UNIT - 1: THE INDIAN CONTRACT ACT 1872

STRUCTURE
1.0 Learning Objectives
1.1 Introduction
1.2 General Principles of contract
1.3 Definitions
1.4 Characteristics of contract
1.5 Kinds of contract
1.6 Summary
1.7 Keywords
1.8 Learning Activity
1.9 Unit End Questions
1.10 References

1
1.0 LEARNING OBJECTIVES

After studying this unit, you will be able to:

 Describe nature of contract

 Identify needs of contract
 State the need and importance of contract
 List the kinds of contract

1.1 INTRODUCTION

The Contract Act refers to a set of laws that regulate contracts in a particular jurisdiction. In
general, a contract is an agreement between two or more parties that creates enforceable
obligations. The Contract Act sets out the rules for forming and enforcing contracts, and it
provides remedies in case of breach of contract.

In most countries, the Contract Act is based on common law principles, which means that the
law is developed through court decisions. However, some jurisdictions have adopted a
statutory approach, which means that the law is set out in a statute or code.

The Contract Act typically covers topics such as offer and acceptance, consideration,
capacity, legality, and interpretation of contracts. It also deals with issues such as breach of
contract, remedies, and discharge of contracts.

Overall, the Contract Act is a fundamental area of law that is essential for understanding how
agreements are formed, how they are enforced, and how disputes are resolved in a legal
context.

2
1.2 GENERAL PRINCIPLES OF CONTRACT

A contract is defined as "An agreement which is enforceable by law" in Section 2(h) of the
Indian Contract Act, 1872. The agreement between two or more parties to do or refrain from
doing what they decided upon in exchange for something, that is, a consideration, is what is
known as a contract.
The intention to establish legal relations is one of the general principles in the construction of
a contract.
a proposal and acceptance.
Legitimate Consideration.
capacity of the parties involved.
Freedom of Will.
The contract's goal must be legitimate.
The agreement must not be void and must also possess the qualities of clarity and the
potential for performance in order to be legally enforceable.
For the contract to be enforceable and have meaning, all of the aforementioned components
must be present. An agreement does not become a contract and is not legally binding if any of
these elements are missing. This means that while every agreement is a contract, not every
agreement qualifies as one. In accordance with Section 10 of the Constitution, "All
agreements are contracts if they are made by the free consent of parties competent to contract,
for a lawful consideration and with a lawful object, and are not hereby expressly declared to
be void." This implies that if the requirements of a contract are satisfied, then all agreements
are contracts.

An agreement is a pledge made by two parties that legally binds them to one another. An
agreement is defined as "Every promise and every set of promises, forming the consideration
for each other, is an agreement" under Section 2(e) of the Indian Contract Act, 1872. We
comprehend that the term "agreement" refers to two elements by its basic definition under
section 2(e). –
A promise Section 2(b) of the Indian Contract Act of 1872 defines promise. When one party
makes an offer—that is, proposes to do or refrain from doing something—and the other party
responds, we might say that the offer has been accepted. This then turns into a commitment.
Promises generally fall into one of four categories. Chapter 9 of the Indian Expressed
Promises: According to Section 9 of the Indian Contract Act of 1872, they are defined.
Whether communicated verbally or in writing, commitments made in connection with offers
or acceptances are referred to as expressed promises.

3
The Indian Contract Act of 1872's Section 9 defines implied promises. Implied promises are
those that have been made when an offer or acceptance has been made in a manner other than
through express words.
The Indian Contract Act of 1872's Section 2(f) defines reciprocal promises. Reciprocal
promises are those that form as consideration for the conclusion of an agreement, i.e., as
consideration for one another.
Alternative Promises: According to Section 58 of the Indian Contract Act of 1872, they are
defined. The type of promises known as alternative promises are those that offer a choice
between two options.
Acceptance - A promise must be unconditionally accepted for the contract to be enforceable,
and this acceptance may be conveyed verbally or physically. When dealing with generic
offers or general promises of continuation, acts may also imply acceptance. Acceptance,
communication, and revocation are covered in Section 3.
Consideration is defined in Section 2(d) of the Indian Contract Act of 1872 as "when at the
desire of the promisor, the promisee or any other person has done, or abstained from doing,
or does, or promises to do, anything."
or to pledge not to do anything; in this case, the act, promise, or abstinence is referred to as a
consideration for the promise.
The phrase "consideration" simply denotes "something in exchange," or "QUID PRO QUO."
Given that it explains the rationale behind each party's participation in the agreement,
consideration is one of a contract's most crucial elements. A consideration must have worth in
the eyes of the law and can take the form of a financial exchange for goods or services or a
swap of one kind of good for another kind of good. Any consideration must also be legal, and
if it isn't, the contract is void ab initio (from the start). The following are some of the
guidelines to be followed:
Any promise, whether past, executory, or executed, must be accompanied by consideration
that is related to the promise.
Past consideration is when something has been finished and the pledge is made after the
deliberation is over. Executed consideration consists of one promise made before an action,
whereas executory consideration consists of two promises.
Any consideration offered by the promisee is required in order for it to be enforceable. This
implies that a promise cannot be enforced by a party that has not given any consideration in
connection with the commitment. And only the party who gave consideration for it has the
right to enforce that guarantee. According to the ruling in the case of Tweddle v. Atkinson,
the son cannot make good on the promise he made to his father.
He was not making it legally binding on him because he had not given it any thought.

4
According to the law, consideration must have some economic or material value, even if it is
very little. It can't just be for nostalgic or emotional reasons. In the 1853 decision of White v.
Bluett, it was decided that an ambiguous guarantee of receiving recompense for unfair
treatment could not qualify as a valid payment.
Even though the consideration need not be sufficient, it must be worth something to the other
person. However, the court is not concerned with the topic's market price, so the
consideration may not be sufficient. Chappell & Co. Limited v. Nestlé is a case in point.
It was shown that contemplation might be of little worth.
A pledge that involves less than the full amount of debt is not enforceable. Payment of a
lesser amount does not satisfy the full amount that was agreed upon. Even if the opposing
party agrees, a partial payment of an obligation does not discharge the entire debt. In Pinnel's
Case, it can be seen that a consented-to and well-attested agreement to accept a less sum as
payment for a debt due does not create a legally binding obligation because there is no new
consideration to back up the new agreement.
Competence - In order for a contract to be enforceable, both parties must be able to enter into
one. This means that at the time the contract was established, they had to be of legal age and
in a stable mental state. Additionally, they cannot be bankrupt or otherwise incapable of
forming a contract.
Free Consent - This means that both parties' consent to enter into a legal relationship must be
freely given and cannot be the result of any of the following, subject to the provisions of
Sections 20, 21, and 22: coercion, as defined in Section 15, undue influence, as defined in
Section 16, fraud, as defined in Section 17, misrepresentation, as defined in Section 18, or
mistake. When consent would not have been provided if it weren't for the existence of such as
deception, misrepresentation, fraud, extortion, or error.

1.3 DEFINITIONS

Section 2 (a) When one person signifies to another his willingness to do or to abstain
from doing anything, with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal;

Section 2 (b) When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise;

Section2 (c) The person making the proposal is called the “promisor”, and the person
accepting the proposal is called the “promisee”;

5
Section 2 (d) When, at the desire of the promisor, the promisee or any other person has done
or abstained from doing, or does or abstains from doing, or promises to do or to abstain from
doing, something, such act or abstinence or promise is called a consideration for the promise;

Section 2 (e) Every promise and every set of promises, forming the consideration for each
other, is an agreement;

Section 2 (f) Promises which form the consideration or part of the consideration for each
other, are called reciprocal promises;

Section 2 (g) An agreement not enforceable by law is said to be void;

Section 2 (h) An agreement enforceable by law is a contract;

Section 2 (i) An agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable contract;

Section 2 (j) A contract which ceases to be enforceable by law becomes void when it ceases
to be enforceable.

1.4 CHARACTERISTICS OF CONTRACT

A legally enforceable agreement between two or more parties is referred to as a contract. It is

crucial to have a contract in place since it outlines the parameters of the agreement between
the parties. This transparency is crucial in making sure that everyone knows what is expected
of them and can assist to prevent any misunderstandings later on.
The contract offers some security in the event that things do go wrong and guarantees that the
parties will carry out the tasks and responsibilities as intended.
A contract must contain several characteristics in order to be legitimate and recognized by the
common law, including an offer, acceptance, consideration, the desire to establish legal
relations, authority and ability, and certainty. A contract is not enforceable without these
components and may possibly not be upheld in court.
It is crucial to keep in mind, nevertheless, that not all legal transactions must be in writing in
order to be enforceable. For instance, if all necessary components are present, an oral
agreement between two parties is nevertheless enforceable. All bilateral contracts must
contain the necessary components to be legitimate and enforceable under contract law,
regardless of whether they are written or spoken. An offer from one party and an acceptance

6
from the other are prerequisites for the existence of a contract. A contract cannot exist
without an offer, hence it is a crucial component. It is a promise made by one side to enter
into a deal if the other party fulfills their end of the contract. It involves a person who wants
particular products, services, or other performances and a person who can carry out the duty
of delivering it.
The other party must be informed of the offer, which must be specific and explicit. The
offeree then has to openly or indirectly accept the offer's contractual terms. If the offeree
accepts the offer, a binding agreement is created and will be upheld. A formal statement of an
agreement's terms that the offeror is prepared to be bound by is known as an offer. It must be
clear and made to form a legally binding agreement.
Agreement: A contract requires mutual agreement between the parties involved. This means
that there must be an offer made by one party and an acceptance of that offer by the other
party. Both parties must be in consensus on the terms and conditions of the contract.

Intention to create legal relations: For a contract to be enforceable, there must be an intention
by the parties to create a legally binding relationship. Contracts entered into with friends or
family members, for example, may lack this intention.
Legality: Contracts must have a lawful purpose and cannot be for illegal activities. If the
subject matter or purpose of the contract is illegal, the contract will be considered void and
unenforceable.
Capacity: The parties entering into a contract must have legal capacity, meaning they must be
of legal age and possess the mental competence to understand the terms and obligations of
the contract. Minors, mentally incapacitated individuals, and individuals under the influence
of drugs or alcohol may lack the capacity to enter into contracts.
Free consent: The consent of the parties must be free from duress, undue influence, fraud, or
misrepresentation. Each party must enter into the contract voluntarily and without being
coerced or deceived.
Writing (in some cases): While many contracts can be oral or implied, certain types of
contracts must be in writing to be enforceable. These include contracts for the sale of real
estate, contracts that cannot be performed within one year, and contracts for the sale of goods
over a certain value, as required by the Statute of Frauds.
It's important to note that contract laws may vary in different jurisdictions, and the specific
requirements and enforceability of contracts may differ.

7
Consideration
Consideration is what each contracting party forgoes or agrees to do in exchange for entering
into the agreement. It could be a valuable item like cash, products, services, or real estate.
Think about an employment agreement between an employer (the promiseor) and an
employee (the promisee). The employee accepts the employment offer made by the company
after receiving it. Here, the employee's consideration is their promise to work for the
employer, whereas the employer's consideration is the employment (and paying the
employee).
But it could also mean refraining from doing something that the promisee has a right to do,
which would be harmful to them. If someone forbids you from smoking in your own home,
for instance, that is a factor.
It's not necessary to invest money in consideration. Most of the time, courts won't evaluate
how adequate the consideration is. The parties are free to make a poor deal. The courts have
traditionally ruled that a "mere peppercorn" can qualify as consideration. However, there are
circumstances when courts will make an exception for employee non-compete clauses and
take into account the value of the consideration.
the desire to establish legal relations
A contract must demonstrate a desire to establish legal relations in order to be considered
binding. The use of formal language, such as "I agree to..." or "This contract is binding on the
parties," can demonstrate this. It's not necessary to formalize intent, though. It is implied by
the actions of the parties.
Intent is significant because it shows how seriously the parties intended to accept the
agreement's obligations as well as its advantages.
There cannot be a legally enforceable agreement if one party does not accept all of the terms,
hence any agreement must be seen as a whole and taken into account in its whole. For
instance, there is no contract if you sign a contract to buy a house and the seller does not
agree to one of the conditions. The contract can be void if it is missing this component. A
typical entire agreement provision declares that any prior written or verbal statements are
superseded and that a written contract incorporates all of the terms.
power and capability
A party's eligibility to enter into a contract is determined by contract law. Each party to the
agreement must be of legal age to give their consent. This implies that they must be of legal
age and be able to comprehend the conditions of the agreement. The agreement may be null
and void if one party lacks the legal competence to sign it.

8
A contract is only enforceable if each of these requirements is met. The agreement can be
void or impossible to enforce if one component is absent.
Certainty
A contract must contain specific provisions in order to be upheld, and the ability to uphold
the fundamental principles of an agreement must be ensured. These terms must be explicit
and clear.
Any agreement must include two key terms: the price to be paid for the promised obligation
(the service to be provided, the good to be sold, etc.), and the consideration or price to a deal
(something of value given in exchange for something else of value).
The contract can be null and void if any of these clauses are omitted. For instance, if you
agree to pay $500 for a car but the contract doesn't specify what kind of automobile it is, the
contract is null and void.
The same holds true if you agree to sell your car for $500 but aren't told what kind of car
you're selling.
If a contract's provisions are excessively ambiguous or uncertain, the courts may not uphold
it. For example, if the parties cannot agree on what constitutes "goods" in a contract for the
sale of goods, the contract cannot be enforced.

1.5 KINDS OF CONTRACT

1.Valid Contracts-Contracts that are valid have all the necessary components and can be
enforced in court. Legal responsibilities are established between contractual parties by a
legitimate contract. It offers one party justification to compel another party to do something
or not.

