Business Law-FYBMS

SEM - I
 
INDIAN CONTRACT ACT, 1872
•Ms. Rachana K. Chawda

Qualification :
• M.com (Accountancy) ,
• M.Phil (Commerce),
• MBA (Financial Management),
• Post Graduate Diploma in Business Operations ,
• UGC-NET,
• LLB,
• LLM (Business Law),
• Certificate and Diploma in French

Designation : Academic coordinator/ Assistant Professor

Extra curricular Activities : Trekking, Astrology, Reiki, Pranic Healing, NLP,

Cognitive Behavior Therapy
UNITS 1 Contract Act, 1872 & Sale of Goods Act, 1930
• Contract Act,1872: Essential elements of Contract; Agreement
and Contract – Capacity to Contract, free consent, consideration,
lawful objects/ consideration, Breach of contract. Remedies for
breach of Contract.
• Sale of Goods Act,1930: Scope of Act, Sale and Agreement to
sell, essential of a valid Sale Contract – Conditions and warranties
– Implied Condition and warranties, Rights of an unpaid seller.
UNITS 2 Negotiable Instrument Act, 1981 & Consumer
Protection Act, 1986
• Negotiable Instrument Act,1981: Introduction of Negotiable
Instruments – Characteristics of negotiable instruments,
Promissory note, Bills of exchange, Cheque, Dishonour of Cheque
• Consumer Protection Act, 1986: Objects of Consumer
Protection- Introduction of Consumers, who is consumer?
Meaning of the words “Goods and services” – Meaning of the
words “Defects and Deficiencies of goods and services” Consumer
disputes and Complaints.
UNITS 3 Company Law
• Company Law: What is company
– Incorporation of company – MOA, AOA,
Prospectus, Meetings, Meaning of transfer
and transmission of shares.
UNITS 4 Intellectual Property Rights(IPR)
• Intellectual Property Rights (IPR)  IPR
definition/ objectives  Patent definition.
What is patentable? What is not
patentable? Invention And its Attributes,
Inventors and Applications  Trademarks,
definition, types of trademarks,
infringement and passing off.  Copy right
definition and subject in which copy right
exists, Originality, Meaning and Content,
Authors and Owners, Rights and
Restrictions.  Geographical indications
(only short notes)
• There are 25 high courts in India.
•  High Courts are the top judicial
bodies in the states controlled and
managed by Chief Justices of States.

Judges of the High Court

and Supreme Court are appointed
by the President of India on the
recommendation of a collegium.
1. Supreme Court: It is the Apex court of the
country and was constituted on 28th January
1950. It is the highest court of appeal and enjoys
both original suits and appeals of High Court
judgments. The Supreme Court is comprised of
the Chief Justice of India and 25 other judges.
Articles 124-147 of the Constitution of India lay
down the authority of the Supreme Court.
The Supreme Court of India, also known as
the Apex Court, is the top court and the
last appellate court in India, and the Chief
Justice of India is its top authority

2. High Courts: High Courts are the highest

judicial body at the State level. Article 214 lays
down the authority of High Courts. There are 25
High Courts in India. High Courts exercise civil or
criminal jurisdiction only if the subordinate
courts in the State are not competent to try the
matters. High Courts may even take appeals from
lower courts. High Court judges are appointed by
the President of India upon consultation with the
Chief Justice of India, the Chief Justice of the High
Court and the Governor of the State.
 Hierarchy of courts
3. District Courts: District Courts are established by the State Governments of India for every district or group of districts based on
the caseload and population density. District Courts are under the direct administration of High Courts and are bound by High Court
judgments.

• The subordinate court system is further classified into two:

• the civil court of which a Sub-Judge is the head followed by the munsif court at the lower level, and
• the criminal court headed by Chief Judicial/Metropolitan Magistrate at top and followed by ACJM /ACMM & JM/MM at the lower
level.

a. Civil Courts
b. Criminal Courts
District Courts are presided over by District Judges. Additional District Judges and Assistant District Judges may be appointed based
on the caseload. Appeals against District Court judgments lie in the High Court.
4. Lok Adalats/Village Courts: these are subordinate courts at the village level which provide a system for alternate dispute
resolution in villages.
5. Tribunals: the Constitution provides the government with the power to set up special Tribunals for the administration of specific
matters such as tax cases, land cases, consumer cases etc.
Appellate jurisdiction refers to the authority of a court to rehear/review a case decided by a lower court. In India, appellate
jurisdiction is vested in both the Supreme Court and High Courts. They may either overrule or uphold the judgments of lower courts.
Civil Courts
Civil courts provide remedies for civil wrongs committed by individuals against other individuals and entities. Civil matters
range from property disputes to breaches of contract to divorce cases. Civil courts follow the principle of ubi jus ibi remedium
(for every wrong the law provides remedy). Unless expressly or impliedly barred by any other law in force, civil courts have the
jurisdiction to try all suits of civil nature.
The Code of Civil Procedure (CPC) 1908 governs the procedures to be followed by civil courts in administering civil cases in
India.
As a matter of fact, every suit must be instituted before the court of lowest jurisdiction (the Munsif court). Upon institution, it is
decided whether the respective court has competence to try the case.
The Civil Court hierarchy in districts is as follows:
1. District Court: The court of district judges is the highest civil court in a district. It exercises both judicial and administrative
functions. The District Judge combines the powers of trying both civil and criminal cases. Hence, they are designated the
District and Sessions Judge.
2. Sub-judge Court: if the value of the subject-matter of the suit is worth more than Rs. 1 lakh, the Sub-judge and Additional
Sub-judge courts may try the suit.
3. Additional Sub-judge Court: this is created based on the case-load.
4. Munsif Court: if the value of the subject-matter of the suit is worth Rs. 1 lakh or below, the Munsif court is competent to try
the suit.
5. Courts of small causes for metropolitan cities -The Presidency Small Cause Courts Act, 1882 empowers the State
Government to establish a Court of small causes anywhere in the state. These Courts have the authority to decide civil cases
with a small value.
Criminal Courts
The power of the various criminal courts is mentioned under the Code of Criminal Procedure (CrPC).
According to Section 26 of the CrPC, any offence mentioned under the Indian Penal Code may be tried
by:
High Courts
Courts of Session
Any other Court as specified in the First Schedule of the Code of Criminal Procedure

• Sessions Court-The Sessions Judge is the presiding officer of the Sessions Court and he is appointed by the High
Court of the state where the Sessions Court is located. A Sessions Court mainly deals with cases involving theft,
murder, dacoity, etc. Sessions Court can pass a judgement providing the death sentence to any accused found
guilty by the Court. The Court can also impose fines on any person for a criminal offence committed by him. The
Sessions Court is the lowest court of the appeal of the criminal cases in the hierarchy of criminal courts
• Subordinate Judge Class I-the Chief Judicial Magistrate is subordinate to the Chief Judicial Magistrate and is
therefore under the control of the Sessions judge. judicial magistrate of the first class can impose a fine of value
not more than ten thousand rupees and can pass a sentence of imprisonment of not more than three years.
• Subordinate Judge Class II -A Judicial Magistrate of second-class, under Section 29(3) of the Code of Criminal
Procedure can impose a fine of not more than five thousand rupees or can pass a sentence of imprisonment of
not more than one year
 Binding value of Judicial Precedents
• Since India is a common law country, previously decided judgments of higher courts such as the
Supreme Court and High Courts are binding on subordinate and lower courts, i.e., subordinate
courts are bound to follow the decisions and hold them to be the law. Precedents are an important
source of law in India. The binding value of different courts in the court hierarchy is as follows:
1.Decisions of the Supreme Court are binding on all courts in India. The Supreme Court is not bound
by decisions of High Courts, lower courts or other judicial authorities.
2.Decisions of a High Court are binding on all inferior courts (as long as they don’t conflict with
Supreme Court decisions) within its jurisdiction but holds only persuasive value for courts outside
its jurisdiction. In case the decisions of the High Court conflict with the decisions of a similar bench,
the matter is referred to a higher bench.
3.Lower courts are bound by decisions of higher courts in their own states. Decisions by High Courts
of other states hold only persuasive value
• The Ministry of Law & Justice at the Union level
is responsible for raising issues
before parliament for the proper functioning of
the judiciary.
• The Ministry of Law & Justice has complete
jurisdiction to deal with the issues of any courts
Step 1
of India, from SC to Subordinate and Executive
Courts.
• It also deals with the appointment of Judges of
the High Courts and the Supreme Court. At the
state level, the law departments of the states
deal with the issues of the High Court and the
Subordinate Courts.
Step 2
• The first requirement to become a
JUDGE in India is to possess an LL.B
degree (3 yrs after Graduation or 5
Years after 12th Std) from any
University/College recognized by
the Bar Council of India.
• graduate has to compete for the
State Judicial Services Examination.
held by respective State
Governments.
• The examination consists of three
stages – Preliminary, Mains, and
Viva-Voice.
In India
Lawyer
A lawyer is someone who has completed legal education or graduate in law. A lawyer CANNOT
represent in the court proceedings. A Lawyer is somebody who has been trained in the law he may be
legal adviser, consultant, academician, in-house legal counsel or in a corporate firm and he may draft
documents such as contracts, deeds or wills, etc.

Advocates
Those lawyers who qualified Bar Council exam as per the Advocates Act, 1961 to practice before Indian
Courts are advocates. The role of an Advocate, in contrast, is limited to representing his/her client
before court. He is a person who publicly supports or recommends a particular cause or policy. He can
put a case on someone else's behalf. He is a professional pleader in a court of justice.

As per the definitions of in Advocates Act 1961 -

2(a) “advocate” means an advocate entered in any roll under the provisions of this Act;
2(i) “Legal practitioner” means an advocate or vakil or any High Court, a pleader, mukhtar or revenue
agent;
Thus the act also clarifies that a person registered with a State Bar Council on completion of his law
degree is known as Advocate.
Advocate on Record
• Advocate on Record is an advocate who is entitled under the Order IV of the Supreme Court Rules, 2013 (previously
Order IV of the Supreme Court of India Rules, 1966), framed under Article 145 of the Constitution, to act as well as
to plead for a party in the Supreme Court of India.
• As per the Rules, no advocate other than an advocate on record shall be entitled to file an appearance or act for a
party in the Supreme Court of India.
• The advocate has to practice for 4 years as an advocate and thereafter has to intimate to the Supreme Court that he
or she has started taking training with a Senior Advocate on record because he or she intends to become an
Advocate-on-record.
• After the expiry of one year's training, the advocate has to appear for an examination conducted by the Supreme
Court itself.
• After an advocate passes this examination he or she must have a registered office within a radius of 10 miles from
the Supreme Court building and a registered clerk.
• It is after this that the Chamber Judge of the Supreme Court accepts him as an advocate-on-record.

Advocate General
• An advocate general is a senior officer of the law.
• In some common law and hybrid jurisdictions, the officer performs the function of a legal adviser to the
government, analogous to Attorneys General in other common law and hybrid jurisdictions.
• The Office of the Advocate General is a constitutional office created under Article 165 of the Constitution of India.
• The Governor of the State appoints a person who is qualified to be appointed as a judge of the High Court as
Advocate General of the State.
Attorney General of India- (  - 2021- K. K. Venugopal)
• The Attorney General for India is the Indian Government's chief legal adviser and is a primary lawyer in the Supreme
Court of India.
• He is appointed by the President of India under Article 76(1) of the Constitution and holds office during the pleasure
of the President.
• He must be a person qualified to be appointed as a Judge of the Supreme Court, also must have been a judge of any
High Court for five years or an advocate of any High Court for ten years or an eminent jurist, in the opinion of the
President and must be a citizen of India.
• The Attorney General gives necessary advice to the Government of India in legal matters referred to him. He also
performs other legal duties assigned to him by the President.
• The Attorney General has the right of audience in all Courts in India as well as the right to participate in the
proceedings of the Parliament, though not to vote.
• The Attorney General appears on behalf of the Government of India in all cases (including suits, appeals, and
other proceedings) in the Supreme Court in which the Government of India is concerned. He also represents the
Government of India in any reference made by the President to the Supreme Court under Article 143 of the
Constitution.
The Attorney General can accept briefs but cannot appear against the Government.
• He cannot defend an accused in the criminal proceedings and accept the directorship of a company without the
permission of the Government.
• The Attorney General is assisted by a Solicitor General and four Additional Solicitors General.
• The Attorney General is to be consulted only in legal matters of real importance and only after the Ministry of Law
has been consulted. All references to the Attorney General are made by the Law Ministry
• Solicitor General of India
The Solicitor General of India is subordinate to the Attorney General of India.
The Solicitor General of India is the second law officer of the country, assists the Attorney General, and is himself
assisted by four Additional Solicitors General for India.
Unlike the Attorney General, Solicitor General does not tender legal advice to the Government of India.
His workload is confined to appear in courts on behalf of the union of India.
Tushar Mehta is Solicitor General of India (2021)
ELIGIBILITIY Citizenship of India; and

For Supreme Court –

According to Article 124(2) of the Constitution of India, “Every Judge of the
Supreme Court shall be appointed by the President by warrant under his hand
and seal after consultation with such of the Judges of the Supreme Court and of Has been a judge for at least five
the High Courts in the States as the President may deem necessary.” years in a High Court or of two or
The Article also explains that in case of appointment of a judge other than more High Courts in succession;
the Chief Justice of India, the Chief Justice of India must also be consulted for or
this purpose

Hon'ble Mr. Justice N.V. Ramana-The Chief Justice Of India. (2021)

Has been for at least an advocate
The Minister of Law and Justice is the head of the Ministry of Law and
Justice and one of the cabinet ministers of the Government of India. for ten years of one or more than
one High Courts in succession.; or
The first Law and Justice minister of independent India was B. R.
Ambedkar, who served in first Nehru ministry during 1947–52.

