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Acceptance

‡ Who can accept offer ? Acceptance of a particular offer: When an offer is made to a particular person, it can only be accepted by him alone. If it is accepted by any other person, there is no valid acceptance. The rule of law is clear that if you propose to make a contract with µA¶, µB¶ cannot substitute himself for a A µ without your consent.

Example of µan acceptance of a particular offer¶.

‡ Boulton bought a hose pipe business from Brocklehurst. Jones to whom Brocklehurst owed a debt, placed an order with Brcklehurst for the supply of certain goods. Boulton supplied the goods even though the order was not addressed to him. Jones refused to pay Boulton for the goods because he, by entering in to contract with Brocklehurst, intended to set off his debt against Brocklehurst. ‡ Held, the offer was made to Brocklehurst and it was not in the power of Boulton to step in accept and therefore there was no contract . [Boulton Vs. Jones(1857)]. ‡ Under a quasi contract, Boulton can however recover the goods from Jones.

Acceptance of a general offer

‡ When an offer is made to world at large, any persons to whom the offer is made can accept it [Mrs.Carlill Vs.Carbolic Smokeball Co.(1893)]

Legal Rules as to Acceptance

The acceptance of an offer is the very essence of a contract. To be legally effective, it must satisfy the following conditions: ‡ 1.It must be absolute and unconditional i.e., it must conform with the offer. ‡ 2.It must be communicated to the offeror ‡ 3.It must be according to the mode prescribed or usual and reasonable mode. ‡ 4.It must be given within a reasonable time.

It must show an intention on the part of the acceptor to fulfill terms of the promise.It cannot precede an offer.It cannot be implied from silence. ‡ 8.«. . ‡ 7. ‡ 9.Legal Rules as to Acceptance ‡ 5.must be given by the party or parties to whom the offer is made..It must be given before the offer lapses or before the offer is withdrawn. ‡ 6.

there is no contract. in order to be binding. must be absolute and unqualified [Sec. it must conform with the offer. major or minor. whether material or immaterial.. It must be absolute and unconditional i. [ Rutledge Vs . there was no contract. ‡ An acceptance. Held. The offer was followed by an acceptance suggesting possession from 1st August. ‡ Examples: ‡ a) µA¶ made an offer to µB¶ to purchase a house with possession from 25th July. ‡ If the parties are not ad idem on all matters concerning the offer and acceptance.e.Grant (1828)] .1.7(1)] in respect of all terms of the offer.

there was no contract between M and N. as the acceptance was not unqualified. N accepted and enclosed 80 sterling pounds with a promise to pay the balance by monthly installments of 50 sterling pounds each. .1. Merret (1930)]. it must conform with the offer. Held.«««.It must be absolute and unconditional i.e. [Neale Vs.. ‡ Examples: ‡ b) M offered to sell a piece of land to N at 280 sterling pounds.

[Jordon Vs.45. there was no acceptance. Held.000´. This is no acceptance and amounts to counter offer.Norton.«««.1838] d) A says to B.50. J agreed to the price and warranted the horse in quiet double harness. it must conform with the offer. I will purchase it for Rs.e. ‡ c) N offered to buy J¶s horse if warranted quiet in harness. B replies.. I offer to sell my car for Rs.000´.It must be absolute and unconditional i.1. .

It must be communicated to the offeror ‡ To conclude a contract between the parties.2. is not sufficient. when there is no external manifestation of the intention of the intention to do so. Giridharilal (1966)] . [ Bhagwandas Kedia Vs. ‡ A mere resolve or mental determination on the part of the offeree to accept an offer. the acceptance must be communicated in some perceptible form.

The manager wrote the word ³approved´ and put the draft in the drawer .It must be communicated to the offeror ‡ Examples: ‡ a) µA¶ tells µB¶ that. . he intends to marry µC¶. Metropolitan Rail Co.(1877)].2. Held. [Brogden Vs. there was no contract. ‡ b) A draft agreement relating to supply of coal was sent to the manager of a railway company for his acceptance. There is no contract even if µC¶ is willing to marry µA¶. But tells µC¶ µnothing of his intention.

2.It must be communicated to the offeror ‡ µF¶ offered to buy his nephew¶s horse for 30 sterling pounds saying: ³If I hear no more about it I shall consider the horse is mine at 30 sterling pounds´. The nephew did not write to µF¶ at all, but he told his auctioneer who was selling his horses not to sell that particular horse because it had been sold to his uncle. The auctioneer inadvertently sold the horse. Held, µF¶ had no right of action against the auctioneer as the horse had not been sold to µF¶, his offer of 30 pounds not having been accepted [Felthouse Vs. Brindley (1862)].

3.It must be according to the mode prescribed or usual and reasonable mode. ‡ The communication must be according to the mode prescribed [ Sec.7(2)] ‡ Eg. If the Offeror has sought the communication of acceptance from offeree by telephone, it cannot be given by post. ‡ In case, the acceptance is made in a manner other than the mode prescribed but the offeror does not raise any objection within a reasonable time, the acceptance will be binding.

4. It must be given within a reasonable time

‡ The acceptance to an offer must be given within a reasonable time. If it is not given within a reasonable time, the offer lapses. ‡ In Ramsgate Victoria Hotel Ltd. Vs. Montefiore(1886) M applied for the shares of R Co on 8 th June. But the Company did not intimate about allotment until November. M refused to take shares. Held, the offer was lapsed by unreasonable delay.

5.It cannot precede an offer.

‡

In a company shares were allotted to a person who had not applied for them. Subsequently when he applied for shares , he was unaware of the previous allotment. The allotment of shares previous to application is invalid.

6.It must show an intention on the part of the acceptor to fulfill terms of the promise. ‡ If no such intention is present. . the acceptance is invalid.

Held. . ‡ Boulton supplied the goods even though the order was not addressed to him. ‡ Under a quasi contract. Jones (1857)]. Boulton can however recover the goods from. ‡ Jones refused to pay Boulton for the goods because he. ‡ Boulton bought a hose pipe business from Brocklehurst.7.Must be given by the party or parties to whom the offer is made. placed an order with Brcklehurst for the supply of certain goods. ‡ Jones to whom Brocklehurst owed a debt. the offer was made to Brocklehurst and it was not in the power of Boulton to step in accept and therefore there was no contract [ Boulton Vs. Jones. by entering in to contract with Brocklehurst. intended to set off his debt against Brocklehurst.

It must be given before the offer lapses or before the offer is withdrawn.8. .

. If I don¶t hear from you in seven days ..9. unless the offeree has by his previous conduct indicated that his silence means that he accepts. A wrote to B.000. There is no contract. I shall assume that you accept´. B did not reply at all.It cannot be implied from silence.10. ‡ The acceptance of an offer cannot be implied from the silence of the offeree or his failure to answer. I offer you my car for Rs.

Acceptance and Revocation ‡ An offer. . ‡ Installing a weighing machine is an offer. putting a coin in the slot of the machine is an acceptance and switching off of the machine amounts to revocation. acceptance it¶s revocation must be communicated by words spoken or written or by conduct. Mode of Communication [Sec.Communication of Offer. The rules are as follows.3] An offer. it¶s acceptance and their revocation (withdrawal) to be complete must be communicated.

. to sell a house to B at a certain price. .4] ‡ Communication of offer: The communication of offer is complete when it comes to the knowledge of the person to whom it is made.g. A proposes by a letter.. 12th July. It reaches B on the 12th July.When is communication complete [Sec. The communication of offer is complete when B receives the letter i.e. The letter is posted on 10th July. E.

when it comes to the knowledge of the promisor. as against the µA¶.. . as against µB¶. on 13th. E. by a letter sent by post on 13th instant.4] ‡ Communication of Acceptance: Communication of acceptance is complete* as against the promisor. so as to be out of power of the promisee . when the letter is posted. * as against the promisee.. i. µB¶ accepts µA¶ s proposal.When is communication complete[S. The letter reaches µA¶ on 15th instant.e. on 15th. when the letter is received by µA¶. when it is put in the course of transmission to him.e.g. in the above case.. i. The communication of Acceptance is complete.

when it comes to his knowledge(Sec.. when it is put in to the 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 .4) . ‡ The communication of revocation is complete -as against the person who makes it.When is communication complete«. -as against the person to whom it is made.

.. on 20th May. by a letter. The revocation is complete as against A when the telegram is dispatched i. The telegram reaches B on 20th May. on 18th May. A revokes his offer by telegram on 18th May. to sell his house to B at a certain price . It is complete as against B when he receives it. It reaches B on 19th May. A proposes.e.The letter is posted on 15th May. i.When is communication complete«« Ex. .e.

Time for Revocation of Offer and Acceptance (Sec. B accepts the proposal by a letter sent by post on the 4th..para 1) A proposal may be revoked at any time before the communication of it¶s acceptance is complete as against the proposer. on 4th but not afterwards. A may revoke his offer at any time before B posts his letter of acceptance. A proposes by a letter sent by post to sell his house to B. i. but not afterwards.5) ‡ Time for Revocation of Proposal(Sec. B may revoke his acceptance at any time before the letter of acceptance reaches A. The letter reaches A on the 6th. Ex. on 6th but not afterwards.e. i. .e. The letter is posted on the 1st of the month..5.