Legal responsibility for contract performance rests with the parties. If a party breaches a
contract, the other side may file a lawsuit.

In many situations, signing on the dotted line binds you to uphold the terms of the agreement,
but there are several situations that render contracts legally unenforceable. There are
numerous factors in contract law that determine whether a contract is legitimate or not. When
you attempt to comprehend what renders an agreement legally binding, things could get
confusing.

2.Void Contract- Consult a specialist in that field if you have any issues regarding contracts.
Void agreements are not binding. A void contract typically lacks one or more crucial

9
components that would give it legal force. As it isn't a real contract, neither party to it needs
to take any action to end it. If all necessary criteria for validity, such as capacity and free
consent, are met when the contract is made, it can be considered legitimate. However, the
contract becomes worthless and loses its ability to be enforced if it is impossible to fulfill or
if the law changes in the future and makes performance impossible. A contract loses its
ability to be enforced when it conflicts with public policy. No one may bring a claim for non-
performance.

3.Voidable Contracts.

Voidable contracts seem to be valid since they possess the criteria for enforcement. Yet, they
also feature a weakness that might allow one or both sides to revoke it. A voidable contract
may initially have legal force but end up being null and void. If a victim does not act, it is still
seen as genuine.

The majority of sales agreements have contingency clauses, which render them voidable.

A party must exercise its right to enforce a voidable agreement in order to make it
enforceable. Legally, the contract can be carried out or not by either party. Usually, only one
party is required to abide by the terms.

4. Express Contract

When the terms of a contract are explicitly agreed upon by the parties (either by verbal or
written communication) at the time the agreement is formed, the agreement is said to be
express. Express contract is the consequence of an explicit promise. When a commitment is
made or accepted verbally, it is referred to as an express promise.

2. Implicit Contract

When a proposal or acceptance is made without the use of explicit language, an implicit
contract is created. Implied promises are made when a proposition or acceptance of a promise
is made in a manner other than verbally. Implicit contracts can be deduced from the facts of
the situation and the behavior of the parties.

An implied contract exists, for instance, when A drinks milk in a hotel.

10
3Quasi-contract.

A quasi-contract is a contract made possible by the law. Neither party intends to enter into a
contract as part of the quasi-contract. Rights and obligations in a quasi-contract are created by
the law, not by an agreement.

For instance, the addressee is required to return any letters that are sent to the incorrect
recipient.

Contract classification based on performance

Contracts can be divided into two categories: unilateral contracts and bilateral contracts,
depending on the extent of performance.

1. Unilateral Contract

One-sided contract is another name for it. In a unilateral contract, only one party is required
to perform their duty at the moment the contract is formed, with the other party having
already done so at that time or earlier.

For instance, A rides a shared vehicle to Mount Road. As soon as A was thrown onto Mount
Road, a contract was created. When that happens, auto guy has already fulfilled his
obligation; only A is left to do so.

2. Bilateral Contract

When both parties' obligations under the contract remain unfulfilled at the moment the
contract is formed, it is considered to be a bilateral contract.

In this kind of agreement, one party makes a commitment in return for another party's pledge.

For instance, 0 agrees to pay Rs. 30 and A promises to sew a shirt. In this case, A guarantees
to sew the blouse, while 0 guarantees to pay. As a result, each party is a promisee and a
promisor.

Contracts are categorized based on how they are executed.

Contracts are divided into two categories: executed contracts and executory contracts,
depending on how they were put into action.

1. Executed Contract
Under the Indian Contract Act, 1872, a valid contract is formed when certain essential
elements are present, including offer and acceptance, lawful consideration, capacity to
contract, free consent, lawful object, and certainty of terms. Once these elements are fulfilled,

11
the contract becomes binding on the parties involved.If you're referring to the execution of a
contract, it typically refers to the process of signing or otherwise expressing agreement to the
terms and conditions outlined in the contract. The execution of a contract can be done in
several ways, such as

Express Agreement: The parties involved explicitly express their consent to the terms of the
contract through written or oral communication. For example, signing a written agreement or
explicitly agreeing to the terms in a recorded conversation.

Implied Agreement: The parties' actions or conduct may imply their agreement to the terms
of the contract. For instance, if a person starts performing the obligations outlined in the
contract, it implies their acceptance of the contract.

Electronic Means: In recent years, electronic contracts and electronic signatures have gained
recognition. The Information Technology Act, 2000, provides legal recognition to electronic
contracts and electronic signatures, subject to certain conditions.

Once a contract is executed, the parties are bound by its terms and are expected to fulfill their
respective obligations as per the agreement. It is essential to review the specific terms and
conditions of the contract and consult with a legal professional to ensure a proper
understanding of the rights and obligations under the executed contract.

2. Executory Contract

A contract that is entirely unperformed or that still requires action from both contracting
parties is said to be executory. A contract may occasionally be partially executed and
partially executory.

Other Contract

More contract kinds exist in addition to the ones mentioned above. Such a contract type is a
contingent contract.

1. Contingent Contract
A contingent contract is a type of agreement where the performance or fulfillment of certain
terms and conditions is dependent on the occurrence of a specific event. In other words, the
contract's execution and obligations are contingent upon the happening or non-happening of a
future event. The event upon which the contract depends is typically uncertain or outside the
control of the parties involved. It could be the outcome of a future event, such as the success
of a particular project, the occurrence of a natural disaster, or the performance of a specific

12
action by one of the parties. The contingency may also involve the absence of an event, such
as the non-occurrence of a certain condition. Contingent contracts are commonly used in
various areas, including business, insurance, and real estate. For example, in the business
context, a company may enter into a contingent contract with a salesperson, where the
salesperson's commission is contingent upon achieving a specific sales target. If the target is
met, the commission is paid; otherwise, no commission is due. It's important to note that the
terms and conditions of contingent contracts must be clearly specified in the agreement to
avoid any ambiguity or disputes. The occurrence or non-occurrence of the specified event
should be objectively determinable. Additionally, the contract should outline the rights and
obligations of each party in case the contingency is met or not met.

It's always advisable to consult with a legal professional to ensure that contingent contracts
are properly drafted and comply with applicable laws and regulations in your jurisdiction.

The crucial components of a Contingent Contract are:

It is an uncertain event, it is a collateral to the contract, and the contingency determines

whether the contract will be performed.

The most typical types of contingent contracts are insurance, indemnification, and guarantee
contracts.

13
1.6 SUMMARY

The Contract Act refers to a set of laws that regulate contracts in a particular jurisdiction. In
general, a contract is an agreement between two or more parties that creates enforceable
obligations. The Contract Act sets out the rules for forming and enforcing contracts, and it
provides remedies in case of breach of contract. A contract is defined as "An agreement
which is enforceable by law" in Section 2(h) of the Indian Contract Act, 1872. The agreement
between two or more parties to do or refrain from doing what they decided upon in exchange
for something, that is, a consideration, is what is known as a contract. Section 2 (a) When one
person signifies to another his willingness to do or to abstain from doing anything, with a
view to obtaining the assent of that other to such act or abstinence, he is said to make a
proposal. A legally enforceable agreement between two or more parties is referred to as a
contract. It is crucial to have a contract in place since it outlines the parameters of the
agreement between the parties. Valid Contracts-Contracts that are valid have all the necessary
components and can be enforced in court. Void Contract- Consult a specialist in that field if
you have any issues regarding contracts. Void agreements are not binding. Voidable contracts
seem to be valid since they possess the criteria for enforcement. Express contract is the
consequence of an explicit promise. When a commitment is made or accepted verbally, it is
referred to as an express promise. When a proposal or acceptance is made without the use of
explicit language, an implicit contract is created. A quasi-contract is a contract made possible
by the law. Neither party intends to enter into a contract as part of the quasi-contract. One-
sided contract is another name for it. In a unilateral contract, only one party is required to
perform their duty at the moment the contract is formed, with the other party having already
done so at that time or earlier. When both parties' obligations under the contract remain
unfulfilled at the moment the contract is formed, it is considered to be a bilateral contract.
Under the Indian Contract Act, 1872, a valid contract is formed when certain essential
elements are present, including offer and acceptance, lawful consideration, capacity to
contract, free consent, lawful object, and certainty of terms. A contract that is entirely
unperformed or that still requires action from both contracting parties is said to be executory.
A contract may occasionally be partially executed and partially executory.A contingent
contract is a type of agreement where the performance or fulfillment of certain terms and
conditions is dependent on the occurrence of a specific event. The crucial components of a
Contingent Contract are:
It is an uncertain event, it is a collateral to the contract, and the contingency determines
whether the contract will be performed.
The most typical types of contingent contracts are insurance, indemnification, and guarantee
contracts.

14
1.6 KEYWORD

 Jurisdiction: Jurisdiction refers to the legal authority or power that a particular court
or governing body has to interpret and apply the law, make decisions, and enforce
laws within a specific geographic area or over a certain subject matter. It determines
which court or governing body has the right to hear a particular case and make
decisions regarding legal matters.
 Consent: Consent refers to the voluntary and informed agreement or permission
given by an individual to engage in a particular action or activity. It is an important
concept that plays a fundamental role in personal relationships, interactions, and
various domains such as law, medicine, research, and sexual encounters.
 Occurrence: The term "occurrence" refers to an event, incident, or happening that
takes place or takes effect. It describes something that takes place or exists in a
specific time or context. An occurrence can be a wide range of things, such as a
natural phenomenon, a social event, a scientific observation, a personal experience, or
any other type of incident or situation. The word "occurrence" is often used to discuss
and analyze various events or phenomena in different fields, including science,
literature, sociology, and everyday conversation.
 Contingent: the term "contingent" refers to something that could have been different
or might not have existed. It is contrasted with "necessary," which refers to something
that could not have been otherwise. For example, it could be argued that human
existence is contingent because it relies on various factors and circumstances.
 Implicit: Implicit meaning refers to the underlying or hidden message conveyed
through indirect or subtle ways, often requiring interpretation or inference. It refers to
the deeper significance or connotation beyond the literal or explicit content of a text,
conversation, or piece of art.

1.7 LEARNING ACTIVITY

1. Define Express contract.

___________________________________________________________________________
___________________________________________________________________________

15
 2. State the principles of contract.
___________________________________________________________________________
___________________________________________________________________________

1.8 UNIT END QUESTIONS

A. Descriptive Questions
Short Questions
 Define Proposal and acceptance?
 Identify the need of contract ?
 Elaborate about the nature of Executed contract.
 What are the criteria for valid contract?
 What do u mean by promisor?
 What do u mean by certainity?

Long Questions

 Define Consideration? Explain the need of consideration in contract.

 Identify and discuss kinds of contract?
 Elaborate about the nature of Contigent contract.
 Describe characteristics of contract.
 Explain capacity of the parties.

B. Multiple Choice Questions

1. The phrase "consideration" simply denotes "something in exchange," or "QUID
_________ QUO."
a. PRO
b. LOW
c. HIGH
d. SLOW
2. A contract requires mutual agreement between the __________ involved.
a. Governors
b. Vendors
c. Parties
d. Lawyers

16
 3. The consent of the parties must be free from duress, undue influence, fraud,
or__________________.
a. Representation
b. Misrepresentation
c. Origination
d. Influential
4. ___________ is what each contracting party forgoes or agrees to do in exchange
for entering into the agreement.
a. Consideration
b. Consent
c. Offer
d. Acceptance
5. A ____________ is only enforceable if each of these requirements is met
a. consideration
b. Offer
c. Proposal
d. contract

Answers

1-a, 2-c, 3-b. 4-a, 5-d

1.9 REFERENCES

Readings:
1. M.C. Kuchhal, and Vivek Kuchhal, Business Law, Vikas Publishing House, New Delhi.
2. Ravinder Kumar, Legal Aspects of Business, Cengage Learning
3. SN Maheshwari and SK Maheshwari, Business Law, National Publishing House, New
Delhi.
4. Aggarwal S K, Business Law, Galgotia Publishers Company, New Delhi.
AkhileshwarPathak, Legal Aspects of Business, McGraw Hill Education.

17
UNIT - 2: ESSENTIAL OF A VALID CONTRACT
STRUCTURE
2.0 Learning Objectives
2.1 Introduction
2.2 Offer and acceptance
2.3 Consideration
2.4 Contractual Capacity
2.5 Free consent
2.6 Legality of objects
2.7 Void agreements
2.8 Summary
2.9 Keywords
2.10 Learning Activity
2.11 Unit End Questions
2.12 References

2.0 LEARNING OBJECTIVES

After studying this unit, you will be able to:

 Describe importance of acceptance.

 Identify scope of offer
 State the need and importance of free consent
 List the functions of void agreements

18
2.1 INTRODUCTION

In the realm of business and legal transactions, the foundation of any contractual
agreement lies in the intricate dance between two fundamental concepts: offer and
acceptance. From the simplest of agreements to complex commercial deals, the process of
offer and acceptance forms the basis upon which parties bind themselves to rights and
obligations.

In this introduction, we will explore the essence of offer and acceptance, their
significance in the formation of contracts, and the key elements that make them legally
enforceable. Whether you are a budding entrepreneur, a legal enthusiast, or simply
curious about the intricacies of contractual relationships, this discussion will shed light on
the fundamental principles that underpin the world of agreements.

An offer serves as the initial expression of willingness to enter into a legally binding
agreement. It outlines the terms and conditions that the offering party proposes to the
other party, signaling their intention to create a contractual relationship. However, it is
essential to distinguish an offer from mere invitations to treat, which are preliminary
communications inviting negotiations rather than a definitive proposal.
Acceptance is the unequivocal and unconditional agreement by the offeree to the terms of
the offer. It indicates the willingness to be bound by the proposed terms and marks the
moment when a contract comes into existence. Acceptance must mirror the terms of the
offer and be communicated in the prescribed manner, establishing mutual assent between
the parties involved.
For a contract to be valid, there must be a "meeting of the minds" between the offeror and
the offeree. This means that both parties must understand and agree upon the essential
terms of the contract. A genuine and voluntary consensus must be reached regarding the
subject matter, price, quantity, and other vital aspects of the agreement.

