What is an Agreement?

OFFER+ ACCEPTANCE = AGREEMENT

 Every promise and every set of promises forming the consideration
for each other is an agreement. A promise is a result of an offer
(proposal) by one person and its acceptance by the other.
For example:
• A invites B for dinner at home and B accepts the invitation, then,
there results a promise between them
• A makes a proposal (offer) to sell his radio to B for Rs 500/- and B
accepts his proposal, there, results a promise between the two
persons.
 
 Cont…
Thus, when there is proposal from one side and
the acceptance of that proposal by the other
side, it results in a promise. This promise from
the two parties to one another is known as an
agreement. That means, they both must be
thinking of the same thing in the same sense.
In other words, there must be consensus-ad-
adem.
 
 What is contract?

Sec 2(a) of NCA 2056, define contract as “ Contract means an agreement

between two or more person to do or not to do something, which can be
enforceable by law.”

LEGALLY ENFORCEABLE AGREEMENT = CONTRACT

• An agreement consists of reciprocal promises between the two parties. In
case of contract, such party is legally bound by the promise made by him.
Thus, According to Nepalese Contract Act, contract consists of four elements:
• Agreement
• Two or more than two parties
• Subject matter(to do or not to do somethings)
• Legal obligation or enforceable by law
 
 Nature of Contract
a) Contract is private law created by contracting
parties and therefore binds only to the
parties to the contract.
b) Contract is only enforceable to the
contracting parties.
c) A person who is not a party to a contract
cannot claim a benefit.
d) Meeting of minds
 All contracts are agreements but all
agreements are not contracts.
The most common ways of making a contract is
through an agreement. The two parties may
agree to something through a process of
mutual negotiations. When one party makes
an offer and the other accepts the same, there
arises an agreement, which may be
enforceable by law. Therefore, an agreement
enforceable by law is a contract.
 Cont…
But every sort of agreement does not create legal
obligation. So where the parties make a binding
contract, they create rights and obligations
between themselves. Thus, all contracts are
agreements but all agreements are not
contracts because some agreements cannot be
enforced by law.
Agreements lacking legal enforceability are known
as social agreements or domestic agreements.
 Eessential elements of a contract

1. An agreement between the two parties:

An agreement is the result of proposal or an
offer by one party followed by its acceptance
by the other. The party making an offer is
known as ‘offeror’ and the party to whom the
offer is made is known as the ‘offeree’. They
both must be thinking of the same thing in
the same way.
 Cont..
2. Intention to create legal relationship:
There should be an intention on the part of the parties to
the agreement to create a legal relationship. The
relationship which is enforceable by the law is known as
legal relationship. Generally, in all forms of commercial or
business agreements it is presumed that the parties have
the intention to create legal relationship. However, an
agreement of a purely social or domestic nature is
presumed not to have an intention to create legal
relationship.
 
 Cont…
3. Lawful consideration
The agreement must be supported by consideration on both sides. Each party
to the agreement must give or promise something or and receive something
or a promise in return. Consideration is the price for which the promise of
the other is sought. However, the price need not be in terms of money. It
may be tangible or intangible. In case the promise is not supported by
consideration, it will be a bare promise and not enforceable at law. This
consideration has to be lawful unless
• it is forbidden by law or
• is of such a nature that, if permitted, it would defeat the provisions of law or
• is fraudulent or
• involves or implies injury to the person or property of another or
• the court regards it as immoral or opposed to public policy.
 Cont…
4. Lawful object in respect of that agreement:
The object of the agreement must be lawful and not
something which the law disapproves. The object must not be
another.
a. it is forbidden by law or
b. is of such a nature that, if permitted, it would defeat the
provisions of law or
c. is fraudulent or
d. involves or implies injury to the person or property of another
or
e. the court regards it as immoral or opposed to public policy.
 Cont…
5. Parties competent to contract:
For a valid contract both parties to the agreement must be
capable of entering into a contract which means that they
must have qualification prescribed by law. According to the
Contract Act prescribes that every person is competent to
contract;
a) If he has attained the age of 16 years
b) if he is of sound mind
c) if he is not disqualified by any existing laws to which he is
subject. An agreement lacking capacity to contract makes it
void.
 Cont…
6. Free and genuine consent of the parties
The consent of the parties to the agreement must be free and
genuine. The consent of the parties should not be obtained by,
• Misrepresentation
• Fraud
• Undue influence
• Coercion
• Mistake
If The consent is obtained by any of these flaws, then the
contract is not valid.
 Cont…
7. Agreements not expressly declared void or illegal:
There are certain agreements, which have been
expressly declared illegal or void by the law. In such
cases, even if the agreement possesses all the
elements of a valid agreement, it will not be
enforceable at law. Sec 13(a), (a), (b), (c), (d), (e),
(f), (g), (h), (i), (j), (k) specify certain types of
agreements which have been expressly declared to
be void.
 Cont…
8. Certainty of meaning:
For a valid contract, the terms of the agreement
must not be vague or uncertain. It must be
possible to ascertain the meaning of the
agreement, for otherwise it cannot be enforced.
For e.g. A agrees to sell 100 metres of cloths but
doesn’t mention its type. The agreement is not
enforceable for want of certainty of meaning.
 Cont…
9. Possibility of performance : The terms of the agreement must
be capable of performance. If the act is impossible in itself,
physically or legally, the agreement cannot be enforced.
10. Necessary legal formalities: A contract may be oral or in
writing. If, however, a particular type of contract is required by
law in writing, it must comply with the necessary formalities as
to writing, registration and attestation, if necessary. Otherwise it
cannot be enforceable at law.
For e.g. many contracts relating to mortgaging of immovable
property, the sale of the immovable property, must be in
written and need to be registered at the concerned govt. office
under Nepalese Law.
 Types of contract
A. On the basis Validity there are Four types of
contracts: a)Valid Contract
b)Void contract
c)Voidable contracts
d)Unenforceable
e)Illegal
 Cont…
a. Valid Contract : A contract to be valid, it must have all the essentials
elements discussed earlier. If one or more of these elements is/are
missing, the contract is voidable, void, illegal or unenforceable.
b. Voidable Contract : A voidable contract is one, which may be
repudiated at the will of one of the parties, but until it is so
repudiated it remains valid and binding. If it is affected by any flaw
(e.g. misrepresentation, fraud, coercion, undue influence) and the
presence of any one of these defects enables the party aggrieved to
take steps to repudiate the contract. Thus, a voidable contract is one,
which is enforceable by law at the option of one of the parties.
Section 14 (a), (b), (c) and (d) deal with voidable contracts. It deals
with coercion, undue influence, fraud and misrepresentation.
 Cont…
c. Void Contract : Void literally means ‘not binding in
law’. An agreement, which is not enforceable by
either of the parties, is void. Thus, a void agreement
does not give rise to any legal consequences and is
void ab-initio. Certain agreements have been
expressly declared void in the Contract Act under
section 13 e.g. agreements in restraint of trade,
marriage and legal proceeding which are clearly
permitted under the law, agreements with unlawful
consideration or objects etc.
 Cont..
d. Unenforceable contract : An unenforceable
contract is one, which is valid in it, but is not
capable of being enforced in a court of law
because of some technical defect such as
absence of writing, registration, etc. Thus, it is
neither void nor voidable but only
unenforceable.
 Cont…
e. Illegal agreement : Illegal means contrary to law. Therefore, illegal
agreement is one the consideration or object of which
1. is forbidden by law e.g. an agreement to run prostitution, or
commit a robbery
2. defeats the provisions of any law
3. is fraudulent e.g. an agreement to sell a land to B acquired by
fraud
4. involves or implies injury to the person or property of another
5. the court regards it as immoral or opposed to public policy