Kiren Rijiju is the current Law and Justice minister of India.

Is a distinguished jurist in the eyes

of the President of India.
• The process started with the need for any fresh law or need of amendment in any existing law.
• This may be done by the government or by people’s groups who are living in society and who can
swell public awareness in regards to the entail of law.
• After the requirement of law, the concerned ministry drafts a ‘bill’ which is containing the desired
law.
• This bill is disseminated to other relevant ministries for modifications and changes they deem fit
in it. It is also induced to the public to take comments from the people.
• The draft is reappraised to subsume such modifications and changes and is then whetted by Law
Ministry and after that presented to the Cabinet for approval and when the cabinet approves the
bill, it is introduced in either house of the parliament.
• Now there are 3 Readings of the bill in both the houses i.e. Lok Sabha and Rajya Sabha.
• First, in foremost based on the topic, the Government forms Research Committee, this R.C after
the intensive research comes out with recommendations which are sent back to the Govt.
• The approved recommendations are then given to the Ministry of Law and Justice, which drafts
the bill.
• Once the bill drafted, the same is kept in the public domain. The suggestions are incorporated
into a revised bill.
• Then this bill is given to the parliament which when passed, becomes an act.
• This act is to be signed in 75 days by the president and then published in Official Gazette and
the law is made which may be implemented by the date prescribed in O. Gazette.
Who makes laws?
 In India, at the central level, laws are formulated by the Parliament and at the state level by Legislative
Assemblies and Councils.

How is a law made?

The process of enacting a new law can be broadly divided into four steps:
      
Step 1: The need for a new law, or an amendment to an existing piece of legislation, is identified. This
may be done either by the government or by citizen groups who can raise public awareness regarding the
need for the law.

Step 2: The concerned ministry drafts a text of the proposed law, which is called a ‘Bill’. The Bill is
circulated to other relevant ministries for inputs. Comments from the public on the proposed draft may
also be invited.
For example recently, the UIDAI has invited public feedback on the 
Draft National Identification Authority Bill.
Following this, the draft is revised to incorporate such inputs and is then whetted by the Law Ministry.
It is then presented to the Cabinet for approval.
Step 3: After the Cabinet approves the Bill, it is introduced in Parliament.
Every Bill goes through three Readings in both Houses before it becomes an Act.
•During the First Reading the Bill is introduced in Parliament.
• The introduction of a Bill may be opposed and the matter may be put to a vote in the House. In
August 2009, the Law Minister withdrew the motion to introduce the Judges (Disclosure of Assets and
Liabilities) Bill as many MPs were opposed to the Bill, on grounds that it violated the Constitution.
•After a Bill has been introduced, the Presiding Officer of the concerned House (Speaker in case of the
Lok Sabha, Chairman in case of Rajya Sabha) may refer the Bill to the concerned Department Related
Standing Committee for examination.
•The Standing Committee considers the broad objectives and the specific clauses of the Bill referred to
it and may invite public comments on a Bill. For example, the Standing Committee on Science and
Technology, Environment and Forests has invited suggestions on the
 Civil Liability for Nuclear Damage Bill, 2010.
•Bills which come under the ambit of a number of different ministries, may be referred to a Joint
Comittee.
•The Committee then submits its recommendations in the form of a report to Parliament.
•In the Second Reading (Consideration), the Bill is scrutinized thoroughly. Each clause of the Bill is
discussed on the floor of the House and may be accepted, amended or rejected.
•During the Third Reading (Passing), the House votes on the redrafted Bill.
•If the Bill is passed in one House, it is then sent to the other House, where it goes through  second
and third readings.
•During the second reading, the Government, or any MP, may introduce amendments to the Bill,
some of which may be based on recommendations of the Standing Committee. However, the
Government is not bound to accept the Committee’s recommendations.

Step 4: After both Houses of Parliament pass a Bill, it is presented to the President for assent. She has
the right to seek information and clarification about the Bill, and may return it to Parliament for
reconsideration. (This may be done only once. If both Houses pass the Bill again, the President has to
assent.)
• Step 5: After the President gives assent, the Bill is notified as an Act. Subsequently, the Bill is
brought into force and rules and regulations to implement the Act are framed by the concerned
ministry, and tabled in Parliament.
• Do bills get passed even without any discussion in the parliament*?
• Parliament passes about 60 Bills every year. It devotes 20-25% of its time on legislative business.
The time spent on debating each Bill varies widely.
• In total, the Lok Sabha passed 30 non-financial Bills in 2009.
• In 2009, 8 Bills were passed in less than 5 minutes (27% of the Bills passed by Lok Sabha in 2009).
These included, The Legal Metrology Bill, The Commercial Division of High Courts Bill, and the
Trade Marks Amendment Bill.
• Only 5 Bills were debated for more than 3 hours.
• In 2008, 16 out of 36 Bills (excluding finance and appropriation bills) were passed by Lok Sabha in
less than 20 minutes, most of these without any debate.
• In 2008, Lok sabha worked for 46 days, the lowest ever in a calendar year.
• Things are worse, for Legislative Assemblies. Delhi assembly worked for 20 days in 2007.
 Civil Law Criminal Law
Definition: Civil law deals with the disputes between individuals, Criminal law is the body of law that deals with crime and the
 organizations, or between the two, in which compensation legal  punishment of criminal offenses.
 is awarded to the victim.

Burden of “Preponderance of evidence” The burden of proof falls on “Beyond a reasonable doubt”: Burden of proof is always on
 the plaintiff. One must produce evidence beyond the the  state/government.
proof:  balance of probabilities.

Examples: Landlord/tenant disputes, divorce proceedings, child Theft, assault, robbery, trafficking in controlled substances,
 custody proceedings, property disputes, personal injury, murder, etc.
etc.

Type of Civil litigation usually involves some type of compensation A guilty defendant is punished by incarceration and/or fines,
for injuries or damages as well as disposition of property or in exceptional cases, the death penalty. Crimes are divided
punishment  and other disputes. into two broad classes: Felonies and Misdemeanors.
:

Case filed Private party Government/State

by:

Appeal: Either Party Only Defendant

 There are two different types of legal case:  civil cases and criminal cases. 
 In criminal cases, the conflict is generally between the state and a person or persons. In civil cases
the conflict is between person and perons
 Names of the sides.  In criminal trials, the state's side, represented by a district attorney, is called
the prosecution.  In civil trials, the side making the charge of wrongdoing is called the plaintiff.  (The
side charged with wrongdoing is called the defendant in both criminal and civil trials.)
 Procedural protections.  Defendants in criminal cases have certain rights, including some guaranteed
by the Constitution, that they do not have civil cases.  For instance, a defendant cannot be
compelled to testify in his own criminal trial, but he can be so compelled in a civil trial.
 Possible punishments.  Only a criminal conviction can lead to prison or capital punishment.  A losing
defendant in a civil trial will usually have to pay monetary damages, though some other remedies
are also available
 The party complaining is called the Plaintiff
 and the party responding is called the Defendant
 The process is called Litigation.
 •Suspect: The word ‘suspect’ is used to refer to a person whose acts have been apprehended to be
against the provisions of the Code. However, no criminal proceedings are initiated against the person
whose acts are apprehended.
•Accused: The word ‘accused’ is used to denote a person against whom the criminal proceedings are
initiated.
•Defendant: When the Court orders the initiation of the main trial the accused person is referred to as
the defendant.
•Convict: When the Court passes a final condemning order or judgement against the accused then the
accused is referred to as convict signifying his guilt to be proved in the trial which has been instituted
against him

Offence Cognizable or Non-Cognizable Bailable or Non-bailable

Punishable With Imprisonment Non-cognizable Bailable
For
•Less Than 3 Years or with fine
only
Punishable With Imprisonment Cognizable Non-Bailable
For
•3 Years or more
 In civil litigation, the plaintiff is asking the court to order the defendant to
remedy a wrong, often in the form of monetary compensation to the
plaintiff in court.
the losing party has to reimburse the plaintiff, the amount of loss which is
determined by the judge and is called punitive damage.

The burden of proof first lies with the plaintiff and

then with the defendant to refute the evidence
provided by the plaintiffs.
In criminal law, the case is filed by the
government, usually referred to as the State and
represented by a prosecutor,
against a Defendant.
An individual can never file criminal charges
against another person- an individual may report a
crime, but only the government can file criminal
charges
 a person found guilty is punished by
incarceration in a prison, a fine, or in some occasion's death
penalty
The burden of proof lies with the
government in order to prove that the defendant is guilty.
One can say that criminal law deals with looking after public
interests. It involves punishing and rehabilitating offenders, and
protecting the society.
The police and prosecutor are hired by the government to put the
criminal law into effect. Public funds are used to pay for these
services.
• Types Of Cases In Civil Court
• Civil courts handle a wide variety of cases involving numerous legal issues.  Very broadly, civil cases
may involve such things as, for example,
• Tort claims.  A "tort" is a wrongful act (sometimes called a "tortious" act), other than a breach of
contract, that results in injury to someone's person, property, reputation, or the like, for which the
injured person is entitled to compensation.  Cases involving claims for such things as personal injury,
battery, negligence, defamation, medical malpractice, fraud, and many others, are all examples.
• Breach of contract claims.  A breach of contract case typically results from a person's failure to perform
some term of a contract, whether the contract is written or oral, without some legitimate legal excuse.
Cases involving claims for such things as not completing a job, not paying in full or on time, failing to
deliver goods sold or promised, and many others, are all examples.
• Equitable claims.  An "equitable claim" asks the court to order a party to take some action or stop some
action.  It may or may not be joined with a claim for monetary damages.  Cases where a party is
seeking a temporary restraining order or injunction to stop something (perhaps the destruction of
property, the improper transfer of land, the solicitation of a business' customers) are examples.
• Landlord/tenant issues.  Civil courts handle disputes arising between landlords and tenants.  Cases
where a landlord is trying to evict a tenant from a rental property or a tenant has moved out and is
suing a landlord for the return of a security deposit are examples.
 JUDGMENT DECREE
1. Judgment is defined under Section 2(9) of the 1. Decree is defined under Section 2(2) of Civil
Civil Procedure code, 1908. Procedure code, 1908

2. Judgement means statement given by a Judge of 2. Decree is an adjudication conclusively

the grounds of decree or order. determining the rights of the parties with regards
to all or any of the matter in the controversy.
3. It is not necessary that there should be a formal 3. It is necessary that there must be formal
expression of order in the judgement expression of the decree

4. Judgement states preciously the relief granted. 4. Decree must determinate the rights of the
parties
5. Judgement contains the grounds of decree. 5. Decree follows the judgment.

6. Judgment may be passed in civil suits as well as in 6. Decree is passed in a civil suit.
criminal cases.

7. Judgment is not capable of execution. 7. Decree is capable of execution.

 DECREE
1. Section 2(2) of the Code of Civil Procedure defines
“Decree”
2. “Decree” means the formal expression of an
adjudication which, so far as regards the Court expressing
it, conclusively determines the rights of the parties with
regard to all or any of the matters in controversy in the
suit and may be either preliminary or final.
3. Decree can only be passed in a suit which commenced
by presentation of a plaint.
4. Decree may be preliminary or final or partly
preliminary and partly final.
5. Every decree is appealable
ORDER
1. Section 2(14) of the CPC defines “Order”
2. According to Section 2(14) of the said Code, “order”
means the formal expression of any decision of a Civil
Court which is not a decree.
3. An order may originate from a suit by presentation of a
plaint or may arise from a proceeding commenced by a
petition or an application.
4. An order cannot be a preliminary order.
5. Every order is not appealable
 The Indian
Contract Act
1972
The Contract
Of Indemnity,
The Consumer
Guarantee ,
Protection Act
Bailment,
1986
Pledge,
Agency

The
Maharashtra
Cooperative
Business The Sale Of
Goods Act
Society Act
1960 Law 1930

The
The Indian
Negotiable
Partnership
Instrument Act
Act 1932
1881

The
Companies Act
2013

Rights in Personam- right of
one individual against person
• E.g. A gave loan to B of
Rs.500/. A has right to recover
money from B
Right in Rem – right which is
available against the world at
large i.e. indeterminate persons.
• E.g. A is owner of a plot of
land. He has right to enjoy
possession of that plot against
every member of the public.

The Law of Contract creates

RIGHT IN PERSONAM
1. Express - words spoken, written telephonic conversation,
sketch, painting, statues, signs and symbol, work of art
communication takes place.
2. Imply - to get to know on your own - communication does
not take place. eg. Purchase a ticket when travelling, opening
an umbrella when it rains

Express IMPLY
 Monitory
(pecuniary)
specify which
court to proceed
for
compensation

Territorial-
specific’s
locality place
boundary limit
territory
 Types of ‘Jurisdiction of a Court’ in India
• 1. Over the subject-matter:
• It means that the court has the authority to hear the type of case or controversy initiated in its court. Certain courts prohibited
from trying suits of particular classes by status. Thus, a small cause court can try  suits for money due on account of an loan
or under a bond or promissory note, a suit for price of work done, etc. It has no jurisdiction to try suits for specific
performance of contracts for a dissolution of partnership, for an injunction or suits relating to immovable property.
• 2. Territorial :
• Every court has its own limits, fixed by the State Government, beyond which it cannot exercise it. Thus, the District Judge is
in charge of the district and cannot exercise his power beyond that district. The High Court has it over the whole territory of
the State. Supreme court has  over whole country.
• 3. Pecuniary :
• There are a large number of civil courts of different grades having jurisdiction to try suits or hear appeals of different
amounts or value. Some of these courts have unlimited pecuniary jurisdiction. Thus the High Court, the District court and the
Civil court have unlimited pecuniary jurisdiction. Other courts have only a limited. Further, small cause court has limited. A
small Cause Court Judge also exercises a limited.
• 4. Original or Appellate 
• The jurisdiction of a court may be Original and also Appellate. In the exercise of its original jurisdiction a court entertains
original suits, while in the exercise of its appellate jurisdiction it entertains appeals. The Munsifs court and the court of small
causes have only original jurisdiction; the District Judge’s court and the various High Courts have both original and appellate
jurisdiction.
Contract Act 1872

• It is a private law. Not public law

• It is prospective and not retrospective.
• English common law is base of contract act 1872
• It is not exhaustive act
• It was passed in Indian parliament (kolkatta)
 Lawful Lawful
Agreement
Offer Acceptance
2(h) of contract act 1972

According to Salmond a contract is

‘an agreement creating and defining
obligations between the parties’

1) An exchange of promises by 2 or more Enforceable

persons, who are known as
AGREEMENT by Law
(a) The promisor or offeror
(b) The promisee or offeree that results
into Contract
2) An obligation to do or to refrain from
doing particular act
3)Which obligation is enforced by law
• An agreement (Section 2(e))  -An Agreement is a promise between two entities creating mutual obligations by
law. Section 2(e) of the Indian Contract Act, 1872 defines an agreement as ‘Every promise and every set of
promises, forming the consideration for each other, is an agreement’.
• To form an agreement, the following ingredients are required:
• Parties: There need to be two or more parties to form an agreement.
• Offer/ Proposal: When a person signifies to another his willingness of doing or omitting to do something with a
view to obtain other’s assent. [Section 2(a)]
• Acceptance: When the person to whom the proposal is made signifies his assent for the same thing in the
same sense as proposed by the offeror. [Section 2(b)]
• Promise: When a proposal is accepted, it becomes a promise. [Section 2(b)]
• Consideration: It is the price for the promise. It is the return one gets for his act or omission. [Section 2(d)]
• An agreement is, therefore, a promise or set of promises forming consideration for all the parties. [Section 2(e)]
• Agreement = Promise or set of promises (offer + acceptance) + Consideration (for all the parties)
• If a 7-year-old boy is buying an ice-cream from an ice-cream vendor and giving Rs. 10 in return, it becomes an
agreement. This is because the boy offers to buy ice-cream and the vendor accepts the offer which makes it a
promise. The consideration for both was ice-cream and money respectively.
• (Section 2(h))=A contract is a lawful agreement. In other words, an agreement enforceable by law is a contract
a) When one person signifies to another his willingness to do or to abstain from doing anything, with a
view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;
b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to
be accepted. A proposal, when accepted, becomes a promise;
(c) The person making the proposal is called the “promisor”, and the person accepting the proposal is
called the “promisee”;
(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act
or abstinence or promise is called a consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each other, is an
agreement;
(f) Promises which form the consideration or part of the consideration for each other are called
reciprocal promises;
(g) An agreement not enforceable by law is said to be void
(h) An agreement enforceable by law is a contract;
(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;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
• an agreement is a contract when:
1.Free consent of the parties: When there is absence of Coercion (Section 15), Undue Influence (Section 16), Fraud
(Section 17), Misrepresentation (Section 18) and Mistake (Section 20, 21, 22), the consent is said to be free.  
2.Capacity of the parties to contract: Section 11 and 12 lay down that the competent parties are persons who have
attained majority {Exception for this was laid down in Mohori Bibee v. Dharmodas Ghose  ILR (1903) 30 Cal 539
(Pc)}, persons who are of sound mind and persons who are not disqualified by law.
3.Lawful consideration and Lawful object: Section 23 lays down that the consideration and object is lawful unless it
is forbidden by law or it defeats provisions of any law or is fraudulent or involves injury to person or property or is
violative of public health, morality, peace and order. 
• Let us look at some examples where agreements are not contracts: 
1.Gabbar asked Samba to kill Jay and Veeru and Samba agreed. This is an agreement but the object of the
agreement makes it an illegal one. Therefore, it cannot be enforced and so it is not a contract. 
2.Rajesh promises his wife Chitra that he will bring for her the stars and the moon. Here, the object of the
agreement is impossible to perform and so it is not enforceable and cannot be termed as a contract.    
3.A mother promises her crying child that she will buy a Barbie doll for her but she does not buy it. Here, the
promise was not made with the intention to fulfil it and so it is not enforceable and cannot be termed as a
contract.    
4.I offer my pen to Neelam and she accepts it, here an agreement is made but such agreement is made out of
friendship and has no consideration. An agreement without consideration is not a contract (an exception to this is
Section 25 of the ICA which states that near relation and natural love and affection can be said to be
consideration).
Essentials of Valid Contract
 10 Essentials of Valid Contract
1.Lawful Offer (proposal ) And Lawful Acceptance
2.Intention to create a legal relationship
3.An agreement for a lawful consideration
4.An agreement for a lawful objects
5.Competency / Capacity Of Persons/Parties. To Enter Into A Contract
6.Free consent of the parties
7.Agreement must not be expressed declared to be void
8.Legal formality
9.Certainty of terms
10.Possibility of performance of the contract
Different kinds of Agreements
Valid Agreement - enforceable by law
Void agreement - not enforceable by law section 2 (g)-
(i) consideration and object unlawful(S-23)
(ii)Lack of consideration (S-25)
(iii) restrain on legal proceedings (S-28)
(iv) uncertainty of meaning of the terms of agreement (S-29)
(v) wagering transaction (S-30)
(vi)incapacity of the parties (S-11)
(vii) because it is illegal immoral or against the public policy
TYPES OF CONTRACT
• Adhesion Contracts – These types of contracts are those which are formed by the stronger party. It is a sort of, “Opt for it or
do not” contract. The stronger party or the one that has the bargaining power leaves the other party with a choice whether to
accept or reject the contract.
• Aleatory Contracts – This type of contract involves a mutual agreement that comes into being after an unexpected occurrence,
accident, or a natural calamity. In this type of contract both the parties have an element of risk. Fire or Car insurances are this
type of contract.
• Bilateral and Unilateral Contracts – Bilateral contracts involve two parties. Both parties are obliged to one another for
performing or abstaining to perform any act. It is also called a two-sided contract as it involves two way promises. Meanwhile,
unilateral contracts are those in which the promise is made by only one party. They consist of an offeror and offeree. The
offeror makes a promise to perform an action and is bound by the law to do so. The offeree is not bound to the court even if he
fails to execute the requested action because he does not promise anything at all.
• Express Contracts – These contracts are those wherein the terms of the contracts are expressed clearly whether in written
documents or orally.
• Implied Contracts – There are no oral or written terms in this type of contract. The contracts are assumed owing to the facts of
the parties. If an individual visits a medical professional, he expects to be diagnosed for a disease or illness and be advised a
cure. This is an implied contract and a patient is capable of suing a medical practitioner for malpractice.
• Void and Voidable Contracts – Void contracts are illegal from the very beginning and hold no validity under law. They are
thereby un-enforceable. Voidable contracts are unlike void contracts in the sense that one party is bound by the contract and
the unbound party is capable of terminating the contract as they are unbound to it.
valid contract - If all the condition are fulfilled it is called as a valid contract. Invalid contract - In a contact
if any one condition is not fulfilled. Is void (Void-ab-initio) - An agreement which is not valid from the
beginning. Becomes void - An agreement which is valid in the beginning but due to some supervening
impossibility the contract becomes void. Voidable contract - A contract which is valid unless until avoided
by either the party.
 Illegal contract - An agreement forbidden by law. It involves the commission of crime or violate public
policy, or immoral in nature. Unenforceable contract - It is valid but due to some technical defect the
contract becomes void. In case defects are removed the contract is enforceable.(lack of registration, lack
of signature etc.,)
 Executed contract - In a contract where both the parties have performed their obligation, there remains
nothing to perform. Executory contract - In a contract where both the parties are yet to perform their
obligation. Unilateral contract - In a contract one party has performed his obligation and other person is
yet to perform his obligation. Bilateral contract - In a contract where both the parties have performed
their obligation. Bilateral & Executory are same and inter – changeable.
A quasi-contract -is unlike a real contract. Salmond defines quasi contracts as “there are certain
obligations which are not in truth contractual in the sense of resting on agreement, but which the law
treats as if they were”. It is important to remember that even though it is imposed by law, it is not created
by the operation of the contract. It is not actually entered into by the parties but is something imposed
on a party by law.
• There are certain kinds of contracts which are expressly declared by The Indian Contract
Act, 1872 to be null and void. The following are some of the agreements which are not
enforceable in the eyes of law:
• Agreements without consideration except it is written and registered or is a promise to
compensate for something done or is a promise to pay a debt barred by limitation law.
• Agreements in restraint of marriage
• Agreements in restraint of trade
• Agreements in restraint of legal proceedings
• Agreements void for uncertainty
• Agreements by way of wager
• Agreements contingent on an impossible event
• Agreements to do impossible act
• Those agreements are void which are based on any of the subjects mentioned above.
There is no liability for not enforcing the contract and thus, the conditions of the contract
are not binding upon any of the parties.
• For example, if Devdas asks Paro not to get married for her entire life then he will give her a new
dress and shoes in return; it cannot be considered as a valid contract because the agreement is
made in restraint of marriage.
• Similarly, if the agreement is made to not to work for the entire life in exchange for a new flat, it will
not be considered as a valid contract as it is in restraint of trade.
• Also, if a father enters into an agreement with his son that the father will get him a new bicycle if
the son scores 105% in his board exams. It will be considered a void agreement because it is
an agreement to do an impossible act.
• The above-mentioned conditions are required to be fulfilled in order to make an agreement legally
enforceable. The agreement becomes void if any of the mentioned conditions are left unfulfilled
except in the case of free consent where the agreement becomes voidable instead of void and
giving the party, whose consent was not free at the time of entering into the contract, the discretion
to continue the contract or not.
• voidable agreement (can be avoided) – this contract set aside by
one or more at his/ their option. But the other party can not avoid
it.
• Until and unless it is avoided, it is good contract
• Contract by coercion(S15), Undue Influence (S16), Fraud (S17),
Misrepresentation (S18), Mistake (S20)
• Electronic Contracts : IT Act 2000 has given legal recognition
under S10
• Unenforceable Agreement :1) lack of proper stamp 2)lack of
registration 3) debarred by the law of limitation
• Illegal contract : always void
Distinction between Illegal and void
Agreement
• As regards to collateral
transaction
• Term Illegal is narrower
than void and voidable
(Wagering agreement is
void but not illegal)
• Help neither party
• Whether severable
• Contingent contract : (S-31) is a contract to do or not to do something if some event, collateral to
such contract happens or does not happen.
•Happening or non happening of event
•Event is uncertain
•Some future event
•A will pay to B Rs.4,000 if B’s house gets burnt in fire.

• Wagering Contrct -Agreements entered into between parties under the condition that money is
payable by the first party to the second party on the happening of a future uncertain event, and
the second party to the first party when the event does not happen, are
called Wagering Agreements or Wager.

• Quasi Contract: (Be like contract)contract results from Mutual Free will of the parties expressed
in order to create contractual obligation through an offer and its acceptance.
Contingent contract (S-32-36)
• Happening of the event is
uncertain
• Non happening of an
uncertain future
• When the event is deemed to
be impossible
• Happening of an event in
fixed time
• The non happening of an
event within fixed time
• Agreement contingent on
impossible events become
void (s-36)
Wagering vs
Contingent
Contract
 AGREEMENT CONTRACT
Meaning When a proposal is accepted by the person When an agreement is
to whom it is made, with requisite enforceable by law, it
consideration, it is an agreement. becomes a contract.

Elements Offer and Acceptance Agreement and Enforceability

Defined in Section 2 (e) Section 2 (h)

In writing Not necessarily Normally written and

registered
Legal obligation Does not creates legal obligation Creates legal obligation

One in other Every agreement need not be a contract. All contracts are agreement

Scope Wide Narrow

Valid Proposal and
Acceptance
Essentially there are three kinds of remedies upon breach of
contract -- Damages, Specific Performance and Injunction
 Lawful offer/ Proposal and lawful acceptance
• Offer present- acceptance absent- No Contract
• Offer absent- acceptance present – No Contract
• Offer present – acceptance present – Valid Contract
Proposal (S (2a))
• When one person signifies to another his willingness to do
or
abstain from doing anything, with a view to obtaining the
assent that other to such act or abstinence, he is said to
make a proposal S. 2(a)

OFFER.
The term "proposal" of the Indian Contract Act ="offer" of English Law
 Offer and acceptance-(Section 2(a)) 
• The entire process of entering into a contract begins with the proposal or an offer made by one
party to another. The proposal must be accepted to enter into an agreement.
• According to the Indian Contract Act 1872, proposal is defined in Section 2(a)  as “when one person
will signify to another person his willingness to do or not do something (abstain) with a view to
obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an
offer.”
• Features of a valid offer
• The person making the offer/proposal is referred to as the “promiser” or the “offeror”. And the
person who accepts an offer is referred to as “promisee” or the “acceptor”.
• The offeror must express his willingness to do or abstain from doing an act. Only willingness is not
adequate. Or just an urge to do something or not to do anything will not be an offer.
• An offer can either be positive or negative. It can be a promise to do some act, and can also be a
promise to abstain from doing any act/service. Both are valid offers.
 Valid Proposal
1. Terms of an offer must be definite-
(No ambiguity and Looseness )
2. An offer must contemplate creation of legal relation (A invites B for dinner. B accepts it but does not go –A can’t sue B)
3. An offer may be express or implied.
4. To whom may an offer be made- General –
(world at large/ Specific- to a class of people)
5. Distinction between an Offer and An Invitation to an Offer-
(Quotation, Printed price, advertisement, Catalogue// offer leads to agreement / invitation to offer leads to offer)
6. An Offer and Invitation for Tenders
(definite tender, standing or continuous tender)
7. How long does an offer remain open
(until accepted/ rejected/ revoked /lapse)
8. Communication of an offer to the offeree
(2 Test- legal relation and actually communicated)
 The element of a valid offer
There must be two parties  -There have to be at least two parties: a person making the proposal and the other person
agreeing to it. All the persons are included i.e, Legal persons as well as artificial persons.
Every proposal must be communicated -Communication of the proposal is mandatory. An offer is valid if it is
conveyed to the offeree. The communication can either be expressed or implied. It can be communicated by terms
such as word of mouth, messenger, telegram, etc. Section 4 of the Indian Contract Act says that the communication of
a proposal is complete when it comes to the awareness of the person to whom it is made.
Example -‘A’ proposes to sell a car to ‘B’ at a certain price. Once ‘B’ receives the letter, the proposal communication is
complete.
It must create legal relations -An offer must be such that when accepted it will result in a valid contract. A mere social
invitation cannot be regarded as an offer, because if such an invitation is accepted it will not give rise to any legal
relationship.
Example -‘A’ invited ‘B’ to dinner and ‘B’ accepted the invitation. It is a mere social invitation. And ‘A’ will not be liable
if he fails to provide dinner to B.
It must be certain and definite -The terms of the offer must be certain and clear in order to create a valid contract, it
must not be ambiguous.
It may be specific or general - The specific offer is an offer that is accepted by any specific or particular person or by
any group to whom it is made. Whereas, The general offers are accepted by any person.
LEGAL RELATIONS.-An offer, in order to give rise to a contract must be
intended to create, and be capable of creating, legal relations Mere
social or moral relations will not give rise to legal obligations
e.g., an invitation to dinner or an agreement to accompany another to a
walk does not constitute an offer.
In an English case, Mr. B, who was posted in Ceylon, promises
his wife living in England, to pay her a monthly allowance, so long as
she could not go to Ceylon for reasons of health. When Mr. B failed to
to honour his promise, and she filed a suit against him, the Court
held that she could not enforce the obligation, as from the nature of
the contract, it was clear that no intention existed to give rise to a
legal obligation. It was merely a domestic arrangement. (Balfour v
Balfour, 1919 2 K. B. 571)
Mere intention is not enough : (Weeks v Tybald 1605):
A say to B that to he intends to 100 pounds to anyone who
marries his daughter with his consent. B marries A’s daughter-
A’s statement was not an offer

Communication of Offer-
X applies for the job- the mgt committee passed resolution to appoint
him. This was not communicated to him. Someone him about him
secretly- later the mgt committee rescinded.
X can not sue the committee.
• Communication, acceptance and revocation of proposals.—The communication of proposals the acceptance
of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any
act or omission of the party proposing, accepting or revoking by which he intends to communicate such
proposal, acceptance or revocation, or which has the effect of communicating it.
• Communication when complete.—The communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made. The communication of an acceptance is complete,— as against
the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
• The communication of a revocation is complete,— as against the person who makes it, when it is put into a
course of transmission to the person to whom it is made, so as to be out of the power of the person who
makes it; as against the person to whom it is made, when it comes to his knowledge.
• Illustrations
• (a) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is
complete when B receives the letter.
• (b) B accepts A‟s proposal by a letter sent by post. The communication of the acceptance is complete, as
against A when the letter is post; as against B, when the letter is received by A.
• (c) A revokes his proposal by telegram. The revocation is complete as against A when the telegram is
dispatched. It is complete as against B when B receives it.
• B revokes his acceptance by telegram. B‟s revocation is complete as against B when the telegram is
dispatched, and as against A when it reaches him
• Acceptance must be absolute.—In order to convert a proposal into a promise, the acceptance
must—
• (1) be absolute and unqualified;
• (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the
manner in which it is to be accepted.
• If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not
made in such manner, the proposer may, within a reasonable time after the acceptance is
communicated to him, insist that his proposal shall be accepted in the prescribed manner, and
not otherwise; but if he fails to do so, he accepts the acceptance.
• Acceptance by performing conditions, or receiving consideration.—Performance of the
conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which
may be offered with a proposal, is an acceptance of the proposal.
• Promises, express and implied.—In so far as the proposal or acceptance of any promise is made
in words, the promise is said to be express. In so far as such proposal or acceptance is made
otherwise than in words, the promise is said to be implied.
According to sec.2(b), when a person made a proposal to another to whom proposal is made, if proposal is assented there to,
it is called acceptance.

LEGAL RULES FOR ACCEPTANCE

• Acceptance must be absolute and unconditional.

• Acceptance must be given as per the mode prescribed by the offerer
. • Acceptance must be given before the lapse of time or within reasonable time.
• Acceptance may be given by any person in case of general offer
 • Acceptance must be given by the person to whom the offer is made or by an authorised person.
• Acceptance must be communicated.
• Mental acceptance is no acceptance or acceptance must not be derived from silence.
• Acceptance must not be precedent to offer.

 According to Section 4, The communication of offer is complete when it comes to the knowledge of the person to whom it

is made. The communication of acceptance is complete-

 As against the proposer- when it is put in to a course of transmission to him so as to be out of the power of the acceptor.

 As against the acceptor – when it comes to the knowledge of the proposer

Classification of offer

An offer can be of many types, ranging across the

spectrum. There are basically 7 kinds of offers:
• Express offer  
• Implied offer 
• General offer 
• Specific Offer 
• Cross Offer 
• Counter Offer 
• Standing Offer 
 Express offer and implied offer (Section 9)
• Section 9 of The ICA defines both of them as: In so far as the proposal or acceptance of any promise is made in
words, the promise is said to be expressed. In so far as such a proposal or acceptance is made otherwise than in
words, the promise is said to be implied.
• Therefore, any offer that is made with words, it may be regarded as express. Any promise that is made
otherwise than in words is implied.
• A bid at an auction is an example of an Implied offer.
• A case in this regard is Upton-on-Severn RDC v. Powell, wherein the defendant called a fire brigade assuming
that those services would be free to him, however it was found that his Farm did not come under that of
Upton. The court held that the truth of the matter is that the Defendant wanted the services of Upton, he asked
for the services of Upton and in response to that they offered their services and they were rendered on an
implied promise to pay for them.
• In Ramji Dayawala & Sons (p) Ltd v. Invest Import, a case between an Indian and Yugoslavian party the notice
for revocation of an arbitration clause in the contract between the parties was made by the Indian party, to
which the other party gave no reply. It was held that this would amount to an implied acceptance i.e.- the
arbitration clause was deleted from the contract, and a suit would lie in the court of law. 
• Similarly entering into an omnibus also amounts to implied acceptance, same as consuming edibles at a self-
service restaurant. Therefore in simpler terms a contract that is entered into because of actions on the offerors
part, may be referred to as an implied offer, any contract entered into otherwise is an express offer.
  Express offer - When offer is given to another person either in writing or in
oral. Implied offer - When offer is given to another person neither in writing nor
in oral.
Specific offer - When offer is given to a specific person.
General offer - When offer is given to entire world at a large.(Carlill Vs. Carbolic
smoke ball Co.,)
Cross offer - When both the persons are making identical offers to each other in
ignorance of other’s offer.
Counter offer – When a person to whom the offer is made, instead of accepting
the terms of the offeror desires modification of the same.
Standing offer - An offer which remains continuously enforceable for a certain
period of time.
 General offer
• A General Offer is an offer that is made to the world at large. The genesis of a General Offer came about
from the Landmark case of Carlill v. Carbolic Smoke Ball Co. A company by the name Carbolic Smoke Ball
offered through an Advertisement to pay 100 Pounds to anyone who would contract increasing epidemic
Influenza, colds or any disease caused by cold after taking its Medicine according to the prescribed
instructions. It was also added that 1000 Pounds have been deposited in Alliance bank showing our
sincerity in the matter. One customer Mrs Carlill used the medicine and still contracted Influenza and
hence sued the company for the reward. The Defendants gave the argument that the offer was not made
with an intention to enter into a legally binding agreement, rather was only to Puff the sales of the
company. Moreover, they also contended that an offer needs to be made to a specific person, and here the
offer was not to any specific person and hence they are not obliged to the Plaintiff. 
• Setting aside the arguments of the Defendant, the bench stated that in cases of such offers i.e- general
offers, there is no need for communication of acceptance, anyone who performs the conditions of the
contract is said to have communicated his/her acceptance, and moreover, the money deposited by the
Defendant in Alliance Bank clearly shows that they intended to create a legally binding relationship. Hence
the Plaintiff was awarded with the amount. An Indian authority in this regard is Lalman Shukla v. Gauri
Dutt, wherein a servant was sent by his master to trace his missing nephew. In the meanwhile, he also
announced a reward for anyone finding his nephew, this in itself is an example of an offer that is made to
the world at large and hence a General Offer.
 Valid acceptance based on fulfillment of condition

• This concept has been given statutory authority under section 8 of the ICA:
• Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal
promise which may be offered with a proposal, is an acceptance of the proposal. 
• This section was applied by YEARS CJ of Allahabad high court in the case of Har Bhajan Lal v. Har
Charan Lal, wherein the father of a young boy who ran from home issued a pamphlet for a reward
for anyone who would find him. The Plaintiff found him at the railway station and sent a Telegram to
his father.
• The Court held that the handbill was an offer that was made to the world at large and anyone who
fulfilled the conditions is deemed to have accepted it.
• In the State of Bihar v. Bengal Chemical and Pharmaceutical Works LTD, the Patna HC held that
where the acceptance consists of an act, e.g- dispatching some goods, the rule that there shall be no
communication of acceptance will come into play. 
General offer of continuing nature

• When a general offer is of continuing nature, like it was in a carbolic smoke ball
case, it can be accepted by a number of people till it is retracted.

• However, when a similar offer requires information regarding a missing thing, it

is closed as soon as the first information comes in.
 Specific offer
• A Specific offer is an offer that is made to a specific or ascertained person, this type of offer can only
be accepted by the person to whom it is made.
• This concept was seen briefly in the case of Boulton v. Jones, wherein the Plaintiff had taken the
business of one Brocklehurst, the defendant used to have business with Brocklehurst and not
knowing about the change in ownership of business, sent him an order for certain goods. The
Defendant came to know about the change only after receiving an invoice, at which point he had
already consumed the goods. The Defendant refused to pay the price, as he had a set off against the
original owner, for which the plaintiff sued him.
• The Judges gave a unanimous judgement holding the defendant not liable.
• Pollock CB held that the rule of law is clear, if you intend to contract with A, B cannot substitute
himself as A without your consent and to your disadvantage.
• It was also held that whenever a person makes a contract with a specific personality, a specific party,
so to say, for writing a book, for painting a picture or for any personal service or if there is any set off
due from any party, no one has the authority to come in and maintain that he is the party contracted
with
Difference between general offer and specific offer

        General Offer         Specific Offer

General Offer is made to the whole world at A specific Offer is made to some specific
large. person.

A general offer can be considered by any A specific offer can be accepted by only a
person. specific person
Cross offer
• When two parties make an identical offer to each other, in ignorance to each other’s offer, they are said to make
cross offers. Cross offers are not valid offers. For example- if A makes an offer to sell his car for 7 lakhs to B and B in
ignorance of that makes an offer to buy the same car for 7 Lakhs, they are said to make a cross offer, and there is no
acceptance in this case, hence it cannot be a mutual acceptance. 
• Basic essentials of a cross offer 
1. Same offer to one another- When the offeror makes an offer to the offeree and the offeree without prior
knowledge makes the same offer to the offeror, then both the object and the party remain the same.
2. Offer must be made in ignorance of each other- The two parties must make their offer in ignorance of each other.
• An important case in this aspect is the English case of Tinn v. Hoffman, the defendant wrote to the complainant
an offer to sell him 800 tons of iron at 69s per ton, at the same time the complainant also wrote to the defendant an
offer to buy the iron at similar terms. The issue in this case was that, was there any contract between the parties,
and would simultaneous offers be a valid acceptance. The court held that these were cross offers that were made
simultaneously without knowledge of one another and would not bind the parties. 
• Here it is imperative to deduce that for a valid contract to be formed there needs to be an offer and acceptance of
the same, whereas in a cross offer there is no acceptance, but only simultaneous offers being and therefore a cross
offer will not lead to the formation of a contract. 
 Counter offer
• When the offeree offers a qualified acceptance of the offer subject to modifications and
variations in terms of the original offer, he is said to have made a counter offer.
• A offered to sell pen to B for Rs. 100. B asked it for Rs.90. A denied and B walked away. Later B
came to A and ready to pay A Rs.100. Now A denied to sell to B
• A counter offer is a rejection of the original offer.
• An example of this would be if A offers B a car for 10 Lakhs, B agrees to buy for 8 Lakhs, this
amounts to a counter offer and it would mean a rejection of the original offer. Later on, if B
agrees to buy for 10 Lakhs, A may refuse. Sir Jenkins CJ in Haji Mohd Haji Jiva v. Spinner, held
that any departure from original offer vitiates acceptance. In other words, an acceptance with a
variation is not acceptance, it is simply a counter proposal which must be accepted by the
original offeror, for it to formulate into a contract.
• The Bombay High court gave this decision based upon the landmark judgement of Hyde v.
Wrench, in which an offer to sell a farm for 1000 Pounds was rejected by the Plaintiff, who
offered 950 for it. Subsequently the Plaintiff gave an acceptance to the original offer. Holding
that the Defendant was not bound by a contract, the court said that the Plaintiff accepted the
original offer of buying the farm at the price of 1000 pounds, it would have been a completely
valid contract , however he gave a counter proposal to it, thus rejecting the original offer.
 Partial acceptance
• Counter offer also includes within its contours Partial acceptance, meaning that a
party to the contract cannot agree to those conditions of the agreement that favour
him and reject the rest, the acceptance should be of the complete agreement i.e.- all
its parts. In Ramanbhai M. Nilkanth v. Ghashiram Ladli Prasad, the plaintiff made an
application for certain shares in a company with the underlying condition that he
would be made the cashier in its new branch
• The Company did not comply with this and hence the suit.
• The court held that the Petitioners application for shares was condition on him being
made the cashier and that he would have never applied for the shares had there
been no such condition. 
 Acceptance of a counter proposal
• In Hargopal v. People’s Bank of Northern India LTD, an application for shares was made
on a conditional undertaking by the bank that the applicant would be made the director
of the new branch. The shares were allotted to him without fulfilling the condition. The
applicant did not say anything and took his dividends, a subsequent suit by him failed as
the court held that he through his conduct had waived the condition. When a counter
proposal is accepted the contract arises in terms of the counter proposal and not in
terms of the original contract.  
 Standing offer 
• An Offer which remains open for acceptance over a period of time is called a standing
offer. Tenders that are invited for supply of goods is a kind of Standing Offer. In Percival
Ltd. V. London County Council Asylums and Mental deficiency Committee, the Plaintiff
advertised for tenders for supply of goods.
• The defendant took the tender in which he had to supply to the company various
special articles for a period of 12 months. In-between this the Defendant didn’t supply
for a particular consignment.
• The Court held that the Tender was a standing offer that was to be converted into a
series of contracts by the subsequent acts of the company and that an order prevented
the possibility of revocation, hence the company succeeded in an action for breach of
contract.
 Difference between an offer and Invitation to offer 
• Although Invitation to Offer is not a type of offer per se, it is imperative to distinguish both to even construe
what an actual offer is.
• An invitation to offer is an offer to negotiate, an offer to receive offers, offers to chauffeur. An offer is a final
expression of willingness to get into a contract upon those following terms. The concept of Invitation to
offer was explained in the Privy Council case of Harvey v. Facey, the Plaintiffs in this asked two questions
from the defendant i.e.- Would you sell me your Bumper Hall pen , telegram me the lowest price? , the
Defendant only gave the answer to the latter question , post which he refused to sell. The Court held that
the defendant was not to sell as he had only answered the second question and reserved the same for his
first question. Thus, this clearly shows the distinction between an offer and invitation to offer.
• In Adikanda Biswal v. Bhubaneswar Development Authority, when a development authority made an
announcement for allotment of plots on first come first serve basis on payment of full consideration. An
application against this with full consideration was only considered to be an offer, as the Development
authority only gave an invitation to offer, and the offer can only be formalized into a contract when it is
accepted by the development authority.
• A sees an article with price tag of Rs. 50. he wants to buy it.
• B, the owner of the articles doesn’t want to sell it.
• Price tag isn’t invitation to offer
 Rules regarding display of goods in shops 
• In Pharmaceutical Society of Great Britain v. Boots Cash Chemists Southern Ltd., lord GODDARD
CJ, said that it would be wrong to say that a shopkeeper intends to sell everything that is displayed
in his shop. Meaning that the customer makes an offer, to which the shopkeeper has the
discretion to accept or deny.
• The shopkeeper may say that he doesn’t have enough stock of that good and therefore may not
sell.
• Similarly, a bankers catalogue of charges is also not an offer, the auction held by a person is also
only an invitation to offer and he may not be liable for the transportation costs that people may
have to pay to come to the place of auction, in case he cancels at the end moment.
 Lapses and revocation of an offer 

• An offer lapses after a defined or reasonable time.

• An offer lapse by not being accepted in the specified mode
• An offer lapses by rejection. 
• An offer lapses by the offeror or the offeror’s death or insanity until acceptance.
• An offer lapses by revocation before acceptance.
• An offer lapses by subsequent illegality or destruction of the subject matter.
When communication is complete?
• Communication of offer (section 4)
• The communication of the offer is complete when it comes to the knowledge of the person to
whom it is made.
• Time of revocation of an offer

Revocation of the offer (Section 4)

• A proposal can be revoked at any time before the communication of its acceptance is
complete as against the proposer but not afterward.

• Revocation of the offer by the offeror

• The offeror can withdraw his offer before it is accepted “the bidder can withdraw (revoke) his
offer at an auction sale before being accepted by any auctioneer using any of the customary
methods.
• Example
• ‘A’ agreed to sell the property to ‘B’ by a written document which stated “this offer to be left
over until Friday 9 AM”. on Thursday ‘A’ made a contract to sell the property to ‘C’. ‘B’ heard of
this from ‘X’ and on Friday 7 AM he delivered to ‘A’ acceptance of his offer.
• Held ‘B’ could not accept A’s offer after he knew it had been revoked by the sale of the
property to C.
 Acceptance (Section 2(b))
• The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person to
whom the proposal is made signifies his assent thereto, the offer is said to be accepted.
Thus the proposal when accepted becomes a promise.” An offer can be revoked before it
is accepted.
• As specified in the definition, if the offer is accepted unconditionally by the offeree to
whom the request is made, it will amount to acceptance. When the offer is accepted it
becomes a promise.
• Example
• ‘A’ offer to buy B’s house for rupees 40 lacs and ‘B’ accepts such an offer. Now, it has
become a promise.
• When an offer is accepted and it becomes a promise it also becomes irrevocable. No
legal obligation created by an offer.
Mode of acceptance

• Under the Indian Contract Act, acceptance can be by following two ways:
• Implied acceptance: Acceptance which is not explicitly made by means of speech
or writing but, by the conduct of the person to whom an offer is made.
• The striking of hammer thrice by the auctioneer in order to show his acceptance
to the offer made by a bidder is an example of implied acceptance to the offer
made by the bidder at an auction to the auctioneer;
• Express acceptance: Acceptance which is made by means of words, oral or
written is known as an express acceptance. For example, A offers B his watch for
sale through a mail and A replies in positive to the offer by email.
Acceptance: absolute and unqualified (Section 7)
• Acceptance to be legally enforceable must be absolute and unqualified. Section 7(1) of the Indian
Contract Act provides that in order to turn an offer into an agreement the acceptance to the offer
must be absolute and unqualified.
• The logic behind the principle that the acceptance to the offer must be absolute and unqualified is
that when acceptance is not absolute and is qualified it results into a counter offer which leads to the
rejection of the original offer made by the offeror to the offeree. If the offeree makes any variations
in the original terms of the contract proposed to him and then accepts the contract, such an
acceptance would result in the invalidity of the contract.
• For example, if A offers to sell his bike to B for Rupees 10,000. But B persuades A to sell him the bike
for 7,000 rupees to which A denies and if B at any later point of time agrees to buy the bike for
10,000 rupees. Then A is under no obligations to sell him the bike as the counteroffer made by B puts
an end to the original offer.
• It is also important that the acceptance made by the offeree should be in toto, i.e. acceptance should
be given to all the terms and conditions of the offer as acceptance of only a part of the offer is not a
good acceptance under the law. For example, A makes an offer to B of sale of 30 kg of wheat at
Rupees 700 but B agrees to buy only 10 kg of wheat. Here the acceptance made by B is not in toto
with respect to the terms of the contract and therefore, the acceptance made by B is no acceptance
in the eyes of law and therefore, A is under no obligation to sell him wheat since there is no contract
between them.
 Legal rules and conditions for acceptance
• Acceptance must be absolute and unqualified 
• The offeree’s approval cannot be conditional. For example, ‘A’ wants to sell her car to ‘B’ for Rs 2 lakh,
‘B’ can’t come back and says that she accepts the offer but will buy the same for Rs. 1 lakh.
• Acceptance must be told to the offeror
• If the acceptor just accepts the offer in his head and he does not mention the same to the offeror, it
can not be called an Acceptance, whether in an express manner or an implied manner.
• Acceptance must be recommended in the following mode
• Acceptance is sometimes required in a prescribed/specified communication mode.
• In a reasonable amount of time, the acceptance is given
• It’s very rare that an offer is always to get acceptance at any time and at all times. Therefore, the offer
defines a time limit. If it does not, it should not be acknowledged forever.
 Rules Regarding Valid Acceptance
• Who can accepts offer- any person, class of persons, world at large. In case
of reward for providing information- first person who gave information
• Acceptance of an offer must be absolute and unconditional.- ad idem-
consenting to the same thing in the same sense.
• Qualified acceptance is counter offer- ( a property is purchased only after
title being approved by solicitor is not a qualified acceptance )
• Acceptance must be made within reasonable time-
• Modes of Acceptance :- written or spoken
• Mental acceptance is no acceptance at all in Law
• Acceptance should be communicated to the offeror
• Acceptance of an Offer is the Acceptance of all its terms
• Acceptance must be communicated before the offer lapse or is
revoked or withdrawn
• If the act is done without knowledge of the offeree, it is no
Acceptance of the offer.
Communication of Proposal and its
Acceptance
1)Communication of Proposal
• An offer must be communicated to the offeree
• When are the special conditions binding offeree?- must be
expressed in writing
• Mode of communication of the Proposal- (Expressed/
Implied)
• When is communication of a proposal complete?
2) Communication of Acceptance :
• Acceptance must be communicated to the Offeror
• Brogden vs Metropolitan Railway – Manager of railway company- received proposal
letter for supply of coal- wrote accepted on back l of letter- put in drawer and forgot –
no contract
• Mode of communication of the Proposal- (Expressed/ Implied)
• Carbolic small ball Co. vs Mrs. Carill- where the former offers $100 whoever contracted with
influenza using their product-Mrs. Carill used and suffered a disease. The company objected
that she should have notified it –
• Held : use of product constitute acceptance
 Mere silence is not acceptance
• If the offeree fails to respond to an offer made to him, his silence can not
be confused with acceptance. But, there is an exception to this rule. It is
stated that, within 3 weeks of the date on which the offer is made, the
non-acceptance shall be communicated to the offeror. Otherwise, the
silence shall be communicated as acceptance.
• https://blog.ipleaders.in/law-of-contracts-notes/
• Revocation of proposals and acceptances.—A proposal may be revoked at any time before the
communication of its acceptance is complete as against the proposer, but not afterwards.
• An acceptance may be revoked at any time before the communication of the acceptance is
complete as against the acceptor, but not afterwards. Illustrations A proposes, by a letter sent by
post, to sell his house to B.
• B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or
at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his
acceptance at any time before or at the moment when the letter communicating it reaches A,
but not afterwards.
• Revocation how made.—A proposal is revoked—
• (1) by the communication of notice of revocation by the proposer to the other party;
• (2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time, without communication of the acceptance;
• (3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
• (4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the
knowledge of the acceptor before acceptance.
 A proposal may be revoked at any time before the communication of acceptance is complete as against
the proposer but not afterwards.  An acceptance may be revoked at any time before the communication
of acceptance is complete as against the acceptor but not afterwards.
M, by a letter posted on 1st June, offers to sell his car to N for 5 lakhs. The letter reaches N on 3rd of June.
N accepts the offers by a letter posted on 5th. The letter reaches M on 7th.
Communication of offer -3rd June. Communication of acceptance- as against the proposer- 5th June As
against the acceptor- 7th June Proposal can be revoked – before 5th June Acceptance can be revoked –
before 7th June Lapse of offer:  Revocation  Lapse of time  Death or Insanity of offerer
 Counter Offer
 Acceptance not as per the prescribed mode
 Destruction of subject matter of contract  Rejection of offer by offeree.
B offered to sell his house to A forRs.50,000. A accepted the offer by post. On the next day, A sent a
telegram revoking the acceptance which reached B before the letter. Is the revocation of acceptance
valid? What would be the effect if both the letter of acceptance and the telegram of revocation of
acceptance reach B at the same time?
  Yes. The revocation of acceptance is valid because the acceptor may revoke his acceptance at any time
before the letter of acceptance reaches the offeror.  If both letter and telegram reach B at the same time,
the formation of contract will depend on the fact – which of the two is opened first by B. If B reads the
telegram first, revocation is valid, but if the letter is read first, revocation is not possible.
Revocation (withdrawal)of Proposal
By communication of Notice of Revocation
By Lapse of reasonable time
By lapse of reasonable or the prescribed time limits
By failure of a condition, precedent to acceptance
By Death, insanity of proposer/ Offeree
Revocation of a proposal by a Counter Offer
Revocation by refusal or rejection of an offer (Expressed/implied)
Revocation of Acceptance :-an acceptance may be revoked at any
time before the acceptance comes to the knowledge of the
proposer but not after words
1.3 Consideration S 2(d)
QUID PRO QUO- Something to Return- The price of a promise
 Legal requirements as to consideration
• Must move at the desire of the promisor- Section 2d of the Indian Contract Act, 1872, clearly mentions that the
consideration should be at the desire of the promisor if the consideration is made at the will of the third
person or is not according to the promisor then it is not a good consideration.
• Can move from the promisee or another person- Unlike English law in which the consideration must move at
the desire of the promisor, in Indian law as long as there is consideration it is immaterial as to who has furnished
it. Moreover, in the case of Chinnaya vs. Rammyya the consideration can also move at the desire of the third
party but only in the condition where he is the beneficiary of the contract. 

• Facts: A lady granted/ gifted a property consisting of some land to her daughter (defendant) by a gift deed. The deed was registered to the
proper authorities. One of the terms of the deed was that the daughter had to pay a sum of Rs.653 annually to her sister. Later the old
lady died, and the defendant refused to pay the money the sister whom she had promised to pay so. And hence the plaintiff sued the
defendant for the recovery of the same.
• Issue: Whether the plaintiff can bring an action against the defendant for the amount promised in a contract where the consideration for
such promise has been furnished by the mother of the defendant (plaintiff’s sister)?

• Can be an act, abstinence or even a promise- If the promisee does something or abstains from doing something
for the promisor, at his desire, then it will be a good consideration.
• Consideration need not be adequate- It is not necessary that the consideration is equal or adequate for the
promise made. However, it is mandatory that the consideration should be something in which the law
attaches some value. It is for the parties to decide the value of the consideration and not a court of law. For
• example- A sells a table to B and B gives him rs 500. It will be difficult for the court to ascertain the value of
the table, so if A is satisfied with the amount given then the consideration is valid.
• Should be real- although the consideration need not be adequate it should be real and not illusory. The
consideration should not be physically impossible, legally not permissible or based on an uncertain event or
condition.
• Should not be something which the promisor is already bound to do- a consideration to do something
which the promisor is already required to do is not a good consideration. For example- the public duty done
by a public servant.
• Should not immoral, or against the public policy of the state- under Section 23 of the Indian contract it is
given that consideration should not be illegal, immoral or against public policy. The court should decide the
legality of the consideration and if found to be illegal then no action on the agreement should be allowed
 Section 2(b)- Consideration
When at the desire of the promisor, the promisee or any other person
• Has done, or abstained from doing or
• Does or abstain from doing or
• Promises to do or to abstain from doing something, such act, abstinence, or, promise is
called a consideration for the promise

• Past consideration is not valid in English law

• But it is valid in Indian law
 Examples
• A promises to B to sell his car to him for Rs.15,000. B accepts the proposal.

• A Promises not to file a suit against B, if he pays a sum of Rs.5,000 by a fixed date
to A. B accepts the proposal.(ABTAINANCE /FORBEARANCE )

Promisor – offeror Promisee – offeree

Who makes Offer To Whom the Offer is Made

Privity of Contract - The relationship that subsist between the parties who have
entered into contractual obligation
 Elements of Consideration
A consideration must move at the desire of a promisor
Chinnaya vs Rammaya

A consideration may be given by the promisee or by any other

person. Exceptions
•A Beneficiary under a Trust
A stranger to a contract can not sue upon it •An Assignee
•Marriage settlement, family
partition or arrangement
A Consideration can be past, present , future •An acknowledgment or Estoppel
•A contract made through an Agent
A Consideration can not be Adequate •Third party risk insurance contract

A Consideration must be real and not illusory

•Forbearance to sue
A consideration must not be illegal, immoral, or opposed to public •A compromise of disputed
policy claim
•Performance of pre existing
Performance of existing obligation is no consideration obligation
 Forbearance to sue 
•  Forbearance sue has always been regarded as valuable consideration. It is, indeed, a kind of abstinence, which
is so very clearly recognized as good consideration in the definition itself.
• “Forbearance to sue” means that the plaintiff has a certain right of action against the defendant or any other
person and on a promise by the defendant he refrains from bringing the action.
• The Patna High Court observed in Debi Radha Rani v Ram Das that: where a wife who is ready to sue her
husband for maintenance allowance has forborne to sue on her husband’s agreeing to pay her monthly
allowance by the way of maintenance, the contract supported by consideration as wife’s forbearance to sue
amounts to consideration for husband’s agreement for payment of maintenance allowance.
• Similarly in Kastoori Devi v Chiranji Lal the withdrawal of a pending suit by a wife against her husband was held
to be a good consideration for his promise to pay her maintenance
• Another easy illustration is in a decision of the Kerala High Court is that three depositors of a bank refrained
from demanding payment of their deposits, although they had matured and become payable, as the director of
the bank had given them a written agreement undertaking personal liability to return the amount with interest
at 6 per cent within 12 months.
• This forbearance to withdraw the amount or press for its repayment was held to be sufficient consideration for
the agreement within the meaning of section
Cases in which an agreement without a
consideration is Valid
• An agreement in writing and registered made out of Natural love and
affection
• Compensation for past voluntary services
• A promise to pay a time barred debt
• Creation of an agency
Types of Consideration
Present
Consideration

An executory or
Unlawful
future
Consideration
Consideration

A past
Consideration-
Unreal / Illusory recognized in
Consideration Indian law only
and not in
English Law
• Past consideration
• It is the consideration which is made before the agreement. It is something which the promisee has already done
at the desire of the promisor. 
• For example- A rescues B. B promises to give him Rs. 1000 for the same. Here it is a past consideration as the act
of rescuing happened before any agreement.
• past consideration which is not valid under English Law. the report of the law commission of England proposes to
remove this rule.
• In India however, there is no compulsion to follow the English law and past consideration is regarded to be valid. 
• Past act at request good consideration
• Past voluntary service -If a person renders voluntary services without any request or promise from another and
the person receiving the services makes a promise to pay for the services, then such a promise is enforceable in
India under Section 25(2) of the Indian Contract Act, 1872
• For Example- Peter finds Noah’s wallet on the road. He returns it to him and Noah promises to pay Peter Rs 500.
This is a valid contract under the Indian Contracts Act, 1872.
• Past service at request past and executed -An act done before the giving of a promise to make a payment or to
confer some other benefit can be a consideration for the promise.
• Executory consideration
• Consideration may be something which is done or in the process of being done. It also consists of an act
which is promised to be done in the future.
• For example- if A promises to pay B when he will sell the goods to him. Until time A does not get the
goods, the consideration is executory, when he got the goods and paid for the same, the consideration
is executed. If B does not sell the goods then A could also breach for the suit.
• Value need not be adequate
• Consideration is defined as an act of abstinence from doing something, at the desire of the promisor.
The consideration should be of some value in the eyes of law, but the courts have been very liberal in
interpreting and anything of value by the parties is regarded as a valid consideration.
• Inadequacy as evidence of imposition
• The inadequacy of consideration is regarded to check whether the consent is freely given.
• For example- A agrees to sell his property worth Rs 1 crore to B for Rs 10,000. denies that his consent
for the sale of the property was not freely given. A party seeking to set aside the transaction based on
the inadequacy of the consideration must show that he was unable to understand it or was by way of
some imposition.
 Lawful consideration and Object

If it is of such a
nature that if If it involves or
Agreement for
permitted, it implies injury to
Forbidden by If it is unlawful
would defeat the person or
Law fraudulent consideration of
the provisions property of
object in part
of any statutory another
law
• If the court regards it as immoral or opposed to public policy
1. Agreement between citizens of enemy countries
2. Agreement for stifling prosecution- compromising for non
compoundable crimes like grievous hurt
3. Agreement for marriage brokerage
4. Agreement interfering administration of justice
5. Agreement interfering public duty
6. Agreement for sale of public office
7. Agreement in restraint of marriage
8. Agreement for maintenance or champetry
8. Agreement in restraints of legal proceedings
9. Agreement to defraud third persons
10. Agreement create a monopoly
11. Agreement for waiver of illegality
12. Agreement in restrain of trade
13.Agreement between lawyer and Client
14.Foreign Awards
15. Non compliance of court’s order
1.4 Capacity of Contract
Section 11
 Person not competent to
contract

Not of sound mind- Disqualified from

Not attained the age Lunatic, an Idiot, contracting by any
of majority suffering from similar law to which he is
disability subject
 5. COMPENTENCY / CAPACITY OF PERSONS
PARTIES. TO ENTER INTO A CONTRACT
•

(1) Minor – A person who is below the age of 18 years.

• Major- A person who has attained the age of 18 years.
• Minor can enter into agreement through his guardian. However, any agreement entered into by
minor on his own accord (on his own) is “ VOID AB INITIO"- invalid from initial stages.
•
He who deals with a minor, does so at his awn (risk) peril.
•

e.g. Prince case.

PRINCE - 21 years of age- in love with a girl of 14 years - girl lies about her age- pretend to be 19 year
– both eloped, get married - caught by the cops- Price blames he confirm the age- girls parents shows
Birth Certificate.
girl set free - prince punished for entering into an agreement with a minor.
• Mohori Bibee vs. Dharmodas Ghose
1.The respondent, Dharmodas Ghose, a minor, had mortgaged his property in favor of the moneylender,
Brahmo Dutt for securing a loan amounting to INR 20,000/-.
2.Mr. Brahmo Dutt had authorized Kedar Nath to enter into the transaction through a power of attorney. Mr.
Kedar Nath was informed of the fact that Dharmodas Ghose was a minor through a letter sent by his
mother.
3.However, the deed of mortgage contained a declaration that Dharmodas Ghose was of the age of majority.
4.The respondent’s mother brought a suit on the ground that the mortgage executed by his son is void on the
ground that her son is a minor.
5.The relief sought by the respondent was granted and an appeal was preferred by the executors of Brahmo
Dutt before the Calcutta high court. The same was dismissed.
6.An appeal was then made to the Privy council. The Privy council held that-
1.  A contract with a minor is void-ab-initio.
2. Sec.7 of the Transfer of Property Act, 1882 states that a person competent to contract is competent to transfer a
property.
3. Hence, the mortgage executed by the respondent is void.
• However, if a minor enters into a contract and performs his part of obligations, the other party can be
compelled to perform and fulfill its obligations, and, in such instances, the contract becomes legally
enforceable.
• Effects of minor’s agreement
• Through Mohori Bibee vs. Dharmodas Ghose landmark judgment, the effects can be explained-
• No liability arising out of either tort/contract: A minor is incapable of giving consent, and the
nature of minor’s agreement is a nullity and cannot be enforced
• The rule of estoppel: Estoppel is a legal rule of evidence which prevents a party from alleging
something that contradicts what he previously stated. The court held that the doctrine of estoppel
does not apply to the case in which the person knows the real facts, beforehand and here the
attorney of the defendant knew that the plaintiff was a minor. Hence this rule does not apply.
• Restitution of benefit: According to Section 64 of the Indian Contract Act, when a person at whose
option a contract is voidable rescinds it, the other party need not perform it.
• This applies to contracts that are voidable, but a minor’s contract is void, and therefore, he cannot
be asked to refund the amount money to the moneylender
• In certain instances, a contract entered into by the minor or by the minor’s guardian for his
benefit is valid in the eyes of law-

1. A contract for marriage entered into by a minor/his guardian.

2. A partnership contract entered into with a minor admitting him to the benefits of a partnership. However,
the minor cannot be held personally liable for the losses incurred.
3. A contract relating to the minor’s property entered into by his guardian if it is for the benefit of the minor.
4. A contract of apprenticeship with a minor.
5. A contract supplying the minors with goods and services necessary for life.
• Websites such as YouTube expressly mention in their terms and conditions that any minor while using its
services represents that he has the permission of his parent/ guardian to do so.
• Parents and guardians are held liable for the child’s activity on such websites.
• Exception to general rule
• For providing protection to a minor, his agreement is void. But there are certain exceptions as well.
• When a minor has performed his obligation: In a contract, a minor can be a promisee but not a
promisor. So if the minor has performed his part of the promise, but the other party hasn’t the minor
being in the position of a promisee he can enforce the contract.
• A contract entered into by a guardian of a minor for his benefit: In that case, a minor can sue the other
party when it does not perform its promise.
• In the case of Great American Insurance v. Madan Lal the guardian on the behalf of her son entered
into an insurance contract in respect of fire for the minor’s property. When the property was damaged
and the minor asked for the compensation, the insurer denied it by saying that a contract with a minor
is a void one. But later the court held that this contract was enforceable, and he is liable to pay
compensation.
• Contract of apprenticeship: Under the Indian Apprentices Act, 1850, a contract of apprentice entered by
guardian on his behalf is binding on the minor
Necessities supplied to a minor                                                                        
• If a person is incapable of entering into a contract is supplied by another person with necessities of life, the
person who has supplied is entitled to get reimbursement from the property of such incompetent person,
including a child as well. But if the minor has no property of his own, then he cannot be bound to reimburse the
other person.
Can a minor be a partner?
• The way of a contract creates a partnership, and the essential of a contract is that the both the parties should be
of the age of majority. However, as an exception as per Section 30 of the Partnership Act is that with the due
consent of all the partners, the minor can be admitted to the benefit of partnership for the time being. But he
will not be liable for any of his acts.
Liability of a minor under the Negotiable Instrument Act
• As per Section 26 of the Act, a minor can draw, endorse, and negotiate and he can bind everybody except
himself.  Every person who is capable of contracting according to the law to which he is subject may bind himself
and be bound by the making, drawing, accepting, delivery and negotiation of a promissory note, cheque or a bill
of exchange.
Can a minor be an agent or principal?
• A minor can never be a principal because Section 183 of the Indian Contract Act for anybody to become a
principal should be of the age of majority and be of sound mind and since a minor is not competent to contract,
he also cannot employ an agent.
• But, a minor can become an agent as per the provisions of section 184 but the principal shall be bound by the
acts of the minor and he would not be personally liable in that case
 A Minor
• Section 3 of Indian Majority Act 1875 – Major- completed 18yrs

Exceptions:
1) When guardian of a minor’s property or
person is appointed by a court of law
Major-21 years
2) When minor’s property is taken over by
Court of Ward for management .-
Law related to Minor’s Agreement
• A Minor’s Agreement is void ab Initio- (Mohori bibee vs Dharamdas Ghose)
• A Minor’s property is liable for necessaries
• A Minor can a promisee or Beneficiaries
• A Minor’s Right to hold property and interest therein
• No Estoppel against a Statute and a Minor (Estoppel- law of evidence / formal law------
Contract law is subjective law which overrides formal law)
• No subsequent ratification of Minor ‘s Agreement
• No specific performance of a Minor’s Agreement
• No Insolvency for a Minor
• A Minor can be admitted to the benefits of partnership
• Minor can act as an Agent
• A Minor can not be a member of a Registered Company
• Contract by parent or Guardian for the benefits of a Minor
• Liabilities of a person standing as a surety for a Minor
• Liabilities of a person making a promise with a Minor in Favor of another person
(ii) Insane - lunatic - idiot
E.g. Ram insane -generally sound, occasionally unsound ---can enter into a agreement when is
sound always / general
Shyam insane - generally unsound -occasionally sound------ can enter into a agreement when he
is sound occasionally, sometimes.

A person who deals with an agreement has to prove whether the agreement was entered into
during the other party was sound or unsound.

(iji) Intoxicated person- Under the influence of drinks and drug can not enter into an
agreement when he is not under the influence

Qui peccat ebrius, luat sobrius - He who does wrong when drunk must be punished when
sober
 Persons disqualified by law
• Alien enemy- An alien enemy is the citizen of a country India is at war with. Any contracts made during the war period
with an alien enemy are void. An Indian citizen residing in an alien enemy’s territory shall be treated as an alien enemy
under the contract law. Contracts made before the war period either get dissolved if they are against public policy or
remain suspended and are revived after the war is over, provided they are not barred by limitation.
• Illustration- A, of country X, orders goods from B, of country Y. The goods are shipped and before they could reach Y,
country X declares a war with country Y. The contract between A and B becomes void.
• Convicts- A convict cannot enter into a contract while he is serving his sentence. However, he regains his capacity to
enter into a contract upon completion of his sentence.
• Illustration- A, is serving his sentence in jail. Any contract signed by him during this period is void.
• Insolvent- An insolvent is a person who is declared bankrupt/ against whom insolvency proceedings have been filed in
court/resolution professional takes possession of his assets. Since the person does not have any power over his assets, he
cannot enter into contracts concerning the property.
• Illustration- A enters into a contract for sale of goods with B. Before the sale takes place, an insolvency suit is filed against
A. A sell the goods to B during pendency of insolvency proceedings. The contract is valid.
• Foreign sovereign- Diplomats and ambassadors of foreign countries enjoy contractual immunity in India. One cannot
sue them in Indian courts unless they submit themselves to the jurisdiction of Indian courts. Additionally, sanction from
the central government is also required in such cases. However, the foreign sovereign has the authority to enforce
contracts against the third person in Indian courts.
• Body corporate- A company is an artificial person. The capacity of a company to enter into a contract is determined by its
memorandum and articles of association.
(iv) Alien
Alien-1)Friend at peace 2) Enemy at war

e.g Ram to send 100 shirts to shyam -Shyam to send 100 trousers
Date of contract I agreement → 1/1/2010
Date of performance - 31/12/2010
war breaks →1/5/2010

OPTION 1 - Cancel the contract on 1/5/2010

OPTION 2: - Wait for the date of performance country at war
may become country at peace.
• (v) Ticket an leave
[a] Date of agreement - 1/1/2010 (vi) REFUGEE
Date of performance → 1/5/2010 A person who seeks/ takes
• shelter/ refuge in another
Ram goes in jail
Shyam has two option nation refers as ticket on leave
•
(i) wait for Ram to come out and perform agreement. (vii ) CRIMINAL- (Refers
(II) Cancel the agreement.
refugee//ticker an leave).
•
[b] Date of Punishment / sentence- 1/1/2010
Punishment will get over on -31/12/2010
Ram and shyam contract on -1 /5/2010
Dade of performance-1/1/2011

AREEMENT - INVALID.
•
[c] Date of Punishment / sentence- 1/1/2010
Punishment will get over on -31/12/2010
Good Behavior - Concession in sentence -I month
• (ticket on leave)
can enter into an agreement during ticket on leave
Agreement by PERSON OFUNSOUND
MIND (S-11,12)
• The capacity to understand the T&C of the Contract
• Ability to form a rational

Agreement by an Idiot
Agreement by Lunatic
Agreement by a Drunkard
Presumption of Soundness and Unsoundness of Mind
Contract by a person of unsound mind for his benefits
Agreement with Alien Enemy

Agreement with Foreign Sovereigns Natural Possibility

Contract by Corporation
Legal possibility
Contract by insolvents

Contracts by convicts
Agreement by Disqualified person
Agreement with Alien
Enemy

Alien Friend Alien Enemy

During continuance of
Contract before War
War
 1.5 Consent and Free
Consent (s- 13-14)
undue
Coercion fraud misrepresentation Mistake
influence
• Consent is said to be free when it is not caused by coercion, undue influence, fraud,
misrepresentation and Mistake.
• Consent is an essential element of a valid contract. In its absence, the contract becomes void or
voidable depending on the circumstance.
• Consent means providing the party with an opportunity to exercise his/her volition ( power of using
one's will)with respect to the contract. For a valid acceptance to the proposal, the assent must be
voluntary and genuine. As discussed earlier assent is required to form a valid agreement.
• Assent here refers to the opportunity to exercise one’s volition. Where consent to an agreement is
not free i.e. has any of these factors- coercion, undue influence, fraud or misrepresentation, the
agreement is a contract voidable if the other party so chooses whose consent was obtained on the
basis of vitiating factors.
• If, for example, a person is induced to sign an agreement by fraud, he may, on discovering the truth,
either uphold the contract or reject it.
• Where consent is caused by mistake, the agreement is void.
• A void agreement cannot be affected by the party [Section 2(g)]  An agreement which is void doesn’t give
rise to legal consequences and is void ab initio  These agreements are not enforced by the court or we can
call this agreement as ‘’ An agreement not enforceable by law’
 Difference between consent and free consent
• Section 13 defines consent: 
• An agreement where both parties share common intention relating to the terms of the contract is known as
true consent or consensus ad idem and is at the root of every contract.
• Free consent is defined under the act as consent which is not caused by coercion, undue influence, fraud,
misrepresentation and mistake.
•  Every free consent is consent but every consent is not a free consent.

• Void Agreement and Void Contract

• Void agreement is an agreement not enforceable by law. A contract which is not recognised by law. There can
be no action instituted in a court of law to claim rights against parties.
• Void agreement is void right from the day the agreement is constructed while a void contract becomes void at
a later stage. In a void contract, the voidness creeps because of some incident or change in circumstance
which is not through the fault of the parties.
• Void agreements have been specifically stated in chapter 2 of the act under Sections 11,20, 23 to 30 and 56.
No such specific mention has been made for a void contract under any chapter of the Act.
Consent – Consent is said to be free when it is not
AD IDEM caused by
1) Coercion (S-15)
2) Undue influence (S-16)
3) Fraud (S-17)
4) Misrepresentation (S-18)
5) Mistake (S-20-22)

Contracts
are
Consent is voidable-
the root of avoided by
Agreement the party if
Two or more persons are said consent when consent is
they agree upon the same in the same sense not free
 Coercion/ Duress –S 15
It means –
1. The committing or threatening - to commit any act, which is forbidden by IPC, The unlawful detaining or
threatening to detain any property
2. It may proceed from any person including a person who is not party to the contract.
3. The act or threat which constitute coercion may be directed against any person and not necessary against
the other party to the agreement
4. The act or threat must have been actually committed or given with the intention of causing any person to
enter into an agreement
5. It does not matter whether the IPC is or is in not in operation in the place where the coercion is employed.
• Example
• ‘A’ went out for a walk, ‘B’ approaches ‘A’ with a stranger, pulls out his gun and asks ‘A’ to give all his
possessions. The consent of ‘A’ is obtained by coercion here.
• Effect
• Coercion has the effect of making the contract voidable.
• It implies that at the discretion of the party whose consent was not free, the contract is voidable. The
aggravated party will, therefore, determine whether to enforce the contract or to cancel the contract.
 Consequences of Coercion
1.The contract is voidable at the
will of other party 2. Special Cases

The aggrieved party may-

•Avoid the contract
•Refuse to perform it
•Abide by contract
•A threat for prosecution is not a coercion
•A threat to commit suicide amounts to
coercion
• Burden of proof 
• The burden of proof lies with the party defending the coercion. The burden of proof is heavier on him. This is because pure
probability or fear is not a threat. In order to create coercion, a person must show that there was a risk that was prohibited by law
and that forced him to enter into a contract that he would not otherwise have
• The term ‘duress’ corresponds to coercion in English law. However, Coercion under the Indian Contract law has a wider amplitude
than duress under the English law

Coercion
Coercion can be employed against any
person
Immediate violence subsequent to coercion
is not an essential element.
Unlawful detention of goods is a kind of
coercion.
Duress
Duress can be employed only against the life
or liability of the other party to the contract
or members of his family.
Duress must cause immediate violence.
Unlawful detention is not duress under the
English Law.
 Techniques of causing coercion
• Consent is said to be caused by coercion when it is obtained by some act which
compels the other party; 
1.Threatening or doing something which is a crime under IPC; or
2.Seizing or confining someone/ detaining.

• An illustration under the First category would be Consent given at the point of a
knife, or by threatening to injure someone, or by intimidation or by threatening to
destroy a man’s property. 
• An example of the second type will be a case where the plaintiff had pledged his
plate with the defendant for $20. When he went to redeem it the pledge insisted
that an additional $10 interest was also owed. The plaintiff paid this to redeem his
plate and then sued to recover it back. The court allowed it and the defendant had
taken advantage of the situation and extracted an amount which was not lawful.
 C. Undue Influence (S-16)
I. There are 3 constituent elements (Conditions) of undue influence –
a) On party must be in a position to dominate the mind of the other party to the contract
b) The dominant party must secure from the contract un unfair advantage i.e. any gain, benefits of advantage
obtained by undesirable means
c) This unfair advantage must spring from the use of that dominant position.
• According to Section 16 of the Indian Contract Act, 1872 an influence will be considered as Undue Influence when:
• One party to the contract is in a position of trust and controls the other party wrongfully.
• Such a person uses his dominant position to gain an unfair advantage over the other.
• There are two key elements of undue influence-
1. The relationship- trust, confidence, authority.
2. Unfair persuasion- careful examination of the terms of the contract
• Where one party is in a fiduciary relation to the other party Fiduciary relationship means a
relationship of trust and confidence.
• When a person imposes faith and confidence on the other, he expects not to be betrayed. If
the other party betrays the confidence and trust reposed in him and gains an undue influence.
• Examples of fiduciary relationship includes:
• Solicitor and client;
• Trustee and trust ;
• Spiritual adviser and devotee;
• Medical attendant and patient;
• Parent and child;
• Husband and wife;
• Master and servant;
• Guardian and ward.
• In other words, we can say that Undue influence occurs when the decision of another party to
the transaction can be influenced by one party.
• Example
• ‘A’ sold his gold ring to his teacher ‘B’ for Rs 200 after he had been offered good grades by his
teacher. Here, A’s permission is not given freely, he was influenced by his teacher.
• Effect
• The effect of undue influence makes an agreement voidable at the option of the party whose
consent was caused. Any such contract can be set aside. Only a party to the contract can avoid or
rescind the contract. This right does not lie in the hands of the third party.

• Burden of Proof
• If the plaintiff wants to bring an action to stop a contract entered into on the grounds of undue
influence, two issues must be kept in mind. The law states that in order for a plaintiff to prove that
he was under undue influence, two things must be established
1.Not only must the defendant has a dominant position but,
2.He must use it.
• It states that it’s not enough for the plaintiff to show the possibility of undue influence that may
have been exercised by the dominant party. It must be certain that a person used his position to
influence the plaintiff. A possibility of the same is not enough for the plaintiff to avoid a contract.
 II. Presumption of the existence of undue
influence

One party holds the

One party stands in a If other party’s mental
Real or Apparent
Fiduciary (mutual trust capacity is temporarily
Authority over other
and confidence) affected
party
relation
E.g. Master & Servant

•Father & Son

•Guardian & Ward
•Solicitor & Client
•Trustee & Beneficiary
•Preceptor & Disciple
When is undue influence suspected?
• Inadequate consideration
• Fiduciary relation between the parties to the contract
• Inequality between the parties to the contract regarding
age, intelligence, status
• Absence of independent advisers for the weaker party
 III. Presumption of User of IV. High Rate of Interest and High
Dominant position Prices
(Unconscionable Transaction)

VI. What are the consequences of

Under Influence ?
V. Pardanishin Women- Voidable at the option of the party
whose consent was so caused
 Pardanashin lady
• In the case- Ashok Kumar and Anr. v. Gaon Sabha, Ratauli And Ors it has been observed as
• Not only because of parda itself, the law throws its protection around a pardanashin lady, but because of the hoe
impairments to which the life of a group of people living in seclusion gives rise to the disabilities and from which a
pardanashin lady suffers.
• A pardanashin woman can be easily manipulated by someone because of her limitations and incapacity to
recognize the terms of a contract. She may be forced to sign a contract which is not in her favour. Anybody can use
their disabilities against her to their own benefit.
• The legislature recognized the issue and saw a need to protect pardanashin women. They did so by offering cover
under contract law
• She has been protected under the provision of undue influence mention in section 16 of the Indian contract act.
• A pardanashin woman is susceptible to undue influence and therefore, the law throws around her a “Special cloak
of protection” i.e. Where such a woman signs a sale, mortgage, gift or release, the person obtaining her signatures
has to prove that the transaction was not only explained to her but also that she had understood the transaction
and that there was no undue influence.
• The general practice of assuming that the person signing the contract has understood it is not followed in the case
of a pardanashin woman. [9] The case of a pardanashin woman is considered exceptional and the other party has
to prove that the pardanashin woman was not influenced and she fully understood the situation she was getting
herself into just like any other reasonable person would.
 BASIS FOR
COMPARISON COERCION UNDUE INFLUENCE
Meaning Coercion is an act of threatening which Undue Influence is an act of influencing the will
involves the use of physical force. of the other party.

Sections It is governed by Section 15 of the It is governed by Section 16 of the Indian

Indian Contract Act, 1872. Contract Act, 1872.
Use of Psychological pressure or Physical force Mental pressure or Moral force

Purpose To compel a person in such a way that To take unfair advantage of his position.
he enters into a contract with the other
party.
Criminal Nature Yes No
Relationship The relationship between parties is not The act of undue influence is done only when
necessary. the parties to the contract are in relationship.
Like teacher - student, doctor - patient etc.
Fraud (S 17 & 19)
• When one party or his agent with the intention to deceive another
• The suggestion.
• The active concealment.
• Promise made without any intention of performing it.
• Any other act fitted to deceive.
• Any such act or commission as the law specifically declared to be
fraudulent.
Constituent Elements Can Silence be
Fraudulent ?
Commission
of an act to Active
deceive concealment Mere silence does not
another of a material constitute Fraud
party fact

False
statement
• When silence is fraud
• Duty to speak (contracts uberrima fides):  Duty to speak arises where one contracting party reposes trust
and confidence in the other. A father, for example, selling a horse to his son must tell him if the horse is
unsound, as the son is likely to rely upon his father.
• Duty to disclose the truth will arise in all cases where one party reposes, and the other accepts confidence. 
• This duty to speak is also expected from the party when the other party has no means to discover the truth
and has to depend on other parties’ judgment or assessment
• A perfect example of this would be a contract of insurance wherein an insurance company knows nothing
about the life or situation of the insured. It is, therefore, the duty of the assured to put the insurer in
possession of all the material facts affecting the risk covered. 
• A contract of insurance is, for this reason, called a contract of absolute good faith, uberrima fides.
• This case where the plaintiff spent a sum of money to mark the engagement of his son. He then discovered
that the girl suffered from epileptic fits and so broke off the engagement. He sued the other party to
recover from them compensation for the loss which he had suffered on account of their deliberate
suppression of a vital fact which amounted to fraud. 
• The court concluded that a mere passive non-disclosure of the truth, however misleading in fact, does not
amount to fraud, unless there is a duty to speak. It was observed that the law imposes no general duty on
anyone to broadcast the blemishes of his female relations; not even to those who are contemplating
matrimony with them. 
• There was no fiduciary connection between the parties. The engagement was, however, held to be
voidable by reason of the misrepresentation, but the plaintiff was not entitled to recover any
compensation under Section 75 of the Contract Act.
• Where silence is deceptive: Silence is sometimes itself equivalent to speech. A person who keeps silent,
knowing that his silence is going to be deceptive, is no less guilty of fraud. Where, for example, the buyer
knows more about the value of the property, which is the subject of sale, but prefers to keep the
information from the seller, the latter may void the sale.
• Change of circumstances: Sometimes a change in circumstances might take place in the intervening
period, between the representation of facts and when the contract is entered into. When this happens it
is the duty of the person who made the representation to communicate the change of circumstances. 
• A medical practitioner represented to the plaintiff that ‘his practice was worth $2000 a year’.
• The representation was true. Five months later when the plaintiff actually bought the practice, it had
considerably gone down on account of the defendant’s serious illness. It was held that the change of
circumstances ought to have been communicated.
• Half-truths: Even when a person is under no duty to disclose a fact, he may become guilty of fraud by
non-disclosure if he voluntarily discloses something and then stops halfway
• A person may be silent, but if he speaks, a duty arises to disclose the whole truth. ‘’ Everybody knows
that sometimes half a truth is no better than a downright falsehood’’
III. What are the consequences (effects) of
Fraud?
Not Voidable- If
Voidable at party can
option of the discovering the
party – if truth with
caused by fraud ordinary
diligence

Aggrieved
Civil wrong or
person can
tort- aggrieved
insist on the
person can sue
performance of
for damages
the contract
• Effect
• The contract arising from fraud is a null contract.
• The misled party has the right to withdraw from the contract.
• Due to the fraudulent agreement, the party is responsible for recovering the damages.
• Evidence and Burden of proof 
• In a large majority of cases, fraud can not be proved by concrete and observable proof. It’s
hidden in its movement by its definition. If the evidence given is such as lead to
wrongdoing, it is, therefore, appropriate that fraud must have been committed. In most
cases, the only tool for dealing with fraud issues is circumstantial evidence.
• If this were not allowed, the ends of justice would be constantly, if not invariably, defeated.
• Simultaneously, fraud involvement is only to be blamed on a deliberate wrongdoer. As a
remedy for restitution, any real damages arising from fraud can be recovered, even if they
could not have been reasonably foreseen subject to the defrauded party’s mitigation law.
Due to contributory negligence, the penalties would not be diminished.
 MISREPRESENATATION (SQ-18,19)
• It means a false statement made by a person, who honestly
believes it to be true or who does not know it to be false
• It includes non disclosure of a material facts without any intent
to deceive the other person
Definition- elements Consequences
• Unwarranted positive • Voidable at the option of the
assertion party
• Breach of Duty • Aggrieved party may insist
• Innocent Mistakes that the contract shall be
performed
• There can be no suit for
damages
• Where a representation acquires the status of being a term of the contract, and it turns out to be false, the
disadvantaged party may, not only avoid the contract but also sue for damages for breach.
• Where the seller of a car stated that the car had done only 20,000 miles, the representation being untrue, the
buyer was allowed to recover compensation for the misrepresentation.
• Breach of Duty
• Any breach of duty which is beneficial to the person committing it by confusing the party to his harm is a
misrepresentation. This clause covers all cases which are called as cases of ‘constructive fraud’, in which there is no
intention to deceive, but where the circumstances are such as to make the party who derives a benefit from the
transaction equally answerable in effect as if he had been actuated by motives of fraud or deceit’’.
• Inducing mistake about subject-matter
• 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 is also misrepresentation (Section 18 (3)). The subject-matter is the core of the
agreement. This has to be of the quality or value which the parties expected at the time of constructing the
agreement. If one of the parties leads the other, however innocently, to make a mistake as to the nature or quality
of the subject-matter, there is a misrepresentation.
• Example: The government auctioned certain forest coupes. A part of the land was occupied by tenants. The forest
department knew this fact but did not disclose it to the purchaser. The contract was held to be vitiated by
misrepresentation. The purchaser was allowed to recover damages for loss. 
Suppression of vital facts
Misrepresentation may also arise from the suppression of vital facts. Cases of concealment or suppression will fall
either under sub-Section (2) when it amounts to a breach of duty or under sub-Section(3) when it leads the other party
to make a mistake about the subject-matter of the agreement.
In R. v Kylsant, the prospectus of a company stated that the company had regularly paid dividends, which created the
impression that the company was making profits, whereas the truth was that the company had been running into
losses for the last several years and dividends could only be paid out of wartime accumulated profits. This was held as
a Misrepresentation.
Expression of opinion
A mere expression of opinion cannot be regarded as a misrepresentation of facts even if the opinion turns out to be
wrong. In some cases, a statement of opinion may also amount to misrepresentation. 
It is a mistake to assume that a statement of opinion cannot involve a statement of fact. When knowledge of the
parties is not on the same footing then a statement of opinion by the person who is more knowledgeable, his
statement has a material fact for he tacitly claims information which justifies his opinion.
Of material facts
A fact is said to be material if it would affect the judgment of a reasonable person in deciding whether to enter into the
contract and, if so, on what terms. Misrepresentation of the age of a car, showing it to be five years younger, was held
to be material because it affected the price which a willing purchaser would have liked to pay for it.
Inducement 
 The misrepresentation must be the cause of the consent, in the sense that but for the misrepresentation
the consent would not have been given. It must have played a substantial role in the plaintiff’s decision to
enter or not to enter into the contract.
The representation must be made with the intention that it shall be acted upon by the other party.
There would be no misrepresentation, even if the advertisement was false if the buyer had inspected the
goods before buying them unless he was the victim of some concealed defect which could not be known by
external examination.
Means of discovering the truth
A party cannot complain of misrepresentation if ‘’ he had the means of discovering the truth with ordinary
diligence’’.
A person who bought a quantity of rice was precluded from alleging misrepresentation about its quality
because he lived very near the place where the goods were lying and, therefore, might have discovered the
truth with ordinary diligence.
• Example
• ‘A’ told ‘B’ that his radio is in good condition, because of the confidence he had in ‘A’, ‘B’
bought the radio from him. The radio did not work properly after some time, ‘B’ thought
he was misled by ‘A’, but ‘A’ believed his radio was in good condition and had no
intention of deceiving him. So, here misrepresentation is in the part of ‘A’, because he did
not know that the radio is not working properly.
• Effect
• If the party that has suffered as a result of the misrepresentation when entering into a
contract may choose to terminate the contract, rescind the contract within a reasonable
time under the Specific Relief Act 1963.
• Kinds of Misrepresentation
• There are two types of misrepresentation:
• Negligent Misrepresentation
• It is considered to be a negligent misrepresentation when the misrepresentation happens due to lack of any
reasonable ground and carelessness;
• Negligent misrepresentation is only known when the representative owed a duty to representee to handle
carefully;
• An individual would only be liable if, in particular, he had ignored the duty specified;
• Even when there is no fiduciary relationship, responsibility exists between the two parties.
• Innocent misrepresentation
• If the portrayal is based on a good reason to believe and there is no error and malicious motive, then it is said to be
an innocent misrepresentation.
• When a person enters into a contract with an innocent misrepresentation, he or she has the right to withdraw from
the contract but is not entitled to damages.
• Unless there are reasonable grounds, a contract will not be void. It would be enough to prove innocence in
misrepresentation to prove the fact.
• Burden of Proof
• The burden of proof is on the defendant to show that the misrepresentation was not rendered fraudulently by
showing that “He had reasonable grounds to believe that the evidence portrayed were valid during the time when
the contract was made.” The party making the misrepresentation carries a heavy burden of proof.
 BASIS FOR FRAUD MISREPRESENTATION
COMPARISON
Meaning A deceptive act done intentionally by The representation of a misstatement, made
one party in order to influence the innocently, which persuades other party to enter
other party to enter into the contract is into the contract, is known as misrepresentation.
known as Fraud.

Defined in Section 2 (17) of the Indian Contract Section 2 (18) of the Indian Contract Act, 1872
Act, 1872
Purpose to deceive Yes No
the other party
Variation in extent of In a fraud, the party making the In misrepresentation, the party making the
representation knows that the representation believes the statement made by him
truth statement is not true. is true, which subsequently turned out as false.

Claim The aggrieved party, has the right to The aggrieved party has no right to sue the other
claim for damages. party for damages.

Voidable The contract is voidable even if the The contract is not voidable if the truth can be
truth can be discovered in normal discovered in normal diligence.
diligence.
 Contracts UBERRIAMAE FIDEL
• Uberrima fidesis a Latin phrase meaning "utmost good faith" (literally, "most
abundant faith").
• It is the name of a legal doctrine which governs insurance contracts.
• This means that all parties to an insurance contract must deal in good faith,
making a full declaration of all material facts in the insurance proposal .
• EXAMPLES
• Insurance contracts
• Fiduciary relationship
• Allotment of shares of companies
Violability of Agreement without consent
• Violability of Agreement without free consent
• Performance of the contract
• Contract is not voidable if consent was not caused by fraud
or misrepresentation- can be found out by ordinary
dilegence
• Power to set aside contract, induced by undue influence
Mistake in law
• an erroneous belief concerning something.
• It can be Mistake of Law or Mistake of Facts
Ignorance of Agreement
Law of the law is not an can not be
country excuse avoided
Mistake of law
Law of a Ignorance of Agreement
foreign law is an can be
country excuse avoided
• There are two forms of  mistake under Indian Contract Law:
1.The mistake of Fact,
2.The Mistake of Law.
• Mistake of Fact
• A mistake of fact arises when one or both of the contracting parties have misunderstood a term that is
essential to the meaning of the contract;
• Such a mistake may be done due to confusion, negligence or omission, etc;
• A mistake is never intentional, it is an innocent overlooking.
• Such mistakes can be either unilateral or bilateral
• Bilateral Mistake (Section 21)
• When both the parties to a contract are under a mistake of fact, essential to the agreement, such a
mistake is known as a bilateral mistake. Bilateral mistakes are also sometimes referred to as mutual or
common mistakes. All the parties do not agree to the same thing and in the same way, which is the
concept of consent. Since there is no consent, the contract is null and void.
• Example
• ‘A’, agrees to buy a cow from ‘B’, but it turns out that the cow was dead at the time of the deal, although
the fact was not known to any party. The arrangement is considered invalid
• Unilateral Mistake (Section 22)
• A unilateral mistake occurs when only one party to the contract makes a mistake. The contract will not
be void in such a case. It is specified in Section 22 of the Act that the contract will not be void just
because one party made the mistake. So if only one party has made a mistake the contract remains a
valid contract.
• Example
• ‘A’ enters into an agreement with ‘B’ for the purchase of horse which he assumes to be a racing horse.
‘A’ do not confirm from ‘B’. In actual a horse is not a racing horse. ‘A’ cannot rescind the contract.
• Mistake of law
• The mistake may be related to the mistake of Indian laws, or it may be a mistake of foreign laws. If the
mistake applies to Indian laws, the principle is that the  law’s ignorance is not a sufficiently good
excuse. This means that either party cannot claim that it is not aware of the law.
• The Contract Act states that, on the grounds of ignorance of Indian law, no party can claim any relief.
This will also include an incorrect interpretation of any legal provisions.
• However, similar treatment is not given to ignorance of foreign law. Ignorance of foreign law provides
some leeway, the parties are not expected to know foreign law and its meaning. Therefore, under the
Indian Contract Act, an error of foreign law is actually treated as a mistake of fact.
2) Void agreement due to bilateral mistakes of facts
3) An erroneous opinion is not a mistake of fact
4) Void agreement due to the bilateral mistake as to the possibility
of the contract
5) Unilateral mistakes
6) Void agreement due to unilateral mistakes :
a) Unilateral mistakes as to identity of the person contracted with
b) Unilateral mistakes as to the nature of contract.
Remedies for Mistakes
• Obligation of a person who has received advantage under
void agreement or contract
• Liability of a person to whom money is paid or thing
delivered by mistakes or under coercion.
 LAW OF
CONTRACT- 1872

Contract of Indemnity
Contract of Bailment Contract of Agency
and Guarantee (S-
(S- 148-181) (S- 182-238)
124- 137 )

Section 77to 123 got repealed – now Section 239 to 266 repealed – now
embodied in SALE OF GOODS ACT enshrined in PARTNERSHIP ACT
1930 1932