´ [. Subject to certain exceptions.CONSIDERATION ‡ Consideration is one of the essential elements to support a contract. ‡ Justice Patterson defines consideration in the following words: ³Consideration means something which is of some value in the eye of law«It may be some benefit to the plaintiff or some detriment to the defendant. an agreement made without consideration is ³nudum pactum´ (a nude contract) and is void. .

1872] ‡ ³When at the desire of the promisor. such act or abstinence or promise is called a consideration for the promise.Definition of Consideration [Section 2(d) of Indian Contract Act. something.´ . 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.

In this sense consideration is in a negative form. Here selling of goods by B to C is consideration for A¶s promise.. and A¶s promise to sell the horse is the consideration for B¶s promise to pay the sum of Rs. abstaining or refraining from doing something.ooo.500.The abstinence of A is the consideration for B¶s payment. . (3) A return promise.10.e. i. Example: A promises B not to file a suit against him if he pays him Rs.¶s promise to sell the horse. In this sense consideration is in an affirmative form.Analysis of Definition of Consideration ‡ (1) An act.. (2) An abstinence or forbearance. i. doing of something.000. Here B¶s promise to pay the sum of Rs.10.e. Example: A agrees to sell his horse to B for Rs 1o.000 is the consideration for A . Example: A promises B to guarantee payment of price of the goods which B sells on credit to C.

Need for Consideration ‡ The reason why the law enforces only those promises which are made for consideration is that gratuitous or voluntary promises are often made rashly and without due deliberation. .

‡ ‡ ‡ ‡ ‡ ‡ ‡ .23). 6.It may be an act. 3.It must move at the desire of the promisor. 4. immoral or opposed to public policy (Sec.It may move from the promisee or any other person. ‡ 8. abstinence or a return promise.egal Rules as to Consideration 1.It need not be adequate.It must be real and not illusory 7. 5.It may be past. 2.It must be something which the promisor is not already bound to do.It must not be illegal. present or future.

If it is done at the instance of a third party or without the desire of the promisor . It must move at the desire of the promisor: An act constituting consideration must have been done at the desire or request of the promisor . ‡ 1. it will not be a good consideration. . Example: A saves B¶s goods from fire without being asked to do so.Legal Rules as to Consideration«««. A cannot demand payment for his services.

. This means that . even a stranger.e. But the stranger to consideration will be able to sue only if he is a party to the contract. ‡ 2. . as long as there is consideration for a promise it is immaterial who has furnished it. Consideration may move from promisee or any other person. i.It may move from the promisee or any other person.Legal Rules as to Consideration«««.

P was entitled to maintain suit as consideration had moved from the old lady. Later. to the daughter. under the direction that she should pay her aunt. [Chinnayya vs. a certain sum of money annually. P (sister of the old lady). made over certain property to her daughter D. The same day D entered in o an agreement with P to pay her the agreed amount. D refused to pay the amount on the plea that no consideration had moved from P to D. Ramayya (1882)] . sister of P. Held. ‡ 2.It may move from the promisee or any other person Example: An old lady.egal Rules as to Consideration«««. by a deed of gift.

Legal Rules as to Consideration«««. (1)Forbearance to sue: If a person who could sue another for the enforcement of a right agrees not to pursue his claim. and fails to pay the amount. as a result.100 at 20 percent p. This forbearance on the part of B to file a suit is a sufficient consideration and B can enforce the promise by A to pay the higher rate of interest. abstinence or a return promise. This results in a benefit to the person not sued and a detriment to the person who could sue. B.. A agrees to pay a higher rate of interest. Ex: A borrows from B Rs. this constitutes a good consideration for the promise by the other person. ‡ 3.a.It may be an act. . When B is about to file a suit. does not file the suit.

the agreement is binding both upon the debtor and the creditors as this amounts to a compromise of the claims of the creditors. Originally .Legal Rules as to Consideration«««. He should also act bona fide (in good faith). the claim should be reasonable and the person claiming should honestly believe that it is a valid claim. (2) Compromise of a disputed claim: Compromise is a kind of forbearance. 3««It may be an act. If the creditors agree to it. (3) Composition with creditors: A debtor who is financially embarrassed may call a meeting of his creditors and request them to accept a lesser amount in satisfaction of their debt. . abstinence or a return promise.

Legal Rules as to Consideration«««. (1)Past Consideration: When consideration by a party for a present promise was given in the past.It may be past. After a month B promises to compensate A for services rendered to him. it is said to be past consideration. i. A can recover promised amount.. Example: A renders some service to B at latter¶s desire. present or future. . before the date of the promise.e. It is past consideration. ‡ 4.

it is said to be present consideration. 50 in return for which he promises to deliver certain goods to B. present or future. The money A receives is the present consideration for the promise he makes to deliver the goods. (2) Present or Executed Consideration: When consideration is given simultaneously with promise. consideration is present or executed. for example. i. In case sale..Legal Rules as to Consideration«««.It may be past. at the time of promise. The money A receives which he promises to deliver certain goods to B. Example: A receives Rs.e. . ‡ 4.

it is future or executory consideration. (3) Future or executory consideration: When consideration from one party to the other is to pass subsequently to the making of the contract.Legal Rules as to Consideration«««. ‡ 4.It may be past. present or future. P promises to pay the price after a fortnight. Example: D promises to deliver certain goods to P after a week. . Consideration in this case is future or executory. The promise of D is supported by the promise of P.

Consideration. the Courts are not concerned as to it¶s adequacy. . provided it is of some value.Legal Rules as to Consideration«««. The law simply provides that a contract should be supported by consideration. ‡ 5. So long as consideration exists. means ³something in return´. as already explained. This something in return need not necessarily be equal to ³something given´.It need not be adequate.

500. and not illusory. Gibbons. it must be real. A¶s promise is physically impossible of performance. Although consideration need not be adequate. the servant of B. He promises to pay Rs. [Harvey vs. who in return promises to discharge A from the debt.20 to C. (2) Legal Impossibility: A owes Rs 100 to B. his master. ‡ 6. (1675)] .It must be real. There is no real consideration in the following cases: (1) Physical Impossibility: A promises to put life in to B¶s dead wife should B pay him Rs. competent and of some value in the eyes of the law. This is legally impossible because C cannot give discharge for a debt due to B.Legal Rules as to Consideration«««.

Legal Rules as to Consideration«««. The captain thereby promised to divide the salary of the deserters among the rest of the crew if they worked the vessel home. ‡ ««««. There is no recognized method of ascertaining the ³reasonable´ remuneration. (4) Illusory consideration: Two of the crew of a ship deserted it half way through a voyage. .It must be real.6. and not illusory (3) Uncertain consideration: A engages B for doing a certain work and promises to pay a ³reasonable´ sum. The promise is unenforceable as consideration is uncertain.

is not a good consideration for a new promise.Legal Rules as to Consideration«««. since it adds nothing to the pre-existing legal or contractual obligation. either by general law or under an existing contract. . Likewise a promise to perform a public duty by a public servant is not a consideration. ‡ 7.It must be something which the promisor is not already bound to do. A promise to do what is already bound to do.

.Legal Rules as to Consideration«««. Where it is unlawful. The consideration given for an agreement must not be unlawful. immoral or opposed to public policy. the Courts do not allow an action on the agreement. ‡ 8.It must not be illegal.

.STRANGER TO CONTRACT ‡ It is general rule of law that only parties to a contract may sue and be sued on that contract. This rule is known as the ³Doctrine of privity of contract. ‡ It implies a mutuality of will and creates a legal bond or tie between the parties to contract. ´ ‡ Privity of contract means relationship subsisting between the parties who have entered in to contractual obligations.

. if there is a contract between A and B.Ltd. Thus. Vs. Selfridge & Co. Ltd. ‡ (2) A contract cannot confer rights or impose obligation arising under it on any person other than the parties to it.( 1915)] .Two Consequences of the ³Doctrine of Privity of Contract´ ‡ (1) A person who is not a party to a contract cannot sue upon it even though the contract is for his benefit and he provided consideration. C cannot enforce. [Dunlop Pneumatic Tyre Co.

a sub-dealer.Ltd.Ltd. sued him for the breach. the Dunlop Co. Selfridge & Co. who agreed with S not to sell below Dunlop¶s list price and to pay the Dunlop Co..Dunlop Pneumatic Tyre Co. ‡ Held. . could not maintain the suit as it was a stranger to the contract. Vs. D sold two tyres at less than the list price and thereupon the Dunlop Co.(1915) ‡ S bought tyres from the Dunlop Rubber Co. 5 pounds as damages on every tyre D undersold. and sold them to D.

Example: A agrees to transfer certain properties to be held by T in trust for the benefit of B .´ ‡ 1. John(1965)] .Exceptions to the rule ³stranger to a contract cannot sue.B can enforce the agreement (i.. Rapai Vs.K.e.A trust or charge: ‡ A person (called beneficiary) in whose favor a trust or other interest is created can enforce it even though he is not a party to the contract. the trust) even though he is not a party to the agreement [M.

partition or other family arrangements. [Shuppu Ammal vs. Subramaniam (1910) Madras High Court. agreed to invest in equal shares a certain sum of money for the maintenance of their mother.Exceptions to the rule ³stranger to a contract cannot sue.Marriage settlement.´ ‡ 2. she was entitled to require her sons to make the investment. Held.] . Example: Two brothers. on a partition of joint properties.

