AL - AMEEN COLLEGE OF LAW

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HOSUR ROAD, BANGALORE-560027

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MODEL ANSWER PAPER

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DECEMBER 2016

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5TH SEM 5YRS.LLB.

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SUBLECT - CONTRACT -I
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PREPARED BY:
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JAYANTH.S [ ASST.PROF]
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AL- AMEEN COLLEGE OF LAW

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BANGALORE.
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 AL -AMEEN COLLEGE OF LAW

BANGALORE

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MODEL ANSWER PAPER DEC 2016

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5TH SEM 5YRS LLB

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SUBJECT :CONTRACT -I

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Duration: 3 Hours Max Marks:100

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Instruction to Candidates:

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Answer Q.No 9 and any five of the remaining questions .
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Q.No 9 carries 20 marks and the remaining questions carry 16 marks each .
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Answers should be written in either in English or Kannada.

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Q.NO.1.Define ‘contract”. Describe the various requisites of a valid

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contract.
FL

Law means a ‘set of rules’ which governs our behaviours and relating in a civilized
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society.
EG

Contracts as Defined by Eminent Jurists

LL

1. “Every agreement and promise enforceable at law is a contract.” – Pollock

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2. “A Contract is an agreement between two or more persons which is intended to be

Enforceable at law and is contracted by the acceptance by one party of an offer made to
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Him by the other party to do or abstain from doing some act.” – Halsbury
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3. “A contract is an agreement creating and defining obligation between the parties” –

Salmond

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Contract 2(h) :- An agreement enforceable by Law is a contract.

Sec.10 :-

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“All agreements are contracts, if they are made –

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by free consent of the parties, competent to contract,

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for a lawful consideration and

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with a lawful object, and

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not hereby expressly declared to be void.”

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ESSENTIALS OF A VALID CONTRACT
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Offer + acceptance = Promise + consideration

=
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Agreement
,B

+
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Enforceability By Law = contract

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1. Proper offer and proper acceptance with intention to create legal relationship.
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Cases; - A and B agree to go to a movie on coming Sunday. A does not turn in

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resulting in loss of B’s time B cannot claim any damages from B since the
LL

agreement to watch a movie is a domestic agreement which does not result in a

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contract.

In case of social agreement there is no intention to create legal relationship and there
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the is no contract (Balfour v. Balfour)

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 j. In case of commercial agreements, the law presume that the parties had the

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intention to create legal relations.

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k. [an agreement of a purely domestic or social nature is not a contract ]

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2. Lawful consideration: - consideration must not be unlawful, immoral or opposed to

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the public policy.

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3. Capacity: - The parties to a contract must have capacity (legal ability) to make valid

contract.

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Section 11:- of the Indian contract Act specify that every person is competent to

contract provided. RE
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(i) Is of the age of majority according to the Law which he is subject, and
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(ii) Who is of sound mind and

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(iii) Is not disqualified from contracting by any law to which he is subject.

,B
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Person of unsound mind can enter into a contract during his lucid interval.

An alien enemy, foreign sovereigns and accredited representative of a foreign state.

FL

Insolvents and convicts are not competent to contract.

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EG

4. Free consent: - consent of the parties must be genuine consent means agreed upon

samething in the same sense i.e. there should be consensus – ad – idem.

LL

The consent is said to be free when it is not caused by coercion, undue influence, fraud,
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misrepresentation or mistake.
EN

5. Lawful object
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n. The object of agreement should be lawful and legal.

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 o. Two persons cannot enter into an agreement to do a criminal act.

p. Consideration or object of an agreement is unlawful if it

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(a) Is forbidden by law; or

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(b) Is of such nature that, if permitted, would defeat the provisions of any law;

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or

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(C) is fraudulent; or

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(d) Involves or implies, injury to person or property of another; or

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(e) Court regards it as immoral, or opposed to public policy.

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6. Possibility of performance:

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q. The terms of the agreement should be capable of performance.
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r. An agreements to do act, impossible in itself cannot be enforced.
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AN

Example: A agrees to B to discover treasure by magic. The agreement is void

,B

because the act in itself is impossible to be performed from the very beginning.
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7. The terms of the agreements are certain or are capable of being made certain [29]

Example: A agreed to pay Rs.5 lakh to B for ultra-modern decoration of his

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drawing room. The agreement is void because the meaning of the term “ultra –
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modern” is not certain.

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8. Not declared Void

The agreement should be such that it should be capable or being enforced by law.
LL

Certain agreements have been expressly declared illegal or void by the law.
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EN

9. Necessary legal formalities

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A contract may be oral or in writing.

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Distinction between Contract Agreement

Contract & Agreement

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Basis

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RE
Where a particular type of contract is required by law to be in writing and registered, it
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must comply with necessary formalities as to writing, registration and attestation.
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If legal formalities are not carried out then the contract is not enforceable by law.
AN

Example: A promise to pay a time. Barred debt must be in writing.

,B
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Agreement is a wider term than contract where as all contracts are agreements. All

agreements are not contracts.

FL
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Thus we see that an agreement may be or may not be enforceable by law, and so all
EG

agreement are not contract. Only those agreements are contracts, which are enforceable
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by law, In short.

Hence, we can conclude “All contracts are agreement, but all agreements are not
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contracts.”
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Contracts = Agreement + Enforceability by law .

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.Section : Sec. 2(h) Sec. 2(e)

. Definition .A contract is an agreement .Every promise or every set of

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. Enforceability : enforceable by law. promises forming consideration

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. Interrelationship: .Every contract is enforceable for each other is an agreements.

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. Scope : .A contract includes an .Every promise is not

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. Validity : agreement. enforceable.

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. Legal : .The scope of a contract is .An agreement does not include

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.Obligation limited, as it includes only a contract.

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commercial agreements. .Its scope is relatively wider, as

.Only legal agreements are it includes both social

called contracts. RE agreement and commercial

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.Every contract contains a legal agreements.
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obligation. .An agreement may be both

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legal and illegal.

,B

.It is not necessary for every

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agreement to have legal

obligation.
FL
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Q.No.2 Define Types or classification of contracts. Explain the

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essentials and rules of Valid Proposal (Offer) with illustrations.

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Types or classification of contracts

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Valid :an agreement which has all the essential elements of a contract is called a
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valid contract.
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Void: (sec.2j) It is a contract which ceases to be enforceable by law. A contract

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 when ordinarily entered into may be valid or binding on the parties. It may

subsequently become void.

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Voidable : (sec.2(i)) An agreement which is enforceable by law at the option of

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one or more of the parties there to, but not at the option of other or others is a

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voidable contract.

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Illegal contract : A contract is illegal if it is forbidden by law or is of such nature

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that, if permitted would defeat the provisions of any law or is fraudulent ; or

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involves or implies injury to a person or properly of another or court regards it as

immortal or opposed to public policy. These agreements are punishable by law.

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These are void-ab-initio.

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“All illegal agreements are void agreements but all void agreements are not
LO
illegal”.
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Unenforceable contract : where a contract is good in substance but because of

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some technical defect can’t be enforceable by law is called unenforceable contract.

,B

These contracts are neither void nor voidable.

AW

ON THE BASIS OF FORMATION

Express contract
FL

Implied contract.
EO

Quasi contract.
EG

ON THE BASIS OF PERFORMANCE

gg.Executed contract.
LL

hh. Executory contract.

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ii. Unilateral contract.

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jj. Bilateral contract.

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 PROPOSAL:

Section 2a of the Indian contract Act defines proposal as:

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one person signifies to another his willingness to do or to abstain from doing

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anything, with a view of obtaining the assent of that other to such act or

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abstinence, said to make a proposal. The term ‘proposal ‘is equivalent to the

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term ‘offer’.

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Section 2(b) defines “promise”.

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Section 2(c) defines “promisor” or “promise”.

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Section 2(f) defines reciprocal promises.

The “proposal” accepted becomes a “promise”. A proposal –

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The person making it signifies his willingness or desire to another.
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This willingness is the expression of desire to do or to abstain from doing
GA

something.
AN

Object of the expression of this willingness is to obtain the assent of that other to
,B

such act or abstinence.

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REQUISITES OF A VALID CONTRACT

1) Purpose of offer: The offer as defined in section 2(a) has 2 purposes:

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a) An expression of offeror’s willingness to do or to abstain from doing something.

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b) It is made with a view to obtaining the assent of the offeree to the proposal act or
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abstinence.

2) Intension: The offer arises from the intension. It is not defined in Indian Contract Act,
LL

1872. Section 2 (a) uses the word “willingness” which is equal to intension.
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The offer must be made with willingness to do business on the proposed terms and
EN

conditions.
ME

The use of the word “willingness” shows that intensions to be bound by the
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 proposal when accepted are an integral part of the concept of agreement.

The party who offers must know the legal consequences of the offer.

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An offer or its acceptance should be made with the intensions of creating legal

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relations.

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The test of intension is objective not subjective.

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The intension of the parties is naturally to be known from the terms of the

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agreement and the surrounding circumstances.

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3) Legal consequences: an offer must be intended to create legal relations and must be

capable of creating legal relations. Offer is the 1st step of agreement. When an agreement

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is enforceable by the law, then only it becomes contract.

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4) Assent of the other party: The proposal must be made with a view to obtaining the
LO
assent of the other party. Since the contract requires “consensus ad idem” (consent at the
GA

same time) unless the offeree is aware of the offer, there can be no acceptance and
AN

consequently no contract.
,B

5) Terms: the terms of an offer must be definite. Uncertain, indefinite and ambiguous
AW

offer do not constitute valid contracts.

6) Offer must be addressed: an offer must be addressed to the world at large or to a

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specific person. An offer addressed to the world is called “general offer” and an offer
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addressed to a specific person is called “specific offer”. An offer can’t take effect so as to
EG

create a binding contract, unless and until it has been brought to the knowledge of the

person to whom it is made.

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7) Words or conduct: An offer may be made by words of mouth or by writing or it may

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even be made by conduct. Among these 3 ways, the offer made by writing is considered
EN

always the best. An offer which is made by conduct is called an “implied offer”. An offer
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which is expressed by words, written or spoken is called “express offer”.

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(Section 9 of the ICA, 1872.)

8) Communication: an offer must be communicated to the offeree. Communication may

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be done in following ways.

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i) In person: a) by words of mouth; b) by writing; c) by conduct.

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ii) By post

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iii) By telephone

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iv) By telegram.

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v) By telex.

vi) By internet.

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vii) By e-mail website.

viii) By radio or television. RE

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ix) By fax.
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x) By SMS etc...
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9) Invitation to offer: invitation for offer is different form of legal offer. It is just an
,B

enquiry. The mere statement of prices in a catalogue is an example of invitation to offer.

AW

Catalogue is not an offer. It is an invitation to offer.

Balfour v/s Belfour (1919) 2 KB 57

FL

An offer must be distinguished from invitation to offer.

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A prospectus issued by a company for subscription of its shares by the public, is

EG

an invitation to offer.

The offer must not contain a term the non-compliances of which may be assumed
LL

to amount the acceptance.

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Cross offers: where 2 parties make identical offers to each other, in ignorance of each
EN

other’s offer; the offers are known as cross offers and neither of the 2 can be called an
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acceptance of the other and therefore there is no contract.

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Q.NO. 3 What is free consent? Explain in brief when the consent is said to

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be free according to the Indian contract act, 1872?

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According to Section 13. Two persons are said to have consented when they agree upon

same thing in the same sense. RE

LO
In English law, this is called ‘consensus – ad – idem’
GA

Effect of absence of consent:

AN

When there is no consent at all, the agreement is void – ab – initio’.

,B

It is not enforceable at the option of either party

AW

Example 1:-

X have two car one Maruti car and one Honda city car. Y does not know that X has
FL

two cars Y offers to buy car at Rs.50, 000. Here, there is no identity of mind in
EO

respect of the subject matter. Hence there is no consent at all and the agreement is
EG

void – ab – inito.
LL

Example 2:-

An Illiterate woman signed a gift deed thinking that it was a power of attorney – no
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consent at all and the agreement was void – ab – inito[ Bala Devi V S.
EN

Manumdats ]
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Free consent
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 Consent is said to be free when it is not caused by [Section 14]

(a) Coercion [Section 15]

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(b) Undue influence [Section 16]

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(c) Fraud [Section 17]

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(d) Misrepresentation [Section 18]

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(e) Mistake [Section 20, 21, 22]

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Effect of absence of Free Consent: - If consent coercion, undue influence, fraud,

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Misrepresentation the contract is voidable at the option of party whose consent was not

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free [19, 19A]

Coercion (section-15)
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Force, compulsion, treats of violence. (Voidable)
GA

Duress is more severe than coercion.

AN

Essential elements of coercion:-

,B

(a) Committing any act which is forbidden by the IPC

AW

(b) Threatening to commit any act which is forbidden by the IPC.

FL

(c) Unlawful detaining of any property or

(d) Threatening to detain any property

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(e) Coercion need not necessary proceeds from party to contract.

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(f) Coercion need not necessary is directed against the other contracting party.
LL

(g) It is immaterial whether the IPC is or is not in force at the time or at the
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Place where the coercion is employed [Bay of Bengal caption)

(e) The consent is obtained by threat of an offence & the person is forced to give his
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consent.
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(f) It is mainly of a physical character

(g) The freedom of will is impaired

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(h) It is of a violent character

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(i) The burden of proof lies upon plaintiff

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(j) It must be uttered with the intention of causing Plaintiff to enter into an agreement.

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Threat to strike is no coercion.

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Compulsion of law is not coercion.

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Effect of threat to file a suit: - A threat to file a suit (whether civil or court) does not

amount to coercion unless the suit is on false charge. Threat to file a suit on false charge is

RE
an act forbidden by the IPC and thus will amount to an act of coercion
LO
GA

Effect of threat to file a suit: - A threat to file a suit (whether civil or court) does not
AN

amount to coercion unless the suit is on false charge. Threat to file a suit on false charge is
,B

an act forbidden by the IPC and thus will amount to an act of coercion
AW

Eg:-

A husband induced his wife to enter into contract u/a threat of committing suicide.
FL

[Chikham Ammiraju v seshama]

EO
EG

English Law - Duress does not include detaining of property or threat to detain property.

- Duress can be employed only by a party to the contract or his agent.

LL

- it must be aimed against the life or liberty of the person or members of his family.
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- it must be such as to cause immediate violence.

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-it must be such as to affect a man a with ordinary firmness of mind.

ME

Effect:- when coercion is employed to obtain the consent of a party the contract is
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voidable at the option of the party where consent was obtained by coercion.

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Undue influence (section-16)

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Sec 19(A) (voidable)

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Meaning of undue influence: - dominating the will of the other person to obtain an

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unfair advantage over the others.

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(a) Where the relation subsisting between the parties must be such that one party is in

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position to dominate the will of the other.

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(b) The dominant party use his position.

(c) Obtain an unfair advantage over the other.

RE
Nothing in this sub-section shall affect the provisions of sec 111 of the Indian Evidence
LO
act.
GA
AN

Undue influence [Section 16]

,B

No. Presumption of Domination of will:-

AW
FL

Presumption of domination of will:- Examples

EO

Circumstances
EG

Where he holds a real or apparent authority Master and servant, parent and child,
LL

over the other Income Tax officer and assesses

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Where he stands in a Trust fiduciary principal and a Temporary Teacher.

(benefit) relation to the other Trustee and beneficiary spiritual

EN

Mental Capacity of a person is temporarily Guru and his disciples, solicitors and
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 or permanent effected by reason of age, clients. Guardian and wards

illness or mental or bodily distress Relationship between medical

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attendant and ward.

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- Involves use of moral force (mental pressure)

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- Obtain an unfair advantage (intention)

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- Not criminally liable

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- Between the parties to the contract

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- One party dominate the other party

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- Voidable or court set aside

- Benefit – order of court – Back

RE
LO

Landlord and Tenant
GA

Creditor and Debtor

Husband and wife (other than Pardanashin)

AN

Principal and Agent

,B

It is of moral / psychological nature.

AW

The person in dominate character exploits the weaker person.

FL

The contract is either voidable or the court may enforce it in a modified form.

It is b/w the parties to the agreement.

EO

Unconscionable bargains.
EG

Urgent need of money, no distress

LL

Statutory compulsion, no distress.

CO

Sec 30, the specific relief act, 1963 such relief is granted to restore which may
EN

have received form the other party & to make any compensation to him which

justice may require.

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Example:

A applies to a banker for a loan at a time when there is stringency in the money

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market. The banker declines to make the loan except at an unusually high rate of

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interest. A accepts the loan on these terms. This is a transaction in the ordinary

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course of business, and the contract is not induced by undue influence.

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Example :

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A spiritual guru induced his chela to donate all his property to the ashram and said

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that in return of it, he will certainly get salvation. The chela did the same. Held, that

this is a case, of undue influence so it becomes void.

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Fraud (section 17)
Sec 19(voidable) RE
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The term fraud means a take representation of facts made wilfully with a view to deceive
GA

the other party, dishonest trick, criminal deception.

AN

⇒ Sec.17- fraud means any act committed by a party to a contract or with his connivance
,B

or by his agent with intent to deceive another party there to or his agent or to induce to
AW

enter into contract.

Contracts uberrima fides (contracts of utmost good faith)

FL

Silence does not amount to a representation & so cant amount to fraud.

EO

Essentials of fraud :-
EG

(a)False statement, made knowingly or without belief in its truth Or recklessly

careless, whether it be true or false.

LL

By a party to the contract

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(b) There must be representation – [an opinion a statement of expression – does not
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fraud].
ME

(c) The representation must be false.(Cause to believe something that is not true)
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(d) Before conclusion of contract.

(e) The misrepresentation must be made wilfully.

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(f) The misrepresentation must be made with a view to deceive the other party.

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(g) The other party must have actually been deceived.

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(h) The other party have suffered a loss. ‘

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(i) The suggestion, as to a fact, of that which is not true by one who does not believe it

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to be true.

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(j) The active concealment of a fact by one having knowledge or belief of the fact.

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(k)A promise made without any intention of performing it.

(l) Any other act fitted to deceive.

RE
(m) Any such act or omission as the law specially declares to be fraudulent.
LO
Intentionally misrepresentation is the essence of fraud.
GA

The suggestion, as to fact, of that which is not true by one who does not believe it to be
AN

true.
,B

The active concealment of a fact by one having knowledge or belief of the fact.
AW

Ex. A sells, by auction, to B a horse which A says nothing to B about the horse

unsoundness, this is not fraud in A.

FL

A statement untrue in fact must be untrue in the belief of the person making it.
EO

A mere expression of opinion does not amount to fraud if the opinion is honestly
EG

held.

Mere silence is no fraud.

LL

Caveat emptor (let the purchaser beware) it is the duty of the buyer to be
CO

careful while purchasing the goods.

EN

Sec 57(Indian Evidence act 1882) the grantor of a licence is bound to disclose to
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licensee such defects in the property.

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Exception : The contract is not voidable in the following cases.

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When the party who consent was caused by silence amount to fraud and be has the

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means of discovering the truth with ordinary diligence. [ Ex class room]

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When the party give the consent in ignorance of fraud.

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When the party after become aware of fraud takes a benefit.

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When the parties can’t be restored to their original position.

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Where interests of third parties intervene before the contract is avoided

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Misrepresentation (section 18)
Innocent misstatement / false statement. RE
LO
Misrepresentation is when a party (person) asserts something which is not true though he
GA

believes is to be true. In other words misrepresentation is a falls representation made

AN

innocently.
,B

An agreement is said to be influenced by misrepresentation if all the following conditions

AW

are satisfied.

(a) The party makes a representation of a fact [The representation by a stranger (By
FL

anyone with his connivance or by agent) to the contract does not affect the validity of
EO

the contract.
EG

(b) The misrepresentation was made innocently i.e. if was not made with a view to

deceive the other party.

LL

(c) The other party has actually acted believing the misrepresent to be true.
CO
EN

Misrepresentation include:-
ME

uuu. Unjustified statement of facts – positive assertion – Believe true really not
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 true no basis misrepresentation

vvv. Breach of duty.

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www. Inducing other to make mistake as to qualify or nature of subject

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matter.

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xxx. Knowingly or without belief in its truth or recklessly careless whether it

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be true or false.

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yyy. making of unwarranted statements which are not true

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zzz. make a mistake as to the substance of the thing

aaaa. a false statement without any intention to deceive

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bbbb. it does not involve dishonest intention

RE
cccc. a mere expression of opinion can’t be regarded as a misrepresentation
LO
dddd. discovering the truth with ordinary diligence
GA

eeee. It need not be made directly to the plaintiff. it can made to a third person
AN

with the intention of communicating it to the plaintiff also amounts to

,B

misrepresentation.
AW

ffff. It may be express by words written in the form of plans, drawings.

gggg. It must have caused the consent of the other party to contract.
FL

hhhh. It requires uberrima fides a fiduciary relationship exists.

EO

iiii. It made should have become untrue.

EG

Effect of Misrepresentation:-

Rescission –sec 19
LL

Remedy- sec 75/sec 30/sec 66/sec 64/sec 35(sra)

CO

(1) Right to Rescind contract:-

EN

Can’t do
ME
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 Discovering the truth with ordinary diligence.

Give consent in ignorance of misrepresentation

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Become aware of misrepresentation takes a benefit

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Where an innocent third party before the contract is rescinds acquires

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consideration some interest in the property passing under the contract.

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Where the parties can’t be restored to their original position.

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(2) Right to insist upon performance.

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Ex.:- Unlike Fraud he cannot sue for damage

Mistake

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(Void)
RE
Mistake Erroneous Belief about some facts
LO
Mistake of Fact Mistake of
GA

Law [21]
AN

Unilateral [22] Bilateral [20] Mistake of Indian Mistake of

,B

foreign
AW

Law Law

One party Under Both parties under the contract is valid same as mistake
FL

fact Mistake of facts

EO

Mistake of fact The contract is valid the contract is void

EG

void

[Not voidable and void]

LL

Both parties under mistake

CO

Exception: - Where contract is not valid (void)

EN
ME

Sec-20 agreement void where both parties are under mistake as to matter of fact
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Sec 21 – effect of mistakes as to law

Sec 22- contract caused by mistake of one party as to matter of fact.

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Illustration:

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A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of

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bargain, though neither party was aware of the fact. The agreement is void.

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The court may reform the contract & rectify the written instrument.

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Ignorantia juris non excusat( ignorance of law is no excuse)

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Classification of mistake:-

Common mistake

RE
Mutual mistake- subject matter/ title/ substance of thing/ root/ identity/ price
LO
Unilateral mistake
GA

Mistake of fact-----
AN

Error in the expression of contract(language )

,B

Error with regard to the nature or terms of the contract

AW

Error may relate to reason or in cause

Mistake with regard to the law of the country

FL

Mistake ---------------------to foreign law

EO

Mistake --------------------- to private rights.

EG
LL
CO

Q.NO.4 State briefly the various void agreements in the Indian Contract
EN

Act with illustrations.

ME
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VOID AGREEMENTS:

Section 2(g): an agreement not enforceable by law is said to be void.

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1. Agreement unlawful in part(section23/24)

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2. Agreement without consideration(section 25)

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3. Agreement in restraint of marriage. (Section 26)

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4. Agreement in restraint of trade. (Section 27)

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5. Agreement in restraint of legal proceedings.(Section 28).

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6. Agreement which is ambiguous and uncertain.(sec.29)

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7. Agreement by way of Wager. (Sec, 30)

8. Agreement to do an impossible act. (sec.56)

1. AGREEMENT UNLAWFUL IN PART (section 23/24) RE

LO
Unlawful agreements: Section 23 defines: the consideration or an object of agreement is
GA

lawful unless-
AN

1. It is forbidden by law.
,B

2. Is of such a nature, if permitted it would defeat the provisions of any law.

AW

3. Involving an injury to the person or property of another.

4. Is fraudulent
FL

5. Immoral: The object of consideration of which is immoral is void and cannot be

EO

enforced.
EG

*dealing with sex workers.

*Illegal cohabitation
LL

*Dancing girls.
CO

6. Opposed to public policy: An agreement which is injurious to the public or against the
EN

interest of society is said to be opposed to public policy.

ME

a. trading with enemy.

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b. hostile act towards a friendly state.

c. by stifling a criminal prosecution.

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d. abuse of legal process- maintenance and champerty.

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e. by interference with the course of justice.

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f. agreements which create conflicts of interest and duty.

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g. marriage breakage contracts.

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h. sale and public officers.

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Section 24: when consideration and object unlawful in part: If any part of a single

consideration for one or more objects or anyone or any part of anyone of several

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considerations for a single object is unlawful, the agreement is void.

AGREEMENT WITHOUT CONSIDERATION:(section 25) RE

LO
Sec 25 - an agreement without consideration is void. Every agreement must be
GA

supported with some consideration then only it becomes a contract. sec 2(d)
AN

defines consideration.
,B

AGREEMENT IN RESTRAINT OF MARRIAGE:(section 26): an agreement

AW

which interferes with the performance of marital duties is against the public policy

is void.
FL

bbbbb. Every agreement is restraint of the marriage of any person, other than a
EO

minor, is void.
EG

ccccc. An agreement which restricts a person’s freedom to marry or to marry

any person of his choice against PP is void.

LL

For example: an agreement to lend money to a woman in consideration of her

CO

getting a divorce and marrying the lender is void.

EN

AGREEMENT IN RESTRAINT OF TRADE:(section 27): every agreement by

ME

which anyone is restrained from exercising a lawful profession, trade or business of

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 any kind is to that extent void.

eeeee. Aim - avoiding competition and has monopolistic tendency.

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fffff. An agreement not to carry on some business for a period of 3 years or to

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close down a mill for 3 months in a year, is void.

een
ggggg. Both the general as well as the partial restraint of trade is prima facie

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void.

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EXCEPTIONS:

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hhhhh. Sale of good will: A person with its goodwill, the seller of the business

may make an agreement with the buyer not to carry on the business in

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competition with the buyer. Such an agreement, if imposes a reasonable

RE
restriction on the seller’s right to carry on business is valid.
LO
iiiii. Exception under the Indian partnership Act,1932:
GA

Section 11(2): the purpose is that the partners will not carry on their own business
AN

ignoring the partnership business. Such an agreement is valid.

,B

Section 36(2): It may be made between the outgoing partner and the remaining
AW

partners who continue the business of the firm.

FL

Section 54: It may be made upon or in anticipation of the dissolution of the firm.
EO
EG

Section 55(3): When a person purchases the goodwill of a business, his interest

may be protected by a covenant by the seller of goodwill that the latter will not
LL

carry on business similar to the one which has been sold.

CO

jjjjj. Restraint by a contract of service: An agreement of a service under

EN

which an employee agrees that he will serve a particular employer for certain
ME

duration and that he will not serve anyone else during that period is valid.
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 kkkkk. Trade combination: Some traders and manufacturers combine

together to eliminate competition as between themselves and make

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agreement fixing minimum price, regulating the supply of goods and putting

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profits in a common pool and diving the same amongst themselves.

een
lllll. Solus agreements: The seller or the manufacturer of a certain product

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may agree that he will supply the whole of his product to a particular single

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buyer only or similarly a buyer may agree that he will purchase all his

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requirements of a certain commodity from a particular seller or manufacturer

only and none else; is valid.

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E. AGREEMENT IN RESTRAINT OF LEGAL PROCEEDING:

RE
Section 28: An agreement absolutely restraining a party from enforcing his rights through
LO
a court of law, or an agreement which places a limit as to the time within which a right
GA

can be enforced is void.

AN

Two kinds of agreements are void.

,B

mmmmm. Agreement, by one party is absolutely debarred from enforcing his

AW

rights through usual legal proceedings.

nnnnn. Agreement, which places a time limit for enforcing a right through
FL

legal proceedings.
EO
EG

AMBIGUOUS AND UNCERTAIN AGREEMENTS:

Section 29: which is not certain or capable of being made certain are void. It is
LL

necessary that there should be no ambiguity about what that parties intend.
CO

Illustrations: ‘A’ agrees to sell to ‘B’a hundred tons of oil. There is nothing whatever to
EN

show what kind of oil was intended. The agreement was void for uncertainty.
ME

AGREEMENT BY WAY OF WAGER: Section 30:

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 Essentials of wager agreement:

qqqqq. The parties have opposite views regarding an uncertain event.

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rrrrr. There are chances of gain or loss to the parties on the determination of the

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event one way or the other.

een
sssss. The parties have no other interest except winning or losing a bet.

am
ttttt. ‘A’ agrees to pay ‘B’ Rs.100 if it does not rain on 1stjan. Next, ‘B’agrees to

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pay ‘A’ Rs. 100 if it rains on that day.(win or loss depending upon the

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determination of the event.

uuuuu. If you take an insurance policy to insure TajMahal or KutubMinar –

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Void.

vvvvv. But if it is for your own house –valid. RE

LO
wwwww. The agreement to pay prize money or lottery tickets – void.
GA

xxxxx. Speculative transaction: An agreement to pay differences only, rather

AN

than actually making or taking the delivery of the goods.

,B
AW

CONTINGENT CONTRACTS: Section 31:

It is a contract to do or not to do something, if some event, collateral to such contract does

FL

not happen. When the contract is dependent or conditional upon the happening or
EO

non-happening of a certain future event, the contract is contingent.

EG

zzzzz. ‘A’ contracts to pay ‘B’ Rs. 10,000 if B’s house is burnt, this is a

contingent contract.
LL

aaaaaa. All contracts of insurance.

CO

Enforcement of contingent contract:

EN

bbbbbb. Section 32: Contracts contingent on an event happening.

ME

cccccc. Section 33: Contracts contingent on an event not happening.

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 dddddd. Section 34: Contracts contingent on the future conduct of a living

person.

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eeeeee. Section 35: Contracts contingent on happening of specified event

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within fixed time.

een
ffffff. Contracts contingent on not happening of specified event within a

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fixed time.

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gggggg. Section 36: Agreements contingent on impossible event.

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RE
LO
GA

Q.NO.5 State the rules relating to appropriation of payments between

AN

debtor and creditor.

,B
AW

Performance of contract-every contract consists of reciprocal promises. Each party

to a contract is bound to perform the promise made by him.
FL

The parties to the contract have a duty to:

EO

hhhhhh. Perform
EG

iiiiii. Offer to perform

Their respective promises.

LL

Joint promisors and the nature of their liability-

CO

Sec 42, 43 &44 of the contract act deal with the liability, rules are contained in these
EN

sections.
ME

Time and place of performance-

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Sec 46 to 50 lay down the principles for the performance of contracts containing different

stipulations as to time & place for the performance of the contracts.

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Performance of reciprocal promises-

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Sec 51 to 54 deal with the performance of reciprocal promises.

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Appropriation of Payments: - [Sec 59 – 61]

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Appropriation means application of payments –

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– The question of appropriation of payments arises when a debtor owes several debts to

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the same creditor and makes a payment that is not sufficient to discharge the whole

indebtness.

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1. Appropriation of Payments
RE
Sometimes, a debtor owes several distinct debts to the same creditor and he makes
LO
a payment which is insufficient to satisfy all the debts. In such a case, a question
GA

arises as to which particular debt the payment is to be appropriated. Section 59 to

AN

61 of the Act lay down following rules as to appropriation of payments which

,B

provide an answer to this question.

AW

jjjjjj. Appropriation as per express instructions

Every debtor who owes several debts to a creditor has a right to instruct his
FL

creditor to which particular debt, the payment is to be appropriated or adjusted.

EO

Therefore, where the debtor expressly states that the payment is to be applied
EG

to the discharge of a particular debt, the payment must be applied accordingly.

Example: A owes B three distinct debts of Rs.2,000, 3,000 and 5,000. A sends
LL

Rs.5,000 and instructs B that the payment should be appropriated against the
CO

third debt. He is bound to appropriate the payment against the third debt only.
EN

kkkkkk. Appropriation as desired by the debtor:

ME
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The application of payment of debt is left entirely to the discretion of the debtor. If the

debtor fails to give any instructions, the creditor can apply the amount to any of the debts

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including a time barred debt.

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When the debtor indicates that particular payment is to be applied for the discharge of a

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particular debt, the creditor has to apply the same accordingly.

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When a debtor has to make payment under multiple heads, he has an option u/sec 59 to

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indicate the head to which the amount paid should be appropriated.

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2. Application of payment where debt to be discharge is not indicated [60]

If section 60 is attracted, the creditor shall have the discretion to apply such

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payment for any lawful debt which is due to him from the person making the

payment. RE
LO
Example: A owes to B, among other debts; the sum of Rs.520. B writes to A and
GA

demands payment of this sum. A sends to B Rs.520. This payment is to be applied

AN

to the discharge of the debt of which B had demanded payment.

,B

llllll. Appropriation by the creditor-----if the debtor fails to make any indication
AW

of his intention, the creditor has a right to appropriate the amount to any debt

provided it is lawfully due, even though it may be time barred. He cannot

FL

make the appropriation to an illegal or void debt.

EO
EG

3. Application of payment where neither party appropriates [61]

The payment shall be applied in discharge of the debts in order of time whether
LL

they are or are not based by the limitation Act 1963, if the debt are of equal
CO

standing (i.e. payable on the same date) the payment shall be applied in discharge
EN

of each of these debt proportionately.

ME

mmmmmm. First interest then principle

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 nnnnnn. Director of payer not receiver.

oooooo. Right primary of the debtor

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pppppp.

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qqqqqq. Appropriation towards debts in order of time----

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When neither the debtor nor the creditor make any appropriation, then the rule mentioned

am
in sec 61 determines to which amount is to be applied for discharging which particular

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debt.

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In such a case, the payment shall be applied in discharge the debts in order of time. The

oldest one is to be discharged first of all, even though it may be a time barred debt. If the

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debts are of equal standing, the payment shall be applied in discharge of each such debt

proportionately. RE
LO
GA

[Whatever is paid, paid according to the intention of paying it]

AN

rrrrrr. [Quickquid soivitur, sovitur secundum modem solventies]

,B
AW

Example: A owes B, the following debts:

Amount of Positions of
FL

the debt the debt

EO

Rs.2,000 Time barred

EG

Rs.1,000 Time barred

Rs.2,000 Due on 10th June

LL

Rs.3,000 Due on 20th September

CO

A sends Rs.1,500 in the month of June. He neither expressly intimates nor circumstance
EN

of the case imply as to which debt the amount is to be applied. Moreover, B also does not
ME

appropriate the payment at his own discretion. Therefore, the payment will be
-A
AL
appropriated in order of time. However, here in this case two debts are of equal standing.

The payment will, therefore, be appropriated in order of time but to all equal standing

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debts. In this case, Rs.1,500 will be appropriated towards the first two debts of equal

law
standing proportionately, i.e. in the ratio of 2:1.

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am
The rules mentioned in sec 59 to 61, although are meant for being applied to several

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distinct debts, the same principles are applicable when there is a single debt and also

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interest thereon.

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RE
LO
GA

Q.No.6 Explain the “doctrine of frustration” with reference to decided

AN

cases.
,B
AW

DISCHARGE OF CONTRACT
It means a contract ceases to operate. It also means the rights and obligations created
FL

by the contract come to an end. The termination of the contractual relationship

EO

between the parties

EG

ssssss. By performance (section 37-67)

tttttt. By impossibility of performance (section 56)
LL

uuuuuu. By agreement (section 62-67)

CO

vvvvvv. By breach (section 39)

EN

Annul, liability fulfilment, to cancel, to release, dismiss, to relieve obligation.

ME

wwwwww. Discharge by performance or doctrine of frustration

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 Frustration: efforts made ineffective: discontented because unable to achieve one’s

desire: disappoint a hope.

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When the performance of the contract becomes impossible the purpose which the

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parties have in mind is frustrated. If the performance becomes impossible, because of a

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supervening event , the promisor is excused from the performance of the contract. In

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English law, it is called “Doctrine of Frustration”. In Indian law, it is called

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“Impossibility of Performance”.

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Section 56 of the Indian Contract act, 1872: this doctrine is applicable in two

circumstances (i) when the performance of the contract was physically cut off: and (ii)

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when the object was failed.

RE
Sec.56. Agreement to do Impossible Act- an agreement to do an act impossible in itself
LO
is void.
GA

Illustrations:
AN

xxxxxx. A agrees with B to discover treasure by magic. The agreement is void.

,B

yyyyyy. A and B contract to marry each other. Before the time fixed for the
AW

marriage, A goes mad. The contract becomes void.

Rules: Section 56 explains the circumstances in which the Doctrine of Frustration

FL

arises. The ingredients of section 56 are as follows:

EO

zzzzzz. The agreement is to do an impossible act is in itself.

EG

aaaaaaa. A contract to do an act becomes impossible or unlawful by an event

which the promisor could not foresee.

LL

bbbbbbb. The promisor knew or might have known with reasonable diligence
CO

that the act he promised is impossible or unlawful, but the promisee did not
EN

know of it, in such circumstances, the promisor is held liable to pay

ME

compensation to the promisee for any loss occurred by the promisee for the
-A
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 non-performance of the promise.

ccccccc. Illustrations appended to section 56 clarify and give propositions of

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this doctrine.

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EFFECT OF FRUSTRATION

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“It is well settled that if and when there is frustration the dissolution of the contract occurs

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automatically.”

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ddddddd. The frustrations should not be self-induced:

Frustration should arise without blame or fault on either side. Reliance cannot be

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placed on a self-induced frustration.

eeeeeee. Frustration must operate automatically:RE

LO
Frustration operates automatically to discharge the contract “irrespective of the
GA

individual’s concerned, their temperaments and failings, their interest and

AN

circumstances”. The legal effects of frustration do not depend on their intension or

,B

their opinions or even knowledge, as to the event. This is particularly true of Indian
AW

law as section 56 of the contract Act lays down a rule of positive law. There must not

be anticipation, knowledge or intension of the parties.

FL

fffffff. Adjustment of rights (Restitution):

EO

Section 65: Obligation of the person who has received advantage under void
EG

agreement, or contract that becomes void- when an agreement is discovered to be void,

or when a contract becomes void, any person who has received any advantage under
LL

such agreement or contract is bound to restore it, or to make compensation for it, to the
CO

person from whom he received it.

EN

ggggggg. As a result of frustration, the contract becomes void.

ME

hhhhhhh. The doctrine of Quantum meruit is allowed in cases of frustrations,

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 wherever possible.

Grounds of frustration

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Following are the well-recognised grounds of frustration on which the doctrine of

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frustration may be applied by the courts:

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iiiiiii. Destruction of the subject matter of the contract:

am
Where the performance of the contract becomes impossible by the destruction of the

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specific thing essential to that performance that contract is discharged. The destruction

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of the music hall in Taylor v. Caldwell case is a good example.

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jjjjjjj. Non-occurrence of a particular state of things:

The doctrine of frustration has also been applied in cases of non-occurrence of a

RE
particular event which is essential for the performance of the contract.
LO
kkkkkkk. Death or incapacity of the party:
GA

Where the performance of a contract depends upon the personal services of a party, the
AN

death or incapacity of such a party may be treated to be a valid ground for frustration
,B

of contract. A leading case on the point is ‘Robinson v. Davinson. In this case, the
AW

defendant’s wife was a famous pianist. She contracted for performing a concert but

could not fulfil her promise because of a serious illness. The plaintiff brought an action
FL

to claim damages for non-performance (breach) of contract. The court held that in this
EO

case the continued health of the pianist was a condition attached to the agreement. Her
EG

serious illness was a valid ground on the basis of which she was discharged from her

obligation under the contract.

LL

lllllll. Change of circumstances:

CO

If the change of circumstances makes the performance of the contract impossible, the
EN

contract will frustrate and parties will be discharged from their obligations under the
ME

contract. If, however, despite the change of circumstances, the performance is still
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 possible the contract will not be deemed to have been discharged.

mmmmmmm. Building contracts:

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Where the execution of the contract is delayed or otherwise becomes impossible by the

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happening of an external event, the contract is discharged. But much will depend upon

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the facts and circumstances and each case has to be judged on its own merits.

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nnnnnnn. Change in law:

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The performance of a contract may also become legally impossible by the change in

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law. If the performance legally impossible, the contract will be discharged. But as

pointed in Anson’s Law of Contract, “The change in the law must be such as to strike

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at the root of the agreement and not merely to suspend or hinder its operation in part.

ooooooo. RE
Legislative or government Intervention: are the well-recognised
LO
grounds of frustration on which the doctrine of frustration may be applied by
GA

the courts.
AN
,B
AW
FL

Q.NO.7Discuss the remedies available for breach of contract.

EO
EG

REMEDIES FOR THE BREACH OF CONTRACT

Remedy means course of action available to an aggrieved party when other party breaches
LL

the contract.
CO

Remedies for Breach of contract

EN

1. Rescission of contract
ME

2. Suit for damage (SEC 73 TO 75)

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3. Suit for specific performance (THE SPECIFIC RELIEF ACT 1963)
4.Suit for Injunction

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5.Quantum Meruit

law
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RESCISSION OF CONTRACT – SEC 39

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It means right to party to cancel contract.

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⇒ In case of breach of contract, other party may rescind contract.

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Effect of Rescission of Contract

ppppppp. Aggrieved party is not required to perform his part of obligation

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under contract.

qqqqqqq. RE
Aggrieved party claims compensation for any loss.
LO
rrrrrrr. Party is liable to restore benefit, if any.
GA
AN

When can Court Grant Rescind Contract?

,B

Court can rescind the contract in the following situation:

AW

sssssss. Contract is voidable.

ttttttt. Contract is unlawful.

FL

uuuuuuu. DAMAGES (Sec 73-75)

EO

The amount of money allowed by a court as compensation for the violation of a duty.
EG

Kinds of damages:

vvvvvvv. Liquidated
LL

wwwwwww. Un liquidated
CO

xxxxxxx. Ordinary/general/usual course of things

EN

yyyyyyy. Special
ME

zzzzzzz. Vindictive/ exemplary – no place of punishment( promise to marry)

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 aaaaaaaa. Nominal- absence of concrete material to show the extent damage

bbbbbbbb. Loss / reputation

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cccccccc. Inconvenience/ discomfort- equal to tortious liability.

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Duty of mitigate: - to make less severe, to make calmer, less angry, a reduction in

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punishment/ penalty, to reduce in amount or degree to mitigate the damage caused by a

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wrongful act.

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dddddddd. Estimation of loss / damage arising from a breach of contract.

ww
eeeeeeee. The party suffering from the breach of contract should take

reasonable steps to mitigate the extent of damage , if he fails to take

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reasonable steps to mitigate the loss he will not be entitled to claim

compensation for such loss. RE

LO
Sec 73- compensation for loss/ damage caused by breach of contract
GA

ffffffff. Such damages which naturally arose in the usual course of things
AN

gggggggg. Such damages which the parties knew, when they made the
,B

contract
AW

hhhhhhhh. But such compensation is not to be given for any remote or indirect

loss or damage sustained by reason of the breach

FL

iiiiiiii. Such compensation for damage arising from breach of a quasi-contract.

EO

Sec 74- compensation for breach of contract where penalty stipulated foe
EG

Sec 75- rightfully rescinds contract is entitled to compensation.

SUIT FOR DAMAGES

LL

jjjjjjjj. It means monetary compensation allowed for loss.

CO

kkkkkkkk. Purpose is to compensate aggrieved party and not to punish party

EN

as fault. It is to put the injured party in the same position(doctrine of

ME

restitution).
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AL
 llllllll. In India, rules relating to damages are based on English judgment of
Hadley vs. Baxendale.

)
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The facts of case were – H’s mill was stopped due to the breakdown of the shaft. He

law
delivered the shaft to common carrier to repair it and agree to pay certain sum of repair it

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and agree to pay certain sum of money for doing this work. H has informed to B that

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delay would result into loss of profit. B delivered the shaft after reasonable time after

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repair. H filed suit for loss of profit. It was held that B is not liable for loss of profit. The

ww
court laid down rule that damage can be recovered if party has breach of contract.

In fact the mill was already stopped due to the breakage of the shaft, with which the

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defendant was nothing to do. It was the fault of the plaintiff not informing the real

circumstances. RE
LO
It was accrued in the nature and mechanical process. If the importance of the arranging
GA

new one was told to the defendant, he might have arranged the substitute arrangements
AN

for quick transportation of the shaft.

,B

KINDS OF DAMAGES
AW

Sec 73: compensation for loss or damages caused by breach of contract

Compensation for failure to discharge obligation resembling those created by contract.

FL

Illustration: A contracts to repair B’s house in a certain manner, and receives payment in
EO

advance. A repairs the house, but not Acc to the contract. B is entitled to recover from A
EG

the cost of making the repairs conform to the contract.

mmmmmmmm. Remoteness of damage

LL

1) Damage arising in the usual course of things

CO

2) More loss arising from the special circumstances

EN

Sec 74: compensation for breach of contract where penalty stipulated for.
ME

The following are the different kinds of damages:

-A
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 nnnnnnnn. Ordinary damages

These are the damages which are payable for the loss arising naturally and directly

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as result of breach of contract. It is also known as proximate damage or natural

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damage.

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oooooooo.

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pppppppp. Special damages

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These are damages which are payable for loss arising due to some special

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circumstances. It can be recovered only if special circumstances which result in

special loss in case of breach of contract and party have notice of such damage.

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Example: A sends sample of his products for exhibition to an agent of a railway

RE
company for carriage to “New Delhi” for an exhibition. The consignment note
LO
stated: “Must be at New Delhi, Monday Certain.” Due to negligence of the
GA

company, the goods reached only after the exhibition was over. Held, the company
AN

was liable for the loss caused by late arrival of the products because the company’s
,B

agent was aware of the special circumstances.

AW

qqqqqqqq. Exemplary or punitive or vindictive damages

These damages are allowed not to compensate party but as mean of punishment to
FL

defaulting party. The court may award these damages in the case of:
EO

rrrrrrrr. Breach of contract to marry – loss based on mental injury.

EG

ssssssss. Wrongful dishonour of cheque – smaller amount, larger the damage.

tttttttt. Nominal damages

LL

Where party suffers no loss, the court may allow nominal damages simply to
CO

establish that party has proved his case and won. Nominal damage is very small in
EN

amount.
ME
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 uuuuuuuu. Damages for inconvenience

If party has suffered physical inconvenience, discomfort for mental agony as result

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of breach of contract, party can recover the damage for such inconvenience.

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Example: A photographer agreed to take photographs at a wedding ceremony but

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failed to do so. The bride brought an action for the breach of contract. Held, she

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was entitled to damages for her injured feelings.

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vvvvvvvv.

ww
wwwwwwww. Liquidated damages and penalty

Party may specify amount at the time of entering into contract. The amount so

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specified may be (a) liquidated damage, or (b) penalty.

RE
If specified sum represent, fair and genuine pre – estimate damages likely to result
LO
due to breach, it is called liquidated damage.
GA

But if specified sum is disproportionate to the damages, it is called as penalty.

AN

As regard the payment of liquidated damages and penalty court can’t’ increase
,B

amount of damages beyond the amount specified in the contract.

AW

Example : A gives B, a bond for the repayment of Rs.1,000 with interest at 12 per
FL

cent, at the end of six months, with a stipulation that, in case of default, the interest
EO

shall be payable at the rate of 75 per cent, from the date of default. This is a
EG

stipulation by way of penalty, and B is only entitled to recover from A such

compensation as the Court considers reasonable.

LL
CO

xxxxxxxx. Forfeiture of security deposit

EN

Any clause in contract entitling the aggrieved party to forfeit security deposit in the
ME

nature of penalty and court may award reasonable compensation.

-A
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⇒ Payment of interest

)
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a. It is permissible.

law
b. If interest is in nature of penalty, court may grant relief.

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c. If no rate of interest is specified in contract party shall be liable to pay

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as per the law in force or as per custom or usage of trade.

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ww
yyyyyyyy. Cost of suit or decree

The court has also discretion to award cost of suit for damages in addition to the

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damages for breach of contract.

RE
LO
Suit for Specific Performance
GA

It means, demanding an order from court that promise agreed in contract shall be carried
AN

out. Recourse of alternative remedy instead of recovering damages.

,B

It is contained in the Specific Relief Act, 1963.

AW

⇒ When is specific performance allowed?

a. Where actual damages arising from breach is not measurable.

FL

b. Where monetary compensation is not adequate remedy.

EO
EG

⇒ When specific performance is not allowed?

c. When damages are an adequate remedy.

LL

d. Where performance of contract requires numbers of minute details and

CO

therefore not possible for court to supervise.

EN

e. Where contract is of personal in nature.

ME

f. Where contract made by company beyond its power. (ultra – vires)

-A
AL
 g. Where one party to contract is minor

h. Where contract is inequitable to either party.

)
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i. Example: A agree to sell B, an artist painting for Rs.30,000. Later on,

law
he refused to sell it. Here B can file suit against A for specific

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performance of the contract.

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zzzzzzzz. Suit for Injunction

.al
aaaaaaaaa. It means stay order granted by court. This order prohibits a person

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to do particular act. Restraining the other party from making a breach of

contract.

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bbbbbbbbb. Where there is breach of contract by one party and order, of

RE
specific performance is not granted by court, injunction may be granted.
LO
Example: Film actress agreed to act exclusively for W for a year and for no one
GA

else. During the year she contracted to act for Z.

AN

Compensation – fixed by the court

,B

Penalty – fixed by the parties

AW

Damages- compensation and other losses.

FL
EO

Q.No.8 Write short notes on any two of the following

EG

(a) QUASI CONTRACTS:

LL

Section 68-72 of the Indian Contract Act, 1872 deals -- with certain relations
CO

resembling those created by contract”. It incorporates those obligations which are

EN

known as quasi contracts under English Law. The basis of the obligations is that no
ME

one should have unjust benefit at the cost of the other. In an action for unjust
-A
AL
 enrichment, the following essentials have to be proved:

ccccccccc. The defendant has been enriched by the receipt of a benefit.

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ddddddddd. The enrichment is at the expense of the plaintiff.

law
eeeeeeeee. The retention of the enrichment is unjust.

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The Indian contract Act deals with the following quasi-contractual obligations:

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fffffffff. Claim for necessaries supplied to a person incompetent

.al
to contract (section 68):

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Where one person supplies necessaries suited to the condition in life of a person, who

is incompetent to contract (for example, minor or lunatic), or to anyone whom such

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incompetent person is legally bound to support (for example, to a lunatic’s wife or

RE
children) the person furnishing such supplies is entitled to a reimbursement from the
LO
property of such incompetent person.
GA

Illustration:
AN

A supplies B, a lunatic, with necessaries suited to his condition in life. A is entitled to

,B

be reimbursed from B’s property.

AW

ggggggggg. Reimbursement of money paid, due by another (section

69):
FL

“69. Reimbursement of a person paying money due by another in payment of which he

EO

is interested- A person who is interested in payment of the money which another is

EG

bound by law to pay and who therefore pays it, is entitled to be reimbursed by the

other.
LL

Two essentials:
CO

hhhhhhhhh. One person is interested in payment of the money and therefore he

EN

pays it. While,

ME

iiiiiiiii. Another person is bound by law to pay the same, but he fails to pay.
-A
AL
 jjjjjjjjj. Obligation of person enjoying benefit of non-gratuitous

)
.in
act (section 70): for applications of this section, the following conditions are

law
to be satisfied.

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kkkkkkkkk. A person lawfully do something for another person, or should

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deliver something to him,

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lllllllll. The person making the payment or delivering the thing must not do

ww
so gratuitously, i.e. he should expect payment for the same: and

mmmmmmmmm. The other person should enjoy the benefit of this payment

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or delivery of the thing.

RE
When all the above conditions are satisfied, the person receiving the benefit becomes
LO
bound to pay compensation to the person conferring.
GA

nnnnnnnnn. No intensions to do act gratuitously: when the person does not

AN

intend to do it gratuitously but expects payment for the same on doing such
,B

act, he can ask for compensation under section 70.

AW

ooooooooo. Enjoyment of benefit by the defendant is necessary: the voluntarily

acceptance of the benefit of the work done or the thing delivered is the
FL

foundation of the claim under section 70.

EO

ppppppppp. Unjust benefit to the defendant necessary: section 70 is founded on

EG

the principle that one should not gain unjust enrichment at the cost of the

other. If there is no unjust gain obtained in any transaction, section 70 has no

LL

application.
CO

Application of section 70 against the government:

EN

Section 70 prevents unjust enrichment and it applies as much to individuals as to

ME

corporations and government. If the services rendered or goods supplied to the

-A
AL
 government are under a purported contract, which does not materialise because of

non-fulfilment of the formalities prescribed in article 299 of the constitution, the

)
.in
government can still be made liable to compensate for the same under section 70 of the

law
contract act, if it has enjoyed the benefit of what has been done under the purported

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contract.

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qqqqqqqqq. Section 70 cannot be invoked against a minor:

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A minor’s agreement being void ab initio, he cannot be made liable under sections 64 and

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65 of the Contract Act. But if necessaries are supplied to a minor, his estate can be made

liable under the section 68. It has been held that no action can be brought against a minor

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to recover compensation from him under section 70. Section 70 cannot be invoked against

RE
a minor. Firstly, the section covers every “person” whether he is competent to contract or
LO
not. Secondly, there is nothing in law which debars a minor from enjoying the benefit of
GA

the act done by another person.

AN

rrrrrrrrr. Responsibility of finder of goods:

,B

Section 71 contemplates still another quasi contractual situation, i.e. when a person is a
AW

finder of goods belonging to another and takes the goods to his custody and is in the

position of a bailee with all responsibility. Every bailee has the following duties:-
FL

sssssssss. Duty or reasonable care(section 151-152 )

EO

ttttttttt. Duty not to make unauthorized use(section 154)

EG

uuuuuuuuu. Duty not to mix(section 155)

vvvvvvvvv. Duty to return(section 156)
LL

wwwwwwwww. Duty not to set up jus tertli (right of third person)

CO

(sec.165-167)
EN

xxxxxxxxx. Duty to return increase. (section 163)

ME
-A
AL
 yyyyyyyyy. Liability of a person getting benefit under mistake
or coercion (section 72):

)
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zzzzzzzzz. Unjust benefit under mistake: section 72 covers a situation where

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money has been paid, or anything delivered by one person to another either

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by mistake or under coercion.

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aaaaaaaaaa. Money paid or anything delivered under mistake: According to

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Article 265 of constitution, no tax shall be levied or collected except by the

ww
authority of law. Law here means only valid law. Section 72 and the same

ought to be refunded by the government because the government cannot be

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allowed to unjustly enrich itself by retaining the tax so received.

bbbbbbbbbb. RE
Money not recoverable where there is no unjust enrichment of
LO
the defendant: If the receiver of the money has no longer the same with him,
GA

and has further paid it under a similar mistake, he cannot be required to

AN

repay the same.

,B

cccccccccc. Unjust benefit under coercion: Section 72 permits the money paid
AW

or anything delivered, either by mistake or under coercion, to be recovered

back.
FL

dddddddddd. Compulsion of law is not coercion.

EO
EG
LL

(b) quantum mereuit

CO
EN

When the injured party has performed a part his obligation under the contract before the
ME

breach of contract has occurred, he is entitled to recover the value of what he has done,
-A
AL
under this remedy.

Where one party has absolutely refused to perform, or has rendered himself incapable of

)
.in
performing his part of the contract, he puts it in the power of the other party either to sue

law
for the breach of it or to rescind the contract and sue on quantum meruit for the work

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actually done.

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Quantum Meruit= “as much as earned”, as much as is merited.

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When a person has done some work under a contract, and the other party repudiates the

ww
contract, or some event happens which makes the further performance of the contract

impossible, then the party who has performed work can claim remuneration for the work

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he has already done.

RE
Illustration: A agrees to delivered 100 bags, B 500 bags of wheat and when A has
LO
already delivered 100 bags, B refuses to accept any further supply, and A can recover
GA

from B the value of wheat which he has already delivered.

AN

eeeeeeeeee. Section 65 of the act lays down that when an agreement is

,B

discovered to be void or becomes void any person who has received any
AW

advantages under such agreement is bound to restore it. Or to make

compensation for it, to the person from whom he received it.

FL

Illustration:
EO

A pays B Rs.1000 in consideration with B’s promise to marry C, A’s daughter. C is dead
EG

at the time of the promise. The agreement is void, but B must repay A the sum of Rs.

1000.
LL

ffffffffff. Section 70; - provides that where a person lawfully does

CO

anything for another person, or delivers anything to him not intending to do

EN

so gratuitously, and such other person enjoys the benefit. Thereof, the latter
ME

is bound to make compensation to the former in respect of or to restore the

-A
AL
 thing so done or delivered.

gggggggggg. When there is an express or implied contract to render services

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but there was no agreement as to remuneration, in such circumstances

law
reasonable remuneration is payable i.e. quantum meruit.

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hhhhhhhhhh. When the completion of the contract has been prevented by

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the act of the other party to contract.

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5. When a contract is divisible and the party in default has enjoyed the benefit of the

ww
part performance, the party who performed the contract may sue on quantum meruit. If

the contract is not divisible, the party who performed the contract cannot claim

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remuneration on the ground of quantum meruit.

(a)In case of void agreement or contract that becomes RE

LO
iiiiiiiiii. Any person who has received any advantage under such agreement or
GA

contract is bound to restore if or to make compensation for it, to the person

AN

from who received it.

,B

Ex. :( 1) - A – B – 10000 – to marry c (A’s daughter) – C – death of the time of

AW

performance of contract – B must repay A Rs 1000.

Ex. (2):- A – B decline 250 quince of rice before the 1st of May. A delivers 130 qu.
FL

Only before that day and none after. B retains the 130 qu. after the first of May. He
EO

is bound to pay A for them.

EG

Ex(3):-A singer – two nights in every week during the next two month and B any

ages to pay her Rs 100 for each night’s performance on the sixth night, A wilfully
LL

absent perfect. B must pay a for the five night on which she had sung.
CO
EN

(b) In case of Act preventing the completing of contract:-

ME
-A
AL
If a party does not complete the contract or prevents the other party to complete the

contract the aggrieved party can sue or quantum meruit.

)
.in
Ex.:- owner – P write a book to be published as series in his magazine. After a few

law
series were published the publication of the magazine was stopped. It was held that

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P could claim payment on quantum meruit for the part already published.

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(c) In case of divisible contract:-

.al
(1) If the contract is divisible and

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(2) If the party not at default has enjoyed benefit of the point performance.

(3) The contract is party performed

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If the above condition an satisfied, the party at fault may claim on payment on quantum

RE
meruit for the part of contract performed by him be con recover such proportion of the
LO
contract price as the work done, by him bears to the work under the contracts.
GA

(d) In case of indivisible contract performed completely but badly.

AN

jjjjjjjjjj. Contract is indivisible

,B

kkkkkkkkkk. Lump sum consideration

AW

llllllllll. Completely performed

mmmmmmmmmm. Performed badly

FL
EO

The party at fault may recover the contract price (Lump sum price) less the deduction
EG

made for done badly.

Ex.:- X agreed to decorate Y’s flat for a lump sum of Rs20,000. X did the complete work
LL

but Y complained of faulty work man stop. It costs Y another Rs3000 to remedy the
CO

defect. X could recover only Rs 17000 from Y.

EN

(e) In case of Non – gratuitous Act – Three condition

ME

(i) The thing must have been done or delivered lawfully.

-A
AL
(ii) The person who has done or delivered the thing must not have intended to do so

gratuitously

)
.in
And

law
(iii) The person from whom the act is done must have enjoyed the benefit of the act.

een
Ex.:- A, a tradesman leaves goods at B’s shop be mistake B treats the good as his own.

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He is bound to pay A for them.

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(c) Time for performance

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Time place and manner of performance [46–50]
RE
The parties are free to decide as to when and where the performance of the contract is to
LO
be made.
GA

1. No time is specified for performance [Sec 46]

AN

nnnnnnnnnn. Time of performance is not specified + promisor agreed to

,B

perform without, a demand from the promise the performance must be made
AW

within a reasonable time. Reasonable time – in each particulars case – a

question of fact.
FL

Sec 36(2) the sale of goods act also contains a similar provision:- when the seller is
EO

bound to deliver the goods, but no time for sending them is fixed, the seller is bound to
EG

send them within a reasonable time.

oooooooooo. Time for performance of promise, where no application to be

LL

made and no time is specified. ( within a reasonable time)

CO

2. Time specified but hour not mentioned [47].

EN

Time of performance specified + promisor agreed to perform without application by the

ME

promisee
-A
AL
 pppppppppp. Performance must perform on the day fixed during the usual

business hours and at the place at which the promise ought to be performed.

)
.in
qqqqqqqqqq. Time and place for performance of promise, where time is

law
specified, and no application to be made.( during business hours on such

een
day/ usual closing time)

am
A promise to deliver goods at B’s warehouse on 1st Jan. On that day, A brings the goods to

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b’s warehouse, but after the usual hour for closing it, and they are not received. A has not

ww
performed his promise.

3. Where Time is fixed and application to be made [48]

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rrrrrrrrrr. Proper place and within the usual hour of business

ssssssssss. Promisee to apply for performance RE

LO
tttttttttt. When the promise is to apply for performance, he must do so at
GA

proper time and place.(usual hours of business)

AN

4. Performance of promise where no place is specified and no application

,B

is to be made by the promise [49]

AW

uuuuuuuuuu. It is the duty of the promisor to apply to the promise to appoint

a reasonable place for the performance and perform it at such appointed

FL

place.
EO

vvvvvvvvvv. Place for performance of promise, where application to be made

EG

and no place fixed for performance ( reasonable place)

A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must apply to B

LL

to appoint a reasonable place for the purpose of receiving it, & must deliver it to him at
CO

such place.
EN

5. Performance in manner or at time prescribed or sanctioned by promise

ME

[50]
-A
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 wwwwwwwwww. In such prescribed manner and

xxxxxxxxxx. Prescribed time

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yyyyyyyyyy. The performance of any promise may be made in any manner, or

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at any time which the promise prescribes or sanctions.

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Ex: - ‘A’ desires ‘B’ who owes him Rs 10,000 to send him a promissory note for Rs

am
10,000 by Post. The debt is discharged as soon as ‘B’ puts into the post a letter

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containing the promissory note duly addressed to ‘A’.

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B owes A 2,000 rupees. A desires B to pay the amount to A’s account with C, a banker. B

who also banks with C, orders the amount to be transferred from his account to A’s credit,

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and this is done by C.

RE
LO
Q.No.9.Solve any two of the following problems.
GA
AN

(a) X, Y, Z jointly promise to pay Rs.30,000 to “D”. “Y” becomes insolvent.

,B

Discuss the liability of X, Y, and Z.

AW

-Yes, x,y,z are the liability to pay Rs.30,000 to D.

FL

- But y becomes insolvent, so now x & z are compelled to pay the amount to D, may have
EO

performed the whole of the promise and they are right to claim the compensation from y
EG

or their representatives later on.

They are entitled to receive 10,000 rupees from y.

LL
CO

Section 42, 43and 44 of the Contract act deal with the question of liability of
EN

the joint promisor.

ME

The liability of the joint promisor is joint and several: When two or more
-A
AL
persons make a joint promise, the promise may, in the absence of express agreement to

the contrary, compel anyone or more of such joint promisors to perform the whole of the

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promise. Their liability to pay the money is joint and several under section 43 of the

law
Contract act.

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Contribution between joint promisor: Since the liability of the joint promisors is

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joint and several, one of them may have performed the whole of the promise. He may

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have, for instance, paid for the share of others also. If that is so, he has right to claim

ww
contribution from the others (section 43).

Effect of release of a joint promisor: Section 44 of the Indian Contract act, 1872:

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“when two or more persons have made a joint promise, a release of one such joint

RE
promisors by the promise, does not discharge the other joint promisors, neither does it
LO
free the joint promisor so released from the responsibility to other joint promisors.
GA

Effect of death of a joint promisor: section 42: On the death of a joint promisor,
AN

his representatives substitute him for the purpose of liability. The liability of the surviving
,B

joint promisors is there along with the representatives of the deceased one. When all the
AW

joint promisors die, the representatives of them all must jointly fulfil the promise.
FL

(b) A musical hall was agreed to be let out on certain day. But before that,
EO

it was destroyed by fire. Is the promisor absolved from the contract?

EG

zzzzzzzzzz. Yes.
LL

aaaaaaaaaaa.The promisor absolutely absolved from the contract.

CO

bbbbbbbbbbb. The promisor is not liable for the non- performance of

EN

the contract.
ME

ccccccccccc. Bcz: by impossibility of performance sec-56

-A
AL
 ddddddddddd. The performance of the contract had become impossible. The

perishing of the hall without any fault on the part of promisor.

)
.in
eeeeeeeeeee.It is held that the contract has become void. Before the date of

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performance arrived, the music hall was destroyed by fire. The contract was

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possible when the contract is entered into but because of fire the performance

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subsequently become impossible or unlawful.

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fffffffffff. The performance is deemed to be impossible and the parties are

ww
excused from performing the contract.

Discharge of contract:

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In the following ways;
RE
ggggggggggg. By performance of the contract sec 37-67
LO
hhhhhhhhhhh. By breach of the contract sec 39
GA

iiiiiiiiiii. By impossibility of performance sec 56

AN

jjjjjjjjjjj. By agreement and novation sec 62- 67

,B

kkkkkkkkkkk. Discharge by impossibility of performance: an agreement to do

AW

an act impossible in itself is void, which becomes unenforceable.

lllllllllll. Initial impossibility:-

FL

mmmmmmmmmmm. ‘Les non cogit ad impossibilia”- the law does not

EO

compel a man to do what he cannot possibly perform.

EG

nnnnnnnnnnn. Impossibility here means not only physical impossibility, but

also legal impossibility. (Sec 23)

LL

ooooooooooo. Subsequent impossibility:-

CO

ppppppppppp. The performance of the contract may be possible when the

EN

contract is entered into but because of some event, the performance may
ME

subsequently become impossible or unlawful.

-A
AL
 qqqqqqqqqqq. So the purpose which the parties have in mind is frustrated. If

the performance becomes impossible, because of a supervening event the

)
.in
promisor is excused from the performance of the contract. This is known as

law
doctrine of frustration under English law.

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am
(c) “M’’ tells his wife that he would commit suicide if she did not transfer her

.al
personal assets to him. She does so under threat. Can wife avoid this contract?

ww
-yes

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-wife can avoid this contract.

-because this contract is caused by coercion, as define in sec15.

RE
Acc to sec 14, consent is said to be free from coercion. Acc
LO
Sec 10 of the act (valid contract)—there should be free consent of the parties, when they
GA

enter into the agreement.

AN

Reasons:--
,B

Section 15 defines coercion. The consent is given under the threat is an offence under
AW

IPC.

rrrrrrrrrrr. The consent is obtained by threat of an offence and the person is

FL

forced to give his consent.

EO

sssssssssss. It is mainly of a physical character.

EG

ttttttttttt. The freedom o will is impaired.

uuuuuuuuuuu. It is a violent character.

LL

vvvvvvvvvvv. The agreement made by coercion is voidable at the option of

CO

the party whose consent was so caused.

EN

wwwwwwwwwww. The burden of proof lies upon plaintiff.

ME

xxxxxxxxxxx. The party avoiding the contract is bound to restore to the other
-A
AL
 party any benefit which he may have received under the contract.

yyyyyyyyyyy. A real or apparent authority which one person has over another.

)
.in
zzzzzzzzzzz.Confidence response by one party in another (fiduciary

law
relationship).

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am
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ww
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RE
LO
GA
AN
,B
AW
FL
EO
EG
LL
CO
EN
ME
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AL