A contract cannot be illegal because contract means an agreement

enforceable by law. But an agreement can be illegal.
 Cont..
B) On the basis Formation there are two types of contracts:
a)Express Contract: express manner by use words,
spoken or written.
b)Implied Contract: by conduct.
C) On the basis Performance there are two types of contracts:
a)Executed Contract: both parties have done what
they were to do under contract.
b)Executory Contract : still to perform or remain to
do something to be done under the contract on bothsides.
 Cont…
D) On the basis obligation there are two types of
contracts:
a)Unilateral Contract: one side contract in which only
one party has to perform his promise or obligation.
b)Bilateral Contract : both party has to perform his
promise or obligation.
E) On the basis legal formalities there are two types of
contracts:
a)Formal Contract
b)Informal Contract
 Void and Voidable Contract
Void Contract :
 Void contract means those contracts which
have no validity at all; it will have no effect
upon the parties.
 This is void ab initio, i.e from the very
beginning no existence at all.
 parties con not seek or claim remedy from
these kind of contract.
 Cont..
 Void contract means those which is treated as
if it never existed.
 In one case Supreme Court has held that, “Any
deed which is against the principles of
contract is void.”
 According to sec.13 of NCA, the following
contracts shall be void.
1. Contract preventing any one from engaging
himself in any occupation, profession or
trade not prohibited by current Nepal law.
Exception:
i) good will
ii) partnership agreement(during and after)
iii) Exclusive service contract
 Cont…
2.Contract restraining marriages of the kinds
other than those prohibited by current Nepal
law.
3. Contract preventing any person from enjoining
the privileges facilities already being enjoyed by
general public.
4. Contract seeking to prevent the legal rights of
any person from being made applicable by any
government office or court.
 Cont..
5. Contract concluded in violation of current
Nepal law.
6. Contract arranged for immoral purpose or
concluded in disregard of public morality or
public interest.
7. Contract which can not be carried out because
the parties thereto do not exactly know about
the subject matter in relation to which it has
concluded.
 Cont…
8. Contract work in respect to which is considered
impossible at the time it is concluded.
9. Contract which is not explicit because there is
lack of a reasonable interpretation thereof.
10. Contract concluded by persons who are
disqualified to conclude contract.
11. Contract with illegal consideration or
objectives.
 Voidable Contract
Section 14 of NCA: if contract is made by following;
then the contract is voidable at the option of the
aggrieved party.
i.Coercion
ii.undue influence
iii.Fraud
iv.Misrepresentation and
v.Mistake
 OFFER

• Offer means a proposal put forward by one

person to another with the expectation of
obtaining his consent for performing or not
performing any work.
 Cont..
According to Section 2 (b) of the Contract Act 2056 of
Nepal, ‘offer means a proposal put by a person to
another with a hope to get an assent from him for
doing or not doing something’. Above definition of
offer reflects following feature of an offer
i. It is expression of willingness to do something or
abstain from doing something.
ii. It is made to another person with a view to seek his
positive response in terms of his assent or
acceptance.
 Cont…
The person who makes the offer/proposal is
called an offeror/promisor and the person to
whom offer/proposal is made is called
offeree/promisee.
An offer must be clear, unequivocal and direct
approach to another party to contract.
 Rules regarding Offer
1. Intention to create legal relation: to constitute on
offer, the offeror must intend to create legal
obligation. Social invitation and invitation to treat
are not offer.
a. social invitation: e.g inviting friend for dinner
e.g agreement between husband and
wife
(balfour v. balfour)
b. invitation to treat : e.g advertisement, “for sale”
 Cont…
2. Offer must be certain, and should be made to a
definite person: offer should not be vague and
ambiguity and offer can be made to the particular
person or to a definite group of person in general.
3. Offer may be conditional: an offer may be made
subject to condition and that must be clearly
conveyed to the offeree. But condition against any
law, morality and public policy can not create legal
obligation.
 Cont..
4. Offer must be communicated.
5. Offer may be expressed or implied.
6. Offer is seeking acceptance of other party.
7. Offer may be specific or general.
8. Offer must be distinguished from invitation to
offer.
9. Offer should not contain the vitiating term(non-
communication or rejection would amount to an
acceptance.)
 Types of Offer
1. General offer: offer made to the public in general.(carlill v. carbolic
smoke ball co.)
2. Special offer: offer made to a definite person.
3. expressed offer: offer made through expression.
4. Implied offer: offer made through conduct.
5. Standing offer: offer which is allowed to remain open for
acceptance over a certain period of time. E.g tender to supply of
goods for certain period of time.
6. Cross offer: where both the parties make their offer innocently to
each other at the same time. A cross offer is not capable to create
a contract because there must be an offer from one side and
acceptance from the other side to create a contract.
 Cont..
7. Counter offer: counter offer is a rejection of
original offer by making a new offer which
may not amount to a contract. Where an
offeree intends to accept the offer after
alteration in any terms of the offer there is
counter offer. When there is acceptance of
counter offer, there is exchange of the position
of offerer and offeree.
 Lapse of an offer
Lapse means comes to an end.
1. Offer lapse after stipulated time or reasonable contract.
2. Offer lapse by the death or insanity of the offeror or the
offeree before acceptance.
3. Offer lapse by subsequent illegality or destruction of
subject matter.
4. A conditional offer lapse when the condition is not
accepted by the offeree.
5. Offer lapse by rejection of an offer by the offeree.
 Cont..
6. Offer lapse by counter-offer by the offeree.
7. Revocation of the offer by the offeror.
 ACCEPTANCE
According to Section 2 (c) of the Contract
Act, 2056 ‘Acceptance’ means giving an
assent to the offer by an offeree in the
same sense as the offeror intends it to be.