19
2.2 OFFER AND ACCEPTANCE

An offer refers to a promise that one party makes in exchange for another party's
performance. In other words, it is an invitation to enter into a contract on certain terms. It can
be expressed in many different ways, from a short and simple oral statement to a long and
detailed written statement. However, you have to make sure that your offer is clearly
communicated and reasonable in order to convince the other party that you are actually
making an offer.
What Is an Offer?
In order to create a valid contract, one party must make an offer, another party must accept
the offer, and consideration must be exchanged. The one who makes the offer is known as the
“offerer,” while the person who receives the offer is called the “offeree.” Although you can
make an offer with just a single-sentence verbal statement, you and the other party will
generally benefit from a detailed written description of the offer and its terms.
An offer refers to a promise that is dependent on a certain act, promise, or forbearance given
in exchange for the initial promise. It is a demonstration of your willingness to enter into an
agreement and an invitation to the other party to conclude the agreement by expressing
assent.
Determining whether a party has actually made an offer is a common challenge in a contract
case. As a rule of thumb, the offer must be definite and reasonable enough for the receiving
party to believe that it is indeed an offer. If your offer includes terms such as quantity, price,
quality, and place and time of delivery, the court may find that you have indeed made an
offer.
A simple price quote is generally not regarded as an offer. While an advertisement may be
considered an invitation to an offer, is not an actual offer. However, if advertisement
promises to give out an award, it may constitute an offer. For contracts involving real estate,
the sale of goods for $500 or more, or transactions taking longer than a year to complete, a
verbal offer is not enforceable against the offerer. Such contracts must be written in order to
be enforceable.
Acceptance, Rejection, and Termination of an Offer
If the one receiving the offer decides to accept it and make a partial payment, the offerer may
be bound to the terms and conditions of the offer. Once the offerer takes the payment, an
agreement is struck. He or she will then be legally obligated to perform his or her part of the
contract. If the offerer fails to fulfill his or her contractual duties, the offeree is entitled to
take legal action.
If the offer is rejected, it is regarded as terminated. If changes are made to the terms of the
offer, the initial offer will be terminated and replaced with a new offer. The new offer is

20
referred to as a counteroffer. If it is indicated that an offer will end within a certain
timeframe, the receiving party cannot accept it after the expiration date. An offer may be
automatically terminated after a reasonable amount of time.
Essentials of a Valid Offer
There are two types of offer: general offer and specific offer. A general offer is made to a
group of people, while a specific offer is specifically made to one person. In order for an
offer to be considered valid, it must meet the following requirements:
Must be communicated
Must be made with the purpose of obtaining the assent of the other party
Must be capable of establishing legal relation, meaning that consideration must be a two-way
process
Must contain language that is certain and no element of uncertainty
In addition, an offer may be express or implied. An express offer is made in the presence of
conversation, while an implied offer is communicated in the absence of conversation. In a
situation where the offerer says that silence means consent, the offer is considered invalid.
Acceptance of an offer must be communicated.
Several types of offers exist as well. One is called the express offer, which is handled through
words written on paper or stated orally. If made orally, the express offer can be made by
telephone or face-to-face. Another type of offer is one that is implied. When conveying the
desire to make an offer through signs or acting, this may be taken as an implied offer.
However, if one of the parties observes silence in the transaction, an implied offer isn't
considered valid.
An offeror can also make a specific offer, which is made to a specific group or individual and
must be accepted by the specific group to which it was made.
A general offer is not made to any specific individual or group, but rather made to the public.
As long as the person making the offer abides by its terms, they can respond to a general
offer. For example, John puts an advertisement in the local newspaper that anyone who finds
his missing dog will receive a reward of $100. Brittany reads the offer in the newspaper and
finds the lost dog. After she finds the dog, she calls John to let him know that she found his
dog. Brittany would be entitled to receive the $100 award as John advertised in the
newspaper.

A cross offer involves both parties in which one makes an offer to the other that is similar to
what the other would have offered without realizing it. For example, Jason emails Amber to
purchase her vehicle for $500, while at the same time, Amber sends an email to Jason with a
price of $500 for her vehicle. This cross-offer situation requires one party to accept the

21
other's offer. The final type of offer is a called an open or standing offer. This offer is
continuous until it has been accepted.
Identifying a Valid offer
In order for an offer to be valid, it must be clearly communicated, giving the offeree a chance
to accept or reject it. Clear communication can include actions, oral communication, or in
writing.
An offer that is legitimate can be made to a team, a single person, or the general public. Valid
offers are definite in their substance. It must be distinguishable from an invitation to treat in
order to be valid.
Classification of a Valid Offer
Offers can also be grouped into two primary categories:
Bilateral Unilateral
The differences between the two classifications are especially important in the revocation,
communication of acceptance, and advertisements related to offers. A bilateral offer has two
sides, involving two parties who are contractually obligated to perform according to the terms
and are equally committed. Bilateral offers may start as invitations to treat as they can lead to
further negotiations and bargaining. Most offers are bilateral, and many of the common
contract laws apply to them. Some of these rules include the way acceptance can be
communicated to the person making the offer and how advertisements can be used.
A unilateral offer is made by one person in exchange for the performance of a specific act.
Acceptance is described in Section 2(b) of the Indian Contract Act of 1872 as occurring
"when the person to whom the proposition has been made shows his assent thereto. As a
result, when accepted, the proposition becomes a promise.
According to the definition, acceptance occurs when the offeree accepts the proposition
without conditions from the giver. An offer like this becomes a promise if it is accepted.
The suggestion also becomes irrevocable once it is accepted and becomes a proposal. An
offer does not constitute a promise, but once it is accepted, a promise is made. A promise is
also unrevocable because it binds parties to legal responsibilities.
An offer may be withdrawn prior to acceptance. However, once acceptance has been made
known, it cannot be changed or withdrawn.
Regulations for Valid Acceptance
1) Only the person to whom the offer was made can accept it.
A specific offer or proposition can only be accepted by the person to whom it was made. No
third party can accept the offer without the offeree's knowledge.

22
2) It must be unqualified and absolute.
Acceptance must be unwavering and unqualified. Conditional acceptance is not allowed
because that would be a counteroffer, and a counteroffer voids the original offer.
Here is an illustration. B is offered 2000 in exchange for A's bicycle. B declares that he will
agree if A will sell it for 1500. This will be considered a counteroffer rather than the offer
being accepted.
Additionally, it has to be expressed in a particular way. If there isn't a defined way to convey
something, it must be done so in a reasonable and usual way, or as it would be in the course
of everyday business. Additionally, implied acceptance may be demonstrated through
actions, actions, etc.
The law, however, prohibits accepting silence as a sign of acceptance. Therefore, the offeror
cannot state that the offer will be regarded accepted if no response is received.
3) The acceptance must be disclosed.
A proposal must be acknowledged to the promisor in order for it to be accepted and turn into
a contract. If no specific form has been defined, the communication must take place in any
form that would normally be used in business.
Furthermore, the offeree must be aware that an offer has been made if he accepts the
proposition. He cannot express acceptance if he is unaware of the offer.
Therefore, when A offers to sell B certain products, and B accepts all the terms. He drafts a
letter of acceptance but neglects to post it. As a result, the acceptance is invalid because it
was not transmitted.
4] It has to be set to the recommended mode.
The offer must be accepted in the way that is specified by the offeror. If no such method is
specified, it must be in a practical way that would be used in daily operations.
However, if the offeror does not object after the offer has been accepted in a different way, it
will be assumed that he has approved of that acceptance.
A thus makes B an offer to buy his farm for ten lakhs. He requests that B reply via postal
mail. B sends A an email approving his offer. A can now ask B to send the response in the
designated manner. However, if A does not, it indicates that he has agreed to B's acceptance
and that a promise has been made.

23
5] Implied Acknowledgement
According to Section 8 of the Indian Contract Act of 1872, acceptance by the promisee's
conduct or actions is acceptable. Therefore, implicit acceptance is acceptable if a person does
certain acts that indicate that he has accepted the offer. A's actions will therefore suggest that
he has accepted the offer if he agrees to buy 100 bales of hay from B for 1000/- and B sends
over the items.
Regulations for Acceptance
The terms of the offer must be in line with the unconditional acceptance.
The acceptance must be expressed verbally or nonverbally.
When given in a specific way, the acceptance is communicated.
Acceptance is never contingent.
The contract cannot be produced by mental assent or unspoken acceptance.
There must be a way to accept things.
Regarding acceptance, there must be a temporal component.
The acceptance must be finished.
An offer must be made by one party to another in order to create a contract. An unequivocal
acceptance of the offer is required.

Once it can be legally enforced, the agreement is considered to be a contract. Without a

contract, an offer or acceptance is notExists a Spectrum of Contract Acceptances?
There are two types of acceptances on bills: general acceptances and qualified acceptances.
When it is unconditional and unqualified, widespread acceptance is seen as absolute and
general.
General acceptance is consent that is granted without qualification. A general acceptance is
when someone agrees to a request to pay a specific sum in full and without any conditions. In
the absence of additional payment arrangements, this is a typical form of acceptance.
To be considered a general rule, an acceptance must be general. When a condition is added to
acceptance of an instrument, acceptance is qualified.
Three varieties of acceptance exist
Embrace approval
Implied approval
Conditional approval

24
All of these ways of acceptance are legitimate, but it is advisable to sign a formal contract to
ensure that there is a legally binding provision in the event of a lawsuit. Acceptance
ultimately expresses and establishes consent to the contract.
Variety Of Acceptance: Conditional approval
A qualified acceptance is another name for a conditional acceptance. This occurs when a
recipient of an offer informs the source of the offer that he or she will accept the offer if the
terms and conditions are modified or if a specific event occurs. When you are unsure about
how your situation will play out or if there are factors that could change your existing
standing, a conditional acceptance can be helpful.
Additionally, it serves as a counteroffer. Before a contract may be made, the initial offerer
must accept a counteroffer. It establishes standards for the offer's acceptance. There are five
main categories of conditional acceptance:
capable of placing
capable of amounting
capable of time
acceptance only by some
Acceptance of periodic payments
A bill is qualified to place when the drawee exclusively pays it at that particular location. If
the drawee accepts the exchange and accepts the payment for only a portion of what is owing,
the transaction is qualified to amount. When the drawee accepts the trade and settles the bill
at a period other than that specified in the contract, it is qualified to time.
When some drawees agree to the swap but not all, this is known as acceptance by some only.
When the drawee agrees to pay the debt in installments, the drawee accepts installment
payments. At the beginning of the agreement, this must be made extremely explicit.

The agreement must make the condition of acceptance very plain and immediately
understandable. In order for the bearer of the instrument to comprehend what was accepted,
the drawee must make any qualifications they choose to make during acceptance based on
certain criteria.

25
2.3 CONSIDERATION

A contract's foundation is made up of consideration. An agreement without consideration is

ineligible to be considered a binding contract. The Indian Contract Act, 19872 specifies that
consideration is something done at the promisee's request. The promisor has the right to
request something of the promisee or anybody else in exchange for consideration. The
contract's consideration is understood to be this act of abstention.
previous thought
Prior to entering into any agreement, the promisee must have provided past consideration—
something they had already done (or refrained from doing). For instance, in June, Mr. A gave
Mr. B transportation. Mr. B and Mr. A agreed to exchange Rs. 1,000 in July in exchange for
the service. The act was committed prior to the promise to pay, hence it serves as past
consideration. It is frequently referred to as moral concern. Let's examine how.
Consider that you are on the road when you see an accident. You assist the victim and
transport them to the hospital. A few days later, the person offers Rs—2,000 as thanks for
your assistance and any costs you may have paid. We will take your assistance as previous
consideration.
current or completed thought
When you engage into a contract and concurrently give the promisor the consideration, this is
what is meant. Any action of this nature is always taken (or not taken) in response to a
contract with a third party.
Consider purchasing fruits from a seller and paying him right away for them. As signed or
present consideration, this payment is considered.
Future or executory consideration
When the promiseor, promisee, or both postpone the deed, it is considered future
contemplation. It denotes that the parties' responsibilities have not yet been fulfilled.
Consider buying a car from a showroom that will be delivered the following week. You
consent to paying the vendor once the car is delivered. This suggests that you and the seller
have a contract in place with a future consideration.
The consideration is valid for a number of reasons. Let's delve into the specifics.
A consideration must satisfy the conditions listed below in order to be valid:
The consideration must advance in accordance with the promisor's wishes.
This suggests that only when the promisor has asked for it will the consideration be
considered valid. In essence, any voluntary action does not qualify as legitimate
compensation. For instance, a person is not required to compensate you if you discover their

26
lost wallet and then ask for a compensation. You offered assistance voluntarily; the person
did not ask for it.
The promisee may transfer the consideration to anyone else.
The promisee is not required to provide the consideration. From any other person, it might
move. As long as you are a party to the contract, you may file a lawsuit even if you were not
given consideration.
The benefit must be legal.
The contract is invalid because the consideration was unlawful. According to the Act,
consideration is considered illegal if it violates any other laws, causes harm to a person or his
property, or is immoral.
The proposal must be plausible and real.
A meaningful thought cannot be an impossible act. Anything determined and accepted as
consideration must be possible to be carried out. Illegality might also be physically
impossible. The consideration also can't be ambiguous.
The factor might not be sufficient.
According to Indian law, adequate compensation is not required. It is up to the parties to
negotiate. A party's poor negotiating skills do not render the contract null and void.
The choice must be made with both partners' free permission, though. For instance, you
decide to sell your 1,000 rupee collection of books for 200 rupees. Legally, you cannot
afterwards say that this was not given enough thought.
What role does consideration play in contracts?
Any contract made without consideration is void, according to the Indian Contract Act of
1872. It is crucial because it places responsibility on both parties to keep their word. If it is
absent, the burden on the parties could not be sufficient to assure the contract's fulfillment.
There are, however, several exclusions to this rule. These are the groups they fall under.
Can contracts exist without any form of payment?
There are some situations when you can enter into lawful contracts without consideration,
even though the Act considers it to be obligatory. As follows:
when a decision is made out of genuine love and compassion. Closely related parties are
involved in this. The arrangement must be put in writing.
when someone offers unpaid services to another person's advantage. The first requirement is
that the deed must be performed out of gratitude and not for one's own gain. Second, the
promisee must be compensated by the promisor. A written or oral agreement may be made.

