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Contract Law Question and Answer
Contract law (University of Hertfordshire)
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AS Levels Law Notes:
The English Legal System
Contents
CONTENTS................................................................................................................................1
CHAPTER 1: COMMON LAW AND
EQUITY
................................................................ 11
GUIDE TO ANSWERING QUESTIONS......................................................................................11
SOURCES OF LAW..................................................................................................................12
COMMON LAW.......................................................................................................................12
THE ORIGINS OF COMMON LAW.............................................................................................12
CONDITIONS TO BE ACCEPTED AS A LEGALISED CUSTOM....................................................13
DEFINITIONS OF COMMON LAW..............................................................................................13
DEFECTS OF COMMON LAW....................................................................................................14
EQUITY...................................................................................................................................15
CREATION OF EQUITY.............................................................................................................15
CONFLICT BETWEEN EQUITY AND COMMON LAW..................................................................16
EQUITABLE MAXIMS – HOW EQUITY OPERATES................................................................16
INTRODUCTION TO EQUITABLE REMEDIES..............................................................................18
CONTRIBUTION OF EQUITY TO CASE LAW..............................................................................20
INTRODUCTION TO CONCEPTS OF EQUITY...............................................................................20
CITATION TIMELINE..............................................................................................................21
CHAPTER 2: JUDICIAL
PRECEDENT
........................................................................... 21
GUIDE TO ANSWERING QUESTIONS......................................................................................21
INTRODUCTION TO JUDICIAL PRECEDENT...........................................................................22
IMPORTANT TERMINOLOGY IN JUDICIAL PRECEDENT........................................................23
ORIGINAL PRECEDENT............................................................................................................23
BINDING PRECEDENT..............................................................................................................24
RATIO DECIDENDI...................................................................................................................24
FINDING THE RATIO DECIDENDI – AN ILLUSTRATION.............................................................24
0.1 Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195...24
0.2 The Issues.........................................................................................................................25
0.3 Material Facts...................................................................................................................25
0.4 The Arguments.................................................................................................................25
0.5 The Decision.....................................................................................................................26
0.6 The Ratio Decidendi.........................................................................................................26
0.7 Endnote.............................................................................................................................26
MORE THAN ONE RATIO........................................................................................................27
PERSUASIVE PRECEDENT.........................................................................................................27
OBITER DICTA.........................................................................................................................28
TOOLS OF DEPARTURE (FROM A JUDICIAL PRECEDENT)...................................................29
REVERSING.............................................................................................................................29
DISTINGUISHING......................................................................................................................29
OVERRULING...........................................................................................................................30
OPERATION OF PRECEDENT WITHIN THE COURT STRUCTURE..........................................31
THE PRACTICE STATEMENT 1966.........................................................................................31
USE OF THE PRACTICE STATEMENT........................................................................................32
COURT OF APPEAL..................................................................................................................34
Guide to Answering Questions
1. Introduction to common law
 Earl of Oxford’s case 1615 +
Question No. 1: Who is competent to contract Discuss the law relating to minor’s agreement in India, with help
of decided cases. Also brief about English Law Indian law in this context.
OR
Minor’s agreements are void at-initio. In which case the above rule was established. Discuss in brief that case
and also bring out the exceptions to the above rule.
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OR
What do you understand by “ capacity to contract” What is effect of Minor’s agreement and when can it
enforced.
OR
“A minor’s bind others but is never bound by others.” Explain by giving illustrations.
OR
Discuss the nature and effects of Minor’s Agreement.
Answer – INTRODUCTION:- All agreements are not contracts. Only those agreements are contract which fulfil
he conditions of section 10 and according to section 10 for a contract parties must be competent, the consent
must be free. Therefore the competency of the parties to a contract is most essentials element of a contract.
According to section 11 of Indian contract Act 1872 which provided, “That every person is competent
to contract who is of the age of majority according to law to which is subject and who is sound mind and not
disqualified from contracting by any law to which he is subject.” The following persons are competent to
contract i) Who is major.
ii) Who is of sound mind.
It is evident that minor’s and unsound mind person cannot make a contract. A Major person means who has
attained the age of 18 years. The age of majority has been decided by Indian majority act 1875. In case of
guardian appointed by the court, the age shall be 21 years.
“ An agreement made by a minor is void.”, from the above statement we find that the minor is not
competent to contract. Indian contract act is silent about whether it will be void or voidable up to 1903. But it
is decided by the Court that these are void. Agreement by a minor is void-ab-initio, such contract cannot be
enforced by law. Further the minor cannot authorise any other person to do a contract.
Case Mohiri Bibi vs Dharamdass Ghosh (1903) A minor Mr. Dharamdass Ghosh executed a mortgage
documents for Rs.20,000.00 in favour of a money lender Sh. Brahmo Dutt. The money lender actually paid
Rs.8,000.00 to the minor. It is important that before this transaction the guardian of the minor informed the
Attorney of Money lender that he (Dharamdass Ghosh) is minor. Later on a suit was instituted by the minor
Dharmadass Ghosh against the money lender Sh. Brahamo dutt with the intention that the mortgage be set
aside. This suit was opposed by Money lender by saying that the above contract being voidable, he has the
right to receive the amount of the loan under section 64 and 65 of Contract Act i.e. minor is bound to return
back the amount.
Privy council held that,“ the contract is void ab-initio which cannot be enforced.” It was also held that
the minor could not be asked to repay the loan taken by him. It was further held that law of estoppels cannot
be applied against the minor Shri Dharmodas Ghosh being mis-stated falsely his age because he was minor at
the time of the agreement and the agreement was void. The law of estoppels as stand in section 115 of Indian
Evidence Act was not applicable to the present case as the plaintiff was minor at the time of making
agreement, this fact was also known to the agent of Brahmo Dutt defendant. Under Specific Relief Act 1877
Section 38 and 41 applies where party had the knowledge of minority age gets restitute degree.
A new concept of beneficial has come into existence now. It has been held in various cases. A minor
is bound for the beneficial contract. The beneficial contract are those contracts which are for the benefit of
minor. The first case was S.Subramanyam v/s Subha Roy-1948 - In this case transfer of inherited property of
a minor affected by his guardian to pay off an in-herited debt was binding on him for his benefit. Here is a list
of beneficial contract
i) Contract of Insurance Such contracts are in the benefit of minors.
ii) Contract to purchase the immoveable property Such contract are valid.
iii) Contract of service - These are for the benefit for the monors
iv) Contract of apprentice ship Training period of any minor who is taking training from any person, because of
the training minor will case his livelihood. It is for his benefit and mono is liable to compensate hat person.
v) Contract of Marriage When guardian made an agreement for the marriage of the minor then another party
cannot enforce it, but minor can enforce it. If agreement is made jointly by guardian and minor, it can be
enforced again on majority age.
vi) Contract of Necessities- Under section 68 of the Contract Act-1872, minor is also liable for necessaries.
Necessaries means the basic things of the life. These are mainly, ROTI – KAPRA-AUR MAKAAN. If any person
supplied necessaries to minor then the minor is liable o compensate the supplier. A case Chapple vs Cooper
The court held that necessaries are not only food, shelter, clothes but also education or religious and any such
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things which are necessary for life, comes under the definition of necessaries. The following two conditions are
necessary for liable
1. The supply must not be more than sufficient.
2. The supply must be according to the standard of minor.
Case PETRESS VS FLEMING
The supply of a watch to a minor whose study was considered as the necessity because to have a watch for
graduate person is his necessity.
RATIFICATION OF THE MINOR’S AGREEMENT
A minor’s agreement being void ab-initio, it is incapable of being validated a subsequent ratification after the
minor has attained the age of majority. Here is minor accepts the contract in some terms is entered during
minority then also he is not liable. If a minor takes 2000.00 in minority and Rs.3000- after getting majority age
and said major give back Rs.5000- then this is valid and with consideration. After getting majority age if minor
uses his option to be a partner, he will be bound for all the responsibilities of minority period, which are against
the firm.
CONTRACT BY MINOR GUARDIANS
1. If the agreement is on behalf of minor done by guardian.
2. With in his Power.
3. Guardian is capable to enter into contract.
4. The agreement will be in the interest of minor.
A case of Raj Rani vs Prem - Father agreed with the Director of Film, and according to this
agreement Director of Film will give a role to Indrani. It was held void because no consideration was therein. It
this agreement is with the daughter then it is void abs-intro. If it is with his father then it has no value even to
think over it.