40
:jLs[lt eGgfn] k|:tfjsf s'/fx? k|:tfjn] h'g
cy{df lnPsf] 5 ;f] s'/fsf ;DaGwdf k|:tfljt
JolQmn] ;f]xL cy{df lbPsf] ;xdlt ;Demg'
k5{ .
“Acceptance of an offer is the expression, by
words or conduct, of an assent to the terms of the
offer in the same manner prescribed or indicated
by the offeror.”

41
 The assent may be:-
1.Express: writing or by word of mouth
2. Implied: conduct
Section 7(3); The person who has been presented with a
proposal shall be deemed to have given his/her consent
to it even if he/she has not done it directly to the offer in
case he/she compiles with the term and conditions
mentioned in the proposal, or accepts any consideration,
benefit or service mentioned in the proposal or
expresses his/her consent in any other form.

42
k|:tfjdf k|ToIf ?kdf :jLs[lt ghgfP klg k|:tfljt
JolQmn] k|:tfjdf plNnlvt s'g} zt{ kfngf u/]df
jf k|:tfjdf plNnlvt k|ltkmn, nfe jf ;]jf :jLsf/
u/]df jf cGo s'g} Joxf]/faf6 :jLs[lt hgfPdf
klg k|:tfjdf :jLs[lt k|bfg u/]sf] dflgg]5 .

43
 Rules regarding a valid acceptance

1. Acceptance must be given only by the person to whom the

offer is made.
2. Acceptance should be absolute.
3. Acceptance should be expressed in usual or prescribed
manner.
4. Communication of acceptance by the offeree to the offeror
–
Section 7(2):k|:tfjdf cfˆgf] :jLs[lt hgfO klg k|:tfljt JolQmn] k|:tfjs
;dIf k7fPsf] :jLs[lt k|:tfjsn] kfPdf k|:tfjsf] xsdf / k|:tfjdf k|:tfljt
JolQmn] :jLs[lt lbPsf] s'/f k|:tfjsnfO{ yfxf ePdf k|:tfljt
JolQmsf] xsdf :jLs[lt lbg] sfo{ k"/f ePsf] dflgg]5 .

44
 Cont.
5. Communication must be made by the offeree
or his authorised agent
6. It must be given within a prescribed or
reasonable time.
7. Slience doesnot amount to acceptance.
8. Acceptance must be given before the offer
lapses or before the offer is withdrawn.
9. Acceptance cannot go before an offer.
45
 Condideration
Section 2 (d) of Contract Act, 2056 defines consideration
as “a promise made by the offeree to do or not to do
something in return for the promise made by the offeror
to do or not to do something mentioned in the offer”
k|ltkmn eGgfn] k|:tfjdf plNnlvt sfd u/L lbP jf gu/L lbP afkt
s'g} sfd u/L lbg] jf gu/L lbg] u/L u/]sf] sa'n ;Demg' k5{ .
;
Consideration means, “Quid pro
Quo”(something in return)

CONSIDER
ATION
 Consideration and Nepalese law

1. Section 4 of contract Act; ….the parties are

autonomous to choose consideration, extent of
consideration…..”
kIfx? :jfoQ x'g]M s/f/sf kIfx? k|ltkmn, k|ltkmnsf] dfqf
lgZlrt ug{ :jfoQ x'g] 5g .
i.e; cosideration=0 or ?
2. Section 13 (k): contract having unlawful consideration
is void.
Cont..
3. Supreme court of Nepal in its decision: “………
Transfer of immovable property unilaterally from
one party to another without consideration
cannot be held as within the contract Act 2023”
(Raghunath Parsad Marwadi v. Bishwonath
Marwadi, 2024)
4.Muluki Ain GharBanauneko Mahal sec 8.
“House or shop could be given on rent without
something in return.”
 We can conclude:

• Parties can decide or extent but it have some

value in the eye of law.
• Consideration is essential in Nepal for valid
contract.
Rules Regarding Consideration
1. It must move at the desire or request of the
promisor.
2. It may move from the promisee(the person who
accepts the proposal) or any other party. (Sec 78)
(Only a person who is a party to a contract may demand
the execution of that contract from other party. But, in
case the contract has been signed for the benefit of any
person, such person may demand the execution of that
contract even if he/she is not a party to that contract.)
 bkmf &*, s/f/sf] kl/kfngf u/fpg] clwsf/
kIfnfO{ dfq x'g],

• s/f/df kIf /x]sf] JolQmn] dfq cs|f] kIf ;Fu ;f]

s/f/sf] kl/kfngfsf] dfu ug{ ;S5 . t/ s'g}
JolQmsf] lxtsf] lgldQ s/f/ ul/Psf] ePdf To:tf]
JolQmn] s/f/ kIf geP klg kl/kfngfsf] dfu ug{
;S5 .
 Cont.

3. It may be past, present or future.

4. It neednot be adequate.
5. Consideration must be something of value
• It must be ‘something which is of some value in the eye
of the law.’ It should be real and competent and should
not be unsubstantial. Consideration must not be
• Physically impossible
• Legally impossible
• Uncertain
Exception of Consideration(No consideration,
no contract)
Consideration being one of the essential elements of a valid
contract, the general rule is that “ an agreement made
without consideration is void’ But there are few exceptions
to the rule, They are as follows:
• 1. Agreement made on account of natural love and affection
• An agreement made without consideration is enforceable, if it is
– expressed in writing
– The documents is registered according to that particular law
which is in force.
– made on account of natural love and affection and
– between parties standing in near relation to each other
 Cont.
2. Compensation for voluntary services.
3. Agreement to pay a time barred debt
4. gift
5. Contract of agency
7.In case of Waiver of contractual rights.
 PRIVITY OF CONTRACT
• The general rule of law of contract is that the
parties to a contract must stand in Privity to
one another.
• Privity simply means that both parties must
have a legally recognized interest in the subject
of the contract if they are to be bound by it.
Outsides parties who do not have such an
interest in the subject matter of the contract
may not be bound by it.
 Privity defines as:
• “That connection or relationship which exists
between two or more contracting parties.”
• Black law dictionary: privity of contract
means the relationship between the parties to
a contract allowing them to sue each other
but preventing a third party from doing so.
 s/f/ P]g sf] bkmf &*-!_
• s/f/sf kIf /x]sf] JolQmn] dfq csf]{ kIf;+u s/f/sf]
kl/kfngfsf] dfu ug{ ;Sg]5 .
t/ s'g} JolQmsf] lxtsf] lgldQ s/f/ ul/Psf] ePdf
To:tf] JolQmn] s/f/ kIf geP klg kl/kfngfsf] dfu
ug{ ;Sg]5 .
 Exception of privity of contract
• Beneficiary
• Assignment of rights under a contract
• Agency
• Insurance
• Trust
 Free consent
• People who enter into contract must give their
free consent. The consent of the parties is said
to be free when they are of same mind on all
material terms of contract.
• One of the essentials of a valid contract is that
the parties should enter into the contract with
their free consent.
• If There is any error in consensus ad idem or
meeting of mind of the parties, then there is
no contract.
• Sec 2(c) NCA defines consent as “ consent
given by a person in the same sense in which
the offeror has taken the substance of the
proposal presented by him to the former”
Consent is said to be free when it is not
caused by
– Coercion -s/sfk_
– undue influence -cg'lrt k|efj_
– Fraud -hfn;fh_
– Misrepresentation -ldYofj0f{g jf em'Sofpg'_ and
– mistake -e"n_
 FREE CONSENT
coercion