27
A pledge to repay a debt that has run out of time may also be unreliable. However, a written
agreement is required.
whether it is an agreement to establish an agency.
If a whole present is promised, then.
To sum up, consideration is a crucial component of a legal contract. Without it, the agreement
is null and void and cannot be carried out. It is crucial to remember that in order to enter into
a contract, a valid consideration must be provided, regardless of how adequate it may be. It
might have happened in the past, present, or in the future.

2.4 CONTRACTUAL CAPACITY

Introduction:
Contractual capacity is an essential element in contract law that determines the legal
competence of parties to enter into a binding agreement. It refers to the ability of individuals
to understand the terms of a contract, comprehend its consequences, and possess the legal
authority to be bound by its terms. This essay will explore the concept of contractual capacity
under the Contract Act, highlighting its significance, the requirements for capacity, and the
consequences of lacking capacity.

I. Significance of Contractual Capacity:

Contractual capacity plays a crucial role in ensuring the fairness and integrity of contractual
relationships. It protects parties from being coerced or deceived into agreements that they
may not fully understand or be capable of fulfilling. By establishing the legal competence of
individuals, contractual capacity promotes the principle of freedom of contract while
maintaining a balance between protecting vulnerable parties and preserving the enforceability
of agreements.

II. Requirements for Contractual Capacity:

A. Age:
One of the fundamental factors determining contractual capacity is age. Minors, individuals
below the age of majority, are generally considered to have limited capacity. While minors
can enter into contracts, their ability to do so is subject to certain restrictions. Contracts
entered into by minors are usually voidable at their option, providing them with protection
against potentially unfavorable or exploitative agreements.

B. Mental Capacity:

28
Mental capacity refers to an individual's ability to understand the nature and consequences of
their actions. Contract law recognizes that individuals with mental impairments may lack the
necessary capacity to form a binding contract. If a person is suffering from a mental illness or
is incapable of understanding the terms of the contract, their capacity may be deemed
impaired, rendering the contract voidable.

C. Intoxication:
Intoxication from alcohol or drugs can impair an individual's judgment and decision-making
abilities. In contract law, contracts entered into while under the influence of intoxicants may
be voidable if the party can prove that they lacked the capacity to understand the terms of the
agreement at the time of its formation.

III. Consequences of Lacking Capacity:

A. Void vs. Voidable Contracts:
Contracts entered into by parties lacking contractual capacity may be classified as either void
or voidable. Void contracts are considered to have no legal effect from the beginning, as if
they never existed. Voidable contracts, on the other hand, remain valid until the affected
party exercises their right to avoid the contract. Minors, individuals with mental impairments,
or those under the influence of intoxication can typically void contracts they entered into due
to their limited capacity.

B. Restitution and Protection:

When a contract is voided due to a lack of capacity, the parties are generally restored to their
pre-contractual positions. This means that any benefits exchanged under the contract must be
returned, and the parties should be placed in the position they were in before the contract was
formed. These restitutionary measures aim to protect parties who lacked capacity and prevent
unjust enrichment or exploitation.

IV. Exceptions to the Capacity Rule:

While contractual capacity is generally required for a valid contract, there are certain
exceptions to this rule. For example, contracts for necessaries, such as food, shelter, and
clothing, are enforceable against minors, even if they lack capacity. Additionally, contracts
entered into by individuals acting as agents or representatives of others may be binding,
regardless of their personal capacity.

29
Conclusion:
Contractual capacity is a vital aspect of contract law, safeguarding the interests of individuals
entering into agreements. By recognizing the limitations of certain parties and providing
remedies for their protection, contractual capacity ensures the fairness and integrity of
contractual relationships. Understanding the requirements for capacity and the consequences
of lacking it is crucial for both legal practitioners and individuals entering into contracts, as it
allows them to navigate contractual obligations with confidence and clarity.

2.5 FREE CONSENT

What Is Free Consent?

The Indian Contract Act defines consent as "it is when two or more persons agree upon the
same thing and in the same sense" under Section 14.
Example "A" consents to let "B" buy his home. A wants to sell one of his three homes in
Haridwar. B believes he is purchasing his home in Delhi. In this instance, 'A' and 'B' have not
agreed upon the same thing in the same sense. Therefore, there is no consent nor a subsequent
contract.
1. Coercion (Section 15)
According to Section 15 of the Indian Contract Act of 1872, coercion is defined as either
performing or threatening to perform an act that is prohibited by the Indian Penal Code (45 of
1860) or the illegal holding or threatening to hold onto any property, to the detriment of any
person, with the purpose of pressuring someone to sign a contract.
Coercion is the act of compelling someone to sign a document. When threats or intimidation
are used to coerce a party into giving consent, i.e. when it is not voluntary consent.
In order to increase the credibility of a threat, coercion may really involve causing physical
and mental suffering. The threatened person may then cooperate or obey under threat of
further injury.
Example: 'A' went for a walk; 'B' comes up to him with a stranger, draws his gun, and
demands that 'A' hand up all of his goods. The agreement of 'A' was coerced in this situation.
Effect
The result is that the contract becomes voidable due to coercion. It suggests that the contract
may be voidable at the whim of the person whose agreement was not given freely. Therefore,
it is up to the aggrieved party to decide whether to uphold the agreement or dissolve it.
Coercion-inducing methods
Threatening to engage in any behavior that is illegal under Indian law.

30
the act of holding property against its will or even threatening to hold it in order to force
someone to sign a contract.
IPC prohibited behavior
The court must determine if the alleged act of coercion is an offense in a civil action because
the word act is prohibited under the Indian penal code.
Threatening to bring a false charm with the intention of pressuring someone into doing
something is equivalent to blackmail or coercion. In the case of Ranganayakamma v. Alwar
Sett, the widow was unable to remove her husband's body until she gave her approval for the
adoption. According to the court, her consent was pressured and was not given voluntarily. It
is obvious that using coercion involves doing something illegal or threatening to do
something illegal.
Illegal Possession of Property
If consent is obtained by the illegal enclosing of property or the threat of doing so, coercion is
said to have taken place.
The father's installment payment at that point was made under duress with the ultimate
intention of preventing the property from being sold, since the legislature annexed the
property with the express purpose of admitting the child's due fine. Under the land detention
class, intimidation is when the government refuses to release a temporary worker's
installment until he gives up his demand for higher rates.
the onus of proof
The side defending the coercion has the burden of evidence. He is under further pressure to
provide evidence. This is thus because a threat cannot come from sheer possibility or anxiety.
A person must demonstrate that there was a danger that was illegal and that it forced him to
enter into a contract that he otherwise would not have in order to establish coercion.
There are some situations when you can enter into lawful contracts without consideration,
even though the Act considers it to be obligatory. As follows:
when a decision is made out of genuine love and compassion. Closely related parties are
involved in this. The arrangement must be put in writing.
when someone offers unpaid services to another person's advantage. The first requirement is
that the deed must be performed out of gratitude and not for one's own gain. Second, the
promisee must be compensated by the promisor. A written or oral agreement may be made.
A pledge to repay a debt that has run out of time may also be unreliable. However, a written
agreement is required.
whether it is an agreement to establish an agency.
If a whole present is promised, then.

31
In summary
A legitimate contract must have consideration as a necessary component. Without it, the
agreement is null and void and cannot be carried out. It is crucial to remember that in order to
enter into a contract, a valid consideration must be provided, regardless of how adequate it
may be. It might have happened in the past, present, or in the future.
Section 16: Undue Influence
In accordance with Section 16 of the Indian Contract Act of 1872, an influence is deemed to
be undue influence when: One of the parties to the contract is in a position of trust and
unfairly dominates the other party.
Such a person takes unfair advantage of the other by taking advantage of his superior
position.
Undue influence is characterized by three factors: the relationship, trust, and authority.
Careful consideration of the contract's provisions constitutes unfair persuasion.
where there is a fiduciary relationship between two parties
A trust-based partnership is referred to as a fiduciary relationship. A person expects not to be
betrayed when they place their trust and faith in another. if the other person violates the faith
and confidence placed in him and wields improper influence.
Examples of fiduciary relationships are those between a lawyer and a client, a trustee and a
trust, a spiritual guide and a follower, a doctor and a patient, a parent and a kid, a husband
and wife, a master and a servant, and a guardian and ward.
In other terms, we can argue that undue influence happens when one party has the ability to
affect the choice of another party to the transaction.
Example
After being promised good results by his teacher, "A" agreed to sell his gold ring to "B" for
Rs 200. Here, A's consent was coerced by his teacher; it was not freely provided.
Effect
An agreement is voidable at the discretion of the person whose consent was obtained by
undue influence. Any such agreement may be annulled. The contract can only be avoided or
canceled by one of the parties. The third party has no control over this right.

32
The Burden of proof
Two things need to be considered if the plaintiff wishes to file a lawsuit to void a contract
that was signed under duress. The Indian Evidence Act of 1872 and the Indian Contract Act
of 1872 include the law's provisions. According to the law, a plaintiff must establish two
elements in order to show that he was under undue influence
The defendant must not only have a dominant position, but also exercise it.
It claims that merely demonstrating the prospect of undue influence on the part of the
dominant party is insufficient for the plaintiff to succeed. There must be proof that someone
influenced the plaintiff by using their power. For the plaintiff to escape a contract, the
possibility of the same is insufficient.
(Section 17) Fraud
The Indian Contract Act's Section 17 defines fraud as any of the following actions taken by a
contracting party, its accomplice, or its agent with the intent to deceive or convince the other
party or its agent to enter into the contract:
Any act or omission that the law deems fraudulent, including the effective concealing of a
fact by someone who knows about it, a promise made without any intent to keep it, and any
other act suitable to deceive.
Fraud does not exist when there is simple silence on information that could influence
someone's desire to sign a contract unless the situation is such that, in light of those
circumstances, The individual who remains silent must talk unless doing so would be
equivalent to speaking quickly.
Effect
The contract that resulted from fraud is void.
The party who was mislead may terminate the agreement.
The party is liable for recouping the damages as a result of the fraudulent agreement.
Evidence and Burden of Proof's
In the vast majority of cases, fraud cannot be established with actual, tangible evidence. By
definition, it is concealed in its movement. It makes sense that fraud must have been
committed if the evidence provided points to wrongdoing. Circumstantial proof is typically
the only method for dealing with fraud-related issues. The goals of justice would regularly, if
not always, be defeated if this weren't allowed. The only person to be held accountable for
complicity in fraud is a willful perpetrator. Subject to the legislation of the party who was
defrauded, any actual damages caused by fraud may be recovered as a remedy for restitution,
even if they were not reasonably foreseeable. Contributory negligence would not lessen the
severity of the sanctions. Making false statements (Section 18)

33
According to the Indian Contract's Section 18, misrepresentation is distorting the truth.
Misrepresentation is when false information is made public, leading to the assumption that
the other side will make a deal and lose it. However, the guilty party's information was given
genuinely believing it to be true. It is claimed that misrepresentation has been made.
First off, it is misleading when a liar claims that there is no evidence to support their claim.
Second, there has been a violation of a duty that has resulted in bias on the part of one party
or the other. Last but not least, a person made a mistake as a result of the act or information
being misrepresented. Effect
If the party who has suffered because of the deception when entering into a contract has the
option to do so, the contract may be rescinded under the Specific Relief Act of 1963 within a
reasonable amount of time.
Misrepresentation types
Two different kinds of misrepresentation exist:
Unscrupulous Misrepresentation
When a misrepresentation occurs owing to negligence and the absence of any justifiable
basis, it is seen as negligent;
Only when the representative owed the representee a duty to handle carefully is negligent
misrepresentation recognized;
A person would only be held accountable if specifically, he had disregarded the responsibility
mentioned;
Even when there is no fiduciary connection, the two parties are nonetheless accountable to
one another.
innocent fabrication
It is referred to be an innocent misrepresentation if the assertion is supported by solid
evidence, there is no inaccuracy, and there is no ulterior motivation.
When someone makes an innocent misstatement when entering into a contract, they have the
right to cancel the agreement but are not entitled to compensation for their losses.
Contracts are not voidable unless there are valid reasons to do so. To establish this reality,
innocence in misrepresentation would be sufficient.
The Burden of proof
By demonstrating that "He had reasonable grounds to believe that the evidence portrayed
were valid during the time the contract was made," the defendant must prove that the
misrepresentation was not committed fraudulently in order to avoid bearing the burden of
proof. The burden of proof is disproportionately on the party making the false statement.

34
Inaccuracy (Section 20)
Under Indian Contract Law, there are two types of errors: errors of fact and errors of law.
Error of Fact
A mistake of fact occurs when one or both parties to the contract have erroneously
understood a phrase that is crucial to understanding the agreement. This might happen due to
confusion, carelessness, or other factors. A mistake is never intentional; it is an unintentional
oversight.
These errors may be unilateral or bilateral.
Bilateral Mistake (Section 21)
A bilateral mistake is one in which both parties to a contract are affected by a factual error
that is crucial to the agreement.
Mutual or common mistakes are other names for bilateral blunders. The idea of consent does
not apply when all parties agree to something and do so in the same way. The agreement is
void because there isn't any consent.
Example "A" agrees to buy a cow from "B," but it turns out that the cow was already dead
when the agreement was made, even though neither side was aware of this. The agreement is
regarded as void.
Unilateral mistake(Section 22)
When only one party to the contract makes a mistake, it is called a unilateral error. In this
situation, the contract is not null and void. According to Section 22 of the Act, a mistake
made by one party would not render the contract null and void. Therefore, even if only one
side made a mistake, the agreement is still enforceable.
Example "A" and "B" engage into a contract for the purchase of a horse, which "A" believes
to be a racing horse. 'A' does not concur with 'B'. A horse is not actually a racing horse. A
cannot terminate the agreement.
Error of law
The error could be caused by an error in Indian law or a mistake in a foreign legislation. The
general rule is that ignorance of the law is not an adequate defense if the error relates to
Indian laws. This implies that neither party can assert that the other is ignorant of the law.
According to the Contract Act, no party may seek redress on the grounds that they were not
aware of Indian law. An improper reading of any legal provisions will likewise fall under this
category.
However, disregard for international law is not treated similarly. Foreign law provides some
wiggle room because the parties are not required to understand it. Therefore, a mistake under
foreign law is actually treated as a factual error under the Indian Contract Act.

35
Conclusion
An agreement must have free consent in order to be legally binding. Free consent is crucial,
and this cannot be emphasized enough. The Party must freely and gladly consent. It is
essential that you agree to the contract voluntarily and without being under any duress. The
freedom of the parties' assent is crucial since it could jeopardize the contract's legality. The
aggrieved party has the right to void the agreement if the consent was gained or caused by
coercion, undue influence, fraud, misrepresentation, or error.

2.6 LEGALITY OF OBEJCTS

According to Section 23 of The Indian Contract Act, a contract must have a lawful object and
consideration in order to be valid. The object of a contract is the reason why the parties enter
into it. The transfer of the agreed-upon consideration from one party to the other results from
the accomplishment of the aim. Let's examine the legal object contract law's criteria for
defining what constitutes a lawful object and consideration.
Legal Purpose and Legal Consideration
According to contract law, the consideration and the goal of a contract are both regarded legal
unless: They are expressly prohibited by law.
They are inherently dishonest.
The goal of the legislation is defeated due to the nature of the object and the consideration.
They involve harm or injury to a person or persons as well as to property.
are viewed as immoral by the legal system.
contravene public policy.
prohibited by law
A contract is void if it contains an illegal object or a forbidden consideration. The term
"illegal consideration of the object" refers to illegal, criminal conduct. When establishing the
legality of an act, the relevant authority's laws and regulations are also taken into account.
These laws and norms are not applicable, though, if they conflict with the law.
A contract is void if it contains a prohibited by law term, however all void contracts may not
be illegal.
Deceptive in Nature
Contracts that have deceptive terms for their object or consideration are null and invalid.

36
Example: A signs a contract with B promising to reimburse B if he steals money from C. The
contract is void since this is a fake object.
thwarts the intent of the law
The agreement will be ruled invalid if it was made with the intent to violate any legal
requirements. If: The purpose of the contract is to carry out an illegal act, it is void.
The contract's intended outcome is illegal either openly or subtly.
Without violating the clauses, it is impossible to complete the contract.
Example: A and B enter into a contract in which B agrees not to file a lawsuit on A's behalf if
A robs B of his home. The terms of the IPC legislation are violated by this transaction.
involves harm or injury to a person or piece of property.
There cannot be any property damage or harm to third parties as a result of the contract's
purpose.
Examples include writing a book on someone's life without getting their permission.
the destruction of a building.
violation of permissions.
Copyrights are being violated.
A and B sign a contract whereby if A damages a city landmark, A will pay B a certain
amount of money. This agreement lacks a legitimate concern, a legitimate goal, and it is not
deemed to be legal.
illegal in moral terms
The contract shall not be regarded as void if its purpose and/or consideration are judged
immoral. Immoral acts go against the reasonable and proper standards of social behavior or
individual conduct.
Example: A lends money to B on the understanding that B will wed A after divorcing C. A
cannot file a lawsuit against B to recoup the funds if B does not divorce C. The fundamental
tenet of this agreement is immoral, hence it will be regarded as invalid.
Contrary to Public Policy
In terms of company law, an item must not violate public policy in order to be considered
lawful.
Public policy exists to maintain and defend the overall welfare of the community, not to
restrict any individual's rights. Here are some examples of contracts that are seen to be
against public policy:
An agreement is null and void if it is made with a party from a nation with which India does
not have friendly relations.

37
Restricting legal action: A contract that forbids a party from taking legal action is deemed
invalid.
Champerty and Maintenance: In a maintenance agreement, a party pledges to support a legal
action in which he has no personal stake. Champerty is when one party promises to support
another in court in exchange for a cut of the awarded damages or settlement.
an agreement to engage in public office trafficking
pacts designed to establish monopolies
a consent to broker a union as payment.
an arrangement that interferes with legal processes and encourages corrupt behavior on the
part of state or judicial personnel.

2.7 VOID AGREEMENTS

"An agreement that is not enforceable by law" is the definition of a void agreement according
to the Indian Contract Act of 1872. Additionally, void agreements can occur frequently; some
of these instances were detailed in earlier articles. However, the contract contains some
clauses that are explicitly stated to be void.
1] Agreement in Restraint of Marriage
Any contract that prevents a major (adult) from getting married is null and void. Minors are
not covered by this. But under the contract laws, an adult's agreement to forego marriage in
exchange for some benefit is expressly void.
Therefore, if A agrees that he won't get married unless B gives him $50,000, that agreement
is null and void.
2] Agreement in Restraint of Trade
An agreement that prohibits someone from engaging in business of any kind, practicing law,
or engaging in any type of trade is clearly void. Such a contract tramples on a person's
constitutional rights.
There are a few instances where this rule does not apply. If a person sells his business and
goodwill along with it, the buyer may request that the seller refrain from operating the same
type of business within the city borders.
Accordingly, the agreement to restrain the seller's trade will be effective as long as the buyer
or his successor operates that firm.
In a similar vein, if a departing partner is permitted to engage into such a trade restraint
agreement with the partnership business. An agreement between partners not to run a
competitive firm while a partnership is still in existence is also a legal contract.

38
One thing to keep in mind with regard to the aforementioned agreements is that their
conditions must be acceptable. Such reasonable terms are to be assessed in light of each
particular scenario and context and are not prescribed by the act.
Let's look at the situation where doctor A hires B as his assistant for three years. B pledges
not to practice medicine elsewhere for the next three years.
Despite being a trade constraint, this agreement is legitimate.
But suppose A, a lawyer, sells B, along with the goodwill, his law firm. A also consents to
refrain from practicing law for the next 20 years anywhere in the state. The clauses are totally
illogical, hence this is not a legal contract.
Agreement to Stay Legal Actions (number three)
An agreement that explicitly forbids one party from exercising his legal rights under a
contract through the judicial system, arbitration, etc. is clearly void.
There are, however, some exceptions, such as when the agreement specifies that any disputes
between the parties shall be resolved by arbitration and that the judgment rendered in such
arbitration will be final and a valid contract.
Additionally, such an agreement is legitimate if the parties concur that any issue they may
have now or in the future will be resolved by arbitration. Such a contract, however, must be
in writing.
An Agreement with Uncertain Meaning
Uncertainty in the meaning of an agreement renders it void and prevents it from being legally
binding. Obviously, a contract cannot be executed if its fundamental meaning cannot be
guaranteed. However, the contract is deemed genuine if the doubt can be eliminated.
Say, for instance, that A consents to sell 100 kg of fruit to B. Due to the omission of the
fruit's species, this contract is null and invalid.
However, the agreement would be enforceable if A exclusively sold oranges because the
meaning would be clear.
5] Wagering Contract
An agreement to wager is void according to the Indian Contract Act. A wager's foundation is
that it is based on whether an uncertain occurrence will occur or not. Depending on the
outcome of such an unknown event, each side would either profit or lose money in this
situation.
The following are the components of a wagering agreement. The agreement will be null and
void if all conditions are satisfied.
must include a commitment to pay money or the equivalent in money.
is dependent on the occurrence or absence of a specific event

39
It must be an uncertain event.
It is beyond the control of any party.
At the time the agreement is made, there must be a shared desire to wager.
The only interest that should exist between the parties is the wager's stake.
The following contracts are not regarded as wagering agreements: insurance contracts, share
market transactions, athletic competition transactions, and competitions involving skills.

2.8 SUMMARY

In the realm of business and legal transactions, the foundation of any contractual agreement
lies in the intricate dance between two fundamental concepts: offer and acceptance. From the
simplest of agreements to complex commercial deals, the process of offer and acceptance
forms the basis upon which parties bind themselves to rights and obligations. An offer serves
as the initial expression of willingness to enter into a legally binding agreement. It outlines
the terms and conditions that the offering party proposes to the other party, signaling their
intention to create a contractual relationship. However, it is essential to distinguish an offer
from mere invitations to treat, which are preliminary communications inviting negotiations
rather than a definitive proposal. An offer refers to a promise that one party makes in
exchange for another party's performance. In other words, it is an invitation to enter into a
contract on certain terms. It can be expressed in many different ways, from a short and simple
oral statement to a long and detailed written statement. However, you have to make sure that
your offer is clearly communicated and reasonable in order to convince the other party that
you are actually making an offer. An offer refers to a promise that is dependent on a certain
act, promise, or forbearance given in exchange for the initial promise. It is a demonstration of
your willingness to enter into an agreement and an invitation to the other party to conclude
the agreement by expressing assent. A contract's foundation is made up of consideration. An
agreement without consideration is ineligible to be considered a binding contract. The Indian
Contract Act, 19872 specifies that consideration is something done at the promisee's request.
The promisor has the right to request something of the promisee or anybody else in exchange
for consideration. The contract's consideration is understood to be this act of abstention.
consideration is a crucial component of a legal contract. Without it, the agreement is null and
void and cannot be carried out. It is crucial to remember that in order to enter into a contract,
a valid consideration must be provided, regardless of how adequate it may be. It might have
happened in the past, present, or in the future. Contractual capacity is an essential element in

40
contract law that determines the legal competence of parties to enter into a binding
agreement. It refers to the ability of individuals to understand the terms of a contract,
comprehend its consequences, and possess the legal authority to be bound by its terms. This
essay will explore the concept of contractual capacity under the Contract Act, highlighting its
significance, the requirements for capacity, and the consequences of lacking capacity.
Contractual capacity is a vital aspect of contract law, safeguarding the interests of individuals
entering into agreements. By recognizing the limitations of certain parties and providing
remedies for their protection, contractual capacity ensures the fairness and integrity of
contractual relationships. Understanding the requirements for capacity and the consequences
of lacking it is crucial for both legal practitioners and individuals entering into contracts, as it
allows them to navigate contractual obligations with confidence and clarity. The Indian
Contract Act defines consent as "it is when two or more persons agree upon the same thing
and in the same sense" under Section 14. Example "A" consents to let "B" buy his home. A
wants to sell one of his three homes in Haridwar. B believes he is purchasing his home in
Delhi. In this instance, 'A' and 'B' have not agreed upon the same thing in the same sense.
Therefore, there is no consent nor a subsequent contract. An agreement must have free
consent in order to be legally binding. Free consent is crucial, and this cannot be emphasized
enough. According to Section 23 of The Indian Contract Act, a contract must have a lawful
object and consideration in order to be valid. The object of a contract is the reason why the
parties enter into it. "An agreement that is not enforceable by law" is the definition of a void
agreement according to the Indian Contract Act of 1872. Additionally, void agreements can
occur frequently; some of these instances were detailed in earlier articles. However, the
contract contains some clauses that are explicitly stated to be void. The following contracts
are not regarded as wagering agreements: insurance contracts, share market transactions,
athletic competition transactions, and competitions involving skills.

41
2.9 KEYWORDS

 Wagering: The term "wagering" refers to the act of placing a bet or making a gamble
on the outcome of an event or situation, typically involving the potential for winning
or losing money. Wagering is commonly associated with activities such as sports
betting, casino games, poker, and other forms of gambling where individuals or
groups place bets on the likelihood of certain outcomes. It involves staking something
of value, usually money, on the result of the event, with the expectation of winning
additional value or losing the initial stake. Wagering can be done in various settings,
including physical establishments such as casinos or through online platforms.

 Subsequent: The term "subsequent" refers to something that occurs or happens after
a particular event or point in time. It implies a sequence or order in which events or
actions unfold. When we talk about something being "subsequent," it means it follows
or comes after something else in a chronological or logical progression.

 Remedies: The term "remedies" refers to measures or actions taken to address or

solve a problem, correct a situation, or provide relief from a particular issue or harm.
Remedies can be legal, medical, or general solutions applied to mitigate or resolve a
problem.

 Contractual: contractual meaning is derived from the language and terms used in the
contract itself. The interpretation of contractual terms is based on the objective intent
of the parties involved and is determined by applying principles of contract law,
including the plain meaning rule, the principle of good faith and fair dealing, and any
applicable statutory or case law. Contractual meaning can be significant in resolving
disputes, clarifying obligations, and determining the rights and liabilities of the parties
involved in a contract. Courts may be called upon to interpret contractual terms and
determine their legal effect when disputes arise between contracting parties.

 Clause: In the realm of legal contracts, a clause refers to a specific provision or

section within a contract that outlines the rights, obligations, terms, or conditions
agreed upon by the parties involved. Clauses are used to define and regulate various

42
 aspects of the contract, such as payment terms, termination conditions, warranties,
and dispute resolution procedures.

2.10 LEARNING ACTIVITY

 Define free consent.

___________________________________________________________________________
___________________________________________________________________________

 State the principles of consideration.

___________________________________________________________________________
___________________________________________________________________________

2.11 UNIT END QUESTIONS

A. Descriptive Questions

Short Questions:

1. Define offer?
2. Explain what is consideration?
3. Describe briefly about acceptance?
4. What do you understand by majority age?
5. What is a free consent?

Long Questions:

1. What is a consideration? Explain the various features of consideration?

2. Describe the contractual capacity.
3. What are the components of acceptance?
4. Describe about the contractual capacity?
5. Explain void contracts?

B. Multiple Choice Questions

1. ___________ is the act of compelling someone to sign a document.

a. Coercion

b. Conclusion

43
c. Compellent

d. Extraction

2. A person must demonstrate that there was a danger that was _________ and that it forced
him to enter into a contract

a. legal

b. illegal

c. major

d. minor

3. The Indian Contract Act's __________ defines fraud as any of the following actions taken
by a contracting party
a. Section 19
b. Section 15
c. Section 17
d. Section 28
4. __________ does not exist when there is simple silence on information

a. Fraud
b. Misrepresentation
c. Coercion
d. Influence
5. Mutual or common mistakes are other names for ____________ blunders.

a. unilateral

b. multilateral

c. lateral

d. bilateral

Answers:

1-a,2-b,3-c,4-a,5-d.

2.12 REFERENCES

Readings:

44
1. M.C. Kuchhal, and Vivek Kuchhal, Business Law, Vikas Publishing House, New Delhi.
2. Ravinder Kumar, Legal Aspects of Business, Cengage Learning
3. SN Maheshwari and SK Maheshwari, Business Law, National Publishing House, New
Delhi.
4. Aggarwal S K, Business Law, Galgotia Publishers Company, New Delhi.
AkhileshwarPathak, Legal Aspects of Business, McGraw Hill Education.

UNIT – 3: DISCHARGE OF CONTRACT

STRUCTURE
3.1 Learning
3.2 Objectives
3.3 Introduction
3.4 Modes of discharge
3.5 Breach and remedies against breach of contract
3.6 Summary
3.7 Keywords
3.8 Learning Activity
3.9 Unit End Questions
3.10 References

3.0 LEARNING

After studying this unit, you will be able to:

 Define breach of contract

 Describe Performance of Contracts
 State Breach Of Contract.

45
3.1 INTRODUCTION

According to Section 2(a) of the Indian Contract Act of 1872, the word "offer" has been
defined. A person makes an offer when they declare their willingness to perform an act or
refrain from performing one in exchange for the consent of the person they are making the
offer to.

When used literally, the word "performance" refers to how something is done. In a legal
sense, "performance" refers to the accomplishment of the responsibilities that one party has
towards the other under the terms of the agreement they have agreed into. For instance,
suppose that A and B sign a contract that requires A to deliver a book to B in exchange for
payment of the consideration of 500 rupees. Here, B gives A 500 rupees and, in accordance
with the terms of the contract, A gives him the book.

The Contract Act's Section 37 discusses performance. There are two sorts of performance,
which are as follows:

 Actual performance: Actual performance of the contract is defined as the actual

discharge of the duty or responsibility that a party has agreed to fulfil and the absence
of any additional work that the party is obligated to carry out in accordance with the
promise. He is alleged to have fulfilled the pledge in actuality.
 Attempted performance: When the performance is eventually due, an attempt is made.
The promisee prevents the promisor from fulfilling his commitment or carrying out
his responsibility, hence he is unable to do so. The attempted performance of a
promise refers to the circumstance when the promisor truly meant to fulfil his
commitment or carry out his duty but was impeded by an unforeseen infirmity.

Attempting to perform is also referred to as Tender. There are two sorts of tenders:

 Tendering of goods and services: When goods are offered for acceptance in line with
the provisions of the contract, the discharge of the contract to deliver goods and
services is complete. If the products and services so offered are rejected, the offeror is
released from responsibility and is required to take the rejected goods and services
back.
 Tender of money: When a debtor offers the creditor money that is due, but the debtor
declines to accept it, this is referred to as a money tender. The need to repay the debt

46
 does not end for the debtor. The discharge of debt cannot, therefore, ever follow a
money tender.

Tender of performance

Sections 37 to 39 deal explicitly with how the parties to the contract will carry out their
obligations under the contract. The parties to a contract are required by Section 37 of the
Indian Contract Act, 1872, to either perform or propose to perform the commitments that
have been agreed upon under the contract. According to Section 2(b) of the Indian Contract
Act, a promise is a proposal put forth by the offeror and accepted by the offeree. Therefore,
each party is required by law to carry out the obligations that have been established by the
terms of the contract. Unless the provisions of the contract specifically exempt or waive the
person's execution of the duty.

If there is no indication to the contrary from the provisions of the contract, the promises made
by the parties to the agreement after their death bind their representatives. As an illustration,
consider a contract between two parties, A and B, in which A promises to provide to B some
things in exchange for B paying A a specific sum of money on a specific day. However, if A
passes away before the contract is finished, his representative will still be held to the promise
he made. As a result, they have a duty to deliver the items to B, and B has a duty to pay the
stipulated sum to A's representation.

However, if the pledge is made in reference to a person's unique talents and qualities, his
representative will not be held to the commitment he made. For instance, consider the
scenario where A pledged to commission a painting for B on a specific day at a specific cost.
A passes away before the contract is fulfilled. The promise made by A is not binding on its
representatives, and neither A nor B may compel the representative to specifically carry out
the commitment.

The parties' obligation to perform

The duties that the parties to a contract are required to uphold are known as the obligations in
the contract. In a contract, the parties often trade items that have monetary value in the eyes
of the law. The chosen item for exchange may be a good, a service, cash, etc. Contractual
duties can be seen, for instance, in the sale of a product like a vehicle. The obligation to pay
for the car is on one side, while the obligation to transfer ownership is on the other. The terms
that govern the obligations, such as the mode and sum of payment and the timing or location
of delivery, will be specified in the contract.

47
There was a contract between the plaintiff and the defendant for the sale of the property in M.
Kamalakannnan v. M. Manikanndan. In this case, the plaintiff withheld a portion of the
money that was specified in the contract in order to compel the defendant to fulfil some of its
obligations, such as giving up the property that was occupied by the tenants and giving the
plaintiff the vacant property. The defence made the claim that failure to pay a portion of the
consideration led to a breach of the contract's provisions.

In Geo-Group Communications INC v. IOL Broadband Ltd, the parties to the contract signed
an agreement and adhered to its provisions to the fullest extent possible, eliminating the need
for additional execution of the documents. The agreement was referred to as one of the initial
and provisional draughts created for debate and consideration only. When the contract was
contested in court, the judge ruled that it was legal and gave the claimant the right to redress.

Tender submission is equivalent to making a proposal.

When a lender responds to an invitation, it is seen as a proposal to contract rather than the
actual contract. The tender in M/S Great Eastern Energy vs. M/S Jain Irrigation Systems Ltd.
included a four-month validity period. The court ruled that no acceptance may be made
following the end of the tender period. Accepting the tender after the end of its validity time
and the tenderer's inability to perform did not constitute an improper forfeiture of the security
deposit amount.

Representatives of the promisor are bound by promises.

According to the caveat attached to Section 37 of the Act, in the event that the promisors pass
away, their representatives would be held to their promises unless a contrary intention was
clear from the terms of the contract. According to Basanti Bai v. Sri Prafulla Kumar Routrai,
if a person passes away without leaving a legal heir, the person who gains ownership of the
contract's subject matter through the deceased party would be responsible for carrying out the
promise on his or her behalf. The Cuttack High Court, however, ruled that because the
plaintiff was unable to establish the validity of the supposed agreement, she was not entitled
to the benefits of the above-mentioned legal concept in the current case.

provision for renewal

The clause for renewal is the clause that specifies how the initial contract terms will be
extended or restarted.

48
The provisions of the contract in Hardesh Ores Pvt. Ltd v. M/S. Hede and Company included
a renewal clause. According to the provisions of the contract, the party with the power to
extend the agreement did so. The other party, however, declined to agree to the revised
conditions brought on by renewal. The Supreme Court ruled that the best course of action in
such a situation for the party who is authorised by the contract's terms to renew the terms of
the contract is to have the renewal proclaimed and enforced by a court of law or to have the
court declare the contract's renewal.

Tender of performance

An obligation under the contract should be offered by the offeror to the offeree. The "tender
of performance" refers to the made offer. The promisee has the option to accept the offer. If
the promisee decides not to accept the offer, neither the offeror nor the promisee will lose
their rights under the terms of the agreement if the contract's conditions are not performed.
Therefore, it is a well-established principle that if the tender of performance is not accepted,
the promisor will no longer be obligated to uphold the conditions of the contract, and he has
the right to sue the other party if they don't. A tender of performance is equivalent to
performance, as stated in Section 38 of the Contract Act. Every performance proposal must
meet the following prerequisites:

 Section 38(1) requires that the offer be unconditional;

 Section 38(2): In order to give the party a fair amount of time to verify that the person
making the offer to him is competent to enter into a contract, the offer must be made
at the correct time and place;
 Section 38(3) states that the offeror must give the offeree a reasonable amount of time
to verify that the goods being offered to him are the same ones to which the offeror is
contractually obligated if the offer is to deliver goods to the offeree.

Tender of performance should be unconditional

A tender must be unconditional, according to paragraph 1 of Section 38, which means that it
cannot be accompanied by any clauses, provisions, or conditions that are either prior to or
following the tender. The court in this decision explained the circumstances in which the
tender becomes conditional in Haji Abdul Rehman Haji Mahomed. The court held that a
tender becomes conditional when it deviates from the provisions of the contract that were
initially drafted and accepted by the parties. It is unreasonable to require a party to accept the
amended or altered conditions of the contract that were not initially agreed upon by the

49
parties, therefore making it essential. A might, for instance, offer to pay B a given amount of
money in exchange for B agreeing to sell him a specific quantity of items. It is invalid since it
is a conditional tender. The same would apply if A had submitted a single check for two
products, only one of which was due right away and the other wasn't due for some time.
Given that the check was one and indivisible, it could either be accepted in full or not at all. It
was decided that the promisee had the right to reject the check.

The performance tender must be submitted at the appropriate time and location.

According to Section 38(2) of the Act, the tender of performance must be made at a time,
place, and under conditions that give the recipient of the offer a reasonable opportunity to
confirm that the offeror is capable of performing the obligations he has agreed to under the
terms of the contract.

According to the court's ruling in P.L.S.A.R.S., Sabapathi Chetty (Deceased) v. Krishna

Aiyar, the parties to the tender of performance typically determine the time and location. At
the time and location specified in the contract, the tender of performance must be made. The
promisor has no further duties if the performance is made within the designated time and
location.

In Startup v. Macdonald, the defendant made a ten-ton purchase of linseed oil that was to be
delivered to the plaintiff within the final 14 days of the month of March. On the fourteenth
day, at night, the plaintiff tendered the defendant. However, the defendant refused to accept
the tender, alleging the lateness of the offer. In this case, the court determined that the
defendant should be held accountable for violating the terms of the contract, and it rejected
his argument that the tender was accepted late because it was made before midnight even
though it was made recently.

The plaintiff and defendant in Afovos Shipping Co. v. R Pagnan made an international
agreement. The contract's terms stated that the amount that served as its consideration had to
be received by the 14th day of the month, but the defendant renounced the agreement earlier
than that. According to the court, the defendant should have postponed the contract's
repudiation until the 14th of the month.

In accordance with Section 138(2) of the Act, the tender must be submitted in a manner that
gives the other party a reasonable opportunity to verify that the person submitting the tender
is able and willing to perform all of the contract's requirements. According to Section 138(3)

50
of the Act, the commodities that are the subject of a tender must match those that are listed in
the tender's description in order for the tender to be valid.

In Dixon v. Clark, the court ruled that the debtor's obligation to repay the debt is not in any
way absolved by the fact that payment was offered but rejected.

The principle of "old standing" that was established in the aforementioned case was upheld in
Vidya Vati v. Devi Das. In order to regain vacant possession of his property, the debtor was
required to repay his loan, and his tender was also turned down. The court decided that the
debtor was not exempt from paying before regaining possession, nonetheless.

Who must carry out contracts?

The Contract Act's provisions for contract performance are found in Section 40. The Section
states that any promise made in a contract must fundamentally be fulfilled by the promisor
himself, and no other person may fulfil the promise on his behalf, if it is clear from the
wording of the contract that this was the parties' intention. In all other contracts, if the
promisor is not present to carry out the promise, another competent person may do so in his
place provided that the terms of those other contracts do not suggest any comparable
intention. Suppose, for instance, that A offers B a particular amount of money. A may
directly pay B the money or could delegate payment to another person on A's behalf. If, as in
the scenario above, A passes away without designating the one who can make the payment on
his behalf. Then, either they must choose someone else to act as his representative or they
must make the payment on his behalf.

Conclusion

According to Section 2(a) of the Indian Contract Act of 1872, the word "offer" has been
defined. An offer is an indication of a person's willingness to perform an act or refrain from
performing one with the goal of winning the approval of the person to whom the offer is
made.

When used literally, the word "performance" refers to how something is done. Performance
refers, in a legal sense, to the parties' satisfaction or completion of their obligations to the
other party under the terms of the contract they engaged into. For instance, if A and B agree
into a contract, its terms stipulate that A must provide B a book in exchange for paying the
consideration of 500 rupees. Here, B gives A 500 rupees and, in accordance with the terms of

51
the contract, A returns the money by giving B the book. The Contract Act's Section 37
discusses performance.

3.2 MODES OF DISCHARGE OF CONTRACT

The Indian Contract Act, 1872 provides various modes of discharge of a contract. A contract
can be discharged by performance, agreement, breach, frustration, operation of law, or
impossibility of performance. In this response, I will outline each mode of discharge in detail.
In contract law, the concept of discharge refers to the termination or conclusion of a
contractual agreement. It signifies the point at which the rights and obligations created by the
contract come to an end. The Indian Contract Act, 1872 provides several modes of
discharging a contract, each with its own set of requirements and consequences.

Discharge can occur through various means, including performance, agreement, breach,
frustration, operation of law, or impossibility of performance. These modes provide
mechanisms for parties to either fulfill their contractual obligations, alter or terminate the
contract, or be excused from further performance due to certain unforeseen circumstances.
Performance is the most straightforward mode of discharge, where both parties fulfill their
respective obligations as agreed upon in the contract. Discharge by agreement occurs when
the parties mutually consent to terminate or modify the contract, while discharge by breach
arises when one party fails to perform their obligations, leading to a violation of the contract.
Frustration comes into play when an unforeseen event renders the contract impossible to
perform or significantly alters the nature of the obligations. This allows the parties to be
relieved from further performance. Discharge by operation of law occurs through certain
legal principles or events, such as death, insolvency, merger, limitation periods, or the
illegality of performance. Furthermore, discharge by impossibility arises when the
performance of the contract becomes objectively impossible due to unforeseen circumstances
or events beyond the control of the parties. Understanding the different modes of discharge is
crucial for parties to know when and how a contract may come to an end, as well as the rights
and remedies available in such situations. It is important to note that the specific requirements
and consequences of discharge may vary depending on the terms of the contract, applicable
laws, and the jurisdiction in which the contract is governed.By comprehending the modes of
discharge, individuals and businesses can effectively manage their contractual relationships,
resolve disputes, and navigate the legal implications associated with the termination of
contractual obligations

52
Discharge by Performance:
A contract is said to be discharged by performance when the parties fulfill their respective
obligations under the contract. It can be achieved through actual performance or tender of
performance. Actual performance occurs when both parties fulfill their obligations as agreed
upon in the contract. Tender of performance takes place when one party offers to perform
their obligations, but the other party refuses to accept it.

Discharge by Agreement:
A contract can be discharged by agreement when both parties mutually agree to terminate or
alter the contract's terms. This can be done by way of novation, rescission, or alteration.
Novation occurs when a new contract is substituted for the existing one, with the consent of
all parties involved. Rescission happens when the parties agree to cancel the contract,
restoring them to their pre-contractual positions. Alteration takes place when the parties agree
to modify the terms of the contract.

Discharge by Breach:
A contract can be discharged by breach when one party fails to perform their obligations as
specified in the contract. The innocent party may choose to terminate the contract and claim
damages for the losses suffered due to the breach. Alternatively, the innocent party can keep
the contract alive and sue for specific performance if the breach is of a serious nature.

Discharge by Frustration:
Frustration occurs when an unforeseen event renders the contract impossible to perform or
significantly changes the nature of the contractual obligations. In such cases, the contract is
automatically discharged, and the parties are excused from further performance. The doctrine
of frustration applies when the event is beyond the control of the parties and is not due to any
fault or negligence on their part.

Discharge by Operation of Law:

Certain events or legal principles can discharge a contract by operation of law. These include:

a. Death or Insolvency: If a party to a personal service contract dies or becomes insolvent, the
contract is automatically discharged.

53
b. Merger: When a contract is absorbed or incorporated into a subsequent contract between
the same parties, the original contract is discharged.

c. Limitation Period: If the right to sue on a contract becomes time-barred under the law of
limitation, the contract is discharged.

d. Illegality: If the performance of a contract becomes illegal due to changes in law or public
policy, the contract is discharged.

Discharge by Impossibility of Performance:

A contract can be discharged if the performance becomes impossible due to unforeseen
circumstances or an event beyond the control of the parties. Impossibility may arise due to
the destruction of the subject matter, the death or incapacity of a party essential for
performance, or the outbreak of war or natural disasters.

It's important to note that this is a general overview of the modes of discharge under the
Indian Contract Act, 1872. For more specific and detailed information, it is advisable to
consult the Act itself or seek legal advice.

3.3 BREACH AND REMEDIES AGAINST BREACH OF CONTRACT

Breach of Contract

When one of the contracting parties fails to uphold the terms of the agreement, there has been
a breach of the agreement. Even when the contract is not being performed as agreed, there is
still a breach. However, such a breach of contract has several remedies that give the injured
party compensation for damages. This article discusses contract breaches, including their
varieties and available remedies.

When one party doesn't carry out their obligations under a contractual contract, there has
been a breach of the agreement. A contract can be broken in a number of ways, including by
failing to provide the promised goods or services, by providing goods or services that fall
short of expectations, or by failing to make the agreed-upon payments for the promised
products or services.

54
  The non-breaching party normally has to demonstrate the following in order to prove
a contract breach:
1. There was a binding agreement between the parties.
2. The non-breaching party fulfilled its contractual responsibilities.
3. The breaching party did not fulfil its contractual responsibilities.
4. Damages were incurred by the non-breaching party as a result of the breach.

It is crucial to remember that not all contract violations are created equal. While some
breaches may be small and have little or no effect on the contract's performance, others could
be so serious that they invalidate the entire agreement. The exact terms of the contract and the
circumstances surrounding the violation will determine the seriousness of the breach and the
potential remedies.

Types of Contract Breach

There are two categories of breach of contract. Its varieties are as follows:

Anticipatory

The anticipatory breach is one caused by one of the parties. The violation will take place
either explicitly or by behaviour. Eventually, the offending party will hint that a breach is
about to occur. If there is compensation and the injured party waits for the actual breach, the
loss will not be sufficient.

In the Hochster v. De La Tour case, it was determined that if the contract is rejected before
the performance, a claim for damages may be filed. De la Tour consents to hire Hochster as
their for a period of three months in accordance with that. Hochster is hired by De La Tour in
April with a start date of June. But by May, De La Tour cancels the appointment. Suing them
is Hochster. De La Tour contends that Hochster is bound by the agreement and that he must
be prepared to fulfil up until the three months are due. However, Lord Campbell CJ rejects
the claim and grants Hochster the damages.

Actual

A breach occurs when a party refuses to uphold the terms of the agreement. One of the parties
breaches the agreement if they fail to finish their performance by the deadline or withdraw
before it is due.

For three months, Poussard was scheduled to perform opera in London. When she became ill,
the production team found a replacement. When she returned, the producers declined to take

55
her back. As it was determined that the producers' defence was valid, the court sided with
them. She was not given the damages by the court. She is obligated to perform starting on
day one, according to the contract. The producers rejected her contract since she didn't follow
the terms of the agreement.

Remedies for the Breach of Contract:

Suit for Rescission

If one side breaks the agreement, the other party is not required to follow it. If the displeased
party terminates the agreement, it is void. The party that was wronged may claim damages.
The disgruntled party typically cancels the contract and then files a lawsuit for damages. The
purpose of this lawsuit is to recover the breach's damages.

Suit for Injunction

An injunction is an order from the court imposing a restraint. The court has the authority to
stop someone from performing a certain act. The harmed party may initiate a lawsuit for an
injunction if the defendant does an unlawful act. This might be either transitory or long-term.

Suit for Specific Performance

A sanction that the court grants to both parties to compel compliance with the contract. One
of the most popular suits is this one. The harmed party won't get enough relief in the form of
financial recompense.

Suit for Quantum Meruit

For contracts, "quantum merit" refers to the fair market worth of the services. When someone
is hired but the contract isn't complete or can't be carried out, the employer has the right to
sue the employee for the value of the services provided as well as any enhancements that
were made. According to the law, the employer must give the worker the compensation he or
she deserves for the services rendered. The employee cannot break the terms of the contract
and file a claim for the quantum meruit if he is bound by an express contract for a specified
sum.

Suit for Damages

56
Damages that result naturally from a violation are referred to as general damages or ordinary
damages. In the lawsuit, the party that was wronged must establish both the losses and their
dollar value.

Liquidated Damages and Penalty: Some contracts cover the subject of breaking, including its
repercussions and penalty. If such a contract is broken, the party responsible for the breach
must pay the other party the agreed-upon sum. It is fair remuneration, and it shouldn't go
beyond the limit specified in the contract. There shouldn't be any barriers in the way of the
parties making the liquidated damages provisions.

Special Damages: In order to receive special damages, the party who was wronged must
demonstrate a special loss.

Exemplary or Punitive Damages: This claim seeks compensation for emotional or mental
distress, which may have been caused by the violation. In most cases, the court is responsible
for such damages.

Nominal Damages: A remedy for the breach is offered, whereas there wasn't one in the
actual. It offers a limited solution and is more technical than necessary.

3.4 SUMMARY

According to Section 2(a) of the Indian Contract Act of 1872, the word "offer" has been
defined. A person makes an offer when they declare their willingness to perform an act or
refrain from performing one in exchange for the consent of the person they are making the
offer to. When used literally, the word "performance" refers to how something is done. In a
legal sense, "performance" refers to the accomplishment of the responsibilities that one party
has towards the other under the terms of the agreement they have agreed into. Sections 37 to
39 deal explicitly with how the parties to the contract will carry out their obligations under
the contract. The promise made by A is not binding on its representatives, and neither A nor
B may compel the representative to specifically carry out the commitment. The duties that the
parties to a contract are required to uphold are known as the obligations in the contract. In a
contract, the parties often trade items that have monetary value in the eyes of the law.
According to the caveat attached to Section 37 of the Act, in the event that the promisors pass
away, their representatives would be held to their promises unless a contrary intention was
clear from the terms of the contract. An obligation under the contract should be offered by the

57
offeror to the offeree. The "tender of performance" refers to the made offer. A tender must be
unconditional, according to paragraph 1 of Section 38, which means that it cannot be
accompanied by any clauses, provisions, or conditions that are either prior to or following the
tender. The Contract Act's provisions for contract performance are found in Section 40. The
Section states that any promise made in a contract must fundamentally be fulfilled by the
promisor himself, and no other person may fulfil the promise on his behalf, if it is clear from
the wording of the contract that this was the parties' intention. According to Section 2(a) of
the Indian Contract Act of 1872, the word "offer" has been defined. An offer is an indication
of a person's willingness to perform an act or refrain from performing one with the goal of
winning the approval of the person to whom the offer is made. The Indian Contract Act, 1872
provides various modes of discharge of a contract. A contract can be discharged by
performance, agreement, breach, frustration, operation of law, or impossibility of
performance. In contract law, the concept of discharge refers to the termination or conclusion
of a contractual agreement. It signifies the point at which the rights and obligations created by
the contract come to an end. The Indian Contract Act, 1872 provides several modes of
discharging a contract, each with its own set of requirements and consequences. When one of
the contracting parties fails to uphold the terms of the agreement, there has been a breach of
the agreement. Even when the contract is not being performed as agreed, there is still a
breach. The anticipatory breach is one caused by one of the parties. The violation will take
place either explicitly or by behaviour. A breach occurs when a party refuses to uphold the
terms of the agreement. One of the parties breaches the agreement if they fail to finish their
performance by the deadline or withdraw before it is due. If one side breaks the agreement,
the other party is not required to follow it. If the displeased party terminates the agreement, it
is void. The party that was wronged may claim damages. The disgruntled party typically
cancels the contract and then files a lawsuit for damages. The purpose of this lawsuit is to
recover the breach's damages. A sanction that the court grants to both parties to compel
compliance with the contract. One of the most popular suits is this one. The harmed party
won't get enough relief in the form of financial recompense. Damages that result naturally
from a violation are referred to as general damages or ordinary damages. In the lawsuit, the
party that was wronged must establish both the losses and their dollar value.

58
3.5 KEYWORD

 Compliance: Compliance refers to the act of conforming to rules, regulations,

guidelines, or standards set by an authority, organization, or legal framework. It
involves following specific requirements or directives to ensure adherence to
established protocols, laws, policies, or industry best practices. Compliance can be
mandatory or voluntary, depending on the context.
 Anticipatory: The term "anticipatory" refers to something that is characterized by
anticipation or expectation. It typically involves predicting or preparing for future
events, outcomes, or possibilities based on present knowledge or experiences.
 Sanction: "sanction" refers to an official action taken by a government, organization,
or authority to impose a penalty or enforce a rule or policy. Sanctions are often used
as a form of punishment or deterrent against undesirable behavior or to influence a
change in behavior. For example, economic sanctions may be imposed on a country to
restrict trade and financial transactions as a response to its actions or policies.
 Explicit: Explicit meaning refers to the direct and obvious interpretation or message
conveyed by a piece of communication, such as a text, speech, or artwork. It is the
surface-level or literal meaning that can be readily understood without the need for
interpretation or inference. The explicit meaning is typically clear, concrete, and
straightforward, leaving little room for ambiguity or multiple interpretations. It is the
opposite of implicit meaning, which involves hidden or implied messages that require
deeper analysis or understanding to grasp.
 Breach: the term "breach" generally refers to a violation, infringement, or
unauthorized access that disrupts the normal functioning, security, or integrity of a
system, contract, or agreement. The specific meaning can vary based on the context in
which it is used.

3.6 LEARNING ACTIVITY

3. Define discharge by agreement

___________________________________________________________________________
___________________________________________________________________________

59
 4. State the principles of discharge by frustration.
___________________________________________________________________________
___________________________________________________________________________

3.7 UNIT END QUESTIONS

A. Descriptive Questions
Short Questions
 Define discharge of contract.
 Identify and discuss discharge by breach?
 Elaborate about the breach of contract?
 What are the criteria that actual breach?
 Explain breach of contract by performance?
 Critically anticipatory contract?

Long Questions

 What is a discharge by contract?

 Describe the breach of contract?
 What are the remedies of breach of contract?
 Describe about the quantum meruit?
 Explain the suit for damages?

B. Multiple Choice Questions

1. When one of the contracting parties fails to uphold the terms of the agreement, there has
been a ___________of the agreement.
a. breach
b. Contraction
c. proposal
d. acceptance
2. Frustration occurs when an unforeseen event renders the contract ____________to
perform
a. impossible
b. possible
c. major

60
d. lethal
3. An obligation under the contract should be offered by the offeror to the_________.
a. drawer
b. drawee
c. offeree
d. payee
4. The duties that the parties to a contract are required to uphold are known as the
___________in the contract.

a. coercion

b. parties

c. obligations

d. breach

5. The Contract Act's Section _____ discusses performance.

a. 38

b. 39

c. 36

d. 37

Answers

1-a, 2-a, 3-c. 4-c, 5-d

3.8 REFERENCES

Readings:
1. M.C. Kuchhal, and Vivek Kuchhal, Business Law, Vikas Publishing House, New Delhi.
2. Ravinder Kumar, Legal Aspects of Business, Cengage Learning
3. SN Maheshwari and SK Maheshwari, Business Law, National Publishing House, New
Delhi.
4. Aggarwal S K, Business Law, Galgotia Publishers Company, New Delhi.
AkhileshwarPathak, Legal Aspects of Business, McGraw Hill Education.

61
UNIT - 4: CONTINGENT CONTRACTS
STRUCTURE
4.0 Learning
4.1 Objectives
4.2 Introduction
4.3 Contingent contract
4.4 Quasi Contracts
4.5 Contract of indemnity
4.6 Contract of Guarantee
4.7 Summary
4.8 Keywords
4.9 Learning Activity
4.10 Unit End Questions
4.11 References

4.0 LEARNING OBJECTIVES

After studying this unit, you will be able to:

 Describe nature of Quasi Contracts

 Identify scope of Contract of indemnity
 State the need and important of contingent contract

4.1 INTRODUCTION

A legally binding agreement is referred to as a contract. [The Indian Contract Act, 1872,
Section 2(h)]. Every contract must contain an agreement that was reached with the voluntary
assent of persons who were legally able to do so, for a legal consideration, and with a legal
purpose. The intention is to create a contract, not to void the agreement. Sir Pollock's
definition, which asserts that every agreement and commitment that is legally enforceable
constitutes a contract, served as the foundation for the definition of contracts in the Indian
Contract Act of 1872. An agreement and something further, i.e., an agreement and its legal
enforceability, are thus necessary for the establishment of a contract. Typically, the word
dependent denotes "subject to chance."

62
This word has been used to signify conditional, much as how we typically use it, in the Indian
Contract Act of 1872. Future events are characterized by uncertainty. Contingency contracts
are all about predicting the likelihood that an unknown event will become certain, projecting
what will happen if it doesn't, and then estimating the potential to deal with the results. Even
if a contract has been legally made, the parties may agree that it must satisfy a contingency
before obligations under it can be fulfilled. The parties to the conditions agree that, in the
event of the occurrence of the contingency on the contracting of a valid contract, the rights
will be upheld and the obligations will become payable.
The Latin proclamation "Nemo debet locupletari ex aliena jactura"—which states that no
person should profit unfairly from another's suffering—is the source of quasi-contract laws.
One of the major tenets of Roman law was this.
The word "quasi" denotes some but not total similarity. The term "quasi contract" refers to
laws that are similar to conventional contract law but not exactly so. A standard contract
needs a few key elements to be considered enforceable. Offers, acceptance, deliberation, and
the presence of two or more people who are of sound mind and legal capacity are all included

4.2 CONTIGNENT CONTRACT

Under the Indian Contract Act, a contingent contract is defined in Section 31. It states that a
contingent contract is a contract that depends on the occurrence or non-occurrence of a
specific event in the future. The event may or may not happen, and it is uncertain at the time
of making the contract.

Here are some key points to understand about contingent contracts under the Indian Contract
Act:

Contingency: A contingent contract is based on the happening or non-happening of a future

event. The event must be uncertain and should not be within the control of either party. If the
event is certain to happen, it does not qualify as a contingent contract.

Performance based on the event: The rights and obligations of the parties involved in a
contingent contract depend on the occurrence or non-occurrence of the specific event. Once
the event happens or fails to happen, the contract becomes enforceable or void.

63
Examples of contingent contracts: Some common examples of contingent contracts include
insurance contracts, where the payment of the insurance claim depends on the occurrence of a
specific event, such as an accident or damage; wagering contracts, where the payment is
contingent on the outcome of an uncertain event, like a sports match or a lottery; and
contracts based on the existence of a particular state of things, such as buying a property if a
certain development plan is approved.

Void if event becomes impossible: If the event on which a contingent contract is based
becomes impossible, the contract becomes void. For example, if a person agrees to sell their
property to another person upon the death of a specific individual, but that individual dies
before the contract is executed, the contract becomes void.
It's important to note that contingent contracts must still fulfill the other requirements for a
valid contract, such as offer and acceptance, consideration, capacity, free consent, and lawful
object and consideration. If a contingent contract meets these criteria and the event occurs or
fails to occur as per the contract's terms, it becomes enforceable, and the parties are bound by
its provisions.

4.3 QUASI CONTRACTS

A contract that is established by a court to stop one party from unfairly enriching themselves
at the expense of another is referred to in law as a quasi-contract, also known as an implied-
in-law contract. It is a legal fallacy used to impose a contractual obligation on a party that
didn't formally agree to a contract but nonetheless received something of value from the other
party.

The doctrine of quasi-contracts has its roots in the unjust enrichment doctrine of classical
Roman law. This doctrine's fundamental tenet is that no one should be permitted to profit
from another's loss without making up for it.

64
In contemporary law, quasi-contracts are frequently employed to offer a remedy when one
party has given another party goods or services but the parties haven't actually entered into a
contract. A party cannot be unjustly benefited by receiving a benefit from another party by
using quasi-contracts to prevent this from happening.

How Do Quasi Contracts Work?

A contract that is inferred by law and serves as a redress in disputes between parties without a
contract is known as a quasi contract. A quasi contract is a judicially determined legal duty
for one party to make restitution to the other, as opposed to a typical contract. In other words,
a quasi contract is a decision that is made in the past to fix a situation where one party gains
something at the expense of the other.

These agreements may be imposed when a party accepts products or services that may not
have been requested. The providing party therefore has an expectation of being paid as a
result of the acceptance.

Knowledge about Quasi Contracts

In common-law states, quasi contracts date back to the Middle Ages and were first used to
describe a legal action known as indebitatus assumpsit, which means to be indebted or to
have taken on a debt in Latin.

Using this legal theory, the courts were able to force one party to make the other pay as if
there had already been a contract or other agreement between them. Therefore, it is believed
that the law implies that the defendant must abide by the terms of the trade. The quasi
contract has typically been used to impose restitution obligations since its inception.

It would be decided that the defendant must compensate the plaintiff. Quantum meruit, or the
amount deserved, is the Latin term for restitution, and it refers to the amount or degree to
which the defendant was unjustly profited.

Because a judge creates this remedy when a contract between two parties is not present, it is
sometimes known as a constructive contract. A court won't make a pseudo contract if there is
already an agreement or contract in existence because there is no reason to do so.

Elements of a Quasi-Contract

In order for a court to determine that a quasi-contract exists, the following conditions must be
satisfied:

65
Benefit Received: One party must have gotten something from the other as the first
requirement of a quasi-contract. The advantage may come in the shape of products, services,
or real estate.

The recipient of the benefit must have been unjustly enriched, which is the second
requirement of a quasi-contract. This indicates that they benefited at the expense of another
party without having a valid legal justification for doing so.

Legal Obligation: A quasi-contract must have a legal obligation to pay for the benefit
received as its third component. This obligation is governed by a court order and not by a
written agreement between the parties.

Purpose

When one party receives a benefit or piece of property from another, a quasi-contract
describes the responsibility of the first party to the second. Without a written contract, a
person may provide anything of value to another without their knowledge or consent. It is
presumed that a reasonable individual would pay for it, return it, or provide some other kind
of payment to the giver in exchange for the good or service.

In order to protect a giver from exploitation and prevent others from unfairly benefiting,
quasi contracts are granted as a remedy.

Legality

Neither party is required to consent to the agreement because it was created in a court of law
and is therefore enforceable.

When one side has an advantage over another, the quasi-contract is intended to produce a
fair result. The plaintiff, the person who was wronged, is entitled to compensation equal to
the worth of the item from the defendant, the party who gained it.

Requirements

A judge must have the following conditions before issuing a quasi contract:

 A transfer must have resulted in a loss for one person, the plaintiff.
 The defendant must have either received the valuable item or admitted receiving it,
kept it, and made no attempt or offer to pay for it.
 The burden of proof then shifts to the plaintiff to show why the defendant received an
unjust enrichment.

66
  The product or service was not presented as a gift.
 It was necessary to give the defendant the option to accept or reject the benefit.

Contract vs. Quasi-Contract

Quasi-contract Contract

That Is Only Implied in Law Can Be Express or Implied

Ordered by a Judge Initiated by Party Agreement

No Contract Exists A Legal Contract Exists

Quasi Contract

Only Implied in Law: An implied duty to pay is one that is made possible by the law, in this
case, a judge who provides a remedy.

Ordered by a Judge: Since contracts implied by law are not covered by contract law, judges
order quasi-contracts.

No Contract Exists: Quasi contracts are not contracts; rather, they are means of resolving
disagreements between parties when one party has benefited unfairly.

Contracts

Can Be Express or Implied: Express and implied contracts are the two main forms of
agreements. An express contract is one in which the conditions are specified and are accepted
by both parties. When both parties agree to a trade but there are no clear stipulations, there is
an implicit contract.

Agreement of the Parties: The parties to an exchange consent to the exchange.

Existence of a Legal Contract: Both express and implied contracts are regarded as valid and
enforceable by law.

Quasi-Contract Types

Express and implied quasi-contracts are the two different varieties of quasi-contracts.

Express Quasi-Contracts: An express quasi-contract is created when two parties seek and
receive products or services from one another without really entering into a contract. The
court will infer a contract in this situation and order the party who benefited from it to pay for
it.

67
Implied Quasi-Contracts: When one party receives a benefit from another without that party's
agreement, but in conditions that make it unfair for the party to keep the benefit without
paying for it, there is an implied quasi-contract. The court will infer a contract in this
situation and order the party who benefited from it to pay for it.

 Sections 68 through 72 of the Contract Act of 1872 provide the following descriptions
of the various forms of quasi contracts:
 Section 68: A third party provides the goods to a person who is unable to sign
contracts on behalf of the incapable person or anyone he is legally required to support.
The property of the disabled person may be used by other parties to recoup the
supplier's cost.
 Section 69: Anyone who makes a payment on another party's behalf is required to do
it in accordance with the law. As a result, the party who made the payment has a
claim to compensation from the other.
 Section 70: The recipient is required to pay the first party when they perform a legal
act for another person or deliver something without intending to do so gratuitously.
 A person who discovers goods that belong to another party and claims possession of
them is subject to the same obligations as a bailee, according to Section 71.
 Section 72: A person who has been forced into accepting a payment or delivery or
who received money in error is required to pay it back.

Quasi-contract examples

1. Auto Repair: Let's say you take your car to the shop for repairs, but you can't come to an
agreement on the cost of the work. As a result of your disagreement over the price, the
technician completes the repair and hands you the bill, which you decline to pay. The
court can decide that a quasi-contract exists in this situation and order you to pay for the
repair.
2. Landscape: Let's say you hire a landscaper to look after your lawn, but you can't come to
an agreement on the cost of the services. You don't agree on the price, so the landscaper
does the tasks and gives you a bill that you refuse to pay. The court can decide that a
quasi-contract exists in this situation and order you to pay for the services.

68
3. Emergency Services: Let's say you need an ambulance to take you to the hospital for an
urgent medical issue, but your condition prevents you from giving consent. The court can
decide that a quasi-contract exists in this situation and order you to pay for the services.

Benefits and Drawbacks of Quasi Contracts

The fact that quasi contracts are frequently founded on the unjust enrichment principle is one
benefit of employing them. As a result, no side will be given an unfair edge over another. As
a result, it protects innocent victims of wrongdoing and serves as a legitimate substitute for
monetary damages, ensuring that the provider of products or services is adequately
reimbursed. As pseudo contracts are established by court order, all parties concerned are
required to abide by them.

There are a few shortcomings or restrictions as well. The recipients of assistance who did so
recklessly, needlessly, or by mistake will not be held accountable. A person can be held
accountable for a quasi-contract, but his liability is limited to the amount he has been paid.
Therefore, there is no provision for the recovery of an amount greater than that which has
already been obtained by the plaintiff. If the plaintiff only receives a portion of the services or
goods he originally contracted for, he is ineligible for compensation because the full sum was
not recovered.

Plaintiffs are required to forfeit all profits if there is a written agreement between the parties.
A plaintiff can only obtain relief if he can show that he experienced losses as a result of the
defendant's breach of the contractual obligations, even if a quasi contract is a legal remedy
that protects recipients of the services or goods from unjust enrichment.

Pros

 Prevents one party from unfairly benefitting at the expense of another

 Court order is legally binding

Cons

 Not suitable in all cases

 Amount cannot include additional damages

Quasi Contracts: What Are They?

69