DOCTRINE OF RESTITUTION
Restitution means if an agreement is declared void, benefit should be returned. Under section 64 & 65 of
contract Act, that section 68 is applies only on voidable agreements, Section 56 is applies on the agreement
which were valid at the time of formation but due to some circumstances(as under sec.56) it becomes void.
Under the equitable doctrine of restitution minor has to restore back the benefit so received by him the exact
things but it is applicable in case of goods and property not in the case of money. Restitution stop where
repayments begins.
A case of Leslie vs Sheill- (1914) - It was held by the court of Appeal that the money could not be recovered. If
there were allowed that would amounts to enforcing the agreement to repay loan, which is void under Inflants
Relief Act-1874.
Section 39(3) specific Relief Act 1877 If the court thinks he may pass an order of restitution in any case, now a
question arises whether he person did not know about the age of minor. If minor is also not know his age. In
this stage plaintiff does not get compensation. If respondent misrepresent his age on this point there are
different view of court.
Case KHARGIL VS LAKHAN SINGH -1928 LAHORE HIGH COURT.
The court ordered a minor to refund Rs.17500- which he had taken in advance for the sale of land. When he
refused to complete the contract. The court was of the opinion that still the Specific Relief Act should apply
whether the minor was the plaintiff or the defendant. The doctrine of restitution should apply whether the
minor had taken the goods or money.
Case Ajudhiya Parsad vs Chandan Lal – 1937
Allahabad High Court refused to following, extended view of restitution and held that a minor who had taken
money by mortgaging his home was not bound to restore the money. Now section 33(2)(b) added according to
this section, when a plaintiff wants to dissolve the agreement and says that at the time of agreement he is
minor than he can get back all his profits.
DOCTRINE OF ESTOPPELS
According to rules contained in Sec.115 of Indian Evidence Act 1872, if you make a statement today, which
misleads another person, you are not allowed to deny the statement to-marrow when the question of your
liability arises. A question whether a minor who has made a false representation about his age is stopped from
pleading his minority, was raised, but it was not decided in this case of Mohiri Bibi. Privy Council held that
where the party knows about the age of minor this principle could not apply. The question arises that whether
minor can be stopped by false representation as to his age is now settled by this case.
A Case Nawab Sadiq Ali Khan vs Bibi Jai Kishori- 1928
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It was held by Privy Council that if a minor makes a contract by fraudulently expressing his age more than
actual then he cannot be stopped as per the rules of estoppels that he was minor at the time of contract.
INDIAN AND ANGLO LAW
It is difficult to differentiate between both the law in respect of contract by minor’s but generally the difference
in both the law is 1. Contract by minor under Indian law is void ab-initio.
2. It is voidable under English Law, such contract can be declared void on the will of minor.
If the contract is for the benefit or fulfilment of necessity of minor. Then it shall be binding.
Q. No 2:- State the difference between void agreement and illegal agreement
OR
All illegal agreements are void but all void agreement are not illegal. Comments
Ans- INTRODUCTION Under section 2(g) of Indian Contract Act 1872, definition of void agreement has been
given and according to it , “ Agreement in not only enforceable by law said to be void.” For instance, an
agreement by a minor has been held to be void. Section 24 to 30 of the Indian Contract Act 1872, make a
specific mention of agreement which are void. Generally the following agreements are not enforceable by law.
i) Whose parties are not competent to do a contract i.e. they are not adult and are unsound mind.
ii) Whose parties do not have free consent i.e. they are under coercion, undue influence fraud &
misappropriation etc.
iii) Whose consideration and object has not been lawful
iv) Which are immoral or against public policies.
v) Which do not create valid (illegal) liabilities between the parties.
vi) Which have been declared as void by the court etc.
All above agreements are void because they cannot be enforced by law.
ILLEGAL- AGREEMENTS
Illegal agreements are such agreements whose consideration and object are not lawful i.e. they are illegal.
Such agreements are mentioned in section 23 of the Indian Contract Act 1872. The following agreements are
considered as illegal1. Which are prohibited by Law.
2. Which is of such a nature if followed would defeat the provisions of law.
3. Which is fraudulent.
4. Which is causing injury to body or property of any other person.
5. Which have been declared by the court as immoral or against public policies.
After the definition of void and illegal agreements we have considered the following statements “ That all illegal agreements are void agreements but all void agreements need not necessarily be illegal.” It can
be adjudged from the following i) Illegal agreements are void – ab-initio which cannot be enforced by law at any time whereas void agreement
need not be void-ab-initio, such agreements could become un-enforceable by law later.
ILLUSTRATION An agreement takes place between the citizen of India and Pakistan which was enforceable by
law at the time agreement, but later on in the event of war between India & Pakistan the agreement becomes
un-enforceable whereas agreement to pay money by A to B for illegal intercourse is void ab-initio which cannot
be enforced any time.” This shows the illegal agreements are always void whereas void agreements are not
always illegal.
ii) Parties of illegal agreements can be punished whereas the parties of void agreements cannot be punished.
ILLUSTRATION - An agreement to encourage any woman for prostitution by paying her money is punishable but
an agreement by minor or without consideration is not punishable. This also proves the fact that every illegal
agreement is void but every void agreement is not illegal because illegal agreement is of punishable nature
whereas void agreement is not. Void agreement does not contain the element of illegal agreement whereas
illegal agreement contains the elements of void agreement.
iii) Void agreement cannot be enforced at any time and illegal agreement is also never enforceable by law.
Hence illegal agreement contains impliedly the element of illegal agreement.
iv) Illegal agreement are those which are mentioned in Sec. 23 of contract act whereas void agreements
included various other types of agreement, like agreement by minor or unsound mind persons, agreement
without consideration etc.
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v) Void agreements include illegal agreements which are not enforceable by law, but illegal agreements need
not contain all types of void agreement. This shows that all illegal agreements are void but all void agreements
are not illegal.
DIFFERENCE BETWEEN VOID AGREEMENT & ILLEGAL AGREEMENTS.
VOID AGREEMENT
ILLEGAL AGREEMENT
1. All agreements are not void-ab-initio but become void later due to circumstances
2 The reason of void agreement could be incompetency of parties, lack of consideration etc.
3 Parties of void agreements are not be punished.
4 Collateral agreement to void agreements can be enforced.
5 The area of void agreement is extremely void. It includes all illegal agreement. 1 Illegal agreements are void –
ab-initio.
2 The reasons of illegal agreement shall be those which are mentioned in sec.23 of the Contract Act., like
prohibited by law. Immoral against public policies, fraudulent etc.
3 Parties of illegal agreement can be punished.
4 Collateral agreement to the illegal agreement can also not be enforced.
5 The area of illegal agreement is comparatively narrow. It does not include all types of void agreement.
Question No 3 : All contracts are agreements but all agreements are not contracts?
OR
Discuss the rule for the formation of a valid contract when a contract becomes complete?
Introduction : i) MULLA :- Every agreement or promise enforceable by law is a contract.
ii) SALMOND :-Contract is an agreement creating defining obligations between parties.
A contract is an agreement enforceable by law. An agreement is the prime stage of the contract. If agreement
is enforceable by law or if agreement is recognised by law then it will become a contract otherwise not. It is
basically based upon British Law because the Contract Act was passed by British Indian Govt., in 1872.
To make contract an agreement it is essential that no contract is possible without an agreement, but we
cannot say that all agreements are contracts. Section 2(y) of contract Act says that, “ Contract is an agreement
enforceable by law.” All agreement e.g. to see cinema is not contract, if offer is accepted then it becomes
promise. Promise is followed by consideration then it becomes agreement and if an agreement is enforceable
by law then it becomes CONTRACT, see below :i) Proposal + acceptance
=
PROMISE
ii) Promise + consideration
=
AGREEMENT
iii) Agreement+ Enforceability
=
CONTRACT
AGREEMENT :- Agreement 2(e) promise or set of promises forming the consideration with each other, is an
agreement.
PROMISE :- Promise is an important part of the agreement. A proposal when accepted becomes promise.