Undue
mistake
influence

misrepresenta
fraud
tion
 1. Coercion -s/sfk_

Section 14 (1) (a) of Contract Act, 2056 defines coercion

Coercion is said to be there when the consent of a person
has been caused either by :
• Unlawful detaining or threatening to detain any property
• Threatening to harm the person's life
• Threatening to defame the person or
• committing or threatening to commit any act forbidden
by the criminal law of the land
 
 Cont…
• s'g} JolQmnfO{ lghsf] OR5f lj?4 s'g} s/f/
u/fpg] dg;fon] lghsf] ;DklQ /f]Ssf /fv]sf] jf
/fVg wDsL lbPsf] jf lghsf] hLp Hofgsf] jf
Ohhtdf wSsf k'¥ofpg] wDsL lbPsf] jf k|rlnt
sfg"g ljk/Lt cGo s'g} sfd u/]sf] jf ug{ wDsL
lbPsf] eP s/sfk u/]sf] ;Demg' k5{ .
 Consequence of coercion
• When consent to an agreement is caused by coercion, the
contract is voidable at the option of the aggrieved party.
• Aggrieved party can also demand to put him in the same
position(pre contract state)
• Aggrieved party has to file the case within one year from the
date when he/she comes to know about such contract.(sec
89(2)(b).
• A person to whom money has been paid or anything delivered
under voidable contract must repay or return .(sec 84).
• Burden of proof will be upon the party who claims that he/she
had entered into the contract through coercion.
 2.Undue influence -cg'lrt k|efj_

• Undue influence means influence exercised by

a person upon another person who is under
his/her influence and is amenable to his/her
wishes with the intention of deriving some
undue advantage for personal benefit or to
fulfill selfish interest.
 Cont..
cfˆgf] k|efjdf /x]sf] cfkm\gf] OR5fg';f/ sfd
u/fpg ;lsg] JolQmaf6 cfkm\gf] lxt jf :jfy{sf
nflu s'g} cg'lrt nfe p7fpg] dg;fon] To:tf] JolQm
pk/ kf/]sf] k|efjnfO{ cg'lrt k|efj ;Demg' k5{ .
 Elements of undue influence
1. Contract is entered upon against the will of a
person.
2. Position to dominate the will.
3. Person must have use the dominant position.
4. Must have obtained some unfair advantage.
The persons who can be easily brought under undue influence are as follows - Section 14(1)(b)(2)

(i) A person living under his/her guardianship,

protection or custody.
-cfkm\gf] ;+/IfsTj, ;+/If0f jf lhDdfdf /x]sf]
JolQm,_
(ii) a persons who cannot take care of their
interest temporarily or permanently by reason
of old age, sickness or physical or mental
weakness.
 Cont..

-a[4fj:yf, lj/fdL cj:yf jf zf/Ll/s jf dfgl;s b'a{ntfn]

ubf{ s]xL ;do jf ;bfsf nflu cfkm\gf] lxtsf] larf/
ug{ g;Sg] JolQm ._

(iii) A person who can be subjected to under

one‘s economic or ranking influences.
-cfkm'n] cfly{s jf klbo bjfj kfg{ ;lsg] JolQm ._
 A person is deemed to be in a position to dominate the will of another -

1. Where he holds a real or apparent authority

over the other; For e.g. employer –
employee, police – accused
2. Where he stands in a fiduciary relation to
the other; Fiduciary relation means a
relationship of confidence and trust. E.g.
solicitor-client, trustee-beneficiary, medical
attendant – patient, creditor-debtor, landlord-
tenant, principal – agent
 Cont..
3. 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.
 Consequence of undue influence
• When consent to an agreement is caused by undue influence,
the contract is voidable at the option of the aggrieved party.
• Aggrieved party can also demand to put him in the same
position(pre contract state)
• Aggrieved party has to file the case within one year from the
date when he/she comes to know about such contract.(sec
89(2)(b).
• A person to whom money has been paid or anything delivered
under voidable contract must repay or return .(sec 84).
• Burden of proof will be upon the party who charged for
undue influence.
 3. Fraud -hfn;fh_

• Section 14(1)(c). A party to the contract or his agent

shall be deemed to have committed fraud if he
leads the opposite party or his agent to believe, or
takes any action which leads the latter to believe,
that a particular matter is true, although he knows
full well that it is false, or suppresses any
information in his possession, or indulge in any
other fraudulent act punishable under current law,
with the intention of deceiving the opposite party
or his agent.
 Cont..
• s/f/ ug]{ kIf jf lghsf] k|ltlglwn] cs|f] kIf jf
lghsf] k|ltlglwnfO{ wf]sf lbg] lgotaf6 s'g}
s'/f ;To xf]Og eGg] hfgsf/L x‘F'bf xF'b} ;f]
s'/f ;To xf] egL ljZjf; lbnfPsf] jf ljZjf; kg{
;Sg] s'g} sfd sf/jfxL u/]sf] jf s'g} tYosf af/]df
hfgsf/L x‘F'bf xF'b} ;f] tYo hfgL hfgL n'sfPsf]
jf k|rlnt sfg"g adf]lhd hfn;fh x'g] cGo s'g} sfd
u/]sf] eP hfn;fh u/]sf] ;Demg' k5{ .
 Can silence be Fraudulent ?
A. Mere silence is not fraud. -df}gtf dfq hfn;fh
xf]Og_
B. Some time silence amount to fraud.
a. when there is duty to speak.(insurance)
b. contract based on fiduciary relationship.
c. Only half truth is spoken
d. silence is ,in itself equivalent to speech.
 Consequence of fraud
• When consent to an agreement is caused by undue influence, the
contract is voidable at the option of the aggrieved party.
• Aggrieved party can also demand to put him in the same
position(pre contract state)
• Aggrieved party has to file the case within one year from the date
when he/she comes to know about such contract.(sec 89(2)(b).
• A person to whom money has been paid or anything delivered
under voidable contract must repay or return .(sec 84).
• Burden of proof will be upon the party who claim that he or she
entered into the contract through fraud.
 4.Misrepresentation -ldYofj0f{g jf
em'Sofpg'_
 Misrepresentation is induced when one of the
parties to a contract made a wrong statement
about some material element of the contract
and, because of this statement, the other
party entered into contract.
 A representation when wrongly made become
person makes a Misrepresentation .
 Sec 14(1)(d) of NCA
• NCA does not give clear meaning of
misrepresentation but it mentions that
following act shall be taken as
misrepresentation;
a. Submission of a false particular on any matter
without a reasonable basis for doing so,
-dgfl;a dflkmssf] cfwf/ a]u/ s'g} s'/fsf] em'§f
ljj/0f lbPsf]_
 Cont..
b.Misleading any party so as to aggrieve him .
-s'g} kIfnfO{ dsf{ kg]{ u/L axsfPsf]]_
c. Causing any mistake or error in respect to the
particulars of the contract.
-s/f/sf]] ljifo j:t' df uNtL u/fPsf]_
 Requirements of Misrepresentation

