger) -.
• has done, or abstained from doing: Past consideration…
something wholly done or suffered, before making the
agreement.
• does or abstains from doing: Consideration.. either some
act, or of some omission or forbearance on the part of the
promisee or any other person,
• Consideration need not be adequate.
Prof. Rajkumar Bagadia
 Consideration - examples
• Vishal is setting up an industry. Towards this, he has to hire
the services of information technology consultants to develop
software. Explore the following four different agreements
between Vishal and the consultants and decide whether
these are contracts or not. In other words, identify the
consideration for both the parties.
• Agreement 1: Rajesh will prepare a software for a fee of Rs
one lakh.
• Agreement 2: Ramesh will prepare a software. Vishal in turn
will give him his laptop.
• Agreement 3: Manu will prepare a software for Vishal. Vishal
will in turn give him the right to use the computer facilities at
his office for one year.
• Agreement 4: Rita will prepare a software for Vishal. Vishal in
return will prepare an architectural plan for a house for Rita.
Prof. Rajkumar Bagadia
Case: Vijay Minerals v. Bikash Chandra Deb

• Bikash Chandra Deb, a land owner in Orissa, reached an

agreement with Vijay Minerals for the sale of manganese
and iron ore.
• The written agreement provided the price at which the ores
were to be sold. It was a long term contract but it did not
provide for any price variation,
• Mr. Deb refused to supply the ore and the company came
before the court for enforcement of the contract.
• Mr. Deb contended that the price was grossly inadequate,
barely 16% of the market selling price. He further
contended that the price did not even meet the costs of
extraction.
• Judgment: The courts do not go into the adequacy of
consideration when considering whether an agreement is
binding or not.
Prof. Rajkumar Bagadia
 A Stranger Enforcing an Agreement

• In view of the definition of Consideration under sec. 2(d),

it is not necessary that the consideration must move
from the promisee only.
• As seen in Chinnaya v. Ramaya, a stranger to an
agreement can enforce, if such a person is a beneficiary
under the agreement.
• Example: A ensures his life with an Insurance Company
and appoints B, his wife as the nominee. Since B is the
beneficiary under the policy, she can sue the Insurance
company to recover the claim amount under the policy.
• However, the basic rule is that a person who is not a
party and not even a beneficiary under an agreement
cannot enforce the agreement.
Prof. Rajkumar Bagadia
 The Doctrine of Privity of Contract
Dunlop Pneumatic Tyres Co. Ltd. v. Selfridge Co. Ltd.
• Dunlop, a manufacturer of motor car tyres sold a large quantity
of tyres to Dew & Co. at a discount of 10% at the scheduled price
for the tyres.
• Dew could sell the tyres to the consumers as well as other
retailers, however Dunlop wanted that the tyres do not get sold
to the end-user at a price lower than the scheduled price.
• Towards this, Dunlop had a written agreement with Dew under
which he could not sell tyres to consumers at a lower price.
• Dew sold tyres to Selfridge, a retail dealer with the same price
maintenance agreement.
• Selfridge however, sold tyres to some consumers (end-users) at a
price lower than the scheduled price.
• Dunlop files a suit against Selfridge.
• Decide
Prof. Rajkumar Bagadia
 Void & Voidable Agreements

• Sec. 2(g): An agreement not enforceable by law is said to be void. A

void agreement has no legal effect. It creates no rights.. no
obligations… are void ab initio… There cannot be a void contract.
• An agreement, which was valid and enforceable, when entered, may
subsequently become void.
• A voidable agreement is one, which can be avoided. Sec. 2(i): ‘An
agreement which is enforceable by law at the option of one or more
of the parties thereto, but not at the option of the other or others,
is a voidable contract.’
• Unenforceable Agreement: Term used in English law… agreement
cannot be enforced by a court of law because of some technical
defect.
• Illegal Agreement: Against a law in force in India.
Prof. Rajkumar Bagadia
 VALID CONTRACTS

• Contract is an agreement which is enforceable by law.