PROPOSAL/OFFER :- According to section 2(a) when one person signifies to other his willingness to do or to
abstain from doing anything with a view of obtaining the assent of that offer to such act or abstinence, he is
said to make a proposal.
ACCEPTANCE:- According to section 29(b) of contract act when the person to whom the proposal is made
signifies his assent there to the proposal then it is said to be accepted. A proposal when accepted becomes
promise.
CONSIDERATION :- Section 2(d) of contract act defines consideration. Section 2 says that an agreement made
without consideration is void unless :a) Natural love and affection. Sec.25 of contract act, the parties to the agreement must be standing in a near
relationship to each other. The promise should be made by one party out of natural love and affection for the
other. The promise should be in writing and registered.
b) Compensation for past voluntary services sec. 25(2) in case Sindha v.Abrahim-1895 Bombay : The promise to
compensate though without consideration is binding because of this exception. The exception also covers a
situation where the promise is for doing something voluntarily”
c) Promise to pay time barred debt: Sec.25(3): The promise must be to pay wholly or in part a time barred debt
i.e. a debt of which the creditor might have enforced payment but for the law for the limitation of suit. The
promise must be in writing and signed by the person to be charged therewith. Case Gobind Das v. Sarju das1908, Ganesh Prasad v.Mt. Rambati Bai-1942.
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ENFORCEABLE BY LAW :- in Indian Contract Act 2(h) it says that contract is agreement enforceable by law. If an
agreement is enforceable by law then it is CONTRACT, otherwise merely an agreement.
To make an agreement a contract in Indian Contract Act section 10, the following conditions must be fulfilled :1. Competent Parties :- Section 11 says, contract should be made with person who must be major and sound
mind not disqualified by law.
2. Free Consent :- Section 14, says that consent must be free, when it is not caused by coercion, undue
influence under section 16, fraud under section 17, misappropriation under section 18 and mistake under
section 20.
3. Lawful consideration & object :- According to section 23, when agreements consideration or object are
unlawful, they are void.
4. Not expressly declare as void:- The such agreements which are made without consideration or expressly
declared to be void as per section (25) are no contract, these are as under:i) Agreement in restrain of marriage section-26.
ii) Agreement in restrain of trade section-27.
iii) Agreement in restrain of legal proceedings section -28.
iv) Agreement which is ambitious and uncertain sec.29.
v) Agreement by way of wages section-30.
vi) Agreement to do an impossible act section-56.
5.FORMALTIES PERFORMED IF NEEDED BY LAW:- The person by whom the contract must be performed time
and place and performance opportunity of payment. Thus when these conditions are fulfilled then an
agreement is made contract because these are enforceable by law. But some agreements are not made
contract because they are not enforceable by law. These are :1. Social Agreement :- When agreements based only social relationship and parties, we cannot enforce these
agreements by law, for example:A case Jones v/s Paday
If ‘ A’ give invitation of dinner to ‘ B ‘ and ‘ B ‘ accept this but does not go to dinner then’ A‘ suffers damage
after this. But ‘ A ‘ cannot file a sue against ‘ B ‘ because it is Social Agreement which is not enforceable by law.
FAMILY LAW:- Family law are not made contract as in the case of :
Balfour v/s Balfour:- In this case the defendant who was employed in Govt.,job in Ceylon went to England with
his wife on love. For health reasons the wife was unable to return to Ceylon. The husband promised to pay 30
ponds per month to his wife as maintenance for the period she had to live abart. The husband failed to pay
this amount. The wife filed a suit against her husband for this money. The court held that this agreement is
not enforceable by law.
Case : Jones v/s Padavllon :
Where a girl left service to join legal education on the promise of her mother to stand the expenses. It was
held to be a family matter and not a binding contract. Thus we can say that all the agreements are not
contracts but all the contracts are not agreements.
A Case LALMAN V/S GAURI DATT-1913 : The defendant’s nephew absconded from home. The Plaintiff who was
defendant servant was sent to search for the missing boy. After the plaintiff had left in search of boy, the
defendant issued handbill announcing a reward of Rs.501.00 to anyone who might find out he boy. The Plaintiff
who was ignorant of this reward, was successful in searching the boy. When he came to know of the reward,
which had been announced in his absence, he brought an action against he defendant to claim this reward. It
was held hat since the Plaintiff was ignorant of the offer of reward, his act of bringing the lost boy did not
amount to the acceptance of he offer, and , therefore, he was not entitled to claim the reward. If a person has
the knowledge of the offer, his acing in accordance with the terms thereof amount to the acceptance of the
same. In such a case, it is immaterial that at the time of accepting the offer, the acceptor does not intend to
claim the reward mentioned in the offer.
DIFFERENCE BETWEEN AGREEMENT AND CONTRACT
AGREEMENT
CONTRACT
1. Three important points for
Two important points
for contract
Agreement: i) acceptance
are i) agreement ii) enforcement
ii) Offer iii) and consideration
by law.
2. An agreement could be legal or
2. Agreement in contract to be lawIllegal.
Ful and enforceable by law.
3. Agreement may or may not be
3. Contract is enforceable by law.
Enforceable by law.
4. Area of contract is limited as
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4. Area of agreement is very wide
every agreement can’t become
As it can be any type legal, moral
contract.
Etc. Any agreement even if not
5. In contract the valid liability is
Enforceable by law remains an
created between the parties.
Agreement.
5. The certain of valid liability is not
6. Contract requires the
Requires in all agreement like, moral
competency of parties, free
Religious etc.
Consent, sufficient consi6. Every agreement does not requires
duration etc.
Competency of parties, free consent,
Sufficient consideration etc., because
Agreement could be by un-enforceable
Law.
Q. No 4 :- Discuss the meaning of consideration? When the consideration becomes unlawful? How does the
Public Policy Effect he consideration? OR
An Agreement without consideration is void.” Discuss with Exceptions ? OR
Define consideration, Past Consideration, Contract without consideration and consideration by a person
unknown to contract with suitable examples. OR
Explain consideration. In what cases the consideration of an agreement are said to be unlawful under contract
Act.? Illustrate with suitable examples.
Answer : INTRODUCTION : The consideration has important place in contract. It is important part of Contract.
A valid contract requires a consideration.
Agreement without consideration are void. The study of
consideration in respect of the subject matter is required.
Section 2 (d) of the Indian Contract Act- 1872 defines consideration. It says, “ When at the desire of
the promisor, the promise 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 promise.”
In other words when a the desire of one person, another person does sense act or abstains from
doing, then it consideration for the first person.
ILLUSTATION :- ‘A’ purposes ‘B’ to buy his cycle for /rs.1000.00. ‘B’ agrees to buy that cycle for Rs.1000/-. Here
Rs.1000/- is the consideration for cycle.
According to Pollock :- “ A party does or abstains from doing or promise to do or abstain from doing something,
is a price for which the promise is bought, the promise thus given for value is enforceable.
According to Auson :- “ Consideration is that which is to be done abstain from doing, to be bear or promises to
do or which the promises abstains from doing in respect of promise or bears it.”
ELEMENS OF CONSIDERATION :I) Consideration to be at the desire of promisor.
II) Consideration can be given by the promise or any other person.
III) Consideration may be past, future or present.
IV) Consideration must be legally adequate and valuable.
V) Consideration must be valid.
A case : Mirahul Enterprises V/s Mrs. Vijaya Srivastav AIR 2003 :
Delhi High Court said that a valid agreement requires the consideration to be definite.
In a Case :-Durga Parsad v/s Baldev The Plaintiff constructed certain shops in a market at the instance of the
Collector of that place. Subsequently the defendants occupied one of the shops in the market. Since the
Plaintiff had spent money for the construction of market, the defendants in consideration thereof, made a
promise to pay the plaintiff commission on the articles sold through their (defendant) agency in that market.
The plaintiff failed to pay the promised commission. In an action by the plaintiff to recover the commission, it
was observed that the consideration for the promise to pay the commission was the construction of the
market by the plaintiff. Such construction had not been done at the desire of the defendants, but on the order
of the Collector. It was therefore held that since the consideration did not moved at the desire of the
defendants ( Promisors in this case), this did not constitute valid consideration and therefore the defendants
were not liable in respect of the promise made by them.