1. It must be a representation of a material fact.

Mere expression of opinion does not amount to
misrepresentation.
2. It must be made before the conclusion of the
contract with a view to inducing the other party
to enter into the contract.
3. It must Actually have been acted
4. It must be wrong but the person who made it
honestly believed it to be true.
 Cont..
5. A wrong statement to become
misrepresentation need not be directly made
to the plaintiff. It is enough if it is made to
third person in a manner that the plaintiff will
become aware of it.(Babul V. R.A Singh)
Consequence of Misrepresentation
• The effects of misrepresentation are that the aggrieved party has
two alternatives courses open to him:
a.Avoid the agreement treating the contract as voidable
b. Insists that the contract be performed and that he be put in the
position in which he would have been if the representation made
had been true.
• Aggrieved party has to file the case within one year from the date
when he/she comes to know about such contract.(sec 89(2)(b).
• A person to whom money has been paid or anything delivered
under voidable contract must repay or return .(sec 84).
• Burden of proof will be upon the party who claim that he or she
entered into the contract through Misrepresentation.
 5. Mistake
• In Nepal nothing is clearly mention regarding
the mistake.
• There is something mentioned under (sec
14(1)(d)(c) of NCA)as part of
misrepresentation .
• Mistake defined as an erroneous belief about
something
 Kinds of mistake
A. Mistake of law.
B. Mistake of fact.
 A . Mistake of law
Mistake of law may be:
1.Mistake of law of the country
2. Mistake of law of the foreign country
 B. Mistake of fact
a. Bilateral mistake
b. Unilateral mistake
 Bilateral mistake

• Common mistake as to the existence of the

subject matter
• Common mistake as to a fact fundamental to
the contract.
• Common mistake as to the identify of the
subject matter
 Unilateral mistake

• Mistake as to the identify of the person

contracted.
Contingent contract -;+fof]lus s/f/_
 Contingent means that which is dependent on
something else.
 Contingent contract is a sort of a conditional
contract and the condition is of uncertain
nature.
 A contract which is subject to a certain or an
absolute type of condition can not be
regarded as a contingent contract.
 Cont….
 When the condition is of uncertain nature,
then only the contract can be regarded as
truly contingent.
 Features of a contingent contract
• It must be a contract .
• Contract must be dependent upon uncertain
event in future.
• Event must be possible but of uncertain nature.
• Event must be collateral(connected with
something else) to the subject matter of the
contract
• Event must not depended upon the will of the
promiser.
Sec 12(1) to (5) of NCA, 2056, describe the
following rules regarding contingent contract
1. Happing of an uncertain future event.
2. Non happing of an uncertain future event.
3. Happening of an uncertain event within
specified time.
4. Non happening of an uncertain event within
specified time.
5. Agreement contingent on impossible event is
void.
 Contractual Capacity
• Every person must be competent to enter into
contract.
• Section 3 (1) (a) (b), (2), (3) and (4) of Contract
Act of Nepal deals with the capacity to
contract. It has clearly provided that the
persons who have completed 16 years of age,
who are of sound mind and who are not
disqualified by the existing laws of Nepal are
only eligible to enter into contract.
bkmf #, s/f/ ug{ of]Uo JolQmM -!_ b]xfosf
JolQm afx]s c? h'g;'s} JolQm s/f/ of]Uo x'g]5M
• s_ ;f]x| jif{ pd]/ k"/f gePsf]
• v_ xf]; 7]ufgdf gePsf]
-@_ pkbkmf -!_df h'g;'s} s'/f n]lvPsf] ePtfklg k|
rlnt sfg"g adf]lhd s'g} vf; s/f/ ug{ cof]Uo
JolQm s/f/ ug{ cof]Uo ePsf] dflgg]5 .
 Cont…
• It means that the following three categories
of persons are not competent to contract:
• A person who has not attained the age of
majority , i.e. one who is a minor
• A person who is of unsound mind
• A person who has been disqualified from
contracting by some law.
 Cont..
• At the same time section 3 (3) also provides
that guardians can execute an agreement on
behalf of a minor or person of unsound mind
so as to protect the interest of these persons.
• -pkbkmf -!_ adf]lhd s/f/ ug{ cof]Uo JolQmsf
tkm{af6 lghsf] lxtsf] nflu lghsf] ;+/Ifsn] s/f/
ug{ ;Sg]5 .
 Rules Regarding Minor’s Agreement

1. An agreement with a minor is void.

• their mental faculty is not mature .
• they do not possess the capacity to judge
what is good and what is bad for them.
• where a minor is charged with obligations
and the other contracting party seeks to
enforce those obligations against minor, the
agreement is deemed as void ab-initio.
 Cont…
2. Minors can be beneficiary.
• any agreement which is of some benefit to the
minor and under which he is required to bear no
obligation is valid.
3. His Agreement cannot be ratified by him on
attaining the age of majority.
• It cannot be ratified by the minor on attaining the
age of majority, for an agreement void ab-initio
cannot be made valid by subsequent ratification.
 Cont…..
4. The rules of estoppels doesnot apply to a minor.
5. Minor's liabilities for necessaries
• Section 11 (a) of Contract Act 2056 has a provision for
minor's liabilities for necessaries. It says that if a person
incapable of entering into a contract or any one whom
he is legally bound to support is supplied by another
person with necessaries suited to his social conditions in
life like articles of daily needs or services, the person
who has furnished such supplies is entitled to be
reimbursed from the property of such incapable person.
 Cont…
• o; P]g jf cGo k|rlnt sfg"g adf]lhd s/f/
ug{ cof]Uo JolQmnfO{ jf To:tf JolQmn] kfng
kf]if0f ug'{ kg]{ s'g} JolQmnfO{ lghsf] ;fdflhs
x}l;ot ;'xfpFbf] s'g} lrh j:t' jf ;]jfsf]] cfjZostf
k"/f ul/ lbPsf]df ;f] k'/f ul/lbg]
JolQmnfO{ lghn] lbPsf] rLh j:t' jf ;]jfsf]] d"No
To:tf] c;dy{ JolQmsf] ;DklQaf6 e/fO{ lbg] .
• (Nahs V Inman)
 Cont….
6. No specific performance
• Specific performance means the actual carrying out of the
contract as agreed. Since an agreement by a minor is
absolutely void, the court will never direct specific
performance of such an agreement by him.
• But a contract entered into on behalf of a minor by his
guardian or by the manger of his estate is binding on the
minor and can be specifically enforced by or against the
minor, provided: (a) contract is within the authority of the
guardian or manager and (b) it is for the benefit of the
minor.
 Cont…
7. Minor can be agent
• A minor can be an agent. He shall bind the
principal by his acts done in the course of such an
agency, but he cannot be held personally liable for
negligence or breach of duty.
8.Minor cannot be declared insolvent
9. Minor can be made partner
10. Minor shareholder
 