´ ‡ 3.Exceptions to the rule ³stranger to a contract cannot sue. acknowledges or otherwise constitutes himself as an agent of a third party. Example: µA¶ receives some money from µT¶ to be paid over to µP¶.¶ A¶ admits of this receipt to µP¶. .Acknowledgement or estoppel: Where the promisor by his conduct. µP¶ can recover the amount from µA¶ who shall be regarded as the agent of µP¶. a binding obligation is thereby incurred by him towards the third party.

Contracts entered in to through an agent: The principal can enforce the contracts entered in to by his agent provided the agent acts within the scope of his authority and in the name of the principal.´ ‡ 4.Exceptions to the rule ³stranger to a contract cannot sue. .Assignment of contract: The assignee of rights and benefits under a contract not involving personal skill can enforce the contract subject to the equities between original parties. ‡ 5.

These cases are--- .25 and 185 dealt with the exceptions to this rule. Sec. i. In such cases agreements are enforceable even though they are made without consideration..e.³No consideration. an agreement made without consideration is void. no contract´ -Exceptions ‡ The general rule is µex nudo pacto non oritur actio¶.

it is enforceable even if it is without consideration. .25(1)]: Where an agreement is expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection between the parties standing in near relation to each other.³No consideration. no contract´ -Exceptions 1.Love and Affection [Sec.

000. If V does not discharge the debt. S. promises to give his son. There is a contract. R.for natural love and affection. Ramaswamy. Rs.Examples: (a) (b) F . [Venkataswamy vs. promises to discharge his debt to B.1. (1903) .F puts his promise to S in writing and registers it . By a registered agreement. V on account of natural love and affection for his brother. R may discharge it and then sue V to recover the amount.

as the essential requirement that the agreement is made on account of natural love and affection between the parties was missing. the agreement was void for want of consideration . [Rajlukhy vs. Bhoothnath (1900)] . after referring to quarrels and disagreement between his wife executed a registered document in favor of his wife agreeing to pay her for maintenance . Held. ‡ Example: A Hindu husband. however does not necessarily imply natural love and affection.Nearness of relationship. but no consideration moved from his wife.

a promise to pay for a past voluntary service is binding.[Sec. Examples: (a) A finds B¶s purse and gives it to him .000. a person who has already voluntarily done something for the promissor.25(2)] A promise to compensate. .´There is a contract between A and B. 50 .1.Compensation for voluntary services. B promises to give Rs. In simple words. is enforceable.This is a contract. (b)A says to B.³No consideration. no contract´. -Exceptions ‡ 2. I promise to pay you Rs. even though without consideration. ³ At the risk of your life you saved me from a serious accident. wholly or in part.

25(3)] A promise by a debtor to pay a time barred debt is enforceable provided it is made in writing and is signed by the debtor or by his agent generally or specially authorized in that behalf.´ . The promise may be to pay the whole or any part of the debt. -Exceptions ‡ 3.³No consideration. no contract´.Promise to pay a time barred debt:[Sec. The debt must be such ³ of which the creditor might have enforced payment but for the law for the limitation of suits.25(3)] A promise by a debtor to pay a time barred debt [Sec.

Rs. .1. Such a debt becomes legally recoverable.500 on account of the debt. D signs a written promise to pay C.A contract without consideration is void -Exceptions ‡ A debt is barred by limitation if it remains unpaid or unclaimed for a period of three years. Example: D owes C Rs.000 but the debt is barred by the Limitation Act. This is a contract.

of any gift actually made.25. . as between the donor and donee .25 shall affect the validity. no contract´ does not apply to completed gifts.A contract without consideration is void -Exceptions 4. nothing in Sec. According to explanation 1 to Sec. Gift: The rule ³ No consideration.

e. Kedarnath Vs.A contract without consideration is void -Exceptions ‡ 5. changes his position to his detriment.. Gauri Mohammad]. .Agency [Sec.Charitable Subscription: Where the promisee on the strength of the promise makes commitments.[ Refer.185] No consideration is necessary to create an agency. i. ‡ 6.

10.000 to the National Defense Fund. A promises a subscription of Rs. He does not pay. Is there any legal remedy against him? .Consideration: Practical Problems ‡ 1.

1 ‡ No. Masum Ali) .Answer: Case.(Abdul Aziz vs.

B. promises to pay A Rs.Case. A hears the cry. removes his coat and dives in to water and rescues B.200 but fails to do so.2 ‡ Can A recover in the following cases? (a) B gets in to difficulties while swimming in the river Ganga and cries for help. who is full of gratitude. .

I promise to pay you Rs.2 ‡ (b) B writes to A. you saved me from a serious motor accident.000.1. ³At the risk of your own life.Case.´ .

. On his return. B promises to pay A Rs.200 for the work done and materials supplied. and his neighbor. a storm damages the roof of B¶s house. carries out the necessary repairs.Case.2 ‡ (c) While B is away on holiday. A.

2 ‡ (d) A finds B¶s purse and gives it to him . B promises A to give him Rs.Case.100 .

who is B¶s friend. B promises to give A Rs. .Case. 100 for his timely help. seeks the help of a few persons in putting down a fire in B¶s house.2 ‡ (e) A.

A can recover the amount from B in all the cases. [Sec.Answers to case.2 ‡ Yes.25(2)] .

3 ‡ A owes B Rs.1. A gives a letter to B agreeing to pay him Rs 500 on account of the debt.000 but the debt is barred by limitation.Case. Is this a valid agreement? .

Answer to Case.3 ‡ Yes. [Sec.25(3)] .

4 ‡ A.11.000 for Rs.Case.000. being a dire need of money. Will he succeed? . Afterwards A seeks to set aside the contract on the ground of inadequacy of consideration.72. sells his new car purchased two months ago at a cost of Rs.1.

.4 ‡ No.Answer to Case.

11 every person is competent to enter in to contract who(a) is of the age of majority according to the law to which he is subject. . ‡ According to Sec.10 an agreement becomes a contract. and (c) is not disqualified from contracting by any law to which he is subject. ‡ Capacity here means competency of the parties to enter in to contract. ‡ According to Sec.(b) is of sound mind.CAPACITY TO CONTRACT [ COMPETENCY OF THE PARTIES ] ‡ The parties who enter in to contract must have capacity to do so. if it is entered in to between the parties who are competent to contract.

CAPACITY TO CONTRACT [COMPETENCY OF THE PARTIES] ‡ Thus Section 11 declares the following persons to be incompetent to contract. and ‡ 3.Minor ‡ 2.Persons of unsound mind.«.. . ‡ 1. Persons disqualified by any law to which they are subject.

he attains majority after 21 years of age.1.1890 or (2) Where the superintendence of a minor¶s property is assumed by a Court of Wards.Minors ‡ According to Indian Majority Act. In the following two cases . . a minor is a person who has not completed 18 years of age. (1) Where a guardian of a minor¶s person or property has been appointed under the Guardians and Wards Act.1875.

Minor¶s Agreements ‡ 1. Dharmodas Ghose.000. therefore. An agreement with or by a minor is void and inoperative ab initio. Subsequently the minor sued for setting aside the mortgage.20. it was cancelled. Further the money lender¶s request for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted. ‡ Held.8. [Mohiribibi vs. ‡ In this case a minor mortgages his house in favor of a money lender to secure a loan of Rs. the mortgage was void and.000 out of which the mortgagee (the money lender) paid the minor a sum of Rs.(1903) Calcutta High Court] . stating that he was under-age when he executed the mortgage.

..Minor¶s Agreements

‡ 2.He can be a promisee or a beneficiary: Inadequacy of a minor to enter in to a contract means incapacity to bind himself by a contract. There is nothing which debars from becoming a beneficiary. [Sharafat Ali Vs. Noor Mohammed(1924)]. Example: (a) M, aged 17, agreed to purchase a second-hand scooter for Rs.5,000 from S. He paid Rs.200 as advance and agreed to pay the balance the next day and collect the scooter. When he came with the money the next day, S told him that he had changed his mind and offered to return the advance. S cannot avoid the contract, though M may, if he likes.

..Minor¶s Agreements

‡ 3.His agreement cannot be ratified by him on attaining the age of majority. ³Consideration which passed under the earlier contract cannot be implied in to the contract which the minor enters on attaining majority.´ [ Nazir Ahmed Vs. Jiwan Dass] ‡ Thus consideration given during minority is no consideration. ‡ If it is necessary a fresh contract may be entered in to by the minor on attaining majority provided it is supported by fresh consideration. [S. Shanmugam Pillai Vs. K. S. Pillai (1973) SC ].

Minor¶s Agreements

‡ 4.If he has received any benefit under a void agreement , he cannot be asked to compensate or pay for it. Sec.65 provides for restitution in case of agreements discovered to be void does not apply to a minor. Example: M, a minor, obtains a loan by mortgaging his property. He is not liable to refund the loan. Not only this, even his mortgaged property cannot be made liable to pay the debt.

Minor¶s Agreements

‡ 5.He can always plead minority: Even ,if he has , by misrepresenting his age, induced the other party to contract with him, he cannot be sued in contract for fraud because if the injured party were allowed to sue for fraud, it would be giving him an indirect means of enforcing the void agreement.

minor.He can always plead minority: Example: S. induced L to lend him 400 POUNDS. the contract was void and S was not liable to repay the amount [Leslie vs.«Minor¶s Agreements 5. Held. by fraudulently representing himself to be of full age. He refused to repay it and L sued him for the money . .1914] Lawrence J observed that in this case ³ Wherever an infant is still in possession of any property in specie which he has obtained by his fraud. merely because he received it under a contract induced by fraud´. Shiell. But I think it is incorrect to say that he can be made to repay money which he has spent . he will be made to restore to it¶s former owner.

Where as the law gives protection to the minors .He can always plead minority: ‡ The Court may. where some loan or property is obtained by the minor by some fraudulent representation and the agreement is set aside .Minor¶s Agreements «. to restore the money or property to the other party. it does not give them liberty ³to cheat men. on equitable considerations.5. direct him.´ .

.There can be no specific performance of the agreements entered in to by him as they are void ab initio.«. A contract entered in to on his behalf by his parent or guardian or the manager of his estate can be specifically enforced by or against the minor provided the contract is (a) within the scope of the authority of the parent/guardian/manager. and (b) for the benefit of he minor.Minor¶s Agreements ‡ 6.

But he may be admitted to the benefits of an already existing partnership with the consent of the other partners. This is because he is incapable of contracting debts.Minor¶s Agreements ‡ 7.««. ‡ 9. . He cannot enter in to a contract of partnership. He cannot be adjudged insolvent.

. was provided clothing of an extravagant style by the defendant .«Minor¶s Agreements ‡ 10. the supplier cannot recover. Vs. already having sufficient clothes suited to his condition of life. In Nash. Inman (1908) a college student. Hence. these were not necessaries. Held.He is liable for the µnecessaries¶ supplied or necessary services rendered to him or anyone whom he is legally bound to support.

.He can be an agent. An agent is merely a connecting link between his principal and third party. A minor binds the principal by his acts without incurring any personal liability.«Minor¶s Agreements ‡ 11. the agent drops out. As soon as the principal and the third party are brought together.

even though the contract is for the supply of necessaries to the minor. His parents / guardian are /is liable for the contract entered in to by him . the parents/guardian shall be liable under the contract. . But if the minor is acting as an agent for the parents/guardian.Minor¶s Agreements ‡ 12.

But where a tort arises out of contract a minor is not liable in tort as an indirect way of enforcing a invalid contract. .A minor is liable in tort (A civil wrong).Minor¶s Agreements ‡ 13.

(Sec. ‡ The claim arises not out of contract but out of what is known as µquasi contracts¶. ‡ A minor is liable to pay out of his property for µnecessaries¶ supplied to him or to anyone whom he is legally bound to support.Minor¶s Liability for Necessaries of Life. He is not personally liable. . it would beimpossible for minors even to live. ‡ Again it is only the property of the minor that is liable for meeting the liability arising out of such contracts. ‡ The law has provided this exception intentionally because if it were not so.68).

defines it in Sec. The English Sale of Goods Act 1893. and (ii) necessaries both at the time of sale and at the time of delivery .1872. and to his actual requirement at the time of sale and delivery´.2 as ³ goods suitable to the condition in life of such infant or other person. ‡ Such goods need not necessarily belong to a class of goods. but they must be (I) suitable to the position and financial status of the minor.What are necessaries of life ? ‡ The term necessaries is not defined in. ICA.

12 lays down a test of soundness of mind. at the time when he makes it.2. for the purpose of making a contract if. A person who is usually of sound mind. A person who is usually of unsound mind but occasionally of sound mind..Persons of Unsound Mind. may make a contract when he is of sound mind. may not make a contract when he is of unsound mind.Sec. It reads as follows: ³ A person is said to be of sound mind. ‡ One of the essential conditions of competency of parties to a contract is that they should be of sound mind.´ EXAMPLES«««. but occasionally of unsound mind. . he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

. who is at intervals of sound mind. ‡ (a) (b) Examples: A patient in a lunatic asylum. may contract during those intervals. or form a rational judgment as to it¶s effect on his interests. A sane man who is delirious from fever.Persons of Unsound Mind. or who is so drunk that he cannot understand the terms of a contract. cannot contract while such delirium or drunkenness lasts.

Persons of Unsound Mind Soundness of mind of a person depends upon two facts: 1.His capacity to understand the contents of the person concerned. he must prove it sufficiently to satisfy the Court. There is a presumption in favor of sanity. . he suffers from unsoundness of mind. and 2. Whether a party to a contract is of sound mind or not is a question of fact to be decided by the Court.His ability to form a rational judgment as to it¶s effect upon his interests. If a person is incapable of both. If a person relies on unsoundness of mind.

He does not exhibit understanding of even ordinary matters. An agreement of an idiot. An idiot is a person who has completely lost his mental powers. He suffers from intermittent intervals of sanity and insanity. . A lunatic is a person who is mentally deranged due to some mental strain or other personal experience. like that of a minor.Contracts of Persons of Unsound Mind ‡ LUNATICS. He can enter in to contract when he is of sound mind. Idiocy is permanent where as lunacy denotes periodical insanity with lucid intervals. is void. ‡ IDIOTS.

However. at the time when he is so drunk or intoxicated that he is incapable of forming a rational judgment.Contracts of Persons of Unsound Mind ‡ DRUNKEN OR INTOXICATED PERSONS. A drunken or intoxicated person suffers from temporary incapacity to contract. i. persons of unsound mind are liable for necessaries supplied to them or to anyone whom they are legally bound to support ..e. .

. namely(a) contracts during the war. and (b) contracts made before the war (a) During the continuance of he war. Other persons ‡ ALIEN ENEMIES.3. Contracts with alien enemy[an alien whose State is at war with the Republic of India] may be studied under two heads. an alien enemy can neither contract with an Indian subject nor can he sue in an Indian Court. He can do so only after he receives a license from the Central Government.

or who is carrying on business there would be treated as an alien enemy.3. (b) Contracts made before the war may either be suspended or dissolved. Other persons ‡ ALIEN ENEMIES. For this purpose even an Indian who resides voluntarily in a hostile country. . They will be dissolved if they are against the public policy or if their performance would benefit the enemy.

Sultan of Johore (1894)]. ‡ But an Indian has to obtain prior sanction of the Central government in order to sue them in our law Courts without any such sanction . [Mighell vs. .Foreign sovereigns. their diplomatic staff and accredited representatives of foreign states ‡ They have some special privileges and generally cannot be sued unless they of their own submit to the jurisdiction of our law Courts.

1956. whether expressly conferred on it or derived by reasonable implication from it¶s objects clause in the Memorandum. ‡ A contractual capacity of a company [corporation] is regulated by the terms of Memorandum of Association and the provisions of Companies Act. It may come in to existence by a special Act of Legislature registration under Companies Act. 1956. the contract ultra vires and is void. having a legal existence apart from it¶s members. .If it exceeds it¶s powers.CORPORATIONS [COMPANY] ‡ A corporation is an artificial person created by law.

and sue and be sued on his behalf.INSOLVENTS & CONVICTS ‡ INSOLVENTS: When a debtor is adjudged insolvent is deprived of his power to deal in that property. . ‡ CONVICTS: A convict when undergoing imprisonment is incapable of entering in to contract. It is only the official Receiver or Official Assignee who can enter in to contracts relating to his property.

PRACTICAL PROBLEMS

‡ 1.A minor fraudulently represented to a money lender that he was of full age and executed a mortgage deed for Rs.10.000. Has the money lender any right of action against the minor for the money lent or for damages for fraudulent misrepresentation ?

Answer to Case.1

‡ No.(Mohiri bibi vs. Dharmodas Ghose) (Leslie vs. Shiell)

Case 2.

‡ 2.A minor is supplied with necessaries of life by a grocer. He makes out a promissory note in favor of the grocer. Is the grocer entitled to claim payment under the promissory note (a) from minor personally, (b)against his estate.

Answer to Case.2

‡ (a) No ‡ (b) Yes(Sec.68)

3 ‡ 3. M. Does the physician have a valid claim for his services ? . broke his right arm in a hockey game. a minor aged 17.Case . He engaged a physician to set it.

Answer to Case.3 ‡ Yes.68). but it is only M¶s estate which will be liable(sec. .

´ Is A right? . a minor: ³I will not pay the commission I promissed you for selling my magazines. said to M. an adult.4 ‡ A.Case. You are a minor and cannot force me to pay.

A minor can be a beneficiary or a promisee .Answer to Case.4 ‡ No. .

Free Consent

‡ Meaning of ³Consent´ [Sec.13] Consent means acquiescence or an act of assenting to an offer. ³Two or more persons are said to consent when they agree upon the same thing in the same sense´.

What is Free Consent ?

‡ Meaning of ³Free Consent´[Sec.14] ‡ A consent is said to be free when it is not caused by1.Coercion as defined in Sec15, or 2.Undue Influence in Sec.16 or 3.Fraud as defined in Sec.17,or 4.Misrepresentation as defined n Sec.18 or 5.Mistake, subject to the provisions of Sec.20,21 or Sec.22].

Coercion [Sec.15]

‡ When a person is compelled to enter in to a contract by the use of force by the other party or under a threat, ³coercion´is said to be employed. ‡ Coercion is the committing or threatening to commit, any act forbidden by the Indian Penal Code,1860 or unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of any person to enter in to an agreement.(Sec.15).Examples are««.

Examples of Coercion

1. A threatens to shoot B if he (B) does not release him (A) from a debt which A owes to B. B releases A under the threat. The release has been brought about by Coercion.

Consent is said to be caused by coercion when it is obtained by: (a) Committing or threatening to commit any act forbidden by the Indian Penal Code.The threat amounts to coercion. . B agrees to lend the amount to C.A threatens to kill B if he does not lend Rs.000 to C.1.1860.B lends the amount. Example« A threatens to shoot B if he (B) does not lend Rs 500. The agreement entered in to under coercion.«Examples of Coercion 2 .

Muthu Karuppa.Examples of Coercion 2. The principal had to give a release deed as demanded. [Muthia vs. ‡ Held. ‡ An agent refused to hand over the account of a business to the new agent unless the principal released him from all liabilities. the release deed was voidable at the option of the principal. (1927)Madras High Court] . Unlawful detaining or threatening to detain any property.

a person to whom money has been paid. ‡ According to Sec.72.Effect of Coercion ‡ When consent to an agreement is caused by coercion.19). or anything delivered by mistake or under coercion. the agreement is a contract voidable at the option of the party whose consent was so caused (Sec. . fraud or misrepresentation. must repay or return it.

a person held out a threat of committing suicide to his wife and son if they did not execute a release in favor of his brother in respect of certain properties. The wife and son executed the release deed under the threat. Seshamma (1917) Madras HC. Held.Threat to commit suicide-Does it amount to coercion? Chikham Amiraju vs. there fore. In this case. ³ the threat of suicide amounted to coercion within Sec. voidable´.15 and the release deed was. .

and necessarily beyond the reach of any punishment too. Basudev Mukherjee(1969)Calcutta] ‡ I was observed that. ³one committing suicide places himself or herself beyond the reach of the law. it may very well be said that the Penal Code does forbid suicide. it cannot be. ‡ Thus suicide as such is no crime. ‡ But it does not follow that suicide is not forbidden by the Penal Code.´ As such a threat to commit to suicide amounts to coercion.Sec.Threat to commit suicide-Does it amount to coercion? [Purabi Mukherjee vs. as indeed. . So. But its attempt is: its abetment too is.306 of the Penal Code punishes abetment of suicide.309 punishes an attempt to commit suicide.Sec.

the near equivalent of the term ³coercion´ is ³duress´. or child) with a view to obtaining his consent to the agreement. parent. If the threat is with regard to the goods or property of the other party.Duress In the English Law. Duress involves actual or threatened violence over the person of another (or his wife. it is not duress.´ .

UNDUE INFLUENCE Section 16(1) ‡ Definition: ³A contract is said to be induced by µundue influence¶ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of other and uses that position to obtain an unfair advantage over the other.´ .

UNDUE INFLUENCE Section 16(1) ‡ A person is deemed to be in a position to dominate the the will of another.g. trustee and beneficiary.g. (a) Where he holds real or apparent authority over the other. (c) Where he makes a contract with person whose mental capacity is temporarily or permanently affected by reason of age. .. solicitor and client.. doctor and patient. Between a medical attendant and his patient. E. (b) Where he stands in a fiduciary relation. and promoter and company. father and son.the relationship between master and servant. E.g.E. illness or bodily distress..[Relation of trust and confidence] to the other.

Undue influence is of moral character.(Mental pressure) ‡ 3.It involves criminal act.There must be an intention of causing any person to enter in to contract. ‡ 4. ‡ 1. ‡ 2.No criminal act is involved.The consent is given under the threat of an offence (Forbidden by Indian Penal Code) ‡ 2. ‡ 4.Coercion is mainly of physical character.The consent is given by a person who is so situated in relation to another that the other person is in a position to dominate the will of the other.Uses to obtain an unfair advantage over the other.Difference Between Coercion and Undue Influence ‡ 1. .(Violent force) ‡ 3.

. A having advanced money to his son. by misuse of parental influence. B during during his minority. a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence.Examples of UNDUE INFLUENCE ‡ 1. obtains upon B¶s coming of age.

Examples of UNDUE INFLUENCE ‡ 2. the consent of the devotee was given under undue influence [Mannu Singh vs. A spiritual guru induced his devotee to gift to him the whole of his property in return of a promise of salvation of the devotee. Held.Umadat Pandey (1890)] .

Held. the gift should be set aside on the ground of undue influence.Shaikh Allie Bin Omar(1929)] .Examples of UNDUE INFLUENCE 3.An illiterate elderly woman made a deed of gift of practically the whole of her property to her nephew who managed her affairs. [Inche Noriah vs.

either innocently or intentionally.Misrepresentation ‡ A statement of fact which one party makes in the course of negotiations with a view to inducing the other party to enter in to a contract is known as a representation. ‡ It may be expressed by words spoken or written or implied from the acts and conduct of the parties. ‡ A representation when wrongly made. is a misrepresentation. .

deliberate or willful misrepresentation with an intent to deceive or defraud the other party.MISREPRESENTATION & FRAUD Misrepresentation may beAn innocent or unintentional misrepresentation. or An intentional. The former is called ³MISREPRESENTATION´ and the latter ³FRAUD´ .

without any intent to deceive the other party.MISREPRESENTATION ‡ ³Misrepresentation´ is a misstatement of a material fact made innocently with an honest belief as to it¶s truth or non-disclosure of a material fact. .

A while selling his mare to B.Examples of Misrepresentation ‡ 1. The representation made by A is a misrepresentation. tells him that the mare is thoroughly sound. Later on B finds the mare to be unsound. . A genuinely believes the mare to be sound although he has no sufficient ground for the belief.

A company¶s prospectus contained a representation that it had statutory powers to run it¶s tramways by steam provided the consent of a Government authority was obtained. the directors were guilty of misrepresentation and not of fraud. The permission was refused. [Derry vs . ‡ Held. The company was then wound up.Examples of Misrepresentation ‡ 2. ‡ The directors issued a prospectus stating there in that the permission for the use of steam power would be granted.Peek (1889)] .

‡ 4.Mere expression of opinion does not amount to misrepresentation even if it turns out to be wrong.It must actually have been acted upon and must have induced the contract. . ‡ 5.It must be a representation of material fact.Requirements of MISREPRESENTATION ‡ 1.It must be made with the intention that it should be acted upon by the person to whom it is addressed. ‡ 2.It must be wrong but the person but the person who made it honestly believed it to be true. ‡ 3.It must be made before the conclusion of the contract with a view to inducing the other party to enter in to contract.

g. was a over sixty years.The bridegroom.It need not be made directly to the plaintiff. ‡ 7. E. [Babul vs..A wrong statement of facts made to a third party with the intention of communicating it to the plaintiff.also amounts to misrepresentation.Requirements of MISREPRESENTATION ‡ 6.It must be made without any intention to deceive the other party.Held. however. the consent was vitiated by misrepresentation and not fraud.Singh(1968)Patiala High Court] .The daughter gave her consent to marry him believing the statement by her father. A told his wife within the hearing of their daughter that the bridegroom proposed for her was a young man.

or . or (ii)without belief in it¶s truth. or (iii)recklessly. not caring whether it is true or false. (2) there is a concealment of material fact.FRAUD ‡ ³Fraud´ exists when it is shown that. (1) a false representation has been made (i) knowingly. and (iv)the maker intended the other party to act upon it.

.FRAUD ‡ The intention of the party making fraudulent misrepresentation must be to deceive the other party to the contract or to induce him to enter in to a contract. .«««.

Any other act fitted to deceive.The suggestion that a fact is true when it is not true and the person making the suggestion does not believe it to be true.Any such act or omission as the law specially declares to be fraudulent.FRAUD ‡ According to Sec.«««.The active concealment of a fact by a person having knowledge or belief of the fact. 2. 4. 3.. .A promise made without any intention of performing it. 5. ³fraud´ means and includes any of the following acts committed by a party to a contract: 1.17.

non disclosure of information amounted to fraud and any one who purchased shares on the faith of this prospectus could avoid the contract.g.Held.There must be a representation and it must be false: E.If the existence of the document had been disclosed the impression would have been different.. [Peek vs.The prospectus of a company did not refer to the existence of a document disclosing liabilities.This gave the impression that the company was prosperous.ESSENTIAL ELEMENTS OF FRAUD ‡ 1.Gurney(1873)] .

.The spoons are as good as that of X. (ii) The spoons have as much silver in them as that of X [This is a statement of fact] (iii) The spoons are the best available in the market for the price.««««ESSENTIAL ELEMENTS OF FRAUD 2.The representation must relate to a material fact which exists now or existed in the past. [This is a statement of opinion]. [This is a puffing statement]. (i)A sells some spoons to B and makes the following statements.

««««ESSENTIAL ELEMENTS OF FRAUD 3.The representation must have been made before the conclusion of the contract with the intention of inducing the other party to act upon it. not caring whether it is true or false. 4.The representation must have been made with a knowledge of it¶s falsity or without belief in it¶s truth or recklessly. .

. A bought shares in a company on the faith of a prospectus which contained an untrue statement that one B was a director of the company. the statement was immaterial from his point of view.The other party must have been induced to act upon the representation or assertion. [Smith vs.««««ESSENTIAL ELEMENTS OF FRAUD 5.A had never heard of B and.A mere falsehood is not enough to give a right of action.Chadwick(1884)] .A¶s claim for damages in this was dismissed because the untrue statement had not induced A to buy the shares. therefore. Eg.

must have subsequently suffered some loss. acting on the representation or assertion. . ‡ 7.If representation does not come to the notice of a party.The other party.The other party must have relied upon the representation and must have been deceived.««««ESSENTIAL ELEMENTS OF FRAUD ‡ 6. it cannot be said to have misled that party because it does not lead that party at all.

A by misrepresentation.Contracts not necessarily voidable -Exceptions. ‡ When consent to an agreement is caused by coercion.g. . leads B erroneously to believe that five hundred tonnes of indigo are made annually at his factory.The contract is not voidable on account of A¶s misrepresentation. E. fraud or misrepresentation.After this B buys the factory. the agreement is a contract voidable at the option of the party whose consent was so caused.which show that only four hundred tonnes of indigo have been made.But in the following cases.. the contract is not voidable: ‡ 1.B examines the accounts of the factory.Where the consent of a party to a contract was caused by misrepresentation or fraud and that party could discover the truth by ordinary diligence.

‡ (1)Mistake of law: It may be«. (a) Mistake of law of the country (b) Mistake of law of foreign country ‡ (2) Mistake of fact: Mistake of fact may be. or (2) Mistake of fact. (a) Bilateral Mistake.MISTAKE ‡ Mistake is erroneous belief about something. It may be a (1) Mistake of law. or (b) Unilateral Mistake. .

MISTAKE OF LAW Example of (1) Mistake of law of the country ‡ A party cannot be allowed to get any relief on the ground that it had done a particular act in ignorance of law. .the contract may be avoided. if a person enters in to a contract by making a mistake of law through the inducement of another. But. whether innocent or otherwise . . therefore. and the contract cannot be avoided. A mistake of law is. no excuse.

21).MISTAKE OF LAW «« (2) Mistake of law of a foreign country ‡ Such a mistake is treated as mistake of fact and the agreement in such a case is void (Sec. .

«««««. .It may be Bilateral or Unilateral Mistake ‡ Bilateral Mistake: It may relate to «« (a)Subject matter.or (b) Possibility of performance (. the agreement is void [Sec.MISTAKE of Fact ‡ Bilateral Mistake: Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement.20].

Held. [Galloway vs.The mistake must relate tom a matter of fact essential to the agreement: E. the car and garage were completely destroyed by fire a day earlier.The agreement is void.Unknown to either party. the agreement was void as there was mutual mistake on a point of fact which was material to the existence of the agreement..Galloway(19141)]. 1. 2.A man and woman entered in to a separation agreement under which a man agreed to pay a weekly allowance to the woman.g.. A agreed to purchase B¶s motor car which was lying down in B¶s garage.The mistake must be mutual: E. mistakenly believing themselves lawfually married.g.Bilateral Mistake ‡ The following two conditions have to be fulfilled. .

There were two ships of that name sailing from Bombay.Mistake as to the Subject matter: (a)MISTAKE AS TO THE EXISTENCE OF THE SUBJECT MATTER.g. 1.W meant the former ship and R. E.g. A agrees to buy a horse from be a certain horse. the latter.[Rafles vs.. though the neither party was aware of the fact.Wichelhaus(1864)] .It turns out that the horse was dead at the time of the bargain.««Bilateral Mistake ‡ : The various cases whish fall under Bilateral mistake are as follows.. W agreed to buy from R a cargo of cotton ³to arrive ex-peerless from Bombay´. there was a mutual or bilateral mistake and there was no contract. (b) MISTAKE AS TO THE IDENTITY OF THE SUBJECT MATTER: E.The agreement is void.One sailing in October and the other in December.Held.

g. A silver bar was sold under a mistake as to it¶s weight.BILATERAL MISTAKE: (c) MISTAKE AS TO THE QUALITY OF THE SUBJECT MATER: E.Prentice(1815)] . [Cox vs.Held the agreement was void as there was a mistake as to the quality of the subject matter.g. [Nicholson &Venn vs.. Table Napkins were sold at an auction by y description ³with the crest of Charles 1 and the authentic property of that monarch´.There was a difference in value between the weight as it was and as it was supposed to be.Held.«.Bilateral Mistake ‡ «««««««««««««««««««1..In fact the napkins were Georgian. the agreement was void.Smith Mariott(1947)] (d) MISTAKE AS TO THE QUANTITY OF THE SUBJECT MATTER: E.

.Held.W Who knew that this offer of 1.Held. E. the lease was void. A person took a lease of a fishery which.250 pounds.250 pounds was a mistake for 2.Phibbs (1815)] (f)MISTAKE AS TO THE PRICE OF THE SUBJECT MATTER. C wrote to W offering to sell certain property for 1.. already belonged to him.250 pounds. [Cooper vs.g. [Webster vs. W knew perfectly well that that the offer was made by mistake and hence the contract could not be enforced. immediately accepted the offer.«.Cecil(1861)] . BILATERAL MISTAKE: (e) MISTAKE AS TO THE TITLE OF THE SUBJECT MATTER: E.He had earlier declined an offer from W to buy the same property for 2000 pounds.Bilateral Mistake ‡ «««««««««««««««««««1. unknown to either party.g.

Regarding the (i) identity of the person contracted with.44... ‡ There are however. A offers to sell his house for Rs.000.(ii)Nature of contract.40. .000.22).«««««. the contract is not voidable(Sec. ‡ E. two exceptions.g.He cannot plead mistake as a defense.MISTAKE ‡ Unilateral Mistake: Where only one of the parties is under a mistake as to a matter of fact.By mistake he makes an offer in writing for Rs.

g.g. E. an old man of poor sight. ‡ (ii)Mistake as to the nature of the contract: Where a person is made to enter in to a contract through the inducement of another but through no fault. there was no contract on the ground that the mind of the signer did not accompany the signature [Foster Vs. In such a case the contract is void. If A intends to enter in to a contract with B. M. Held. C cannot give himself any right in respect of the contract by accepting the offer.. endorsed a bill of exchange thinking that it was a guarantee.«««««.MISTAKE ‡ (I )Mistake at to the identity of the person contracted with: E. Mackinson (1869)] .

Legality of Object ‡ An agreement is a contract if it is made for a lawful consideration and with a lawful object (Sec. 10) ‡ Every agreement of which the object or consideration is unlawful is void. .

or if it is of such a nature that. .«Legality of Object ‡ The consideration or object of an agreement is unlawful. or the Court regards it as immoral. or it is fraudulent. or opposed to public policy. ifit is forbidden by law. ‡ No action is allowed on an illegal agreement. if permitted it would defeat the provisions of any law. or it involves or implies injury to the person or property of another.

23) 4.Agreements the consideration or object is unlawful in part.20) 3.2(g)] ‡ The following agreements are declared to be void.11).Agreement made without consideration is void ( Sec.Agreement made under mutual mistake of fact (Sec. 2.24) 5.25) .Void Agreements ‡ A void agreement is one which is not enforceable by law. 1.Agreements the consideration or object is unlawful (Sec.An agreement made by incompetent persons (Sec. [Sec. (Sec.

Agreement in restraint of marriage (Sec. (Sec.Agreement in restraint of trade (Sec.Agreement contingent on impossible events (Sec.27) 8.56) .Agreement the meaning of which is uncertain (Sec.Agreement in restraint of legal proceedings (Sec.26) 7.28) 9.36) 12.Agreement by way of wager (Sec.29) 10.Void Agreements 6.«««««.Agreement to do impossible acts.30) 11.

30] ‡ A wager is an agreement between two parties by which one promises to pay money or money¶s worth on the happening of some uncertain event in consideration of the other party¶s promise to pay uncertain event in consideration of the other party¶s promise to pay if the event does not happen. .Wager / Wagering Agreement [Sec.

A will lose but if it turns out the other way he will win´. if the event turns out one way.30] ‡ ³The essence of gambling and wagering is that one party is to win and the other to lose upon a future event. [Thacker Vs.«Wager or Wagering Agreement [Sec. which at the time of the contract is of an uncertain nature. that is to say. Hardy(1878)] .

«Wager or Wagering Agreement [Sec. and therefore remaining uncertain until that issue is known. it is not a wagering agreement´.(1892) . Carbolic Smoke Ball Co. if either of the parties may win but cannot lose. Carlill vs. Mrs. whether he will win or lose being dependent on the issue of the event. or may lose but cannot win.30] ‡ ³It is essential to a wagering agreement that each party under it either win or lose.

Essentials of a wagering Agreement ‡ ‡ ‡ ‡ ‡ 1.Each party must stand to win or lose.Promise to pay money or money¶s worth 2. 4.Uncertain event 3.No control over the event 5.No other interest in the event .

e. A crossword competition involving a good measure of skill for it¶s successful solution ‡ 2.Share market transactions in which delivery of stocks and shares is intended to be given and taken.500 or above to be awarded to the winner or winners of a horse race (Exception to Sec.The following transactions however are. picture puzzles or athletic competitions ‡ 3.g.A contract of insurance. ‡ 5. not wagers ‡ 1. prize or sum of money of the value of Rs.A subscription or contribution or an agreement to subscribe or contribute toward any plate (a cup or other prize for a race or other contest).. .Games of skill.30) ‡ 4.

‡ Characteristics of a contingent contract. if some event. does or does not happen. collateral to such contract.Contingent Contracts ‡ Contingent contract is a contract to do something. 3. . 1.It¶s performance depends upon the happening or non happening in future of some event.The uncertain future event must be collateral to the contract. 2.The event must be uncertain.

Kokila 159 .

37 parties to a contract must either perform or offer to perform. ‡ According to Sec. Kokila 160 .WHAT IS PERFORMANCE OF CONTRACT ‡ It takes place when the parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed. their respective promises. unless such performance is dispensed with or excused.

and the offer has not been accepted. This is known as ³attempted performance´ or ³tender´. nor does he thereby lose his rights under the contract. Kokila 161 .OFFER TO PERFORM(SEC. the tender of performance is equivalent to actual performance.38) ‡ Sometimes promisor offers to perform his obligation under the contract at the proper time and place but the promisee does not accept the performance. ‡ It excuses the promisor from further performance and entitles him to sue the promisee for the breach of contract. ‡ Thus. the promisor is not responsible for non-performance. ‡ Where a promisor has made an offer of performance to the promisee.

: D. 2. It becomes conditional when it is not in accordance with the terms of the contract. the amount due to him on the condition that C sells him certain shares at cost. It must be by a person who is in a position. 1.g. E. to perform the promise.REQUISITES OF A VALID TENDER It must be unconditional. a debtor offer to pay to C. 3. E. This is not a valid tender. his creditor. Kokila 162 . and is willing. It must be of the whole quantity contracted for or of the whole obligation.g.: A tender of an installment when the contract stipulates payment in full is not a valid tender.

Kokila 163 . He offers to pay on the 1st of July the amount with interest up to the 1st of July.: D owes C Rs.g. A tender of goods after the business hours or of goods or money before the due date is not a valid tender. It must be made at the proper time and place. E.100 payable on the 1st of August with interest. It is not a valid tender as it is not made at the appointed time.4.

In case of tender of goods. It must be made to one of the several joint promisees. 6. the promisee or his duly authorized agent. It must also be in proper form..5. A tender of goods at such time when the other party cannot inspect the goods is not a valid tender. In such a case it has the same effect as a tender to all of them. i. It must be made to the proper person. Kokila 164 .e. it must give a reasonable opportunity to the promisee for inspection of goods. 7.

Delivery was tendered at 8. though the hour was unreasonable. The defendant refused to accept the goods owing to lateness of the hour. Held.m. Kokila 165 . a Saturday.But in the following case tender is held to be valid. on March 31. the defendant could still take delivery before midnight. CASE: STARTUP VS MACDONALD The plaintiffs agreed to sell ten tons of linseed oil to the defendant to be delivered" within the last fourteen days of March´.30 p.

Tender. In case of tender of money. the debtor is not discharged from making the payment. the debtor must make a valid tender in the legal tender money. Kokila 166 . in this case.8. If the creditor refuses to accept it. does not discharge the debt.

he cannot repudiate it. the manager of a theatre. On the sixth night A willfully absents herself from the theatre. his acquiescence in the continuance of the contract.g. ‡ But if the promisee has signified. a singer enters into a contract with B. his promise in its entirety.100 for each night¶s performance. to sing at his theatre two nights in every week during the next two months and B agrees to pay her Rs.: A. Kokila 167 . B is at liberty to put an end to the contract. or disables himself from performing. by words or conduct. the promisee may put an end to the contract.EFFECT OF REFUSAL OF A PARTY TO PERFORM PROMISE WHOLLY (SEC. E.39) ‡ When a party to a contract refuses to perform.

B neglects or refuses to point out to A the places in which his house requires repairs. Wholly or in part. the performance of the promise made to him or extends the time for such performance or accepts any satisfaction for it (sec.62)  When the promisee dispenses with or remits. if it is caused such neglect or refusal.63)  When the person at whose option it is voidable.CONTRACTS WHICH NEED NOT BE PERFORMED  When its performance becomes impossible (sec.64)  When the promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise(sec.67) E.56)  When the parties to it agree to substitute a new contract for it or to rescind or alter it(sec. A is excused for the non-performance of the contract. rescinds it (Sec.  When it is illegal Kokila 168 .: A contracts with B to repair B¶s house.g.

BY WHOM CONTRACTS BE PERFORMED? 1. If there is something in the contract to show that it was the intention of the parties that the promise should be performed by the promisor himself. Kokila 169 . such promise must be performed by the promisor. E.Promisor himself. volition or diligence of the promisor or which are founded on personal confidence between the parties must be performed by the promisor himself.: Contracts which involve the exercise of personal skill.g.

2.e.. i. But their liability limited to the value of the property inherit from the deceased. 3. A contract which involves the use of personal skill or is founded on personal considerations comes to an end on the death of the promisor. Legal representatives. the legal representatives of the deceased promisor are bound to perform it unless a contrary intention appears from the contract. a personal action dies with the person. the promisor or his representative may employ a competent person to perform it. As regards any other contract. The rule of the law is : ACTIO PERSONALIS MORITUR CUM PERSONA. Kokila 170 . Agent: Where personal consideration is not the foundation of a contract.

4. he cannot afterwards enforce it against the promisor. Third persons: when a promisee accepts performance of the promise from a third person. Kokila 171 . 5. Joint Promisors: Where the promise is done by more than one promisee.

TIME AND PLACE OF PERFORMANCE Kokila 172 .

or the intention of the parties at the time of entering into the contract.RULES REGARDING TIME AND PLACE OF PERFORMANCE 1. the usage of trade. What is a reasonable time? It depends on the special circumstances or the case. Kokila 173 .: It has to be performed within a reasonable time . Where no application is to be made and no time is specified.

‡ E. A has not performed his promise Kokila 174 . Where time is specified and no application is to be made: ‡ When a promise is to be performed on a certain day. On that day A brings the goods to B¶s warehouse. but after usual hour for closing it and they are not received.g.2. the promisor may undertake to perform it without application by the promisee. the promisor may perform the promise at any time during the casual hours of business on such day and at the place at which the promise ought to be performed.: A promises to deliver goods at B¶s warehouse on the 1st January. ‡ In such a case.

Performance in manner or at time prescribed or sanctioned by the promisee: E.000 quintals of jute to B on a fixed day.2000.: A owes B Rs. The delivery of the goods operates as a part payment.: A undertakes to deliver 1.3. Application for performance on a certain day and place. Application by the promisor to the promisee to appoint place. E. B accepts some of A¶s goods in reduction of the debt. 5.: 4. A must apply to B to appoint a reasonable place for the purpose of receiving it and must deliver it to him at such place.g.g. Kokila 175 .

RECIPROCAL PROMISES Kokila 176 .

Kokila 177 .g.WHAT ARE RECIPROCAL PROMISES? Promises which form the consideration or part of the consideration for each other are called ³Reciprocal Promises´.: A promises to do or not to do something in consideration of B¶s promise to do or not to do something. the promises are reciprocal. E.

The promises are mutual and independent. or is willing to perform. the promises are mutual and independent.g.: In a contract of sale. Kokila 178 . E. B agrees to pay the price of goods on 10th instant. S promises to supply the goods on 20th instant.CLASSIFCATION OF RECIPROCAL PROMISES ‡ Mutual and Independent : Where each party must perform his promise independently and irrespective of the fact whether the other party has performed. his promise or not.

A need not perform his promise if B fails to provide him with the cart. the promises are conditional and dependent.‡ Conditional and dependent: Where the performance of the promise by one party depends on the prior performance of the promise by the other party.: A promises to remove certain debris lying in front of B¶s house provided B supplies him with the cart. The promises. are conditional and dependent.g. ‡ E. Kokila 179 . in this case.

: Sale of goods for cash. Kokila 180 .g.‡ Mutual and concurrent: Where the promises of the both the parties are to be performed simultaneously. they are said to be mutual and concurrent. ‡ E.

a question arises: ‡ To which debt should the payment be appropriated? Kokila 181 .APPROPRIATION OF PAYMENTS ‡ When a debtor owes several distinct debts to a creditor and makes a payment insufficient to satisfy the whole indebtedness.

the law will look to the circumstances attending on the payment for appropriation. IT IS TO BE APPLIED ACCORDING TO THE EXPRESSED WILL OF THE PAYER. 3.RULES REGARDING: ‡ 1. 2. WHERE THE DEBTOR INTIMATES: If it was intimated by debtor. NOT OF THE RECIEVER´ Kokila 182 . 1. RULE : µ IF MONEY IS PAID. If there is no express intimation by the debtor. the creditor must do so.

but he may apply it to a debt which is barred by the Law of Limitation. Where the debtor does not intimate and the circumstances are not indicative: ‡ The creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor. ‡ He cannot. apply the payment to a disputed or unlawful debt. however. Kokila 183 .‡ 2.

the payment shall be applied in discharge of each proportionately. Kokila 184 .e. Where the debtor does not intimate and the creditor fails to appropriate: ‡ The payment shall be applied in the discharge of the debts in chronological order. ‡ If the debts are equal standing. i. in order of time..‡ 3.

It may takes place by : ‡ Act of the parties ‡ Operation of law. Kokila 185 .ASSIGNMENT OF CONTRACTS ‡ It means transfer of contractual rights and liabilities under the contract to a third party with or without the concurrence of the other party to the contract.

2. 3. ASSIGNEMNT OF CONTRACTUAL OBLIGATIONS: Contractual obligations involving personal skill or ability cannot be assigned.ASSIGNMENT IS SAID TO TAKE PLACE BY AN ACT OF THE PARTIES WHEN THEY THEMSELVES MAKE THE ASSIGNMENT ‡ 1. Kokila 186 . A promisor cannot assign his liabilities or obligations under a contract. The promisor may transfer his liability with the consent of the promisee and of the transferee.

2. Kokila 187 . 2.ASSIGNMENT IS SAID TO TAKE PALCE BY AN ACT OF THE PARTIES WHEN THEY THEMSELVES MAKE THE ASSIGNMENT ‡ 1. subject to all equities between the original parties. ASSIGNMENT OF CONTRACTURAL RIGHTS: The rights and benefits under a contract not involving personal skill may be assigned. An actionable claim can always be assigned.

It takes place in two cases: 1.Operation of law ‡ Assignment by operation of law takes place by intervention of law. Death 2. Insolvency. Kokila 188 .

Discharge by 3. The various modes of discharge of contract are as follows: 1.Discharge by 4.Discharge by 5. .Discharge by 2.Discharge of Contract ‡ A contract is said to be discharged when the obligations created by it come to an end.Discharge by performance agreement or consent impossibility lapse of time operation of law breach of contract.Discharge by 6.

when the rights and obligations created by it come to an end. .e.«Discharge of Contract Discharge of contract means termination of the contractual relationship between the parties. A contract is said to be discharged when it ceases to operate. i..

3. By lapse of time. By impossibility or performance. .1. 4. 2. By agreement or consent. By performance. 5. By breach of contract. 6. By operation of law.

the parties are discharged and the contract comes to an end. Discharge by performance: ‡ Performance means the doing of that which is required by contract. Such a party gets a right of action against the order party who is guilty of breach. But if only one party performs the promise.«DISCHARGE OF CONTRACT ‡ 1. In such a case. Discharge by performance by takes place when the parties to the contract within the time and in the manner prescribed. he alone is discharged. (i) Actual Performance or (ii) Attempted Performance [Tender] . The performance may be.

Discharge by agreement or consent: The contract rests on the agreement of the parties.««.DISCHARGE OF CONTRACT ‡ 2.. The parties may get discharged from the obligations of performance of contract by agreement or mutual consent .

a) b) c) d) e) f) Novation Rescission Alteration Remission Waiver Merger .

Discharge by agreement or consent: The discharge by consent may be express or implied. of Contract 2.. . Discharge by consent ± ‡ (a) Novation : Sec 62 When a new contract is substituted for an existing one. either between the same parties or between the one of the parties and the third party. a contract between two parties is rescinded in consideration of a new contract being entered in to on the same terms between one of the parties and a third party ‡ (b) Rescission: When all or some of the terms of contract are cancelled.Discharge.

Rescission of a contract takes place when the parties to a contract may decide that they will forget the contract and will not bring a new contract into existence to replace it. A promise not to demand performance from each other becomes the mutual consideration for discharge of contract. .The agreement to mutually rescind the contract may take place either before its breach by a party or after its breach. this will amount to abandonment of the contract and will bring about its implied rescission. It may be noted that if the parties do not take steps towards performance of a contract for a long time .

in discharge of whole of the debt. The one side concession of remission is given under mutual agreement between the parties. e.Discharge by agreement or consent (c) Alteration : When one or more terms of the contract is/are altered by the mutual consent of the parties to a contract. Sec. acceptance of a lesser sum than what was contracted for.2. It is not necessary that there must be some consideration for the remission of the part of the debt. or to extend the time for performance or to accept any other satisfaction instead of performance. . Remission means acceptance of a lesser fulfillment of the promise made.g. 63 allows the promisee to dispense with or remit the performance of the promise by the promisor..

i.Strictly speaking.e.««2. then it is called waiver . If the same one-sided concession is given by a unilateral declaration of renunciation. waiver is not a method of discharge by mutual agreement.Discharge by agreement or consent (e) Waiver: Intentional relinquishment or giving up of a right by a party entitled thereto under a contract. (f) Merger: When an inferior right accruing to a party under a contract merges in to a superior right accruing to the same party under a new contract. .

. of Contract ‡ The law does not recognize what is impossible.Discharge. and ‡ What is impossible does not create an obligation .

Discharge by impossibility: Impossibility of performance may be(1) Initial impossibility or (2) Supervening impossibility. .Discharge «of Contract ‡ 3. (1) Initial impossibility: An agreement to do an impossible act in itself is void.

The cases covered by of supervening impossibility include: (a) Destruction of the subject mater (b) Non-Existence or non-occurrence of a particular state of things (c) Death or incapacity for personal service (d) Change of law. . & (e) Outbreak of war The contract is discharged in these cases.««Discharge of Contract (2)Supervening impossibility : Impossibility which arises subsequent to the formation of contract (which could be performed at the time when the contract was entered in to) is called supervening impossibility.

lock outs and civil disturbances (e) Failure of one of the objects The contract is not. .Discharge of Contract ‡ The following cases are not covered by supervening impossibility: (a) Difficulty of performance (b) Commercial impossibility (c) Failure of a third person on whose work the promisor relied (d) Strikes.discharged in these cases.

‡ 5. and (e) rights and liabilities becoming vested in the same person. (a) death (b) merger (c) insolvency (d) unauthorized alteration of the terms of a written agreement.«Discharge of Contract ‡ 4.Discharge by operation of law: This includes discharge by. the contract is discharged. .Discharge by lapse of time: If the contract is not performed within the period of limitation and if no action is taken by the promisee in a law court.

(1) Actual breach of contract may occur.Discharge by breach of contract: If a party breaks his obligation which the contract imposes. there takes place breach of contract. Breach of contract may be (a) Actual or (b) Anticipatory breach.Discharge of Contract ‡ 6. (a) at the time when the performance is due. . (2)Anticipatory breach of contract occurs when a party repudiates his liability or obligation under the contract before the time for performance arrives. or (b) during the performance of the contract.

Suit for RESCISSION: Rescission is the revocation of contract. The foundation for modern law of damages.Suit for DAMAGES: Damages are monetary compensation awarded to the injured party by Court for the loss or injury suffered by him. the injured party has one or more of the following remedies: 1. He is also absolved of all the obligations under the contract. Baxandile . the injured party may sue to treat the contract as rescinded.Remedies for Breach of Contract ‡ In case of breach of contract. is to be found in the case of Hadley vs. When there is breach of a contract by a party . both in India and England. 2. .

.2. X did not make known to Y that delay would result in loss of profits. Y was not liable for loss of profits during the period of delay as the circumstances communicated to Y did not show that a delay in the delivery of the shaft would entail loss of profits to the mill. By some neglect on the part of Y the delivery of the shaft was delayed in transit beyond a reasonable time (so that the mill was idle for a longer period than otherwise would have been the case had there been no breach of the contract of carriage). to be taken to a manufacturer to copy it and make a new one. ‡ Held. a common carrier.Baxandile(1854) ‡ X¶s mill was stopped by the breakdown of a shaft. He delivered the shaft to Y.Hadley vs.

‡ (2) Special Damages: Damages which arise from unusual circumstance known to both the parties to the contract are called special damages.2. Damages which may reasonably be supposed to have been in the contemplation of both the parties at the time when they made the contract as the probable result of the breach of it.Damages may be of four types: ‡ (1) Ordinary Damages: These are damages which actually arise in the usual course of things from the breach of a contract. . are known as special damages and may be recovered.

‡ 4..Nominal Damages: Where the injured party has not suffered any loss by reason of the breach of a contract. .Damages may be of four types: ‡ 3.«.Vindictive or Exemplary or Punitive Damages: These damages are allowed in case of the breach of a contract to marry or dishonor of a cheque by a banker wrongfully. the Court may award a very nominal sum as damages.

has become discharged by the breach of the contract by the other party.3. partly performed by one party. .Suit upon QUANTUM MERUIT: [As much as earned] A right to sue on a quantum meruit (as much as earned) arises where a contract. This right is founded on the implied promise by the other party arising from the acceptance of a benefit by that party.

A µpenalty¶ is a sum named in the contract at the time of it¶s formation. which is a fair and genuine pre estimate of the probable loss that might ensue as a result of breach. fixed or ascertained by the parties in the contract. .Liquidated Damages and penalty. ‡ µLiquidated damages¶ represent a sum. which is disproportionate to the damage likely to accrue as a result of breach the Courts in India allow only µreasonable compensation¶.

exactly according to the terms of the contract.Specific Performance :In certain cases the Court may direct the party in terms of the contract to actually carry out the promise. .4. This is called ³specific performance of the contract´.Suit for Specific Performance ‡ 4.