TYPES OF CONSIDERATION ;- There are three types of consideration which are as under :i) Past consideration.
ii) Present consideration.
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iii) Future consideration.
Present consideration means such consideration which is paid to the promissory immediately. Example : ‘A’
offers to ‘B’ to sell his vehicle for Rs.50,000/-, ‘B’ pays to ‘A’ Rs.50,000/- at that moment, and ‘A’ gives the
possession of vehicle to ‘B’. This is present consideration.
Past consideration is the consideration for the service or promise performed in past. Example :- ‘A’ at the desire
of ‘B’ takes care of the family of ‘B’. After three years ‘B’ promises o ‘A’ that he shall pay him Rs.10000/- for his
services given. Here, the services provided by ’A’ in the past to ‘B’ shall be called past consideration.
Future consideration means such consideration which shall be paid in future. Example:- ‘A’ promises to sell his
house for Rs.75,000/- to ‘B’ on 5th.Feb 2003, and both parties decide that possession of house shall be
delivered on 1st.Dec.2003 and on that day he payment of Rs.755,000/- shall be made. This is future
consideration, because the contract had originated on 05.02.2003 but its consideration was to be paid on 1st
December, 2003.
WHEN THE CONSIDERATION IS ILLEGAL
A valid contract requires the consideration to be valid or legal contract with illegal consideration is not
enforceable. Sec.23 of Contract Act mentions those situations in which the consideration shall be considered to
be illegal. These situations are as under:i) When it is prohibited by law.
ii) When it is of such nature that if followed would defeat the provisions of law.
iii) When it is fraudulent.
iv) When it involves injury to the person or property of another.
v) The court regards it as immoral or opposed to public policy.
Consideration forbidden by Law:-Such agreements are void. An agreement or act forbidden by law is that
which is not permitted by law to be followed or which is against the law. A case: Ram Sewak v/s Ramcharan :
AIR 1982 Allahabad. : The partners of a partnership firm made an agreement for the concealment of profit for
the purpose of deceiving tax. It was held illegal consideration or an agreement forbidden by law.
Consideration to defeat the provisions of Law:- An agreement with such consideration is also void, whose
purpose is to defeat the provisions of law. In other words, where an agreement is done with such
consideration that if applied would defeat the provisions of law, then such consideration and agreement shall
be considered void.
ILLUSTRATION : ‘A’ and ‘B’ agrees with the intention that they shall be able to take any dispute related to a
particular subject to the court, even though the limitation for it has been determined,. This agreement defeats
the provisions of Limitation Act, and is therefore void.
IN Nutan Kumar v/s Additional District Judge, Banda (AIR 1994 Allahabad): Allahabad High Court held that
such an agreement between landowner and tenant which is inconsistent to the provision of Rent control Act
shall be void. Such agreements cannot be enforced through court.
Fraudulent Consideration: Agreement with such consideration which are fraudulent, are void. For example: A,
B and C agrees for the partition among themselves of the profits obtained or to be obtained by fraud.
Agreement is void because its object and consideration is against law.
Consideration to cause injury to Body or property of any other person:- Such agreement is void whose object
and consideration are illegal owing to be causing injury to body or property of any other person. A case :
K.Abdul `Qader v/s The Plantation Corporation of Kerla. AIR 1983: Kerla High Court said that a contract made
with the object to cause injury to body or property of any other person, is void and unenforceable.
Immoral and Opposed to Public Policy:- Agreement with consideration being immoral and opposed to public
policy are void and unenforceable. Several decisions of court in his respect have been made. Several judicial
decisions have considered following object and consideration to be immoral and opposed to public policy :a) Agreement to lent house on rent for prostitution.
b) Agreement to lent vehicle to be used for prostitution.
c) Agreement to provide money to have cohabitation with the wife of any other person.
d) Consideration of earlier cohabitation.
e) Agreement to give consideration for future illegal cohabitation.
A case of Subhash Chandra v/s Narbada Bai (AIR- 1982 of MP) A man made agreement for maintenance with
a woman. It was the result of an earlier cohabitation with a woman with that man. Court held it to be void
and unenforceable. Agreement with consideration being opposed to public policy are also void. The public
policy does not have any universal definition, but several judicial decisions have considered following things to
be against public policy :I) Insurance conscience.
II) Obstruction in freedom.
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III) Elements creating restrain to trade or natural or legal rights.
IV) Against good conduct etc.
The following agreements have been considered to be against public policy :
a) Agreement to cause injury to public service.
b) Transfer of decree for the purpose of avoiding the effect of decree to other creditors.
c) Agreement to pay money in return of marriage.
d) Agreement to bribe for adoption etc..
A case : SBI v/s Aditya Finance and Leasing co. – 1999 Delhi) It was held that the land spotted or embarked for
residential purposes is used for commercial purposes by an agreement which shall be void by being against
public policy. Thus the agreement with such consideration that adversely effect over the interest of common
people or which are not proper in respect of public shall unenforceable by being void.
AGREEMENT WITHOUT CONSIDERATION ARE VOID
As we have seen above that Consideration is essential for a valid contract. Agreement without consideration
cannot be imagined. Section 25 of Indian Contract Act-1872 clearly provides that “ Agreement without
consideration is void.”
ILLUSSTRRATION :- ‘A’ promises ‘B’ to pay him Rs.2000/- without any consideration. This is void agreement.
Exceptions :- But the above rule have some exceptions also i.e. an agreement without consideration in
following situation is valid and enforceable :1. Agreement Under Natural Love and Affection:- Agreement without consideration due to Natural Love and
Affection are valid and enforceable provided that they are written and registered.
ILUSTRATION : ‘A’ promise to pay his son ‘B’ a sum of Rs. 5000.00 under the Natural Love and Affection. A
writes his promise toward B and gets it registered. This is contract. Natural love and affection includes relation
between father-son husband-wife, brothers etc. Such relations do not require consideration for a valid
agreement. A case : Manali Singhal V/s Ravi Singhal-1999-Delhi), It was said by Delhi High Court that where any
family agreement in relation to the amount of maintenance has been made for love and affection, family
peace, harmony and satisfaction there consideration shall not be required. Such agreement shall be
enforceable by Court.
2. Agreement to pay compensation for past service Where any person without the knowledge of promisor or
otherwise than his prayer, does any service or has done service and the promisor promise to compensate him,
there consideration shall not be required, with the following thing which are necessary :i) An act has been voluntarily done already for the promisor
ii) At the time of commission of that act, promisor was competent to contract.
ILLUSTRATION ‘A’ at the desire of ‘B’ does service for the relatives of ‘B’. Later ‘B’ agrees to pay Rs.1000/- to ‘A’
for the service. This agreement been result of earlier service is valid and enforceable. Such consideration is
also called past consideration.
3.Agreement for payment of Time Barred Debt. Such an agreement for payment of a debt barred by time
under limitation act, is considered to be lawful because a time barred debt is also a good consideration as the
debt remains ever after the completion of time of recovery. A case: Tulsiram v/s Samey Singh AIR-1981 Delhi
Delhi High Court held that an agreement for the payment of a time barred debt can be made under Se.25(3)
but it requires that the agreement shall mention that consent has been given for the payment of time barred
debt.
UNIT – III
Question No. 5. Discuss contingent contract. Elaborate with suitable illustrations. How are such contract is
different from Agreements?
Answer :- INTRODUCTION : Contingent contract is special types of contract. Generally in most contracts rights
of parties are enforced immediately after the execution of contract, but sometimes there are contracts whose
enforcement depends upon happening or non-happening of an event.
DEFINITION :Section 31 of Indian Contract Act 1872 defines that Contingent Contract according to it : “A contingent contract
is a contract to do or not to do something, if some event, collateral to such contract does or does not happen.”
ILLUSTRATION :‘ A’ contracts with ‘B’ that if the house of ‘B’ destroyed by fire then he shall pay Rs.10,000/- to B. It is
contingent contract because the enforcement of contract depends on the happening or non happening of an
event.
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Thus the contingent contract depends upon the happening of a uncertain event. If the event is of certain
nature, then it shall not be contingent contract.
ELEMENTS OF CONTINGENT CONTRACT
These are as under:1. The contingent contract depends upon the happening or non-happening of an event.
2. Such event shall be of uncertain nature i.e. it may or may not be happen.
3. Such event is not the part of mutual promises of parties.
4. Happening or non happening of the event does not depend on the will of the parties.
5. The future uncertain even is collateral to the main contract.
In case : Ranchoddas V/s Nathmal Hirachand and company 1951 (Bombay)
In this case the court decided and did not accepted the contention and said that reaching of cloth to India was
a method of delivery. This cannot be said contingent contract.
NATURE OF CONTINGENT CONTRACT:Section 32 to 36 of Act mention that various forms of contingent contract like:i) According to Section 32 . Contingent contract to do or not to do be anything if an uncertain event happens
cannot be enforced by law unless and until that event has happened. If the event becomes impossible such
contract becomes void.
ILLUSTRATION :- A contract to pay B a sum of money when B marries C. C dies without being married to B.
The contract becomes void.
ii) Section 33 says : contingent contract to do or not to do anything, if an Uncertain future even does not
happens can be enforced by law when the happening of that event becomes impossible.
ILLUSTRATION :- A agrees to pay to B a sum money if a certain ship does not return. The ship is sunk. The
contract can be enforced when the ship sinks.
iii) Section 34 says : that if future event on which a contract is contingent is the way in which a person will act
at an unspecified time, the event shall be considered to become impossible when such person does anything
which renders it impossible that he should so act within any definite time, or otherwise than under further
contingencies.
ILLUSTRATION :- A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must
now be considered impossible, though it is possible that D may die, and that C may afterwards marry B .
iv) Section 35 says that :- contingent contacts to do or not to do anything if a special uncertain event happens
within as fixed time become void if, the expiration of the time fixed, such event has snot happened, or if, before
the time fixed, such becomes impossible.
ILLUSTRATION :- A promises to B to pay a sum of money if a certain ship returns within a year. The contract may
be enforced if the ship returns within a year, and becomes void if the ship is burnt within the year.
v) Section 36 says that : contingent contract to do or not to do anything if an impossible event happens, are
void, whether the impossibility of the event is known or not to the parties to the agreements at the time when
it is made.
ILLUSTRATION: - A agrees to B, a sum or Rs.1000.00, if two straight lines should on close a space. The
agreement is void.
Contingency dependent on the behaviour of the parties. It is important that if the performance of the promise
depends on the mere will and pleasure of the promisor, it is no promise at all but promise to pay what a third
party decide is valid promise.
DIFFERENCE BETWEEN CONTINGENT CONTRACT & WAGER CONTRACT
Contingent Contract
Wager contract
1. All contingent contract are
All wager contract have the element of
Not wager.
Contingent contract.
2. The interest of the parties
The interest of the parties is vested upon
Is vested on the happening
wining or losing sum of money.
Or non-happening of event.
3. The future event is collateral The future event is the base of decision.
To the contract.
4. Only one party shall give
Parties give reciprocal promises.
Promise.
5. Win or loss of the parties is
One party has to win and other has to
Not important.
Lose.
6. Contingent contract are
Wager contract are void with few
Valid.
Exceptions.
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Question No.6 : Define Fruad? Distinguish between Fraud and Misrepresentation. Whether silence amounts to
fraud?
OR
2. What are the factors which vitiate consent and make the Agreement
Void or voidable?
OR
3. What is consent? When is consent said to be free under Indian Contract Act?
OR
Distinguish between coercion and undue influence.
Answer : INTRODUCTION :An agreement becomes contract if it fulfils the conditions of /section 10. According to sec. 10 for an agreement
becomes contract with law full object and consideration. It means free consent is not free then the contract is
invalid. But it is voidable not void. Voidable means a contract which can be declared void by the court at the
option of other party.
under sec.2(1). Section 198, 10(a) also deines the term voidable.
Section 13 : Consent : According to Indian Contract Act 1872:- “ Two or more persons are said to consent when
they agree upon something in the same sense.”
In the above definition it shows that (i) At least two persons are must (ii) for the same thing and same sense.
ILLUSTRATION : At least two persons are must:- A agrees to sell his house to B for Rs.50,000/- B accepts this
proposal.
For same thing and same sense:- ‘ A’ have two cars; one Maruti and the other is Fiat. He agree to sell to B. A
might be thinking to sell Maruti car while B might be thinking to purchase fiat car. In this example A & B do not
agree upon the same thing in the same sense, hence there is snot contract in this case.
A Free Consent :- under sec.14 Consent: is said to be free when it not caused by : i) Coercion Sec. 5.15 (ii)
Undue influence sec..16 (iii) Fraud sec..17 (iv)
Misrepresentation .18 (v) Mistake 5.20.
In other words consent is free if it is not affected by coercion, undue influence, fraud and misrepresentation. In
case of consent taken by mistake the consent shall be void.
1.
COERCION ( 5.15) :
Coercion means by force or compulsion. Coercion is a method of doing consent. This method is against the law.
When any person by doing an illegal act gets the consent of any other person on an agreement it is called
coercion. It means:
Explanation : It is immaterial whether the IPC-1860 is or is not in force in the place where the coercion is
employed.
(a) Threading to commit any act forbidden by IPC: If consent obtained by threat of committing act forbidden
by SC it called is coercion. Example : A kidnapped a son of B, A says you give me your scooter in Rs.50/- then I
will give you your child. B agreed, it is a coercion. Case : Masjidi v/s Ashiya 1880: It was held that it cannot be
simple upon these facts that the consent of such person was caused by coercion.
Case:- Raganayaswami V/s Alyar Sette A Madrasi man died leaving behind a widow. The relative of the dead
threaded the widow to adopt a boy otherwise they will not allow her to remove the dead body of her husband.
The widow adopted the boy and subsequently applied to cancel the adoption. The court held the adoption is
not valid.
Muthiah Chettiar V/s Karupan Chettiar
A was an agent of B. A at the end of his services denied to give account to other agent. He said to B to release
him from liabilities otherwise he shall not give the account book. It held by coercion.
(b) Threat to commit suicide: It comes under sec.15.
Case: Ammiraja V/s Seshamma
A person held out a threat to commit suicide to his son and wife, if they refused to execute a release deed in
his favour. They executed the deed in his favour. It was held by the court that this coercion. According to old
filled J threat to commit suicide no body can be punishable under IPC, and suicide itself not a crime under IPC,
because after suicide no body can be punished. Only attempt to commit suicide is punishable.
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(c) Un lawful detaining of any property : According to sec.15 coercion could also be caused by unlawful
detaining or threatening to detain any property to the prejudice of any person whatsoever with the intention
of causing any person to enter into an agreement. Property may be moveable or immovable. If one person
detains unlawfully, it is coercion.
(d) To Prejudice of a person : Coercion may be against a party as well as against any person.
(e) Legal Threatening not coercion:- A commits accident with B. B says you give me Rs.500 otherwise I shall sue
against you. It is not coercion.
(f) Place of coercion: coercion may be committed at any place. It may also be committed even outside India.
(g) Burden of proof on Plaintiff:
(h) Remedies: Voidable or restitution.8
Andhra Sugar Ltd. v/s State of Andhra Pradesh – 1968 : It was held that the agreement cannot be said to be by
lack of free consent.
2. UNDUE INFLUENCE : SEC.( 16)
Undue influence means unreasonable influence or improper or not right influence. When consent is taken by
way of unreasonable influence or improper way then it is not free. The consent can be declared void on this
ground. Section 16 says that when any person has such position over the other person as to dominate his will,
the person who dominates the will of the other must have superiority over the other. This is done under the
following conditions.
1. Relationship superior or inferior may be real or apparent relationship as
(a) Money lender or borrower.
(b) Income Tax Officer and shopkeeper.
(c) Income Tax Officer and assessee.
(d) Police and thief.
Case :- J.R.Bhatt v/s State of U.P. Pt. Was employed in the court of UP. He wants a leave. Registrar said leave
can be granted on the condition if you will not come in service after the end of leave. He wrote it. It was held
by servant under undue reference influence.
(B) Fiduciary Relationship :- 1. Advocate & Client. 2. Master & Servant. 3. Guru and chela 4. Father and
children 5. Teacher & student. 6.Doctor & Patient. 7. Creditor and Debtor. 8. Trustier and benefishes. Case :
Manu Singh v/s Umadat Pandey : An old Hindu woman gifted the whole property to her religious guru to get
peace in heaven. It held undue influence .
Parda-Nashin women : contract with parda-nashin women is presumed to have been induced by undue
influence. She can avoid the contract unless he other party can show that it was her intelligent and voluntary
act, A case : Ismiel v/s Amir Bibi 1902 : It was held that the women does not become parda-nashin women.
Mental sickness:-If one party is not in position to think his interest due to mental sickness. Case : Rani
Annpurna v/s Swami Nath. A widow who did not have any mental fitness went to creditor, she got Rs.1500/- or
100% interest. It was held voidable because she was not in a position to give free consent. The Party attempted
to influence the will of other party. A state of mental fear is not undue influence. If a party is in a position to
influence other’s will it is not undue influence whether other party gets damaged.
2. Real Damage :- If no damage is done to the Pt. Then it will not be undue influence. Remedies : 1. Voidable
u/s 19.2. Restitution u/s 64 3.damages u/s 73. The court under section 19 can declare the whole agreement as
void or the court may be declared it void on reasonable condition.
Burden of Proof. : Pt. Will have to prove that the def. Was in a position to dominate the will of the pt. Thus if
such relationship is proved by the pt. The court will presume the undue influence. Now burden to disprove this
presumption comes on defendant, that there was no undue influence. He should prove that he did not try to
dominate other’ will.
• He paid sufficient consideration to aggrieved.
• That the plaintiff had opportunity to take free advice.
• Effect of Undue Influence:- Section 19A says when consent to an agreement is caused by undue influence, the
agreement is a contract, voidable at the option of the party whose consent was so caused.
FRAUD UNDER SECTION (17):Section 17 defines that “ Fraud “ includes any of the following act committed by a party to a contract or with
his connivance or by his agent with intent to deceive another party there or his agent or to include him, to
enter into the contract( whenever a person obtains any material advantage from another by unfair and
wrongful means. It is said that he has committed fraud. Fraud is the wilful representation made by a party to
contract with the intent to deceive the other party or to induce such party to enter into a contract.
ESSENTIALS OF FRAUD :- (1) To give a suggestion that a fact is true, while it not true: (false suggestion) such
suggestion, which is not true.
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Case : Mithu Lal v/s LIC of India :- In this case the court held that Devlata committed fraud.
i) Active concealment of a fact which is in the knowledge of the person: Every body has the duty to disclose the
defects in the material or the property while entering to the contract, if it is not done then the agreement is
based on fraud.
Example :- ‘A’ agrees to transfer his land to B but the land is already mortgaged to C, A does not disclose this
fact. It is a fraud.
ii) To do such promise without intention of perform(false promise )
iii) Any other act fitted to deceive.
iv) Any act which is declared by law as fraudulent : such as in slavery act for companies it has been specified
that certain type of transfer of property is fraud.
v) Fraud committed by partner or agent of the firm: such as River silver mining v/s Smith AIR 1869: The court
held that this act was done by the Agent of company u/s liabe.
vi) There must be a false representation i.e. A shopkeeper tells B that these goods are fresh. It is A option to
reject it. It will not be fraud.
vii) Representation must have been made by the Party or by his agent: The representation must have been
made knowing that it is false without knowing its truth. In both cases it will be fraud.
viii) The representative must have been an intention to deceive.
ix) Mere silence is no fraud: under sec.17: A contracting party is not obliged to disclose each and everything to
the other party. Merely because a person does not disclose the defects in the goods sold by him, there is no
fraud. Shri Krishan v/s Kurukshetra University- 1976 : It was held that there was no fraud by the candidate and
the University has no power to withdraw the candidature of the candidate on that account.
x) There are two exceptional cases where mere silence may amount to fraud :1. Duty to speak : when the circumstances of the case are such that, regard being had to them, it is the duty of
the person keeping silence to speak. Keeping silence in such case amounts to fraud.
Case : Srinivasa Pillai v/s LIC of India, AIR-1977 : It was held that the claim is not maintainable against the
insured corporation.
2. Duty to disclose changes :- If a statement is true when made, but subsequently becomes false by the change
of circumstances, there is duty to disclose the change before the other party acts upon it.
xi)
Ratification : When even after the knowledge committing fraud party ratifies agreement now he cannot
repudiate. Damage, Restitution.
Prof of Fraud
Fraud is essentially a question of fact and has to be proved by the person who alleges that the fraud was done
on him.
MISREPRESENTATION (UNDER SEC. 18)
When a false statement is made with the knowledge that it is false and also with the intention to deceive the
other party and make him enter into a contract on that basis, it is known as Fraud,
But when the person making a false statement believe the statement to be true and does not intend
to mislead the other party to the contract, it is known as “Misrepresentation” it is somewhat different from
fraud. example : ‘A’ while selling his watch tells ‘B’ that his watch is made in Switzerland, A does not know that
the watch is not made in Switzerland. It is fraud because the watch is made in India. A is guilty of
misrepresentation.
It includes :- 1) The positive assertion, in a manner not warranted by the information of the person
making it of that which is not true, though he believes it to be true. 2. Any breach of duty which without an
intention to deceive gains an advantages to the person committing it.
ESSENTIALS
1. The positive assertion of material fact: When one party believes that his statement is true but it is not true, it
is called misrepresentation. Case: The Ocean steam Navigation comp. v/s Sunderdas Dharmsay: ‘A’ sold ship
telling it is of 28 tons but it was of less tons. ‘A’ did not know about it. It held misrepresentation.
2. Any Breach of duty : When on Party without intention of committing fraud breaches duty and if he also takes
benefit from the agreement it will be misrepresentation. Case : Bamarsi Dass v/s New India Assurance :
Actually one liability of party released in that deed held misrepresentation. There was the duty of the party to
disclose the fact of deed. B could not read it but he did not. It means he trusted on A and it is his false
statement, which held then it is Misrepresentation.
3. Innocent Misrepresentation: When false statement is made innocently then it is Misrepresentation. Smith
v/s Land & House Property Corp.: A sold a hotel and said that all rent holders are gentleman. Actually they it all
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were defaulters. It held misrepresentation. Case : Derry v/s Peek(1889) it was held that the management of the
company was guilty of misrepresentation, and not for fraud. Another Case : Noor-ud-din v/s Umerao Bibi 1998:
A sale deed was challenged on this ground that it was executed under fraud and misrepresentation seller was a
blind person. He was also not paid sufficient consideration. The possession of property was also transferred to
the buyer, court declared such sale deed to be set-aside.
DIFFERENCE BETWEEN FRAUD & MISREPRESENTATION
FRAUD
MISREPRESENTATION
1. Fraud contains the intention
It does not contain any such intention.
To deceive.
2. The facts are altered with the No such thing in misrepresentation. Any
Intention to deceive the other is presented as such presented as such
Person.
Whereas it does not came out to be true
3. The guilty person has the
The guilty person has no knowledge of
Knowledge of truth.
Truth.
4. Fraud is a type of tort and
It does not come under tort.
So punishable.
5. Contract by fraud can be
Contract by misrepresentation can only
Rescinded to demand
be rescinded not demand compensation
Compensation.
6. The guilty person can not
Such defence could be availed.
Take the defence that the
Victim person as plaintiff
Could have find out the
Truth.
MISTAKE (Section: 20-22)
The fifth element defecting the consent is MISTAKE, contract by mistake are either void or voidable. It is not a
free consent. One or both of the parties may be working under same.
Mistake is of three kinds :1. Mistake in the mind of the parties is such that there is no genuine agreement at all. There is no meeting of
minds or consensus ad idem.
2. There may be mistake as to a matter of fact relating to that agreement.
3. The mistake essential to the agreement as to the subject matter.
TYPES OF MISTAKE :Mistake when there is no consensus ad idem: According to sec.13: two or more persons are said to consent
when they agree upon the same thing in same sense. If there is no meeting of minds or consensus ad idem,
there arises no contract which could be enforced.
Section 20 requires that:- Mistake of both the parties : The agreement is void if there is mistake on the part of
both the parties. A case Ayekam Angahal Singh v/s Union Bank Of India, AIR- 1970: It was held that since the
mistake was unilateral, the contract was not affected thereby and the same could not be avoided.
According to Sec.21 of the Contract Act which lays that mistake of law of country is not excusable i.e. any
contract is done under a mistake of law being followed in India then such contract shall not be voidable, but if
contract is under a mistake of foreign law that i shall be void, i.e. Mistake of Foreign Law and Mistake as to
individual rights. Case : Cooper v/s Phibbs-1867: The court held that the mistake related to general ownership
shall the same effect what the mistake of fact would have. Mistake of fact is not excusable.
ILLUSTRATION :- ‘A’ agrees to buy horse from ‘B’ at the time of agreement, the horse had already died but both
the parties had no knowledge of it such, agreement is void.
The following points are important in respect of Mistake of Fact :1. Mistake must be mutual. Case: Courturier v/s Hastie: 1856: It was held that the agreement was void because
of the mutual mistake as to existence of the subject matter.
2. Mistake must relate o any substantive fact, like mistake as to identity of the parties, identity of subject
matter identity of nature of transaction etc.
3. Mistake must relate to present or existing fact.
Case : Raffles v/s Wichellehaus – 1864 : It was held that owing to mistake as to the identity of subject matter of
contract, such contract was void.
4. Mistake as to Promise:- If a mistake because of which the promise does not reflect the real intention which
was there in the proposed agreement, such an agreement would be void. Case :Hartog v/s Colins& Shields:
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1939 It was held that there had arisen no contract in this case because the buyer could have noticed the
mistake.
Q.No. 7:- Explain the law relating to agreement in restraint of trade with reference to Indian Law along-with
exceptions.
Answer :-INTRODUCTION : Section 25 to 30 of the Indian Contract Act-1872 mentions that those agreement
which are void. Void agreement are defined in sec. 2(g) of the act. According to it :- “An agreement not
enforceable by law is said to be void.” Thus sec.25 to 30 of the act mentions following agreements to be void :AGREEMENT IN RESTRAINT OF TRADE
Section 27 of the act mentions that all such agreements shall be void which creates restraint or partial restraint
in any type of occupation, trade or business of a person. In simple language, agreements creating restraint in
lawful trade, occupation or business are void.
Indian constitution provides every person the freedom to trade, occupation or business. This freedom cannot
be interfered except in certain situation. Freedom of trade, occupation or business is in accordance to public
policy. This is the reason that this provision has been mentioned in sec.27 of the act. But it is important that a
reasonable restraint on trade, occupation or business shall not make an agreement void. The requirement is
that restraint shall be reasonable.
Case : Northernfelt v/s M.N.Felt Guns and Ammunition Co. Ltd. 1894: It was held that before declaring
agreement in restraint of trade to be void, the reasonability of restraint shall be examined and the examination
shall consider mainly that whether it is reasonable or not for parties or public interest.
Illustration : If two neighbouring land owner agrees that they shall not organise market for cattle on their lands
on the same day then such agreement shall not be void because it is in the interest of both.
Case : Ms.S.Dey Forments Industrial Ltd v/s Ravindera Nath S.Kamath 1999: It was held that where any person
is appointed in a company as an advisory and a condition is laid that he shall not act anywhere during his
service, there such an agreement shall not be void.
The above rules does have few exceptions which are under :1. Sale of Goodwill : Where the goodwill of any trade, occupation or business is sold, there the buyer shall have
an agreement with the seller that the seller shall not do any such business within the local limits for a specific
time which shall be done by the buyer with that goodwill. Four things are necessary for the exception:
i) Trade is similar.
ii) Within specified local limits.
iii) Buyer is doing such business.
iv) The restraint is reasonable in the eye of court.
Case : Gujrat Bottling Co. Ltd. v/s Coca Cola Co. 1995: It was held that provisions related o agreement in
restraint of trade shall not apply in such matters in which are prohibited only for the time of existence of
contract. If they are applied even after the termination of contract, then i shall be void.
2. Partnership Agreements : Where there is an agreement between partners at the time of formation of firm
that any partners shall not carry a similar or otherwise any trade during the existence of partnership, then such
an agreement is not considered to be creating restraint.
3. Dissolution of Partnership :- If any agreement is made between the partners at the time dissolution of
partnership or a partner shall not carry a business similar to that of firm for a specific time, then such
agreement shall not be void provided that it is reasonable.
Question No.8 : What do you understand by ‘Quasi-contract? State its essential features. OR
Quasi-Contract are in law but not in fact. Explain. OR
Quasi- contract is not the product of an agreement entered into parties but a creation of law on the basis of
equitable principles.” Discuss the above statement and state the quasi contract relations recognised by the
India in Contract Act.? OR
What do you understand by Quasi-contracts? Explain some relations which are resembling to those created by
contracts as incorporated under the Indian Contract Act 1872.
Answer :- INTRODUCTION: For a valid contract there must be offer, acceptance and consideration with some
other requirements. But sometime the position comes when there is neither offer not acceptance still there is
contract. Such position is put under the category of “ Quasi- Contract” or relation resembling to those contract.
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The term Quasi Contract generally means half or ‘semi’. It means Quasi contract is half or semi contract.
But this meaning does not fulfil our aim. It is a confusing term. However we can say that ‘quasi contract’
means the contract, which is equal to that of a valid contract. Chapter 5 of the Indian Contract Act deals with
such situations under the heading of certain relations resembling to those created by contract. The chapter
avoids the word ‘quasi-contract’.
Generally the contracts or agreements are the result of acts of parties. Parties agree to do or not to do
something but several times there is no agreement between the parties, but still the liabilities arise between
the parties such liabilities are called by, Quasi-Contract.
Definition : Indian Contract act does not define the Quasi-contracts. It only mentions that, certain relations
resembling those created by contract. However the various jurists have defined the Quasi-contract as
under:-:According to Wharton’s Law Lexicon: “ An act which has not strict form of a contract but has the effect
of it, is an implied Contract.”
According to Desai : Quasi contract or implied contracts are exceptional kind of contracts by which one party is
bound to pay money in consideration of something done or suffered by the other party. They are not founded
on actual promises but arise when one party so conducted himself that he must be deemed as if had made
promise although he has not,”
According to Pollock:- “Quasi contracts are contracts in law but not in fact.” In other words it can be said that
Quasi contracts is not a product of an agreement entered into parties but a creation of law on the basis of
equitable principles.
Basic of Quasi-Contract : Lord Mansfied is considered as the father of this contract. According to him, ‘Natural
justice demands that one should not get unjust profit at the cost of another unjust loss. This order has been
laid down in the case of :- MOSES v/s MACFERLAN : Such action lies for money paid by mistake or upon a
consideration which happens to fail or for money got through imposition or extortion or oppression or for an
undue knowledge taken of the pt’s situation. Country to the law made for protection of persons under those
circumstances of the case. It is obliged by lies of natural justice and equity o refund the money.
Under section 68 to 72 It has been recognised by Indian Contract act under the heading of , Certain relations
resembling to those contracts.
CHARACTER/SKETCHES OF QUASI-CONTRACTS
1. These agreement are never made by parties but imposed by law.
2. One party is bound to pay money to other party.
3. Such contract gives right to one party. Again the other party in not against world.
4. Only money can be obtained not the liquidated damages.
KINDS/ESSENTIAL OF QUASI-CONRACT
1. Necessaries supplied to a person of contracting: Sec. 68 says that if a person who is incapable to enter into a
contract is supplied necessaries, then he is bound to compensate the suppler. Incapable means, who are not
capable under sec. 11 and 12, Minor is insane or disqualify by law. If basic necessities are supplied to this, it will
be deemed quasi contract and its price can be recovered through medical aid, clothes, food, marriage of
minor’s sister etc., that is depending upon him. Minor’s marriage is not a basic necessity. The ingredients of
sec.6 are as under :
i) Necessaries supplied to a person not competent to make contracts.
ii) These goods must be for the basic needs.
iii) The goods must be according to the status of minor.
iv) The supplier can recover the price against the property of minor. It is not personal liability.
Case : Chapple v/s Cooper: 1844: It was held the things for necessities shall be considered those without which
it is not possible to live. The food, clothing, shelter, medicine etc., are the necessaries to minor or lunatic. But it
must not be more than sufficient.
2. PAYMENT BY AN INTERESTED PERSON : Section 69 of act is provides that a person who is interested in the
payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be
reimbursed by other.
ILLUSTRATION : ‘B’ holds land in Bengal, on a lease granted by A, who is a zamidar. The revenue payable by A
to the government being in Wlaw, the consequences of such sale will be the annulment of B’s lease. B prevent
the sale and consequent annulments of his own lease, pays to the government the sum due from A. A is bound
to make goods to B the amount so paid.
i) Person is legally bound to pay money.
ii) The person paying has the interest in such paymen.
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iii) Payment is t o be made to another person.
Case : Govind Ram Gordhan dass Sekajri v/s State of Himachal : Where Maharaja, having sold mills without
paying the overdue municipal taxes was sued by the buyer, who had to pay to save the property from being
old. The Privy Council held that he was bound by law to pay without the meaning of the sec. Where a person is
only morally bound and is not legally compellable to pay he will not bound to pay.
3. LIABILITY TO PAY FOR NON-GRATUITOUS ACT: When any person lawfully does any act for another person not gratuitously and the other person has enjoyed
the benefit of that act then he is bound to compensate him.
ILLUSTRATION:- ‘A’ is a trade man leaves goods at B’s house by mistake. B treats the goods as him own. He is
bound to pay ‘A’ for them. A Case : Subramanyam v/s Thaippa 1961: A contractor did more build more that
what was required by the contract and did not intended act gratuitously. Court held that the contractor was
entitled to compensation for extra work.
Essential conditions of section 70:i) One person legally works for other
ii) The act is done voluntarily.
iii) He gets some benefit for this work.
iv) To whom it is done takes benefit of that act.
v) Act has been done not gratuitously.
A case : Kanhiya Lal v/s Inder chand: The court held that section 68 does not apply because she was a minor at
sec.70 also does not apply because she did not get any benefit. Because it was not a quasi-contract as his
friend having no interest in this payment.
4. Responsibility of Finder of Goods:- Section 71 of the Act provides that a person who finds belonging to
another there will be a quasi contract . If bailment between two looses all the rights and duties of bailer and
balee will be presumed under section 165 & 169( rights and Duties of bailee).
5. MISTAKE OF COERCION:- Section 72 of the act says that, “ when anything is delivered by way of mistake then
it is the duty of the person to return that things to the concern person or to compensate him.”
A case :- Sales Tax Officer Banaras v/s Kanhayya Lal : In this case it was held that the transactions is to be ultrawires. The firm was allowed to recover back the tax which he had paid.
Similarly if any person takes any thing from another person by coercion i.e. by way of force under this petition
also the person is bound to return the goods to the concerned person under quasi-contract obligation.
For example :- A at the point of pistol takes some gold rings from ‘B’. Here ‘A’ is bound to return the gold rings
to ‘B’ under quasi contract obligation. The word coercion is same as defined in sec.15 and the word mistake is
same as defined under sec.20. There are the provisions with regard to quasi-contract.
CONCLUSION
Thus, in all above matters there is no agreement between the parties but the conduct and actions of parties
show that an agreement has originated between them and get binding in similar way as like a contract. This is
called Quasi-Contract.
UNIT-III
Question No.9:- Explain the term ‘Anticipatory Breach of Contract’ and discuss the consequences of such a
breach.
OR
Discuss the consequences of breach of contract with relevant case.
OR
Who must perform the Contract? Who can demand for the performance of Contract?
Answer: INTRODUCTION ; Contracts are important when they are performed. There are two main questions in
this respect :i) Who shall perform the contract,
ii) Who can enforce the performance of the contract.
i) Who shall Perform a Contract :- Section 40 of the Act mentions that generally the contract shall be performed
by the promisor itself if the parties has such intentions. Otherwise the promisor can employ any other person
for the performance of contract.
Generally contract based on personal qualifications shall be performed by the promisor himself. For example,
’A’ promise to paint a picture for B. The performance of contract requires it to be done by the promisor himself
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because painting in personal skill of ‘A’. Whereas the contract of sale of property can be performed by promisor
himself or by some other person.
Promisor can perform a contract by himself in the following conditions :
a. Where the intention of parties was that the contract shall be performed by the promisor only.
b. Where the performance depends upon personal skill of promisor. Such contracts get terminated on death.
c. By Agent :- If the performance of contract does not depend upon personal skill, then such contract can be
performed by the agent of promisor. Generally such contracts are contracts for the sale of property.
d. By Legal Representative : Where the promisor dies before the performance of contract and the performance
does not depend upon personal skill of promisor, there such contracts shall be performed by the legal
representatives of deceased promisor, but only up to that limit to which the legal Representative had the
interest in the property of deceased.
e. By Third Person:- Where promises accepts the performance from a third person, there such promise can be
performed by that third person. In such mattes, promise cannot enforce performance from promisor under
section 41 of the Indian Contract Act.
PERFORMANCE OF JOINT PROMISES
There are provisions in the Indian Contract Act in this respect:i) Under section 42 of the act when two or more persons have made a joint promise, all such persons must
jointly fulfil the promise.
ii) When any one of joint promisor dies, his legal representatives shall perform the promise.
iii) Under section 43 of the act when two or more persons make a joint promise, the promise may compel any
of such joint promisors to perform the whole promise.
iv) Section 44 of the act says that where two or more persons have made a joint promise, a release of one of
such joint promisor, by the promisee does not discharge the other promisor of joint promisors neither does it
free the joint promisor so released from responsibility to the other joint promisor or joint promisors.
WHO CAN DEMAND FOR THE PERFORMANCE OF CONTRACT.
The following persons can demand for the performance of the contract :a) The first right for the performance of contract is with the promisee. He can demand for the performance of
contract.
b) If the contract is not of personal nature then on the death of promisee his legal representative or
representatives can demand the performance.
c) Where there is joint promise, there all the joint promisors can jointly demand.
d) Where any one of the joint promisee dies, then the legal representative of such deceased shall demand for
the performance.
e) Where are promisee dies, then their legal representatives can demand the performance.
ANTICIPATORY BREACH OF CONTRACT:
Section 39 of the Act provides for the Anticipator Breach of Contract which means :“ That before the performance of the contract, any party to contract refuse to perform the promise or contract
or makes itself disable for performance is breach of contract.
ILLUSTRATION :- A singer enters into a contract with B the manager of theatre to sing at his theatre for two
nights in every week during the next two months and B agrees to pay her Rs.1000/- for each night’s
performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the
contract. In such cases promisee can cancel the contract.
The base of section 39 is “ when a party to a contract has refused to perform or disable himself from
performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified by
words or contract his acquiescence in its continuance.
REMEDIES :
The following remedies are available against the anticipatory breach of contract :1. The promisee can file a suit for the breach of contract considering it to be actual breach.
2. The promisee shall wait till the actual date of performance and then file the suit.
3. Specific performance and Injuction : sometimes a party to the contract instead of recovering damages for
the breach of contract may have protection to the alternative remedy of specific performance of the contract.
4. Damages : Remedy by way of damages is the most common remedy available to the injured party. This
entitles the injured party to recover compensation for the party who causes the breach. Sec.73 to 75
incorporate the provisions in this regard. A case : Hadley V/s Baxendale-1854: It was held that the special
circumstances were not communicated by the plaintiffs to the defendants. The plaintiffs were therefore not
entitled to recover the loss.
Victoria Loundry Ltd. v/s Newman Industries Ltd. 1949.
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It was held that the defendant had the knowledge of the fact. The case was referred to official Referee to
determine the damages payable in this case.
5. Quantum Meruit:- When the injured party has performed a part of his obligation under the contract before
the breach of contract has occurred, he is entitled to recover the value of what he has done under this remedy.
6. Measure of Damages :- That after certain result of the breach of contract in nearest time is to be
compensated. Damages are therefore, to fix amount of that basis if a party takes security deposit from the
other for the due performance of the contract.
A case : State of Kerla V/s K.Bhaskaran 1985.
It was held that generally 10% profit is taken as an element in the estimation of the contract and the contractor
was entitled to claim compensation on that basis.
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