 Persons of Unsound Mind

• In Contract Act of Nepal, there is no definition of

unsound mind and there is no provision, which states
under what circumstances a person is said to be of
unsound mind.
• But in the Indian Contract Act, sound mind has been
defined as follows:
 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 judgment as to its effects upon his interests.
 It also provides that

• A person is said to be of unsound mind for the purpose

of making a contract if at the time when he makes it,
he is incapable of understanding it and of forming a
rational judgment as to its effect upon his interests.
• A person who is usually of unsound mind but
occasionally of sound mind may make a contract when
he is of sound mind.
• A person, who is usually of sound mind but
occasionally of unsound mind, may not make a
contract when he is of unsound mind.
 Cont..
• Therefore, it is obvious that soundness of mind of
person depends on two facts:
a.His capacity to understand the terms of the
contract, and
b. His inability to form a rational judgment as to its
effect upon his interests.

• Idiots, lunatics and drunken persons are

examples of those having an unsound mind.
 Disqualified person
• In Contract Act of Nepal, it is not mentioned
who constitute disqualified persons in the
eyes of law.
• Disqualified Persons
1.Alien enemies
2.Foreign sovereigns and ambassadors
3.Convict
4. Insolvents
 Performance of contract
• Performance of contract means “fulfillment of
obligation” created under a contract by the
contracting parties.
• If contracting one party is failure to perform
than other party have following rights;
a. To ask for actual performance.
b. To claim compensation for damages
c. To rescind the contract.
 Sec.74 of NCA 2056
“Each party to a contract shall fulfill their
obligation under contract”
Section 71 of NCA 2056, focused on methods of
performance
1.RULES REGARDING PERFORMANCE OF
CONTRACT

Section 71,72,74,76, 77,78

 1.1Time and procedure of performance of
contract
a. In the case contract specifies the schedule time or
procedure of executing the contract, it shall be
executed according to such schedule and procedure.
b. In case no time or procedure of performing the work
mentioned in the contract has been specified,
whereas, in case the work can be performed only at
any specific time or according to any specific
procedure, the contract shall be deemed to have
been concluded so as to perform the work at that
time and according to that procedure.
 Cont…
c. Except in the circumstances mentioned in
Sub-section (2), in case the time and
procedure of performing the contract has not
been mentioned in the contract, the contract
shall be performed within a reasonable time
by adapting a reasonable procedure.
 1.2 Place for performance
Sec 72, NCA 2056, mentions about place of
performance
1. At the specific place: In case any specific
place has been specified in the contract for
performing the work, the work shall be
performed at the same place.
2. At the place where the goods are stored:
 Cont..
In case any party has to hand over or deliver
goods to the other party under the contract,
and the place where those goods are to be
handed over or delivered has not been
specified in the contract, the contract shall be
deemed to have been concluded with a
provision to and over or deliver the goods at
the place where those goods are stored.
 3. At the particular place:
In case the specific place where the work mentioned
in the contract has to be performed, has not been
specified in the contract, and where as that work
can be performed only in a specific place, or in
case the work needs to be performed in any
specific place due to the general practice and
custom or the nature of the work, the contract
shall be deemed to have been concluded with a
provision to perform at work at place.
4. At the reasonable and appropriate place

In circumstances other than those mentioned in

Sub-sections(2) and (3), in case the place for
performing the work prescribed in the
contract is not mentioned in the contract, the
party performing the work according to the
contract shall inform the other party to specify
a reasonable place for performing the work,
and the other party shall specify a reasonable
place to perform the work.
 1.3 person to perform or execute the
contract
Sec 74 of NCA; “Each party to a contract shall
fulfill their obligation under contract”
Section 77 of NCA mentioned about the person
who are bound to perform the contract as
follows;
 Cont..
a. Promisor himself: Except when the person
concludingcontract is under the obligation to
execute the contract, he/she may have it
executed by his agent or a person appointed by
him/her or any other person on his/her behalf.

Provided that, no party to a contract may transfer

the obligations under the contract to any other
person without the consent of the other party.
 Cont..
b. By third person: Except when otherwise provided for
in the contract, once a party accepts a work done by a
third person, he/her may not later claim that the
work has to be done by the party signing the contract.
c. Joint promisor: In case two or more person have
jointly signed a contract with any other party, any of
the persons jointly signing the contract shall fulfill or
cause to do so for the fulfillment of the obligation
under the contract, except when otherwise provided
for in the contract.
 Cont..
• d. By legal heirs (sec 76): In case party to a
contract dies or loses his/her senses, the
rights accruing from the contract shall devolve
on the heir to his/her property, and the heir
shall also bear liability to the extent covered
by the property received by him/her. Provided
that, the rights and liabilities accruing on the
basis of personal skills and qualification shall
not devolve on such heir.
 Persons to demand performance
a. Contracting party sec 78(1):Only a person
who is a party to a contract may demand the
execution of that contract from other party.
Provided that, in case the contract has been
signed for the benefit of any person, such
person may demand the execution of that
contract even if he/she is not a party to that
contract.
 Cont..
b. Legal heirs (sec 76).
c. Third person (proviso ofsec78(1))
Contract which need not be performed
• Sec 73 of contract Act mentions that on the following
circumstance the contract neednot be performed.
(a) In case one party to the contract absolves the other
party from fulfilling the obligations according to the
contract;
(b) In case a voidable contract is made void by the
party concerned;
(c) In case one can not execute the contract due to its
violation by the other party;
 Cont..
(d) In case it becomes unnecessary to perform
the work mentioned in the contract under any
provision of this Act;
(d) In case it becomes unnecessary to comply
with the contract under Section 79.
 TERMINATION OF CONTRACT
• When the obligation and rights created by a
contract come to an end, there is the
termination of contract.
• The contract can be terminated when
contracting parties become free from their
task or legal obligations arising from a
contract.
 Modes of Termination
A. BY PERFORMANCE:
B. BY MUTUAL AGREEMENT
C. BY IMPOSSIBILITY
D. BY LAPSE OF TIME
E. BY OPERATION OF LAW
F. BY BREACH OF CONTRACT
 A. Discharge by Performance
• Discharged by performance takes place when the
parties to the contract fulfill their obligation arising
under the contract within the time and in the
manner prescribed.
• Whenever both of the parties fulfill every things,
which they have agreed, then there will be nothing
left for performance.
• If only one party perform the promise, he alone is
discharged. Such a party gets a rights of action
against the other party who is guilty of breach.
 Performance may be:
a. Actual performance
b. Substantial performance
c. Partial performance
d. Attempted performance or tender:
Section 80 of Contract Act 2056 provides that both
the parties to the contract must facilitate each
other for the performance of the contract. In case if
any party fails to perform such contract due to
failure of other party to facilitate the other party,
then the first party shall not be liable for any kind of
consequence that may arise later on.
Essentials of a valid tender are as follows
• It must be unconditional
• It must be made at a proper place time and place
• It must be made for the whole obligation
contracted and not part
• Reasonable opportunity to the promisee for
inspection of goods
• It must be made by a proper person who is in a
position and is willing to perform the promise
 B. BY MUTUAL AGREEMENT
OR CONSENT