• Which Agreements are Contracts / Enforceable by Law?
• All contracts are agreements but all agreements are not
contracts….. CONTRACT must be enforceable by law.
• S. 10: All agreements are contracts, if they are made:
1) by the free consent
2) of the parties competent to contract
3) for a lawful consideration and a lawful object, and
4) are not expressly declared to be void.
• If a contract has to be in writing... it must be in writing…
if witness or compulsory registration is required… all
such requirements have to be complied with.
Prof. Rajkumar Bagadia
 What is a CONTRACT ?

Contract

Agreement Enforceable by Law

Set of Promises 1. Free Consent

Forming Consideration 2. Competency of Parties
3. Lawful Consideration &
Promise
Lawful Object
Acceptance 4. Not expressly declared to
be void.
Proposal

Prof. Rajkumar Bagadia

Ingredients of a Valid Contract

Contract

Agreement

Free Consent Competency

Sec. 13 to 22
Not expressly
of Parties Lawful
declared to
Sec. 11 & 12 Consideration and
be void
Lawful Object Sec. 26 to 30
Sec. 23 to 25

All requirements must be present…they must co-exist.

They are conjunctive and not disjunctive.
Prof. Rajkumar Bagadia
Competency of Parties: Sec. 11 & 12
• All the parties must be competent to contract -
Every person is competent to contract who is:
1) of the age of majority,
according to the law to which he is subject.
2) who is of sound mind, and
3) who is not disqualified from contracting.
• Minor’s Agreement:
Indian Majority Act... Minor is one who has not completed
18 years of age... where a guardian is appointed of the
minor’s person or property… twenty one years. Majority… a
necessary element. Agreement by a minor... void and
inoperative. Mohiribibi v. Dharmodas Ghose (1903 Cal.).
• Minor cannot be a promisor but can be a promsee.
Prof. Rajkumar Bagadia
 Competency of Parties: Sec. 11 & 12
• Ratification of minor’s contract –
• Minor’s contract is void ab initio... no question of ratifying it…
consideration given during minority is no consideration at all.
• Sec. 68: minor’s property is liable for payment of reasonable
price for necessaries supplied to the minor or to anyone to
whom the minor is bound to support.
• Persons of unsound mind – For a valid agreement... each party
should have a sound mind – Test of soundness of mind:
• (1) capacity to understand
• (2) ability to form rational judgment.
• Unsoundness of mind… insanity or lunacy, idiocy, drunkenness,
mental decay brought about by old age. Contract..
unsound mind… absolutely void.
• Contract by Drunkards…
Prof. Rajkumar Bagadia
 Free Consent
• Free consent.. an important ingredient… agreement valid only
when it is the result of free consent of all the parties…
• Must agree upon the same thing in the same sense... Sec. 13.
• Consensum ad idem: Latin term…an agreement having a
meeting of minds between the parties.
• Not only consent but free consent… Consent but not free
consent, the contract is voidable at the option of the party
whose consent was not free.
Consent – free only when not caused by

Coercion Undue Influence Fraud Misrepresentation Mistake

Sec. 15 Sec. 16 Sec. 17 Sec. 18 Sec. 20,
21 & 22
• Five ingredients of free consent.
Prof. Rajkumar Bagadia
 Coercion: Sec. 15
• Coercion is:
1. committing of any act forbidden by the IPC; or
2. threatening to commit any act forbidden by the IPC; or
3. the unlawful detaining of any property to the prejudice of
any person whatsoever or
4. the unlawful threatening to detain any property to the
prejudice of any person whatsoever -
with the intention of causing any person to enter into an
agreement.
• In Purabi Bannerjee v. Basudev Mukharjee: a teacher and a
student fell in love and got married. Subsequently the student
alleged that her consent was obtained by coercion as the
teacher threatened to commit suicide.
• It was observed that committing suicide is not a crime, it is
forbidden by law.
Prof. Rajkumar Bagadia
 Undue Influence: Sec. 16
• Contract is said to be influenced by
undue influence where the relations
subsisting between the parties are such that one of them
i. is in a position to dominate the will of other, and
ii. uses that position to obtain an unfair advantage over
the other.
• Three examples : A person is deemed to be in a position
to dominate the will of the other :
a) Where he holds a real or apparent authority,
b) Where he stands in a fiduciary relation or
c) Where he makes a contracts with a person whose
mental capacity is affected.

Prof. Rajkumar Bagadia

 Fraud : Sec. 17

• Any of the following five acts committed by a party or with

his connivance or by his agent with intent to deceive
another party… to induce him to enter into a contract.
• To deceive means to make a person to believe that
something is true which in fact is false.
 A false statement intentionally made is a fraud.
 Active concealment of a fact by one having a knowledge
or belief of the fact.. mere non-disclosure is not a fraud.
 Promise made without any intention of performing.
• Can silence be fraudulent?: Mere silence is not fraud,
unless the circumstances are such that it is the duty of the
person keeping silence to speak or else silence itself is
equivalent to speech.
Prof. Rajkumar Bagadia
 Misrepresentation : Sec. 18
• Consent given under misrepresentation of facts does not
amount to free consent.
• A statement made which in fact is not true, under the
belief that it is true, is misrepresentation. It means:
 positive assertions, in a manner not warranted by the
information of the person making it.
 any breach of duty which, without an intent to
deceive, gain or advantage to the person committing
it... by misleading another to his prejudice or any
other claiming under him... party is under a duty to
disclose certain facts and does not do so thereby
misleading another. Ex. Contract of Insurance…based
on good faith.

Prof. Rajkumar Bagadia

 Mistake – Sections 20, 21 & 22
• Mistake not defined by the Act… an erroneous
belief or an incorrect belief concerning something.
• Free consent… an essential requirement which is possible only
when the parties agree upon the same thing in the same sense
• Rules: (1) Mistake... two types: (i) Mistake of law
(ii) Mistake of fact.
• Mistake of law again of two types: (a) Law in force in India
(b) Law not in force in India. Mistake on a point of Indian law
does not affect the contract. Mistake… Foreign law… treated as
mistake of fact.
(2) An agreement induced by a mistake of fact is void provided
(a) both the parties are under a mistake;
(b) mistake is as to a fact essential to the agreement.
• Erroneous opinion as to the value of the thing, which is the
subject matter, is not deemed to be a mistake of fact.
Prof. Rajkumar Bagadia
 Mistake – Sections 20, 21 & 22
• A contract… not voidable merely because it was caused by
one party... being under a mistake as to a matter of fact. But if
nature of mistake is such so as to preclude the existence of
consent, agreement is void, even if mistake is unilateral.
• A mistake may prevent the formation of a legal agreement
'upon the same thing in the same sense.’
• When there is a fundamental error and the consent though
apparently given is not really there... agreement is void.
• S. 65: Where the contract is void due to mistake…parties to
restore the advantage received or make compensation.
• Ex.: A and B, believing themselves married, made a separation
agreement whereby A agreed to pay B Rs. 500/- per month.
They were not, in fact, validly married. A stopped paying and
B filed a suit for recovery.
• Decide.
Prof. Rajkumar Bagadia
Lawful consideration and lawful object
• The third ingredient of a valid contract is that its
consideration and object must be lawful...
Sec. 23 – Consideration is the act, abstinence or
the promise made at the desire of the promisor… object is
the purpose for which the agreement is entered into.
• consideration or object of an agreement is lawful, unless -
a) it is forbidden by law; or
b) it would defeat the provisions of any law... violation of
law; or
c) it is fraudulent; or
d) it involves or implies injury to the person or property of
another; or
e) the court regards it as immoral; or
f) the court regards it as opposed to public policy.
Prof. Rajkumar Bagadia
 Agreements without consideration
• Consideration is essential for the validity of a contract…
nudum pactum (a naked pact) is unenforceable.
• Sec. 25 lays down exceptional cases where a contract is
enforceable even though there is no consideration:
1. An agreement…
• is in writing,
• is registered,
• made on account of natural love and affection,
• is between parties standing in near relations to each
other.
• Ex. A husband promised to give his wife a separate flat for her
residence and stated in the agreement that due to frequent
quarrels he decided to give her the flat, it was held that the
promise to make the gift was not on account of natural love
and affection.
Prof. Rajkumar Bagadia
 Void Agreements
• An agreement may be void due to mistake, lack of or
unlawful consideration or object, lack of capacity, non-
enforceability at law etc. In addition, the Act expressly
declares certain type of agreements to be void.
1. Agreements in Restraint of Marriage - Sec. 26: Every
agreement in restraint of marriage of any person, other
than a minor, is void. Restraint of marriage means any
restriction or limitation on a person’s right to marry..
such restraint or interference… is void.
2. Agreements in Restraint of Trade - Sec. 27: Every
agreement, by which any one is restrained from
exercising a lawful profession, trade or business of any
kind, is to that extent void… Fundamental right under
the Constitution (Art. 19)… Exception – sale of goodwill
of a business. Also under Partnership Act.
Prof. Rajkumar Bagadia
 Void Agreements
3. Agreement in Restraint of Legal Proceedings - Sec. 28:
An agreement, which prohibits a person from initiating
judicial proceedings, in respect of any right, is void…
includes (a) agreements limiting the time allowed by the
law of limitation, (b) deciding upon the jurisdiction of a
court not permitted by law.
Exceptions - agreement to refer a pending or a future
disputes to arbitration.
4. Uncertain Agreements - Sec.29: Agreements, the
meaning of which is not certain, or capable of being
made certain are void.
5. Agreements by Way of Wager – Sec.30:
6. Agreement to do an Impossible Act - Sec. 56: An
agreement to do an act impossible in itself is void.
Prof. Rajkumar Bagadia
 Agreements by Way of Wager
• Sec. 30: Agreements by way of wager are void. A wager is an
agreement by which money is payable by one person to
another on the happening or non-happening of a future
uncertain event… gambling, gaming, betting or wagering...
There must be mutual chance of gain and loss…one wins and
the other looses. If an agreement does not involve loss to
either party, it is not a wager.
• It is not the words but the substance of the agreement and
the intention of the parties is the deciding factor…Sale of
goods.. no intention to perform but settle the deal… wager.
• Exceptions: (a) games of skill or athletic competitions; (b)
Crosswords or literary competitions; (c) Insurance contracts;
(d) Share market transactions where delivery of stocks and
shares takes place; (e) Speculation is not necessarily always
wager; (f) Horse racing which is declared illegal is wager.
Prof. Rajkumar Bagadia
 Contingent Contracts
• Promise may be ‘absolute’, ‘unconditional’ or may be
‘conditional’.
• Sec. 31: A contingent contract… to do or not to do
something, if some event, collateral to such contract, does
or does not happen… a contract with a condition, when the
condition or contingency arises, contract come into effect.
• Contingency may be wholly beyond the power of the parties
or may be within the power of one of the parties…
contingent upon mere will and pleasure of a party, no
contract.
• Ex.: Contract enforceable upon happening or not happening
of an event, or event deemed to have become impossible, or
contracts enforceable on happening or not happening of
some specified event within a specified/ fixed time etc.
Prof. Rajkumar Bagadia
All Contracts are Agreements, But
all Agreements are Not Contracts
Essentials of a Valid Contract: Sec 2(h) & sec. 10:
1. Offer and Acceptance
2. Intention to create legal relationship
3. Lawful consideration
4. Capacity of parties - Competency
5. Free consent
6. Lawful object
7. Agreement not declared to be void
8. Certainty and possibility of performance
9. Legal formalities

Prof. Rajkumar Bagadia

 Performance Of Contracts

• Contract creates legal obligations, performance

means carrying out of these obligations.
• Rules regarding performance of contracts can be
studied under following broad heads:
1. Obligation of parties to perform contracts
2. By whom contracts must be performed
3. Time, place and manner of performance
4. Rules as to appropriation of payments
5. Modes of discharge of contracts

Prof. Rajkumar Bagadia

Obligation of Parties to Perform : Sec. 37-39

A. Sec. 37- Parties to a contract must perform or offer to perform

Promises are binding on legal representatives, unless a
contrary intention appears.
B. Offer to perform… tender/attempted performance. Sec. 38-
Valid tender is made… other party refuses, the party
tendering- (a) is free from liability, but (b) does not loose his
right under the contract.
C. Valid tender/offer to perform –
i. must be unconditional,
ii. made at a proper time and place,
iii. Offer to perform a part of promise... not valid,
iv. when several promises... offer to perform any one of them
is a valid tender,
v. when offer is to deliver anything, the promisee must have
reasonable opportunity of seeing the thing offered.
Prof. Rajkumar Bagadia
Breach / Anticipatory Breach of Contract

• When a party to a contract (a) has refused to perform, or

(b) disabled himself from performing – his promise in its
entirety – the promisee may put an end to the contract,
unless he has signified by words or conduct, his consent in
its continuance.
• Anticipatory Breach or repudiation of contract before the
time fixed for performance has arrived.
• Where a party refuses… before the actual time arrives...
promisee has option to either (a) elect to rescind… end of
the contract and claim/sue for damages, or (b) elect not to
rescind, wait for the time of performance and later on hold
the party responsible for non-performance. But, if he elects
not to rescind... contract remains operative for benefit of
both the parties.
• Either party may refuse to perform.
Prof. Rajkumar Bagadia
Time as an essence of the contract: Rules

Parties may stipulate performance on a certain date or within

a certain time. Sec. 55 lays down the rules:
1. Where time is of the essence and there is failure to perform
within the fixed time, the contract (or whatever remains
unperformed) becomes voidable at the option of the
promisee.
2. Where time is of the essence, the promisee may accept
performance after the time so fixed, but if he does so he
cannot claim compensation - unless he gives notice of his
intention to claim compensation while accepting the
delayed performance.
3. Where time is not of the essence, failure to perform within
the time… contract is not voidable but promisee is entitled
to compensation for loss occasioned to him by such failure.
Prof. Rajkumar Bagadia
Time as an essence of the contract: Rules

• Law does not always regard time as a rigid condition...

However where time is of the essence… contract
voidable at the option of the promisee.
• If time is not of essence, non-performance within the
specified time, contract not voidable, but promisee
entitled to compensation for the loss occasioned to him
by such failure to perform within the specified time.

Prof. Rajkumar Bagadia

 Appropriation of Payment: Rules
When there are several debts.. A payment is made, to which of
the debts is the payment to be appropriated?
1. Sec. 59: If debtor expressly intimates that the payment is to
be applied to the discharge of some particular debt, the
payment if accepted, be applied accordingly.
2. If no express appropriation, but there are circumstances
which imply what the debtor intended, the debtor’s intention
be followed, if money is accepted.
3. Sec. 60: If no express/implied appropriation by the debtor,
creditor may apply money to any lawful debt, even the time
barred debt.
4. Sec. 61: When neither debtor nor creditor makes any
appropriation, payment shall be applied to debts in order of
time, including time barred debts. If the debts are of equal
standing, payment be applied proportionately.
Prof. Rajkumar Bagadia
 Modes of Discharge of Contracts
(Contracts which need not be performed)
• A contract creates a legal obligation that subsists until
discharged. When the obligations come to an end, the
contract is said to be discharged and terminated. A Contract
may be discharged in the following ways:
1. By performance
2. Where performance is dispensed with or excused
3. By refusing tender of performance
4. By one party refusing to perform
5. By act becoming impossible or unlawful
6. By novation, rescission or alteration or by waver
7. By accord and satisfaction
8. By rescission of a voidable contract
9. By promisee failing to afford facilities of performance
10. By operation of law
Prof. Rajkumar Bagadia
 Quasi Contracts
Contractual obligations are voluntarily created by free consent
through proposal and acceptance. In some cases, some
obligations though not contractual but treated as contractual
by law. In fact there is no contract but there is one in
contemplation of law… quasi contracts.
• Sec. 68 to 72... five types of quasi contracts:
1. Claim for necessaries supplied to a person incapable of
contracting- S. 68: A person incapable of contracting or the
one to whom he is legally bound to support, (a) is supplied
by another person with necessaries of life, such other person
is entitled to be reimbursed for the necessaries supplied, (b)
to a person incapable of entering into a contract or to whom
he is legally bound to maintain, (c) the price to be paid is
reasonable price, and (d) only the property of incapable
person is liable and not the incapable person personally.
Prof. Rajkumar Bagadia
 Quasi Contracts

2. Reimbursing a person paying money due by another-

S. 69: a person who is interested in payment of money
which another is bound by law to pay, and who
therefore pays it, is entitled to be reimbursed by the
other.
3. Obligation of person enjoying benefit of a non-
gratuitous act- S. 70: Where a person lawfully does
something for another or delivers anything to him, not
intending to do so gratuitously, and such other person
enjoys the benefit thereof, the later is bound to make
compensation to the former.

Prof. Rajkumar Bagadia

 Quasi Contracts

4. Responsibility of finder of goods- An agreement is implied

by law where a person finds goods belonging to another
and takes them into his custody.. he is subject to the same
responsibility as a bailee… responsibility to take care of the
goods and try and find out the true owner.. entitled to its
possession as against everyone except the true owner.
5. Payment or delivery by mistake or under coercion-
Sec. 72: A person whom money has been paid or anything
delivered by mistake or under coercion must repay or
return it.
• Further as per S. 73 the rights and liabilities of parties to a
quasi contract are the same as if they willingly, and in fact,
entered into such a contract.

Prof. Rajkumar Bagadia

 Breach Of Contract
• Law expects parties to perform their respective
Obligations, any party committing a breach,
the other party has three remedies:
1) Claim damages for the loss sustained, or
2) decree for specific performance, or
3) an injunction.
• The law as to damages regulated by the Contract Act.
• Specific performance and injunction are regulated by the
Specific Relief Act.
• When a contract is broken, party who suffers is entitled to
receive, compensation for any loss or damage caused to him:
a) which naturally arose in the usual course,
b) which parties knew, when they made the contract to be
the likely result from the breach.
Prof. Rajkumar Bagadia
 Breach Of Contract

• Under… sale of goods, the measure of

damages is the difference between the
contract price and the market price on
the date of the breach. It is not necessary
that the buyer should have actually
bought the goods from the market.
• Compensation not to be given for any remote and indirect
loss or damage. Damages measured by actual loss suffered by
the parties. Losses actually arise in the usual course.
• In estimating the loss or damage, the means, which existed of
remedying the inconvenience caused, must be taken into
account.
Prof. Rajkumar Bagadia
 Breach Of Contract
• Sometimes, parties themselves while contracting, agree that
a particular sum of money will become payable in case of
breach of the contract. Such a sum is known as ‘Liquidated
Damages’ – a sum payable as damages, which instead of
being left to the determination of the court, is previously
determined by the parties themselves. Sometimes it is also
known as ‘Penalty’.
• S. 74: A contract, which has been broken… sum named to be
paid by way of a penalty... the party complaining has a right to
receive from the other reasonable compensation… not
exceeding the amount so named.
• A person entering into a bail-bond, recognizance, or other
similar instrument or under the order of the government gives
any bond for the performance of any public duty or act in which
public is interested, the liability is for the whole sum mentioned
therein.
Prof. Rajkumar Bagadia
Rules as to the Amount of Damages
• Ordinarily, aggrieved party entitled to recover only the actual
loss suffered.
• Calculating the actual loss... fairly and reasonably arising
naturally... remote damages not allowed.
• Contract contemplates reasonable damages then even
remote damages may be allowed –‘special damages’.
• General rule- injured party is to be placed in the same
financial position, he would have been in, if the contract duly
performed.
• Duty of the injured party to minimize the losses.
• A sum mentioned payable in case of breach... court to allow
reasonable compensation, not exceeding that sum.
• Difficulty of calculating damages... no ground for refusing
damages. Court must make an assessment of loss and pass
order accordingly.
Prof. Rajkumar Bagadia
Thank YOU
 Law of Contracts
The Indian Contract Act, 1872
by
Prof. Rajkumar Bagadia
LEGAL ASPECTS OF
BUSINESS
by
Prof. Rajkumar Bagadia

Prof. Rajkumar Bagadia

 LEGAL ASPECTS OF
BUSINESS

by
Prof. Rajkumar Bagadia

Prof. Rajkumar Bagadia

mdp@somaiya.edu