Unit1

Q1)What is the meaning and nature of contract?

contract means an agreement, which is enforceable by law. An agreement consists of reciprocal
(mutual) promises between the two parties. In the case of contract each party is legally bound by the
promise made by them. A contract is legally enforceable when it meets the requirements of applicable
law.

Agreement- An Agreement is a promise between two entities creating mutual obligations by law.
According to section 2(e) of the Act, every promise and every set of promises forming the consideration
for each other is an agreement. In an agreement, there are promises from both the sides. 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.For
Example: – ‘A’ promises to deliver his watch to ‘B’, and in return ‘B’ promises to pay a sum of Rs. 2,000
to ‘A’. There is said to be an agreement between ‘A’ and ‘B’.

definition of contract

Contract is a promise enforceable by law. The promise may be to do something or to refrain from doing
something. The making of a contract requires the mutual assent of two or more persons, one of them
ordinarily making an offer and another accepting. Contract is an agreement or set of promises giving rise
to obligations that can be enforced or recognized by law.

According to section 2(h) of the Indian Contract Act, 1872, contract is an agreement enforceable by law.
An agreement becomes a contract when it satisfies all the essentials of a valid contract mentioned in
Section 10.

How a Contract is formed?

Contract is formed in 3 steps given below: –

Offer + acceptance = Promise

Promise + consideration = Agreement

Agreement + enforceable by law = Contract

nature of contract

The nature of contract is that it’s the branch of law which determines the circumstances in which
promises made by the parties to a contract shall be legally binding on them. It does not lay down the
duties and responsibilities which the law will enforce but It consists a number of limiting principles,
subject to which; the parties may create rights & duties for themselves which the law will upload.
Nature of contract, a contract is an understanding enforceable at law, made between two or more
persons, by which rights are acquired on the one side to acts or forbearances on the other. To make an
agreement which results in a contract, there must be an offer and an acceptance; and to the promises
which stem from the offer and acceptance the law attaches a binding force of obligation.

Essentials of a valid contract are as follows: –

1.Two Parties: – A valid contract must include at least two parties identified by the contact. One of
these parties will propose the offer and the other party will eventually accept it. Both parties should
have legal existence, e.g. must be companies, schools, organizations, etc. or natural persons.

2.Agreement: – A contract is initially an agreement when the person to whom the offer is made
indicates his acceptance to it. There is an agreement that is the foundation of a contract.

3.Free Consent: – The parties must agree on the same thing in the same sense and at the same time. An
agreement without consent is not legally binding. The parties are called to consent when they agree on
the same thing in the same sense; moreover, the parties to the contract must have free and genuine
consent to constitute a valid contract i.e., not to be obtained by misrepresentation, fraud, undue
influence or mistake. If the agreement is not free, the contract is void.

4.Intention to create a Legal Relationship: – There should be an intention by both parties to form a
legal relationship and to bind themselves legally as a result of such agreement. Thus, agreements of a
social or domestic nature are not contracts, as the parties do not intend to have a legal relationship. For
Example: – where two parties agree to move together, a legal contract will not amount.

5.Contractual Capacity: – The parties to the agreement must be able to enter into a valid contract.
According to the Act, every person is capable of entering into a agreement, if he or she: –

is of the age of majority;

is of sound mind; and

is not disqualified from contracting by any law.

6.Consideration: – An agreement by an incompetent person is not valid. A valid contract should be

supported by consideration. The idea means “something in return”. It can be cash, kind or an act. It can
be past, present or future. The idea must be genuine and valid.

7.No Unlawful Considerations: – According to the Act, the consideration of an agreement is called
unlawful if: –it is prohibited by law,it is of such a nature that, if allowed, it will defeat the provisions of
any law,it is fraudulent,it includes or means injury to the property of the person/other, andthe court
considers it immoral.
8.Lawful Consideration: – Something in return is a consideration. In each contract, the agreement must
be supported by consideration. It must be valid and genuine.

9.Lawful Object: – Section 23 of the Indian Contract Act, 1872, The consideration or object of an
agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would
defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property
of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the
consideration or object of an agreement said to be unlawful. Every agreement of which the object or
consideration is unlawful is void.

scope of Contract

The scope of the contract defines all aspects of the document. Contracts have different forms, and the
amount involved ranges from small to large amounts. Some contracts last for years while others have
shorter deadlines. The materials found in contracts also vary depending on their purpose.There are
many aspects of commercial law, and sometimes it is difficult to define all areas. Typically, commercial
law practice involves human research as it relates to, but is not limited to, contracts, sale of goods,
taxation, insurance, and rental.The identification phase provides a basic scope of the contract. Some
projects have different development and management affiliations that lie under different scopes of a
contract. This means that the obligations or services go toward other parties.

Q2)what are the Types of Contracts On The Basis Of Validity?

Chapter 2 of the Indian Contract Act, 1872 discusses the voidable contracts and void agreements. On the
basis of validity or enforceability, we have five different types of contracts as given below.

1.Valid Contracts

According to section 2(h) of the Indian Contract Act, 1872, contract is an agreement enforceable by law.
An agreement becomes a contract when it satisfies all the essentials of a valid contract mentioned in
Section 10.such as Two Parties,lawful consideration,lawful object,intention to creat legal
relationship,capacity to form a contract,free consent,etc.

2.Void Contract Or Agreement

The section 2(j) of the Act defines a void contract as “A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable”. This makes all those contracts that are not enforceable
by a court of law as void. Section 2 (j) of the Indian Contract Act, 1872 defines Void Contract as a
contract that no longer remains a valid contract and cannot be enforced in the court of law. Such
contracts do not have any legal effect and cannot be enforced by either party.

Void contracts are valid, when they are entered into, as they conform to all the conditions of
enforceability, laid down under section 10 of the act and are binding on the parties, but later on
becomes void because of impossibility to perform.Such contracts becomes unenforceable in the eyes of
law due to: –Supervening impossibility,Change of law,Subsequent Illegality,Repudiation of voidable
contract,Contingent contract etc.

Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of Rs. 8,000. A dies of natural
causes in 4 years. The contract is no longer valid and becomes void due to the non-enforceability of the
agreed terms.

3.Voidable Contract

These types of Contracts are defined in section 2(i) of the Act: “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.” This may seem difficult to wrap your head around but consider the following
example:Suppose a person A agrees to pay a sum of Rs. 10,0000 to a person B for an antique chair. This
contract would be valid, the only problem is that person B is a minor and can’t legally enter a contract.

So this contract is a valid contract from the point of view of A and a “voidable” contract from the point
of view of B. As and when B becomes a major, he may or may not agree to the terms. Thus this is a
voidable contract.

A voidable contract is a Valid Contract. In a voidable contract, at least one of the parties has to be bound
to the terms of the contract. For example, person A in the above example.

The other party is not bound and may choose to repudiate or accept the terms of the contract. If they so
choose to repudiate the contract, the contract becomes void. Otherwise, a voidable contract is a valid
contract.

4.llegal Contract

An agreement that leads to one or all the parties breaking a law or not conforming to the norms of the
society is deemed to be illegal by the court. A contract opposed to public policy is also illegal.

For example, A agrees to sell narcotics to B. Although this contract has all the essential elements of a
valid contract, it is still illegal.

The illegal contracts are deemed as void and not enforceable by law. As section 2(g) of the Act states:
“An agreement not enforceable by law is said to be void.”

Thus we can say that all illegal contracts are void but the reverse is not true. Both the void contracts and
illegal contracts can’t be enforceable by law. Illegal contracts are actually void ab initio (from the start or
the beginning).

Also because of the criminal aspects of the illegal contracts, they are punishable under law. All the
parties that are found to have agreed on an illegal promise are prosecuted in a court of law.

5.Unenforceable Contracts
Unenforceable contracts are rendered unenforceable by law due to some technical. The contract can’t
be enforced against any of the two parties.For example, A agrees to sell to B 100kgs of rice for 10,000/-.
But there was a huge flood in the states and all the rice crops were destroyed. Now, this contract is
unenforceable and can not be enforced against either party.

6.Void Agreement

According to Section 2(g), of the Indian Contract Act, 1872, an agreement which is not enforceable by
law is known as void agreement. An agreement that was void from the beginning is said to be ab-initio.
For example: – An agreement by a minor is considered as void agreement.Agreements without
consideration are also void. An agreement which impose any restrictions on marriage and an agreement
that impose any restrictions on trade.

7.Illegal agreements

An illegal agreement in contract law is a contract that was made for an illegal reason and is consequently
against the law. If the content of the agreement causes the parties to perform illegal actions, then the
contract is illegal. There are certain agreements which are illegal in the sense that law prohibits the very
act, doing of which is considered as illegal.For example: –an agreement to commit a crime or a tort.an
agreement to defraud public income.

Such an agreement are opposed to public policy. And the law prohibits the making of such agreements.
An illegal agreement may be distinguished from a mere “void” agreement which may not be opposed to
public policy.For example: – An agreement to do an impossible act is void which is not opposed to public
policy. An illegal agreement is one which is not permissible by law. An illegal agreement is void since
very beginning.

Q3)differences between a void and a voidable contract?

1. “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”.
but“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.”

2.A contract becomes void if either it lacks the essential elements, the law changes drastically or the
terms of the contract change such that it is no longer possible to enforce the contract in a court of law.
butA contract becomes a voidable contract when at least one of the parties reserves its consent
or the consent of one of the parties was not free at the time of the formation of the contract.

3.Void contracts can’t be fulfilled.

But The validity and enforceability of the voidable contract depend on the choice of the unbound party.
If the unbound party decides to repudiate the contract it becomes void.

4.Void contract can’t grant any rights or considerations to any of the involved parties.

But The right to rescind a voidable contract is retained by the unbound party.
Q4) Key Differences Between Void Agreement and Void Contract?

1.A void agreement is one, which according to law is neither enforceable nor it creates any legal
consequences. But The void contract, on the other hand, is a contract which is valid at the time of
formation but becomes unenforceable, due to impossibility or illegality.

2.A void agreement is void since it has been created. As against this, a void contract is valid at the time
of creation but later on becomes void.

3.A void agreement is never valid, whereas a void contract is a valid contract, till it does not lack
enforceability.

4.A void agreement is void due to the absence of one or more necessary elements that result in a
contract. On the contrary, a void contract is one that becomes void due to the impossibility of
performance.

5.The void agreement does not satisfy the prerequisites of a valid contract, and because of this, it is
considered as void. Conversely, the void contract is one that fulfils all the requirements of a valid
contract, but cannot be enforced due to unexpected circumstances, thus becomes void.

6.Restitution or restoration is not granted in the case of void agreement, although in certain
circumstances, restitution is permitted on equitable grounds. On the contrary, restitution is granted to
the concerned party when the valid contract, eventually becomes void.

Q5) what is Proposal or offer and revocations of offer and kinds of offer?

The entire process of entering into a contract begins with the proposal or an offer made by one party to
another. The proposal must be accepted to enter into an agreement.

According to the Indian Contract Act 1872, proposal is defined in Section 2(a) as “when one person will
signify to another person his willingness to do or not do something (abstain) with a view to obtain the
assent of such person to such an act or abstinence, he is said to make a proposal or an offer.”

Features of a valid offer

The person making the offer/proposal is referred to as the “promiser” or the “offeror”. And the person
who accepts an offer is referred to as “promisee” or the “acceptor”.

The offeror must express his willingness to do or abstain from doing an act. Only willingness is not
adequate. Or just an urge to do something or not to do anything will not be an offer.

An offer can either be positive or negative. It can be a promise to do some act, and can also be a
promise to abstain from doing any act/service. Both are valid offers.

The element of a valid offer

1.There must be two parties -There have to be at least two parties a person making the proposal and
the other person agreeing to it. All the persons are included i.e, Legal persons as well as artificial
persons.

2.Every proposal must be communicated-Communication of the proposal is mandatory. An offer is valid

if it is conveyed to the offeree. The communication can either be express or implied. It can be
communicated by terms such as word of mouth, messenger, telegram, etc. Section 4 of the Indian
Contract Act says that the communication of a proposal is complete when it comes to the awareness of
the person to whom it is made.Example ‘A’ proposes, to sell a car to ‘B’ at a certain price. Once ‘B’
receives the letter, the proposal communication is complete.

3.It must create Legal Relations-An offer must be such that when accepted it will result in a valid
contract. A mere social invitation cannot be regarded as an offer, because if such an invitation is
accepted it will not give rise to any legal relationship.Example‘A’ invited ‘B’ to dinner and ‘B’ accepted
the invitation. It is a mere social invitation. And ‘A’ will not be liable if he fails to provide dinner to B.

4.It must be certain and definite-The terms of the offer must be certain and clear in order to create a
valid contract, it must not be ambiguous.

5.It may be specific or general-The specific offer is an offer that is accepted by any specific or particular
person or by any group to whom it is made. Whereas, The general offers are accepted by any person.

Kinds/Classification of offer

Express Offer

An offer may be made by express words, spoken or written. This is known as Express offer.When the
offer is made by express communication then the offer is said to be an express offer. The express offer
can be made face to face or via telephone. The express offer in written format can be made via text
messages, advertisements, letters or e-mail.A written application by a candidate for a post of manager
in a written form is an express offer. Confirmation of his appointment with the explanation of terms of
employment by the vice president of a company who is authorized to do so by telephone is also an
express offer. ExampleWhen ‘A’ says to ‘B’, “will you purchase my car for Rs 2,00,000”?

Implied Offer

An offer may be derived from the actions or circumstances of the parties. when the offer is not
communicated expressly but communicated by conduct or by the circumstances of the case, then offer
is called an implied offer.

When we are waiting for a bus to go to a certain place, the bus which can take us to the place where we
desire to go arrives and halts at the bus stop. We enter the bus and pay requisite fair. A ticket is given to
us. When destination comes the bus halts at the stop and we board down the bus.. By entering the bus
we accept the offer. Thus acceptance is also by conduct. Such offers are implied offers.
General Offer

A general offer is not made by any specified party. It is one that is made by the public at large. Any
member of the public can, therefore, accept the offer and have the right to the rewards/consideration.

General offer means an offer which is made to the public in general. A General offer can be accepted by
anyone. If offeree fulfills the terms and conditions which are given in offer then offer is
accepted.Communication of acceptance is not necessary in the case of a general offer.General offer is
unilateral offer. For instance, advertisements can be considered unilateral offers. Display of goods by a
vendor can also be a unilateral offer as any individual can choose to buy a product or service from a
shopkeeper which results in a contract. In this case, the offeror does not wait for communication of
acceptance.

Specific Offer

It is the offer made to a specific person or group of persons and can be accepted by the same, not
anyone else. Special offer means an offer made to (a) a particular person or (b) a group of person. It can
be accepted only by that person to whom it is made. communication of acceptance is necessary in case
of a specific offer.Example A offers to buy a car from B for 10 Lakh. Thus, a specific offer is made to a
specific person, and only B can accept the offer.Communication from B for acceptance or rejection is
necessary.It is bilateral offer. In this type of offer, acceptance must be communicated, and all parties
involved promise to provide some consideration to others.

Cross offer

Two parties make a cross-offer under certain circumstances. It means that both make the same offer at
the ex When two parties exchange identical offers in ignorance at the time of each other's offer the
offer's are called cross offer. Two cross offer does not constitute a contract. In the cross offer, the offers
are made by the same parties to one another, each party not knowing about the offer made by the
other party. The terms and conditions contained in cross offers are the same. Note that in this case,
both are offeror and same time offerree. There is no specific acceptance. Hence it cannot become an
agreement. In such cases, a contract comes into existence when any of the parties, accept the cross
offer made by the other party.Example: A offers by a letter to sell 100 cycles at 1,000 per cycle. On the
same day, without knowledge B also writes to A offering to buy 100 cycles at 1,000 per cycle. In both,
the cases offer is there but another main ingredient acceptance of the agreement is missing. If A accepts
offer of B then it leads to a contract. act time to each other. However, in either case, the cross-offer will
not amount to accepting the offer.

Counter-offer

A counter-offer is an answer given to an initial offer. A counter-offer means that the original offer has
been refused and replaced by another. The counteroffer offers three choices to the original offerer;
accept, refuse, or make another offer. Example: A offered to sell his old car to B for 1,00,000. B replied,
"I am ready to pay 90.000". On A's refusal to sell at this price, B agreed to pay ₹1,00,0000. Now A is not
bound to sell his car to B at 1,00,000. Initial offer to sell the car for 1,00,000 was made by A. B rejected
the offer by giving a counter-offer to buy the car at ₹90,000.A refused this counter-offer. Now again B is
giving a new offer to A to buy the car at 10,000. Thus as offeree, he has the right to accept or reject the
new offer by B. Note that a counter-offer amounts to a rejection of the original offer.

When communication is complete or Communication of offer (section 4)

The communication of the offer is complete when it comes to the knowledge of the person to whom it is
made. Section 4 of the Indian Contract Act 1872 says that the communication of the offer is complete
when it comes to the knowledge of the person it has been made to. So when the offeree (in case of a
specific offer) or any member of the public (in case of a general offer) becomes aware of the offer, the
communication of the offer is said to be complete.So when two people are talking, face-to-face or via
telephone, etc the communication will be complete as soon as the offer is made. Example if A tells B he
will fix his roof for five thousand rupees, the communication is complete as soon as the words are
spoken.

Lapses and revocation of an offer

1.Time of revocation of an offer

A proposal can be revoked at any time before the communication of its acceptance is complete as
against the proposer but not afterward. At times, the offer extended has a time limit. In case it remains
unaccepted, the offer expires or lapses. Any formal acceptance made after this mentioned date does not
create a contract as the offer is not open anymore.For example Angel Holidays had made an offer to the
public that any holiday packages booked with them before the 31st of May will be entitled to a 25%
discount. So this implies that the offer is time-bound and shall expire after the aforementioned date. In
case a person accepts the same on or after 1st of June would do so as it has lapsed.

2.Revocation of the offer by the offeror

The offeror can withdraw his offer before it is accepted “the bidder can withdraw (revoke) his offer at an
auction sale before being accepted by any auctioneer using any of the customary methods.Example‘A’
agreed to sell the property to ‘B’ by a written document which stated “this offer to be left over until
Friday 9 AM”. on Thursday ‘A’ made a contract to sell the property to ‘C’. ‘B’ heard of this from ‘X’ and
on Friday 7 AM he delivered to ‘A’ acceptance of his offer. Held ‘B’ could not accept A’s offer after he
knew it had been revoked by the sale of the property to C.

3.Revocation by Communication

Revocation can be both, expressed or implied. It can be either orally expressed or expressed in writing.
Let us understand the same through the below mentioned scenarios. For example-Mr. A. wishes to sell
his gold chain to Mr. K. The former offers to sell the same to the latter. Mr. K is still contemplating what
to do and has not accepted the offer yet. Meanwhile, Mr. A revokes the offer, as he does not wish to sell
his chain anymore. This is considered as a proper, legal and accepted revocation.
4.Revocation by Failure to Fulfill a Condition Precedent

There could be an offer made by a proposer but it may be subject to certain conditions.For example M/s
AYB Associates had a job opening for an accountant. They wanted a person who was certified by the
Chartered Accounts’ Association. They interviewed several candidates and like Arin. Arin too was keen
on working with them and accepted the job offer. But at the time of joining, he was asked to submit the
original certificate of his diploma from the Chartered Accounts’ Association. He could not submit the
same. So M/s AYB Associates revoked the job offer and the condition precedent could not be fulfilled.

5.Revocation by Death/Insanity of Proposer

Offers are automatically revoked if the proposer has passed away or has officially been declared insane.
If the person has passed away, it is understood that a contract cannot be created. If he/she is declared
insane then he/she is not competent to contract. Hence, if there is any offer made by a party who either
dies or is declared insane after the offer is made, by default it is revoked For example Tyson made an
offer to sell his house to Lytus. Unfortunately, Tyson passed away and hence his offer stands revoked.

6.Revocation by Unqualified Acceptance

In case there is some offer made and the acceptor accepts it subject to his/her own conditions, the offer
stands revoked, as the acceptance is not clear, absolute and qualified. For example Abraham offered to
sell his bike to Araz. Abraham wanted a cheque for the full amount. Araz accepted to buy and was OK
with the price as well but was adamant that he will pay partly by cheque and partly by cash. Abraham
has every right to revoke the offer.

Q3)what is Acceptance?kinds?revocation and communication of acceptance?

The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person to whom the
proposal is made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when
accepted becomes a promise.” An offer can be revoked before it is accepted.As specified in the
definition, if the offer is accepted unconditionally by the offeree to whom the request is made, it will
amount to acceptance. When the offer is accepted it becomes a promise.Example‘A’ offer to buy B’s
house for rupees 40 lacs and ‘B’ accepts such an offer. Now, it has become a promise.

When an offer is accepted and it becomes promise it also becomes irrevocable. No legal obligation
created by an offer.

Types of Acceptance

1.Expressed Acceptance

If the acceptance is written or oral, it becomes an Expressed Acceptance.Example‘A’ offers to sell his
phone to ‘B’ over an email. ‘B’ respond to that email saying he accepts the offer to buy. Express
Acceptance An express acceptance occurs when a person clearly and explicitly agrees to an offer or
agrees to pay a draft that is presented for payment.
2.Implied Acceptance

If the acceptance is shown by conduct, It thus becomes an Implied acceptance.ExampleThe Arts

Museum holds an auction to sell a historical book to collect charity funds. In the media, they advertise
the same. This says that a Mere Invitation to an Offer as per Indian Contract Act, 1872. Implied
Acceptance An implied acceptance is one that is not directly stated but is demonstrated by any acts
indicating a person's assent to the proposed bargain. An implied acceptance occurs when a shopper
selects an item in a supermarket and pays the cashier for it. The shopper's conduct indicates that he or
she has agreed to the supermarket owner's offer to sell the item for the price stated on it.

3.Conditional Acceptance

A conditional acceptance also referred to as an eligible acceptance, occurs when a person to whom an
offer has been made tells the offeror that he or she is willing to accept the offer provided that certain
changes are made to the condition of the offer. This form of acceptance operates as a counter-offer. The
original offeror must consider a counter-offer before a contract can be established between the parties.

Conditional Acceptance A conditional acceptance, sometimes called a qualified acceptance, occurs when
a person to whom an offer has been made tells the offeror that he or she is willing to agree to the offer
provided that some changes are made in its terms or that some condition or event occurs. This type of
acceptance operates as a counteroffer. A counteroffer must be accepted by the original offeror before a
contract can be established between the parties.

Legal Rules and Conditions for Acceptance or features

1.Acceptance must be absolute and unqualified -The offeree’s approval cannot be conditional.For
example, ‘A’ wants to sell her car to ‘B’ for Rs 2 lakh, ‘B’ can’t come back and says that she accepts the
offer but will buy the same for Rs. 1 lakh. because it would be a counteroffer, nullifying the initial offer

2.Acceptance must be told to the offeror-If the acceptor just accepts the offer in his head and he does
not mention the same to the offeror, it can not be called an Acceptance, whether in an express manner
or an implied manner.

3.Acceptance must be recommended in the following mode-Must be Given in the Prescribed

ModeAcceptance must be given in the prescribed/specified manner that has been stated in the offer. In
case a specific mode has not been mentioned, acceptance must be made in a reasonable manner that is
used in the normal course of business. In cases where a specified form of giving acceptance is not
stated, silence is not considered a form of acceptance.

4.In a reasonable amount of time, the acceptance is given-It’s very rare that an offer is always to get
acceptance at any time and at all times. Therefore, the offer defines a time limit. If it does not, it should
not be acknowledged forever.

5.Mere silence is not acceptance-If the offeree fails to respond to an offer made to him, his silence can
not be confused with acceptance. But, there is an exception to this rule. It is stated that, within 3 weeks
of the date on which the offer is made, the non-acceptance shall be communicated to the offeror.
Otherwise, the silence shall be communicated as acceptance.

6.Acceptance Can Only be Given by the Offeree -Acceptance of an offer can only be given by the person
to whom the offer has been made. Self-acceptance meaning states that the acceptance given by the
offeree only is considered valid. A third party cannot accept the offer without the knowledge of the
offeree. If the offeree has authorized an agent to give the acceptance on his behalf, then the acceptance
is considered valid.

7.Acceptance Must be Communicated-Acceptance must always be communicated to the offeror for the
proposal or offer to become a binding contract. Before giving his acceptance, the offeree must be aware
of the fact that an offer has been made to him. Acceptance cannot be communicated without the
knowledge of the offer. The intent to give acceptance is not considered valid in case it is required for the
acceptance to be communicated clearly.

8.It must be Unqualified and Absolute-Acceptance must be complete and unconditional. Conditional
acceptance is impossible.

When communication is complete or Communication of acceptance (Section 4)

Communication of acceptance is complete when it is put in the course of transmission to him as to be

out of the power of the acceptor to withdraw the same and when it comes to the knowledge of the
proposer. In communication of acceptance, there are two factors to consider, the mode of acceptance
and then the time of acceptance. Acceptance can be by an act which includes communication by words,
oral or written through phone, letters, e-mails, fax, etc. or by conduct like boarding a bus etc.

Time of acceptance

A proposal can be accepted by the offeree any time before the communication of revocation is
complete against him. Once accepted by the offeree the communication of acceptance is complete:

1.as against the proposer, when it is put in a course of transmission to him, so as to be out of the power
of the acceptor;

2.as against the acceptor, when it comes to the knowledge of the proposer.

Revocation of Acceptance
There can be instances where a proposer makes an offer and the acceptor accepts the proposal and
communicates the same to the proposer. Can the acceptor revoke/cancel this acceptance? Yes, the
acceptor can cancel this acceptance before the communication of acceptance reaches the proposer.
That is before the communication of acceptance is complete as against the acceptor. If the revocations
of acceptance reached the proposer before the acceptance comes to the knowledge of the proposer
there can be a valid revocation of acceptance. The Revocation of Acceptance is complete only at any
time before the communication of acceptance is complete as against the acceptor, but not afterwards.
Communication of Revocation of Acceptance-The communication rules for revocation of offer will be
applicable to revocation of acceptance as well. The communication is complete against the proposer
when it comes to is knowledge.

Time of revocation of acceptance-An acceptance may be revoked at any time, but not afterward, before
the communication of the acceptance is complete as against the acceptor.

Q4)what is Consideration?

Section 2(d) of the Indian Contract Act defines the term consideration as follows-

When at the desire of the promisor, the promisee or any other person Has done, or abstained from
doing something;OrDoes or abstains from doing something; Or Key Promises to do, or to abstain from
doing something; Then such act, abstinence or promise is called a consideration for the promise.In
short, the term consideration means ‘something in return’ i.e. ‘QUID PRO QUO’.

Pollock- “the price for which the promise of the other is bought, and the promise thus given for value is
enforceable”.Blackstone- “the recompense given by the party contracting to the other”

In Currie v. Misa, Lush J. define the term consideration as follows-

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or
benefit accruing to the party, or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by other”.Illustration- A agrees to sell his car to B for Rs. 50,000. Here, B’s promise to pay
the sum of Rs. 50,000 is the consideration for A’s promise to sell the car, and A’s promise to sell the car
is the consideration for B’s promise to pay the Rs. 50,000.

Essential elements of consideration

1.Consideration should be passed at the request of offeror:- offeree should send only such
consideration which is wanted by the offeror. In the case where offeree sends unwanted consideration,
he has no right to claim counter consideration. As we read the definition of consideration in section 2
(d), the act or abstinence to do or not to do something must be at the desire of the promisor and not at
any other third party.This means, for the formation of a consideration, when the parties perform any act
or abstinence to do or not to do something, such act or abstinence must be at the request of the
promisor and not any other person.

2.Consideration may move from a promisee or any other person:- In Indian law, according to section
2(d) of the Indian Contract Act, consideration may move from the promisee or if the promisor has no
objection, from any other person. It means the act or abstinence to do or not to do something
performed by the promisee or any other third person, then the consideration may move from the
promisee to that third person. Example: A gifted his property to his brother B with imposing one
condition that he should pay a certain amount to A’s daughter X per annum. But, B refused to pay the
amount to X. So, here B failed to fulfil the promise, and also the consideration of X is moved. And, X can
file a suit for the same.

3.Consideration need not be adequate:- Consideration of the contract need not have equal magnitude.
The inadequacy of consideration will not infect the validity of the contract. the adequacy of
consideration means the consideration agreed by both parties in the formation of an agreement need
not be equal in value. This means the consideration or the value or the promise agreed by the parties is
not required to have equal value.Example: A gives a room on rent to B for a nominal price of Rs. 100/-
per month. But, the regular price of the rent should be Rs. 500-800.

4.Consideration must be lawful:- Presence of unlawful consideration makes the contract illegal and
hence void.Illustration- A promises to maintain B’s child and B promises to pay A Rs. 1,000 yearly for the
purpose. Here, the promise of each party is the consideration for the promise of the other party. They
are lawful considerations.

5.Consideration must be real:- Consideration should not be of an illegal contract. It must be a believable
concept. Consideration must be real and have some value in the eyes of the law. The consideration
should not be illusionary or impossible to perform. In simple words, the consideration must have some
economic value.Example: A offers B to put life in B’s dead wife. B accepts and pays a certain amount to
A. Here, the consideration is not real and is impossible to perform. Hence, the agreement is void.

6. Consideration may be in Past, Present, or Future-As we discuss in the definition of consideration that
the consideration may be done or abstained from doing (past), or does or abstains from doing (present),
or promises to do or abstain from doing something (future).

7. Consideration should not unlawful, immoral, or opposed to public policy-The consideration must be
abiding with the law of land. If there is any violation of law due to the parties agreeing upon the illegal
consideration in their agreement then it is an illegal agreement.The consideration must follow the public
policies and abide by the law and not affect society’s morality. Example: A offers B to buy his smuggled
goods for half of their price compared to market value. And, B accepts it. A contract is an illegal contract.

Types of consideration

1. Past Consideration-In a general contract, then consideration should be with the contract, but in the
past consideration the act has been done already before making any promise then it is known as Past
Consideration. in India, past consideration is considered. And, it has some exceptions

* Past Voluntary Service-If we read section 25 (2) of the Indian Contract Act, it
talks about past considerations. According to Section 25 (2), if the promise to compensate wholly or in
part to a person who has already voluntarily done something for the promisor, or something the
promisor is liable to do.Example: A has found a purse on the road and he searched for the true owner of
that purse i.e. B. A returns the purse to B. Then B gives him Rs. 500/- as a reward.
 *Past Service on Request-If any action takes place before the promise
then it is called a past service. And, this is not a part under section 25 (2).Even, in the Indian Contract
Act, there is no provision provided for the consideration of the past service on request.

2. Present Consideration-When the promisor performs any act or abstinence to do or not to do

something at the same time when the promise is made is called Present Consideration. The
consideration and promise take place simultaneously in the present consideration.Example: A goes to
the stationery shop and buys a pen and pays Rs. 10/.

3. Future Consideration- This type of consideration is a promise to do or abstain from doing something
in the future. Sometimes executory consideration is also known as a future consideration. Illustration:-
A promises to pay a sum of money to B in consideration of B’s promise to delivers a book for A. As B’s
promise has not yet been performed, it is executory.

4. Unreal Consideration- When a consideration exists only in words, and not in fact. Then such
consideration is known as unreal consideration for a promise. Illustration:- A promises to pay B, Rs.
2,000 on a particular day, in consideration of a promise by B to pay A Rs. 500 at the same time, the
consideration is ‘unreal’ or ‘illusory’, and the promise will be regarded as merely a gratuitous promise by
A to pay B, Rs. 1500.

5.Unlawful Consideration- Sec 23 of the Act describe the term unlawful consideration. A consideration
is said to be unlawful if-It is forbidden by law; Or It would defeat the provision of any Or It Is
fraudulent; Or Involves or implies injury to the person or property of another; OrIt is regarded as
immoral or opposed to public policy, by the Court.Illustration- A, B and C enter into an agreement for
the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void,
as its object is unlawful.

6.Executed Consideration-When one party to the contract performs his part of the promise and has
given his part of the consideration to the other party and now only the part of the promise on the side
of the other party is left to be performed is referred to as an Executed consideration. It is also called
present consideration.

7. Executory Consideration-Before the formation of a legally binding contract, when a person makes a
promise after the other person has also promised then it is termed to be an executory consideration,
wherein both the parties are yet to perform their part of the act. This is also called future consideration.

8.Performance of the legal obligations does not constitute a consideration-If a party is already under a
legal obligation towards another then the act done to fulfill that legal obligation would not be
considered as a valid consideration to become a basis of the contract which is enforceable in the eyes of
law.

Exceptions to Consideration:-
Section 25 of the Contract Act lays down a few exceptions when an agreement made without
consideration is not void.

Exception 1- Natural Love and Affection-A written and registered agreement based on natural love and
affection between near relatives is enforceable without consideration. The expression ‘near relative’ will
include parties related by blood or marriage.

Exception 2- Past Voluntary Service-A promise to compensate a person, who has already voluntarily
done something for the promisor, or something which the promisor was legally compellable to do, is
enforceable. However, such service should have been rendered voluntarily and without promisor’s
knowledge, and for the promisor only.For example, a promise made after attaining the age of majority
to pay for goods supplied to the promisor during minority was held to be within the
exception.Illustration:- A finds B’s mobile phone and gives it to him. B promises to give Rs. 100. This is a
contract.

Exception 3- Time-barred Debt-A promise to pay a time-barred debt is enforceable.Illustration:- X owes

Y, Rs. 1,000, but the debt is barred by the Limitation Act. X signs a written promise to pay Y, Rs. 500 on
account of the debt. This is a contract.

Privity of Contract

The doctrine of privity of contract states that only the parties to the contract can enforce the contract or
take action against it. A person who is not a party to the contract but perceives some benefits from the
contracts is not entitled to take any enforcement action.

“The doctrine of privity means that a contract cannot, as a general rule confer rights or impose
obligations arising under it on any person other than the parties to it.”

For example, if a party ‘A’ promised ‘B’ to pay Rs.100 to the third party ‘C’. Thus, ‘A’ and ‘B’ can sue
each other in case of a breach of contract. However, ‘C’ cannot sue the parties. This is known as the
privity of contract.

Different courts in India have different views regarding the concept of privity of contract. There have
been cases where the third party is not able to sue in case of a default due to the operation of the rule
of privity of contract while there are some cases where the rule of privity of contract is completely
disregarded. Hence, the rule of privity of contract is a topic of great debate amongst scholars.

Privity of consideration states that only a person who has provided consideration can enforce the
contract and take action against it. In the above case, ‘C’ cannot sue the parties as he has not provided
any consideration for the contract.

Exceptions to the Doctrine of Privity of Contract

There are some exceptions to the doctrine of privity which makes the third party capable of enforcing
the contract. These are as follows:
1. Agency-In case of a principal-agent relationship between the third party and the contracting party,
wherein the third party i.e. the principal party has expressly consented that the other has to act on his
behalf and the contracting party i.e. the agent consents to act in that manner, the third party, being the
principal party, can also enforce the contract.

2. Trust-In case one party ‘A’ promises the other party ‘B’ for the benefit of ‘C’, although being the third
party, ‘C’ can enforce the contract as ‘B’ is the trustee of ‘C’. ‘A’ person can become a trustee of the
other person if he fulfills the following criterion:The party should have the intention of creating
trust.This intention should be to benefit a particular third party and not all the third parties.

A landmark case for the defense of trust in the privity of contracts is Rana Uma Nath Baksh Singh v. Jang
Bahadur. The facts of the case were that Rana Uma Nath Baksh Singh was given the possession of the
entire estate by his father. In return, Rana Uma Nath Baksh Singh was required to pay a certain some of
the money and a village to Jang Bahadur, the illegitimate child of his father. It was held in this case that a
trust was created for the benefit of Jang Bahadur and hence he is entitled to enforce the contract.

3. Collateral contract-In case of a contract is accompanied by a collateral contract, then the party to
the collateral contract can enforce the contract. For example, when a party ‘A’ purchases goods from ‘B’,
there is a contract between A and the manufacturer of that good.The doctrine of privity of contract is
subject to various debates despite being accepted in many jurisdiction. In the case Debnarayan Dutt vs
Chunilal Ghose “The Indian Contract Act is unlike the English Contract Act and the limits with which the
doctrine of privity of contracts operates in English law cannot, with the same vigor be applicable to the
Indian Contract Act.” As given in the definition of consideration in Section 2(d), as long as there is a
consideration it does not matter who has furnished it.

Q5) what is the standard form of contract?

Standard form of contract in lay-man term means ‘take it or leave it’ kind of contract, in this type of
contract the other party is not in position to negotiate with the terms and condition laid down in the
contract, party just have the option of either enter into the contract or forget about the contract. Thus,
the fundamental right to negotiate is affected by this type of arrangement popularly these type of
contract are known as adhesion or a boilerplate kind of contract. Most common type of standard form
of contracts are insurance company contract, on purchasing a washing machine, signing up for your e-
mail, social networking sites, etc.

Legal Status of Standard form of Contract (SFC)

Indian contract system does not have any specific differentiation between SFC and general contract, as
the SFC is a kind of contract which is govern by the laws provided for general contracts in Indian contract
Act 1872. Due to heavy industrial development these kind of contract has become common and are
executed in large numbers now a days. This had led to demand of formulation of fledge rules on
standard form of contract to protect the rights of the weaker party in standard form of contract.
However, in many countries judiciary is empowered to apply the principle of natural justice and give
good justice to the weaker party as it is in Israel there are certain provisions that may be cancelled by
court of law. Apart from courts some legislature have also made laws related to this kind of contract.
There are certain rules made by the legislature which seems to be unreasonable like in U.K, sec 3 of
Unfair Contract Terms Act 1977 limits the ability of drafter on consumer or limits the provision of
standard form of contract to the Drafter.

Why people accept Standard Form of Contract?

First reason why people accept SFC, they don’t read the contract clauses thoroughly as even after
reading they don’t find it worthy of giving so much time in writing down the clauses.In certain contracts,
there are clauses like if you accept the given terms and condition then they will tell the full terms and
condition of the contract.SFC kind of contract the party generally focus on the price mentioned in the
contract; he doesn’t really care about other different clauses which might be exploitative in
nature.Manufactured pressure on the party is created by another party to sign SFC, earlier all the
negotiation and the terms had been discussed orally and explained to them. So it becomes a kind of
bounding on the party to sign the contract.The major point SFC’s are that they are take it or leave basis,
so they don’t have any choice but to accept the contract.

Ways to limit exploitation from SFC

It is easy to exploit the party entering into standard form of contract, there are certain rules made to
protect the interest of the weaker party. Specific procedure has been mention in order to protect the
weaker party in SFC contract.

1. Reasonable Notice-A reasonable notice must be given by the person delivering the document to give
adequate information about the terms and condition laid down in the contract. This principle was
propounded in the case of Henderson V. Stevenson from House of Lords. Case facts were that, a person
buy a ship ticket on face of it only boarding place and arriving place was written on it but on its back side
there were certain terms and conditions which party didn’t see nor anything was written on face of it to
turn over and look at the back of ticket. Simple reason given by court was that a person cannot agree to
a term if he had not seen it or is not told of it.

Notice of the terms and condition should be given before or at the time of contract when it is to be
signed. As clearly said by Lord Denning it is duty of the party relying on a clause to its benefit to make it
clear to other party the terms and condition of contract in the famous case of Thornton V. Shoe Lan
Parking Ltd.

2.Contractual Document-For a standard form of the document, there must be a contractual document
signed between the parties in order to make it enforceable in court. The basic problem lies between
identifying the document as a contract document or as a receipt. Different between these two is, if the
document clearly explains the express and implied a condition in the document then it is a contractual
document if not then it is a receipt. The contract must be signed by the person accepting the terms and
conditions mentioned in the document. Misrepresentation, Fraud, Mischief and other elements which
makes a contract void should not present in the contract in order to make an agreement enforceable by
law.

3.Unreasonable or Unfair terms

Pointing out unreasonable terms in the contract can be one the protective safeguard for the weaker
party. Unreasonable terms of contract can be said about those terms in the contract which contradicts
the very purpose of the contract or are against the public policy. In Lilly White V. Mannu-Swami this
principle has been clearly explained in the case. In this case the laundry receipt contained a condition
that in case of loss or destruction of cloth only 15% money of the market price of cloth will be returned
these clauses were held unreasonable from the court and was held that the clauses were against the
public interest.

In the case of contract with the government certain points must be observed in order to prevent
exploitation of the other party in the contract. As the decision from the government had been taken in
bad faith. Decision is based on irrational or irrelevant consideration. Decision has been taken without
following the prescribed procedure in the system. If these things are not followed diligently contract will
be termed as irrelevant by the court and party will be protected by certain clauses against exploitation
of contracted party.

Theory of Fundamental breach

It’s one of the tools to protect the weaker party from exploitation through this theory. What happens in
theory there is a core or fundamental of the contract which is bounding on both parties to follow them
and if that is not followed then there will be a breach of contract. In the case of breach of contract the
weaker party will not be bound to follow the contract in case of breach of contract by other party. Test
of fundamental breach of contract can be done through sec 11 of 1977 unfair contract act which says
the contract will be void if it will not satisfy the reasonableness of the contract.

Exemption Clauses and Third Party

Under this clause we have to take a look at the doctrine of privity of contract which says that the
contract is between the two parties who have contracted with each other and no third party is entitled
to enjoy the right provided in the contract nor hold any liability.

As the third party does not hold any responsibility for the irregularity in the contract, he is not entitled
to any benefit from the contract.

Ambit and authority of Contract Act

Under the Indian contract, there is no such form or condition which is binding on the parties. Parties
may agree to contract in a particular mode which is not probihited under the law. Problem that is
prevalent in the Indian context is that there is no such specific rule provided in Contract Act, different
provision has been mentioned in different kinds of Act which govern activity of contract like specific
provision of railways act, public transport control by the government. Different kinds of rules provided
by the government to contract in coffee industry, tea plantation which is entered into by workers with
the industry.

Unit2

Q1)Explain the Capacity to Contract?

The phrase ‘Capacity to contract’ or ‘Contractual capacity’ refers to the legal competency of parties to
enter into a valid contract. In general, it delves into the question as to ‘who can enter into a contract
and who cannot’. Capacity is established by whether or not a person has achieved the age of majority
and whether or not they are mentally competent of comprehending the terms and conditions of the
contract. For instance, children have a restricted legal capacity to contract, meaning that they can only
engage in legal transactions in particular situations, which often involves the presence of a parent or
legal guardian. This is done because of their immaturity and lack of understanding of contractual
transactions, and to protect them from exploiters. The capacity to sign contracts, is moreover, a delicate
responsibility, since it requires an individual to legally commit himself or herself to several conditions
that might have financial or personal ramifications. This is why contractual capacity has limits.Simply
put, such capacity has the effect of binding the parties to the contract with a promise to abide by it. But
on failure to fulfil such promise, the defaulting party can be made legally liable and be sued in a court of
law. For this reason, only certain persons have been granted the competency or the capacity to make a
contract.This capability is also linked to individuals’ health conditions and mental stability at the time of
signing. So, individuals with mental disorders or significant psychological impairments are typically
deemed incapable of acting on behalf of others or even for themselves. The positions of various such
persons who are declared ‘incapable of contracting’ is discussed at length in this article.

According to Section 11, “Every person is competent to contract who is of the age of majority according
to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by
any law to which he is subject.”So, we have three main aspects:

1.Attaining the age of majority

2.Being of sound mind

3.Not disqualified from entering into a contract by any law that he is subject to capacity to contract

1] Attaining the Age of Majority

According to the Indian Majority Act, 1875, the age of majority in India is defined as 18 years. For the
purpose of entering into a contract, even a day less than this age disqualifies the person from being a
party to the contract. Any person, domiciled in India, who has not attained the age of 18 years is termed
as a minor.Let’s look at certain laws governing a minor’s agreement:

A Contract made with a Minor is Void

Since any person less than 18 years of age does not have the capacity to contract, any agreement made
with a minor is void ab-initio (from the beginning).Example, Peter is 17 years and 6 months old. He
needs some money to go on vacation with his friends. He approached a moneylender and borrows Rs
25,000. As security, he signs some papers mortgaging his laptop and motorcycle. Six months later, when
he attains the age of majority, he files a suit declaring that the mortgage executed by him when he was
a minor is void and should be cancelled. The Court agrees and relieves Peter of all liability to repay the
loan.A Minor can be a Beneficiary of a Contract

Contract by Guardian

Under certain circumstances, a guardian of a minor can enter into a valid contract on behalf of the
minor. Such a contract, which the guardian enters into, for the benefit of the minor, can also be
enforced by the minor.However, guardians cannot bind a minor by a contract for buying immovable
property. But, a contract entered into by a certified guardian of a minor, appointed by the Court, with
approval from the Court for the sale of a minor’s property can be enforced.

2] Person of Sound Mind

According to Section 12 of the Indian Contract Act, 1872, for the purpose of entering into a contract, a
person is said to be of sound mind if he is capable of understanding the contract and being able to
assess its effects upon his interests.It is important to note that a person who is usually of an unsound
mind, but occasionally of a sound mind, can enter a contract when he is of sound mind. No person can
enter a contract when he is of unsound mind, even if he is so temporarily. A contract made by a person
of an unsound mind is void.

3] Disqualified Persons

Apart from minors and people with unsound minds, there are other people who cannot enter into a
contract. i.e. do not have the capacity to contract. The reasons for disqualification can include, political
status, legal status, etc. Some such persons are foreign sovereigns and ambassadors, alien enemy,
convicts, insolvents, etc.

Q2)what is the position of a minor in a contract?

A minor refers to someone who has not yet attained the age of majority. In India, the age of majority is
18. However, a person whose person or property has been assigned to a guardian by the court remains
a minor until they reach the age of 21.A person under the age of 18 has no legal competence to engage
into a contract. Hence, a contract by a minor, or any agent acting on his behalf, is void ab initio, i.e., it is
invalid from its inception.

A Contract made with a Minor is Void

Since any person less than 18 years of age does not have the capacity to contract, any agreement made
with a minor is void ab-initio (from the beginning).Example, Peter is 17 years and 6 months old. He
needs some money to go on vacation with his friends. He approached a moneylender and borrows Rs
25,000. As security, he signs some papers mortgaging his laptop and motorcycle. Six months later, when
he attains the age of majority, he files a suit declaring that the mortgage executed by him when he was
a minor is void and should be cancelled. The Court agrees and relieves Peter of all liability to repay the
loan.Also, if a minor enters into a contract, then he cannot ratify it even after he attains majority since
the contract is void ab-initio. And, a void agreement cannot be ratified.

A Minor can be a Beneficiary of a Contract

While a minor cannot enter a contract, he can be the beneficiary of one. Section 30 of the Indian
Partnership Act, 1932, also specifies that while a minor cannot become a partner in the partnership firm,
the benefits of the firm can be extended to him.Example, Peter lends some money to his neighbour,
John and asks him to mortgage his house as security. John agrees and the mortgage deed is made
favouring Peter’s 10-year-old son – Oliver. John fails to repay the loan and Peter, as the natural guardian
of Oliver, files a suit against John to recover his money. The Court holds the case since a minor can be a
beneficiary of a contract.

A Minor is always given the Benefit of being a Minor

Even if a minor falsely represents himself as a major and takes a loan or enters into a contract, he can
plead minority. The rule of estoppel cannot be applied against a minor. He can plea his minority in
defence.

Contract by Guardian

Under certain circumstances, a guardian of a minor can enter into a valid contract on behalf of the
minor. Such a contract, which the guardian enters into, for the benefit of the minor, can also be
enforced by the minor.However, guardians cannot bind a minor by a contract for buying immovable
property. But, a contract entered into by a certified guardian of a minor, appointed by the Court, with
approval from the Court for the sale of a minor’s property can be enforced.

Insolvency

A minor cannot be declared insolvent as he cannot avail debts. Also, if some dues are pending from the
properties of the minor and he is not personally liable for the same.

Joint contract by a Minor and an Adult

In case of a joint contract between an adult and a minor, executed by the guardian on behalf of the
minor, the liability of the contract falls on the adult.

Effect of a Minor’s Agreement

1.Doctrine of Estoppel: Not Applicable

The rule is that an estoppel action cannot be brought against a minor. Even if he falsely represented that
he had reached the age of majority when the agreement was made, he is permitted to plead minority as
a defense to escape responsibility under the agreement. The rationale behind this is that giving effect to
the doctrine of estoppel would mean enforcing an otherwise void agreement and would defeat the
substantive principles of the Statute. Section 115 of the Indian Evidence Act, 1872, lay down the law of
estoppel but the Indian Contract Act makes it clear that a minor is incompetent to contract thus a minor
cannot incur liability under any contract and the rule of evidence cannot be invoked to defeat this
section.

2.Ratification: Not Allowed

Because a minor’s agreement is invalid from its inception, it cannot be confirmed by ratification after
the minor has reached the age of majority. A void contract is like a dead letter and cannot be revived,
nor can it serve as a consideration for a subsequent promise. Thus, an agreement entered into by a
minor cannot be ratified.However, if a person receives part of the benefit while still in his minority and
part after reaching the majority, a commitment to pay for both made after reaching the majority is
legitimate and enforceable. So, while a contract made by a minor is void, it is perfectly legal for such a
person to continue the transaction begun during his or her minority, after reaching majority, in such a
way as to commit oneself for the entire transaction.

3.Liability for Compensation

The question of Compensation finds mention under sections 64, 65 and 70 of the Indian Contract Act on
one hand, and under sections 39 and 41 of the Specific Relief Act, 1963 on the other. According to the
current position, a minor cannot be made liable under sections 64 and 65 as these sections apply to only
those who are competent to contract in the first place. With regard to section 70, it has been observed
in State of W.B. v. B.K. Mondal & Sons[3], “ The minor is excluded from the operation of Section 70 for
the reason that his case has been specifically provided for by Section 68…”.

If a minor sues as a plaintiff to get the instrument cancelled, or claims relief, he can be asked to
compensate the defendant in the interest of equity, so as restore the position before the contract took
place.A minor could be asked to compensate the ill gains even when the property cannot be traced.

4.Minor as an agent:

Agent acts as a connector between the principal and third party. Minor can be appointed as an agent
but he is not personally liable for his actions. He is personally not liable for his actions as he has not
sufficient knowledge for his acts. He is doli incapax that is not able to understand whatever he is doing.
He is also will no be responsible to his principal. Different types of agent like brokers, auctioneers etc.
There is a creation of the agency, either by express or implied contract it means the principal may
appoint an agent through writing or an orally.

5. Minor as an insolvent:

Firstly, understand the meaning of term insolvent means when the liabilities of a person are more than
the assets. A minor cannot be declared as an insolvent. This so because all agreements with minor is
absolutely void.
6. Minor as a partner:

A partnership is defined as the relation between persons who have agreed to share the profits of a
business carried by an all or any of them acting for all. Sec 30, Partnership Act, provides that though a
minor cannot be a partner in a firm, but with the consent of all the partners, for the time being, he may
be admitted to the benefits of partnership by an agreement executed through his guardian with the
other partner. So, minor cannot become a partner in the firm but he enjoys all the benefits of a firm
with the consent of all other partners. If the majority of the partners agrees or give consent that minor
enjoys the benefits of the firm then he can enjoy or otherwise not. The minor has the right to inspecting
the taking copies of the books of account of the firm. On attaining the majority or on knowing that he
had been admitted to the benefits of partnership, whichever is later, the minor must decide within six
months whether he would like to become a partner in the firm and give public notice of his decision. If
he fails or remains silent to give such a notice, it will be presumed that he has elected to be a partner in
the firm. As after attaining the age of majority, it is presumed that he becomes doli capax means able to
understand the nature and consequence of his act.

7.Liability for Necessaries

According to Section 68 of the Indian Contract Act of 1872, if a person is unable to enter into a contract
and gets necessaries that are suitable for his or her position in life from another person, he or she has
the authority to compensate the person who provided the necessaries. Reimbursement is permitted
from the estate of such an incapable person.Despite the fact that section 68 holds minor responsible for
the necessaries, it does not specify the meaning of necessaries. In fact, necessaries encompass all
necessities as well as additional requirements that are to the infant’s reasonable advantage and
comfort, based on his or her social and economic standing.

8.In a Contract of Marriage

A contract for a minor’s marriage is presumed to be for his or her advantage. In India, parents amongst
certain communities contract the arranged marriage of their minor son or daughter. This custom has
been accepted in law, provided it does not violate any statute. For instance, the age of the girl must be
at least 18 years and that of the boy must be at least 21 years as per the Hindu Marriage Act, 1955 on
the date fixed for marriage. Similarly, under Muslim Law, the girl and boy must have attained puberty. If
the age falls before the stipulated lower limit, the contract can be avoided.[9]

9.Under Negotiable Instruments

According to section 26 of the Negotiable Instruments Act, 1881, a minor is authorized to draw, indorse,
deliver and negotiate a negotiable instrument (e.g., Bill of Exchange, Cheque, etc.). In doing so, a minor
can bind all the parties, save himself or herself. That is to say, he or she wouldn’t incur any liabilities as a
promise, payee, indorser, etc.

10.Position of a Minor in a Contract of Agency

It is important to highlight that even if a minor enters into contractual agreements through an
authorized agent acting on his behalf, the agreement would still be considered void.So, a contract which
is entered by a minor (acting as a principal) through his agent is void. The rationale behind this is that ‘an
agent is said to act on behalf of the principal’; so, it would mean enforcing a contract by a principal who
is a minor, viz., someone not allowed by law to contract.Although the minor cannot act as a principal, he
or she can be an agent as an agent functions only as a connecting link between two parties. Moreover,
he can be absolved from liability as an agent on account of his minority.

11. Restoration of Money or Property:

Sometimes, a minor receives some money or property by falsely representing their age. In such cases,
the minor can be asked to restore such money or property so long as traceable in his possession.

Nature: Minor’s Agreement

1. Void – ab –initio-Void-ab- Initio means void from the very beginning. So, the contracts made by a
minor are considered to be as void-ab-initio. These contracts are not valid. An agreement with a minor
does not create any legal rights and obligations between the concerned parties.A minor is absolutely
incompetent to contract; the agreement with minor considered as void -ab-initio,An agreement with the
minor considered as voidable, the minor is not liable but the other party is liable.Minor’s agreement was
held to be void ab initio and that plaintiff cannot be made to repay the amount back to the defendant.
Minor was allowed to plead his minority and hence, the agreement was made void.

Law of estoppels, as stated in Section 115, Indian Evidence Act, was not applicable in this case, as the
attorney had the knowledge of the true facts and was not misleading.

Section-64 says that if a contract is voidable at the option of a party, rescinds it, the other party need
not perform the promise and the party rescinding it, must restore the benefits accrued by him under the
contract to another party. The Privy Council held that this Section would not be applicable in the case
because it relates to voidable contract and not void contracts. Moreover, the section pertains to
competent parties, and not incompetent parties making a contract as in the present case.

Section 65, which says that benefits, if any, accrued through a void agreement, must be restored to the
other party. The Council rejected the applicability of this section too in the present case and held that
minor cannot be asked to repay back the loan amount.

The defendant claimed refund of loan money even under Section 41, Specific Relief Act, 1877, which
requires the party to whom relief is granted to make any compensation to other on the adjudication of
cancellation of an instrument. The Privy held that since knowledge of infancy was known to attorney,
the return of the money advanced to the minor was not required.

Hence, an agreement made with a minor is void ab initio.

Q3)explain the position of a person of unsound mind in contract?

According to section 12 of the Indian Contract Act of 1872, “A person is said to be of sound mind for the
purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of
forming a rational judgment as to its effect upon his interests.”

From this definition, a person of ‘unsound mind’ can be interpreted to be someone who isn’t capable of
understanding the nature and consequences of the contract. It may include a drunken person, insane
person, a lunatic etc. Further, even a normal person, who is incapable of understanding the nature of
the transaction can be deemed as a person of ‘unsound mind’ or an idiot. In the case of Inder Singh v.
Parmeshwardhari Singh[10], a property valued around Rs.25,000 was agreed to be sold for only Rs.7000.
His mother demonstrated that he was a “congenital idiot,” incapable of comprehending the transaction
which he spent much of his time wandering about.

This definition also applies to ‘imbeciles’. However, in Lingaraj v. Parvathi[11], it was noted that mere
‘weakness of intellect’ does not come under the ambit of the definition of unsound mind, and that mere
simplicity of mind would not mean that a person is of ‘unsound mind’. In the same manner, ‘loss of
memory’, or ‘absent mindedness’ due to old age cannot mean the same as ‘unsoundness of mind’.[12]

To establish unsoundness of mind, medical evidence of mental disorder need not be proved; simply, it
could be proved that the person was not conducting himself or herself reasonably, and not able to judge
the consequences of the act, thereby acting to his or her detriment.

A contract made with, or entered into by a person of ‘unsound mind’ is absolutely void. However, as
regards the position of a person of unsound mind to contract, the following points must be noted:

1.A person who is usually of unsound mind can make a contract when he is of sound mind.

2.A person who is usually of sound mind cannot enter into a contract when he is of unsound mind.

3.It must be noted that the onus to prove unsoundness of mind lies upon the person(s) who allege such
state of mind of the person.

According to Section 11 of the Indian Contract Act 1872, Persons of unsound mind are not competent
to Contract.

Unsound Mind- Section 12 of the Indian Contract Act 1872, "a person is said to be of sound mind for
the propose of making a contract, if, at the time when he makes it, he is capable of understanding it and
of forming a rational judgment as to its effect upon his interest.

Contracts of persons of unsound Mind

1) Lunatics: A lunatic is a person who is mentally deranged due to some mental strain or other personal
experience. He suffers from intermittent intervals of sanity and insanity. He can enter into a contract
during the period when he is of sound mind. In India a Lunatic's Contract is void.
2) Idiots: An idiot is a person who has completely lost his mental power. He does not exhibit an
understanding of even ordinary matters. Idiocy is permanent whereas lunacy denotes periodical insanity
with lucid intervals. An agreement of an idiot, like that of a minor and it is void.

3) Drunken or intoxicated persons: A drunken person who suffer from temporary in capacity to
contract. for example: at the time when he is so drunk that he is incapable of forming a rational
judgment. The position of a drunken person is similar to that of a lunatic.

A person who is usually of unsound mind, but occasionally of sound

mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but
occasionally of unsound mind, may not make a contract when he is of unsound mind.

Q4)what is free consent?

Free Consent In the Indian Contract Act, the definition of Consent is given in Section 13, which states
that “it is when two or more persons agree upon the same thing and in the same sense”. So the two
people must agree to something in the same sense as well. Let’s say for example A agrees to sell his car
to B. A owns three cars and wants to sell the Maruti. B thinks he is buying his Honda. Here A and B have
not agreed upon the same thing in the same sense. Hence there is no consent and subsequently no
contract.

Now Free Consent has been defined in Section 14 of the Act. The section says that consent is considered
free consent when it is not caused or affected by Coercion,Undue
Influence,Fraud,Misrepresentation,Mistake

Elements Vitiating Free Consent

1] Coercion (Section 15)-Coercion means using force to compel a person to enter into a contract. So
force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent.
Section 15 of the Act describes coercion as

a.committing or threatening to commit any act forbidden by the law in the IPC

b.unlawfully detaining or threatening to detain any property with the intention of causing any person to
enter into a contract

For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B
sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion.

Now the effect of coercion is that it makes the contract voidable. This means the contract is voidable at
the option of the party whose consent was not free. So the aggravated party will decide whether to
perform the contract or to void the contract. So in the above example, if B still wishes, the contract can
go ahead.
Also, if any monies have been paid or goods delivered under coercion must be repaid or returned once
the contract is void. And the burden of proof proving coercion will be on the party who wants to avoid
the contract. So the aggravated party will have to prove the coercion, i.e. prove that his consent was not
freely given.

2] Undue Influence (Section 16)-Section 16 of the Act contains the definition of undue influence. It
states that when the relations between the two parties are such that one party is in a position to
dominate the other party, and uses such influence to obtain an unfair advantage of the other party it
will be undue influence.The section also further describes how the person can abuse his authority in the
following two ways,

a.When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary
relationship with the other person

b.He makes a contract with a person whose mental capacity is affected by age, illness or distress. The
unsoundness of mind can be temporary or permanent

for example A sold his gold watch for only Rs 500/- to his teacher B after his teacher promised him good
grades. Here the consent of A (adult) is not freely given, he was under the influence of his teacher.

Now undue influence to be evident the dominant party must have the objective to take advantage of
the other party. If influence is wielded to benefit the other party it will not be undue influence. But if
consent is not free due to undue influence, the contract becomes voidable at the option of the
aggravated party. And the burden of proof will be on the dominant party to prove the absence of
influence.

3] Fraud (Section 17)-Fraud means deceit by one of the parties, i.e. when one of the parties deliberately
makes false statements. So the misrepresentation is done with full knowledge that it is not true, or
recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free
consent.So according to Section 17, a fraud is when a party convinces another to enter into an
agreement by making statements that are suggesting a fact that is not true, and he does not believe it to
be true the active concealment of facts a promise made without any intention of performing it any other
such act fitted to deceive,.example. A bought a horse from B. B claims the horse can be used on the
farm. Turns out the horse is lame and A cannot use him on his farm. Here B knowingly deceived A and
this will amount to fraud.

One factor to consider is that the aggravated party should suffer from some actual loss due to the fraud.
There is no fraud without damages. Also, the false statement must be a fact, not an opinion. In the
above example if B had said his horse is better than C’s this would be an opinion, not a fact. And it would
not amount to fraud.

4] Misrepresentation (Section 18)-Misrepresentation is also when a party makes a representation that

is false, inaccurate, incorrect, etc. The difference here is the misrepresentation is innocent, i.e. not
intentional. The party making the statement believes it to be true. Misrepresentation can be of three
types

a.A person makes a positive assertion believing it to be true

b.Any breach of duty gives the person committing it an advantage by misleading another. But the breach
of duty is without any intent to deceive

c.when one party causes the other party to make a mistake as to the subject matter of the contract. But
this is done innocently and not intentionally.

5.Mistake-A mistake is an erroneous belief that is innocent in nature. It leads to a misunderstanding

between the two parties. Now when talking about a mistake, the law identifies two types of mistakes,
namely A Mistake of Law,A Mistake of Fact,Mistake of Law and Mistake of Fact

a.Mistake of Law-This mistake may relate to the mistake of the Indian laws, or it can be a mistake of
foreign laws. If the mistake is regarding Indian laws, the rule is that the ignorance of the law is not a
good enough excuse. This means either party cannot simply claim it was unaware of the law.The
Contract Act says that no party shall be allowed to claim any relief on the grounds of ignorance of Indian
law. This will also include a wrong interpretation of any legal provisions.However, ignorance of a foreign
law is not given a similar treatment. Ignorance of the foreign law is given some leeway, the parties are
not expected to know foreign legal provisions and their meaning. So a mistake of foreign law is in fact
treated as a mistake of fact under the Indian Contract Act.

b.Mistake of Fact-Then there is the other type of mistake, a mistake of fact. This is when both the
parties misunderstand each other leaving them at a crossroads. Such a mistake can be because of an
error in understanding, or ignorance or omission etc. But a mistake is never intentional, it is an innocent
overlooking. These mistakes can either be unilateral or bilateral.

c.Bilateral Mistake-However, to render an agreement void the mistake of fact should be about some
essential fact that is of importance in a contract. So if the mistake is about the existence of the subject
matter or its title, quality, quantity price etc then it would be a void contract. But if the mistake is of
something inconsequential, then the agreement is not void and the contract will remain in place.For
example, A agrees to sell to B his buffalo. But at the time of the agreement, the buffalo had already
died. Neither A nor B was aware of this. And so there is no contract at all, i.e. the contract is void due to
a mistake of fact.

d.Unilateral Mistake

A unilateral mistake is when only one party to the contract is under a mistake. In such a case the
contract will not be void. So the Section 22 of the Act states that just because one party was under a
mistake of fact the contract will not be void or voidable. So if only one party has made a mistake of fact
the contract remains a valid contract.However, there are some exceptions to this. In certain conditions,
even a unilateral mistake of fact can lead to a void or voidable agreement. Let’s see a few of these
exceptions via some examples and case studies.When Unilateral Mistake is as to the Nature of the
Contract: In such a case the contract can be held as void.

When the Mistake is regarding the Quality of the Promise: There was an auction being held by A to sell
hemp and tow. B thinking the auction was only for hemp, mistakenly bid for a tow. The amount bid was
on par for hemp but very high for a tow. Hence the contract was held as voidable.Mistake of the Identity
of the Person contracted with: For example, when A wants to enter into a contract with B but
mistakenly enters into a contract with C believing him to be B.

Q5) Difference between Coercion and Undue Influence?

1.Through coercion, by committing an offence or threatening to commit an offence, consent is gained.

But Under the undue influence, consent is gained by suppressing other party’s will.

2.Coercion is typically physical in nature, in order to obtain consent, it requires a physical force of violent
nature.

But Undue influence is immoral in nature, using mental pressure to gain consent.

3.Coercion includes a criminal act and is punishable under the IPC by a person who commits coercion.
But Undue Influence requires unlawful act and is not punishable under the IPC by a person who
has done undue influence

4.Coercion does not involve a party’s relationship.

But Undue influence can only be exerted if there is a relationship between two-party.

5.When coercion induces consent to an agreement, the agreement is null and void at the option of the
party whose consent is induced.

But When consent to an agreement is caused by undue influence, it becomes null and void at the
discretion of the individual whose consent has been so affected.

Q6) The distinction between fraud and misrepresentation ?

1.A fraudulent act intentionally committed by one party to induce the other party to enter into the
contract is referred to as fraud.

But Misrepresentation is known as the representation of an innocent mistake, which persuades other
parties to enter into the contract.

2. fraud comes under Section 17 of the Indian Contract Act, 1872.

But misrepresentation Section 18 of the Indian Contract Act, 1872

3. In fraud, the party making the representation knows that the declaration is not true.
But In misrepresentation, the party making the representation considers the statement made by him to
be valid, which later turned out to be false.

4.The aggrieved party is entitled to claim damages in fraud.

But The aggrieved party has no right to sue for damages to the other party in misrepresentation.

5.in fraud The contract is voidable even if in usual diligence the truth can be found.

But in misrepresentation If the truth can be found with reasonable diligence, then the contract is not
voidable.

Q7) brief exaplanation of Agreement In Restraint Of Marriage Under Common law?

Agreements in Restraint of Marriage

According to Section 26 of the Indian Contract Act, all agreements in restraint of marriage except that of
a minor are void. Romans were the first to delegitimize agreements that were in restraint of marriage.
The basis of making agreements in restraint of marriage void is that marriage is a sacrament and nothing
should interfere in the institution of marriage, not even contracts. The idea behind this provision is to
not snatch away the personal right of every individual to marry someone of their own choice. It is
important to note here that according to the section, agreements in restraint of marriage of a minor are
not void.

Illustrations

A person Susan agrees with John, in return for some consideration, that she will not marry a certain
person Mark. This agreement is one in restraint of marriage and is thereby void.

Tina’s father promises a person Rahul, that he won’t marry his daughter Tina to anyone else but he, if
only he would pay a sum of Rs. 20,000 per month until their wedding date. This is a void agreement, as it
is in restraint of marriage of a person of age.

Section 26 of Indian Contract Act (Features)

1. The basic notion underlying this provision is to reinforce the right granted by Article 21 of the Indian
Constitution i.e. to proscribe every possible deed that may snatch away the liberty of either party to
marry a person of his own choice.

2.The agreement in restraint of marriage is void as in the first place, it is contrary to public policy.
Secondly, the law constrains all kinds of inference in the institution of marriage even it may be in the
form of agreement.

3. An agreement that serves to hold either the partial or absolute restraint of marriage is void, unlike
Section 28 of Indian Contract Act, which denounces agreements only in complete restraint of legal
proceedings as void. Besides, it is pertinent to note that the English common law allows the agreement
in partial restraint of marriage.
4. All the agreement in the restraint of marriage is void, but such agreements that impose marriage
limitations on a minor could be exalted to the valid status.

Case laws

The case of Lowe v. Peers set a precedent in the law relating to restraint of marriage. In this case, the
defendant contended that if he marries any other person except the plaintiff, he would give her 1000
pounds within three months of his marriage. It was held that such an agreement is void.

In the recent case of Shrawan Kumar v. Nirmala, the petitioner filed a suit in the Allahabad High Court
asking the court for an injunction on the defendant’s marriage to the other person. The plaintiff
contended that the defendant had promised to marry him, and therefore her marriage with the other
person should be injuncted against. Pankaj Mithal, J. cited Section 26 of the Indian Contract Act, 1872
while pronouncing his judgment, whereby he dismissed the petition.

Conclusion:Reiteratively, as per the scheme of Section 26 of the Indian Contract Act, in general, all the
agreement in restraint of marriage is void regardless of whether it imposes partial or absolute
limitations on marriage that challenges the fundamental right granted under Article 21 of the Indian
constitution. The only exception that has been mentioned in the Section itself is that the agreement in
restraint of minor marriage; it is valid as the minor marriages are against the collective social policy and
public interest.

Q8) briefly explain Agreements in Restraint of Trade?

Agreement in restraint of trade is void under Section 27 of the Act. That is, any agreement that debars
one person from starting or continuing his trade or profession, in return for some consideration is void.
Therefore, any agreement stopping a person from trading in the manner he likes or wherever he likes,
on an agreement with other party, in which the other party benefits from him stopping his trade or
profession, will be called an agreement in restraint of trade. Apart from two exceptions, which we will
discuss below, all agreements in restraint of trade are void. The two exceptions lie in Sale of Goodwill
and Partnership Act.

Common Law-The background for delegitimizing an agreement in restraint of trade lies in the history of
conflict between free markets and the freedom of contracts. Ensuring freedom to the contract would
mean legitimizing agreements in restraint of trade, which would result in parties agreeing to curb
competition. Under the common law, the current position is derived from the case of-In this case,
Thorsten Nordenfelt was a manufacturer of guns in Sweden and England. Thorsten sold his business to a
company, which then transferred the business to Maxim Nordenfelt. At this time, Thorsten entered into
an agreement with Maxim that he would not engage in the manufacture of guns for 25 years, other than
what he manufactures on behalf of the company. Later, Thorsten broke his vow claiming that the
agreement was not enforceable as it was in restraint of trade. The decision of the court was in
Thorsten’s favour.

In common law, a test of reasonability is followed. An agreement in restraint of trade is valid, if:
1.There is a valid interest that the party imposing the restraint is trying to protect.

2.The restraint is no more than that which is necessary to protect this interest.

3.Restraint is not contrary to public interest.

Position in India-Section 27 of the Indian Contract Act declares all agreements in restraint of trade, void
pro tanto, with the only exception being Sale of Goodwill. Yet, it is important to understand that these
agreements are void, not illegal. Which means, these agreements are not unlawful to make, they are
just not enforceable in a court of law if either of the parties fails to perform his part of the agreement.
Unlike the common law, even partial agreements in restraint of trade or reasonable restraint are not
valid under the Contract Act.

Exceptions to Restraint of Trade

Section 27 of the Act mentions only one exception validating restraint of trade, i.e., Sale of Goodwill.
Another exception is found in the Partnership Act.

What is a Sale of Goodwill

Goodwill is an intangible asset of a firm, that is, it exists, yet it is not material or physical. It essentially
means the reputation or status of the firm in society. Goodwill has its origin in brand value, employee
morale, reputation, customer advantage etc. It is an important asset because a customer is expected to
engage with the same favorable firm, that he was engaged with earlier, because of its name and
reputation. This why Goodwill of a firm holds a value.

Like other assets of the firm, the goodwill of the firm can also be sold. Once the goodwill of a firm is
sold, the buyer acquires some rights:

1.He/she can use the firm’s name.

2.He/she can represent the firm.

3.He/she can restrain the seller of the goodwill from being in contact with the previous customers of the
firm.

After a sale of goodwill, the seller continues to enjoy the right to carry out a competing business. But, in
case,it is agreed upon through a contract that the seller will not enter into any such agreement, such
rights extinguish.

Conditions that make restraint of trade valid

There are certain conditions that make a restraint on trade during a sale of goodwill valid, these are:

1.The seller can be restrained only from carrying out a similar business.

2.The restraint can be applied only to certain local limits.

3.The limits/restraint should appear to be reasonable.

Partnership Act

Another exception to the rule of limitation on agreements in restraint of trade is provided under the
Partnership Act, 1932. The Act lays down three exceptions. These are:

1.An agreement with a partner of the firm to not carry out his own business so long as he/she is a
partner in the said firm will be valid under Section 11 (2) of the Partnership Act.

2.An agreement between partners to not engage in a similar business as that of the said firm within
specified territorial and time limits (period of restraint). (Section 36 (2))

3.In anticipation of dissolving the firm, the partners may come to an agreement in restraint of carrying
out a similar business within specified territorial and time limits so long as this restraint is reasonable.

Case-Firm Daulat Ram vs. Firm Dharm Chand In this case, two similar business owners, in a partnership,
came to an agreement that only one of their factories would work at a time and the profit will be shared
between them. This restraint was held to be valid.

Q9)briefly explain Agreement in Restraint of Legal Proceedings?

Any agreement between the two parties that debars either or both of them from going to a court of law
in case of non-compliance of the contract, is a void agreement. Section 28 of the Indian Contract Act
says that any agreement that restricts an aggrieved party from enforcing his rights to approach a
relevant court or tribunal in case of a breach of contract, or limits the time within which he may do so, is
a void agreement. It further says, any agreement that extinguishes the rights of any party or discharges
either of the parties from liability is a void agreement.In simple terms, all agreements are void, if:

1.They render it invalid, by agreement, for a party to approach a relevant court or tribunal if the parties
rights have been violated.

2.Limit the time within which the aggrieved party can approach such a court or tribunal.

3.Make a party immune from liability by agreement.

Exceptions

There are two exceptions to Section 28, as mentioned in the Act. Agreements in restraint of legal
proceedings are valid, if:

1.A future dispute or a past dispute is referred to arbitration. That is if there is an arbitration clause in
the said agreement.

2.Agreements stating the limit of time as per the Limitation Act, 1963. For instance, as per the Limitation
Act, 1963, a suit for breach of contract may be brought within the period of three years from the date of
the breach.
Case-Food Corporation of India v. New India Assurance Co. Ltd.In this case, the Supreme Court held that
the terms of an agreement should not be so construed as to bar the other party from seeking the
remedy of the suit.

10) briefly explain Certain and ambiguous agreement?

Section 29 provides the meaning of an agreement that should be clear on the face of it, as shown in
Kovuru Kalappa Devara vs Kumar Krishna Mitter [1], but the effect can be provided to the contract if its
meaning is found with reasonable clearness. If this is not possible then the contract would not be
enforceable. Merely difficulty in interpretation will not be considered as vague. The principle can be
formulated as a party who seeks remedy from court for breach of a contract, the obligation must be
able to identify the obligation with sufficient precision to justify the remedy. The law thus stated is more
flexible, and recognizes that different levels of certainty may be needed for the remedies. In case of an
agreement to sell immovable property, if the property cannot be identified with the certainty and there
is no consensus between the parties as regards the price payable, there could not be no concluded
contract between the prospective purchasers of flats and the builders.

Concluded Contract-As stated in The parties should make their own contract and the court will not
construct a contract for parties when the terms are indefinite or unsettled. The court must first be
satisfied that the parties have a concluded contract, before seeking to make certain terms.

Capable of Being Made Certain

A contract out of which more than one meaning, when constructed, can produce in its application more
than one result will not be void for uncertainty. A contract will be void for uncertainty only if its essential
terms are uncertain or incomplete unless the uncertain part being not essential is severed, leaving the
balance of the agreement intact. To ascertain what is essential and what is not, one must look into the
intention of the parties. There is no concluded contract when an essential or critical terin is expressly
left to be settled by future agreement of the parties. Also, there will not be a binding contract where the
language is obscure and incapable of any definite meaning.An agreement that provides for the future
fixation of price by the parties or by a third party is capable of being certain and is valid under Section
29. Such a contract will not be void for uncertainty.

Resolving Uncertainty

The courts are reluctant to hold a contract void for uncertainty of any provision that is intended to have
legal effect as given in Brown v Gould [3]. It has been emphasized that it must always be in such a way as
to balance matters that, without violating essential principles, man’s dealings are treated as effectively
as possible and that the law cannot be accused of destroying bargaining.

But the courts will not undertake to supply defects or remove ambiguities according to its own notions
of what is reasonable as it would not be to enforce a contract by parties but to make a new contract for
them.

Implying Terms
A contract that is intended to be binding may be enforceable even though certain terms have not been
precisely agreed if the nature of the terms can be ascertained by implication. The courts construe
business agreements fairly and broadly and imply terms to the extent that is necessary to give business
efficacy to the transaction.

Commercial Agreements

Commercial documents are sometimes expressed in language which does not have a clear meaning. This
was seen in Dhanrajamal Gobindram vs Shamji Kalidas And Co.[5]. Cases of commercial contracts are
different as there are standards of commercial custom and usage to appeal in deciding what terms are
just and reasonable. Words that are grammatically meaningless may be found used in a mercantile
sense and constructed accordingly. The mere fact that it is difficult to interpret a commercial contract is
not fatal, nor is difficulty synonymous with ambiguity so long as to any definite meaning can be
extracted. A contract is not necessarily ineffective because it is open to more than one meaning if the
meaning intended can be ascertained.

Custom and Trade Usage

As given in the Indian Evidence Act 1872, vagueness apparent on the face of the contract may be
resolved by reference to the custom or trade usage. A commercial contract for the sale and purchase of
American cotton was not void for vagueness or uncertainty by reasons of a clause ‘subject to the usual
force majeure clause’.

Previous Course of Dealings

In Lani Mia vs Muhammad Easin Mia [7], a covenant for renewal of lease which did not specify the
period or rent must be presumed to be for the same period and the rent as the original lease and is not
void for uncertainty.

Reasonableness

Where an intention to transact is clear, which is the intention to buy and sell, the terms can be
determined by the standard of reasonable. This may be implied by law as Section 46 of the Act. When
goods are sold without naming a price, the agreement is understood to be for payable of a reasonable
price. Where the remuneration in a contract of service was to be fixed by the employer, the contract
was enforceable and the rate fixed on basis of what is fair and reasonable. But a condition for the
purchase of a motor van to be partly paid on hire purchase terms over a period of two years was held to
be indefinably too vague to constitute a binding contract in Scammell v Ouston , it was held that where
remuneration in a contract service was to be fixed by the employer, the contract was enforceable , and
the rate fixed on the basis of what was fair and reasonable.

Performance Executed

The degree of certainty required for creating obligations varies according to the whether the transaction
remains wholly executory or has been party formed or acted upon. Whether the alleged agreement has
been wholly or partially executed that is performed by any party the very fact of the performance being
executed may itself lead to the conclusion that agreement is binding as in Hart v Hart [8].

For example as in the case of many commercial contracts two parties continue to send each other
counter offers after they comment performance. A Court may decide that there is a contract one of the
following places-

(i)- The terms agreed with the court’s idea of of what are reasonable terms being supplied to fill all areas
of omission or disagreement;

(ii)- The entire contract being constructed on what the court thinks is reasonable, the terms which the
parties have agreed being evidence of what is reasonable in the circumstances.

Machinery for Ascertainment

A contract would not be vague if it provides machinery for ascertaining a term. In Damodhar Tukaram
Mangalmurtiand v The State Of Bombay [9], the renewal clause contained a provision which said
“subject to such fair and equitable enforcement as the lessor shall determine”. The clause was not held
vague or uncertain. In Talbot v Talbot [10], the provision in a will giving option to the beneficiaries under
the will to purchase the farms in which they live at a reasonable valuation was enforceable.However the
High court of Australia in Hall v Busst [11], held by majority that the words reasonable sum to cover
depreciation as uncertain and therefore unenforceable. In Milnes v Gery [12], an agreement to sell at a
fair valuation was also held to be uncertain.

Severance of Uncertain Part

Where there is agreement on all substantial terms, the court may disregard a subsidiary term on the
grounds that it is meaningless as in Nicolene ltd v Simmonds. But this rule cannot be applied to a major
term, which was seen in Kingsley & Keith, Ltd. v. Glynn Brothers (Chemicals), Ltd. [13], or subject to a
war clause or to force majeure conditions, or an option on terms to be agreed.

Agreements Held Certain

In S.R. Varadaraja Reddiar vs Francis Xavier Joseph Periaria [14], it was held that where both the parties
were fully aware of the identity of the property to be conveyed under the agreement, the agreement
would not be uncertain merely because the exact boundaries, survey number or location were not
mentioned in the agreement, if the identity of the property could be reasonably ascertained there form.
In Mithu Khan vs Pipariya wali [15], an agreement for sale of land with the name of the land but without
its survey number or are was not void for uncertainty.

What Is an Ambiguous Contract?

A contract is considered to be ambiguous if the contract is reasonably subject to more than one
interpretation. Sometimes, this can mean that it’s unclear as to what the parties intended overall. But
usually, an ambiguous contract means that a specific term, word, phrase, or definition is vague or
unclear.If a contract is ambiguous, it can sometimes be resolved by the parties through further
discussions. If not, it may be necessary to have the document reviewed in court to have the issues
resolved. Ambiguity in contract law can result in a void or voidable contract, depending on the type of
ambiguous language identified in the agreement. A contract might be ambiguous if the language itself,
i.e. a specific term, word, or phrase, is reasonably subject to more than one interpretation. Moreover, if
one of the parties is unclear as to what is expected of him, then that party can make an argument that
the contract is ambiguous.If one of the parties has communicated to the other party that the terms are
ambiguous, then the parties could try to resolve the ambiguous terms. If, however, the parties can’t
agree amongst themselves, then one of the parties might bring a legal contractual dispute against the
other party for breach if the defendant party isn’t performing under the contract.

For example, assume that a homeowner enters into a contract with an electrician to conduct work
throughout the home. The contract indicates that the services must be rendered in June. The
homeowner is interpreting the language to say that the services must be rendered and complete by
June 30; however, the electrician might be interpreting the language to say that he must begin the work
in June but that doesn’t necessarily mean that he needs to have the work complete by June 30.

How Do Courts Treat Ambiguous Contracts?

Usually, if there is no evidence of fraud or misrepresentation between the parties, a court will allow the
parties to rewrite the contract in order to resolve the ambiguity. When engaging in contract
interpretation, a court might use the following to help them understand the parties’ intentions:

Common Usage: Vague words can be clarified using the common usage of the term, or the dictionary
meaning. This is useful for everyday, non-technical terms.

Parol Evidence: Parol evidence refers to oral agreements that were reached prior to the formal signing
of the contract (as in negotiations). In some cases parol evidence can be introduced in court, though
this may vary by case

Industry Usage: Courts may have to rely on the way a word is commonly used in a particular industry.
This is common for words that have a highly technical meaning specific to a certain industry or business

Prior dealings: Ambiguities can be resolved by examining how the parties used the term in the past. This
is good for when the parties have had consistent interactions in the past

Reasonableness: Courts will also factor in whether one interpretation is more reasonable than another.
If an interpretation leads to an impossible or unlikely outcome, a different interpretation will be favored.

Implied Meanings: A court may simply “fill in the blank” and imply that a word has a certain definition,
especially where terms were left blank. However, they will avoid this if it is certain that the parties
intended the contract to be silent on a certain point

Also, in most jurisdictions, ambiguous contracts are said to be resolved “against” the party that drafted
the contract. The party that did not write the contract will sometimes receive the benefit of the doubt
regarding ambiguities. This is because it is assumed that the party that drafted the contract may have
more knowledge and bargaining power compared with the other.

Finally, courts may sometimes avoid resolving ambiguous contracts in ways that would lead to
unnecessary hardship for one of the parties. This is common where one party has significantly more
experience or bargaining leverage than the other.

Writing: It’s best to put all the contract terms in writing.

Different Meanings: If a particular term or phrase has two meanings, make sure that it means the same
meaning for both parties and make a note of any alternative meanings.

Other Documents: Attach any other related documents to contract that could be used later on to clear
any disagreements. Other documents may sometimes not be allowed under the parol evidence rule.

Review: Have each party review the full and complete contract before each party assents to it and signs
off on it

Legal Advice: Obtain professional advice from an experienced contract attorney and have them review
the contract to resolve any ambiguous terms that may cause future problems.

What Is the Parole Evidence Rule?

The parole evidence rule states that once the parties have entered into a contract and the contract is full
and complete expression of the parties agreement, no outside oral or written agreements may be
introduced to add, change, or contradict the terms of the contract. However, if language in the contract
is ambiguous and unclear, the parol evidence allows parties to bring is outside evidence only to resolve
the ambiguous language and explain the parties intention.

Remember, that if ambiguity arise after the contract is entered into, the parol evidence rule may only be
used to interpret the language and explain that parties actual intentions, but can never add, contradict,
or change any terms of the original contract agreement.

How to Avoid Ambiguous Contracts

There are certain steps that both parties can take to avoid any ambiguous terms in a contract. These
include:

1.Put all contractual terms in writing

2.Identify the true meaning of a term, particularly for words with more than one meaning

3.Include supporting documentation, i.e. other agreements or e-mails proving prior negotiations that
were entered into before the contract was formalized. This could help if the court looks to the parol
evidence rule when reviewing the contract.

4.Review the contract with one another before formalizing and signing it
5.Obtain legal advice regarding the terms in the contract to ensure that no ambiguous language is
present.

Q11) briefly explain (section 30) Agreements by way of wager?

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be
won on any wager, or entrusted to any person to abide the result of any game or other uncertain event
on which any wager is made.Exception in favour of certain prizes for horse-racing.—This section shall
not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or
contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount
of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race.

Section 294A of the Indian Penal Code not affected.—Nothing in this section shall be deemed to legalize
any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal
Code (45 of 1860) apply.

Agreements by way of wager are void under the Section 20 of Indian Contract Act, 1872.Agreements by
way of wager are not enforceable by law, and hence are considered illegal, However The Indian Contract
Act,1872 does not define wager or agreements by way of wager it simply states that agreements by the
way of wager are void, and no party can take an action to file a suit for recovery of the waging amount
in any form of court, Wagering agreements have characteristics of contingent contract, but cannot be
enforced by law under Section 30.According to Supreme Court Agreements by the way of wager are void
and hence illegal, but not forbidden by the law.

Legal Position Of Wagering Agreement:-Current legal position of agreement by the way of wager is as
follow- Wagering agreement is void under section 30 and is not enforceable and hence, Section 65 is not
applicable.

TYPES OF WAGER:

I. Moneyline Betting:-This type of betting is one of the easiest types of betting. Betting through money
line is very simple as it is done only on sports competitions and games and it is totally based upon the
outcome/result of the match. This type of betting is illegal and this type of activity has been mostly seen
in cricket that to the highest in the Indian Premier League.

II. Spread Betting:-This type of wager/ betting takes place where the person who is placing the bet on
the most favored team playing in the match to win the match by a certain margin or on the team which
is regarded as the underdog for it to win or even if it loses then with a very close margin.

III. Over Betting:-This type of betting is done in the game where the better places his bet on the total of
number score or total of goals scored by both the teams through a combination of the certain number
and which is totally a futuristic event uncertain and nobody has control over it.
IV. Under Betting:-This type of betting takes place when the better places his bet on the condition that
the combination of the total number of goals and pints that are scored by both the teams will be less or
under a certain limit. This type of wager is also related to the final outcome of the game.

V. Prop Betting:-This type of betting is very unique and creative in nature as it is not related to the final
result of the game. In this case, the better places his bet on something like the first half of the game or
like whether there will be a super over in a cricket game etc. thus, this is also known as prop betting.

ESSENTIALS OF A WAGERING CONTRACT:

1.Equal opportunity:-One of the main points in a wagering contract is that there should be an equal
chance for both to either win or lose depending upon the outcome of the future event.

2.Uncontrollable:-These events are futuristic which may or may not take place and it should be beyond
the control of either of the party because if either of the party has control over it then it would not
amount to wager.

3.No Outside Interest:-Both the parties should have a single interest as to the profit or loss in the result
of the event and there should not be any outside or personal interest attached with the uncertain event
as that will not amount to wager as well.

4.Dependency:-The wager agreement is fully dependent upon the happening of the futuristic event
whether it is contrasted with the past, present or future as to the result of that event.

5.Promise:-The wager contract should contain an important clause which should state that the parties
promise to pay the money or money’s worth to the other party on the happening of the event and this
should be agreed upon by both the parties.

CAN A WAGERING CONTRACT BE ENFORCED?

The Effects and Enforceability of a wagering contract can be understood by the concept that under the
Indian Contract Act it has been explicitly declared as a void ab initio and thus even section 65 of the
Indian Contract Act does not apply to it as the contract is void but there is nowhere mentioned that
these type of contracts have been forbidden by the law, which again implies that except the state of
Gujarat and Maharashtra the wagering contracts are void and are legal in the other states. Thus, these
agreements by way of wager are void and thus no suit can be brought for recovering anything alleged to
be won on any wager or entrusted to any person to abide by the result of any game or any other such
uncertain event on which any wager is made. This was also seen in the case of Badridas Kothari v.
Meghraj Kothari AIR 1967 the court held that although a promissory note was executed for the payment
of the debt caused through wagering transaction, the note was not held enforceable. Thus, the winner
cannot recover the money, but before it is paid to him the depositor recover from the stakeholder. Also,
it was also seen in the case of GherulalParekh v. MahadeoDas 1959 AIR 781 the honorable supreme
court in its judgment said that although a wager is not unlawful under Section 23 of the Indian Contract
Act and thus all the proceedings and transactions collateral to the main transaction are as such
enforceable.
EXCEPTIONS TO THE WAGER AGREEMENT:As per the Indian Contract Act Section 30 states that there
are also certain exceptions in the wagering agreements and thus the section read as follows:

“This section shall not be deemed to render unlawful a subscription or contribution, made or entered to
into for or towards any plate, prize or sum of money, of the value or amount of five hundred rupees or
more, to be awarded to the winner of any horse race. Nothing in this section shall be deemed to legalize
any transaction connected with horse- racing, to which the provisions of section 294A of the Indian
Penal Code shall apply”. Since a wagering contract is a void contract, thus there are certain exemptions
to it which are as follows:

1. Showcase of talent is not a wager:-Using your talent or skill in front of people in some competition
will not amount to wager(such as sports competitions, puzzles etc), but there is a winning the prize
depend upon mere possibility then it will amount to wager. In the eyes of law prize competitions do not
amount to wager but if the amount is not reasonable then it would amount to gambling and it will
automatically become void.

2.Share Market:-The transactions that take place under the share market shall not amount to wager
where the shares are bought and sold and mere delivery of shares from one person to another will not
be regarded as the wager.

3.Horse race competition:-Sometimes, the state government may authorize certain horse race
competition if the local laws permit it and if the people contribute with a sum of RS 500 or more
towards the prize money which is to be given to the winner of the horse race then it will not consider a
wager.

4.Insurance Contracts:-The contracts of insurance are not wagering at all because these are contracts of
Indemnity. These contracts are entered upon to safeguard and protect the interest of one party from
any damage hence it is not a wager.

5.Commercial transactions:-The Agreements that are done for sale and purchase of any commodity that
is to be used on a commercial base in which there is genuine intention to do legitimate businesses which
are valid and if they intend to do so they are required to pay the difference.

12)DIFFERENCE BETWEEN WAGER AGREEMENT AND CONTINGENT CONTRACT:

1)All wager contracts are void.but Contingent contracts are not void.

2)Wager contracts come under the ambit of Contingent contracts and thus is a narrow concept.but
These contracts cover the concept of wager contracts and is a wider concept.

3)The happening of the uncertain event is the sole condition of the wagering contract.but The
happening of the event is not the sole condition of the contingent contracts.
4)The parties have only one interest in the contract i.e the winning or losing depending upon the
outcome.but The parties have there personal and other motives attached to the contract except for the
profit or loss.

5)The parties are required to keep mutual promise under the rules of the wagering contract.butThe
parties are not required to keep mutual promises under the contract.

13)Difference between Wagering Agreement and Contract of Insurance

1.Wagering agreement is void under section 30 of Indian Contract act, however Contract of insurance is
legally enforceable

2.In wagering, agreement interest is limited to the stakes/sum wagered by the two parties, whereas in
contract of insurance there must be an insurable interest.

3.Good faith need not be observed in wagering agreement, however, it holds utmost important in
contract of insurance.

4.Wagering agreement are disapproved by the society as it is considered as part of gambling, whereas
contract of insurance is encouraged by the society.

5.Oriented in wagering whereas, Insurance is meant for protection against certain risk

6.The event of wager is bound to happen where as the event mentioned in Insurance may or may not
happen in the future.

7.In wagering agreement there is no yardstick to assess the risk accurately, whereas, contract of
insurance is based on scientific and actuarial calculation of risk and the premium is calculated.

8.The amount payable to the winner or payable by the loser is known in advance, thus a wager is either
lost or won, however every type of insurance contract claim involves risks of varying degrees, for
Example- A fire insurance policy for instance may involve crores of rupees or not even a single rupee.

9.In case of wagering agreement, the premium paid is also returned to the winner in addition to prize
money, whereas in insurance agreement, the insurer is liable to pay the money, if an insured event
occurs but, is not required to return the premium

10.Nothing more than indemnity is offered in insurance other than life or persona; this does not enter
wager.

14)what is Speculative Transactions?

According to section 43 article 5. It is a transaction in which a contract for the purchase or sales of any
commodity including shares and stocks is periodically or ultimately settled otherwise than by the actual
transfer or delivery of the scrips or commodity.

Difference between wagering agreement and speculative transactions are as follow:

Wagering transactions are speculative in nature however not every speculative transaction is not
wagering in nature. This was held by Privy Council in the case of Kong Lee Lone and company vs Lowjee
Nanjee, a contract for the sale and purchase of the goods at a given price and for being delivered at a
given time can be constituted by the parties, but if the circumstances show that the intention of the
parties was never to have the actual transfer of goods between them but only intended to pay and
receive money between themselves according to the rise and fall in the market price, is not a
commercial contract but a contract of wager depending upon a future uncertain event.

Unit3
Q1)what is contigent contract?

The word contingent means when an event or situation is contingent, i.e. it

depends on some other event or fact.For example, making money is contingent
on finding a good-paying job.

Now, the ‘contingent contract’ means enforceability of that contract is directly

depends upon happening or not happening of an event.

Section 31 of the Indian Contract Act, 1872 defines the term ‘Contingent
Contract’ as follows:

‘A contingent contract is a contract to do or not to do something, if some event

collateral to such contract does or does not happen’.

In simple words, contingent contracts, are the ones where the promisor perform
his obligation only when certain conditions are met. The contracts of insurance,
indemnity, and guarantee are some examples of contingent contracts.

Illustration:- A contracts to pay to B Rs. 20,000 if B’s house is burnt. This is a

contingent.

How is it different from wagering agreement?

A wagering agreement is absolutely void (S.30) while on the other hand

contingent contract is a valid contract.
In a contingent contract, the future uncertain event is merely collateral whereas
in a wagering agreement the uncertain event is a sole determining factor of the
agreement.

In a wager, the parties are not interested in the occurrence of the event except
for winning or losing the best amount while in a contingent contract the parties
have a real interest in occurrence or non-occurrence of the event.

All wager contracts are contingent contracts, but all contingent contracts are not
by way of the wager.

Essential elements of the contingent contract

After examining the definition of the contingent contract given under section 31
of the Act, the essentials of the term contingent contract are as follows:

1)There must be a valid contract to do or abstain from doing something

Section 32 and 33 of the Act talks about enforcement of the contingent contract
on the happening or not happening of the events respectively. The contract will
be valid only if it is about performing or not performing an obligation.

Illustration 1: X makes a contract with Y to buy Y’s dog if X survives Z. This

contract cannot be enforced by law unless and until Z dies in X’s lifetime.

Illustration 2: X agrees to pay Y a sum of money if a certain ship does not return.
The ship is sunk. The contract can be enforced when the ship sinks.

2)Performance of the contract must be conditional[i]

The condition for which the contract has been entered into must be a future
event, and it should be uncertain. If the performance of the contract is dependent
on an event, which is although a future event, but certain and sure to happen,
then it’ll not be considered as a contingent contract.

The said event must be collateral to such contract

The event on whose happening or non-happening of the event on which the
performance of the contract is dependent should not be a part of the
consideration of the contract. The happening or non-happening of the event
should be collateral to the contract and should exist independently.

Illustration: X enters into a contract with Y and promises to deliver 10 books to

him. Y promises to pay Rs. 2000 upon delivery. This is not a contingent contract
since Y’s obligation depend on the event which is a part of the contract(delivery of
10 Books) and not a collateral event.

3)The event should not be at the discretion of the promisor

The event so considered as for contingency should not at all to be dependent on

the promisor. It should be totally a futuristic and uncertain event.Illustration: X
promises to pay Y, Rs. 10,000 if Y leaves Delhi for London on 31st March 2019.
This is a contingent contract. Going to London can be within Y’s will but is not
merely his will.

Enforcement of contingent contract or Conditions when a contingent contract

becomes void

Provisions related to the enforcement of the contingent contract are given under
section 32 to 36 as follows:

Condition #1- enforcement of contract contingent on the happening of an event

The contingent contracts to do or abstain from doing something if an uncertain

future event happens. However, the contract cannot be enforced by law unless
the event takes place. If the event becomes impossible, such contracts become
void.[Section 32]Illustration: X promises to pay Y, Rs. 100,000 if he marries Z, the
prettiest girl in the neighbourhood. This is a contingent contract. Unfortunately, Z
dies in a car accident. Since the happening of the event no longer possible, the
contract is void.

Condition #2- enforcement of contract contingent on an event not happening

The contingent contracts to do or abstain from doing something if an uncertain
future event does not happen can be enforced when the happening of that event
becomes impossible. If the event takes place, then the contingent contract is
void.[Section 33]Illustration: X promises to pay Y a sum of money if a certain ship
does not return. The ship is sunk. The contract can be enforced when the ship
sinks. On the other hand, if the ship returns, then the contract is void.

Condition #3- when an event on which contract is contingent to be deemed

impossible if it is the future conduct of a living person

If a contract contingent upon how a person will act at a future time, the event
shall be considered impossible when such person does anything which makes it
impossible for the event to happen.[Section 34]Illustration: X agrees to pay Y, Rs.
100,000 if Y marries Z. However, Z marries A. The marriage of Y to Z must now be
considered impossible, although it is possible that A may die and that Z afterward
marry Y.

Condition #4- contracts contingent on an event happening within the fixed time

Contingent contracts to do or not to do anything if a future uncertain event

happens within a fixed time. Such a contract is void if the event does not happen
and the time lapses. It is also void if before the time fixed, the happening of the
event becomes impossible.[Section 35(para 1)]Illustration: X promises to pay Y a
sum of money if a certain ship returns before 1st April 2019. The contracts may be
enforced if the ship returns within the fixed time. On the other hand, becomes
void if the ship sinks.

Condition #5- contracts contingent on an event not happening within the fixed
time

Contingent contract to do or not to do anything if an uncertain event does not

happen within a fixed time may be enforced by law when the fixed time has
expired, and such event has not happened, or before the time fixed has expired, if
it becomes certain that such event will not happen.[Section 35(para 2)]
Illustration: X promises to pay Y a sum of money if a certain ship does not return
before 31st March 2019. The contract may be enforced if the ship does not return
before 31st March 2019. Also, if the ship burnt before the given time, the contract
is enforced by law since the return is impossible.

Condition #6- contract contingent of impossible event void

If an agreement to do or not to do is based on the impossible event, then such

agreement is void, whether the impossibility of the event is known or not to the
parties to the agreement at the time when it is made.[Section 36]Illustration: X
promises to pay Y, Rs 500 if two straight lines should enclose a space. The
agreement is void.

Commercial applications of contingent contracts

Insurance is a contract to do something if the future event occurs that will be

contracted by the parties and liability will be taken by the offeror. In all Insurance
like Life Insurance, Marine Insurance, Fire Insurance, and other Insurances, the
Offeror promises to take the risk of the offeree against the incident to do or not
to do something and for that the offeree agrees to pay a certain amount of
money.

The contingent contract can be used in the contract of guarantee as well as the
contract of warranty. Contingent guarantees generally are used when a supplier
does not have a relationship with a counterparty.

We can use a contingent contract in negotiation. Contingent contracts normally

occur when negotiating parties fail to reach an agreement.

We can use the contingent contract in mergers and acquisitions (M&A) as well.
Depending on the M&A deal, contingent payments such as earn-outs, Seller
notes, and Buyer stock may be part of the Seller’s proceeds. After the deal is
finalized, these contingent payments will need continuous contact between Buyer
and Seller.

It can also be used in the contract of indemnity.

Q2)what is performance of contract?and offer of performance?

When one party offers and the other party accepts, this makes each party bound
to perform the promise made by them. And as it is said that every contract
consists of reciprocal promises. But, if we take a situation like, A offers to perform
his part of the promise, but the other party, B, does not want to perform his part
of promise, then what will A do? And how will the performance of the contract
will be complete? Or when does the performance of the contract starts does it
start when one party offers, or does it start when the other party accepts the
offer?

So, to answer these questions, we need to understand the provisions of the

Indian Contract Act, 1872 which deals with the Performance of Contract.

Performance of Contract

Performance of contract starts when promisor offers like A, offers to sell his
watch to B for Rs. 2,000 and promisee accepts that offer like B accepts to buy A’s
watch for Rs. 2,000. When both the parties i.e., promisor and promisee have
performed their respective duties, according to the conditions of the contract
then their liability under the contract comes to end and the contract is said to be
discharged by performance which means the performance of contract will be
complete, but the performance should match with the terms of the contract.

According to section 37 of the Indian Contract Act,1872:

The parties to the contract have a duty to

1. Perform, or

2. Offer to perform

As per section 38 of the Indian Contract Act, 1872; if one party A offers to perform
his part but the other party, B, does not perform his part then, then A cannot be
blamed for non-performance of promise as he would be discharged from its duty
under the contract. For example, A promises to sing a song in B’ cafe, but B does
not allow him to do so. A will be discharged from its promise. And just like actual
performance, an offer of performance by the promisor discharges a promisor
from his obligation under a contract.

Offer of Performance

When the promisor is willing to perform the contract and he offers to perform the
same, then the promisee has a duty to accept the performance of the contract. If
the offer of performance is not accepted by the promisee, the promisor cannot be
blamed for the non-performance of the contract and will not lose his right under
the contract.

An agreement enforceable by law constitutes a valid contract. In the case of a

contract, each party is legally bound between both parties. Under section 2(h) of
the Indian Contract Act, 1872 (ICA), the term contract has been defined as an
agreement enforceable by law. The term agreement has been defined under
section 2(e) of the ICA, 1872 as “every promise and every set of promises forming
consideration for each other becomes an agreement.” An agreement involves a
promise from both sides, and when an agreement becomes enforceable under
the law, a valid contract arises. An important essential element of a valid contract
is the offer and subsequent acceptance to form an agreement. An offer is the
manifestation of the promisor’s mind, and an offer can be both positive and
negative, that is, to do or not to do something. Towards this offer, consent should
be signified and communicated by an act or omission by which the promisee or
the party accepting the offer intends to express their consent, and this consent is
known as acceptance Once a proposal is accepted by the other party and it is
timely communicated to the party who proposed in a proper manner, it becomes
a binding contract, provided that consideration and object are legal and the
parties do have the intention to create legal relationships.

Offer of Performance/Tender

In case of an offer of performance of tender, the promisor is willing to perform

the contract and offers the same, the promisee as an obligation to accept the
same and in case, the promisee rejects the offer, then the promisor cannot be
made liable for non-performance of the contract, nor does he lose his rights
under the contract. The act of non-providing reasonable opportunities/facilities
for the performance of the contract by the promisee to the promisor also excuses
the promisor from the performance of the contract and the same has been
upheld by section 67of the Indian Contract Act, 1872. An offer of performance is
also known as Tender. The essentials of a valid offer of performance/Tender are
stated under section 38 of The Indian Contract Act, 1872.

Essentials needed to be fulfilled for such offer of performance/ Essentials of a

Valid Offer of Performance/Tender

As stated above, the essentials of a valid tender are mentioned in section 38.
These essentials are as follows:

1. The Tender must be unconditional: The tender must be unconditional. In the

case of Sitaram v Ramrao, it was held that the offer of the promisor to pay only a
fraction of the total sum and consideration of the part payment as full payment
will amount to the imposition of a condition and thus, the tender was considered
invalid.

2. The Creation of the Tender at A Proper Place AND Time: Another important
essential of a valid tender is the creation of the tender at a proper place and time,
with the opportunity to the promisee to determine or establish the proper
performance of the tender by the promisor in the future. If a place and time are
determined and the contract is performed according to that place and time, then
the contract is discharged and both the parties are discharged from their
obligation. The case of Demby Hamilton & Co. v Burden is important case law in
this regard. In this case, a contract for the supply of 30 tons of apple juice was
made. The juice was tendered, but the buyer refused to take delivery of some of
the installments. This delay of acceptance of delivery made the apple juice putrid.
It was subsequently held that it was the fault of the buyer for not taking the
delivery of the goods when tendered, and he was made liable for compensating
the seller for loss caused because of this delay.

3. The Opportunity to the Promisee to Ascertain/Establish that the Goods are in

accordance with the Contract: Another essential of a valid tender is the
reasonable opportunity provided to the offeree/promisee to ascertain that the
thing offered is the same thing which the promisor is bound by his promise to
deliver. A similar provision is provided under Section 41(2) of the Sales of Goods
Act, 1930 laying emphasis on the same point made above. . If there is an offer of
delivery of anything to the promisee, then the promisee must be a given
reasonable opportunity for checking the thing offered as is it the same thing
which the promisor promised to deliver.

4. The Offer of Performance to One of The Joint Promisees is a Valid Tender: It has
been stated in section 38 of the Indian Contract Act, 1872 that an offer to one of
the several joint promisees has the same legal consequences as an offer to all of
them, in case there is the involvement of several joint promisees. From the above
discussion, it is clear that when there are more than one joint promisees, an offer
of performance, that is, a tender to one of them will be treated as a valid tender.If
there are a number of joint promisees, an offer of performance may be in favor of
one of them.

Who can perform the contract?(Promisor or his Agent)

If the contract is one which is based on personal confidence or involves the

exercise of personal skills like painting, dancing, singing, marrying, or writing a
book, etc., it must be performed by the promisor himself and nobody else. Like if,
A promises to sing a song in b’s cafe, A must perform this promise himself. But if
the contract does not involve personal skills, the promisor or his representative
may employ a competent person to perform the same. For example, A promises B
that he will pay the money in December. A can perform this promise either
himself by paying the money to B or can ask his agent to pay for him to B, if A dies
before the time appointed for payment, his agent must perform the promise after
his death.

Non-performance of the contract in time and its effect

When time is mentioned in the contract, and when the contract is not performed
in time then it will end the purpose of the parties, and, therefore, if in such a case,
there is a delay in performance by one party, the other party has the right to
avoid the contract given under section 55 of Indian Contract Act. The time of
performance of the contract may also be extended by a mutual agreement
between the parties.

When time is not mentioned in the contract, it must be performed within a

reasonable time. The delay in the performance of such a contract does not make
the contract voidable, the remedy available to the aggrieved party in such a case
is to claim compensation. Whether time is important in a contract or not depends
on the intention of the parties.

Like in the case, C.C. of India Ltd. Vs S.S. Corporation, (1970)

There was a contract to supply goods “within 10 days or earlier” i.e., before
10thMay 1964. The buyer extended the time and accepted the deliveries up to
November 1964. He then gave a notice to the seller that no further extension will
be given, and the contract must be performed by the end of 1964. It was held that
on the seller’s failure to supply the goods by 31st December 1964 the buyer had a
right to terminate the contract.

Promises bind representatives

A promiser is bound to fulfil his promise .In case of a promiser's death before
performance the representative becomes bound, unless a contrary intention
appears from the contract.

Case law to understand this is – Kunwar Singh Rawat vs State of Uttaranchal,AIR-

2007. The government contracts for construction of class rooms. , the
construction was completed, before the payment of the balance amount the
building got damaged. The required enquiry was done and, in that enquiry, it was
found out that it was not the mistake of the contractor as the building was made
of good material and the damage was caused due to rains and landslides. And
thus, the contractor was allowed to recover the amount.

The renewal clause of a contract-

There are a few contracts which have a renewal clause I.e., the contract can be
renewed as per the conditions provided and so it’s very important to read the
contract and about this clause.

This can be understood through a case Hardesh Ores (p) ltd. Vs hade & co,
(2007). a contract contained a clause for renewal, so the party having the right to
renewal under the contract did so. The other party refused to accept the renewal.
Then the supreme court said that the best course for the party was to get its right
of renewal declared and enforced by a court of law.

Effect of accepting performance from Third person

We can understand this through the case of in Hirachand Punamchand v

Temple[1911] 2 KB 330,a debt was held to be discharged when creditor accepted
a smaller sun from debtor’s father in full settlement. Performance done by
fatherin this case discharged the contract. Discharge of the contract by the
performance of third parties can take place only if it is done in order to do so. The
situation in which the organization made an ex-gratia payment to an individual
who had been defrauded by its secretary demonstrates these conditions. The
victim was entitled to recover all the damages incurred because the company's
reimbursement was not made on behalf of the secretary.

Liability for Failure to Consider Tender

As discussed above, in case of an offer of performance of tender, the promisor is

willing to perform the contract and offers the same, the promisee as an obligation
to accept the same and in case, the promisee rejects the offer, then the promisor
cannot be made liable for non-performance of the contract, nor does he lose his
rights under the contract. Similarly, not providing reasonable opportunities to the
promisor for the performance of the tender or contract discharges the promisor
from the performance of the contract. It has been stated under section 38 of the
Indian Contract Act, 1872 that if an offer of performance has been made by the
promisor to the promisee and the promisee either fails to consider the tender or
is not accepted by the promisee, then the promisor is not liable for non-
performance of the offer of performance and he does not lose his rights under
the contract.

Q3)what is performance of joint promises?

If it appears from the nature of the case that it was the intention of the parties to
any contract that any promise contained in it should be performed by the
promisor himself, such promise must be performed by the promisor himself such
promise must be performed by the promisor. In other cases, the promisor or his
representatives may employ a competent person

For instance, if A promises to paint a picture for B, a must fulfill the promise
himself.

But is A owes B money; A can repay the money personally or cause the money to
be replayed to B through another person or associate of A. And if A dies before
the fulfillment of the promise, the next of kin or the family of A or a pre-
appointed person must repay the money back to B.

“When a promisee accepts performance of the promise from a third person, he

cannot afterwards enforce it against the promisor” the scope of the rule has been
discussed by the Supreme Court.”

Joint promises

There may be contracts have joint promisors and joint promisees. There maybe
two or more creditors entitled to the same obligations, or two or more debtors
under the same liablity. In the case of debts owed by a principle debtor, and
guaranteed by one or more sureties and the liablity of two or more persons who
commit a tort, the liablity is joined. In Latin terms, each of the debtors are bound
in solidum (for the whole and not a proportional part) A solidarity obligation is
one where two or debtors owe the same thing to the same creditor.

Joint promises may take any of the following shapes:

(i) Where several joint promisors make a promise with a single promisee, e.g., A,
B, and C jointly promise to pay Rs. 3,000 to D, or
(ii) Where a single promisor makes a promise with several joint promisees, e.g., P
promises to pay Rs. 3,000 to Q and R jointly, or

(iii) Where several joint propiisors make a promise with several joint promisees,
e.g., A, B and C jointly promise to pay Rs. 3,000 to P, Q and R jointly.

We have earlier seen as to “Who can demand performance,” and “by whom
contracts must be performed,” when there is an agreement between a single
promisor and a single promisee. We now attempt to answer the aforesaid
questions in the case of joint promisees.

Who can demand performance of joint promises? The answer to this question is
found in Section 45 which provides that when a promise is made to several
persons jointly, then, unless a contrary intention appears from the contract, the
right to claim performance rests with all the promisees jointly and a single
promisee cannot demand performance. When any one of the promisees dies, the
right to claim performance rests with the legal representatives of such deceased
person jointly with the surviving promisees. When all the promisees are dead, the
right to claim performance rests with all of them jointly and on the death of any
promisee his legal representatives step into his shoes.

Illustration

A, in consideration of Rs. 5,000 lent to him by B and C, promises B and C jointly to

repay them that sum with interest on a day specified. B dies. The right to claim
performance rests with B’s representative jointly with C during C’s life and after
the death of C, with the representatives of B and C jointly.

It is worth noting that under the terms of the Section, if a promisor makes, the
payment to one of the several joint promisees, it does not operate as a complete
discharge of the debt (Govindlal vs. Firm Thakurdas).

By whom joint promises must be performed? The rules on the subject, as

contained in Sections 42 to 44 of the Contract Act, are as follows:
1. All promisors must jointly fulfill the promise:

When two or more persons have made a joint promise (e.g., signed a promissory
note jointly), then, unless a contrary intention appears by the contract, all such
persons must jointly fulfill the promise. When any one of the joint promisors dies,
his legal representatives must, jointly with the surviving promisors, fulfill the
promise. On the death of all the original promisors, the legal representatives of all
of them jointly must fulfill the promise (Sec. 42).

The above rule is of course subject to the following usual conditions:

(a) Contracts involving personal skill, e.g., to paint a picture, come to an end on
the death of any of the joint promisors and the liability of performance does not
fall on the legal repre-1 sentatives.

(b) Wherever the legal representatives are made liable to perform the promise,
they are not personally liable. Their liability is limited to the assets inherited by
them.

2. Any one of joint promisors may be compelled to fulfill:

When two or more persons make a joint promise, the promisee is entitled, in the
absence of express agreement to the contrary, to compel any one or more of such
joint promisors to fulfill the whole of the promise (Sec. 43, Para 1). In other
words, according to the Section, the liability of joint promisors is “joint and
several” as against the promise, unless there is a contract to the contrary. For
example, A, B and C jointly promise to pay D Rs. 3,000. D may compel either A or
B or C or all or any two of them to pay him Rs. 3,000.

In case-of death of original debtor, if the debt falls upon a number of heirs,
promisee must bring the suit against all heirs collectively, because the liability is
only joint and not several in case of co-heirs. Co-heirs are not joint promisors.

3. Right of contribution inter-se between joint promisors:

If one of several joint promisors is made to perform the whole contract, he may
require equal contribution from the other joint promisors, unless a contrary
intention appears from the contract (Sec. 43, Para 2). Thus, in our example, if A is
compelled to pay the entire amount of Rs. 3,000, he can realize from B and C Rs.
1,000 each.

4. Sharing of loss by default in contribution:

If any one of the joint promisors makes a default in making contribution, if any,
the remaining joint promisors must bear the loss arising from such default in
equal shares (Sec. 43, Para 3). Thus, in our example, if A is compelled to pay the
whole and C is unable to pay anything, A is entitled to receive Rs. 1,500 from B. If
C’s estate is able to pay one-half of his share, A is entitled to receive Rs. 500 from
C’s estate and Rs. 1,250 from B [Illustrations (b) and (c) to Section 43],

5. Effect of release of one joint promisor:

In case of joint promise, if one of the joint promisors is released from his liability
by the promisee, his liability to the promise ceases but this does not discharge the
other joint promisors from their liability; neither does it free the joint promisor so
released from his liability to contribute to the other joint promisors (Sec. 44).

Section 44

“Effect of release of one joint promisor – Where two or more persons have
made a joint promise, a release of one of such joint promisors by the promisee
does not discharge the other joint promisor or joint promisors ; neither does it
free the joint promisors so released from responsibility to the other joint
promisor or joint promisors”

The effect of a release of any of the joint promisors by the promisee does not
release or discharge the other joint promisors, nor does it affect the right of such
others to claim contribution from the joint promisor so released.

Release of one joint promisor

Section 44 also deviates considerably from English law, under which, since joint
liability creates one obligation, release of one of the joint debtors under under
seal or by accord and satisfaction discharges all. This position is the same under.
This position is the same in the case of joint and several liabilities.

This section applied equally to a release given before or after breach. Thus, where
in a suit for damages against several partners, the plaintiff compromised the suit
with one of them, and undertook to withdraw the suit as against him. It was held
that the release did not discharge the other partners and the suit might proceed
as against them. The contention that the section occurred in the portion of the
act relating to the performance to the contract and therefore did not apply to
liabilities arising out of breach, was held to be too narrow a construction to this
section. The section applies as much as to partial discharge as to complete
discharge. Abatement of an appeal against one joint debtor or the death of one
joint debtor doesn’t release the other joint promisor.

The same principle has been applied to the judgment-debts and a release by a
decree-holder of some of the joint judgment-debtors from liability from under the
decree, does not work as a release of the other judgment debtors. It also applies
to co-mortgagors jointly and severally liable.

Where the promisee releases one or more of the joint promisors, the liability as
between the joint promisors to contribute equally doesn’t end. Where one of the
executants makes payment on the joint promissory note and the promisee agrees
to discharge him from liability, the joint

Judgment debtors from liability under the decree does not operate as a release of
the other judgment debtors .it also applies to co mortgagors jointly and severally
liable.

Where the promisee releases one or more joint promisors , the liability as
between joint promisors to contribute equally does not end .where one of the
executants makes payment on the joint promissory note and the promisee agrees
to discharge him from liability ,the co-executant is liable for the balance , but
subject to his right to claim, the first co executant for contribution. Where two
out of three judgment debtors were discharged

Section 45
Devolution of joint rights is governed by almost the same kind of principles as the
devolution of joint liabilities. When a promise is made to more than one person
jointly, the right to claim performances rests with all of them jointly. If anyone of
them dies, it rests with his legal representatives jointly, Section 45 is as follows:

“Devolution of joint rights – When a person has made a promise to two or more
persons jointly, then, unless a contrary intention appears from the contract, the
right to claim performance rests, as between him and them, with them during
their joint lives, and, after the death of any of them, with the representative of
such deceased person. Jointly with the survivor or survivors, and, after the death
of the last survivor, with the representatives of all jointly.”

In the absence of any contrary intention appearing from the contract the right to
claim performance, that is , the right of joint promisees to claim performance is a
joint right, and in case of death of any one of them the representatives of the
deceased in entitled to the benefit with all survivors. In all cases of joined
promises, there is always one promise in favor of all the joined promises.
Therefore it is not open to one of the joint promisees to sue either the
performance of the promise in its entirety or to the extent of his share.

Example : A in consideration of `100000 lent to him by B and C, promises B and C

jointly to repay them that sum with interest on a day specified. B dies and thus,
the right to claim performance rests with B’s representatives jointly with C during
C’s life and after the death of C, with the legal representatives of C and B jointly.

The Supreme Court in Anokhe lal v. Radhamohan bansal has held that the
principle made out in section 45 [8] applies to situation where one person has
made a promise to two or more people jointly. The right to claim performance of
the contract arising out of such a promise would then rest with those promisees
together with their joined lives and after the death of any one of them, such a
right would be passes on the legal regal representatives of the deceased jointly
with the surviving promisees. If the joint promisees were partners in a firm, this
provision obliges the legal representatives of a deceased partner to join the rest
in enforcement of the right to have performance of the contract. This is the the
gist of Section 45 of the Indian Contract Act, 1872.
Rights of joint promisees

This section applies to all joint promisees whether they are partners [9] , co-
shares [10] , mortgages, joint lessors or members of a joint Hindu family carrying
on business in partnership [11] . In case where the owner of a single right dies,
and several persons become entitled to it, it has been held that all of them must
join in a suit to enforce the right and if any of them refuses to join the plaintiff, he
must be added as a defendant [12] , obviously, joint promises cannot divide the
debt among themselves and sue severally for the portions.

Right to performance of promises during joint lives

As the right to claim performance of a promise in the case of joint promisees rests
with them all during their joined lives, it follows that all the joint promisees
should sue upon the promisor. [14] Therefore, if a suit is bought by some of them
only, and the other promisees are subsequently added as plaintiffs on objection
taken either by the defendant [15] or by the court on its own motion, the whole
suit will be dismissed if it is barred by limitation as regards the other promisees
who were added subsequently at the time of their joinder.

Suit by a surviving partner

The general rule of English law is that joint contracts are enforceable by the
survivors or survivor alone. There is an equitable exception, founded on
mercantile custom, as to debts due to partners: but even in this case ‘although
the right of the deceased partner devolves on his executor… their remedy services
to his co-partner, who alone must enforce the right by action and will be liable on
recovery to account to the executor of administrator for the share of the
deceased’.

The present section extends the mercantile rule of substantive right to all cases of
joint contracts. It seems to be the better option that the representatives of a
deceased partner are not necessarily parties to the suit for recover of debt which
accrues due to the partnership in the lifetime of the deceased . The dissolved
partnership firm may sue for debt.

Deceased partner’s estate

The high court of Bombay has decided, after full examination of the rule and the
present section of the act in the light of both Indian and English authorities, that
where a partner has died before the commencement of a suit against the firm,
the rule doesn’t enable the act to make the deceased partner’s separate estate
liable without adding his legal representatives as parties.

Suit by representatives of deceased partner

The representative of the estate of deceased partner may maintain a suit for the
recovery of a partnership debt, and may join the surviving partners as defendants
in the suit where they refuse to join as plaintiffs .

Government securities

The application of the principle in this section maybe excluded by statutes

specially those relating to securities which provide that

1 securities payable to one or more persons jointly shall on the death of any of
them be payable to the survivor or survivors

Securities payable to one or more persons severally shall be payable on the death
of any of them to any of the survivors or the legal reps of the deceased holder.

Any one or more joint holder can give effectual receipts for interest until notice
has been given by the other holders to the promisor

Exceptions to section 45

Order 30, Rule 4(1) Of Code Of Civil Procedure.

The supreme court in Anokhe Lal V. Radhamohan bansal [20] had held that Order
30, Rule 4(1) Of Code of Civil Procedure Is an exception to the S.45 of the act [21] .
The said rule reads as under:
‘(1) Not withstanding anything contained in section 45 of the Indian contracts act,
1872, where two or more person may use or be used in the name of the firm
under the foregoing provisions and any of such person dies, whether before the
institution or during the pendency of any suit, it shall not be necessary to join the
legal representative of the deceased as a party to the suit.

(2) Nothing in sub-rule (1) shall limit or otherwise affect any right which the legal
representative of the deceased may have –

to apply to be made a part of the suit, or

To enforce any claim against the survivor or survivors.’

The supreme court has held that what sub-r(1) of r4 in O30 of the code provides is
that there it is not mandatory to join the legal representatives of a deceased
partner as a party in the said suit. What sub-r (2) says is that sub-r (1) is not a
hindrance to any legal representative of a deceased partner to get himself
impleaded if he has otherwise any right to do so.

Devolution of joint liabilities

When there is a promise between two or more persons,then the right to claim
performance rests with all of them during their joint lives,and if anyone dies out
of them, then the right can be enforced by the representative of that deceased
person jointly with the others left, and after the death of the last one, then the
representative of all jointly, can enforce the right.

Place for performance of promise, under the condition (where no application to

be made and no place fixed for performance)

If a pledge is to be fulfilled by the promisee without application, and no place for

the execution of it is set, it is the responsibility of the promisor to order the
promisee to assign a suitable place for the performance of the promise and to
execute it at that place.

Q4)Time and place of performance of contract?

As a promisor and promise are essential to a contract, so are the time and place
of the performance of contract. If a time and place for the performance of
contract are agreed upon, then the promisor should perform the promise
accordingly. If not, then it should be performed at a reasonable place and time.
The Indian Contract Act, 1872, specifies some rules regarding the time and place
for the performance of contract under sections 46 – 50.

Rules Regarding Time and Place of Performance of Contract

1) When no application is to be made by the promisee and no time is specified –

Section 46

In situations where there is no time period specified for the performance of the
contract and the promisor has to perform the contract without any request by the
promisee, in such a case the promisor must perform the contract within a
“reasonable time”.

Here reasonable time means a fair amount of time that is required to do

something conveniently and as soon as the circumstances permit. Hence here
time is not important since a specified date for completion is not mentioned but
this does not mean that the promisee does not have the right to have the
contract performed by the promisor.

Also, the term reasonable time depends on the facts and circumstances of the
case and will also depend on the nature of the transaction.

Illustration

Srishti takes a loan of Rs 10,000 from Shivani and says that she will return it to her
when she receives her next salary. Here the reasonable time for performance of
the contract is after Srishti receives her next salary.

2) When time and place of performance is specified but no application is to be

made by the promisee- Section 47
When the terms of the contract say that the promisor has to perform the contract
without any request by the promisee, on the place specified by the promisee and
on the exact date specified by him.

In case no specific time is mentioned then the promisor should deliver the goods
during the usual hours of business.

Illustration

Ankita promised to deliver goods to Ira on an advance payment of Rs 10,000. Ira

made the payment and asked Ankita to deliver the goods on 13th of the same
month at her office at Tis Hazari. Since the time is not specified, she should
deliver it between 10 am and 5 pm, assuming those are the regular court timings.

If Ankita attempts delivery after the business hours, then Ira has the right to not
accept the goods and ask Ankita to deliver again during business hours.

3) When Performance is to be made on a proper place and time but an

application is to be made by the promisee to the promisor for its performance-
Section 48

When the terms of the contract say that a performance of a contract has to be
made on a particular day but the promisor will only do so when the promisee
makes an application to the promisor on that specific day for performance.
Hence, here since it is specifically mentioned in the contract that the promisee
has to request the promisor for performance on that specific day, he must do so
at the proper place and during the usual business hours as specified by him.

Illustration

Manu agrees to supply Nishant 50 cartons of alcohol on 3rd November at his

office. As per terms of the contract, Nishant would have to request Manu for
performance. Thus on the due date and within usual business hours, Nishant
should request Manu regarding a time and place for the supply of goods.

4) Where no place is fixed and no application has to be made to the promisor by

the promisee- Section 49
When the terms of the contract does not specify the place where the goods have
to be delivered and that no request has to be made by the promisee for the
performance of a contract, in such a situation it is the duty of the promisor to
request the promisee of a place reasonable to both where the goods can be
delivered and then accordingly perform the contract.

The place for the performance of goods implies both the delivery and payment of
goods.

Illustration

Sheela entered into a contract for supplying 100 cartons of Gram Flour to Anu on
5th September at a specific price. On the due date of performance, Sheela must
apply or request Anu for determining a reasonable place and also make the
payment at the same place.

5) When the performance has to be made in the time and manner as specified
by the promisee- Section 50

A contract can also exist in which the promisor agrees to perform the contract in a
manner and at a place and time prescribed by the promisee.

Illustration

Prankur’s son is in the hospital and needs money for his son’s operation. Harshil
owes money to Prankur and agrees to repay him in at any place or time decided
by Prankur. In this case, Prankur has the liberty to ask for the performance of the
promise in any manner and at any place or time suited to him.

The consequence of Failure to perform the contract at a fixed time when the
time is essential

Section 55 of the Indian Contract Act,1872 deals with the effect of failure to
perform the contract at a fixed time when the time is essential.

If an act is not done within the stipulated time, the contract becomes voidable at
the option of the promisee provided the Intention of the parties was that time
should be of the essence of the contract.
Thus whether time was the essence of the contract depends on the intention of
the parties and also on the nature of the contract.

In Bhudra Chand v. Betts(1915) the defendant promised to deliver an elephant to

the plaintiff for the capture of a wild elephant as a part of Kheda Operations. The
contract provided that the elephant would be delivered on the 1st of October,
1910, but the defendant obtained an extension of the time till 6th Oct and yet did
not deliver the elephant till 11th. The plaintiff refused to accept the elephant and
sued for damages for the breach. It was held that the plaintiff was entitled to
recover damages since it was proved that time was the essence of the contract
since the defendant had tried to obtain an extension of time.

This section says that if it was not the intention of parties to make time of the
essence of the contract, the contract does not become voidable by the failure to
perform the contract on or before the specified time but the promisee is entitled
to claim compensation for any loss caused by the default

Finally, the section goes on to say that if time is intended to be of the essence by
the parties but performance is accepted on some other time other than the time
agreed, compensation cannot be claimed by the promisee unless he gives such a
notice to the promisor.

In the case of State of Kerala v. M.A Mathai(2007), it was held that if there are any
delays in the performance of reciprocal obligations by an employer, the
contractor gets the right to avoid the contract but if he does not avoid the
contract and accepts the belated performance, he cannot claim compensation for
any loss sustained to him due to delay in performance, unless he gives a notice of
the same to the delaying party.

The intention of the parties

In Indian law, the question of whether the time is of the essence of the contract
or not is determined by the intention of the parties.

The intention of the parties can be determined from:

(a) The express words used in the contract

(b) The nature of the contract itself

(c) The nature of the property which forms the subject matter of the contract

(d) The surrounding circumstances

It has been held in the case of China Cotton Exporters v. Beharilal Ramcharan
Cotton Mills Ltd (1961) that in commercial contracts time is ordinarily of the
essence of the contract.

Thus It is ordinarily presumed that except in commercial contracts, time is not of

the essence in other contracts. This presumption can be rebutted by showing the
intention of the parties.

For example, Time is presumed not to be of the essence in contracts relating to

immovable property, but of the essence in contracts of renewal of leases.

In M/S Citadel Fine Pharmaceuticals vs M/S Ramaniyam Real Estates Pvt. Ltd. and
Ors. (2011), It was held that time was the essence of the contract which was
specifically mentioned in clause 10 and the consequences of non-completion are
mentioned in clause 9. So, from the express terms of the contract and the
commercial nature of the transaction and the surrounding circumstances make it
clear that the parties intended time to be of the essence of the contract.

However, merely specifying the time at which the contract has to be performed
does not make time the essence of the contract. In order to determine this the
terms and conditions of the agreement should be read carefully. If the contract in
its terms provides that time is the essence of the contract, but other terms of the
agreement show that the parties did not intend time to be of the essence, the
court has held that time is not of the essence.

For Example, in the Case of Hind Construction Contractors v. State of

Maharashtra (1979) the Appellant entered into a contract with the respondent on
July 2, 1955, for some construction work with the condition that the contract
should be completed within 12 months from the commencement of the work.
The Appellant could not complete the work within the stipulated time and the
Respondent canceled the contract with effect from August 16, 1956. The
Appellant contended that time was not of the essence and further on account of
several difficulties, such as excessive rains, lack of proper road and means of
approach to the site, the completion was delayed. The Supreme Court, in deciding
that time was not of the essence in relied on two clauses in the contract –

1. First, there was a power to grant an extension of time on reasonable grounds

by the respondent on an application by the appellant. Even though the appellant
made an application for extension, the respondent revoked the contract which
was wrong.

2. Second, there was a provision to recover penalty/compensation from the

appellant at specified rates during the time the work remains unfinished.

These two provisions, as per the court, exclude the inference that time was
intended to be of the essence of the contract.

Time Can Be Made Essence By Notice

When time is not of the essence in a contract, it can be made so by giving notice
to the promisor. The notice must contain clearly that it wants to make time as the
essence of the contract and the necessary implications if it is not adhered to. The
promisor can also be intimated through the notice that default in the compliance
with the terms will lead to the cancellation of the contract. The party serving the
notice must himself be bound by it.

Extension of time

Since one party to the contract cannot unilaterally vary the terms of the contract,
he also cannot extend the time without the consent of the other party through an
agreement, Therefore, time for performance can be extended only

by an agreement arrived at between the promisor and promisee. Thus if one

party requests the other party for extension of time but the other party does not
communicate his acceptance, the time cannot be extended in such a case.

Q5)what is Anticipatory breach of contract?

Anticipatory breach of contract is also known as anticipatory repudiation of
contract. Anticipatory breach of contract meaning has been explained in the
provisions of the contract law. Anticipatory breach of contract means that the
contract has been repudiated even before the performance of the contract has
actually commenced.

In simple terms the anticipatory breach of contract meaning is that a promising

party in a contract does not intend to live upto his or her obligations under the
terms of the contract. When a party to a contract is incapable to perform or there
is a lack of willingness to perform the contract even before the due date of the
contract then it is anticipatory breach of contract.

The anticipatory breach of contract by one party gives the right to other party of
the contract to claim damages and compensation under the anticipatory breach
of contract Section 39 of the Indian Contract Act.

There are two types of anticipatory breach of contract which are discussed
below :

Express Repudiation: In this type of anticipatory breach the party breaches the
contract expressly. It means that the party to the contract has clearly refused to
perform his part of the contract even before the actual due date of the contract.

Implied Repudiation: In this type of anticipatory breach of contract the party

does not clearly refuses to perform his or her obligation rather imply from his/her
words or actions that he/she is not going to perform his part of contract before
the due date of the contract.

Effect of Anticipatory Breach of Contract

When an anticipatory breach of contract is committed the injured or the

aggrieved party generally has two options at his/her disposal. The options
available to the injured party in case of anticipatory breach of contract are as
follows :

As soon as the anticipatory breach has been committed, the injured party can
rescind or repudiate the contract and can bring an action for damages for
anticipatory breach of contract without waiting for the due date for the
performance of the contract.

The other option is that the injured or the aggrieved party waits till the due date
fixed for the performance of contract and then bring a case against the defaulting
party for breach of contract.

There are four key factors which are considered essential to determine whether
an anticipatory breach of contract has happened or not. These factors are as
below:

1.When the party has clearly communicated that he will not perform his part of
obligation and such performance goes to the root of the contract,

2.The renunciation or repudiation to perform a contract cannot be conditional on

certain circumstances taking place. The refusal, therefore should be absolute.

3.While deciding whether there has been sufficient refusal to perform the
obligation of the contract, it must be judged according to whether a reasonable
person in the position of the innocent party would regard the refusal as being
clear and absolute.

Anticipatory breach of Contract Remedies

Any contract can be said to be breached when one party to the contract
unconditionally refuses to perform his part of the contract. When this refusal to
do the obligation under the contract is done before the due date of the contract
then it is known as anticipatory breach of the contract. The Indian contract act
provides for anticipatory breach of contract remedies which are provided to the
aggrieved party against the party committed anticipatory breach of contract.

Following are the anticipatory breach of contract remedies which are provided
in the Indian Contract Act :

1.Monetary Damages - It includes a sum of money that is awarded as a

compensation for the financial losses suffered by the party against whom the
anticipatory breach has been committed. The party can claim the bargain which
he/she was entitled for under the terms of contract or can ask compensation for
the net gain which they have occurred if the anticipatory breach of the contract
would not have been done. In case of an anticipatory breach the party can
recover the damages only to the extent of amount of actually spent by the party
in execution of his part of the performance.

2.Restitution - It is an anticipatory breach of contract remedy which provides that

the injured party of the contract in the same position as he/she was in before the
contract was made. If the Restitution is chosen as the anticipatory breach of
contract remedy then the injured party cannot ask for compensation for the loss
incurred by him because of the anticipatory breach of contract. Restitution as a
remedy focuses on returning the injured party money or the property which has
been given to other party of the contract who has committed the anticipatory
breach of contract.

3.Rescission - It is a remedy of the contract which puts an end on the obligation

of both the parties completely. The parties that are indulged in the contract due
to the mistake, fraud, undue influence can ask to set aside the the contract and
the obligations formed thereunder by way of remedy of rescission available in
such cases.

4.Reformation - It is a remedy available in case of a breach of contract. In this

type of remedy the court changes those substance of the contract because of
which inequities was suffered by the injured or the aggrieved party to the
contract. The courts generally resist in providing the remedy of the reformation as
a mistake in a contract can be easily changed by doing a pre-contract signing
investigation.

5.Specific Performance of Contract - Specific performance of the contract is an

equitable remedy available in case of anticipatory breach of contract or an actual
breach of contract. This remedy compels the breaching party to perform his part
of the contract i.e., his or her duties as specified under the terms of the contract.
When the monetary damages are inadequate to compensate the injured or
aggrieved party against the anticipatory breach of contract only then the court
orders for the remedy of the specific performance of contract. The remedy of
specific performance of the contract is generally given when the subject matter of
the contract is the main reason of the dispute.

In case anticipatory breach of contract has been committed against you consult
the famous civil lawyers near you to get the proper assistance and to know which
remedy is best suited for you.

Anticipatory Breach vs Actual Breach of Contract

The remedies discussed above are available for both anticipatory breach of
contract and actual breach of contract. Where anticipatory breach means a
breach committed before the due date of the performance of the contract, actual
breach is a breach committed on the due date of the contract.

Other than this difference there are following difference between the
Anticipatory Breach of Contract and Actual Breach of Contract -

Occurrence Anticipatory breach of contract happens when a party to the contract

tells his incapability to perform his part of the contract in advance i.e., before the
due date of the contract. Actual breach of contract happens when a party on the
date of the performance of the contract fails to perform his part or his duties as
specified in the contract.

Nature of Breach-Nature of breach in case of anticipatory breach of contract is

that the entire contract is repudiated. In an actual breach of the contract,
the breach can be of warranty, condition or an innominate term.

Effect of Breach-The injured party in case of anticipatory breach can either accept
the breach or can continue with the contract. In an actual breach of contract
the injured party can only go for the remedy available for breach of contract.

Anticipatory Breach of Contract Cases

Indian Judiciary has dealt with the issue of anticipatory breach of contract in a
number of cases before it. Some of the landmark anticipatory breach of contract
case which explains and deals with anticipatory breach of contract at length are
discussed below :
1.In the case of Food Corporation vs J.P. Kesharwani, 1994 Supp (1) SCC 531, it
was held by the Supreme Court that where one party making unilateral
alterations without any intimation to the other and then cancelling the contract,
this amounted to breach (repudiation). Therefore it can be correctly stated that,
any kind of contract may be examined as broken once a party refuses to perform
under the contract as promised, regardless of when performance is supposed to
occur. This unconditional refusal is known as a repudiation of contract.

2.In the case of Universal Cargo in the year 1957 it was held by the Supreme Court
that the “Anticipatory breach means that a party is in breach from the moment
that his actual breach becomes inevitable. Since the reason for the rule is that a
party is allowed to anticipate an inevitable event and is not obliged to wait till it
happens, it must follow that the breach which he anticipates is of just the same
character as the breach which would actually have occurred if he had waited.”

Unit4
Q1) What Is a Breach of Contract?and what are the types?causes?remedies?

A business contract creates certain obligations that are to be fulfilled by the parties who entered into
the agreement. Legally, one party's failure to fulfill any of its contractual obligations is known as a
"breach" of the contract. Depending on the specifics, a breach can occur when a party fails to perform
on time, does not perform in accordance with the terms of the agreement, or does not perform at all.
Accordingly, a breach of contract will usually be categorized as either a "material breach" or an
"immaterial breach" for purposes of determining the appropriate legal solution or "remedy" for the
breach.

A breach of contract is an instance where one or more parties to a contract either actively breaks or fails
to fulfill the terms outlined within a legally binding contract. A contract breach can broadly be defined as
a violation of any agreed-upon terms and conditions, so the scope of a contract breach can cover
everything from late delivery of certain goods or services to missed payments.

Can one Sue for Breach of Contract?

When a breach of contract occurs or is alleged, one or both of the parties may wish to have the contract
enforced on its terms, or may try to recover for any financial harm caused by the alleged breach.

If a dispute over a contract arises and informal attempts at resolution fail, the most common next step is
a lawsuit. If the amount at issue is below a certain dollar figure (usually $3,000 to $7,500 depending on
the state), the parties may be able to resolve the issue in small claims court.
Courts and formal breach of contract lawsuits are not the only options for people and businesses
involved in contract disputes. The parties can agree to have a mediator review a contract dispute or may
agree to binding arbitration of a contract dispute. These out-of-court options are two methods of
"alternative dispute resolution" that can take place as alternatives to business litigation.

What causes a breach of contract?

A breach of contract is caused by a contracting party’s reluctance or inability to fulfill the terms they
originally agreed to within the contract. This results in certain contractual obligations going unmet, and
the promises made within a contract being undermined.

Unfortunately, it’s not rare for breaches of a contract to happen. They can happen for a number of
reasons:

One example is where a contracted supplier has failed to deliver certain goods to a business, which can
result in the buyer being unable to fulfill the contractual obligations they owe separately to another
business.

This is common in supply chain contracts and procurement contracts. There could even be other
external circumstances that make it challenging to deliver certain goods and services in a timely fashion,
like outages or technical difficulties.

Alternatively, there could be a misunderstanding between different departments within a business

about what the obligations actually are.

Whilst most commercial agreements are drafted and agreed by in-house legal teams, it’s often the sales,
customer success, and business operations teams that are responsible for performing certain tasks
under the contract.

If these aren’t communicated effectively between departments, these duties can be missed, resulting in
a breach of contract.

Remedies for a Breach of Contract

When an individual or business breaches a contract, the other party to the agreement is entitled to
relief (or a "remedy") under the law. The main remedies for a breach of contract are:

1.Damages
The payment of damages — payment in one form or another — is the most common remedy for a
breach of contract. There are many kinds of damages, including the following:

Compensatory damages aim to put the non-breaching party in the position that they would have been in
if the breach had not occurred.
Punitive damages are payments that the breaching party must make, above and beyond the point that
would fully compensate the non-breaching party. Punitive damages are meant to punish a wrongful
party for particularly wrongful acts, and are rarely awarded in the business contracts setting.

Nominal damages are token damages (small amount of damages) awarded when a breach occurred, but
no actual money loss to the non-breaching party was proven.

Liquidated damages are specific damages that were previously identified by the parties in the contract
itself, in the event that the contract is breached. Liquidated damages should be a reasonable estimate of
actual damages that might result from a breach.

2.Specific Performance
If damages are inadequate as a legal remedy, the non-breaching party may seek an alternative remedy
called specific performance. Specific performance is best described as the breaching party's court-
ordered performance of duty under the contract.

Specific performance may be used as a remedy for breach of contract if the subject matter of the
agreement is rare or unique, and damages would not suffice to place the non-breaching party in as good
a position as they would have been in had the breach not occurred.

3.Cancellation and Restitution

A non-breaching party may cancel the contract and decide to sue for restitution if the non-breaching
party has given a benefit to the breaching party.

"Restitution" as a contract remedy means that the non-breaching party is put back in the position it was
in prior to the breach, while "cancellation" of the contract voids the contract and relieves all parties of
any obligation under the agreement.

Breach of contract: it’s a risk faced by anyone who enters a legal agreement. If you deal with volumes of
agreements (and volumes of types of agreements, from employment contracts to vendor and customer
deals), chances are good that eventually you will run into a contract that doesn’t deliver on the terms
agreed to by all parties.

Fortunately, contracts are legally-binding agreements, so when a party fails to meet their contracted
obligations, there may be a remedy. Such instances are called a breach of contract, and the first
important step to claiming your contracted rights is being able to recognize that a breach occurred.

Kinds of breach of contract

1.Material Breach of Contract

A material breach occurs when one party receives significantly less benefit or a significantly different
result than what was specified in a contract. Material breaches can include a failure to perform the
obligations laid out within a contract or a failure to perform contracted obligations on time. When a
material breach occurs, the other party may pursue damages related to the breach and both its direct
and indirect consequences.

2.Minor Breach of Contract

Also sometimes called a Partial Breach of Contract or an Immaterial Breach of Contract, a Minor Breach
of Contract refers to situations where the deliverable of the contract was ultimately received by the
other party, but the party in breach failed to fulfill some part of their obligation. In such cases, the party
that suffered the breach may only be able to pursue a legal remedy if they can prove that the breach
resulted in financial losses. A late delivery, for example, may not have a remedy if the breached party
cannot show that the delay resulted in financial consequences.

3.Anticipatory Breach of Contract

Another type of breach of contract is an anticipatory breach. This is when the breach hasn’t actually
happened yet but one of the parties expresses their intention to breach the contract’s terms. Usually, an
anticipatory breach of contract occurs when a breaching party notifies the counterparty about their
decision not to fulfill the obligations. This decision can be intentional or because they are physically
unable to. But it can also occur when one of the parties’ actions suggests that they won’t fulfill their
obligations, without them explicitly voicing this intention. An anticipatory breach of contract turns into
an actual breach once the date certain obligations were due to be performed has passed.

4.Actual Breach of Contract

An Actual Breach of Contract refers to a breach that has already occurred, meaning the breaching party
has either refused to fulfill their obligations by the due date or they have performed their duties
incompletely or improperly.

When a breach does occur, there are several types of remedies the other party may pursue. These
include compensatory damages to address direct economic losses stemming from the breach, and
consequential losses, which are indirect losses that go beyond the value of the contract itself but are the
result of the breach.

5. Repudiatory breach of contract

The most severe type of contract breach is a repudiatory breach of contract. This occurs when the
breach goes to ‘the root of the contract’ and fundamentally undermines the purpose and performance
of the contract. Usually, a repudiatory breach of contract will result in the breakdown of a contract in its
entirety, unlike a minor breach of contract. However, that doesn’t necessarily mean that parties will be
entitled to terminate the contract in the event of a repudiatory breach. The parties may choose to affirm
the existing contract instead.

Consequences of a breach of contract

The consequences of a breach of contract will almost always be feelings of frustration and
inconvenience. This is often true regardless of the severity of the breach.

However, the specific consequences of a breach of contract will depend entirely on the nature of the
contract, the severity of the breach, and what the parties had agreed in advance.

In fact, when drafting a contract, most parties will describe the consequences of a breach within the
contract itself. For example, businesses could negotiate and agree on a penalty charge for late payment.
They could even outline opportunities for early termination if certain promises go unmet.

There’s also a range of remedies available to the innocent party, depending on the severity of the
breach. These include damages to compensate the business for their financial losses, specific
performance to ensure that the obligations are still performed, or termination of the contract to end the
commercial relationship altogether.

As damages can be both compensatory and punitive, the cost of breaching a contract can be significant
for small businesses. It can also result in reputational damage if they choose to sue your business
publicly for their losses, rather than settling it privately.

So what can you do to prevent your business from ending up in a similar position? There are a few
things you can do to ensure contract compliance.

How to prevent a breach of contract

1. Draft robust legal agreements (or automate them)

Firstly, you should ensure that your contracts are robust. This means ensuring that they cover all of the
terms and conditions necessary to protect your business from unexpectedly breaching the contract.

This can be challenging in businesses where contracts are drafted freely in Word by commercial teams
using static contract templates. Without sufficient oversight from legal, these contracts can omit
important exclusion clauses, use incorrect contract terminology and compromise on certain positions to
get over the line.

Businesses can avoid this by setting up dynamic automated contract templates instead. Using a contract
automation tool like Juro, legal teams create contract templates with conditional logic that can trigger
certain contract terms to be added for certain types of business contracts, or for contracts in certain
jurisdictions or with a certain value.

You can even use Juro’s integrations to pull data directly from your systems of record into the relevant
part of the contract using contract smart fields. Legal teams can even determine which parts of a
contract commercial teams can edit and which parts remain fixed.

By automating contracts using pre-approved templates, you can enable your business teams to self-
serve on contracts without needing constant input and approval from legal teams. But most
importantly, legal teams can rest assured knowing that these contracts are watertight and can help to
alleviate the risk of a breach.

2. Improve transparency around who is responsible for what

Another way businesses can avoid a breach of contract is to ensure that each department is familiar
with their specific responsibilities under a contract. If they aren’t, these obligations will go unmet.

The simplest way to do this is to ensure that all commercial teams have access to relevant contracts.
When contracts are scattered across email and shared drives, it can be difficult for sales, HR, and finance
teams to find and view these.

By contrast, when businesses implement a contract management solution, all of these contracts can be
stored neatly within a contract repository and organized into different workspaces or filtered by the
contract owner.

Doing this provides departments with a birds-eye view of their responsibilities and flags the contracts
they need to monitor the performance of. As a result, teams become more accountable for certain
deliverables and can avoid a breach of contract.

3. Capture and track important contract data

Finding a reliable way to capture and track important data points from your contracts is another
effective way to keep on top of your contractual obligations. This process will make it easier to identify
the effective date of a contract, contract renewal dates, contract values and other information that
establishes which responsibilities need to be managed and when.

This information can then be collated into an excel spreadsheet or a contract dashboard for full visibility
of upcoming deadlines. Even better, if you use a contract tool like Juro, you can integrate the software
with other project management tools like Monday.com, Greenhouse or Workday to trigger different
tasks and actions based on this contract data.

4. Set up reminders to track contract obligations

It’s also a good idea to set reminders for different contract obligations. These notifications can be set
throughout the duration of a contract to ensure specific deadlines are met for payment, delivery and
other commitments made within the agreement.

These key contract milestones could be tracked manually, with the legal team issuing alerts when
certain deliverables are due. Alternatively, you could automate the entire process and free up your legal
team’s time to focus on higher-value tasks.

By adopting a contract automation solution like Juro, you can set contract reminders that auto-alert
your team well in advance of upcoming deadlines. This means there’s no excuse for missing important
dates and breaching your existing contracts.
Q2)what is Anticipatory Breach of Contract?
Anticipatory breach of contract is also known as anticipatory repudiation of contract. Anticipatory
breach of contract meaning has been explained in the provisions of the contract law. Anticipatory
breach of contract means that the contract has been repudiated even before the performance of the
contract has actually commenced. In simple terms the anticipatory breach of contract meaning is that a
promising party in a contract does not intend to live upto his or her obligations under the terms of the
contract. When a party to a contract is incapable to perform or there is a lack of willingness to perform
the contract even before the due date of the contract then it is anticipatory breach of contract. The
anticipatory breach of contract by one party gives the right to other party of the contract to claim
damages and compensation under the anticipatory breach of contract Section 39 of the Indian Contract
Act.

Types of anticipatory breach

There are two types of anticipatory breach of contract which are discussed below :

1.Express Repudiation: In this type of anticipatory breach the party breaches the contract
expressly. It means that the party to the contract has clearly refused to perform his part of the contract
even before the actual due date of the contract.

2.Implied Repudiation: In this type of anticipatory breach of contract the party does not clearly
refuses to perform his or her obligation rather imply from his/her words or actions that he/she is not
going to perform his part of contract before the due date of the contract.

Effect of Anticipatory Breach of Contract

When an anticipatory breach of contract is committed the injured or the aggrieved party generally has
two options at his/her disposal. The options available to the injured party in case of anticipatory breach
of contract are as follows :

As soon as the anticipatory breach has been committed, the injured party can rescind or repudiate the
contract and can bring an action for damages for anticipatory breach of contract without waiting for the
due date for the performance of the contract.

The other option is that the injured or the aggrieved party waits till the due date fixed for the
performance of contract and then bring a case against the defaulting party for breach of contract.

There are four key factors which are considered essential to determine whether an anticipatory breach
of contract has happened or not. These factors are as below:

When the party has clearly communicated that he will not perform his part of obligation and such
performance goes to the root of the contract,
The renunciation or repudiation to perform a contract cannot be conditional on certain circumstances
taking place. The refusal, therefore should be absolute.

While deciding whether there has been sufficient refusal to perform the obligation of the contract, it
must be judged according to whether a reasonable person in the position of the innocent party would
regard the refusal as being clear and absolute.

What are the Anticipatory breach of Contract Remedies?

Any contract can be said to be breached when one party to the contract unconditionally refuses to
perform his part of the contract. When this refusal to do the obligation under the contract is done
before the due date of the contract then it is known as anticipatory breach of the contract. The Indian
contract act provides for anticipatory breach of contract remedies which are provided to the aggrieved
party against the party committed anticipatory breach of contract.

Following are the anticipatory breach of contract remedies which are provided in the Indian Contract
Act :

Monetary Damages - It includes a sum of money that is awarded as a compensation for the financial
losses suffered by the party against whom the anticipatory breach has been committed. The party can
claim the bargain which he/she was entitled for under the terms of contract or can ask compensation
for the net gain which they have occurred if the anticipatory breach of the contract would not have
been done. In case of an anticipatory breach the party can recover the damages only to the extent of
amount of actually spent by the party in execution of his part of the performance.

Restitution - It is an anticipatory breach of contract remedy which provides that the injured party of the
contract in the same position as he/she was in before the contract was made. If the Restitution is
chosen as the anticipatory breach of contract remedy then the injured party cannot ask for
compensation for the loss incurred by him because of the anticipatory breach of contract. Restitution as
a remedy focuses on returning the injured party money or the property which has been given to other
party of the contract who has committed the anticipatory breach of contract.

Rescission - It is a remedy of the contract which puts an end on the obligation of both the parties
completely. The parties that are indulged in the contract due to the mistake, fraud, undue influence can
ask to set aside the the contract and the obligations formed thereunder by way of remedy of rescission
available in such cases.

Reformation - It is a remedy available in case of a breach of contract. In this type of remedy the court
changes those substance of the contract because of which inequities was suffered by the injured or the
aggrieved party to the contract. The courts generally resist in providing the remedy of the reformation
as a mistake in a contract can be easily changed by doing a pre-contract signing investigation.

Specific Performance of Contract - Specific performance of the contract is an equitable remedy

available in case of anticipatory breach of contract or an actual breach of contract. This remedy compels
the breaching party to perform his part of the contract i.e., his or her duties as specified under the terms
of the contract. When the monetary damages are inadequate to compensate the injured or aggrieved
party against the anticipatory breach of contract only then the court orders for the remedy of the
specific performance of contract. The remedy of specific performance of the contract is generally given
when the subject matter of the contract is the main reason of the dispute.

Anticipatory Breach vs Actual Breach of Contract

1.Anticipatory breach of contract happens when a party to the contract tells his incapability to perform
his part of the contract in advance i.e., before the due date of the contract. but Actual breach of
contract happens when a party on the date of the performance of the contract fails to perform his part
or his duties as specified in the contract.

2.Nature of breach in case of anticipatory breach of contract is that the entire contract is repudiated.
But In an actual breach of the contract, the breach can be of warranty, condition or an innominate term.

3.The injured party in case of anticipatory breach can either accept the breach or can continue with the
contract. But In an actual breach of contract the injured party can only go for the remedy available for
breach of contract.

Q3) what
are damages ?what is Remoteness of Damage?mitigation of
damages?
Damages
The word "damage" simply means a sum of money given as compensation for loss or harm of any kind.1
In other words, "damages" is compensation for causing loss or injury through negligence or a deliberate
act, or an estimate of Court or award of a sum as a fine for breach of a contract or of a statutory duty. It
is the amount of money which the law awards or imposes as pecuniary compensation, recompense, or
satisfaction for an injury done or a wrong sustained as a consequence of a breach of a contractual
obligation. According to Black Law Dictionary, a damage is "Money compensation awarded as a remedy
for a breach of contract or tortuous acts."

The term damages refer to the monetary compensation to the aggrieved party in a contract for the
losses, injury or damages caused by the guilty party. The quantum of the damages caused is determined
by the magnitude of the damages caused to the injured party due to the breach of contract. As the
injured party suffers loss or inconvenience so, if the matter for damages reaches the court the court
desires the victim party to accept his mistake and pay adequate compensation to the affected party as
the damages.

The principle behind the damages is explained by Fuller and Prude as damages may seek the protection
of “expectation interest”, “reliance interest” or “restitution interest”. The expectation interest, also
known as performance interest, refers to putting the suffering party in a position where he would have
been if the promise would have been fulfilled.

The reliance interest, also known as the status quo interest, seeks to restore the position of the injured
party where he was before the promise was made and in the course of which the promise altered his
position by putting reliance over the promise. The restitution interest tends to prevent the defaulter
promiser from gaining due to the loss caused to the promisee. Section 73 and Section 74 of the Indian
Contract Act, 1872 finds the provisions of the contractual damages. Section 73 deals with the “General
or unliquidated damages” whereas Section 74 deals with the “liquidated damages”. Since the
contractual breach is civil in nature, the purpose behind the damages is to compensate the injured party
for the loss and not to punish the victim party.

Ways to determine damages for different kinds of breaches

In order to ascertain the damages available, the injured party shall have to specifically prove that the
breach of contract has incurred him/her financial losses. The injured party (plaintiff) must specify the
kind of damages he is seeking before the court. Now, the court looks into the issue of whether the
breach was substantial in nature or a partial one. There are some cases where the courts may award
damages that go beyond the strict measure of compensation. The examples of non-compensatory
damages are nominal damages, aggrieved damages, restitutionary damages. Damages for the breach of
contract are subject to the principle of remoteness, causation and mitigation. Now, we shall analyse the
approach of the Indian courts in determining the damages for breach of contract.

Remoteness of damages
The provision under Section 73 of the Indian Contract Act, 1872 provides ‘loss or damages occurred in
the usual course of things in a contractual breach’ as one of the important requirements for awarding
the damages.

So, the victim party (defendant) shall not be liable for the damages that are remote to the breach of
contract. In a landmark common law case of Hardley vs. Baxendale, the principle of remoteness was
described. The rules enumerated in this case was that the injured party can only ask for the recovery of
damages where the damages are fairly and reasonably arising out naturally from the usual course of
things; or supposed to have been reasonably in contemplation of both the parties at the time of the
execution of the contract, as its probable breach.

Now, in case the contract was executed under special circumstances and such circumstances were
communicated to both parties, in such a situation the breach shall reasonably contemplate the injury as
the special circumstances were duly communicated to the parties in the contract. But, if the party
causing injury is fully unaware of the special circumstances and the damages arise out of the breach,
such damages shall put the guilty party at an advantage depriving the other party.

In this case, the special circumstances were never communicated by the plaintiff to the defendant which
resulted in losses to the plaintiff. So, it was held that if the plaintiff proves that the defendant was in the
knowledge of the special circumstances arising in the contract, the latter will be liable for the damages
for the losses. However, if the defendant assumes the risks evolved under the special circumstances
under the contract as a reasonable man would have, such assumption shall not be deemed as the
communication of the special circumstances to the defendant and not make him liable for any breach.

The Indian courts have also adopted this evolving jurisprudence while deciding the case on similar
issues. The Kerala High Court in State of Kerala v. K. Bhaskaran held that the defendant shall be liable
only for the natural and proximate consequences of breach or those consequences which were in the
contemplation of the parties at the time of contract. The party guilty of breach shall be liable only for
reasonably foreseeable losses that a prudent man possessing similar information during contract would
have reason to foresee the future breach.

Important tips to be kept in mind while computing damages

For calculating the damages in the manner subsequent to the breach of contract the apex court has laid
down two underlying principles in the case of Murlidhar Chiranjilal v. Harishchandra Dwarkadas. These
principles are provided as:

As the breach of contract is proved, the injured party claiming the damages is placed in a manner as the
money could put him in a good situation, as if the contract wouldn’t have been performed; and

The plaintiff is also duly bound to mitigate all the losses arising out of the breach and prevent him from
claiming any kind of damages which is a consequence of his failure to mitigate the damages.

The legal provisions in the Contract Act don’t specifically provide the measure for computation of the
damages, so most of the times the courts have given free hand to the arbitrators for the purpose of
computation of damages.

Regarding the measurement of the damages, the parties in the contract may execute stipulated norms
as a specific measure for the calculation of the damages for the breach of contract.\

In a contract, where the seller delays in delivering the goods the damages is calculated proportionally
after mitigating the losses by the plaintiff.

With respect to the time and place for the assessment of the damages, generally, the time and place
where the goods ought to have been delivered are the value of the goods to the purchaser of such
goods at the time and place they ought to have been delivered, and it is taken into consideration. For
the purpose of determining the market value of the goods in course of the assessment of damages, the
court refers to the buying price of the goods from where the purchaser can get that item.

What Is Mitigation of Damages?

Mitigation of damages is a contract law concept that requires that a victim in a contract dispute to
minimize the damages that result from a breach of the contract. This means that the victim is legally
obligated to act in a manner that will mitigate both the effects of the breach and their own personal
losses and even if the victim who suffers personal injury through no fault of his or her own has an
obligation to take reasonable steps to avoid further loss, and to minimize the consequences of the
injury.

If a victim does not mitigate damages, the court may refuse to award any exorbitant damages that could
have been reasonably avoided by the victim. The court will evaluate the victim’s actions following the
breach of contract to determine if they took steps that a reasonable person in similar circumstances
would have taken to minimize their losses. However, mitigation of damages does not require the victim
to take extreme steps or make substantial sacrifices in order to avoid or minimize loss.

Duty to Mitigate
Same as above, when a person suffers damages as a result of a breach of contract, he or she has the
legal obligation to minimize the effects and losses resulting from the injury. The duty to mitigate works
to deny recovery of any part of damages that could have been reasonably avoided.

“Reasonably avoided” has no specific definition, but generally means what a reasonable person would
do under similar circumstances. If a person has a duty to mitigate damages and they do not do it, the
courts will usually reduce their damages by the amount that they could have mitigated.

How Do Courts Calculate Damages in a Breach of Contract Case?

The court will first look at the contract itself. The court will determine what was promised and by whom.
The court will evaluate the terms of the contract. The court will also decide if a breach occurred and if
so, when. If no breach occurred, the plaintiff is not entitled to damages.

The court will then estimate damages by looking at whether the contract was partially fulfilled. The
court will also examine the plaintiff’s actions to determine if the plaintiff was partially responsible for
the damages. If so, the damage award may be reduced.

Examples of Mitigation of Damages?

Contract Law: A homeowner contracts with a plumbing company to fix a bathroom leak for a set
price. The plumbing company begins to fix the leak but then finds a less difficult and more profitable job.
The plumbing company abandons the project, therefore breaching the contract. The homeowner never
hires another plumber and instead allows the leak to worsen. The house eventually develops a severe
mold infestation and warped flooring. The plumbing company will not be liable for the mold infestation
and warped flooring because the homeowner had a duty to mitigate damages by hiring a new company.

Landlord/Tenant: A tenant needs to move for a new job and therefore breaks his lease early. He
still has six months left on his lease. The landlord lets the apartment sit vacant for six months, then sues
the tenant in landlord tenant court for six months of rent plus late fees and other penalty fees. The
landlord will not be able to get this entire amount because the landlord had a duty to mitigate by finding
a replacement tenant.
Employment: An employee signs an employment contract with a company to work as a consultant in
a non-at-will state. Due to the recession, the employer wrongfully terminates the contract after only one
year. The employee then does not bother to find a new job and instead sues for lost wages. The
employee will not be able to get the entirety he is asking for because he had a duty to search for a new
job to mitigate his damages.

Business Law: A creditor must mitigate his damages when a debtor breaches. For example, if a
debtor breaches on his car loan, the creditor must mitigate by attempting to sell the car. He cannot
keep the car and sue the debtor for damages.

Liquidated Damages and Unliquidated Damages

"Liquidated Damages" mean a sum which the parties have assessed by the contract as damages to be
paid notwithstanding whatever may be the actual damage. The parties to a contract, as part of the
agreement between them, fix an amount which is to be paid by way of damages in the event of breach.
A sum stipulated in this way is classified as liquidated damages where it is in the nature of a genuine
pre-estimate of the damage which would probably arise from breach of the contract.

But The term "Unliquidated Damages", means a sum of money not established in advance by the
contracting parties as a compensation for a breach of contract, but determined by a court after such
breach occurs. Such damages are unascertained in advance.

Differences Between Liquidated Damages and Penalty

While both liquidated damages and penalty are payable when there is a default in the performance of a
contract. There are a number of differences between these two:

When the amount payable on the breach is so large that it is far more than the probable loss/damage, it
is a penalty. On the other hand, when there is just and equitable estimation of the amount payable for
the probable damages suffered by the injured party, it is liquidated damages.

As you have seen in the case of electricity bills, there is always a due date, on or before which we have
to pay the amount of bill. If we fail to pay that on the due date, then we are bound to pay a further sum
to keep the services. In such a case, the further sum that we pay is a kind of punishment for late
payment which is ultimately a penalty.

No matter what expression the parties have used in the contract, it is not considered final. That is to say,
the court must identify whether the amount so pre-determined in the contract is actually a penalty or
liquidated damages. If the amount decided is huge, the court will treat it as a penalty, irrespective of the
term used by the parties in the contract.

The point of whether the amount specified is either a penalty or liquidated damages is a question of
construction, which is determined on the basis of the contractual terms and circumstances of the case,
determined at the time of formation of the contract and not at the time of its breach.
Example
Liquidated Damages-Vivek sold laptops to Javed, who contracted that he would not resell them or
offer them for sale, at a price that is below the list price offered by Vivek. Javed agreed to pay a sum of ₹
10,000 as liquidated damages if there is any breach of contract. Javed sold the tyre to Girish at a price
less than the list price of Vivek, for which Vivek filed a suit against Javed for damages for breach.The
court held that the sum decided by the parties concerned was a fair pre-estimate of the damage. So, it is
liquidated damage.

Penalty-Vishwa contracted with Shubam for repainting his house within a period of 10 days and
charged a sum of ₹ 10,000. Further, Vishwa also agreed that if he fails to perform the contract within the
stipulated time, he will pay ₹ 50,000 as damages. Apparently, the sum is not reasonable. So, it is a
penalty.

Liquidated damages: If the amount fixed by all parties is a genuine estimate of the loss by a future
breach of contract, then it is liquidated damages. Thus, all parties to the contract agree that the amount
is fair compensation for the breach.

Penalty: If the amount fixed by all parties is unreasonable or used to force the performing party to
fulfill the obligation, then it is a penalty. In such cases, the amount is disregarded and the suffering party
cannot claim more than the actual loss.

The Indian law makes no distinction between liquidated damages and penalty. The compensation
awarded cannot exceed the amount mentioned in the contract. According to Section 74 of the Indian
Contract Act, 1872, if the parties fix the damages, the Court will not allow more. However, it may award
a lesser amount, depending on the case. Hence, the suffering party gets reasonable compensation but
no penalty.

There is an exception to Section 74 which states that if a party enters into a contract with the State or
Central government for the performance of an act in the interest of the general public, then a breach of
such a contract makes the party liable to pay the entire amount mentioned in the contract.

If the sum payable is far in excess of the probable damage on breach of the contract, then it is a penalty.
But If a contract mentions an amount payable at a certain date and an additional amount if a default
happens, then the additional sum is a penalty. This is because a mere delay in payment is unlikely to
cause damage.

Even if the contract specifies a sum as ‘penalty’ or ‘damages’, the Court needs to discern from the facts
of the case if the amount mentioned therein is, in fact, a penalty or liquidated damages.

The crux of the penalty is the payment of money as a terrorem of the defaulting party. Liquidated
damages, on the other hand, are the true pre-estimate of the damage.
While the English law distinguishes between a penalty and liquidated damages, in India, there is no such
distinction. The Indian Courts focus on awarding a reasonable compensation to the suffering party which
does not exceed the amount fixed in the contract.

Other Remedies Available

Interestingly, claiming damages is not the only remedy for a breach of contract. Here are some other
remedies available to suffering parties:

1] Rescission of Contract-Rescission means revocation, cancellation, or repeal of a law, order, or

agreement. If one party breaches the contract, then the other party can treat the contract as rescinded.
Also, he is discharged of all obligations under the contract. Further, he can claim compensation for
damages, if any.Example: Peter agrees to deliver 50 bags of cement to John on July 01, 2018. John
agrees to pay Rs 10,000 on receipt of the same. However, Peter fails to deliver the cement on the
specified date. Hence, John is absolved of his obligation to pay the price. Further, he can claim
compensation for losses suffered in procuring the cement from another seller.

2] Quantum Meruit-Quantum Meruit means a reasonable sum of money paid to a person for
services rendered when the amount is not specified in a legally enforceable contract.In such cases, the
law infers a promise to pay since the service rendered indicates an understanding between both parties.
Quantum Meruit covers a case where the party who provides the service has completed part, but not all
of the work that he was bound to do and seeks compensation for the value of the work done. There are
two important conditions that must be met for this rule to be applied:

a)Contract is discharged

The claim is brought by the party who has not defaulted.-In simple words, Quantum Meruit allows
compensating a party for the value of work done or services rendered. While damages are
compensatory in nature, Quantum Meruit is restitutory since it is a reasonable compensation awarded
on the implication of a contract to remunerate.

A Quantum Meruit claim arises in the following cases:

When an agreement is found to be void or it becomes void

If a party does some work or renders services without the intention of doing so ‘free of charge’.

If there is a contract to render services (express or implied) but there is no mention of remuneration.

b)When one party refuses to perform a contract.

The contract is divisible and the party who has not defaulted has enjoyed the benefit of the part-
performance.The contract is indivisible and for a lump sum but the performance is not proper. In such
cases, the party performing the contract can claim the lump sum and the other party can deduct a
certain amount for the bad work done.
3] Suit for Specific Performance-There are cases where damages are not an adequate remedy
upon the breach of a contract. In such cases, the Court may, in its discretion on a suit for specific
performance, instruct the defaulting party to perform the promise as per the terms of the contract.

4] Suit for Injunction-If a party has promised not to do something vide a contract but is negating
these terms, then the Court can issue an injunction order to restrain the party from doing what he has
promised not to do.Example: Peter is a famous Bollywood actor. He signs a contract with John, a
producer. In the contract, he agrees to work exclusively for him for the next 2 years. However, he enters
into a contract with Oliver, another producer, to act in his upcoming movie. The Court can issue an
injunction order restraining Peter from working with any other producer.

Section 75 of the Indian Contract Act, 1872

According to this section, if a party rightfully rescinds a contract, then he can claim compensation for
any losses or damages sustained due to non-performance of the contract.Example: Peter is a drummer
and enters into a contract with John, a nightclub owner. According to the contract, Peter agrees to play
at John’s club every Friday and Saturday night. The agreement is for the next two months against a
payment of Rs 5,000 per night. On the fourth night, Peter wilfully absents himself from the club and
John rescinds the contract.Since he does so rightfully, John can claim compensation for the damages
sustained due to Peter’s non-fulfillment of his promise.

Q4)quasi contracts?types of it?

A quasi-contract is an agreement imposed by the law, which outlines the obligation of one party
towards another party if the former possesses the property of the latter party, i.e., something is
acquired by one party at the expense of another party. The court creates these to avoid unjust
enrichment of any party’s overpayment against a good or service. Since the court makes these, neither
party can disagree with it and must follow it.

The word ‘Quasi’ means pseudo. Hence, a Quasi contract is a pseudo-contract. When we talk about a
valid contact we expect it to have certain elements like offer and acceptance, consideration, the
capacity to contract, and free will. But there are other types of contracts as well.There are cases where
the law implies a promise and imposes obligations on one party while conferring rights to the other
even when the basic elements of a contract are not present. These promises are not legal contracts, but
the Court recognizes them as relations resembling a contract and enforces them like a contract.These
promises/ relations are Quasi contracts. These obligations can also arise due to different social
relationships which we will look at in this article.The core principles behind a Quasi Contract are justice,
equity and good conscience. It is based on the maxim: “No man must grow rich out of another persons’
loss.”.

example of a Quasi contract: Peter and Oliver enter a contract under which Peter agrees to
deliver a basket of fruits at Oliver’s residence and Oliver promises to pay Rs 1,500 after consuming all
the fruits. However, Peter erroneously delivers a basket of fruits at John’s residence instead of Oliver’s.
When John gets home he assumes that the fruit basket is a birthday gift and consumes them.Although
there is no contract between Peter and John, the Court treats this as a Quasi-contract and orders John
to either return the basket of fruits or pay Peter.

Features
The features are as follows:

*Usually, the quasi-contracts provide the right to the money.

*There is an absence of the contract or mutual consent among the parties; thus, it is imposed by the law
and is not the outcome of any agreement.

*They are based on equity, a good conscience, justice, and principles of natural justice.

*It is usually a right to money and is generally (not always) to a liquated sum of money

*The right is not an outcome of an agreement but is imposed by law.

*The right is not available against everyone in the world but only against a specific person(s). Hence it
resembles a contractual right.

*Sections 68 – 72 of the Indian Contract Act, 1872 detail five circumstances under which a Quasi
contract comes to exist. Remember, there is no real contract between the parties and the law imposes
the contractual liability due to the peculiar circumstances.

Requirements of Quasi-Contract
There are certain types of the requirement that are required for a judge to fulfill for making a ruling for
the quasi-contract, as discussed below: –

The plaintiff must have provided service or tangible goods to the defendant, and the plaintiff had the
impression that he would receive payment for such goods or services.

Also, the plaintiff should justify that the defendant would be unjustly enriched if he received goods or
services without their payment.

Difference Between Quasi-Contract and Contract

The contracts are the expressed ones approved by the parties under consideration as a matter of law
where they share interests and consequences though specifically described conditions. In contrast,
under quasi-contracts, the obligations are enforced by the law based on the parties’ conduct to prevent
the undue advantage of one party over the cost of another party.

Advantages
It prevents the undue advantage of one party over the cost of other parties as it is based on the unjust
enrichment principle.

It is created by order of the court, so none of the parties involved can disagree with such orders. So, all
the parties involved are obliged to follow it.

Disadvantages
The enriched party will not be held liable in the cases where the benefit he received was tendered
negligently, unnecessarily, and by the miscount.

It is generally created only to the extent necessary to prevent unjust enrichment. The plaintiff must
forgo all the expected profit he would have earned if there is a whole expressed agreement between the
parties involved.

Types of quasi-contract
1)Section 68 – Necessaries Supplied to Persons Incapable of Contracting

It states that a person is not capable of entering into any contract. Therefore, the supplies are provided
to him or anyone the incapable person is legally bound to support by the third party. The supplier third
party is entitled to recover such supplier’s price from the unable person’s property.

Imagine a person incapable of entering into a contract like a lunatic or a minor. If a person supplies
necessaries suited to the condition in life of such a person, then he can get reimbursement from the
property of the incapable person.

John is a lunatic. Peter supplies John with certain necessaries suited to his condition in life. However,
John does not have the money or sanity and fails to pay Peter. This is termed as a Quasi contract and
Peter is entitled to reimbursement from John’s property.However, to establish his claim, Peter needs to
prove two things:

*John is a lunatic

*The goods supplied were necessary for John at the time they were sold/ delivered.

2)Section 69 – Payment by an Interested Person

It states that if a person is interested in paying money and pays on behalf of another person, he is bound
to pay by the law. So then, the person who made the payment is entitled to reimbursement by another
party (on behalf of whom he has paid).

If a person pays the money on someone else’s behalf which the other person is bound by law to pay,
then he is entitled to reimbursement by the other person.
Peter is a zamindar. He has leased his land to John, a farmer. However, Peter fails to pay the revenue
due to the government. After sending notices and not receiving the payment, the government releases
an advertisement for sale of the land (which is leased to John). According to the Revenue law, once the
land is sold, John’s lease agreement is annulled.

John does not want to let go of the land since he has worked hard on the land and it has started yielding
good produce. In order to prevent the sale, John pays the government the amount due from Peter. In
this scenario, Peter is obligated to repay the said amount to John.

3)Section 70 – Obligation of Person enjoying the benefits of a Non-Gratuitous Act

It states that the receiving party has enjoyed the same benefits if a person does anything for the other
person lawfully or delivers something without intending to do the same gratuitously. Then, such a
receiving party is bound to compensate the former party.

Imagine a person lawfully doing something or delivering something to someone without the intention of
doing so gratuitously and the other person enjoying the benefits of the act done or goods delivered. In
such a case, the other person is liable to pay compensation to the former for the act, or goods received.
This compensation can be in money or the other person can, if possible, restore the thing done or
delivered.However, the plaintiff must prove that:

*The act that is done or thing delivered was lawful

*He did not do so gratuitously

*The other person enjoyed the benefits

4)Section 71 – Responsibility of Finder of Goods

It states that if a person finds goods that belong to another party and takes such goods into his custody,
then the former has responsibility the same as that of a bailee.

If a person finds goods that belong to someone else and takes them into his custody, then he has to
adhere to the following responsibilities:

Take care of the goods as a person of regular prudence

No right to appropriate the goods

Restore the goods to the owner (if found)

Peter owns a flower shop. Olivia visits him to buy a bouquet but forgets her purse in the shop.
Unfortunately, there are no documents in the purse to help ascertain her identity. Peter leaves the
purse on the checkout counter assuming that she would return to take it.

John, an assistant at Peter’s shop finds the purse lying on the counter and puts it in a drawer without
informing Peter. He finished his shift and goes home. When Olivia returns looking for her purse, Peter
can’t find it. He is liable for compensation since he did not take care of the purse which any prudent man
would have done.

5)Section 72 – Money paid by Mistake or Under Coercion

It states that if a person has been paid or delivered mistakenly or under coercion, he must repay or
return.

If a person receives money or goods by mistake or under coercion, then he is liable to repay or return it.

Let us see an example. Peter misunderstands the terms of the lease and pays municipal tax erroneously.
After he realizes his mistake, he approached the municipal authorities for reimbursement. He is entitled
to be reimbursed since he had paid the money by mistake.

Similarly, money paid by coercion which includes oppression, extortion or any such means, is
recoverable.