 If the parties to a contract agree to substitute any contract for

it or to rescind it or alter it, the original contract is discharged.
• SEC 80(1) of NCA, In case the parties to a contract agree, all
or any of the portions of the work to be performed under the
contract may be changed or amended, the time-limit for
performing any work under the contract extended, the
contract suspended by not making it obligatory to perform
any work to be performed under the contract for some time,
the work mentioned in the contract may be replaced by
another work, or a new contract may be signed as a
replacement of the original contract.
 CONT..
• Similarly Sec. 80(2) In case any change or
amendment is made in the contract under Sub
section (1), a new contract shall be deemed to
have been signed,and the contract shall
become effective accordingly. In case a new
contract is signed in this manner, liability
under the initial contract need not be borne
except when otherwise provided for in the
contract.
 Cont…
Following are the ways of discharge by agree
ment or consent:
I. Novation: Novation occurs when a new contract is
substituted for an existing contract, either between
the same parties or between different parties.
II. Alternation: Alternation of a contract may take place
when one or more of terms of the contract are
altered by the mutual consent of the parties to the
contract. In sucha case, the old contract is
discharged.
 Cont…..

III. Rescission (Repealing): A contract may be rescinded(repealed) by

agreement between the parties at any time before it is discharged by
performance.
IV. Remission(Accord and Satisfaction): Remission is the acceptance of a lesser
sum than what was contracted for or a lesser fulfillment of the promise
made. Every promise may dispense with or remit, wholly or in part, the
performance of the promise made to him or may extend the time for such
performance or may accept instead of it any satisfaction which he thinks fit.
• A owes B 5,000 rupees, C pays to B 1,000 rupees and B accepts them in
satisfaction of his claim on A. This payment is a discharge of the whole claim.
• Between A and B, if A accepts the extension of the due date for the payment
of the amount due to A by B for three months, then the promise is binding.
He cannot institute a suit.
 Cont…
V. Waiver:Waiver means the deliberate
abandonment or giving up of a right, which a
party is entitled to under a contract,
whereupon the other party to the contract is
released from his obligation
 For e.g. A promises to paint a picture for B. B
afterwards forbids him to do so. A is no longer
bound to perform the promise.
 Cont…
VI. Merger: Merger means coming of two rights
in the same place. When a superior rights and
an inferior rights coincide and meet in one
and the same person, the inferior rights
vanishes into the superior rights. This is known
as merger.
 C. BY LAPS OF TIME
 If the parties have agreed upon a contract for
the fixed period, then the contract is
discharged after expiry of such stipulated time
(it does not matter whether the work is
completed or not)
 D. BY OPERATION OF LAW
 A contract terminates by operation of law in the following cases:
• Death:Death of a promisor results in termination of the contract
in cases involving personal skill and ability. In other contracts the
rights and liabilities of the deceased person pass on to the legal
representatives of the dead man.
• Insolvency
• Merger:Where an inferior right contract merges into a superior
right contract, the former stands discharged automatically.
• Unauthorized material alteration: A material alteration made
in a written document or contract by one party without the
consent of the other will make the whole contract void.
 E. By BREACH
Breach of contract means 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 or by his own act makes it
impossible to perform his obligation under it.
 Cont…
Sec 82(1) In case any party to a contract does
not meet liability under the contract, or gives
a notice to the other party that he/she will not
perform the work to be performed under the
contract, or in case his/her action or conduct
shows that he/she is incapable of performing
the work under the contract, he shall be
deemed to have breached the contract.
 Cont..
Breach of contract may be of two kinds:
1. Anticipatory breach: Anticipatory breach of contract
occurs when a party repudiates it before the time fixed
for performance has arrived or when a party by his
own act disables himself from performing the contract.
There are two ways in which it can take place.
a. Expressly by words spoken or written:A party may
communicate to the other party by words or writing
his intention not to perform it before the due date of
performance.
 Cont..
b. Impliedly by the conduct of one of the parties:Party may by his
voluntary act also disables himself from performing the contract. The
effects of this breach is that the promisee or other party may either
(a) rescind the contract and at once sue for damages without waiting until
the due date of performance or
(b) he may elect not to rescind but to treat the contract operative and wait
for the time of performance and then hold the other party liable for the
consequence of non-performance. In the latter case the party who has
repudiated may still perform if he can and can also take advantage of any
supervening impossibility which may have the effect of discharging the
contract. The aggrieved party shall lose the right to sue for damages.
 
 Cont…
2.Actual Breach: Actual breach may also
discharge a contract. It occurs when a party
fails to perform his obligation upon the date
fixed for performance by the contract or
during the performance of the contract.
 F. BY IMPOSSIBILITY
(Frustration)
If the performance of a contract is impossible
the same is void. Impossibility in a contract
may be either inherent in the transaction or it
may be introduced later by the change of
certain circumstances material to the contract.
• There are two kinds of impossibility:
 Cont..
1. Firstly, impossibility existing at the time of the making
of the contract.
• There is no question of discharge of a contract which is
entered into to perform something that is obviously
impossible, e.g. an agreement to discover treasure by
magic, because, in such a case there is no contract to
terminate it being an agreement void abinitio. Similarly,
an agreement to bring a dead person to life is also void. It
means not only physically impossibility, but also legal
impossibility like contracts with unlawful objects or
consideration.
 Cont…
2. Secondly, subsequent impossibility
• In this case, a contract, which is possible of
performance and lawful when, made, but the
same becomes impossible or unlawful
thereafter due to some supervening event
becomes void.
• E.g. A and B contract to marry each other.
Before the time fixed for the marriage, A goes
mad. The contract becomes void.
 Cont..
this subsequent impossibility is referred to as
‘Doctrine of Frustration’. It is also called
'Doctrine of Supervening or Subsequent
Impossibility'
 Cont…
Section 79 (1), (2) and (3) of the Contract Act 2056 has
provisions regarding doctrine of subsequent
impossibility.
• 1. Subsequent illegality - Section 79 (2) (a)
A subsequent change in law may render the contract
illegal and in such cases the contract is deemed
discharged. The law may actually forbid the doing of some
act undertaken in the contract or it may take from the
control of the promisor something in respect of which he
has contracted to act or not to act in a certain way.
 C0nt…
2.Natural Calamities – Section 79 (2) (b)
When it becomes impossible to perform a contract
because of the situations beyond the control of human
beings like war, flood, landslides, earthquake, volcanoes
etc.
 
3. Destruction of subject matter - Section 79 (2) (c)
When the subject matter of contract subsequent to its
formation is destroyed without the fault of the
promisor or promisee the contract is discharged.
 Cont..
4. By the death or disablement of the parties - Section 79 (2) (d)
• Where the performance of a contract depends upon the
personal skill, capacity or expertise, the contract is discharged
on the ground of physical and mental incapacity, mental
unsoundness or the death of that person and the
representative cannot be made liable to perform such a
contract.
 Failure of ultimate purpose
• Where the ultimate purpose for which the contract was
entered into fails, the contract is discharged, although there is
no destruction of any property affected by the contract and
the performance of the contract remains possible in literal
sense.
 Doctrine of supervening impossibility
There are certain cases where the impossibility of performance cannot be an
excuse are as follows:
1. Difficulty of performance - Section 79 (3) (a)
• The mere fact that performance is more difficult or expensive or less
profitable than the parties anticipated does not discharge the duty of
performance.
2. Commercial impossibility - Section 79 (3) (b)
When in a transaction profits dwindle to a very low level or actual loss
becomes certain it is said that the performance of the contract has become
commercially impossible. This kind of commercial impossibility also does not
discharge a contract. Merely because the procurement of the goods becomes
difficult due to strike in the mill or there is rise in prices or a person will not
be able to earn the expected amount of profits, it is not enough to frustrate
the contract.
3. Dependence on the third party - Section 79 (3) (c): If a
promisor to a contract depends on any third party who is not
a party to the contract for the performance of the same and if
that third party makes a mistake or becomes incapable of
fulfilling his obligation because of which the promisor fails to
perform the contract, then in such case the promisor is not
excused from the duty of performance.
4. Strikes, lockouts and civil disturbances - Section 79 (3) (d):
Events like these also do not terminate contracts unless there
is clause in the contract to that effect. A strike by the workers
or a lock out by the employer also does not excuse
performance because the former is manageable and the latter
is self-induced.
 Cont..
5. Tax, fees or any other taxable revenues -
Section 79 (3) (e): Liability to pay additional
taxes, revenues or fees shall not be made an
excuse for the impossibility of the performance
of the contract.
6. Failure of on the objects - Section 79 (3) (e):If
the contract is made for several purposes, the
failure of one of them does not terminate the
contract.
 Remedies for Breach of Contract
When a party performing a contract does not
perform according to the agreed terms and
conditions or within the set period, then the
party is in breach of the contract. When a
contract is broken, the injured party may have
several courses of action open to him. These
are;
 Cont..
1. To refuse further performance of contract;
2. To sue on a quantum meruit;
3. To sue for specific performance
4. To sue for an injunction;
5. To bring an action for damages
1. To refuse further performance of contract

• Sec 82(2) of NCA: In case a party has broken

the contract in case his/her action or conduct
shows that he/she has not basically compiled
with the contract, the other party shall not be
compelled to perform the contract, and may
cancel the contract by furnishing a notice
thereof to the other party.
 2. To sue on a quantum meruit;
(sec 11(c) and 85)

The phrase “quantum meruit” literally means as

much as earned. Where there is breach of
contract, the injured party, instead of suing for
damages, may claim payment for what he has
done under the contract.
• Sec 11(c); In case any person gives anything to
another person, or employs him/her in any
work, to pay the appropriate cost or
remuneration.
 Cont..
• Sec 85; The aggrieved party may claim payment in proportion
to the work performed or the amount paid by him/her in cash
or in kind in any of the following circumstances;
(a) In case the contract is terminated due to the mistake of the
other party at a time when he/she has already completed the
work to be performed under the contract or was performing
it;
(b) In case the other party utilizes any service or commodity that
has been given to him/her without the clear intention of
giving it free of cost.
 3. To sue for specific performance

Specific performance means the actual carrying out of the

contract as agreed. Under certain circumstances an
aggrieved party may file a suit for specific performance .
Sec 86; In case the cash compensation paid in
consideration of the actual loss or damage suffered by
the aggrieved party as a result of breach of contract is
not reasonable or adequate, the aggrieved party may
demand the execution of the contract as stipulated
specific performance instead of making a claim for
compensation.
 Cont…
But no claims for execution of the contract as
stipulated specific performance shall be heard
in any of the following circumstances;
(a) In case the amount paid in cash as
compensation for breach of contract is
adequate;
(b) In case the court can not supervise whether or
not the work to be performed under the
contract has been actually performed
 Cont…
(c)In case the contract has been signed for
providing services relating to personal
expertise, skill or knowledge;
(d) In case the situation is -such that the
contract can not be executed as stipulated;
(e) In case the party violating the contract
him/herself demands that the contract be
executed as stipulated.
 4. To sue for an injunction;

In case it becomes impossible to execute the

contract because any party about to take any
action or behave in a manner contrary to the
nature of the contract, the party aggrieved by
such action or conduct may file a complaint
with the Appellate Court to stay such action or
conduct.
 5. To bring an action for damages

Damages are a monetary compensation allowed

to the injured party by court for the loss or
injury suffered by him by the breach of a
contract. The fundamental principle
underlying damages is not punishment but
compensation. By awarding damages the
court aims to put the injured party into the
position in which he would have been, had
there been performance and not breach.
 Cont..
. Compensation must be commensurate with
the injury or loss sustained arising naturally
from such breach. If actual loss is not proved,
no damages will be awarded. Such
compensation is not to be given for any
remote and indirect loss or damage sustained
by reason of the breach.
 Cont..
An Injured party have right to claim for
compensation from the breacher party. sec
83(1)(2)and (3):
1. Compensation of actual loss:
2. Compensation of an amount equal to that
mentioned in the contract:
3. Compensation if not mentioned in the
contract: