N.

H,
Jhabvala

The
Law of
Contracts
2019

C. Jamnadas & Co.

Find More at https:/tne/LawCollegeNotes Stuffs
THE LAW OF CONTRACTS
(The Indian Contract Act, 1872 )

BY
NOSHIRVAN H. JHABVALA, B.A., LLB.
Advocate (0. S.), High Court, Mumbai

C. JAMNADAS & CO.

EDUCATIONAL & LAW PUBLISHERS
Shoppe Link (DostiAcres), 2nd Floor, HO
Ph-2519410
4 Office No. 19-20-21-22, Antop Hill, M-9338955144
–
Wadala (East), MUMBA| 400 037
s- Phone: 24171118/2417 1119
E-mail :cjamnadas11@gmail.com
Kbagictd

Find More at https://t.me/LawCollegeNotes _Stuffs

 Published by
Rushabh P. Shah
For C. Jamnadas & Co.,
Shoppe Link (Dosti Acres), 2nd Floor,
Office No. 19-20-21-22, Antop Hil,
Wadala (East), MUMBAI - 400 037

Thoroughiy Revised & Updated

THIRTY FiFTH EDITION

(AlI rights including those of translations reserved by the Publishers)

accuracy of the contents of this

Although every effort has been taken to ensure the
nor the Editor shall be,
book, neither the Publishers nor the Printers nor the Author
in any way, liable to any person for any claim whatsoever,
arising out of, or in any
in the book.
way connected to, this book, including any error, omission, misprint, etc.

Price : Rs. 280=00

Printed by
K. BHIKHALAL BHAVSAR
SHREE SWAMINARAYAN MUDRAN MANDIR
12, Shayona Estate, Nr. Vadilal lcecream Factory,
Dudheshwar Road, Shahibaug, AHMEDABAD-380 004
Phone : 079-5626996

Find More at https://t.me/LawCollegeNotes _Stuffs

PREFACE TO THE THIRTY-FIFTH EDITION

We are very glad to place before

the students the
thirty fifth edition of this popular book. In this
revised
edition, several changes have been made in the
arrangement of the matter, and an attempt has been
made to make it up-to-date.
t A detailed Table of Contents has been given at the
beginning for the convenience of the students. New cases
have been added and an Index of Cases has been
provided for ready reference of the students. Likewise,
questions set at recent examinations of the University
of Bombay have been given in the margins at the
appropriate places.
A Glossary of Latin terms and expressions has also
been included in the Appendix to the book.
We are confident that this revised edition will continue
to be of immense use to the student community.

-Publishers

Find More at https://t. me/LawCollegeNotes_Stuffs

 CONTENTS
Sr. No. Subject Page No.
General
1
I. GENERAL PRINCIPLES OF CONTRACTs
1. Introductory
3
2. Basic Concepts :
5-40
A. Proposal
5
B. Acceptance
12
C. Promise, Promisor & Promisee
21
D. Consideration
23
E. Agreement & Contract
36
3. The Communication of Proposal, Acceptance
and Revocation :41-45
A. Acceptance
41
B. Communications
42
C. Revocation
43
4. Valid Contracts
46-47
5. Competency of Parties to a Contract
48-56
Government Contract
54
6. Consent and Free Consent
57-84
Parties ad idem 57
Free Consent : 59
() Coercion 60
(ii) Undue influence
62
(ifi) Fraud 70
(iv) Misrepresentation 74
(v) Mistake of fact 80
7. Lawful Consideration and Object 85-102
8. Agreements without Consideration 103-110
9. Agreements in Restraint of Marrlage 111-112
10. Agreements In Restraint of Trade 113-119

Find More at https://t.me/LawCollegeNotes_Stuffs

Sr. No. Subject
Page No.
1. Agreements in Hestraint of Legal Proceedings
120-122
49. Agreements which are Uncertain (Ambiguous
Agreements) 123-124
13. Agreements by Way of Wager
125-132
14. Contingent Contracts
133-136
15. The Performance of Contracts
137-178
1. Obligation of parties to perform contracts
137
2. By whom contracts must be performed
147
3. Time, place and manner of performance
152
4. Performance of reciprocal promises
155
5. Performance of alternative promises 159
6. Rules as to appropriation of payments 159
7. Modes of discharge of contracts 163
16. Certain Relations Resembling those created by Contract 179-187
(Quasi Contracts)
1. Claim for necessaries supplied to person incapable of contracting,

or on his account 180

2. Reimbursement of person paying money due by another in the
payment of which he is interested 181
3. Obligation of person enjoying benefit of a non-gratuitous act 183
4. Rights and liabilities of finder of goods 185
3. Liabilities of person to whom money is paid or a thing
delivered, by mistake or under coercion 186
17. Breach of Contract 188-205
A. Rules measure 189
governing the damagesof

Compensation for breach of contract where penalty is stipulated for 198

C. Rights of
party rightfully rescinding
a contract 204
D. Quantum Meruit 204

Find More at https://t. me/LawCollegeNotes_Stuffs

Sr. No. Subject Page No.

CONTRACTS
I. SPECIFIC

1. Indemnity and Guarantee 206-226

206
A. Contract of Indemnity
208
B. Contract of Guarantee
227-246
2. Bailment
227
Definitions
230
Duties and liabilities of a bailor
231
Bailee's rights
235
Bailee's liabilities
Effect of mixture of bailor's goods with bailee's 238
239
Rights and liabilities of a finder of goods
239
Pledge
247-284
3. Agency
A. Appointment of agents 247

B. Kinds of Agent
250
C. Authority of an agents 255
D. Law relating to sub-agents 257

E. Ratification 260
F. Agency how terminated 263
2 G. Revocation of agent's authority 266
H. Agent's duties to principaln su o b
267
.
Principal's duties to agent 269
J. Liability of principal for agents fraud or misrepresentationet 270
K. Rights of an agent 272
L. Effect of
agency on contracts with third persons 275

of Latin terms & expressions)

285-286
Appendix (Glossary

Find More at https://t. me/LawCollegeNotes_Stuffs

 RECOMMENDED
FOR
FURTHER READING

Anson Law of Contract

Pollock & Mulla : The Indian Contract and Specific Relief Acts
:
Mulla The Indian Contract Act (Students' Edition)

Cheshire & Fifoot : Law of Contract

Cases on the Law of Contract

:

Cheshire & Fifoot

Avtar Singh The Law of Contract
: Law of Contract in India
Ramchandran
Venkoba Rao
:
Commentaries on The Indian Contract Act
Major :
Cases in Contract Law

Major :
The Law of Contract
:
Sutton & Shannon On Contracts
Chitty : On Contracts
Prof. Pithawalla : Leading Cases on The Law of Contracts

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE LAW OF CONTRACTS
IMPORTANCE
OF THE LAW OF CONTRACTS.- Contracts play
very important role in the day-to-day life of ovory person. Many a
a people enter into contracts without ovon reallsing It. Thus,
time,
hen one buys any item, sSay a newspaper, there is contract. In
a
return for the money paid to the paper-vendor, one gets the
newspaper. Similarly, there is also a contract when one opens
the
door of a taxi and
announces his destination. The taxi-driver agrees
w
takethe person to that place, and in return, the person agrees to
0ay the fare indicated by the
taxi-meter.
The law of contract thus affects every person, - for everyone
onters into contracts day after day. In every purchase that a person
makes, in every loan of an article, in going for a ride in
a bus or a
faxi. and in various other transactions of daily life, contracts are

entered into and legal relations created, though a layman may not
bother to find out what he is doing from the legal point of view. To a
man of business, however, the law relating to contracts is of vital

importance, for usually, his whole business, and most of his

transactions, are based upon contracts.
All such transactions, whether of laymen or of businessmen,

when analysed, show that they are based on agreements creating

mutual rights and obligations. In this book, an attempt is made
to
explain, in as simple a style as possible, the fundamentals of this
Interesting branch of the law regulating contracts, as contained in
the Indian Contract Act,
1872.
SCHEME OF THE ACT- The Act can be divided into the
1olowing two very
broad heads :
I. GENERAL PRINCIPLES OF CONTRACTS
I. SPECIFIC KINDS OF CONTRACTS
I. GENERAL PRINCIPLES OF CONTRACTS
ht (Sections 1 to 75)
The general principles of Contracts are laid down in Ss. 1 to
15 of the Act.
teventeen These sections will be discussed under the
following
sub-heads :
1. Introductory
(9. 1)
2. Basic concepts (Proposal, Acceptance, Consideration, etc.)
(Ss. 2-9)
1

Find More at https://t.me/LawCollegeNotes _Stuffs

 2 THE LAW OF CONTRACTS

3. Communication of Proposal, Acceptance and Revocation

(Ss. 3, 7 & 8)
4. Valid Contracts (S. 10)
5. Competency of parties to contract (Ss.
11 & 12)

6. Consent and Free Consent (Ss. 13-22)

7. Lawful consideration and object (Ss. 23, 24, 57 and 58)

8. Agreements without consideration (S. 25)

9. Agreements in restraint of marriage (S. 26)
10. Agreements in restraint of trade (S. 27)
11. Agreements in restraint of legal proceedings (S. 28)
12. Ambiguous agreements (S. 29)
13. Agreements by way of wager (S. 30)
14. Contingent Contracts (Ss. 31-36)
15. Performance of Contracts (Ss. 37-67)
16. Certain relations resembling those created by Contract
(Quasi-Contracts) (Ss. 68-72)
17. Breach of Contract (Ss. 73-75).

I. SPECIFIC KINDS OF CONTRACTS

The remaining part of the Act deals with three particular kinds
of contracts, discussed in Ss. 124 to 238 of the Act. These are -
1. Indemnity and Guarantee (Ss. 124-147)
2. Bailment (Ss. 148-181)
3. Agency (Ss. 182-238).
Originally, the Indian Contract Act also dealt with contractS
relating to sale of goods and partnership. However, the law relauny
to sale of goods Is now embodied in the Indian
Sale of Goods Aol
1930, while that of partnership is now to be found in the Indlan
Partnership Act, 1932. This is why the Act does not contain
aiy
section between S. 75 and S. 124, For good reasons,
the remainig
sections were not re-numbered.

Find More at https://t. me/LawCollegeNotes_ Stuffs

 L
GENERAL PRINCIPLES OF
CONTRACTS
(Ss. 1-75)

1
[M. U. = Mumbai
INTRODUCTORY (S. 1) Universityl
The Indian Contract Act, 1872, which extends to the whole of
India, except the State of Jammu & Kashmir,
came into force on 1st
September, 1872.
Besides the three specific types of contracts mentioned earlier,
there are other kinds of contracts, e.g., contracts of sale or mortgage
of immovable property, leases, etc., which are not covered by the
it can be
Indian Contract Act, but by the Transfer of Property Act. So,
said that the Act is not exhaustive, i.e., it does not deal with all the
branches of the law of contracts. There are various other Acts
which deal with specific kinds of contracts, as for example, the
Negotiable Instruments Act, the Transfer of Property Act, the Specific
Relief Act, the Companies Act, the Sale of Goods Act, the
Partnership Act, the Railways Act, etc.
As stated in the Preamble, the Indian Contract Act was passed
to define and amend certain parts of the law relating to contracts.

thus, though this Act is a statute relating to contracts, it does not

Contain the entire contract law of India. The Indian Contract Act is
V.
not exhaustive; it is not a complete Code. (Irrawady Flotilla Co.
Bhagwandas, 18 1LA. 121)
Although the Act applies to the whole of India (except Jammu
&
Kashmir), it or custom of trade. Nor does
does not affect any usage
affect any incident of contract not expressly repealed by the Act.
LEGISLATIVE LIMITATIONS ON THE FREEDOM OF
CONTRACTS.- It may be noted that due to the complexity of
modern commercial an increased
and social conditions, there is
tendency
towards increased legislative interference with the right
of
the parties to makeany contract they like.
were
The
nineteenth century was an era of laisez-falre, and there
very few restrictions placed on the freedom of contract.
Writing
in 1861, Sir Henry Maine postulated (in his book entitled
3

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
4 THELAW OF

Ancient Law) that the movement of progressive soclatles had

However, the position
been a movement from status to contract. a fundamental change
today is quite different, and there has been
both in social outlook and in the policy of the
Legislature towarda
law interferes, at
the law of contracts. The result is that, today, theto make whateve
numerous points, with the freedom of parties
Acte
contract they like. Thus, the legislature has enacted certain
for the protection of employees, and an employer
cannot, therefore.
induce his employees to enter into
any contract favourable to the
employe. Similar protection is given by otheron. Acts to tenants, to
persons dealing with money-lenders, and so
Thus, today, freedom of contract is mostly a myth. The standarg.
vogue today.,
form contract (with printed terms and conditions) is in
and several contracts entered into by laymen are not the result
of

individual negotiations. Thus, if a person is in need of electricity or

a telephone or a gas connection, it is not possible for him to settle
the terms of the agreement with the Electricity Board or the
Telephone or the Gas Company. Each of them would have
standardised printed contracts, and the intending consumer would
have no opportunity to discuss or negotiate any of the clauses. He
would either have to accept it on those terms, or do without
electricity, telephone or gas, as the case may be. In such a case,
since one cannot go on without such necessary services, the
individual is, in effect, compelled to accept all the standard terms. It
is clear, therefore, that absolute freedom of contract is now largely
an illusion.

Find More at https://t.me/LawCollegeNotes Stuffs

 2
BASIC CONCEPTS
(Sections 2 to 9)
The following fundamental and basic concepts of the law of
:
contracts are dicussed in this Chapter
A. Proposal
B. Acceptance
C. Promise, Promisor & Promisee
D. Consideration
E. Agreement & Contract

A. PROPOSAL' [S. 2(a)]

Definition
When one person signifies to another his willingness to do or to
abstain from doing anything, with a view to obtaining the assent of A proposal is the
that other to such act or abstinence, he is said to make a proposal: starting point of a
S. 2(a). contract." Discuss
with reference to the
t is to be noted that an offer to do or not to do something must esential elements of
a valid proposal.
be made or the purpose of being agreed to. So, if one person
M.U. Nov. 2014
informs another that he is ready to do a particular act, this may be a
threat or a mere statement of fact about himself, as for instance, "
should like to serve you" or "! am willing to die for my country".
Thus, a statement is not a proposal, unless it is made with the view
of Obtaining the assent of the other party to whom it is addressed. What is an offer?
(2 marks)
s,
propose to marry you" or "l am willing to sell you this book M.U. Apr. 2015
forfifty rupees" are proposals, as they are made with that view.
OPFER,-The term "proposal" of the Indian Contract Act is
Synonymous with the term "offer of English Law.
LEGAL RELATIONS.-An offer. in order to give rise to a contract, What is Proposal' as
must
be intended to create, and be capable of creating, legal defined under the
relations. Mere social or moral relations will not glve rise to legal Indian Contract Act?
(2 marks)
obligations, e.g., an
accompany
invitation to dinnor or an agreomont to M.U. Apr. 2016
an offer. Thus, it
another for a walk does not constitute
5

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
6
to amount to a contract, there must be a promise
is necesSsary that, something as a egal duty.
to do or abstain from doing
case, Mr. B, who was posted in
Ceylon, promised
Define proposal. What In an English
are tne esseitais of a his wife living in England, to
pay her a monthiy alowance, so long
valid proposal? go to Ceylon for reasons of health. When M:. A
M. U. May 2018 as she could not him, the
failed to honour his promise, and
she filed a suit against
held that she could not enforce the obligation, as from the
Court no intention existed to diva
nature of the contract, it was clear that
obligation.It was merely a domestic arrangement
rise to a legal
(Balfour. Balfour, 1919 2 K. B. 571)
mean that in al family matters, there
This does not, however,
important is whether the
cannot be legally binding contracts. What is
consequences. Thus, in one case, a husband
parties intended legal
filed against each
and wife withdrew the complaints which they had
other under an agreement by which the husband
promised to pay an
from
allowance to the wife, and she, in turn, agreed to refrain
was a valid
pledging his credit. The Court held that the agreement
contract: McGregor v. McGregor, (1888) 21 Q. B. D. 424.
as
A football pool competition was run on the understanding that
between the competitors and the organisers, no legal relationship
whatsoever would arise. X, who sent a successfu! forecast of the result,
could not sue for the prize, as no legal claim existed, which a Court
t would enforce : Appleson v. Littlewood, (1939) 1 All Eng. Rep., 464.
Similarly, A promises to consider favourably the application of
8, a contractor, for renewal of a contract, if satisfied with B's bona
fides. The Court held that this did not create legal relations between
the parties : Montreal Gas Co. v. Vasey, (1900) A. C. 595.
t MERE INTENTION IS NOT ENOUGH.-Similarly, a mere
statement of intention, made in the course of conversation, will not
constitute a binding promise, even though acted upon by
the pary
to whom it was made. 6
yt5
Thus, A says to B, in conversation, that he
ntends to give 100
pounds to any one who marries his (.e. A's) daughter with
consent. Bmarries A's daughter with A's hs
consent. In theso
circumstances, there will be no contract between A
and B, becaus
A's statement was not an offer. (Weoks v. Tybald,-1605.Noy.
11). A

the Court observed in that case, it is not reasonable

should be bound by such general words
that the perso
spoken to entice suitors.

Find More at https://t.me/LawCollegeNotes _Stuffs

 BASIC CONCEPTS
COMMUNICATION 7
OF
OFFER.- It is to be
there is no offer till
it is communicated to the offeree.remembered that
promises something an act Thus, if A
if
knowing about the offer,
is done, and B does that act not
there will be no contract. (See Lalman v.
Gauri Dut, discussed later under
the topic entitled "ACCEPTANCE".)
lmilarly, if A does some work
without the knowledge or request of
B.A cannot claim payment for the work done.
PROBLEM.-X applied for the post of a
A
its meeting, the Managing
head master in a school.
Committee passed a resolution
appointing him to that post. X did not
receive any official intimation of
tic anpointment, but one of the members of the Committee
informed him about it. The privately
resolution was subsequently rescinded.
Can X Sue the Managing Committee for
breach of contract?
Ans.- No, he cannot. There was no official communication to X
by the Committee, and
hence, no contract. As observed by the
Court, the very fact that the
Committee did not inform X goes to
show that their decision was not
final, and that there was a possibility
of reconsidering the same. (Powell v. Lee,
1908 24 TLR 606)
Further, an offer to work cannot bind a person
who has no
opportunity of accepting or rejecting the work. Thus, in
Taylor v.
Laird (25 L.J. Ex. 329), T was
engaged to command L's ship. During
voyage, T gave up
the command, but he helped to bring the vessel
home. T claimed wages for this work
from L. As L had no opportunity
of accepting or rejecting
the offer of T for working the ship back to
port, L is not
bound to pay.
may be noted in passing
It
that a proposer cannot dictate terms
Under which the offer may
be refused, e.g., a person cannot say
at, within a certain time, acceptance is not communicated, the
if
Oner would
be considered as accepted. [This point is discussed at
Iength under the topic entitled "ACCEPTANCE".)

is
COUNTER-OFFER- At times, the person to whom the proposal
made indicates
he
willingness to buy at a lesser price than what
his
is offered. Thus, A
100, but B makes an offer to B to sell his pen for Rs. What is the effect of a
insists on
says that he is wiling to buy it for Rs. 90. A, however, counter-offer?
Rs. 100
(2 marks)
for the pen. goes away, but after a while, he
B
M.U. May 2018
Bas back to A, and tells him that he is now wiling to buy it for
100. At this
B point of time, however, A refuses to sell the pen to
for Rs. 100. Would
he be justiffed in doing so?
Inthe above circumstances, wOuld be entitled to
A
do so. When
offered
to pay Rs. 90, he was actually rojecting A's offor of

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
8
counter-offer for Rs. 90, which A rejected
Define offer. Explain Rs. 100, and he made a
counter-offer and Later. when B came back to A, and purported to no
accept A's earlier
invitation to offer with not so, as there was offer trom A
offer of Rs. 100, he could
case laws.
time. It was B who was now making a fresh offer lot
M.U. April 2014 that point of
not accepting.
Rs. 100), which A was justified in
INVITATION TO OFFER.- An offer must be
distinguished trom
Write a short note on:
an invitation to offer. Many statements which seem to be offers
are.
Offer and invitation to
offer. very often, merely invitations to offer. Thus, the following are not
M.U. Apr. 2013
Nov. 2015 offers, but merely invitations for an offer
:
quotations of the usual
lowest price in answer to
an
prices of a trader, quotations of the
Give 2 examples of or books, and advertisement for
invitation to offer. enquiry, a catalogue of goods
t purchaser who
(2 marks) tenders, or an advertisement of an auction. is the
M.U. Nov. 2014 book-seller or the auctioneer
May 2018 makes the offer, and it is for the trader,
to accept the offer or to reject it.
In short, every statement that seems to be
an offer may not be
such
an offer, and may not create legal obligations. Very often,
statements are merely invitations to offer. Thus, a book-seller's
catalogue, with prices stated against the names of the books,
does
an ínvitation
not contain a number of offers, but constitutes simply
to the purchasers. The purchasers are the ones who make the
offers, and it is for the book-seller to accept or to reject such offers.
Thus, A sees an article marked Rs. 50 in B's shop. He tells
he will buy it, and offers him Rs. 50. B says that he does not wish
to sell that article. It will be seen that here there is no contract at
Does article
a all. If a customer enters the shop, tenders the price and demands
displayed in shop a the article, the shop-keeper is not bound to sell it to him. In sucn
with a price tag
amount to an offer? cases, the price-tag is not an offer, but an invitation to offer. The
(2 marks) demand of the customer is the offer, which the shop-keeper is free
Nov. 2013 to accept or reject as he pleases, and therefore, there is no contract.
Jan. 2017
In a famous English case, A telegraphed B: "Will you sel us
Bumper Hall Pen ? Telegraph lowest price." B telegraphed, "Lowest
price 900 pounds". A replied : "We agree to buy. B.H.P. for 900
pounds". The Court held that there was no contract, because b
never made a proposal, i.e., expressed his willingness to sell :
Harvey v. Facey, (1893) A.C. 552.
In another case, a merchant wrote to a firm of oil millers, "1 an
offering today plate linseed for January-February shipment to Leith and
have pleasure in quoting you 100 tons at usual plate terms. I shall be
glad to hear if you will buy and await reply" The oil millers telegraphed
the next day : "Acoept", and confirmed it by aletter. It was held,

Find More at https://t. me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 9
distinguishing
Harvey v. Facey, that the merchant's letter was an offer
to
and not a mere quotation of price,
sell, and that the contract was
concluded by the telegram :: Philip &
Co. v. Knoblanch, (1907)
S.C. 994.
eTANDING OR OPEN OFFERS. – Government, Railways and
other bodies, who require stores in large quantities, often invite
tenders for the supply of goods. An advertisement inviting tenders is
not an offer in itself; it is merely an invitation to offer. It is the person
who sends a tender for the supply of the goods that
is making the
ofer which the party inviting the tender may or may not accept. The
so-called "acceptance" of such a tender merely amounts to an
intimation that the offer wil be considered to remain open during the
neriod specified, and that it will be accepted from time to time by
orders for specific quantities. It does not bind either party, until such
orders are placed. On the one hand, there is no obligation on the
party accepting the ternder to place any order; on the other hand, the
party making the tender has only made an open or continuing offer,
which he may revoke before any order has actually been placed.

A submits a tender to B to supply grains upto 1,000 quintals

within a year. B accepts that tender, and from time to time,
places orders with A for the quantities required. Here, the tender
does not constitute the offer, nor does the so-called "acceptance"
amount to acceptance in law. The tender is really a continuing
offer, which may, from time to time, be accepted by placing an
order, but, till an order is placed, there is no acceptance
Kundan Lal v. Secy. of State, 72 P.R. 1904.
Similaly, A agrees to supply coal to B at certain price upto
åcertain quantity, as much as B may require. Here, B
has not
agreed to buy any specific quantity of coal, and there is no
Contract, but a mere continuing or standing offer, which may be
dccepted from time to time, by placing orders : Bengal Coal Co.
V.
Homi Wadia & Co.. 24 Bom. 97.
INVITATION FOR TENDERS.- A person who invites tenders for
the purchase or
person sale of goods does not make an offer. It is the
who submits a tender that makes an offer, which it is for the
person
who invites the tenders to accept or not.
AUCTION
auction
SALES.- The same principle governs the case of
bidder,
sales also. In auction sales, the offer proceeds from the
and it is for the auctioneer to accept it or not. In auction
sales,
the
offer can acceptance is signified by the fall
of the hammer, but the
be revoked before such acceptance.

Find More at https://t.me/LawCollegeNotes_Stuffs

 10 THE LAW OF CONTRACTS

An announcement of an auction is only an invitation offer,

constitutes offer. Like all t
and a bid made at the auction the
no obligation
offers, it may be accepted or rejected. Thus, there is
may be tha
on the auctioneer to accept any bid, even though it
highest bid, unless it has been announced in advance that
the

goods would be sold to the highest bidder.

Payne v. Case, 3 TR. 148.-Aholds an auction of his furniture
A
which E, F and G bid. The highest bid of Rs. 1,000 is made by G.
refuses to sell. There is no contract, for an auctioneer merely invites
proposals, and the bidders make proposals which are accepted by the
auctioneer with the fall of the hammer, and before the hammer falls., the
property may be withdrawn or bids not accepted.
So also, if an auctioneer advertises that he will have an auction
sale on a particular day at a particular place, it does not legally bind
him to hold such auction. Nor does it make hím liable to indemnity
persons who may have incurred expenses to attend the sale. Such
advertisements are only invitations to offer. (Harris V. Nickerson)
Warlow v. Harrison, I E & E. 295. A
advertises an auction
"without reserve", indicating thereby that there is no reserve price
and that the highest bid would be accepted. B makes the highest
bid at the auction. A must sell to B; otherwise, he will be liable for
committing a breach of the contract.
PROPOSALS FOR INSURANCE. The concepts of proposa
and acceptance in insurance contracts may be best illustrated by
the following three cases:
1. A person handed over to an insurance company, a
"Proposal
Form", by which he proposed to insure his life with
the company, and
the company wrote that the "proposal had been accepted", adding that
"No insurance can take place until
the first premium is paid" Before the
first premium was paid, the company came to
know that the proposer
had gone down in health, and refused to accept
the premium. In a sut
against the company, it was pointed out that
was only a preliminary.negotiation, the so-called "proposal
was really the offer, so and that the so0-called "acceptance
that there was no contract till the first premium
was paid. was
It held that the company could, therefore, revoke their
so-called "acceptance" ( in law only an
offer) before the premium was
paid : Canning v. Farquhar, (1886)
16 Q.B.D,727.
2. South British Ins. Co. v.
Stenson, 52 Bom. proposes
to have an insurance policy:; B
issues one 532.A
to A, subject to paymen

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 11
premium.
does not pay the premium. B files a suit to recover
A

of premium. The
suit will fail, for the issue of policy subject to a
the
condition was a counter-offer, which A
has not accepted.
The plaintiff entered into acontract of insurance against theft of
andI furniture. He signed the proposal and paid the premium
his goods
for the
year to the General Manager of the Insurance Company. The
insurance was to be in force for one year. The Insurance Company
a Cover Note, acknowledging the receipt of the premium, and
nt
undertook the risk for 30 days, within which the policy would be
eeed, No policy was, as a matter of fact, issued. Theft having occurred
in the plaintiff's house within the year, the Insurance Company
repudiated its liability to compensate the plaintiff for his loss.
R is clear that, in this case, the contract is complete, and the
Insurance Company is liable to compensate the plaintiff for his loss
:Mohmed Sultan V. Clive Insurance Co., 56 Al. 726.

PROBLEMS
1. a second-hand book-seller, published a catalogue quoting
A,

prices against various second-hand books. A received letters from

a
the customers B, C
and D, offering to buy particular book. A
wants to refuse to sell the book for the price. Can he do so?

Ans. Yes, He can do so. A, in publishing the catalogue, did not

make any offer, but merely invited offers. A may, therefore, refuse to sell
the book, because, in doing so, he is merely refusing to accept an ofer.

2. A sends an invitation to his friend B in Bombay, to come to

Pune to play in A's friendly cricket match against a local team
Curing the week-end. B
sendsa letter accepting A's offer and travels toA
une at hiS OWn expense. He presents himself on the cricket field, but
Ieiuses to include him in the team, Can Bsue A for a breach of contract?

Ans,- It is clear that. in this case, A's invitation is not an offer,

an invitation to offer. B's letter is an offer, and unless that offer
8noacepted by A, there is no concluded contract, and consequently
in the team, has
A
breach of contract. By refusing to include B

refused cannot, therefore, sue A. Moreover,

acceptance of B's offer. B

it is also was no intention to create

a
legal
relationship clear that there
between the parties.
Would
A
offered to sell B his farm for 1,000 pounds. B said he B
buy for 950 pounds, for which price A
refused to sel. Then
expressed a
his willingness to buy for 1,000 pounds, Is there
Concluded
contract between the parties?

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
12 THE LAW OF

AnsS.-- There iscontract between the parties in this case.

no
a counter-oier, a rejection of the
The offer to buy for 950 pounds is
original offer, which comes to an end.
Subsequent willingness t
acceptance, as there is nothino
pay 1,000 pounds can be no
334)
accept now. (Hyde v. Wrench, 5 Bear.
B accepts he
4. invites B and his family to dinner, and
A

family), A sues him fer

invitation. When B fails to turn up (with his
unconsumed food. Will he succeed?
the price of the
Ans.- No, A's suit will be dismissed. Here, there was no intention
no enforceable contrat
to create a legal relationship, and hence,
(Kalai Haldar v. Sheik, 23 W.R. 217)

B. 'ACCEPTANCE (S. 2(b), Ss. 7-8]

What is acceptance of S. 2(b) defines acceptance thus the person to whom the
: When
an offer? (2 marks) proposal is made signifies his assent thereto, the proposal is said
M.U. Aprl 2014
to be "accepted".
Section 8 then lays down that performance of the conditions ofa
proposal, or the acceptance of any consideration for a reciprocal promise
which may be offered with a proposal, is an "acceptance"of the proposal.

Its essentials
lays down two essentials of a valid acceptance. It says that
S.7
in order to convert a proposal into a promise, the acceptance
must (1) be absolute and unqualified; and (2) be expressed in
some usual and reasonable manner, unless the proposal
"Acceptance is to a prescribes the manner in which it is to be accepted. If the proposal
proposal what a prescribes a manner in which it is to be accepted, (as for instance,
ighted match is to a
train of gunpowder." by registered post only), acceptance can validly be made in that
Discuss and state the manner only. If the acceptance is not made in that manner, the
essentials of a valid proposer may insist (within a reasonable time) that his proposal
acceptance.
M.U. Apr. 2011
shall be accepted in the prescribed manner, and not otherwise; but
if he fails to do so,
Apr. 2015 he accepts the acceptance.
5CONDITIONS REQUISITE TO CONVERT PROPOSAL INTO
PROMISE- It may be noted that every contract springs from the
acceptance of an offer. The acceptance may be made either by
words or by conduct. It must be absolute and unqualified. If there 1S
a variation in the acceptance, the acceptance is not an acceptance.
but a counter-proposal in itself; and there is no contract until this
cOunter-proposal is, in its turn, accepted by the original proposet,
that
This is sometimes referred to as
the "mirror image rule, namely,
the acceptance must be a mirror image of the proposal, which n
changes or variations whatsoever.

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 13
Thus, until there is an absolute and unqualified acceptance, What is the effect of
stage of negotiation has not passed and no legal obligation a conditional accep
the tance? (2 marks)
comes into play. Acceptance of a proposal with conditions and
acceptance at all. M.U. Nov. 2015
reservations is no
Where and B agreed upon the terms of a contract
A
of sale,
writing concluded with the words "contract in due
and the course", it
was not a
was helthat this concluded contract : Sewakv. Municipal
Board, A.l.R. (1937) All. 328.
B offered to purchase a house upon certain terms, possession
tobe given on or before 25th July. A agreed to the terms, but said
would give possession on the 1st of August. This was
he held not
to be an acceptance of B's offer.
A
offered to buy B's mare on giving a warranty that the mare
was quiet in
harness. B gave a warranty that the mare was "sound
andquiet in double harness". The Court held that this was not an
acceptance of the offer.
A
offers to let his house to B for 10 years at a certain rent. B
accepts, adding that he would have an option of renewal for another
5years. This is not an unqualified acceptance, but a counter-offer.

Similarly, when an offer to sell property was accepted "subject

to the terms of
the contract being arranged" (as in Honeyman v.
Maryaf) or when examination of title deeds was yet to be had at
the office of the seller's attorney (as in Koylash Chunderv. Toriny
Churn), it was held that there was no acceptance in
either case, as
a condition remained to
be performed in the future.
Hai Mahomed v. Spinner, (1900) 24 Bom. 510- A made an
oner in writing to B for
the purchase of 200 bales of Pepperill at a

,
Siated price. A few days later,
B's salesman tendered for signature
1OA, an indent
containing certain terms not according to the original
and in particular containing the words "Free Bombay Harbour
Sn
erest".Arefused to sign this. B, however, ordered the goods,
and on their
arrival, tendered them to A, demanding at the same
sums as would have been due under a contract entered
intch
into on
theterms "Free Bombay Harbour and interest". refused to A
Pay. On
a suit by B,
ofler, it was held that there was no acceptance of A's
but that was only a counter-proposal by which was
notaccepted there
B,

by A.
Hindustan
Xslgned Co-operative Insurance Society v. Shyam Sunder-
Organiser a proposal form of life insurance and gave it to Y, an
Dremium. of the Insurance Company, along with a cheque for the
Y
had actually no authority to cash the cheque, but after

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
14 THE LAW OF

the cheaua
the medical examination of X, the Company cashed
Two weeks later, the Company wrote
to Y, asking him to make
hi
X died of pneumonia
further inquiries regarding X's proposal, but then was at
contract complete tro
the very next day. It was held that the re
in the circumstances.
y
the moment the cheque was cashed, and
express communication of acceptance.
had dispensed with the F
messenger, B accepts by post
sends a written offer to B by a
A
CC

circumstances are such ac

The acceptance is good, for "where the
that, according to the ordinary
usage of mankind, the post might be wl
acceptance of an offer, the
used as a means of communicating the Herschell
acceptance is complete as soon as it is posted". (Per Lord de
of
in Henthorn v. Fraser, (1892) 2 Ch. 27)
complete to
(The detailed rules as to when acceptance is said to be vit
a Chapter.)
when the parties are at a distance are discussed in later
REFUSED PROPOSAL HAS TO BE RENEWED.- If a proposal is Bi
once refused, it cannot be accepted unless it is renewed. Thus,
it A
th
says that he will
makes a proposal to sell his horse for Rs. 5,000 and B be
pay Rs. 3,000, he cannot afterwards bind A to sell the house, even though be
A. This is so,
he is ready to pay Rs. 5,000, i.e., the amount demanded by ar
a counter-offer
because A's offer of Rs. 5,000 was rejected by B, who made F
for Rs. 3,000 (which was not accepted by A). So, unless A
once again ca
makes an offer for Rs. 5,000, there is nothing left for B to accept. dc
OFFEROR CANNOT IMPOSE BURDEN OF REFUSAL.-
A

person making an offer cannot impose on the other party, the burden kn
assume
of expressly refusing the offer, by saying that he will Se
acceptance if he receives no answer within a stated time. The sti
proposer has the right to prescribe the manner in which the proposal pr
may be accepted, but not the manner in which it may be refused,
e.g. Fc
a person
cannot say that if within two days, acceptance is not W
go
communicated, the offer would be considered as accepted. "I will take ins
it to be clear law" said Jenkins, C.J. in Haji Mahomed v. Spinner, 24
thi
Bom. 510, that a person making a proposal cannot impose on the
party to whom it is addressed, the obligation to refuse it under the G
penalty of imputed assent, or attach to his silence the legal result ne
must be deemed to have accepted it." No duty is cast by the law upoi of
a person to whom an offer is made to reply to that offer.
pri
MENTAL ACCEPTANCE.- At the stage when the offeree makes tel
up his mind to accept the offer, the agreement obviously does not ha
come into being. This accoptance has then to be communicated to
do
the proposer. In other words, there must be some rogard externalas tet
Write a short note on:
Mental accep-tance is manifestation of assent or some act which the law can ag
not enough. communication of the acceptance to the proposer. Mental acceptaoe
MU. Nov. 2014 therefore, would not be enough. t

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 15
Felthouse v. Bindley, 11 C.B. (N.S.)
869.–Foffers by letter to buy
nephew N's
his
about him, .
shall
horse,Z,
consider
for 30 pounds saying, "If | hear no more
the horse mine at 30 pounds," does not
N

reply, but instructs

B,
the auctioneer with whom his horses are for
Z. B sells Z by mistake. F sues B.
sale, notto sell In the circumstances,
Fs suit against B,
the auctioneer, will not succeed as there was no
concluded contract between F and N. N's silence cannot amount to
acceptance, and mere uncommunicated or mental
acceptance by N,

which is indicated by his directing B not to sell Z, is not enough.

However, if it could be shown that, on account of previous

dealings between the parties, it was reasonable to infer that the
offeree was under a duty to notify the proposer if he did not intend
to accept the proposal, his silence could amount to acceptance, a
wiew which finds support in the American Reinstatement of the Law.

Cheshire and Fifoot are of the view that, if in Felthouse v.

Bindley (above), the nephew had sued the uncle, instead of suing
the auctioneer, the Court would have held that a contract did exist
between the parties. This would, indeed, be a paradoxical situation,
because if F sues B, the Court would rule out a contract between F
and N, and if F were to sue N, there would be a contract between
Fand N, the facts and circumstances being indentical ! This paradox
can, however, be partially solved by the argument invoking the
doctrine of estoppel against N, when sued by F
A similar problem of acceptance arises in the case of what is
known in English Law as "inertia selling". In such cases, a trader
sends unsolicited goods to a customer, along with a letter which
states that if the goods are not returned within ten days, it would be
presumed that the customer has decided to purchase them.
Following the well-established principles of the law of contract, it
would be seen that the customer is under no obligation to return the
goods, but, it he manifests any intention to accept the goods, as for
instance, by using or consuming the goods, he would have to pay for
them. In England, such cases are now covered by the Unsolicited
Goods and Services Act. 1971.
STANDARD FORM CONTRACTS.-As stated earlier, the days
in contract law are gone and standard form contracts
of
laissez-faire
iVogue today. A standard form contract is one which hasa
printed terms a
business entity (say,
and conditions on which
telephone
company) does business. Any person who wishes to
have a
dotted
telephone connection from this company must sign on the
terms
line on a document where the company has listed dozens of
a prospective consumer
agree and conditions. It is not open to to
or
to only Some those terms. Either he agrees to the conditions
all
he stays content without a telephone line of
that company!

Find More at https://t. me/LawCollegeNotes_Stuffs

 THE LAW OF
CONTRACTS
16
courts have interpreted
What is a
"standard The following are the ways in which
if
forn contract". these types of contracts:
(2marks) It may k.
M.U. Nov. 2008
IGNORANCE OF OFFEREE OF TERMS OF OFFER--
communicated, although the acceptor may
Apr. 2011
noted that an offer may be
of some of the terms of the offer.
Many contracts set
be ignorant f
issued by the railway, tram-way,
in printed documents, e.g., tickets numerous terms, many
C

steamship and airline companies, contain

document. But, they
which are not read by the party receiving the
is bound by them
deemed to be communicated to him, and he are legible. t
whether or not he has read them, provided they
If, however, it can be shown that the acceptor did not
know that the
document contained the terms of the contract and reasonable
ot
notice
terms.
them was not given to him, he will not be bound by the
Richardson v. Rowntree, (1894) A.C. 217.A passenger, who
suffered injuries byy the negligence of a steamship
company, filed
company. The onty evidence of a t
suit for damages against the
contract between her and the steamship company was the ticket
issued to her by the company. On the ticket, there was a clause
printed in small types which purported to limit the liability of the
company in various ways. The said clause was, however, obscured by
words stamped across it in red ink. The Court held that as the
passenger id not know about the printed conditions relating to the
contract, she was not bound by the conditions, as she did not know
of their existence, and having regard to the smallness of the types in
which they were printed, the absence of any calling of attention to
them and the stamping of red ink across them, the company had no
given any reasonable notice of such conditions. Therefore, the
passenger's suit for damages succeeded.
It has often been stated that if a particular condition relied upon by
a party seeking exemption is unusual in such contracts, such a party
must take special measures to bring it to the notice of the other party
This may be done by underlining such a condition, or putting it in bou
print, etc. ln one case, Lord Denning went to the extent of observing
that such a clause "would need to be printed in
red ink on the ao
the document, with a red hand pointing to it before the notice coula
held to be sufficient". (Spurling Ltd. v.
Bradshaw)
It is submitted that Lord
Denning's "red hand approach Commercia
have taken the matter a bit too appel
far, and its applicability to Chemical
contracts was doubted in
subsequent cases like Ocean
Transport Inc. v. Exnor Craggs
Lt.iai yK
Such a
However, in cases where
the contracting party has signedboundby
document, and all its terms and conditions are
legible, he

Find More at https://t. me/LawCollegeNotes_Stuffs.

 BASIC CONCEPTS 17
terms, evenif he had not actually read it. This is also known as the
its v. Graucob Ltd.
rulein L' Estrange (1934 All. E.R. 16). In that case, a
signed an agreement for the purchase of a cigarette vending
buyer Short noteon
reading its terms. One of
a
machine without Write
the terms excluded liability standard form
all kinds of defects in the machine. The machine supplied was Contracts.
for
defective, but the Court held that
the supplier was not liable. M.U. Apr. 2007
Apr. 2008
the terms are not apparent on the face of contract, no
If
reasonable caution the and
is taken to draw the attention of the acceptor,
those terms
will not be binding. Thus, where the attention of a
passenger was not drawn to
the clause "that the Company is not
ablefor any loss the luggage", it was held, in a suit for the loss of
of

he luggage, that the Company was liable : Henderson v. Stevenson.

In Henderson v.
Stevenson, the plaintiff sued the defendant What is reasonable
company for damages tor losS of his luggage on account of the notice in a standard
negligence of the servants of
the company. The company's defence was from contract?
that the company was protected by the conditions the
of contract which (2 marks)
yere printed on the back of the ticket. The front side of the ticket showed M.U. Apr. 2009

sinoy the names of the places, viz. "Dublin to Whitehaven". On the

hark of the ticket, it was printed in small types
that the company was not Wite a short note on:
liable for the loss to the passengers due to the negligence of the Reasonable notice of
servants of the company. It was held that the plaintiff did not have terms under standard
sutficient notice of the conditions, and as such he could recover. form contract.
M.U. Nov. 2009
In Haris v. G. W. Rly., H deposited luggage at a cloak room and May 2017
received a ticket on the face of which was printed, "Left subject to
the condition on the other side. This ticket to be given up when the
uggage is taken away." On the back of the ticket was a condition State the various
that The company will not be responsible for loss of or injury to any modes evoved of by protection
the courts
package beyond the value of 5 pounds, unless extra payment are to protect an indivi
made: H knew that there were conditions on the back, but did not dual against the
au em. Ihe luggage was lost, and the company refused to be possibility
of exploi
Tesponsible as the extra payment had not been made. H was held
tation inherent in
standard form
Dound by the conditions on
the ticket, although she had not read contract.
bmem, for
the ticket in effect contained the terms of the offer which H M.U. Nov. 2009
oepted by leaving her luggage and paying for its deposit. Nov. 2013

Mackalican v. Compagnie des Messageries Maritime de France Explain standard form

. Cal.
French, 227),-- In this case, Xbought a ticket which was written in contracts and the
and contained several clauses and conditions in French. The safeguards provided
against
oon
Was
before the Court was whether X, who did not understand French,
sbound by clauses.
standard

understand the
clauses. The Court observedthat although he did not M. U. May 2018
a
French, was a man of
business, contracting with French
Company, he
and he knew that tickets were issued in French. He had ample
ime and means
not. to get the ticket explained and translated, which he did
Hewaas, therefore,
bound by the clauses and conditions.

Find More at https://t. me/LawCollegeNotes_Stuffs

 18 THE LAW OF CONTRACTS

In Mukul Datta Indian Airlines Corporation, the Court has

v.

t
down the following three propositions regarding tickets issued
passengers:
(a) If the passenger did not know that there was any writing on
the ticket, he is not bound by the conditions.
(b) If the passenger knew that there was a writing, and knewa
believed that such writing contained conditions, he is bound by h
conditions, although he did not read them.
(c) If the passenger knew that there was some writing on the
ticket, but did not know or believe that such writing containe
conditions, he would nevertheless be bound, if the party delivering
the ticket has done all that is reasonably necessary to give hin
notice of such conditions.
Lily White v. Muthuswami (A.I.R. 1966 Mad. 13)– In this case, a
customer had given a new sari to a laundry, for which a receipt was
issued by the laundry. One of the conditions on this receipt was that in
case of loss of a garment, the customer would be entitled to claim
only 50% of its market price or its value. When the laundry lost the
new sari, the customer sued for its full value.
The Madras High Court
held that the term was so unreasonable that it would defeat the very
purpose of the Contract. Therefore, f
this condition was not binding
between the parties. As the Court observed, such a term would place
a premium on dishonesty,
-
to purchase new garments at 50%%
inasmuch as Would enable the laundry
their price.
ACCEPTANCE OF THE PROPOSAL
NEED NOT ALWAYS BE
EXPRESSED IN WORDS.- Sometimes,
being made to any definite person, is
the proposal, instead o
and as sOon as any person who is willing to
made to the public at large.
words or conduct, a contract accept it, acceptS y
is made.
Under section 8 of the Indian
Contract Act, a prop0sal may
accepted in any of the following
three ways:
(1) By communicating the acceptance;
(2) By acceptance of any
consideration for a reciprocal promise; a
(3) Performance
of the condition of a
Though the general proposal.
rule
Communicated to the proposer, is that an acceptance muslapossible
to accept a proposal by performing yet, as seen above, it is
In these cases, the conditions of such prop
the proposal may be of kinds. Firstly,
the
proposal may be in two
large. For example, the nature
world at
of an offer
made to the
dog, the offer, in
in the case of an offer of a for a lost
its very nature, does not contemplate reward intimation
of acceptance from every person an
offer, decides to who, on becoming aware
search for the dog. In cases Os
of this type, itis

Find More at https://t. me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 19
impossible
for the offeree to express his acceptance otherwise
pperformance of
than bycondition of the contract. In such cases, performance
thhe
acceptance
of
the proposal itself will be deemed to be an
of the proposal which binds the person who
proposal. makes
the
Secondly, the proposal itself might indicate that performance is
ode of acceptance. For example, when one orders a book and
asks the publisher to send it by
V. P.
P., it
is
clear that such
publisher must accept the proposal by performing the condition. In
SUch
cases, whether the performance of a condition can amount to
acceptance or not depends on
proposer
the intention of the prop0ser. If the
intended that the
has expressly proposal should be
accepted by performance of the condition, then alone it would
amount to acceptance, but not otherwise.

Carlill v.
Carbolic Smoke Ball Co. (1893 1 Q.B. 256).-- In this
interesting English case, the Carbolic Smoke Ball Company
advertised that any person who caught influenza after using the
medicine of the Company (viz. Carbolic Smoke Ball) in a specified
way and for a
specified period, would be paid 100 pounds. It was
further mentioned that the Company had deposited 1,000 pounds
with the Aliance Bank to show
the sincerity of the Company in the
matter. Mrs. C, after using the medicine (as prescribed by the
Company) nevertheless caught influenza.
It was
held that she was entitled to recover 100 pounds, because
the Company's advertisement was something more than an invitation
to transact
business. The Company was held liable, for (0) the
alleged offer was not a mere advertisement or puff, for the statement
that 1,000 pounds had been deposited to meet possible claims, was
evidence tending to show that the offer was sincere; and (i) the
Roeptance was complete, as the offer in question admitted of no
Oner acceptance than performance of the condition. The objection
Dy the Company that Mrs. C ought to have notified her
a0ceptance to
the Company was rejected by the Court.
Ihe principle underlying the Carbolic Smoke Ball Co.'s case
(above) a case
was applied by Allahabad High Court in where
2 young the
boy had run away from his father's home, and the father
hadissued
pamphlets announcing thus : "Anybody who finds trace
theboy and X
saw this boy
niear
a brings him home will get Rs. 500."
Police Railway Station and promptly took him to the
Railway
Station
foundthe and then son. sent a telegram to the boy's father that he
the Condition missing The Court held that
X
had performed
Bhajan and was, therefore, entitled to the reward. (Har
Lal v. Harcharan Lal, A.!.R. 1925 All. 539):

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
20 THE LAW OF

THE PERSON TO WHOM

PROPOSAL IS MADE MAY OR MAV
perSon or persone
NOT BE DEFINITE,- It is to be noted that the
one or mnore, definite o
whom a proposal is made may be either n
may
indefinite. It to an unascertained number of persOns
be made
no contract can arise until it has beas
to the world at large. But
person. Only when anyone accepts the
accepted by an ascertained
offer, a contract comes into existence. The
offer is regarded as bein
it, but to the person
or
made, not to the many who might accept a to ar
persons by whom it is accepted. Thus, the offer of reward of an
conviction
person giving such information as shall lead to the
of a lost boy
offender, or the discovery of lost property, or discovery
is an offer to pay the reward to the first
person, and the first person
person is
only, who gives such information. The motive of such
information as
immateríal. Thus, where a reward was offered for such
gave
might lead to the discovery of a murder, and the plaintiff
information believing that she would not live long, and for the purp0se
was entitled to the
of easing her conscience, it was held that she
& Ad. 621.
reward William v. Carwardine, (1833) 4 B.
:

EFFECT OF ACT DONE IN IGNORANCE OF PROPOSAL.

But if the act is done in ignorance of the proposal, it is no acceptance
of the proposal, and hence there will be no contract, for, when

there is an uncommunicated offer, there can be no acceptance.

In Lalman Shukla Gauri Dut, (1913) 11 A.L.J. 489, the plaintii
v.
was in defendant's service as a munim. The defendant's nephew
absconded, and the plaintiff went to find the missing boy. In the
plaintiff's absence, the defendant issued handbills, offering a reward
of Rs. 501 to any one who might find the boy. The plaintif traced
him and claimed the reward. The plaintiff did not know of the
handbills when he found the boy. The Court held that the plaint
was not entitled to the reward.
The Court went a step further in an Australian case, where
was held that even if the acceptor had once known about the onel
but had completely forgotten about it at the time of acceptance,
would be in the same position as a person who had not hearo
the offer at all. (A.V. Clarko - 1927 40 CLR 227), In that case, one
of the Judges gave an interesting example, as follows : Suppose person
offer is made to the world at large to pay 100 pounds to any
who swam a hundred yards in the channel on the 1st of Jana
Now, if X was accidentally or mallciously thrown. overboard on
and
very day, and he swam that distanco, simply to save his lite reward.
without any thought of the offor, he could not claim the
although he might have heard about it earller,

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 21
ACCEPTANCE
MUST BE BY AN ASCERTAINED
PERSON.-
stated above, while an offer may be made to
As unascertained
persons or to the world at acceptance
ascertained individua. If A
large, must be by an
publishes an offer of a specific reward
information leading
for to the arrest of a murderer, he does not
intend to make as many contracts as there should be perSons
giving such information. His contract will be only with the person
ho first gives such intormation; and the offer being thus accepted
result in a binding promise. But for the future, it will come to an
end. so that a person giving information later will be acting on no
subsisting offer: Lancaster v. Walsh, 4 M. & W. 16.

JEGAL EFFECT OF ANNOUNCEMENT IN RAILWAY TIME

TABLES.- The principle that the performance of the conditions of
Doposal is an acceptance of the proposal, has also been applied to
ime-tables published by railway companies; for, the representation
made by railway companies in their time-tables cannot be treated as
mere waste paper. It
has been held, in Denton v. Great Northern
Ralilway Co., that a statement in a railway company's time-table that a
certain train will run at a certain time is an offer which is capable of
being accepted by a passenger who comes to the station and tenders
the price of the ticket. The railway company, however, may absolve
tself from liability by the insertion of a suitable disclaimer clause.

C. PROMISE, PROMISOR & PROMISEE

Wnen a proposal is accepted, it becomes a promise. The person Who are the promisor
making
the proposal is then called the promisor, and the person to and promisee under
the indian Contract
whom it is made
is called the promisee. Act?
M.U. Nov. 2012
Promises are of four kinds :
1. Express (S. 9)
2. Implied
What is 'promise' as
(S. 9) defined under the
3. Reciprocal Indian Contract Act?
(S. 2) M.U. Apr. 2016
4. Alternative
(S. 58)
0)
"Express" (2) "Implied" promise (S. 9)
and
Where
Words, the proposal or acceptance of any promise is made in
the promise is said to be express. Where such proposal or
ateptance
is made otherwise than in words, the promise is said to
teimplied:S. 9.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
22 THE LAW OF

CONTRACTS.- As already seen above, great mase.

a
TACIT
contracts, which are
human transactions depend upon implied
of the parties. Thus, when
written, but grow out of the acts
tacith. a
passenger enters into a bus or engages a taxi, he thereby
a purchaser takee
impliedly agrees to pay the fare. So also, when pav h
newspaper from a book-stall, he thereby tacitly agrees to
even
price thereof, and so on. An offer will be perfectly valid,
Words are used.
Under the law, both an offer and an acceptance may be made
by conduct. A nod at an auction may constitute
a bid or an offer
contract, the terms of
and a fall of the hammer, the acceptance. A
which are not expressed in words, written
or oral, is called an
t
implied contract.
tl
Thus A, a baker, exposes cakes on his counter. B enters and
picking up one, eats it. A's act Constitutes an offer to sell, and Bs
eating an acceptance of the offer or a promise to pay the price.
This is, however, an implied contract, as A did not, in so many
t
words say, "I am willing to sell my cakes." Nor did B expressly say,
"1 am willing to buy (and eat) your cakes."

(3) Reciprocal promises [$. 2(1)]

Promises which form the consideration or part of the
consideration for each other, are called reciprocal promises : S. 2.
When the agreement consists of reciprocal promises, as is
usually the case, there is an obligation on each party to perform his
Own promise and to accept performance of the other's promise.
In the case of reciprocal promises, each party gives a promise.
inreturn for the other's promise, e.g., a promise to sell and purchase
between and B. It will be seen that, in such a case, each promise
A

is a consideration for the other.

(The law as to reciprocal promises will be considered at greate
length, when discussing Ss. 51-54.)

(4) Alternative promise (S. 58)

An alternative promise is one which
offers the choice ofRs.1,000,
one
two things. For instance, A agree
and B
shall pay B
for which B shall afterwards deliver to Athat
A

either rice or wheat.

. WHAT IS AN ALTERNATIVE
PROMISE- When the promise
given an alternative or choice of one of two things,
the promis

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC cONCEPTS
23
saidto be alternative. If to pay B Rs. 1,000 in return for
A

Ipromiseto sell him 50 promises

maunds of rice or 100 maunds of
Bspromise wheat,
is an alternative one. Either of
B's the alternatives is perfectly
B delivers either rice or wheat, the obligation
valid; so, if
fulfilled. would
be
Ot there are no circumstances to indicate which of the
if
alternatives wasintended to be enforced, the whole contract will be
Vod for uncertainty; e.g, A agrees to sell to B his white horse for
Bs.500 or Rs. 1,000, there being nothing to show which of the two

prices was included. In this case, the contract will

be void.
ALTERNATIVE PROMISES, ONE BRANCH BEING ILLEGAL.- In
the case of an alternative promise, one branch of which is legal
and
the other illegal, the legal branch alone can be enforced : S. 58.

llustration.- and B agree that A shall pay B Rs. 1,000, for

A

which B shall afterwards deliver to A

either rice or smuggled opium.
This is a valid contract to deliver
rice and a void agreement as to
the opium:S. 58.
(The law relating to alternative promises will be considered at
greater length under S. 58.)

D. CONSIDERATION
Definition [S. 2(d)]
S. 2(d) of the Act defines consideration thus :

(i) has done, or

When, at the abstained from
desire of the
promiso, doing, or
the promisee or any (ü) does or abstains something,
other person
from doing, or
(ii) promises to do, or to
abstain from doing-
Such act,
promise.
abstinence or promise is called a consideration for the
What is "considera
tion" as defined under
S. 2 does not. contain any illustrations of the term the Indian Contact
consideration'. Act? (2 marks)
These are to be found in S. 23, as under :
lMlustrations M.U. Nov, 2011
to S. agrees to sell his house to
B
for
23.- (a)
A
10,000 Nov. 2015
rupees. Here, B's promise to pay the sum of 10,000 rupees Jan. 2017
isthe Consideration for A's promise to sell the house; and A's May 2017

Find More at https://t.me/LawCollegeNotes_Stuffs

 24 THE LAW OF CONTRACTS

promise to sell the house is the consideration for B's promise

the 10,000 rupees.

topay
(b) A promises to pay B 1,000 rupees at the end of six months, it n
who owes that sum to B, fails to pay it. promises to grant time
B

toC
accordingly. Here, the promise of each party is the consideration fort
promise of the other party.(Thisis an instance of contracttofguarantee,)
a

(c) promises for a certain sum paid to him by B, to make

A

good to the value of his ship if it is wrecked on a certain voyage.

B

Here, A's promise is the consideration for B's payment, and E: p

payment is the consideration for A's promise. (Incidentally, this is a
contract of insurance.)
(d) A promises to maintain B's child and B promises to pav A C

1,000 rupees yearly for the purpose. Here, the promise of each
party is the consideration for the promise of the other party.
C
State the salient MEANING OF "CONSIDERATION"- In the ordinary course
features of conside t
rations. What are the when
a person makes a promise to another, he does so with an
exceptions to the rule. intention of deriving some advantage which the person to whom the
"No consideration, no
proposal is made is capable of conferring upon him.
Contract'?
M.U. Nov. 2014 Thus, suppose A, at the request of B, has taken care of B's child.
B now promises to give him Rs. 20,000 in return for that act. Here,
the act of A is a consideration for the amount of Rs. 20,000. This is a
past act, and hence, it is called past consideration. It is clear, from
the language of the definition, that consideration may be past
present or future.
Again, consideration may be an act of forbearance. Thus, A telis
B that if he pays him Rs. 500 out of Rs.1,000, which B owes him,
he will not file suit against him. This is abstinence or forbearance,
and is a good consideration.
Blackstone defines consideration as "the recompense
given Dy
the party contracting to the other". Pollock calls it
"the price tor
which the promise of the other is
bought, and the promise thus
given for value is enforceable".
In Curriev. Misa (1875 CR 10
Ex. 153), Lush J. observed as follows .
"A valuable consideration,
in the sense of the law, may
either in some right, interest, profit or conSs
or some forbearance, detriment, benefit accruing to the part,
loss or responsibility given, suttere
or undertaken by the other."
Consideration is an important requisite
any contract will show of contract. An analysis v
that it consists of two clearly separable pare

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS
25
promise on the one hand and the
consideration for the promise
: the other hand. A person who makes a promise
on the to do or refrain
from doing something as a
legal duty, usually does so as a return or
equivalent of
equivalent Some benefit accruing to him, or as a return or
of some loss, damage or inconvenience
that may
Occasion, or may have been occasioned, to the other party in respect
promise. The benefit so received, or the loss, damage or
of thhe
inconvenience so caused, is
regarded in laW as consideration for the
promise. lt may be described as something accepted or agreed upon
s a return or equivalent (or quid pro quo) for the promise made.

The law, for very sOund reasons, insists on the existence of

consideration, if a promise is to be enforced as creating a legal
nbligation. The fact that a promise has been made in return for, or
as an equivalent of, something, suggests that the parties to the
contract had deliberated. It also shows that the parties contemplated
the creation of a legal right.

The doctrine of consideration, as developed in English jurispru

dence, is thus stated by Blackstone : "A consideration of some sort
or other is so necessary to
the forming of a contract, that a nudum
pactum, or agreement to do or pay something on one side, without
any compensation on the other will not at law support an action;
and a man cannot be compelled to perform it. The law supplies no
means nor affords any remedy to compel the performance of an
agreement made without consideration. If I promise a man 100
pounds for nothing, he neither doing nor promising anything in
return or to compensate me for my money, my promise has no
Torce in law". In the
absence of consideration, a promise or
undertaking is purely gratuitous, and however sacred and binding in
honour, it creates no legal
obligation.
Ex nudo pacto non oritur actio.– The law will not enforce a What is considera
Pomise given for nothing. Consideration, in the sense of benefit or tion? When consi
detriment, is a deration is absent,
to
absolutely essential Support a
simple promise. Out of what is the effect on
laed pact, no cause of action arises : Ex nudo pacto non oritur actio. the validity of the
contract?
n one English case, the defendants, in their newspapers, offered M.U. April 2013
to give advice
about sound investments. The queries and answersa
Were
published
in newspaper. The plaintiff was in search of
good the
stock broker, and wrote to the defendants for advice. The man
tecommended by
insolvent, the defendants turned out to be an undischarged
him.
who misappropriated the money which the plaintiff sent to
The plaintiff sued the defendants for the amount thus lost.

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE LAW OF
CONTRACTS
26
no contract, as.
The defendants contended that there was
consideration had passed between the parties.
Court of Appeal held that when the
defendants chose
The
newspaper, that would tend
publish letters and queries in the
increase the sales of their newspaper. This possibility of the benefit t
consideration for their offer, and therefore., the
better sales) was good
a

plaintiff was entitled to recover the

sums lost due to the negligence of
1908 | K.B. 280)
the deferndants. (De La Berev. Pearson,
In England,
a contract under seal
is valid, even in the absence
of consideration; such a contract is known as a specialty
contract F

All contracts which are not under seal are simple

contracts. All
simple contracts require consideration to support them. Specialhy
contracts (i.e., contracts under seal) are required by law to be
in
t
writing. A specialty contract is, therefore, a contract which
is in
It also
writing and is signed, sealed and delivered by the parties. is
called a deed or a contract under seal. No consideration is reguired
in the case of such contracts. Specific performance, however, will
not be granted of gratuitous contracts.
However, the position is different in India. Our law does not recognise
contracts under seal, which can be made without consideration.
f
However, contracts are enforceable in India even ii made without
consideration, if they are covered by any of the exceptions to S. 25 C
(which will be discussed later).
GRATUITOUS PROMISE WHEN ENFORCEABLE It is to be t
noted, however, that a promise, though gratuitous, would be
enforceable if, on the faith of the promise, the promisee suffers a
detriment or undertakes a liability.
Kedarnathv. Gorie Mahomed (14 Cal. 64).- A had agreed to
subscribe Rs. 1,000 towards the construction of a Town Hall at
Howrah. B, the Secretary, on the faith of A's promise, called for
plans, entrusted the work to contractors and undertook liability to
pay them. In a suit by B, on A's failure to pay
the amount, it was
held that, though the promise was to subscribe to a charitable
institution, and there was no benefit to A, the promisor, still it was
supported by consideration, in that B suffered a detriment
having undertaken a liability to the contractor on
the faith of
promise. In the course of the judgment, the Court observed that
knew the purpose to which the subscriptions were to be appleu
and he further knew that on the faith of such subscriptions,
t
obligation was to be incurred to pay the contractors.

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS
27
DEFINITION
ANALYSED.- The following is an
Components of analysis of the
different the definition of consideration.

At the desire of the promisor'

The 2ct or forbearance must be at the desire of the promisor
be remembered that
It is to the act or forbearance must be done at
e desire of the promisor. If
it is done at the instance of a third
party, or without the desire
of
the promisor, it is not consideration.
Thus. in Durga Prasad v. Baldeo (1881) 3 All, 211,
Durga
Prasad sued on an agreement in writing by which the defendants
nrnmised to pay him a commission on articles sold
through their
agency in a bazar in which they occupied shops, in consideration of
the plaintiff having expended money in the construction of
the
hazar. Such money had not been expended by plaintiff at
the the
request of the defendants, but voluntarily for third person. It was
a
held that such expenditure was not consideration for the agreement,
since it was not made at the desire of the promisors, the defendants.

Bormbay Municipal Corporation v. Sec. of State, (1934) 36 Bom. LR.

568.- In this case, the plaintiffs agreed to incur additional expenditure
for the purpose of extending educational facilities in the city of Bombay,

i the Government of Bombay would pay half the additional expenditure.

Having made payments for two years, the Government stopped their
contribution. In a suit by the plaintiffs on the above agreement, it was
held that the agreement was supported by consideration, inasmuch as
there was an advantage to be gained by a section of the Government's
citizens, viz., the citizens of Bombay.

t is, however, enough the promisee gives consideration at the

if
dESre of the promisor; not necessary that the promisor himself
it is
SMould benefit by the consideration; the promise would be valid
even if
the benefit accrued to a third party.
nus, A, who owed Rs. 20,000 to B, persuadedC to make a
promissory
amount
note in favour of promised that he would pay the
B. C B

and B
credited the amount to A's account. Here, the
discharge :
of A'saccount was consideration for C's promise National
Bank of
Upper India v. Bansidhar, (1930) 5 Luck. 1.
"The
promisee
or anny other person" : Can a
stranger to
ne consideration
According
sue?
promisee to English law, consideration must move from the
or
from his agent, or if the consideration moves from
a
third
party, it
must move on the procurement of the promisee.

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
28 THE LAW OF

is a general rule under the

It
English law that no one can
or be sued on a contract, other than the parties by
whom it is ma
contract must proceed from
There, the consideration for the person. So, astranger to
promisee himself, and not from any other contract.
contract is not allowed to claim any benefit under the
Indian Contract Act, however, consideration can
Under the person. So, in India
furnished by the promisee or by any other
contract. This means th
stranger to the consideration can sue on
a

a person other than the promien

where consideration is furnished by
such a promisee, though a
stranger to the consideration, can sue tn
to B, for which consideratien
A

the contract. Thus, a promise made by a stranger to the

is furnished by C, is enforceable by B, although B is
Contract
consideration. This is possible because section 2(d) of the
Act expressly recognises that
consideration for a promise may be
furnished by a third person, i.e., a person other than the promisee.
seen
This, however, is not the position under English law. As
move
above, under English law, consideration for a promise must
from the promisee himself, and not from any other person. Thus.
in the above example, B wOuld not be able to enforce the
promise under English law.
In the old English case, Dutton v. Poole (1678 2 Lev. 210), the
father of a bride was about to chop down timber on his estate to
provide a marriage portion for her. The son promised to provide for
his sister if the father refrained from chopping down the timber. The
father abstained from doing so. On the sister suing her brother on
the basis of this consideration, which wholly proceeded from their
father, the suit was held to be maintainable, although the plainti
(i.e., the sister) was not a party to the contract. The ground for the
decision was that, owing to the near relationship of the plaintiff and
the party who gave the consideration, viz., the father, the plaintit
was considered to be a party to the consideration.
The decision in Dutton v. Poole, was, however overruled in
later case, Tweddle v. Atkinson, (1861, I B & s. 393). In that case
decided in 1861, an agreement was entered into between tie
respective fathers of the husband and the wife, that each shoulð
pay a sum of money to the husband. After both the contracting
parties died without having made the respective payments,
husband sued the executors of wife's father upon the a
e
agreement, but the suit was held not to be maintainable. The husba
was a stranger to the consideration, and the plea of nearness
relationship to the contracting parties (which was upheld by u
"

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS 29
v.
Court in Dutton Poole) was
regarded as of no consequence. This
case thus laid down that a
third party cannot sue on a contract,
though made for his benefit, and the nearness of relationship would
immaterial.
be
Tyeddle v. Atkinson was, however, distinguished in a subsequent
English case, Beswick v. Beswick (1966 3 W. L. R. 396), in which an
old coal
merchant transferred his business to
his nephew, in
consideration of the nephew agreeing to pay him a fixed amount per
week for the rest of the uncle's life, and thereafter to his widow.
After the uncle's death, after giving the agreed amount to the widow
tor the first week,
the nephew refused to make any more payments,
and the widow sued him, both in her capacity as the administratrix
of the deceased's estate and in her personal capacity.

The Court of Appeal held in favour of the widow, pointing out

that she was suing, not only as a beneficiary under the contract, but
also as the heir of her late husband, who was a party to the
contract. Now, if the husband had been alive and he had sued for a
breach of the contract, he would definitely have suCceeded; therefore,
the widow's suit was as good as a suit by the contracting party, and
would thus succeed.

Beswick v. Beswick (above) has thus established that, in such

cases, if a third party files a suit in the name of a contracting party,
the defendant would have no defence.
The position is, however, different n India. As seen under S.
Z(0) above, consideration may move from any other person besides

he promisee. This principle can be ilustrated by a Madras case,

Vz,, Chinnaya v. Ramaya, (4 Mad. 137). In that case A, by a deed

gt, gave certaín property to her daughter, with a direction that

e daughter should pay an annuity to A's brother, as had been
done by A.
On same day, the daughter executed a writing in
favour of
the
declined
the brother, agreeing to pay the annuity. The daughter
under
to fulfil her promise, and the brother sued the daughter
the agreement. In these circumstances, the daughter sought
l0 argue that she waas not liable, as no consideration had proceeded
from
the brother. The Court, however, held that the words "the
promisee a stranger
or any person" in S. 2(d) clearly show that
other
toa Consideration may, in certain circumstances, maintain a suit.
Hence,
entitled the brother, though
a stranger to the consideration, was
to maintain the Suit.
ItwillthuS
ruling be seen that the IndianContract Act has adopted the
of Dutton V. Poole, and not that of Tweddle
v.
Atkinson.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
30
sue when he is not a party to
person to
Right of a
stranger to the
contract cannot Sue on
contract: "A the
Privity of Contract 1
contract":The Doctrine of
English law, a person who is not
English law.- the
Under
agreement. Thus, a
agreement cannot sue on the ita
party to the Y, cannot
Z sue on the groundthat
X

Contract is between and

X

contract.
breach of that
has committed a (1915) &

Pneumatic Tyres Co. Ltd. v. Selfridge Co. Ltd.,

Dunlop
What is privity of
manufacturer of motor tyres,
sells a large quantity ofcoven
tyres a
contract? Discuss the 847.-A, a
into a
on B entering
exceptions to the
a certain price to B, a wholesale dealer,
doctrine of privity of
tyres below the prices mentioned in a printed list supte
not to sel the under a

turn, supplies tyres to C, a retail dealer, sells

Contract.
M.U. Apr. 2013 to him by A. B in his
covenant as between A and B. C i
contract stipulating the same
prices. sues C. Now, it
A
he
wil

breach of the covenant below the list

a contract can sue on it.
A

seen that only a person who is a party to

no privity of contraa
stranger to a contract cannot sue. There is
successfully sue C.
between and C, and therefore, A cannot
A

the same
Indian law- The indian law on the point is basically
as there
However, it differs slightly from the English law, inasmuch i
onh
are a few exceptions to the general rule which lays down that
parties to a contract can sue on the contract. But the basíc
rule d
If A agrees to

privity of contract is equally applicable in India also.

sell his house to B, and fails to do so, C, third party, cannot sut
a

A. In other words, both under English law and Indian law, a strange
to the contract cannot sue upon the contract.
Define "considera Problem.-A mortgages his property to B for Rs. 10,000. B pays
tion" Explain the role Rs. 8,000 in cash, and promises to A to pay Rs. 2,000 to C whicn
of privity of contract amount A owes to C. B does not pay Rs. 2.000 to C. Advice C as
with relevant cases.
State the exceptions his right to recover amount.
to the role of privity.
M.U. Jan. 2017 Ans.- In this case, C is not a party to the contract, and therefore
he cannot recover the amount from B. (Babu Ram v. Dhan Singa
A.!.R. (1957) Pun. 169)
PRIVITY OF CONTRACT.If A
What
and B enter into a contract,normal
ano
is pritivy of commits a
breach thereof,
contract? Discuss the circumstances, sue A.
it is only B
who can, inreason
B's friend has no right is
to
C,
various exceptions to do so. The which
the doctrine of privity that there is a prlvity of contract between A and B, a bond
of contract. binds them in law, whereas there is no legal
M,U. Apr, 2011
such bond between A
and
Jan. 2017 legis,
The doctrine of privity of contract creates a tie or vinculum
bond which is personal to the parties. Other parties (not being ther

Find More at https://t. me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS
31
representatives)
are neither bound by What is the doctrine of
the contract, nor entitled under it. privity
Thus, the
doctrine prevents a
third party from enforcing a contract. (2marks) of contract?
Applyingthe same
logic, it also prevents the contracting parties M. U. May 2018
enforcing obligations against a stranger, from
a
i.e. third party. Thus, a
contract between A
and B cannot be enforced by C (- as stated
-};equally a contract between A and B cannot above
impose any liability on C.

Shiv Dayal v. Union of India, AIR

(See 1963 Punj. 538.)
Vaening the above in mind, ifBand C enter into an agreement. Writ short note on:
under which B
promises to write a book for C, Privity of Contract.
and in turn,
C,

M.U. Apr. 2015

oromises to pay Rs. 10,000/- to A, if there is no payment, A cannot
sUP C, as he is a stranger to the contract.

Contract enforceable by a beneficiary though not a party to the

contract. The Indian law is the same as English law, but with this
modification, that in India, a person who is not a party to the
agreement can sue on the agreement if such a person is a
beneficiary (also called 'cestuique trust) and the contract is for his
benefit. In other words, where a contract between A and B is
intended to secure a benefit to C, then C may sue in his own right.

This is the principle underiying the decision of the Privy Council

in Khwaja Muhammad v. Husani Begum. In that case, C sued her
father-in-law, A, to recover arrears of certain allowances called
Kharch-ipandan, payable by A to C under an agreement made
between A and C's father prior to and in consideration of C's
marriage with A's son, D. Both C and D were minors at
the date of
he marriage. The agreement created a distinct charge in favour of
on certain immoveable property belonging to A for the payment
of the allowance. It was
contended, on behalf of A, on the authority
OT
Iweddle v. Atkinson, that C could not sue upon the contract, as
she waas not a party
to the agreement. But this contention was
verTuled, and the suit was decided in favour of C. The Court
cbserved
that, India, and particularly in communities such as the
Mohamedans, in
among whom marriages are contracted for minors by
parents
and guardians, it might occasion serious injustice if the
Common
law doctrine (of England) was applied to agreements or
assignments
entered into in connection with such contracts.
Theabove
hasbeen rule applied in other similar cases.-The same principle
applied by the Courts of India to cases where a provision is
made
forthe maintenance of temale members of a Hindu family on a
partition
of the joint
family property between the male members.

Find More at https://t. me/LawCollegeNotes_Stuffs

 THE LAW OF CONTRACTS
32
Similarly, where a provision is made for the marriage
expenses of a female member of a Hindu family on a partition
male members,
the joint family property between the thefemale
member is entitled to sue the parties to the partition deedto
enforce the provision in her favour.
So also, a person who is not a party to a contract can maintai
suit if he is so authorised by Statute. Thus, under the Insurance Act
a
a

a stranger to the contract may recover from the Insurance Comn

in case third party risks are recovered by the Insurance Policy.

From what has been discussed above, it is clear that, in Inda

there are four cases in which a stranger to a contract is competent th
maintain a suit. In other words, the following are four exceptions th
the general rule which lays down that a person who is not a party to
a contract is not entitled to maintain an action upon that contract:
() such person is a beneficiary (cestui que trust) under the
If
contract.
(i) If on a partition of a Hindu Joint Family (made between the
male members), a provision is made for the maintenance d
the female members.
(ii) If on a partition of a Hindu Joint Family (made between mak
members,) a provision is made for the marriage expenses
the female members.
(iv) Under a Statute, e.g., under the Insurance Act (as explained
above).
-
The above discussion and the cases referred to - make
clear that, in India, a stranger to the consideration can sue on &

contract, but not a stranger to the contract.

"Has done or abstained': Past consideration, how far vallo

PAST CONSIDERATION EXPLAINED,– Past consideration
something wholly done before the making of the agreement
person has already done something for another, and then come
promise from the other, the consideration is said to be p
consideration. Thus, A saves B's life. B promises to pay A
10,000 out of gratitude. Here, the consideration is past, becaus
did nothing or account of B$
refrained from doing anything on

promise. Whatever he did, he did before B's promise was maoopast

Indian law as to past consideration. In India,need nd
consideration is sufficient to sustain a valid contract; it language
be present or future, as required by the English law. The

Find More at https://t.me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS
33
definition of
"consideration" is explicit and past
ofthe
given at request the promisor, will support consideration,
ifpromise. the words
of
a
The "has done or abstained from doing" subsequent
make it
very clear that an act done by A at
contemporaneous B's request, without any
promise from B, may be a
consideration for a
subsequent promise from B to A.
The Indian Contract Act thus allows past consideration. In Sindha V.
Abraham, (1896) 20 Bom. 775, the plaintiff rendered services to the
dofendant at his desire expressed
during his minority, and continued
thnse services at the same request
after his majority. The question
srose whether
such services constituted consideration for a
euhseguent express promise by
the defendant to pay an annuity to the
Dlaintiff. The agreement was one
to compensate for past services, and it
W2s held
that it could be enforced, as the services
formed a good
consideration within the meaning of the definition of
'consideration'.
Problems.- 1. A's mother falls suddenly ill during A's
attended on her till A's return. A
absence. B
promises B to compensate him by
paying a certain amount. A
breaks the promise. Advise B.
Ans.- In this case, the consideration is good
consideration
under Indian Law. Therefore, B can
succeed.
2. Mr. promises to give Rs. 10,000 to Mrs. in consideration
A
B

of his past
co-hatbitation with her. When the amount is not paid,
Mrs. B sues him. VWill
she
succeed?
Ans. - Although this is a case of past consideration, Mrs. B will
not succeed,
under Indian law as the consideration is immoral
Under S. 23 of
the Act. and the agreement between Mr. A and Mrs.
bis, therefore, void. Under English law, the agreement would
Vol0 on two
be
grounds, namely, that the consideration is past
Consideration and that the consideration is immoral.
"Does or
abstains from doing" : Forbearance to sue
ISclear from the definition of consideration that consideration
may
consist either of some
desire act which the promisee does at the
part
of the promisor, or of some omission or forbearance on the
of the promisee;
suit which, thus, if a promisee refrains trom bringing a
but for the promise,
Onsideration
for the promise.
he may have brought, there is good
Forbearance to a
an agreement, enforce bona fide claim is good consideration
been
given although t may be that the claim may not have
effect to by a
Court of law.

Find More at https://t. me/LawCollegeNotes_Stuffs

 THE LAW OF
CONTRACTS
34
promise to give time to
A
a
debtor is good consideration,
both
in
England and India.
Consideration need not be adequate
As Anson puts it, the Courts do not sit
to make bargains for
parties to the suit, and consideration need
not be adequate,
althou
it must of some
be value in the eyes of the law.
agrees to sell his race horse to for Rs. 50 only,
B

ifA
Thus, th
Court will enforce this contract, presuming that it is shown that a
had freely consented to do so. The reason underlying thisrule
is
that it is the function of the parties to negotiate the contract (art:
.
bargain the price, if necessary), whereas the Court's function is to
enforce the bargain.
VARIOUS KINDS OF CONSIDERATION– Consideration is d P
:

the following five kinds

1. An
executed consideration is something actualy
Executed.-
done, forborne, or suffered contemporaneously with the making d
the contract. The offer of a reward for information accepted by the
supply of the information required, the offer of goods accepted by A
their use or consumption, are illustrations of executed consideration. a
ir
Aconsideration is said to be executed when the promisee has
already done or forborne something. Thus, A promises to pay a b
sum of money to Bif he paints a picture for A. B paints the picture t
B's act is the consideration for A's promise; since the act is dont c
already, it is said to be executed consideration. P
n
2. Executory.- An executory consideration is a promise to do o C
forbear from doing something in the future. Mutual promises to marry,
promise to do work in return for a promise of payment, are illustrat
C
of executory consideration. A consideration is said to be execli
when there is a promise for a promise. Thus, A
of money to B
promises to pay A. As
in consideration of B's promise to paint a plcture for
B's promise has not yet been performed, it executory.
is
forborne
3. Past.- Past consideration done,
or suffered before the making is
something wholly
of the agreement. (This has
explained above at length.) t
'unrea
4. Unreal- A consideratlon a
for promise is sald to be
promises
when it subsists morely in 0
promiseby
words, and not in fact. If
A

pay B, Rs.
1,000 on particular day, in conslderation of a tunroal'o'
B
to pay Rs. 100 at
the same timo, the consideration is
A

Find More at https://t. me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS
35
ilusory; and the promise will be
regarded as merely a gratuitous
promise by to payA B,
Rs. 900. An apparent
consideration which
has no legal
value is no consideration at
all.

if a person promises,
1
ikewise, for consideration, to do what he
already bound to do, the
scases, it can also be said
consideration is "unreal". In fact, in such
that there is no consideratiion at all.
Similarly, an impossibility existing
at the time of the contract,
and obvious on the fact of it, would also make
unreal". Thus, borrowing from the consideration
the facts in Hall v. Cazenove (1804
IB.5 C.P., 577), if in a Gharterparty executed on 1st April, 2013, it
is agreed that the ship should sail on 1st February, 2013, the
contract would be void. (t is, of course,
on 1st of April
presumed that the execution
had no connection with practical jokes normally
played on that day.)
SAreference may also be made to the topic entitled
"Agreement
to do an impossible act", under S. 56(1), discussed later.]
In White v. Bluett (1853 23 L.J. Ex., 36), a son owed some
money to his
father, for which he had executed a promissory note.
After the father's
death, in a suit by the father's
executors, the son
alleged that the father had promised to
discharge him from liability
in consideration of a
promise by the son that he would stop
complaining (as he used to) that his father had bestowed
less
benefits and advantages on him than on his brothers. It was
held
that this so-called "promise" was too vague
and "unreal" to form
consideration for the father's promise to waive his right
under the
promissory note. As observed by the Court, the son's promise was
no more than "a promise not to bore his ather", with the usual
complaints, and was not "real" consideration, which
the law requires.
5. Unlawtul.- (This is fully discussed under S. 23 in a later
Chapter.)

POINTS OF DIFFERENCE BETWEEN THE

ENGLISH & INDIAN LAW OF CONSIDERATION

e
differs
English
Indian Contract Act, though mainly
substantialy
based on English law,
from the corresponding provisions under the
law.The main points of difference between the two on the
topic of
consideration are as follows :
1. Under is binding
vithout the English law, a contract under seal any
consideration. The Indian law does not recognise division
oicontracts
into simple contracts and those under seal. Even in the

Find More at https://t.me/LawCollegeNotes_Stuffs

 36 THE LAW OF CONTRACTS

case negotiable instruments, where the consideration is presume

of

under sec. 118 of the Negotiable

Instruments Act, they would
hba
void if, as a matter of fact, it is proved that no consideration
passed between the parties.
2. Under the English law, consideration
must have moved
fron
may move fro
the promisee, but under lndian laW, consideration
the promisee or any other person.
3. Under the English law, consideration, to have legal effgg
eves
need not be adequate, but must have some value in the
law. A g0od consideration, such as natural love and affection, a:
distinguished from valuable consideration, is not suficient in Engle:
law to support a contract. Under the Indian law, however, nature
love and affection is valid consideration under S. 25.
4. Under the English law, consideration may be present o
future, but past consideration is no consideration. Under the India
law, past consideration will support a subsequent promise.
[Note : s. 23, which deals with lawful and unlawful consideration,
and S. 25, which lays down the cases in which consideraticr
is not necessary, will be discussed in a later Chapter.]

E. AGREEMENT & CONTRACT

Under S. 2(e), promise and every set of promises, forming thà
consideration for each other, is an agreement.
agreement which is not enforceable by law is said
An to bE
void: S. 2(g).
VALID, VOID, VOIDABLE,
UNENFORCEABLE AND
AGREEMENTS. -
All agreements can
ILLEA
be classified as follows :
1. Valid Agreements.-These are
agreements that are entorcea
at law. Such an agreement is fully
operative in accordance witn
the law. Such an agreement satisfiesiia
intention of the parties and
the conditions of a valid contract
under the Act.
2. Voidable Agreements.-A
is valid as long as it voidable agreement is one
is not "avoided" by the party entitled to
So. Thus, ít is an agreement
option of one of which is enforceable at law
the
option of the other. parties to such agreement, but notah at he
Thus, agreements undue
influence, fraud or induced by coercion, the
party upon whom misrepresentation- are voidable. It is forsuch
to set updoes
such fraud has been
fraud and have agreement practised
the set
not, (within
the period prescribed aside
by
the court; if he the
agreement stays as a by the of limitation),
legal binding contract.law

Find More at https://t. me/LawCollegeNotes_Stuffs

 BASIC CONCEPTS
37
Unenforceable
unenforceable at Agreements.-
if some
An otherwise valid contract may
be
law, rule of
law renders it incapable of
proof because of some technical defect, e.g., a
promissory note
which is unstamped or not sufficiently
stamped. Such a contract is
otherwise valid, but cannot proved and enforced in a Court law.
be of

A Void Agreements.-AVoid agreement

is one which has no Define void Agree
legal effect at all, and is therefore not enforceable at law.
agreements of which Thus, ments. State &
the object or consideration is unlawful, or explain briefly the
4
are in restraint of trade or of agreements which
ich
or which are by way of wager, are
marriage or of legal proceedings are expressaly decla
2t all void. No legal rights flow from red void under the
such an agreement, and consequently, no action can be taken Indian Contract Act.
al under such an agreement in a Court of law. In the eves of law. M.U. Apr. 2016
there is no agreement at all. Such agreements are void ab initio, i.e. May 2017
void from the very beginning.

an
It may also happen that a contract which was valid when entered
into becomes void at a later stage. Thus, on January 1, A makes an
agreement to sell his horse to B on January 10. Through no fault of
either party, the horse dies on January 7. In these circumstances, the
contract become void on January 7.

However, it must be kept in mind that there cannot be a void contract.

A contract is always an agreement which is
enforceable at law and
therefore, to speak of a void contract involves a contradiction in terms.

5. llegal Agreements.- These are agreements which are void

because they are against the law. Thus, an agreement to buy
Smuggled opium would be void as it is illega.

Mlegal and void contracts distinguished.- The term illegal' is

AL
narower in meaning than the term 'void'. AIl illegal contracts are
VoIG, but
all contracts that are void are not necessarily illegal. e.g.,
ble an agreement in
restraint of trade is void but not illegal. A void
he greement is destitute of legal effect when it is
proved to be so, but
aln iegal one is so ab initio. The distinction between a void and
ilegal contract
is important as regards collateral transactions,
because an
icl cannot agreement which is collateral to an illegal agreement
do be enforced, whereas transactions collateral to a void
greement are
the not affected.
the Void,
distinction
voidable, and unenforceable contracts distinguished.- A

or voidable is sometimes drawn between agreements which are void

an agreementand those which are unenforceable. Strictly speaking.
toflaws is void or voidable because of its substance, owing
the inthe Contract, or for want of free consent; while one which
S unenforceable
Instance, so because of a proceural defect, as for
is
due to want of stamp, by bar of limitation; etc. t is valid,

Find More at https://t. me/LawCollegeNotes_Stuffs

 38 THE LAW OF CONTRACTS

but incapablo of proof. It substanco, though by reason

is good in
of

somo technlcal dofect, ono or both the partios cannot sue

upon it.

'CONTRACTS'
S. 2(h) dofines the term "contract"
as an agreement enforceable
by law.
CONTRACT EXPLAINED–A contract is an agreement, the object
of which is to create an obligation. In the words
of Anson, "the law of
contract is that branch of law which determines the circumstances
in

which a promise shall be legally binding

on the person making it.

will construct
Thus, if there is an agreement between A and B that Á
a house for B, and B will pay Rs. 50 lakhs to A, the agreement is
a
B
contract. Likewise, If there is an agreement between A and B, that
will get Rs. 5000, if he does not canvass votes for C, the agreement
is also a contract, because on account of the agreement, A is entitled
to B's forbearance. Thus, when an agreement enables a man to compel
another to do something or not to do something, it is called a contract.
AGREEMENT AND cONTRACT DISTINGUISHED.- An agree
ment is the expression by two or more persons of a common
intention to affect their legal relation. "It is a wider term than
contract." (Savigny) Contract results from a combination of two
ingredients--agreement and obligation. An agreement becomes a
contract when there are competent parties, consideration, free
consent and legal object. (S. 10) Contract is that form of agreement
which directly contemplates and creates a legal obligation. (Anson)
Thus, all contracts are agreements, but all agreements are not
contracts. An agreement, in order to be a contract, must be
enforceable by law. "Agreement" is a wider term than contract", and
it covers a variety of transactions which may not
be enforceable by
law because of the absence of some of the essential elements of a
valid contract, e.g., capacity of parties, free consent, lawful
consideration and object, eto.
S. 10 of the Act (discussed later) lays down the various conditions
which an agreement must satisfy in order to
become a contract.
VOIDABLE CONTRACT
What is a voldable As seen earlier, an agreement which is enforceable by law ar
contract? (2 marks) the option of one of
M.U. Nov. 2014 the partles thereto, but not at the option of the
other is a voidable contract. A contract which ceases to De
enforceable by law becomes vold when It ceases to
be enforceable.

Find More at https://t.me/LawCollegeNotes Stuffs

 BASIC CONCEPTS 39
thus be seen that a voidable contract is a contract with a
It will
law, of which one of the parties may, if he chooses, take advantage.
Thus, agreements induced by coercion, undue influence, fraud or
misrepresentation are voidable (S. 19). To take an example, if A,
intending to deceive B, falsely represents that five lakh pairs of
shoes are made annually at A's factory, and thereby induces B to
buy the factory, the contract is voidable at the option
of B.
CIRCUMSTANCES WHICH MAKE AN AGREEMENT VOIDABLE.
There are some circumstances under which an agreement may
become
voidable. Out of these, the following three are the most
important :
1. When a consent to an agreement is caused by coercion,
undue influence, fraud or misrepresentation, the agreement
contract which is voidable at the option of
is a
the party whose consent
was so caused : Ss. 19 and 19-A.
2. If a party to an executory contract prevents the
other party
from performing his part of the contract,
the contract becomes
voidable at the option of the party so prevented : S. 53.
3. If a party to a contract, in which time is essential, fails to
perform his part of the contract at a fixed time, the contract is
voidable at the option of the other party : S. 55.
[All these sections are
discussed at their proper places below.]
OTHER TYPES OF CONTRACTS

Executed and executory- A contract creates rights and

obligations. Both the parties to a contract have mutual rights and
Obligations. Thus, if A agrees to sell a horse to B, A is under an
obligation to sell and deliver the horse to B, and at the same time,
he has the right to receive the price of the horse from B. Similarly,
Bis under an obligation to pay the price, and he has the right to
get the delivery of the horse from A. When a party to a contract
ns performed his part of the obligation, the contract is called
erecuted, though it may leave an outstanding obligation on the
Qner side to perform his part of the promise. Thus, a contract of
van, where money has been advanced by the creditor, is an example
U executed contract, because the creditor has done what he was to
u9 under the contract; it remains for the debtor to repay the debt.

5ut where neither party has performed his part of the obligation,
the contract executory. Thus, promises to engage as his
B

servant from is
A

January next. Here, the contract is executory, because

neither nor we
A
has done what he had promised to do. also,
B So

Find More at https://t.me/LawCollegeNotes _Stuffs

 40 THE LAW OF CONTRACTS

have executory contracts, in which certain acts may have beox

performed, but there remains something to be done on both sides
A
contracts to purchase from B a house for Rupees eight lakhs
and pays a sum of Rs. 80,000 as earnest money. B gives poSsessinn
of the house to A, but does not execute a sale deed. This is s
instance of an executory contract in which there remains something
to be done on each side.
Unilateral and bilateral.- A unilateral contract is one in which
the consideration is executed; a bilateral contract is one in which
the consideration is executory.
Three types of contracts under English law. - According to the
English law, contracts are of three kinds : (a) Contracts of Record;
(b) Specialty contracts; and (c) Simple contracts.

(a) Contracts of Record are judgments and recognizances, both

of which are enforced by immediate execution. These are entered
into through the machinery of a Court of Justice, e.g., a
recognizance. A judgment of a Court of Record imposes an obligation
upon the person against whom judgment is recorded to pay the
sum awarded. Although this is called a contract, it is not, strictly
speaking, a contract, because of the absence of agreement on the
part of the person against whom the judgment is passed.
(b) A specialty contract is a
contract which is in writing, and is
signed, sealed and delivered by the parties. It is also called a deed
or contract under seal. No consideration is required in the case of a
deed. Specific performance, however, will not be granted of gratuitous
contracts.
(c) All contracts which are not under seal are simple contracts.
All simple contracts require
consideration to support them. Some,
though not all, contracts are also required by law to be in writing.
This classification is, however, peculiar to English law. It has
no application in lndia.

Find More at https://t.me/LawCollegeNotes Stuffs

 3
THE COMMUNICATION
OF PROPOSAL,
ACCEPTANCE & REVOCATION
(Ss. 3-8)
A. ACCEPTANOCE (Ss.
3, 7, 8)
Acceptance of proposal, its essentials
Ss. 7-8 lay down the requisite
conditions for converting a proposal Discuss the iaw
inth a promise. It is relating to comr iuni
provided that (i) the performance of the conditions
of a proposal, or (0)
cation of proposal,
the acceptance of any consideration for a acceptance and revo
reciprocal promise which may be with a cation. How can a
ffered proposal, is an
acceptance of the proposal :
S. 8. proposed be
revoked?
S. 7 then lays down the following two essentials of a Nov. 2011
acceptance, which will convert a proposal into a
validM.U. Jan. 2017
promise :
(1) The acceptance must be absolute
and ungqualified.
(2) The acceptance must be expressed in some usual and
reasonable manner, unless the proposal prescribes the manner in
which it is to be accepted.

If the proposal
prescribes a manner in which it is to be accepted,
and the acceptance is not made in such manner, the proposer may,
within a reasonable time after the acceptance is communicated to
him, insist that his proposal shall be accepted in the prescribed
manner and not otherwise: but if
he fails to do so, he accepts the
acceptance :S. 7.

Acceptance how made

S.3 lays down as to how acceptance is to be made. Acceptance

iay be communicated by words or by conduct. The acceptor must
vO Something to signify his intention to accept. Though acceptance
B
ordinarily communicated by express words, it may even be made
without
express communication; in other words, communication
of

a acceptance may
also be by conduct.
However, mere intention, i.e., mental acceptance, If uncommuni
cated, would
not suffice. Acceptance means communicated
acceptance. In more than
short, acceptance must be something
41

Find More at https://t.me/LawCollegeNotes _Stuffs

 42 THE LAW OF CONTRACTS

mental acquiescence. The acceptor is expected to do somethine

to inform the offerer of the acceptance of the offer. It is no
enough the acceptor only informs his friend or his agent about dis
the acceptance. (A reference may be made to Felthouse v. Bindtew
discussed in an earlier Chapter.) as
it r
B. COMMUNICATION (S.4)
When is communi S. 4 proceeds to lay down how (i) a proposal, (0) an acceptance.
cation of a proposal and (iii) a revocation are communicated.
said to be complete?
(2 marks) pro
M.U. Nov. 2014(a) Communication of proposal, when complete rev
Communication of a proposal is complete when it comes to the
When is communica knowledge of the person to whom it is made S. 4.
: (a)
tion of acceptance
complete? (2 marks)
ilustration.- A proposes, by letter, to sell a house to B at a
M.U. May 2012 certain price. The communication of the proposal is complete when
a

of
Apr. 2015 B receives the letter.

Con
(b) Communication of acceptance, when
complete but
Communication of an acceptance is
complete-
(i) as against the proposer,- when it is put in course of hou
transmission to him, so as to be out of the power rev
of the acceptor;
as pos
(i) against the acceptor,- when it comes to the knowledge of
:
the prop0ser S. 4.
Illustration.- B accepts A's proposal by a letter sent by wh
post.
The communication of the acceptance is complete-
- as against A, when the letter is
posted;
Ser
rev
- as against B, when the letter is received by A.
(See below, "Acceptance and revocation made through pos
post)
Lav
(c) Communication of revocation,
when complete Cor
Communication of revocation tele
is complete
the
(() as against the person who
makes it,- when it is put intothi
COurse of transmission to
the person to whom it is made, so as
be out of the power of the person who bes
makes it; an:
(i) as against the person to whom it is "W
to his knowledge:S. 4. made,- when it coie
per
Itlustration.- A revokes his proposal Ja
by telegram.

Find More at https://t.me/LawCollegeNotes_Stufs

 COMMUNICATION, ACCEPTANCE & REVOCATION
43
The revocation is complete as against A
when the telegram is
dispatched. It is complete as against B,
when B receives it.
B revokes his acceptance by
telegram. B's revocation is complete
as against B when the telegram
is dispatched, and against whenA

it reaches him.

C. REVOCATION (Ss. 5-6)

Just as S. 4 lays down the laws as to
communication of a
proposal and acceptance, Ss. 5-6 lay down
the laws as to their
revocation as under:
(a) When a proposal or an acceptance can
be revoked When can an offer be
Aproposal may be revoked at any time before the revoked? (2 marks)
communication M.U. Apr. 2011
ofacceptance is complete as against proposer,-
the but not afterwards. Nov. 2012
An acceptance may
be revoked at any time before the
communication of acceptance is
complete as against the acceptor,
but not afterwards.
Illustration.- proposes, by a letter sent by post, to
A

house to B. B accepts the proposal by a sell his

letter sent by post. may When
A
can an
revoke his proposal at any time before or at
the moment when B acceptance of a
posts his letter of acceptance proposal be revoked?
but not afterwards. (2 marks)
B may revoke his acceptance at any
time before or at the moment M.U. Apr. 2016
when the letter communicating it Jan. 2017
reaches A– but not afterwards.
ACCEPTANCE AND REVOCATION MADE THROUGH POST.
Sections 4 and 5 of the Contract Act
deal with acceptance and
revocation of acceptance made through post.

As regards acceptance and the revocation of acceptance by

post, there is some difference between
the English and the Indian
Law. According to
the English law, the acceptance of an offer is
Complete.as soon as it is posted, and cannot
be revoked, e.g., by a
gam reaching the proposer earlier than the letter communicating
the acceptance.
The decision in Dunlopv. Higgins, 1 H.L.C. 381, affords the
est illustration of this English principle. In that case, Dunlop, in
answer to an inguiry as to
"We
the price of plg-iron wrote to Higgins:
shall be glad to supply you with 2,000 tonne pig-iron at 65s.
onne, and after further correspondence wrote on the 28th
January
explaining that the price was 65s. net. Higgins received this

Find More at https://t.me/LawCollegeNotes_Stufts

 THE LAW OF
CONTRACTS
44
will take h.
on 30th January, and on the same day wrote :"We
post was then delayed by
2,000 tonnes pig-iron you offer us". The rez
the state of the roads, and the acceptance
was received six houre
Dunlon an'
later than the hour at which that post ought to have arrived. wa
A

refused to sell the iron. It was held that the posting of the letter
te as
an acceptance of the offer, and that Dunlop could not refuse
supply the iron. (b
The Indian law, however, has introduced some qualifications;
although it makes the communication of an acceptance complete as 6 |
against the proposer when it is put into course of transmission
to

him (as in English law), it has made some concession in favour of

the acceptor, as against whom the acceptance of communication
would be complete when it comes to the knowledge of the proposer.
Thus, it gives the acceptor, even after he has posted his acceptance,
a right to revoke the same by some other communication (e.g., a
telegram) reaching the proposer earlier than his letter of acceptance.

PROBLEMS
1. The defendants, writing from Cardiff on 1st October made an
offer to the plaintiffs in New York, asking for a reply by cable. The
plaintiffs received the letter on 11th October, and at once accepted
in the manner requested. In the meantime, however, the defendants
had, on the 1th October, posted a letter revoking the offer. The
letter did not reach the plaintiffs until the 20th October. Is the Ca
revocation binding on the plaintiff ? to
dc
Ans.- In this case, the revocation became complete only when
it was communicated to the plaintiffs.
Before that, the plaintiffs
accepted the offer and put the acceptance into ac
communication. Therefore, the revocation is
the course of Er
not binding on the
plaintiffs. [Byrne v. Von Tienhoven,
(1880) C.P.D. 344.]
2. A
a
is merchant at Calcutta and B is a
proposes by a letter dated trader at Bombay. A
1st January, to sell his house at
Bombay to B for Rs. 50 lakhs. The
letter states that B must give
his reply within seven days from the receipt
ofthe letter by him. It
takes three days for a letter posted.at Calcutta to reach the
addressee at Bombay and vice versa. B receives the letter
by on the morning of 4th January. B
A written
sends a reply by post to A
on 5th January, accepting
As proposal. On 6th January, B changes
his mind, and desires to revoke his acceptance.
yes, how? Can he do so? If

Find More at https://t. me/LawCollegeNotes_Stuffs

 COMMUNICATION, ACCEPTANCE
& REVOCATION 45
Ans.- Here, B's letter of 5th January,
accepting A's proposal will
roach Calcutta on the 8th. It open
any time before or is to revoke his acceptance
at
at the moment the letter communicating it
A (see S.
5). B should send a telegram revoking reaches
as to reach A before the acceptance, so
the letter of the 5th reaches him.
(b) How a proposal can be revoked
S.5 above lays down as to when a proposal can be revoked. S.
6 provides it can
how be revoked, and can be analysed as follows:
A
proposal is revoked in one of the following Wit short note on:
four ways: Modes of revocation
1. By the communication of of proposal.
notice of revocation by the proposer M.U. May 2012
to the other party.
2. By the lapse of
the time prescribed in such proposal for its
acceptance or, if no time is prescribed, by
the lapse of
reasonable time, without communication of the acceptance.
3. Bythe failure of the acceptor to fulfil a condition
precedent
to acceptance.
4. By the death or insanity of the proposer,
if the fact of his
death or insanity comes to the knowledge of the acceptor
before accepting.
Under the English law, death of either party,
before acceptance
causes the offer to lapse,
and the question of such fact coming
to the knowledge of
the other party (as under the lndian law)
does not arise at
all.
Further, in England, the insanity of the proposer before
dtceptance does not operate as a revocation, because under the
English law, a lunatic's contract is voidable
and not void, as in India.

Find More at https://t.me/LawCollegeNotes_Stuffs

 4 la
th
VALID CONTRACTS (s. 10)
It is important to note that one cannot speak of a "void contract". By
its very deinition, a contract is an agreement which is enforceable by 2
law. Hence, it would be a contradiction in terms to talk of a void
contract. The right term to use in such cases would be void agreement.
Hence, agreements may be valid or void; but contracts are valid b
(i.e., enforceable by either party) or voidable (i.e., enforceable by
only one of the parties, at his option.)
Which Agreements are Contracts (S. 10)
As seen above, all contracts are agreements, but all agreements
are not contracts. To be a contract, an agreement must be
enforceable at law. Thus, and B may agree to smuggle gold into
A in

India. This may be an agreement between them, but it will not be a

contract, as it is not enforceable at law.
Under S. 10, all agreements are contracts, if they are made :
"All agreements are
not contracts but all (1) by the free consent
contracts are agree
ments." Discuss (2) of parties competent to contract
M.U. Nov. 2011 (3) for a lawful consideration and a lawful
Nov. 2013 object, and
Apr. 2016 (4) are not expressly declared to be void.
S. 10 further provides that if a contract
the provisions of any other law, then it must
has to be in writing under
instance, the Memorandum and the Articles also be in writing. For
company must be in writing, as of Association of a
prescribed by the Companies Act.
Similarly, the Transfer of Property Act
requires certain documents like
sale-deeds, leases and mortgage-deeds,
to be in writing.
Likewise, if the presence of
witnesses or compulsory registration
is required by any law (as for instance,
the Indian Registration Act),
such requirements would also have to
be observed. (S. 10)
As regards the first requirement, namely,
free consent, the position is governed by that there must be
Act, which will be discussed Sections 13 to 22 of the
at length in a later Chapter.
As regards the second requirement,
namely, the competency ol
the parties, Sections 11 and 12 of the Act
are discussed in the next apply, and these sections
Chapter.
46

Find More at https://t.me/LawCollegeNotes_Stuffs

 VALID CONTRACTs
47
The third requirement is that the agreement
lawful consideration and a should be for a
lawful object. Sections 23 to 25 clarify
the position in this respect, and
these sections wilI be discussed
at their proper places.

The fourth requirement postulates

that the agreements should
not be expressly declared to
be void by the Contract Act. Sections
26 to 30, in turn, expressly declare
certain agreements to be void,
and these sections will be discussed later.
Allthe abovementioned requirements of a valid contract must
be present in every case. In other words, these reguirements are
conjunctive,and not disjunctive. All of them must co-exist in every case.
Contracts required to be in writing.- As seen above, the Contract
Act does not require every contract to
be in writing, unless so specified
by law. Thus, under S. 25 of the Act, writing is one of
the essential
conditions of certain contracts referred to therein. Again,
certain
provisions of the Transfer of Property Act require writing, as for
instance, in the case of a sale, a mortgage, a lease, and a gift. The
provisions of the Indian Trusts Act also require trusts to be created in
writing. Acknowledgement to save the law of limitation are
also required
to be in writing by Sec. 18 of the Limitation Act, 1963. Submissions
under the Arbitration Act are similarly required to be in writing.
Variance between print and writing.- It sometimes happens that
hand-written words or sentences appear on a printed contract; in
such cases, there may be variance, or even contradiction, between
what is printed and what is hand-written. The question that arises in
Such cases is as to which of the two should be given more weight
in interpreting the contract.

The leading English case on this point is Robertson v. French,

(1803 4 East, 130), where Lord Elenborough said that the words
added in writing with mutual consent are entitled to have a greater
efect attributed to them, inasmuch as the written words reflect the
real and immediate intention of the parties. However, the printed
Words are not altogether to be discarded, and the Court should
arive at the real intention of the parties from the printed as wel
as the hand-written
words.
It will be seen, from what is stated above, that S. 10 only lays
down
the various requirements of a valid contract. However, these
requirements are
expanded and amplified by the succeeding sections
viz. Ss.
11 to 30 (which are discussed in the Chapters that follow)
and by other
laws.

Find More at https://t.me/LawCollegeNotes_Stuffs

 5 ler
m

COMPETENCY OF PARTIES TO A CONTRACT

ac
(Ss. 11 & 12) se
the
In order that an agreement
may be a valid contract, the fire M.
must he
ingredient which must be satisfied is that the agreement Ca
is laid down in
made by parties who are competent to contract. This C
Ss. 11 and 12 of the Act. ag
agreements are contracts
All if they are made by pe
competent parties. Ba
S. 11 lays down that a party is competent to contract, ie., if filn
(0) he is of the age of majority,
wh
(ii) he is of sound mind, and
sai
(ii) he is not disqualified from contracting by any law to which prc
he is subject. mi:
MINOR'S AGREEMENT.- According to the indian Majority Act. (i.e
a minor is one who has not completed 18 years of age. Earlier, in Voi

Who is competent lo the case of minors for whom a guardian was appointed, the status of als
contract? Discuss the minority continued untii the age of twenty-one years under the Indian the
law relating to Majority Act. However, aftera recent amendment of that Act, this is no leg
contracts with a He
minor. longer so. In other words, today, the Act fixes the age of majority at
M.U. Nov. 2011 -
eighteen years irespective of whether or not a guardian has been
als
Pre
appointed or the mino. According According to the Indian Contradt
At what age does a Act, age of majority of the contracting parties is a necessary element
person become for the validity of contracts. pla
Competent to cotract?
(2 marks) Following the English laW, several High Courts in India hao pre
M. U. May 2018
earlier held that a minor's agreement was voidable at his option, COL

and not altogether void. However, the Privy Council, interpreting the Ma
Who is competent to
contract? (2 marks) wording of Section 11, held in a leading case, Mohiri Bitbi .
M.U. Apr. 2013 Dharmodas Ghose (1903) 30 Cal. 539 (P.C)) that a minors Hin
Apr. 2014 agreement is void, and not merely voidable. So,a minor is no
Nov. 2014 liable either to perform what he has promised to do under a Acc
Jan. 2017 agreement or to repay the money that he has received under it. was
May 2017
Thus, A, a minor borrows Rs. 10,000 from B, on the security o not
of t
a mortgage executed by A. Can A be compelled to make good the
benefits derived by him? age
Con
The answer is : No. All agreements of a minor are void a anc
initio. Therefore, a mortgage made by minor is void, and a money
48

Find More at https://t.me/LawCollegeNotes _Stuffs

 COMPETENCY OF PARTIES TO A CONTRACT 49
lender who has advanced money to a minor on the security of the Give any two ules
mortaage is not entitled to repayment of regarding a minor's
the money. contract. (2 marks)
C, aged 16, is stamp collector. He is particularly M.U. Apr. 2015
anxious to
acquire a rare stamp belonging to M, who agrees in writing to
sell this to C for Rs. 100, but subsequently refuses to deliver it,
though C tenders the price. C wants to bring an action against
M. Here, C is a minor. His contract is
therefore void, and he
cannot succeed. A minor's agreement being absolutely void, neither
C nor M acquires any right, or incurs any liability, under the
agreement. Ccannot bring any action against M, either for specific
performance or for damages. (Suganchand & Co. v. Laduram
Balkrishandas Firm, I.L.R. (1942) Nag. 281)
In one interesting case decided by the Bombay High Court, a
film producer and a minor girl entered into an agreement under
which the minor was to act in a film. Another agreement to the
same effect was also entered into by the father of the girl with the
producer. When the producer failed to keep his commitment, the
minor sued the producer through her father. The first agreement
(i.e., the one between the minor and the producer) was, of course,
void. As regards the second agreement, the Court held that it was
also void. The reason given was that the consideration moving from
the father was girl's promise to act, and as the minor girl was not
legally competent to promise, there was no consideration at al.
Hence, the contract between the producer and the girl's father was
also void on the ground of absence of consideration. (Ra Rani v.
Prem Adib, AiR 1949 Bom. 215).
"According to the law to which he is subject."- These words find
place in the section because, in the older days, diferent laws
prevailed in British India and in the former princely States. To-day, of
COurse, the expression is of an academic interest only, as the Indian
Majority Act applies to all persons who are domiciled in India.
In an old case, Kashiba v. Shripat (1895) 19 ILA Bom. 697,
a Who are competent
as per
widow of 17 years, and having her domicile in British India. to contract of
indu section the
executed a bond in Kolhapur (which was outside British India). Indian Contract Act?
According to the law in the British India (/.e. law of domicile), she State the rules
was a minor, as she was under the age of 18, and
was therefore regarding a minor's
agreement.
not liable. However. according to the law of Kolhapur (.., the law M.U. Nov. 2015
OT
the place where the contract was slgned), she
was liable, as the
age of majority there was 16. The Court held that her capacity to
Contract was regulated by the law of her domicile (/.e. British India),
and she was therefore not liable.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
50
contract. Again, since a
Specific performance of minor's
minor's agreement is void ab initio, there
can be no specit
was held by pPrin
performance of such an agreement. Thus, it
a guardian has no
Council, in Mir Sarwarjan v. Fakruddin, that
power to bind a minor by a contract for purchase of immovable h
case
property, and the minor cannot enforce the contract. In such a a
h
specific performance also cannot be decreed.
Contracts by guardians.- A valid contract can, however, be
two
made by a guardian on behalf of a minor, if the following
b
conditions are satisfied, namely,
(i) the guardian is competent to do so; and b
() the contract is
F
(a) for the minor's benefit, or
(b) for the minor's legal necessaries.
On attaining majority, Ratification of minor's contract.- Since a minor's contract is
can a person ratify an void ab initio, it follows that there can be no question of ratifying it; h
agreement made by A
him during hís and hence a promise by a person on attaining majority to repay tt
minority? (2 marks) money lent and advanced to him during minority cannot be enforced,
a
M.U. Nov. 2013 as the consideration given during minority is no consideration at all.
Upon the same principle, a promissory note, given by a person on if
attaining majority, in settlement of an earlier one signed by him while
a minor, in consideration of money then received from the other, S
cannot be enforced by law. Such a note is void for want of consideration. b
Since the agreement by a minor is void, there can be no question of ir
ratification, for there can be no ratification of a void agreemnent. (
Transfer in favour of a minor.- There is, however, nothing in
the Contract Act which prevents a minor from being a promisee or ir
transferee. The law does not regard a minor as incapable of
accepting a benefit. It has been held by a Full Bench of the rt
Madras High Court that a mortgage executed in favour of a minor, fc
who has advanced the mortgage-money, is enforceable by him 0
by any other person on his behalt.
So also, where a minor purchaser of immovable property was.
subsequent to his purchase, dispossessed by a third party, it was
held that the minor could recover from his vendor. the sum which
he had paid as purchase money. e
On the same principle,
it has been held that a promissory
note executed in favour of a minor is not void,
and can be
enforced by the minor.

Find More at https://t. me/LawCollegeNotes_Stuffs

 COMPETENCY OF PARTIES TO A CONTRACT 51
Under Sec. 184 of the Contract Act, which provides
that a
minor may act as an agent, but unlike other agents,
he is not
liable to his principal for his acts. So also, a minor agent, though
he can make his principal responsible to third persons for his
acts, will not himself be liable to his principal. A
minor cannot,
however, contract through an agent.
Again, under Sec. 30 of the Partnership Act, a minor cannot enter
into a contract of partnership, though he may be admitted to
the
benefits of the partnership, with the consent of all the partners. Such
a minor cannot be made personally liable for obligations of
the firm,
but only the share of such a minor in the property of the firm is liable.
Estoppel against a minor if he makes a false representation.
Formerly, there were many conflicting decisions as to whether a
minor would be liable if he had made false representation as to his
age, i.e., if he had falsely told the other party to the contract that
he had attained the age of majority. However, now the controversy
has been set at rest by the decision of the Privy Council in Sadik
Ali Khan v. Jai Kishore (30 B.L.R. 1346), where it was observed
that a deed executed by a minor is a nulity, and there cannot be
any estoppel against a statute.
A contract by a minor is absolutely void (i.e. void ab initio). Even
if minor obtains a loan by falsely representing that he is of ful age,
a
he is not estopped from setting up the plea of minority. He cannot be
sued either on the contract or in tort for damage or for fraud,
because to allow the injured party to sue would be giving him an
indirect means of enforcing a void contract : R. Leslie Ltd. v. Sheil,
(1914) 3 K. B. 607.
In A. Leslie Ltd. V. Sheil (above), the defendant, who was an
infant, induced the plaintiff to lend him 400 pounds, by falsely
representing that he was of full age. The plaintiff sued the infant to
recover the money on the ground (i) of fraud and (i) alternatively
for money he had received. It was held that the Infant's Relief Act
made the contract absolutely void, and to give the plaintiff relief on
either of these two grounds would be an indirect way of enforcing a
void contract, and consequently the suit failed.
Liability of minor in tort.- As infants can be sued under the law
OT
torts, it may now be considered whether a minor who has
entered into an agreement can be sued in tort for damages.
a
Burnard v. Haggis, (1863) 143 E.R. 360.- A, an infant, hires
norse from B, expressly for riding and not for jumping. A, however,
JUmps it a lot for a long distance and kills it. What is the liability of

Find More at https://t.me/LawCollegeNotes_Stuffs

 52 THE LAW OF CONTRACTS

A to B? Here, the horse was hired for one purpose and used for
contract in
another and thus, there is a tort wholly independent of
pa
Therefore, A is liable for damage caused by the death of B's horse
will thus be seen that an agreement cannot be converted
inte
It
v. Sheil, abovel wi
a tort to enable a person to sue a minor (A. Leslie
an th
However, if there is a tort independent of the minor's agreement,
v. Haggis, above). to
action in tort will lie (as in Burnard
th
Reimbursement for necessaries supplied to a minor.- Although in
a minor's contract is void ab initio, if a person supplies necessaries CO

to a minor or to his dependants whom he is legally bound to

support, such a person is entitled to be reimbursed out of the ne
property of the minor (S. 68). It will be seen that in such cases lia
also, the minor is not personally liable; the reimbursement is
only out of the minor's property, if any. (S. 68 is discussed at pe
greater length in a later Chapter.) ar
Who is said to be of PERSONS OF SOUND MIND.- Under S. 12, a person is said to bi
sound mind under be of sound mind for the purpose of making a contract if, at the time m
Indain Contract Act?
when he makes it, he is capable () of understanding it, and (i) ot tir
(2 marks)
M.U. Jan. 2017 forming a rational judgment as to its effect upon his interests. th
Besides, a person who is usually of unsound mind, but occasionaly
of sound mind, he may make a contract when he is of sound mind.
Likewise, a person who is usually of sound mind, but occasionaly of o
unsound mind, may not make a contract when he is of unsound mind. to
When is a person it
Illustrations.- (a) A patient in a lunatic asylum, who at intervals,
said to be of unsound is of sOund mind may contract
mind under the Indain during those intervals. M
Contract Act? (b) A sane man, who is delirious from fever or who is so drunk
(2 marks)
M.U. Nov. 2012 that he cannot understand the terms of a contract or form a rational C
judgment as to its effect on his interest, cannot contract whilst sucn tt
delirium or drunkenness lasts.
CONTRACTS BY LUNATICS.- Very much akin to a minor is the
case of a lunatic and a drunkard. The law throws around them a
special cloak of protection. S. 12 deals with the case of lunatic, and
has already been discussed above. The contract of lunatic, like that
of a minor, is absolutely void.
English and Indian law compared.- In India, a contract by
lunatic is altogether void. In England, mere unsoundness of mind l
no defence; the contract of a lunatic
is binding upon him, unless ne
can show that at the time of making
the same, he was uttery

Find More at https://t.me/LawCollegeNotes _Stuffs

 COMPETENCY OF PARTIES TO A
CONTRACT 53
incapable of understanding what he was
doing, and that the other
party knew of his lunacy.
is not necessary to prove that the person
In India, it
with the lunatic knew of his being a person of dealing Write a short note on:
unsound mind; so, Unsoundness of mind.
the party pleading unsoundness of mind M. U. May 2018
has the burden upon him
to prove such unsoundness to
have existed at
the contract. Therefore, a lunatic's contract the time of making
made during a lucid
interval is valid. The presumption is primarily in
favour of sanity. The
contract of a lunatic, like that of a minor,
is absoutely void.
England, a person of unsound mind is personally
In
liable for
necessaries supplied to him. In India, only his property
would be
liable.
CONTRACTS BY DRUNKARDS.- In
England, a contract by a
person who is too drunk to know
what it is about is voidable onty
and not void, and can be ratified by him when he is
sober, so as to
bind him without any further consideration. To
avoid the contract
made in a state of intoxication, a person must prove
that, at the
time of entering into the contract, he was
incapable of understanding
the nature of the act, and that the other party knew his condition.
In India, a contract by a person in a state of
drunkenness is
absolutely void and incapable of ratification. But drunkenness, in
order to avoid a contract, must be so excessive and absolute as
to suspend the reason for a time and create
impotence of mind;
it must be such as to deprive
the contracting party of knowledge
of the nature of the contract
and its legal consequences.
Mere drinking is not a hindrance to the contracting of
just
obligations. Here, in India, presumably the legal position of a
Contract by a drunken man would depend upon whether or not
the other contracting party fraudulently took advantage of his
mental state.
CONTRACTS BY MARRIED WOMEN.- There is nothing in the
Contract Act which prevents a married woman from making a
contract. Both under the Hindu and Mahommedan law, a married
woman is entitled to make a contract, so as to
bind her property.
CONTRACTS BY INSOLVENTS. There is nothing to prohibit
a contract by an insolvent after commencement of insolvency
Proceedings, but before adjudication. Thus, X executed a sale
deed, but before he could get it registered, an insolvency petition
Was filed against him. The registration of the deed took place

Find More at https://t.me/LawCollegeNotes_Stuffs

 54 THE LAW OF CONTRACTS
Under thes
during the pendency of the insolvency proceedings.
sale-deo
circumstances, the Madras High Court held that the
was valid and binding on the parties.
CONTRACTS BY CORPORATIONS.- No provision is made
i
a corporation to
the Indian Contract Act as regard the capacity of
enter into a contract; all that Ss. 10 and 11 say is that thepersor party
must be competent to contract, and in order to be so, the
must be of the age of majority and of sound mind and not otherwise
disqualified from doing so; but no mention is made as to the
contracting powers of a corporate body. The powers of a corporation
to make a contract vary according to the character of the corporation.
A company is an artificial person created by law, and is competent
to contract. But its powers of contracting are subject to limitations
which may be either necessary or express.
A company, being an artificial person created by law, there
are limitations to its capacity to enter into a contract; the limitations
are: (a) necessary. or (b) express. A necessary limitation is that
which is imposed by the very nature of the corporation. It being
an artificial body and having an existence apart from its members
who compose it, it is impersonal and must contract through its
agent. A limitation is express if it is imposed by the terms of its
incorporationany and agreement entered into by it in excess of its
powers defined in its Memorandum of Association, would be void
being ultra vires.
GOVERNMENT CONTRACTS
Write a note on:
Government COn Under Art. 299 of the Constitution of India, all contracts
made in
tracts. the exercise of the executive power of the Union or of the State are
M.U. Nov. 2013 to be made in the name of the
Apr. 2015 President or the Governor
respectively, and are to be executed on behalf of
Apr. 2016 the Governor by such persons as he may
the President or
Jan. 2017 However, the President or the direct or authorise.
Governor is not personally liabie
under such contracts.
The following are thus the three requirements
of Art. 299 of the
Constitution of India:
(a) The Contract must be expressed to
be made by, ie. it should
be in the name of, the President or the Governor, as the case
may be.
(b) It must be executed by a person
duly authorised by the President
What is a government or the Governor.
contract? (2 marks) (C) Such person must execute
M.U. Apr. 2014 or the Governor in the contract on behalf of the Presiden
the prescribed manner.

Find More at https://t.me/LawCollegeNotes Stuffs

 COMPETENCY OF PARTIES TO A CONTRACT 55
the above conditions are cumulative in nature, if any condition
As
is not complied with, the contract will not be enforceable by or
against the Government. Nor can any of these conditions be waived
by the parties.
It has been held that even when no formal
document is
executed between the parties, a contract can be spelt out from
the correspondence, and if it complies with Art. 299, the contract
is enforceable. (Bhikrey v. Union of lndia, AIR 1962 SC 113,
followed by the Madras High Court in Manickram Chettiar v.
State of Madras, AIR 1971 Mad 221)
Earlier, the courts had taken the view that a contract which Can a government
does not comply with the above requirements could nevertheless contract made in
contravention of Act,
be ratified. However, this view is not legally tenable. As is completely 299 be ratified?
void, and therefore, cannot be ratified by the government. (2 marks)
(Mulumchand v. State of M.P., AIR 1968 SC 1218; State of U.P. M.U. Apr. 2013
v.
Murari Lal, AIR 1971 SC 2210)
The Calcutta High Court has observed that if a contract is
not made in accordance with the above requirement, it is void,
and just because some payment were made under such contracts
on previous occasions is no ground for holding that payment
become due under that particular contract also. (Kessuram Poddar
V.
Sec. of State 54 Cal. 460)

Types of government contracts

Government contracts are of various types. Almost all contract
which can be entered into by private individuals can today be
entered into by the government. The following are the kinds of
contracts usually entered into by the government:
(i) Service contracts

(ü) Contracts with suppliers of goods and services (to the

government)
(n) Contracts for supplies by the government to private parties.
(iv) Contracts with banks and financial institutions
() Contracts with persons whose tenders have been accepted by
the government
(M) Contracts for construction and maintenance of roads,
flyovers,bridges, buildings, school, hospitals, etc.

Find More at https://t.me/LawCollegeNotes Stuffs

 CONTRACTS
56 THE LAW OF
a Government contract wbit
Whether S. 70 of the Act applies to
is invalidly executed
When a contract is not in accordance
with Art.
299, but the
defendant has accepted the benefit of such
a contract, the plaintk
will be entitled to sue under S. 70 of the Indian Contract
Act
courte
there will be a "quasi-contract" between the parties. The
have taken the view that section are satisfied. This is so, becausa
under S. 70, the claim is not based on any contract, but on the
equitable doctrines of restitution and unjust enrichment.
In State of West Bengal . B. K. Mondal & Sons, a firm had
constructed a kutcha road, guard-room, kitchen, etc. for the State of
West Bengal. The contract did not, however, comply with the
requirements of S. 175 of the Government of India Act, 1935, and
therefore, the firm could not sue under the contract. However, they
were entitled to succeed under S. 70 of the Indian Contract Act. The
firm had not intended to act gratuitously, and the government of West
Bengal had accepted the benefit of the contract. The firm could thus
Sue under a quasi-contract under the said section.
In similarcircumstances, in Secretary of State v. G. T. Sarin & Co.,
a
where Commanding Officer ordered food for horses, the supplier was
entitled to succeed under S. 70, although the contract was void, as it
did not comply with the statutory requirements.

Find More at https://t.me/LawCollegeNotes _Stuffs

 6
CONSENT AND FREE CONSENT

Consent
The next ingredient of a valid contract is free consent.
Under
this head fall several important topics like coercion, undue influence,
fraud, and misrepresentation. Now, parties usually agree upon
the
same thing in the same sense. If they do not, there is no contract.
S. 13 therefore, lays down that twO or more persons are said to
consent, when they agree upon the same thing in the same sense.
PARTIES AD IDEM.- It is essential to the creation of a contract
that both parties agree to the same thing in the same sense, in
which case they are said to be ad idem. It is clear that the word
"thing' must be understood in a very wide sense and would cover
the whole content of the agreement, whether that refers to material
objects or payment or any other act or promise.
If the parties are not ad idem on the subject-matter about which
they are negotiating, i.., there is no consensus ad idem, there is
no real agreement between them. When their minds are directed to
different objects, or if they attach different meanings to the language
which they use, it is obvious that there is no agreement. Thus, if
two persons enter into an apparent contract concerning a particular
person or ship, and it turns out that each of them, misled by a
similarity of name, had a different person or ship in mind, no
contract would exist between them.
i InRaffles v. Wichelhaus (1864 2 H & C 906), A and B entered
into a sale contract for 125 bales of cotton coming from Bombay by
a ship called "Peerless". There were actually two ships by this
name, and whilst A had one ship mind, B thought it was the
in
other. The Court held that A and B were not ad idem, and so, the
agreement was void.
In Fosterv.
Mackinnon, (1869) L.R. 4 C.P. 704, the defendant an old
and feeble man, purported to endorse a bill of exchange which he was
was a subsequent holder for value,
od was a guarantee. The plaintiff
and therefore, the fact that the defendant's signature was obtained by
Waud would not have protected him in this suit. But the Court held that

57

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
58
not being intended as an endorsement of a bill
his signature, any negotiable instrument, was wholy
exchange, or as a signature to
written on a blank piece
inoperative, just as if the signature has been
on the other side later on.
paper first, and a bill or note written
a document was put before an old man, and s.
So also, where to sian
was falsely told that it was a guarantee and he, intending
it wae
guarantee, wrote his namne on the document, in the belief that
was held the
quarantee, whereas in fact it was a bill of exchange, it
for his signatura
he was not liable even to a bona fide holder for value,
was fraudulently obtained on a document which he never intended
to

no agreement entered
sign. There was no consent and consequenty
into by him. A deed executed by a person in such
circumstances is a
nullity : Oriental Bank v. Fleming, 3 Bom. 242, 267.
of a
A good illustration of parties not being ad idem because
mistake in identity, is the case of Cundy v. Lindsay (1878 19 .L.
case.
Bom. 697), the leading English case on the point. In that
Blenkarn, taking advantage of the similarity of his name
with

Blenkiron, wrote to Lindsay & Co., and ordered goods of them.

They mistook his order for that of Blenkiron ( as the signature
the latter ordering the goods was also made look like Blenkiron's),
a respectable firm, and delivered the goods to Blenkarn, who solid
the goods to Cundy, and did not pay Lindsay & Co. for them. In a
suit by Lindsay & Co., against Cundy, it was held that owing to the
mistake caused by Blenkarn, there was no real agreement between
him and Lindsay & Co., and that Cundy got no title to the goods.
Another interesting case on the point is the decision of the
English Court in Lewis v. Averay (1972 1 K.B. 198). In this case,
Mr. Lewis advertised his Austin car for £ 450. Mr. X, in reply to
this advertisement, came one evening to the apartment of Mi.
Lewis, tried the car, tested it and was ready to buy it for that sum.
He told him that his name was Mr. Richard Green, the famous
television actor who played the role of Robin Hood in televisiot
shows. Thereafter, Mr. X wrote out a cheque for £ 450, anu
wished to take away the car, but Mr. Lewis was hesitant. Seeing
this, Mr. X took out from his pocket, a special pass for admission
to Pinewood Studios, bearing his photo and an oficial rubber
stamp. (In fact, this admission pass was a fake one.) Though o
totally convinced, Mr. Lewis took the cheque, and handed over
the car and the Log Book to Mr. X, who took this car and sld !
to Mr. Averay for £ 200, representing that he was Mr. Lewis. In t
meanwhile, the cheque given to Mr. Lewis was returned to him D!
the Bank, dishonoured. When Mr. Lewis came to know that

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONSENT AND FREE CONSENT 59
car was in possession of Mr. Averay, he filed a
suit against Mr.
Averay. The question before the Court was
that of a case where
one of two innocent people would have to
suffer for the fraud of a
third person, who had absconded.
In this case, the Court held in favour
of Mr. Averay, and came to
the conclusion that when two parties enter into a contract, the fact
that one party is mistaken as to the identity of the other, does not
mean that there is no contract. lt only means
that the contract is
voidable, i.e., liable to be set aside at the instance of the person who
was mistaken, provided he
does so before a third person acquires a
right under it in good faith. For this reason, it was held that there was
a contract, under which property in the car passed to Mr. X, and in
due course, to Mr. Averay, before the contract was avoided.
It will be noticed that the main difference between the above case
and Cundy v. Lindsay is that in Cundy v. Lindsay, the goods were sent
only because one party believed the other to be what he represented
himself to be (and only on his representation); in Lewis v. Averay, there
was nothing to show that Lewis was prepared to sell the car only
because the purchaser was a famous television actor. On the basis of
this distinction, the Court held in the first case, that there was no
cContract between the parties and in the second case that there was a
concluded contract in the circumstances, although the same was
voidable. (Cases of mistaken identity of the parties to an agreement
also fall under the head "Mistake", discussed later in this Chapter.)
(See further, under the heading "MISTAKE AS TO THE SUBJECT
MATTER OF THE CONTRACT", later in this Chapter.)

Consent when said to be "free" (S. 14)

Now, parties to a contract may agree upon the same thing in
he same sense. But, mere consent is not enOugh; consent must
also be free.
When is consent said
Under S. 14, consent is said to be free, when it is not caused by-
() Coercion - as
(0) Undue influence
defined in S. 15;
as defined in S. 16;
to be free?
M.U. Apr. 2016

(i) Fraud– as defined in S. 17;

(v) Misrepresentation as defined in S. 18; or
(V) Mistake subject to the provisions of Ss. 20, 21 & 22.
FREE CONSENT.- As stated above, not only consernt, but tree
Consent, is necessary to complete the validity of a contract. Where
nere is no consent. there can be no contract at all. Where there is

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
60
contract, which is voidable
consent, but no free consent, there is a
the option of the party whose
consent was not free. in other worda
voíd. However, wher
when there is no consent, the agreement is
contract is voidabie
there is consent, but the consent is not free, the
What is free con Consent is said to be free when it is not caused by () coercionor (v
sent? (2 marks) or (ü) undue influence, or (ii) fraud, or (iv) miísrepresentation,
M.U. Apr. 2014 mistake. Consent is said to be so caused when it would not have
May 2017 been given but for the existence of such coercion, undue influence
under
fraud, misrepresentation or mistake. If the consent is given
any of the first four circumstances, the contract is voidable at
the 1

If the consent is
option of the party whose consent was sO caused.
1

Explain free consent.

caused by mistake of fact of both the parties, then the agreement
is
M. U. May 2018

void. It is thus essential for the formation of a valid contract that

there should be free consent of both the parties.
These five ingredients of free consent are considered below in

necessary details.
(() COERCION (Ss. 15, 19 & 72)
According to S. 15, coercion is
What is coercion as or
defined under the () the committing of any act forbidden by the lndian Penal Code;
Indain Contract Act?
(2 marks)
M.U. Apr. 2011
() the threatening to commit any act forbidden by the Indian
Penal Code; or
Nov. 2011
Apr. 2013 (ii) the unlawful detaining of any property to the prejudice of
Apr. 2015 any person whatsoever; or
Apr. 2016
(iv) the unlawful threatening to detain any property to the
prejudice of any person whatever;
with the intention of causing any person to enter into an
agreement.
however, immaterial whether the Indian Penal Code is or is
It is,
not in force in the place where the coercion is employed.
Write a short note lMlustration,- A, on board an English ship on the high seas.
on: Coercion.
M.U. May 2012 causes B to enter into an agreement by an act amounting to
Nov. 2013 criminal intimidation under the Indian Penal Code. A afterwards
Apr. 2014 Sues B for breach of contract at Calcutta. A has employed coercioni
Nov. 2014 although his act is not an offence by the law of England, anv
although section 506 of the Indian Penal Code was not in force a
the time when or place where the act was done : S. 15.
It may be noted that coercion may proceed: from
anybody
even a person who is not a party to the contract. It may be directed

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONSENT AND FREE CONSENT 61
against anybody, and not necessarily the other contracting party. It
includes physical compulsion, fear and even menace to goods.
Under English law, the general rule is that coercion must proceed
from a party to the agreement, and must also be directed to the
other party to the agreement.
CASES. W forged his father's endorsement to some promissory
notes by which certain bankers were defrauded. The bankers insisted
(without actually threatening) on prosecuting the son for forgery.
The
father was induced to consent to the settlement by the knowledge
that a prosecution would almost certainly result in conviction of his
son. The Court held that the settlement should
be set aside on the
ground that the father was not a free voluntary agent.
In another case, an agent employed by the plaintiff to purchase
timber in Siamese territory was imprisoned by an officer of the
Siamese Government, on a charge brought against him by the
defendant of stealing timber. In order to obtain his release, he
contracted to purchase (on behalf of the plaintif) timber which he
was charged with stealing, at a price much beyond its value. It was
held that the plaintiff could rescind the contract.
Ranganyakamma v. Alwar Setti, 13 Mad. 24.-A Hindu widow
was forced to adopt X under a threat that her husband's corpse
would not be allowed to be removed unless she adopted X. The
adoption was held to be voidable, as having been induced by
coercion, as with the intention of wounding the feelings of the
widow, indignity (non-removal) was offered to the corpse.

ACT FORBIDDEN BY PENAL CODE.- In Amiraju v. Seshamma

(1912 16 I.0. 344), a case decided by the Madras High Court, an
interesting question arose. The Court was called upon to decide
whether, if a person held out a threat of committing suicide to his
Wife and son if they refused to execute a release in his favour, and
the wife and son, in consequence of the threat, executed the release,
the release could be said to have been obtained by coercion within
the meaning of this section.
Wills, C. J. and Seshasgiri Aiyar, J., (who delivered the majority
opinion), answered the question in the affirmative, holding in effect
that though a threat to commit suicide was not punishable under the
Indian Penal Code, it must be deemed to be forbidden by that Code,
as an attempt to commit suicide was punishable under that Code.
Oldfield J. answered the question in the negative, on the ground
that the present section should be construed strictly, and that an

Find More at https://t.me/LawCollegeNotes_Stuffs

 62 THE LAW OF CONTRACTS

act that was not punishable under the Penal Code could not be sa:
to be forbidden by that Code. This view seems to be correct. Th
Penal Gode forbids only what is declared punishable. The irresistabla th
conclusion seems to be that the language of the Act has omitted th
take account of this exceptional possibility.
In Purabi v. Basudeb (A.I.R. 1969 Cal., 293), the question befora
the Calcutta High Court was, once again, whether a threat to
commit suicide amounts to coercion. In this case, Purabi, a student
filed a suit against her tutor, Basudeb, for annulment of marriage.
on the ground that her consent was obtained by coercion. She
alleged that Basudeb had threatened her that if she did not mar
him, he would first kill her and then commit suicide. The Cout
observed that to actually commit suicide is not an act punishable by
the Indian Penal Code. (Once suicide is committed, there is none
left to be punished.) But, that does not mean that the act is ngt
forbidden by the .PC. After all, suicide is self-murder. Moreover.
abatement of suicide and attempt to commit suicide are both
punishable. Therefore, the Court held that a threat to commit suicid
does amount to coercion. (In fact, however, it was not proved that
Basudeb had held out any threat. On the contrary, the Court came
to the conclusion that Purabi had married him of her own free wil.
Her suit was, therefore, dismissed on this ground.)

Liability of person to whom money is paid or thing

delivered under coercion (S. 72)
S. 72 lays down that a person to whom money
or anything delivered under coercion must repay or has been
pad.
return it.
Illustration.- A railway company refuses to deliver certain goods
to the consignee, except upon the payment of an illegal charge to
carriage. The consignee pays the sum charge in order to obtain the
goods. He is entitled to recover so much of the charge as was
illegally excessive.

(1) UNDUE INFLUENCE (Ss. 16 and 19A)

The second factor which invalidates consent is undue influence
S. 16 lays down that a contract is said to be induced by "undue
What is "undue influence", where the relations subsisting between
intluence" as detined the parties
in the Indian Contract
such that one of the parties () is in a position to dominate the w

Act? (2 marks) of the other, and (i) uses that position to obtain an unfair advantay
M.U. Nov. 2013 Over the other.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONSENT AND FREE CONSENT 63
In other words, undue influence means any influence by which Write a short note on:
the exercise of free and deliberate judgment is excluded. As observed Undue influence.
M.U. May 2017
hy Lord Selborne in Earl Aylesford v. Morris, undue influence is
"the unconscientious use by one person, of power
possessed by
him over another, to induce the other to enter into a contract.
Define undue influe
Now, what is the meaning of being "in a position to
dominate nce. (2 marks)
the will' of another? This is also clarified by S. 16, which gives M.U. Apr. 2014
three examples (without affecting the generality of the concept)
when a person is deemed to be in a position to dominate
the
will of another, namely

(a) where he holds a real or apparent authority over the other; or When is a person
(b) where he stands in a fiduciary relation to deemed to be in a
the other; or position to dominate
(c) where he makes a contract with a person the will of another?
whose mental (2 marks)
capacity is (temporarily or permanently) affected by reason of age,
M.U. Apr. 2011
ilness, or mental or bodily distress. Nov. 2012
Illustrations.- (a) A, having advanced money to his son, B,
during his minority, upon B's coming of age, obtains, by
misuse of
parental influence, a bond from B, for a greater amount than
the
sum due in respect of the
advance. A employs undue influence.
(b) A man enfeebled by disease or age is induced by B's
influence
Over him as his medical attendant, to agree to pay
Ban unreasonable
Sum for his professional service. B employs undue influence.
(c) A applies to a banker for a loan at a time when
there is
stringency in the money market. The banker declines to make the
loan except at an unusually high rate of interest. A accepts
on these terms. This
the loan
is a transaction in the ordinary course of
business, and the contract is not induced by undue influence.
As was said in England by Lindley, L.J. "The equitable doctrine
Of undue
influence has grown out of, and been developed by, the
necessity of grappling with insidious forms of spiritual tyranny
with the infinite
and
varieties of fraud."
In Tate v. Williamson (1866 2 Ch. App. 55), the Court propounded
ne principle of undue influence in the following words:
"Wherever two persons stand in such a relation that
while it continues, confidence is necessarily reposed by one
and the influence which necessarily grows out of that
Confidence is possessed by the other, and this confidence is
abused, or the influence is exerted to obtain an advantage

Find More at https://t.me/LawCollegeNotes_Stuffs

 64 THE LAW OF CONTRACTS

the confiding party, the person

at the expense of
so availino
to retain tha
himself of his position will not be permitted
int
advantage, although the transaction could not have
been
existed." ca
impeached if no such confidential relation lea

In one case, the plaintiff agreed to

serve on a voyage to the he
When is a contract of the
said to be induced byBaltic and back to London at £ 5 per month. In the cOurse ba
voyage, two seamen deserted, and the captain who was unable
th
undue influence ? distributed
When isto a be party
deemed
men, promised that their wages would be
in a find other pr
rest, including the plaintiff. The plaintiff brings a suit
for
position to dominate among the
course be
the will of another? the extra wages. This is a transaction in the ordinary
of

influence, The S
What is the effect of
undue influence on a business, and the
contract is not induced by undue
contract? plaintiff is entitled to the extra wages; his suit will be
decreed.
he
money.
M.U. May 2012
Where a poor Hindu widow borrowed Rs. 1,500 from a
Nov. 2015
lender at 100 per cent per annum, for the purpose of enabling
her

to establish her right to maintenance, the High Court of Madras

v.
allowed the lender interest at 24 per cent. (Ranee Annapurni ho
Swaminathan, 1930 34 Mad. 7) gr
The relief, however, has not been confined to money-lending
transactions, and as far back as the year 1874, the Judicial
Committee set aside a bond obtained by a powerfui and wealthy
banker from a young zamindar who had just attained his majoriy
be

and had no independent advice, by threats of prolonging litigation

commenced against him by other person with the funds and
assistance of the banker.
C
WHETHER AELIGIOUS INFLUENCE CAN AMOUNT TO UNDUE
INFLUENCE.– In a leading English case, Allcard v. Skinner (1887
36 Ch. D 145), the Court was faced with the question as to whether it
religious influence can amount to undue influence. In that case, a
young girl joined a Sisterhood at the age of 27, and bound hersel in
to observe the triple vows of chastity, poverty and obedience. The h
rule of obedience required her to regard the voice of Mother
Superior as the voice of God. Moreover, no Sister was allowed t
take any independent advice from an outsider, without the leave o
Mother Superior. VWhen the girl's father died, leaving considerabe
money and shares, she made a gift thereof to the sisterhood, an
also made a will bequeathing everything to the sisterhood on hel
death. In 1879, she left the sisterhood, and revoked her will soon
thereafter. In 1885, she filed a suit to revoke the gift (which st
had made to the slsterhood at the tlme of her father's death) 0
the ground that the transaction was vitiated by undue influeno th

and therefore, voidable at her option, s

Find More at https://t.me/LawCollegeNotes Stufts

 CONSENT AND FREE CONSENT
65
TheCourt unanimously came to the conclusion that religious
influence can amount to undue influence. However, in
ace. since six years had elapsed between the the present
date of her
Ioaving the sisterhood and the date of filing
the suit, the Court
held, by a majority (Cotton, LiJ. dissenting) that
her claim was
barred by laches (undue delay).
Where an old Hindu woman gifted away the whole
of her
oroperty to her spiritual adviser, merely with a view to secure
benefits to her soul in the next world, the gift was held invalid.
So also were transactions avoided in a case of a gift
by an old
lliterate woman to her managing agent and in another case to
her mukhtyar. Where a beneficiary under a trust made a gift of a
portion of the trust fund to the trustees, it was held
that the
case would be covered by this section.
Mere hardship or unconscionableness not
enough.- It may,
however, be noted that a party to a contract cannot avoid it on
the
ground of undue influence, merely by showing that it worked hardship
on him or was unconscionable,
unless he proves that the other
party was in aposition to dominate his wil. t is only when it has
been so proved, that the question arises whether that position has
been used to obtain an unfair advantage.

QUESTIONS FOR CONSIDERATION UNDER S. 16

In dealing with cases of undue influence, the Court should
consider the following four important questions, viz.
(1) Whether the transaction is a righteous transaction, i.e., whether
it is a thing which a right-minded person might be expected to do.

(2) whether it was improvident, i.e., whether it shows so much

Improvidence, as to suggest the idea that the donor was not master of
himself and was not in a state of mind to weigh what he was doing.
(3) Whether it was a matter requiring legal advice.
(4) Whether the intention of making the gift (if any) originated
with the donor: Mohamed Buksh v. Hosseini Bibi, 15 1.A. 81.

UNDUE INFLUENCE, WHEN PRESUMED.- After reciting the

general principle as above, S. 16 proceeds to lay down certain rules
presumption as regard persons in particular relationships. The
Section proceeds to lay down a rule of evidence as to the burden of
proof, It provides that where a person who is in aposition to dominate
the will of another enters into a contract with him and the transacton

Find More at https://t.me/LawCollegeNotes_Stuffs

 66 THE LAW OF CONTRACTS

appears on the face of it to be unconscionable,-the burden

influence lies
proving that such a contract was not induced by undue
upon the person in a position to dominate the will of the other.
Ilustration.- A, being indebted to B, the money-lender of hie
appear to he
village, contracts a fresh loan on terms which
was po
unconscionable. It lies on B to prove that the contract
induced by undue influence.
Thus, the general rule is that he who alleges undue influence
must prove it. However, once the peculiar position of the parties
ie

established, and it appears that the transaction is an unconscionable

one, the Court will presume that undue influence was exercised
The burden of proving that it was not so, will rest on the party
benefiting by the agreement.
The onus will lie on the other party only when it is established that
(a) he was in a position to dominate the will of the person
whose consent was obtained by such influence; and
(b) the transaction appears, or is shown, to be unconscionable.
Thus, where undue influence is pleaded in defence in a suit on
a bond, before the burden can be laid on the creditor, not one, but
both the elements mentioned above must be established. Thus,
although a mortgage with ample security provides for excessive
and usurious interest, no presumption arises that it was induced by
undue influence, in the absence of proof by the mortgagor that the t
mortgagee was in a position to dominate his will.
Thus, for instance, if A, a man enfeebled by disease or age, is
induced, by B's influence over him as his medical attendant, to agree
to pay B an unreasonable sum for his professional services, it will be
presumed that Bemployed undue influence; the onus of proving thai
the agreement was not so induced will lie on B. Cases of needy
borrowers and exacting money-lenders have been of common
OcCurrence and often called for the interference of the Courts under
this Act till the passing of the Usurious Loans Act, 1918.
CASES. Safdar v. Nur Mohd., 1930 Sind 25,- X, aged 100
makes a gift in favour of Y, his creditor, disinheriting
son and stripping himself of almost everything. his wife a
Undue influence W

be presumed, as both conditions of S.

16 (2)--(0) position
dominate, and (i) unconscionability, are present.
Abdul Karim v. Ihsan-ul Ghani, 1921 Oudh an helr, "
order to
207A,
finance litigation for his claim to the estate, takes a lo
from B of Rs. 3,700, and passes a bond for. Rs.
25,000 payable

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONSENT AND FREE CONSENT 67
roceiving theestate, A being at the time of the loan even without
means of subsistence. The transaction is, on the face of it,
unconscionable.

Pt. Shyam Lal V. Badri, 1925 AIl.

31.– A and B, illiterate
anriculturists, execute a bond in favour of a professional money
lender Y, whereby interest at 4% per month is to be paid. Undue
influence will be presumed, for the law throws a cloak of protection
around agriculturists, against professional money-ienders.
CONTRACT WITHAPARDANASHIN LADY-A pardanashin lady is
one who, by the custom of the country or
the usage of the particular
community to which she belongs to, is obliged to observe complete
seclusion. The Courts in India regard such women as being especially
open to undue influence. When, therefore, an literate pardanashin
woman is alleged to have dealt with her property and to have executed
a deed, the burden of proving that there was no undue influence, and
that she was a free agent, lies on the party setting up the deed.
The Privy Council has observed as follows : "In the first place,
the lady was pardanashin lady, and the law throws around her a
special cloak of protection. It demands that the burden of proof
shall, in such a case, rest not with those who attack, but with
those who found upon the deed, and the proof must go so far as
to show affirmatively and conclusively, not only that the deed was
executed by, but was explained to, and was really understood by,
the grantor. The Court when called upon to deal with a deed
executed by a pardanashin lady, must satisfy itself upon evidence,
first that the deed was actualy executed by her understanding
what she was about to do; secondly, that she had full knowledge
of the nature and effect of the transaction in which she is said to
have entered, and thírdly, she had independent and disinterested
advice in the matter".
Monshee v. Shamsoonissa, (1867) 11 M.LA.551.-In this earliest
ecision of the Privy Council on the subject, a Mahommedan lady
Sued her husband to recover the value of Company's paper, alleging
nat the paper was her property, and that she had endorsed and
ianded it over to him for collection of interest. The husband's
cetence was that he had purchased the paper from his wife. Their
Lordships held. upon a review of the evidence, that although the wife
icd failed to prove affirmatively the precise case set out by her,
evertheless as the wife was pardanashin, the husband was bound
Prove something more than mere endorsement and
delivery. He
onus probandl, which was on him, that
cO Tailed to discharge the

Find More at https://t. me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
68
paner
given value for the
the sale was bona fide and that he had
The wife's suit thus succeeded.
UNDUE INFLUENCE IN MONEY-LENDING
TAANSACTIONS,
transaction
The mere fact that the rate of interest in a money-lending
is exorbitant is, by itself, no ground for relief under S. 16,
unless it
will of
is shown that the lender was in a position to dominate the
money
the borrower. The Privy Council has held that urgent need of a
on the part of the borrower does not, of itself, place the lender in
position to dominate his will within the meaning of section 16.
enter
people, with their eyes open, choose wilfully and knowingly to
into unconscionable bargains, the law will not protect them.
As

observed in Aziz Khan v. Duni Chand, a transaction may undoubtedly

be improvident, but in the absence of any evidence to show that the
money-lender had actually taken advantage of his position, it is
difficult for a Court to give relief only on the ground of hardship.
Problem.-A, a poor Hindu widow, borrows money from S, a
money-lender, on interest at the rate of 100 per cent. S has filed a
suit for the recovery of the amount advanced by him with interest at
the contract rate. A is seeking to avoid the contract in toto. Advise A.
Ans.- The contract cannot be avoided in toto, but relief will be
given to her against payment of interest at the exorbitant rate. (Rani
v. Swaminath, 34, Mad. 7).
COMPOUND INTEREST.-Compound interest in itself is perfectly
legal, and it is competent to a Court to allow compound interest at
the same rate as simple interest from the date of default, if there is
clear stipulation to that effect. In other words, a stipulation in a
bond that on default of payment of simple interest, compound
interest at the same rate shall be payable from the date of default
is not by way of penalty : Sunder Koer v. Rai Sham Kishen, (1907)
34 Cal. 150 (P.C). The Courts do not lean towards compound
interest; but when there is a clear agreement to pay, it is, in the
absence of disentitling circumstances, allowed.
UNCONScIONABLE OR CATCHING' BARGAINS.- Originally,
in a contract for a loan made with oppressive terms with an expectant
heir, relief was granted in equity, on the ground of constructive
fraud, i.e., on the ground that the parties were not on equal terms.
of which unfair advantage had been taken and a hard bargain
made. Such bargains are called catching bargains or unconscionabe
bargains. The onus is placed on the person seeking to enforce the
contract to show that the contract is fair and reasonable. The doctrine

Find More at https://t.me/LawCollegeNotes_Stuffs

 cONSENT AND FREE CONSENT 69
extended to all cases where parties do not meet on equal
has been is under pressure without adequate protection,
terms or where one
contract
e.g., a between solicitor and his client.
cOERCION' AND UNDUE INFLUENCE DISTINGUISHED.-
Coercion and undue influence are clearly distinguishable from
each
other. In the first case, the consent is obtained by the threat of an
offence and the person is forced to give his consent. In the second
case, the consent is obtained by dominating the will of the giver.
Undue influence differs from coercion in that coercion is mainly
of a physical character, while undue influence is of a moral character.
But with both alike, the freedom of will is impaired. While coercion
is of an avowedly violent character, undue influence is more subtle
and intangible, but nonetheless equally effective.

The party who alleges coercion is bound to prove it in a court

of law. However, in some cases (discussed above), undue influence
can be presumed by the court and it is for the other side to prove
that there was no undue influence.

Both in the case of coercion and undue influence, the agreement

is voidable at the option of the party whose consent was so caused.

In both cases, the party avoiding it is bound to restore to the

other party, any benefit which he may have received under the
contract. However, in the case of undue influence, the Court in its
discretion, may set aside the agreement, upon such terms and
conditions, as may seem just.

Effect of undue influence (S. 19A)

Assuming that a party has entered into a contract under the
effect of undue influence, what are his rights? These are discussed
in S. 19A.

When consent to an agreement is caused by undue influence,

he agreement is a contract voidable at the option of he party
whose Consent. was so caused. Any such contract may be set
aside, either absolutely, or if the party who was entitled to avoid it
has received any benefit thereunder, upon such terms and conditions
as the Court may deem just : S. 19A.

note. B,
,-
Illustrations. (1)A's son forged B's name to a promissory
under threat of prosecuting A's son, obtains
a
bond from A

ne amount of the foraed note. If B sues on this bond, the Court

may set the bond
aside.5

Find More at https://t. me/LawCollegeNotes_Stuffs

 70 THE LAW OF CONTRACTS

(2) A, a money-lender,advances Rs. 100 to B, an agriculturist. an.

w

by undue influence, induces him to execute

a bond for Rs. 200
may set the bond asida
interest at 6 per cent per month. The Court
may seem just.
ordering A to repay Rs. 100, with such interest as

(iI) FRAUD (Ss. 17 and 19)

What is fraud as The third factor due to which consent will not be free is fraud.
defined under the S. 17 defines fraud' thus :
Indain Contract Act?
As mere silence is Fraud means and includes any of the following five acts
not fraud, state the committed by a party to the contract (or with his connivance, or by
circumstances, under
his agent), with intent to deceive another party thereto (or
his
which a duty to :
speak arises. agent) or to induce him to enter into the contract
M.U. Nov. 2012
() the suggestion as to a fact, of that which is not true or
which he does not believe to be true (suggestio falsi);
(ii) the active concealment of a fact by one having knowledge
or belief of the fact (suppresio veri);
(ii) a promise made without any intention of performing it;
(iv) any other act fitted to deceive;
(v) any such act or omission as the law specially declares to
be fraudulent.
FRAUD.- From the definition which enumerates various acts
which constitute fraud, it will be seen that no endeavour is made in
the Act to lay down any precise definition of fraud' or to state in a
general proposition as to what shall be held to constitute fraud. Any
Write a short note on: act fitted to deceive would be covered by the definition if the other
Fraud.
M.U. Noy. 2011 elements which are essential to constitute fraud are present. "The
fertility of man's invention in devising new schemes of fraud is s0
great that it would be difficult, if not impossible, to confine traud
within the limits of any exhaustive definition."
Having dealt with the constitutive elements of fraud in a
general way, it remains to be observed that the definition s
obviously intended to cover all surprise, trick, cunning, and other
unfair ways whereby a person is deceived. Usually there is either
Suggestio .falsi, a false representation, or suppressio verl,
intentional suppression of truth, or both.
Thus, A, a horse-dealer, sold a mare to B. A knew that
mare had a cracked hoof, which he filled up in such a way as
defy detection. The defect could not be detected during the inspection
of the horse before the sale, but was subsequently discovered Dy

Find More at https://t.me/LawCollegeNotes_ Stuffs

 CONSENT AND FREE CONSENT 71

It
was held that the agreement could be avoided by B,
as his
consent was obtained by fraud.
The directors of a company issued a Prospectus, inviting
subscriptions for debentures,
and stated that the objects of the
were to complete alterations
issue in the buildings of the company
and to purchase horses and vans. The real object was to enable
he directors to pay off pressing liabilities. The statement as to the
object for which the money was wanted was held to be fraudulent.
ESSENTIALS OF "FRAUD"The following are the four
essential
elements of fraud as defined in the Indian Contract Act
:

1. The act must have been committed- () by a party to

the
contract, or (i) with his connivance, or (i) by his agent.
2.The act must
be- () a suggestion by one as to a fact of that
which is not true or which he does not believe it to be true; or (ii)
an active concealment of a fact by one having knowledge or beliet
of the fact; or (ii) a promise made without any intention of performing
it; or (iv) any other act fitted to deceive; or (v) any such act or
omission as the law specially declares to be fraudulent.
3. The act (i) must have been committed with an intent to
deceive, and (i) must have actually deceived.
Intent to deceive.- It is only when consent to an agreement is
caused by fraud or misrepresentation that a person can be said to
have a grievance that his consent was not free. A party who, at the
time of the agreement, knows that the other is making a false
representation or is trying to overreach him, and yet enters into the
agreement, can have no grievance. It is to be remembered that
deceit which does not deceive is not fraud, for however false and
dishonest the artifices or contrivances may be, by which one man
may induce another to contract, they do not constitute a fraud if
nat other knows the truth and sees through the artifices or devices.
Haud enim decipitur qui scit se decipt.

Thus, for instance, if A, who wants to sell his factory to B,

Taudulently tells B that C had offered A Rs. fifty lakhs for the
Tactory, and B knows that C had offered only Rs. forty lakhs, and
S
buys the factory for Rs. fifty lakhs, it will not be open to B to
Void transaction on the around of A's fraud. This is further made
gear by the Explanation to S. 19, which lays down that a fraud or
Srepresentation which did not cause the consent to a contract of
MR party on whom such fraud was practised, or to whom such
misrepresentation Was made, does not render a contract voidable.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
72
must have been aimed at-() the party
Lastly, the deceit
4. to
with a view to induce
the contract, or (i) his agent, or (ii) the other
contract.
party to enter into the
Silence when amounts to fraud (S. 17, Expln.)
Mere silence, without any duty to speak, does
not, by itcak
amount to fraud.
Turner v. Green, (1890-2 Lh. 205).- Negotiations for settlemen
of a suit were going on between X and Y. Before the final agreemen
was arrived at, the solicitor of X learnt that the suit was decidet
against X; Y was unaware of this, and neither X nor his solicitg
communicated it to him. In ignorance of this background, Yagreed to
the settlement.
The Court held that mere silence as regards a material fact.
which the other party is not bound to disclose to the other, is not a 1

ground for rescission, or a defence to specific pertormance.

The Explanation to S. 17 enacts that mere silence as to facts
likely to affect the witlingness of a person to enter into a contract is
not fraud, unlesS
(() the circumstances of the case are such that, regard being had to
them, it is the duty of the person keeping silence to
speak, or
1

(ii) silence is, in itself, equivalent to speech.

IMlustrations to
which
S.17– (1) A
sells, by auction, to Ba horse
knows to be unsound.
A
says nothing to Babout the
A

horse's unsoundness. This is not fraud in A.

(2) In the above llustration, B
is A's daughter and had just
come of age. Here, the relation
between the parties would make
A's duty to tell if the horse is unsound.
(3) B says to A you do not deny it, I
-"f
the horse is sound." A says nothing. Here, A's shall
assume that
to speech. sitence is equivalen
(4) A and B, being traders, enter upon a
contract. Ahas private
information of a change in prices which
would affect B's willingness
to proceed with the.contract. A is not
bound to B. inform
It,
therefore, follows that in cases where there is a duty to
speak, non-disclosure amounts to a breach of duty and if made
with an Intent to decelve, it is fraudulent under Sec. 17 (Explanation)
but if it is made without such Intention, it would be misrepresentation
under S. 18.

Find More at https://t. me/LawCollegeNotes_Stuffs

 CONSENT AND FREE CONSENT 73
Effect of silence amounting to fraud (S. 19 Expln.)
The Exception to S. 19 deals with the effect of such silence. It lays
down that if such consent was caused by misrepresentation, or by
silence fraudulent within
the meaning of section 17, the contract,
nevertheless, is not voidable if
the party whose, consent was so
caused had the means of discovering the truth with ordinary diligence.
Thus, A, by a misrepresentation, makes B erroneously to believe
that 500 maunds of indigo are made annually at A's factory. B
examines the accounts of the factory, which show that only 400
maunds of indigo have been made. After this B buys the factory.
The contract is not voidable on account of A's misrepresentation.

Effect of fraud (S. 19)

Under S. 19, whenconsent to an agreement is caused by fraud,
the agreement is a contract which is voidable at the option of the
party whose consent was so caused.

Right of a party to a contract whose consent was caused

by fraud (S. 19)
S. 19 also provides that a party whose consent is caused by
fraud may insist that the contract shall be performed, and that he
shall be put in the position in which he would have been if the
representation made had been true.
Illustrations to S. 17.
(a) A, intending to deceive B, falsely represents that five hundred
maunds of indigo are made annually at A's factory, and thereby induces
B to buy the factory. The contract is voidable at the option of B.

(b) A,by a misrepresentation, leads B erroneously to believe

tnat five hundred maunds of indigo are made annually at As factory.
B examines the accounts of the factory, which show that only four
hundred buys the
B
maunds of indigo have been made. After this,
factory. The contract
is not voidable on account A's
of

misrepresentation.
c) A
fraudulently informs that A's estate is free from
B

encumbrance. thereupon buys the estate. The estate is subject to

B

mortgage. B may on its being

either avoid the contract or may insist
carried out
and the mortgage debt redeemed.
(0) B having discovered a vein of ore on the estate of A, adopts
means ore from
to conceal, and does conceal, the existence of the

Find More at https://t.me/LawCollegeNotes_Stuffs

 74 THE LAW OF CONTRACTS

A. Through A's ignorance, B is enabled to buy the estate at

undervalue. The contract is voidable at the option of A.
(e)
A
is entitled to succeed to an estate at the death of
8.
dies. C, having received intelligence of B's death, prevents &
intelligence reaching A, and thus induces A to sell him his inter
in the estate. The sale is voidable at the option of A.

(iv) MISREPRESENTATION (S. 18)

The fourth factor which will prevent consent from being free i
misrepresentation. Consent given under misrepresentation of fact
cannot amount to free consent.
S. 18 defines misrepresentation as follows:
"Misrepresentation" means and includes
(a) The positive assertion, in a manner not warranted by tha
information of the person making it, of that which is ngt
true, though he believes it to be true.
Thus, A learns from X that B would be a director of a company
which is about to be formed. A says to
M: 'B is going to be a
director of the Co., in order to induce him to purchase shares. M

does so. This is misrepresentation by A, though he believed in the

truth of the statement and there was no intent to deceive, as the
information was derived not from B, but from X,
and was mere
hearsay. Belief under S. 18(1) must not only be reasonable, but also
must be derived from the best possible information. (Mohanlal v
Shri Gangaji Cotton Mills Co., 4 C.W.N. 369)
A
wants to buy B's mare. B
writes:"l think your queries wouo
be satisfactorily answered by a friend if you have one in the station
and Ishall feel more satisfied. All I can say is the mare is thorougn)
sound". This letter is a "positive assertion" of
with a recommendation to B to satisfy himself
soundness, COuplev
before purchasiliy
(Currie v. Rennick, 1886 Pun. Rec. No. 41) 3
(b) Any breach of duty which, without an
intent to decev
gains an advantage to the person committing it (or any
claiming under him), by misleading another to his prejud
or to the prejudice of any one
claiming under him.
agreement
(c) Causing, however innocontly, a party
to an !
a
make mistake as to substance of the thing which
subject of the agreement.
s;

Find More at https://t.me/LawCollegeNotes_ Stuffs

 CONSENT AND FREE CONSENT 75
Thue on A's representing innocently, that there is
motorable
beetween X and Y, B,
having business at Y, agrees to deliver a
road
boiler to A at
X. In
fact, there is a suspension bridge between the
places, which cannot bear the weight of the boiler, though A

oat knowof this fact. The agreement is voidable at the instance

af as A's statemnent amounts to misrepresentation under clause
B.

lc) : Johnson v. Crew, (1874) 5 N. W. P. 350.

In The Oceanic Steam Navigation Co. v. Sunderdas Dhurumsey,

1890) 14 Bom. 241, the defendants in Bombay chartered a ship
wholly unknown to them from the plaintiffs, which was described in
the charter party and was represented to them as being not more
than 2,300 tonnage register. It turned out that the registered tonnage
was 3,045 tonnes. The defendants refused to accept the ship in
fulfilment of the charter party, and it was held that they were entitled
to do so, by reason of the erroneous statement as to tonnage.

PROBLEM.-Ahorse belonging to A was to be sold by auction.

B visited A's stable to examine the horse and while B was examining,
A
said, "You have nothing to look, for I assure you he is sound".
Thereupon, B desisted from further examination. The next day, B
relying upon A's assertion, purchased the horse at the auction,
where nothing was said about the soundness of the horse. The
horse proved to be unsound. What is B's remedy? It will be seen
that this is a case of misrepresentation, and B can avoid the sale.

CONTRACTS UBERRIMAE FIDEI- To avoid a contract on the

ground of misrepresentation or fraud, some sort of represerntation is
necessary; but there are cases where a contract is vitiated because
of the non-disclosure of material facts. Such contracts are called
Contracts uberrimae fideí, or contracts of utmost good faith. Here,
one of the parties to the contract is on vantage ground. He knows
more about the subject-matter of the contract than the other party,
and consequently, he is under a legal obiigation to disclose all the

ais which are likely to influence the mind of an average reasonable

man who is
about to enter into a contract.
A contract is said to be uberrimae fidei where it is the duty of one
ne parties to disclose all the facts within his knowledge to the
other,
and silence is deemed to be equivalent to speech. In such
contracts,
one. of the parties is presumed to have means or
knowledge
not accessible to the other. The distinguishing features of
Such contracts
are that they are entered into between persons in
a

particular
relationship and require full discosure and utmost good

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
76
e.g., contract between a father and a son who has just cor.
faith, a
are exceptions to the rule caveat emptor (let tha
of age. These also
buyer beware).
contracts uberrimae fidei.
The following are a few instances of
1. Contracts of insurance.- In such
contracts, the insured knOWe
so
more about the subject-matter of the contract than the insurer:
all material facts which
that it is the duty of the former to disclose
contract, or in fixing the
might influence the insurer to enter into the
even if no
amount of premium. Any omission in this respect,
fraudulent, will vitiate the policy.
When
2. Contracts for the purchase of shares in companies.-
a Prospectus is issued by a company inviting members of the
may influence
public to take shares, it must disclose everything which
an intending investor regarding the nature and advantage of such
contract.
investments. Omission of any material fact would vitiate the
It must
The prospectus should not contain any misdescription.
not endeavour to mislead the reader, by any half-statement of the
truth, or unfair reservation, or ambiguous phraseology.
3. Contracts relating to family settlements.- In all family
settlements, a duty to disclose is imposed upon all parties who
know or come to know of any fact which might have any effect
on

the judgment of the others in entering into a compromise. A family

arrangement is not binding if either party has been misled by the
concealment of material facts.
4. Contracts in which a fiduciary relationship exists between the
parties.- In certain cases in which a fiduciary relationship exists
between the parties to a contract, that relationship requires that the
fullest disclosure should be made between the parties. Thus, n
case of contracts between partners, creditors and sureties, agent
and principal, solicitor and client, a guardian and his ward, trustee
and beneficiary, and various other cases which are too
numerous to
enumerate, the most frank disclosure is called for from the partners,
or ary
the creditor, the agent, the solicitor, the guardian, the trustee
other person in a fiduciary position.
5. Contract of suretyship.- Sec. 143 0f the Contract Act lay
down that any guarantee which the creditor has obtained by mearts
of keeping silence as to material circumstances ls invalid. A credito'
must disclose all materlal circumstances to the surety.h

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONSENT AND FREE CONSENT 77
MISAEPRESENTATION
OF LAW.-- Misrepresentation of a
generalrule of law gives no right to avoid a
contract, as everyone
supposed know the law,
to and ignorance of the law is no
is
excUse. However, misrepresentation of particular rights, such as the
document, is a misrepresentation of fact. Similarly,
etfect of a
misrepresentation
of
law, if fraudulent, is actionable.
MISREPRESENTATION
AND FRAUD DISTINGUISHED.- The What is rescission of
Contract Act itself does not throw much light on When can
the relation between contract?
rescission be
misrepresentation; and as observed by Pollock
fraudand and Mulla, adjudged or refused?
may even be said to obscure it. The relationship between fraud M.U. Jan. 2017
it misrepresentation May 2017
and has been analysed by the above-mentioned
writers thus-- Fraud, as a cause of rescission of contracts, is
generally reducible to fraudulent misrepresentation. Accordingly, we
nay Say that misrepresentation is either fraudulent or not fraudulent.
H
fraudulent, it is always a cause for rescinding a contract induced
bv
it if not, it is a cause of rescission only under certain conditions,
wtich the definitions of S. 18 are intended to express".

innocent misrepresentation (called simply 'misrepresentation' in

the Contract Act) differs from fraudulent or wilftul misrepresentation
(referred to as "fraud" in the Contract Act).
The following are the points of difference between fraud and
misrepresentation:
1. First, both in fraud and misrepresentation, there is a statement
which is false, but the distinction between them mainly turns on the
Intention of the party. A false statement without any intention to
deceive would be a
misrepresentation, but a false statement
celberately or recklessly made to deceive another is a case of fraud.
In other words, fraud implies that there must be an intention

oier to deceive or to induce the other party to enter into a contract,

whereas misrepresentation may be
innocent, i.e., there may not be
deceit or
any intention to gain an advantage. Thus, under the heading
of
fraud, will
be found grouped cases where dishonest intention is
traceable;
under the heading of misrepresentation are to be found
cases
which do not involve dishonest intention, that is to say, the
element of
moral obloquy
is absent.
Contract. econdly, misrepresentation ls only
a vitiating elomnt in a
party It merely makes the contract voidable at the option of the
injured; but, fraud, besides being a vitlating elemont in a
contract,
gives rise to an independent action of tort. In other words,

Find More at https://t. me/LawCollegeNotes_Stuffs

 THE LAW OF CONTRACTS
78
fraud, besides avoiding the contract, gives rise to cause of
a act

ex delicto (to claim damages), while misrepresentation only vitia

the contract.
Both misrepresentation and fraud make a contract voidable a
the option of the party whose consent has been caused by Such
misrepresentation or fraud. In the case of fraud, however, the pary
defrauded gets the additional remedy of suing in tort for damaget
for loss caused by such fraud; in case of innocent misrepresentation
the only remedies are rescission and restitution.
3. Lastly, in case of misrepresentation, the fact that the plaintit
had the means of discovering the truth is a good plea; whereas, in
a case of fraud, as a general rule, it does not lie in the mouth of
the person making a false or reckless statement to say that the
plaintiff had the means of discovering the truth with ordinary
diligence. In other words, in the case of fraud, the defendant cannot
set up the defence that the plaintiff had the means of discovering
the truth or could have done so with ordinary diligence; in the case
of misrepresentation, it would be a good defence.

Right of a party to a contract whose consent was caused

by misrepresentation (S. 19)
Under S. 19, a party whose consent is caused by fraud or
misrepresentation may insist that the contract shall be performed,
and that he shall be put in the position in which he would have
What are the been if the representation made had been true :S. 19.
consequence when
consent to an S. 19 also lays down that if such consent was caused Dy
agreement is caused misrepresentation or by silence fraudulent within the meaning of
by coercion, fraud or section 17, the contract nevertheless, is not voidable, if the party
misrepresentation ?
(2 marks) whose consent was so caused had the means of discovering the
M.U. Nov. 2012 truth with ordinary diligence.
However, a fraud or misrepresentation which did not cause tne
consent to a contract of the party on whom such fraud was practise0.
or to whom such misrepresentation was made,
does not render a
contract voidable.

Voidabllity of agreements without free consent (Ss. 19-19A

Now, suppose a person has alroady entered into a contract
through fraud, coerclon, misrepresentation or undue influence
the other party; what is the offect of such a contract? The answer

Find More at https://t.me/LawCollegeNotes Stuffs

 CONSENT AND FREE CONSENT
79
be found in Sections 19 and 19A of
isto
under: the Act, which provide
as
When consent to an agreement is
caused by
() coercion, (i) fraud, (ii) misrepresentation, or (iv)
infuence, the agreement is a contract voidable undue
at the option of
the party whose consent was so obtained : Ss. 19
and 19A.
A party
whose consent was so obtained may opt that the
agreement should not be
enforced against him, that is to say, he may
rescind the agreement. He may also, if
he likes, disregard the vitiating
tctor and insist on the agreement being carried out. And if
the case
is one of fraud or misrepresentation,
he may, if he thinks fit, insist that
the contract be performed and that he be put in the position in
which
he would have been if the representation made had been true.
Thus, for instance, if A fraudulently informs B that A's house is
free from any encumbrance and induces B to
buy it, and it turns
out that the house is subject to a mortgage, B may
either avoid the
contract or may insist on its being
carried out and the mortgage
debt redeemed. And, as stated above, in case of fraud, he can
sue in tort for
also
damages.
Moreover, deceit which does not deceive does not make a
contract voidable. It is, therefore, laid down that a
fraud or
misrepresentation which did not cause the consent of the party on
whom such fraud was practised, or to whom such misrepresentation
was made,
does not render a contract voidable.
lustration,- a misrepresentation, leads B erroneously to
A, by
that 500 maunds of indigo are made annually at A's factory.
believe
D examines
the accounts of the factory, which shows that only 400
Haunds of indigo have been made. After this B buys the factory.

eThe
contract is not voidable on account of A's misrepresentation.
principle a
false
underlying this rule is obvious. If
representation
upon has not induced the to act
party to whom it is made
it (by entering
(whether into the contract), such misrepresentation
Complain
fraudulent or no) becomes irrelevant. Such a person cannot
of being misled by a statement which did not lead him at all.
A, who
Certificate wants to sell unsound horse, forges veterinary doctor's
a a

B comes
stating the horse
to be sound, andnotpins it on
the stable door.
agrees to inspect the horse, but does notice the certificate.
B

tobuy the horse after the inspection. After buying the horse,
iscovers
B

that the horse is unsound, and wishes to avoid the contract

Find More at https://t.me/LawCollegeNotes_Stuffs

 80 THE LAW OF CONTRACTS
on the ground of the forged certlificate, about which he learns later. He
cannot do so, as decoit which does not decelve is not fraud, ang
therefore, not a ground for avoiding the contract.
Inone English case, T bought a cannon manufactured by H.
The cannon had a detect, which made it worthless, and H had put
a plug to conceal this defect. However, T agreed to buy the cannon
without inspecting it. When the cannon burst on firing, and T sought
to rescind the contract on the ground of fraud, it was held that he
could not successfully plead fraud, because if he had not examined
the cannon at al, he was not in fact deceived by the plugging of
the defect. (Horsfall v. Thomas, (1862) 1 H.&C. 90)

(v) MISTAKE (SS. 20, 21 AND 22)

Mistake of fact (Ss. 20 & 22)

Mistake is of two kinds--of fact or of law. As to mistake of fact,
two principles are stated in Ss. 20 and 22. The first principle is :
1. Where both the parties to an agreement are under a mistake as
to a matter of fact essential to the agreement, the agreement is void.

What is the effect of However, an erroneous opinion as to the value of the thing
a mutual mistake of which forms the subject-matter of the agreement is not to be deemed
fact on an agree- a mistake as to a matter of fact.
ment? (2 marks)
M.U. May 2012 IlMustration.-(a) A agrees to sell to B a specific cargo of goods
Nov. 2013
supposed to be on its way from England to Bombay. turns out t
May 2017
that, before the day of the bargain, the ship conveying the cargo
had been cast away and the goods lost. Neither party was aware of
the facts. The agreement is void.
Write a short note on:
A
(b) agrees to buy from Ba certain horse, it turns out that the
Mistake. horse was dead at the time of bargain, though neither party was
M.U. Apr. 2015 aware
of the fact. The agreement is void.
(c) A being entitled to an estate for the life of B, agrees to sell
it to C. B was dead at the time of the agreement, but both parties
were ignorant of the fact. The agreement is void : S. 20.
PROBLEM.– A agroed to purchase a house trom B for Rs.
1,000. He discovered that his opinion as to the value of the hous
was erroneous. Is the agreement vold? Give roasons.
Ans.- No, bocause S. 20 oxprossly providos that an erronaous
opinion as to the value of the sutbject-matter of the agreement I5
not a mistake of fact whichwill render an agreement vold.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONSENT AND FREE CONSENT
81
A
mistake of fact may be either (i) bilateral, or (iü)
unilateral. It is
only a mutual (i.e. bilateral) mistake as to an existing
fact essential
to the agreement renders the agreement void.

ordinarily, mistakes arise either as to

identity of a person or as
to the subject-matter of a contract.

MISTAKE AS TO IDENTITY.OF
PERSON,- The best illustration
af the case of a mistake as to
the identity of a person is afforded
hy the well-known case of
Cundy V. Lindsay (which has already
heen referred to earlier). A reference may also
be made to Lewis v.
Averay, also discussed earlier.
MISTAKE AS TO THE SUBJECT-MATTER
OF THE CONTRACT.
If two persons contract
for the sale of an article, each having in
mind a different article, but believing
themselves to be in agreement,
there is no contract, as the mistake avoids the contract. In
the
leading case of Raffles v. Wichelhaus
(1864-2 H & C 906), A
agreed with B for the purchase of 125 bales of Surat Cotton "to
arrive ex Peerless from Bombay"
There were, in fact two ships
named Peerless sailing from Bombay, and A had in mind one of
these ships, while B had the other in mind. It was held
that the
mistake as to the identity of the subject-matter
rendered the
agreement void.

2In Couturier v. Hastie (1856-9 Ex 102), contracted to sell to B,

A

a cargo of corn which it was supposed by both parties, was on a

voyage to England. In fact, at
the time when the parties entered into
the contract, the corn, having become heated, had already
been sold
at intermnediate port. It was held that as was a
there mutual mistake
as to the existence of the subject-matter,
the contract was void.
At an auction sale, A purchased a property in Calcutta
and paid
earnest money. It then transpired that nearly half the property was
to be acquired by the Improvement Trust, which fact was unknown
TO
both the parties at the time of the purchase. It was held that
here was a mistake as to matter of fact essential to the agreement
and that A
could avoid the contract and recover the deposit :
Nursing Dass v. Chutto, (1923) 59 Cal. 615.
A agrees
to sell to Ba particular picture by Rembrandt in his
welery for a certain price. Unknown to both the parties, a thief had
slolen the genuine Rembrandt and substituted a fake one in its
Place. After taking delivery of the picture and paying the price, B
discovers that it is not the genuine Rembrandt which he had agreed

Find More at https://t.me/LawCollegeNotes_Stuffs

 82 THE LAW OF CONTRACTS

to buy. B offers to return the picture and claims refund of the price
In this case, both A and B are under a mistake as to the genuineness
of the picture, a matter of fact essential to the
agreement. Therefore
the agreement is void.
in s
2. Thesecond principle as to mistake of fact is declared
becausa
22, which lays down that a contract is not voidable merely
it being under a mistake a
it was caused by one of the parties to
to a matter of fact.
As seen above, mistake must be mutual, and not unilateral
Both the parties must be labouring under such a mistake.
Then

alone will the agreement become void. The following case is

the

best illustration of this principle.

Haji Abdul Rahman Alarakha v. The Bombay and Persia Steam
a
Navigation Co., (1892) 15 Bom. 561.- The plaintiffs chartered
steamer from the defendants to sail from Jedda on "the 10th August,
1892 (fifteen days after the Haj)" in order to convey pilgrims returning
to Bombay. The plaintiffs believed that "the 10th August, 1892'
corresponded with the fifteenth day after the Haj, but the defendants
had no belief on the subject, and contracted only with respect to
the English date. It turned out that the 19th July, 1892, and not the
10th August, 1892, corresponded with the fifteenth day after the
Haj. On finding out the mistake, the plaintiffs sued the defendants
for rectification of the charterparty. It was held that the mistake was
not mutual, but on the plaintiffs' part only, and therefore, there could
be no rectification. The Court, therefore, decided that there was a
valid contract between the plaintiffs and the defendants.

Mistake of law (S. 21)

As to mistake of law, S. 21 provides that a contract is not
voidable because it was caused by a mistake as to any law in
force in India; but, a mistake as to a law not in force in India
(i.e. a foreign law) has the same effect as a mistake of fact.
llustration.- and B make a contract grounded on the
A
erroneous belief that a particular debt is barred by the Indian Law
of Limitation. The contract is not voidable.

Ram Ruton v. Municipal Committee, A.l.R. (1939) Lah. 511,–In

one case, a decree-holder agreed to give up costs of the suit, if the
judgment-debtor would not file an appeal from the decision. It wa
subsequently found that the judgment-debtor had no right to appea.
It was held that
judgment-debtor
the agreement was. void if the

Find More at https://t.me/LawCollegeNotes_Stuffs

 cONSENT AND FREE CONSENT 83
honestly believed that she had a right of appeal, or voidable under
judgment-debtor
the made a dishonest misrepresentation.
S.19,if B Rs. 10,000. B was under
owed the impression that the debt
barred by the Law of Limitation. B,
however, pressed to pay A
wasamount
of the debt. was aware that
A
debt was not barred
the Law Limitation. offered to pay Rs.the
A
of
3,000 in full settlement
bythe claim. accepted the offer. Thereafter, B
B
found that the debt
of B's
was not barred
by the Law of Limitation. desired to avoid the
B

contract whereby, he agreed to receive Rs.

3,000. Here, the contract
between A and is grounded
B on
the erroneous belief that A's debt
barred by the Law of Limitation. This is a mistake as to a law in
forcein India, and cannot avoid the contract.
B

nJCA! MISTAKE OF LAW WILL VITIATE A CONTRACT

What is the effect of
Although a mistake of fact vitiates a Contract, a mistake of law does mistake of law under
not.This is
basd on the maxim that ignorance of law is no excuse. Act?
the Indian Contract
(2 marks)
lonorantia juris non exCusat. But it must not be supposed that relief
M.U. Apr. 2011
can never be given in respect of mistake of law. In the following
Jan. 2017
three cases, a mistake of law would vitiate the contract :

1. Privaterights of property, though they are the result of the rules

of lawor depend upon rules of law applied to the construction of legal
instruments, are generally to be considered as matters of fact.

2. Ifa contract is brought about by a wilful mísrepresentation of

law, it can be set aside.
3. Mistake as to any foreign law is a mistake of fact and as
SUch, it vitiates a contract.

PROBLEM- A and B, believing themselves married, made a

Separation agreement in which A agreed to pay B Rs. 100 per month.
Iney were not, in fact, validly married. A having fallen into arrears, B
sUed A to recover the amount. Will B succeed in the suit ?

Ans.- be seen that, in this case, the basis of the deed of

It will
eparation was the belief of both the parties that they were
pectively husband and wife. As this was not in fact the case,
ere was a mutual mistake of fact essential to the agreement, and
the aggreement
is, therefore, void. B, will, therefore, not succeed
in
the suit.
(Galloway V. Galloway, 1914 30 Times Law Reports, 531,
followed
in Law v. Harragin, 1917 33 Times Law Reports, 381)
In a leading English case on the point, Bell Lever Bros. Ltd.,
v.

(1932 A.G.
161), a Company paid a large amount of compensation
MO
its Directors and terminated their contracts. Later, the
of

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
84 THE LAW OF

realised that it could have terminated the contracts o

Company
Directors for breach of duty, even without paying them
these recover the money paid
compensation. The Company sued to common
and
agreement was void for mistake,
argued, inter alia, that the of Lords, it was
matter went appeal to the House hel
When the in mistake was not
mutual, an
(though by a bare majority) that the
so fundamental as to invalidate
also that the mistake was not
There was therefore, a valid and binding contract.
agreement.
DISTINGUISHEn
MISTAKE OF FACT' AWD OF 'LAW'
will vitiate a contract; a mistake of law
does
1. A mistake of act
not, unless it is one of the three kinds mentioned above.

2. Secondly, where there is mutual mistake as to an existing

fact material to the agreement, the contract is void : Ss. 20 and 2
Where there is a mistake of law, the contract is not voidable, unless
the mistake of law falls within one of the three exceptions discussed
:
above S. 21.

Remedies for mistake (Ss. 65 and 72)

S. 65 lays down that where the contract is void on account of
mistake, any person who has received any advantage under it, is
bound to restore it or make compensation for it to the person from
whom he received it.
Thus, A pays B Rs. 1,000 in consideration
marry C, A's daughter. of B's promising to
C is dead at the time of the promise. The
agreement is void, but B must repay
A, Rs. 1,000.
The second remedy is
proided for in S. 72, which lays dow
that a person to whom money
by mistake, must repay or has been paid, or anything deliVereu
return it.

Find More at https://t.me/LawCollegeNotes _Stuffs

 7
LAWFUL CONSIDERATION AND OBJECT
(Ss. 23, 24, 57 and 58)
The next ingredient of a valid contract is that its consideration
and object must be lawtul.
llustrations.- (a) A agrees to sell his house to B for Rs. 10,000.
Here, B's promise to pay the sum of Rs. 10,000 is the consideration
for A's promise to sell the house, and A's promise to sell the house is
the consideration for B's promise to pay Rs. 10,000.
(b) A promises to pay B Rs.1,000 at the end of six months, if C
who owes that sum to B fails to pay it. B promises to grant time to
C
accordingly. Here, the promise of each party is the consideration
for the promise of the other party, and they are lawful considerations.

promises, for a certain sum paid to him by B, to make

(c) A

good to B the value of his ship, if it is wrecked on a certain voyage.

Here, A's promise is the consideration for B's payment, and B's
payment is the consideration for A's promise, and these are lawful
considerations.
(d)promises to maintain B's child, and B promises to pay A
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.
Under S. 23, the consideration or object of an agreement is
lawful,
unless
(i) it is forbidden by law; or When is conside
ration of an agree
(i) is of such a nature that, if permitted, it would defeat the ment said to be
lawtul?(2 marks)
provisions of any law; or M.U. Apr. 2013
(ii) is fraudulent; or
(v) involves or implies injury to the person or property of another;

() the Court regards as immoral or opposed topublic policy.

it

each of
in these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which the
vOject or consideration is unlawful is void.

85

Find More at https://t. me/LawCollegeNotes_Stuffs

 86 THE LAW OF CONTRACTS
'CONSIDERATION' AND 'OBJECT DISTINGUISHED.– The
object
consideration for a contract is quite distinct from its at the
Consideration is the act, abstinence or the promise made
purpose for which
desire of the promisor, whereas the object is the may
there
the agreement is entered into. For example, war
be a contract
of sale of arms for the
purpose of waging against the State. In
may consist of a set of promises. But
this case, the consideration
wage war. An agreement is void
the object of the contract is to
not lawful.
either the object or the consideration is

Thus, the consideration or object of an agreement is

lawful,
:
unless
() forbidden by law
it is
ACTS FORBIDDEN BY LAW- No suit can be filed on a contract
which is prohibited either by the general law or by statute.
A

one
contract may be illegal either by reason of the promise being
which is prohibited by law, or by reason of the promise being made
for consideration which is prohibited by law.
A, B and C agree to rob and to divide equally any property
which they may obtain by such robbery. In pursuance of the said
agreement, A, B and C rob D of Rs. 1,000. The said sum of Rs.
1,000 remains with A, who declines to give to B and C their agreed
shares. Here, the agreement is void, as its object is unlawtul.
Therefore, B and C cannot recover their agreed share from A.
in India, the expression "act forbidden by law" would largely
cover acts which are punishable under the Indian Penal Code or
other Acts of the legislature. However, parties are not, as a rule,
foolish enough to make a soiemn agreement to do anything which
is obviously illegal, or at any rate, to bring such a matter before the
Court. Hence, the question that is faced by the Courts in most
cases is whether an act agreed to between the parties does or
does not contravene some legislative enactment or regulation made
abee if tsa by a competent authority.
Cases in which penalty is imposed.- A difficulty, however, arises
when an act is not expressly forbidden, but a penalty is imposed for
doing such an act. The law does not always forbid things in express
terms, but imposes certain conditions and penalties for a breach of
those conditions. Whether the imposition of a penalty in an Act
amounts to forbidding' an act or not depends on the object of the
Legislature in imposing that penalty and on the nature of the words
used in the particular Act in question. A dstinction has to be drawn

Find More at https://t.me/LawCollegeNotes_Stuffs

 LAWFUL CONSIDERATION AND OBJECT 87
between cases where-
(a) the prohibition is for protection of the public, that is,
when it
would be defeating the policy of the law if the Court were to
enforce an agreement for doing an act so prohibited; and
(b) where the prohibition is imposed for administrative purposes
only.
Generally speaking, the act is deemed to be forbidden by law in
the first case (clause (a) above), but not so in the case of
clause
(b) above.

Cases under Excise LawS. Many cases under this head have
arisen in connection with Excise Acts. The underlying principle that
emerges is that when conditions are prescribed by statute for the
conduct of any particular business or profession, and such conditions
are not observed, agreements made in the course of such business
or profession are void, if it appears by context that the object of the
Legislature imposing the condition is the maintenance of public order
or the protection of the persons dealing with those on whom the
condition is imposed. However, they are valid if no specific penalty is
attached to the specific transaction, and if it appears that the
condition is imposed for merely administrative purposes, e.g. under
the Ferries and Tollis Act. Thus, an agreement to transfer a toll lease,
without the consent of the Collector, has been held not to be void.
Nazarali v. Baba Miya, 40 Bom. 64.-The Forest Department
grants a licence to A
to cut grass. A cannot, under a term of the
licence, sub-let; and a fine is provided for such sub-letting. A agrees
to sub-let the contract to B. The agreement is not void and may be
enforced. It is, of course, open to the authorities to revoke A's licence.
(The object of the term in the licence is mere protection of revenue.)
But, take the case where A
agreed to admit B as a partner in
his business of a wine merchant, for which a licence had been
granted under the Abkari Act to A alone. The agreement was held
to be void, as the Act prohibited the licensee from admiting any
partner in the business, and made such a violation punishable.
(Hormusji v. Pestoni, 12 Bom. 422)sts
Cases in which object of Legislature is protection of the pubic.
Conditions under the Abkari and Opium Acts are cases where the
object of imposing conditions is protection of the public, and not
lerely administrative convenience. It has accordingly been held
that the sub-letting of a licence to manufacture and sell country

Find More at https://t. me/LawCollegeNotes_Stuffs

 88 THE LAW OF CONTRACTS

liquor, without obtaining the Collector's permission, is to be deema

to be an act forbidden by law, and that a claim to recover mone
due to either party on such sub-lease is not enforceable. Similary,
a

a transfer of a contract to convey postal mails without the permission

of the Post Master General is also void.

(i) Itis of such nature that, if permitted, it would defea

the provislons of any law
Agreements which would defeat the provisions of any statutory
law, or the rules of the Hindu or Mohammedan law, or which haVe
the tenderncy to affect the administration of justice by contravening
other rules of law, are void.
lMlustration.- A's estate is sold for arrears of revenue under the
provisions of an Act of the Legislature, by which the defaulter is
prohibited from purchasing the estate. B, upon an understanding
with A, becomes the purchaser, and agrees to convey the estate to
A upon receiving from him the price which B has paid. The
agreement is void, as it renders the transaction, in effect, a purchase
by the defaulter, and would so defeat the object of the law.
Thus,where A was required under the Code of Criminal Procedure
to furnish a surety for his good behaviour, and B agreed to becomea
surety,on condition that A would deposit with him the sum in which he
was required to give bail, and the deposit was made, it was held (in a
suit brought after the expiry of the period of suretyship) that A was not
entitled to recover the deposit from B,
as the effect of the agreement
was to defeat the provisions of the Code, by
rendering Ba surety only
in name: Fateh v. Samval, (1878) 1 All. 751.
Similarly, a surety who has given a bail for an
accused person
cannot recover from the accused, the bail-amount which has been
forfeited in consequence of the accused failing to appear, wnen
required by the Court which released him on bail.
So also, an agreement by a debtor not to raise the plea o
limitation is void, as it would defeat the provisions of th
Limitation Act; the same would be equally so case of a
in
agreement extending the statutory period of timitatlon or alterin9
the starting point of limitation.
Under the Companies Act, a trading partnership of more tha
20 persons ls ilegal unless registered as a company. It has bee
held that a suit will not lle for dissolution of such a partnership,
it would defeat the provisions of the Companies Act.

Find More at https://t.me/LawCollegeNotes_Stuffs

 LAWFUL CONSIDERATION AND OBJECT
89
Srinivas V. Raja, 1951 M.W.N.653.- The amount
promissory note for advanced under
a the purpose of celebrating a marriage contrary
tothe provisions
of
Child Marriage Restraint Act is not
purpose recoverable.
As the
of
borrowing is unlawful under S. 23,
enforceable. the promissory
note is not
Aareements defeating rules of Hindu or Mahommedan law.-An
agreement which
would defeat any of the rules of Hindu or
ahommedan law Would also be void. Thus, an agreement to give
eon in adoption in consideration of the natural parents receiving
an annual allowance during
their lives is void, as this agreement, if
it was capable of being carried out, and if it was recognised by the
Courts. would involve an injury to the person and property of
the
adopted son, and would defeat the provisions of Hindu law,.
Likewise, an agreement entered into before marriage between a
Mahommedan wife and husband, by which it is provided that the
wite would be at liberty to live with her parents after marriage,
wOuld be void, and would not afford an answer to a
suit for restitution
of conjugal rights.
Mohram Ali v. Ayesha, 31 I.C. 562.- A, a Muslim, while marrying
B, agrees with her that should A marry again, B would have the
right to divorce him. The agreement is not per se void, as
Mahommedan law recognizes delegation by the husband of his
right to divorce, to the wife, under the doctrine of talaq--tafwiz.
Such an agreement is opposed neither to Mahommedan law, nor
public policy or morals, although monogamy may be desirable.

(ii) It is fraudulent
When the parties to an agreement intend to commit fraud or to
practise fraud upon some other person, the object of the agreement
would be fraudulent.
Thus, and Bagree to distribute between themselves gains
A

acquired or to be acquired by fraud. The object of the agreement is

Traudulent, and hence, the agreement is void.
Similarly, if parties agree not to bid against each other for
ne purpose of defrauding a third person, such an agreement
Would be void.

n one Punjab case, when the object of an agreement between A

and B was to obtain a certain contract from a Government Department
(for the benefit of both), a contract could not be obtained
and such
Without practising
fraud on the Department, it was held that the
Jreement was void, as the object of the agreement was fraudulent.

Find More at https://t.me/LawCollegeNotes_Stuffs

 90 THE LAW OF CONTRACTs

(iv) It involves or implles Injury to the person or property

of another
lMustration,– A, boing agont for a landed propriotor, agroes
for
a
money, without the knowledgo of his principal, to obtain for B, leasa
of land belonging to his principal. The agrooment botween
A and B ie

void, as it imples a fraud by concoalment by A

on his principal.

Another example of such an agreement would be an agreement

for payment of the price of a libellous publication
or an agreement to
indemnify a person against the consequence of a wrongful act.
A suit

cannot lie to recover advances paid for printing libellous matter and
the defendant cannot counter-claim for the printing already done.
a
An agreement between persons to purchase shares in
company, by fraud and deceit, in order to induce other persons to
believe, contrary to the truth, that there is a bona ide market
for

the shares, is illegal, and no action can be brought to enforce

such an agreement.
(v) The Court regards it as immoral, or opposed to
public policy
llustrations.– (1) A, who is B's mukhtar, promises to exercise
his influence, as such with B in favour of G, and C promises to
pay Rs. 1,000 to A. The agreement is void, because it is immoral.
(2) A agrees to let her daughter in hire to A
for concubinage.
The agreement is void, because it is immoral- though the letting
may not be punishable under Indian Penal Code.
(3) A promises to obtain for B an employment in the public
service and B promises to pay Rs. 1,000 to A. The agreement is
void, as the consideration is unlawful.
(4) promises B to drop a prosecution which he has instituted
A

against B for robbery, and B promises to restore the value of things

taken. The agreement is void, as its object is unlawful.
IMMORAL AGREEMENTS.- Of all the kinds of agreements,
those which are tainted with mmorality present little difficulty. The
immorality here alluded to is sexual immorality. It will readily be seen
that agreements contra bonos mores (against good morals) or those
involving social immorality or prostitution are frowned upon by law.
All agraements in violation of morality and founded upon
a
Wite short note on: consideration contrary to public morals (contra bonos mores) are
Immorally of a vold. An agreement which is made upon an immoral
obfect. condition, or 0
M.U. May 2018 an immoral purpose, is unenforceable, Hence, a landlord cann

Find More at https://t.me/LawCollegeNotes _Stuffs

 LAWFUL CONSIDERATION AND OBJECT 91
recover the rent of his house knowingly let to a prostitute who
vocation there. Similarly, money lent to a prostitute
carries on her
expressly
to enable her to carry on trade cannot be recovered. On
grounds, ornaments lent by a brothel-keeper to a
like
prostitute for
attracting men and encouraging prostitution, cannot be recovered.
Past cohabitation.-
A, in
consideration of past cohabitation,
agrees pay £ 100 to In English law, past consideration is no
B.

to and on
consideration
that ground itself, the agreement will not be
enforceable. In India, one view is that
the promise would be binding
onder S. 25(2)-compensation for something voluntarily done in
the past
:
Mehtab V. Fifaqatullah, 1925 AlI. 474.
But the other view, which is the better view, is that past
consideration, which was illega! when it passed, cannot support a
subsequent promise Husseinali v. Dinbai, 1924 Bom. 35. But
adulterous cohabitation, being an offence, cannot be lawful
consideration Alice v. Tom Clarke. 27 All. 256; unless it be with the
:

husband's consent or connivance : Sita Devi v. Gopal, 1928 Pat. 375.

On the same principle, money paid by a wife to third person
to be given as a bribe to a jailor for procuring the release of her
husband from the jail cannot be recovered on failure of the jailor
to procure the release.
Similarly, where the plaintiff advanced money to the defendant,
a married woman, to enable her to obtain a divorce from her
husband, and the defendant agreed to marry him as soon as she
could obtain a divorce, it was held that the plaintiff was not entitled
to recover the amount, as the agreement had for its object the
divorce of the defendant from her husband, and the promise of
marriage given under such circumstances was contra bonos mores.
(Bai Vijli v. Nansa Nagar, 10 Bom. 152)

PROBLEM.-Aborrowed Rs. 500 from B, in order to bribe a

the bribing was paydone and completed,
A
certain officer. After
a
obtained a
loan from C
expressly to off
B,
and executed
mortgage to enforce the mortgage,
C
A

in favour of C. In a suit by
that the mortgage is unlawful as the consideration for
Contends it

S unlawful, Is A's contention

valid?
was not to effect any
object of the mortgage
Ans, No.
legal purpose. The
As such illegal purpose had already been
effected, it
cannot
be said that the mortgage transaciton was against public
23 is not concerned with the motive of the person. It is
policy. S.

Find More at https://t.me/LawCollegeNotes_Stuffs

 92 THE LAW OF CONTRACTS

confined to the object of the transaction, the reasons or motive whi

prompted it being irrelevant. (Kashinath Bapurao, 1940 A. N.
v.

305)
Agreement to give evidence.– An agreement to pay money
consideration that the plaintiff would give evidence in a civil sut
behalf of the defendant cannot be enforced. Such an agreemen
may be for giving true evidence, and then there is no consideration
for the performance of a legal duty is no consideration for a promies
or it may be for giving favourable evidence, either true or false, in
which case, the consideration is vicious.
On the same principle, a promise given by a master of a ship to
his sailors in the course of a voyage, to give them extra wages i
they continued service till the voyage was over was held to be
without consideration, for the promises merely undertook to fulfi
conditions of an existing contract. But a promise to remunerate an
executor for undertaking and performing the task of an executor
does not fall under this class; nor is it unlawful.
AGREEMENTS AGAINST PUBLIC POLICY. The doctrine of
'public policy' covers very wide ground. It includes political, social or
Write a short note on: economic grounds of objection, outside the common scope of
Agreements against morality. Public policy is, in its nature, so uncertain and fluctuating,
public policy.
varying with the habits and fashions of the day, with the growth of
M.U. Apr. 2014 commerce,
and usages of trade, that it is difficult to determine its
limits with any degree of exactness. This rule may, however, be safely
laid down, that wherever any contract contravenes any established
interest of society, it is void as being against public policy. At the
same time, it may be noted that the enlargement of trade and the
growth of cities, with the new and various relations created thereby
have rendered many species of contracts valid, which were formery
considered to be against public policy.
Give two examples of Public policy, however, cannot be defined with any degree o
agreements which are to be injurious to the public
oppOSed to public presion. Any agreement which tends
or is against public good is void as being contrary to public policy
policy. (2 marks)
M.U. Nov. 2015 It may be observed that the doctrine of public policy cannot be
considered as being always the same, and that many things would be.
and have been, held contrary to public policy which are not so held no
The rule, no doubt, remains the same, but its application varies with te
principles which for the time being guide public opinion.
TWELVE HEADS OF PUBLIC POLICY,– Although public pol
is an uncertain and fluctuating concept, sometimes compared to

Find More at https://t.me/LawCollegeNotes _Stuffs

 LAWFUL CONSIDERATION AND OBJECT
93
"unruly horse" the Courts have now laid down that the following
305 twelve types of contracts would be against public
policy:
ey Contracts amounting to trading with an enemy-A contract
an enemy (i.e., a person owing alliance to a Government at war
h
wah one's cOuntry), except with the permission of
the Government, is
ion against public policy. Not only is it unlawful
to enter into a contract
mise with an alien enemy, but it is also unlawful to
purchase goods from
Be, enemy country without licence from
the Government.
Such contracts are illegal on the ground of public policy
based
u00n two reasons, namely, that the further
ipt performance of the
es ntract Would involve commercial intercourse with the enemy, and
hat the continued existence of the contract would confer an
fuli immediate or future benefit upon the enemy : In re
Badishe Co. Ltd.,
(1921) 2 Ch. 331.
tor Janson v. Driefontein Consolidated Mines, (1920) A.C. 484.- A,
of country X, orders goods from B, of country Y.
The goods are
shipped and are insured with C and Co. X declares war against Y.
The contract between A and B, as also the contract of
insurance
betweenAand C, become void, as it would amount to trading with an
enemy. A cannot recover from C
should the goods be seized by the
Govern-ment of X.
2. Contracts for stifling prosecutions. Contracts for stifling
prosecutions (as for instance, when the relatives of a murdered
person "settle" with the murderer,
and agree not to prosecute the
murderer), being against public policy, are void. Contracts for the
compounding or suppression of criminal charges, or offences of a
public nature (non-compoundable offences) are illegal and void.
Agreements to stifle criminal prosecutions are bad, for it is not open
to parties to make a trade of felony, or to take the administration of
justice out of the hands of the authorities and themselves determine
Wnat should be done. This is a rule of law dictated by the soundest
considerations of public policy and morality.

Eitect of compromise of compoundable offences.- The criminal

aw of India, however, makes a distinction between various classes
O offences, by dividing them into three groups: (i) compoundable
offences;
(i) non-compoundable offences, and (ii) offences which
n be compounded only with the permission of the court. If the
ence is compoundable (under the Criminal Procedure Code), and
ban be settled in or out of Court without the leave of the Court, a
Onpromise in such a case is not forbidden by law or against

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE LAW OF CONTRACTS
94
public policy, the policy of the criminal law being to allow suck
cor
compromise. Thus, where agreed to execute a document of
A

lands in favour of B, in consideration

B
of abstaining from takin
an offence of si
criminal proceedings against A with respect to
contract
assault (which is compoundable), it was held that the
not against public policy and could be enforced.
Thus, A agrees to pay Rs. 100 in consideration of
B

withdrawing a complaint pending against him on a charge of adutery

The promise is enforceable, as the offence is compoundable withorn
reference to the Court, and the agreement in such cases does n
amount to a stifling of prosecution. The same would be the result
the agreement related to withdrawal of prosecution of abductin
where such abduction would be a compoundable offence, or in fac,
any other compoundable offence : Sannaullah v. Kalimullah, 1932 Lah
o!

446. A promissory note executed in consideration of withdrawal

v.
such a complaint is enforceable Ramjas Markande, 1934 All. 1068
:

Effect of compromise of non-compoundable offences.- Where

the offence is non-compoundable, as where the charge is one
o!

criminal breach of trust or murder, and the offence is compounded

by the accused or if the offence is compoundable only with the
leave of the Court, and it is compounded without obtaining
the

Court's leave, the agreement will be void.

Majibar Syed Muktashad, 43 Cal. 113,–A, in consideration
the
of
v.

or
compounding of an offence, which is non-compoundable to
compoundable only with the permission of the Court, without reference
recover on the bond.
the Court, passes a bond in favour of B. B cannot
The principle underlying this rule is that "Felony cannot be
made

of gain"; in other words, it is in the interest of the public is

a source that

prosecution of felons should not be abandoned. If the accused

innocent, the law is abused for the purpose of extortion; if he is gua
a
the law is eluded by a corrupt compromise, screening criminal
for

bribe. The law does not help the plaintiff in such cases, as n
ae
partes, pari delicto potier est conditio defendantis when parties
:

equally guilty, the position of the defendant is stronger.

3. Contracts in the nature of champerty and maintenance
Champerty and maintenance contracts are unlawful they tend
if

encourage litigation which is not bona fide but speculative. Thes

one has no b0
two terms refer to promotion of litigation in which
fide interest.

Find More at https://t.me/LawCollegeNotes_Stuffs

 LAWFUL CONSIDERATION AND OBJECT 95
English Law.- Maintenance is the officious intermeddling in an
action, by supporting it with money or otherwise, offered by a third
person to
either party to a suit, in which he himself has no
legal
interest, merely to enable such party to prosecute or defend it.
Where a person agrees to maintain a suit in which he has no
interest And does so out of sheer spite or malice,
the proceeding is
known as
maintenance; where he bargains for a share of the result
tn be ultimately decreed in a suit, in consideration of assisting its
maintenance, it is known as champerty. Both
these agreements are
declared unlawful under the English law.
As Lord Abinger observed, "the law of maintenance is contined
on account of the illegality of their object, as they tend to encourage
itigation which is not bona fide but speculative, to cases where a
man improperly and for the purpose of stirring up litigation and
strite, encourages others to bring actions or to take defences which
they have no right to make."

Itmay be noted that, in such cases, the person maintaining the

suit acts through ill-will and spite. Malice is of the essence of the
action. The law, it is said, presumes or implies malice in all cases
of maintenance on proof of officious assistances. But this
presumption may be rebutted by the defendant by showing :
(a) That he had a common interest in the action, which the
party maintai-ned, e.g., master for a servant or vice versa,
brothers, kinsmen etc., or
(b) That he was impelled- () by motives of charity, bona fide
believing that the person maintained was poor and was harassed
by a rich person (though the charity may be misguided and the
action groundless), or () by religious sympathy.
Indian Law.The English law of maintenance and champerty is
not applicable in India. The Privy Council, in Bhagwat Dayal Singh v.
Debi Dayal Sahu, held that an agreement which is champertous
according to English law is not necessarily void in india; it must be
gainst public policy to render it void here. In India, a fair contract to
share the result of the action successful, in consideration of providing
e means of carrying it on, is not void, as it is not contrary to public
rOlcy. But, if it is found to be extortionate and unconscionable, or
if

tis made, notthe bona fide object of assisting a claim, but for
with

purpose of gambling in litigation or of injuring or oppressing

eothers, by abetting and encOuraging unrighteous suits, it is void.

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE LAW OF
CONTRACTS
96
Thus, in India, agreements to share the subject-matter
supplying funds to carry
litigation, if recovered, in consideration of
policy, as for instanc
on, are not, in themselves, opposed to public cannot affow
a master finances a
just claim of his servant who
if kind are carefully watched
expensive litigation.. Agreements of thisunconscionable, so as to h
when found to be extortionate and
and to be made, not with
inequitable against the party, or when found
a claim believed to be just and
of

the bona fide object of assisting

recompense therefrom, but for improper
obtaining a reasonable
as the purpose of gambling in litigation or of injuring or
objects for
unrighteous suits
oppressing others by abetting and encouraging
not to be
so as to be contrary to the public policy, effect ought
given to them.
part of the estate
Thus, where it was found that the value of the
in return for Rs.
promised to be conveyed amounted to Rs. 64,000
person who financed the filing
12,000 which was to be spent by the
it was held that, although the
of an appeal in the Privy Council,
agreement was bona fide, it was not enforceable because
the

reward was excessive and unconscionable.

4. Marriage brocage contracts. These
are contracts for the
payment of money in consideration of procuring a marriage.
A

procure for
marriage brocage contract is a contract for reward to
are against
another, a husband or wife in marriage. Such contracts
public policy, because parties ought to choose their life-partners
for

themselves and out of their own free will.

On a review of authorities, the following two rules have been
deduced in Bakshi Das V. Nadu Das on the subject of marriage
brocage contracts:
(a) An agreement to remunerate or reward a third person
n

consideration of negotiating a marriage is contrary to public policy

and cannot be enforced.
o (b) An agreement to pay money to the parents or guardian O
a bride or a bridegroom in consideration of their consenting
the betrothal is not necessarily immoral or opposed to pub
policy. Where, however, the parents of the bride are not seeking
her welfare, but give her to a husband otherwise ineligible,
consideration of a benefit secured to themselves, the agreeme
by which such benefit is secured is opposed to public polic
and ought not to be enforced.

Find More at https://t. me/LawCollegeNotes _Stuffs

 LAWFUL CONSIDERATION AND OBJECT 97
Reldeo Sahai v. Jumma Kunwar, 23 All. 465.-A, for a reward
promised B,
agrees to procure the marriage of B with C. This
by
agreement,
called a marriage brocage contract, is void under English
taur under this head, as marriage should be by the free consent of
parties. In India, however, marriages are often
arranged by parents,
relations and friends, and such an agreement would not be
necessarily void. If a father agrees to give his daughter B in marriage
ny notled by the benefit of the girl or her welfare, but by a gain to
himself, the agreement would be void even in India.
5. Contracts interfering with the course of justice.- It hardly
need be said that any agreement for the purpose of using improper
influence of any kind with judges or officers of justice (as for instance,
by bribing them), is void. But the following curious case may be noted:

Balasundara v. Mahomed, 53 Mad. 29.- A entered into an

agreement with B, and engaged B for the purpose of performing
puja and offering prayers to Goddess Kali for A's success in a suit,
and promised to pay Rs. 5,000 in the event of success. The suit
ended in a compromise, under which A obtained a substantial sum,
much beyond his expectations. B sued A for the amount agreed
upon. A, however, contended that the agreement was void, as it was
one which interfered with the course of justice. The Court heid that
there was nothing wrong in A employing someone to pray on his
behalf for reward. Thus, the agreement entered into between A and
B was not void (as it did not, in any way, interfere with the course
of justice), and B was entitled to succeed.

6. Contracts tending to create interest against duty,– If a person

enters into an agreement with a public servant which, to his
knowledge, might cast upon the public servant an obligation
inconsistent with public duty, the agreement is void.
Atma Ram v. Banku Mal, 1930 Lah. 561.-For an agreed amount,
A agrees to
place his daughter at the disposal of B, to be married as
B likes. The agreement is void, as it would interfere with A's parental
auty (in India) to select a husband in the best interests of the girl.
7. Contracts as regards the sale of public offices.-Traffic by
Way of sale in public offices and appointments is obviously to the
Prejudice of the public service by interfering with the selection of
the bestqualified persons and consequently, such sales are void.
Ledu v. Hiralal, 43 Cal, 115--A pays B, a district Nazir, a
sum of money, on A's son an appointment in
B's promise to get

Find More at https://t.me/LawCollegeNotes_Stuffs

 98 THE LAW OF CONTRACTS

sues to recover the sum. u.

fails to do so,
A

the Court. B
cannot succeed, inasmuch as the object of the agreement as
was

trafficking in public appointment or, what in English law styles

will not hel
"service brocage" and is thus illegal, and the Court
a party to an illegal agreement.
Another instance of a service brocage contract would be
the
a
case where A promises to pay a sum to B in order to induce him
retire, so as to provide room for A's appointment to the public
office

held by B: Saminatha v. Muthusami, 30 Mad. 530.

one English case, the Secretary of a charity, fraudulently
In

represented to Mr. X that the charity could procure a knighthood

for

him if he made a substantial gift to that charity. Consequently, Mr. X

In
paid £ 3,000 to the charity and waited in vain for his knighthood.
a suit by Mr. X against the charity to recover his money, as no title
was forthcoming, the Court held that he could not do so, as the
agreement is opposed to public policy, being in the nature of
tratficking in a public office. (Parkinson v. College of Ambulance
Ltd., 1925 L. K.B.1)
Indian cases on this topic have arisen mainly in connection with
religious offices. Thus, it has been held that the sale of the office of
a shebait is not valid. Likewise, it has been held that the office of
mutawali of a wakf is not transterable.
8. Contracts tending to create monopolies. It is against public
policy to enter into a contract which would create a monopoly, as
the law discourages monopolistic tendencies.
v.
B.
474.-Alocal body grants
D.
Jhelm Hari Chand, 1934 Lah.
monopoly to A to sell vegetables in a particular locality,.
a The
agreement is void as being opposed to public policy : Devi Dayal .
Narain Singh, 1928 Lah. 33. The law looks with disfavour on
monopolies. Exclusive rights to run lorries on a particular roa0
given by District Board has also been held to be illegal.
Monopolistic and large business houses and indertakings were
sought to be controlled and regulated by enacting the Monopoles
and Restrictive Trade Practices (MRTP) Act, 1969, However, the
said Act were repealed in 1991. Thereafter, the Competition Ac

2002 was passed to regulate and prohibit Gompetitive practices.

9. Waiver of ilegality Contracts which seek to waive an illega

are also void on the ground of public policy.

Find More at https://t.me/LawCollegeNotes_Stuffs

 LAWFUL CONSIDERATION AND OBJECT
99
Thus, for instance, there may be a contract which is
against
public policy (as for instance, because it amounts
to trading with an
enemy). Now, if there is a second contract
between the same
parties, in which they agree that thefirst contract shall be valid and
blnding, such second contract would also be void.
10. Agreement not to bid against each other.--In England, an
anreement not to bid against each other
is declared illegal by
statute [Auction (Binding Agreements) Act, 1927]
In India, however, such an agreement would not
be against public
policy, unless it was entered into for the purpose of defrauding a
third
person.

However, bid rigging and collusive bidding are within the ambit
of the Competetion Act.
11. Suicideand Insurance policies.- In England, it has been
held that if a person has insured his life, and he commits suicide,
his heirs cannot enforce the insurance policy, because it would be
against public policy to enforce such an insurance contract.
In India, however, it has been held that not against public
it is
policy to enforce a contract of insurance where the insured has
committed suicide. (However, in practice, Insurance Policies contain
an excusion clause, under which no money is payable if the assured
commits suicide.)
12. Contracts between Pleaders and clients.- The earlier view
was that agreements between a pleader and his client under which
the pleader is to receive an extra remuneration in case of his
SUccess, are void only if the inamchithi (i.e., the promise to pay the
additional sum) was given after the vakalatnama (i.e., the authority
to act in the case) had been executed. However, the recent (and
better) view is that such inamchithis are per se against public
policy, irrespective of when they were executed.
InGanga Ram v. Devi Das, the majority of the judges in a Full
Bench held that the agreements between legal practitioners and
their clients making the remuneration of the legal practitioner
dependent, to any extent whatsoever, on the result of the case in
which he is retained, are llegal as being contrary to public policy,
and the legal practitioners entering into such agreements are
therefore guilty of professional misconduct, and render themselves
liable to disciplinary action of the Court.

Find More at https://t.me/LawCollegeNotes_Stufts

 100 THE LAW OF CONTRACTS

CASES WHERE CONSIDERATION OR OBJECT IS

UNLAWFUL IN PART
23 (which has been considered above) deals with cases i
S.
which consideration is wholly and entirely void or illegal. But what i
the position if consideration is partly legal and partly illegal? S.
provides for such a case, and lays down that if any part of a single
consideration for one or more objects or any one (or any part of
any one) of several considerations for a single
object, is unlawfu
the agreement is void.
Illustration. A promises to superintend, on behalf of B, a leoat
manufacture of indigo, and an illegal traffic in
other articles, A
promises to pay to a salary of Rs. 10,000 a year.
A

The agreement
is void, the object of A's promise and
the consideration for B's
promise being, in part, unlawful.
Thus, if the consideration or object
is partly lawful and partly
unlawful, then the question will
arise as to whether the two can be
severed (i.e. separated); if they can,
can be rejected, and then the illegal portion thereof
the legal portion retained. If, however,
are inseparable, the entire the two
agreement is void.
Therefore, if Aagrees to serve
to live in adultery with him B as his house-keeper and also
at a fixed salary, A cannot sue even for
the service rendered as house-keeper,
ascertain what was due on account
as it is not possible to
what was due for house-keeping. of adulterous intercourse and
The whole agreement is void,
nothing not even that for and
recovered : Alice v. Clarke, acting as a house-keeper- can
(1905) 27 All. 266. be
Kathuv. Vishwanath,
(1925) 49 Bom.
engaged B as a pleader, to 619.- Aagreed, when he
Success in the suit, give a fee of Rs. 500 in case of full
property in dispute
and also to convey to him a portion of the
for religious or
that the agreement that B charitable purposes. It was
should be given a part heo
dispute in which he was of the property n
was unlawful engaged was contrary to
under S. 23, and that a part public policy and
for one object having of the single consideration
under this section.
been unlawful, the whole agreement was Vo
PROBLEM,-- A
holds a licence for
The ganja licence the sale of opium and ga
partners into the contains a condition prohibiting A from admittng
ganja business without
the permission of tro

Find More at https://t.me/LawCollegeNotes_Stuffs

 LAWFUL CONSIDERATION AND OBJECT 101
Collector. No such condition is embodied in the opium
icence. B,

aware of the prohibition, enters into a

whois partnership agreement
with A,
both in the opium and ganja business, without the leave of

Collector, and pays A Rs. 500 as

his share of the capital.
the
Disputes arise between A
and B. B
sues A
for dissolution of
partnership and for a refund of his Rs. 500. Decide
answer. the case, giving
reasons for your

Ans.-The contract being indivisible, B cannot recover anything.

The no suit will lie to recover money advanced as capital for the
nurpose of a partnership which is partly illegal : Gopalrao v. Kallappa,
164.
3 Bom. L.R.
Also connected with S. 24, are Ss. 57 and 58 of the Act.
Sections 57 and 58 of the Contract Act may be read in the light of
the above principle.
1. Where persons reciprocally promise, firstly, to do certain
things which are legal, and secondly, to do certain other
a
things which are illegal, the first set of promises is contract,
but the second is a void agreement S. 57.
:

IlMustration.- and B agree that

A
shall sell Ba house for Rs.
A

shal pay A
10,000, but that, if B uses it as a gambling house, he
to sell
Rs. 50,000 for it. The first set of reciprocal promises, namely,
a contract. The second
the house and to pay Rs. 10,000 for it, is
may use the house as
set is for an unlawtul object, namely, that B
a gambling house, and is a void agreement.

S. 57 contemplates a case of
a contract consisting of several
a separate
promises which are distinct and severable with
are thus
Consideration for each such promise. The promises
independent of each other, except that they form
part of the same
contract. Under such circumstances, the section
declares that
affect those which
ne set of promises which are illegal will not
are legal; the former alone will be void.
case an alternative promise, one branch of which
Z. In the of
branch alone can be
is legal and the other illegal, the legal
enforced :S. 58.
pay B Rs. 1,000, for which B
ustration,-Aand Bagree that A shall a
afterwards deliver to A either rice or smuggled opium. This is
l agreement as to opium.
Contract to deliver rice and a void
passes a bond to 8
Grimwade, (1888) 39 Ch. D. 605,-- A or
O0g consideration promise not to take civil
,O00 in of Bs

Find More at https://t.me/LawCollegeNotes_Stuffs

 102 THE LAW OF CONTRACTS

criminal proceedings against him. The bond is void, as part of the

t
consideration is illegal. is not possible to say what part of the
for
promise to pay money is for the legal consideration and what
the illegal one.
Mst. Roshan v. Mohd., 46 P.R. 1887.– On Bs promising to
marry A on divorcing C, A advances Rs. 300 to meet expenses of
to
divorce proceedings and to purchase ornaments. On B's failure
obtain the divorce, A cannot recover anything not even the
money spent on the ornaments.

Kearney v. Whitehaven Colliery, (1893) 1 Q.B. 700.- In

consideration of being employed by X, A agrees to give 14 days'
notice before leaving service and to allow X to make certain
deduction from his wages which are illegal under a statute.
A's promise being severable, only the legal part as to notice will
be enforced.

Find More at https://t.me/LawCollegeNotes_ Stuffs

 8
AGREEMENTS WITHOUT CONSIDERATION
(S. 25)
While discussing the definition of 'consideration', it was seen
that an agreement without consideration (nudum pactum) is void. To
this general principle, S. 25 of the Act has laid down three important
exceptions, which provide as follows
:

An agreement made without consideration is void,

unless
1. It is in writing and registered, and is
made out of natural love
and affection by a person standing in near relationship; or
2. It is a promise to compensate (wholly or in part), a person
who
has already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do; or
3. It is a promise made in writing
and signed by the promisor (or No consideration, no
his duly authorised agent), to pay (wholly or in part), a debt contract." Discuss
barred by the law of limitation. and state the
exceptions, if any.
Apart from the above three cases, every agreement, in order to M.U. May 2012
be enforceable by law, must In
be spported by consideration. other
words, the above three exceptions are the circumstances in which
an agreement made without consideration is valid in India.

Additionally, S. 25 does not affect the validity of a gift which is What is considera
already made, as, by its very definition, a gift is a transfer without tion? When conside
consideration. ration is absent, what
is the effect on the
As seen earlier, in England, a contract under seal is valid even validity the
in the absence of consideration. Such a contract has to be in writing Contract?
M.U. Apr. 2013
and signed, sealed and delivered by the parties. It is also called a
deed or a specialty contract. Indian law, however, does not provide
that such contracts would be valid in the absence of consideration.
Ihe position in India is governed by S. 25 of the Act.
Thus, an agreement made without consideration is void, except
in the following
three cases:
Exception 1– Natural love and affection [S. 25(1)]
If the agreement is
expressed in writing and is registered, and
S made on account of natural love and affection between parties
standing in a near relation to each other, the contract is valid.
103

Find More at https://t.me/LawCollegeNotes Stuffs

 THE LAW OF CONTRACTS
104
– .
Define and explain Illustrations (a) A promises, for no consideration, to give
consideration. What B, Rs. 1,000. This is a void agreement.
are the exceptions to
to give his Son
the rule, "No consi
deration, no contract"?
(b) A, for natural love and aflection, promises
Rs. 1,000. A puts his promise to B into writing and registers it. Thi
M.U. Apr. 2014
is a contract.
Nov. 2014
may be noted that in illustration (b), all the four requirements
It
of S. 25 are satistied. Firstly, the agreement is in writing. Secondy
neas
it registered. Thirdly, it is made between parties standing in
is
relationship to each other (father and son). Lastly, it is also made
out of natural love and affection.

Give 2 exceptions to
NATURAL LOVE AND AFFECTION.– An agreement without
the rule, "No consi- consideration would be legal, provided it is in writing and registered
deration, no contract"? and proceeds from natural love and affection between parties in
(2 marks)
near relation to each other. Therefore, an oral agreement or an
M.U. Nov. 2015
unregistered agreement, though in writing, will not be valid, even it
it proceeds from natural love and aftection, and although the parties
to it are near relations to each other. It must be both, in writing and
registered.
Write a short notes on: Thus, in order to fall under this exception, an agreement mus!
Exceptions to: No fulfil the following four conditions
:

consideration no
Contract. (0) must be in writing.
It
M.U. May 2018
(i) It must be registered.
(ii) lIt must be made on account of natural love and affection.
(iv) It must be between parties standing in a near relationship to
each other.
Love and affection.- It is not to be be presumed that merely
because a husband passes a registered writing to his wife, promising
to pay her money or anything else, it is a valid contract, though no
consideration has moved from the wife. The writing must have been
passed out of natural love and affection. In other words, it is not to
be supposed that the nearness of relationship necessarily imports
natural love and affection.
Thus, where a Hindu husband executed a registered document
in favour of his wife, whereby, after referringg to
quarrels ano
disagreements between the parties, the husband agreed to pay her
for a separate residence and maintenance, and
there was no
consideration moving from the wife, it was held, in a suit by the wite
brought on the agreement, that the agreement was void as belng
made without consideration. It was further
held that the agreeme
could not be said to have been made on account of natural love

Find More at https://t.me/LawCollegeNotes_Stuffs

 AGREEMENTS WITHOUT CONSIDERATION 105
affection, the recitals in the agreement being
and opposed to that
(Rajlukhy Dabee v. Bhootnath, (1900) 4 C.W.N. 488)
view.
Exception to
2Promise
25(2)]
compensate for voluntary
services (S.
The second exception to the general rule mentioned above is
where a promise is made to compensate a person for voluntary
services. Thus
An agreement without consideration is valid when it is a
promise to compensate (wholly or in part) a person who has
already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do :
S. 25(2).
llustrations (a) A finds B's purse and gives it to him. B
promises to give A
Rs. 50. This is a contract.
(b) A supports B's infant son. B promises to pay A's expenses
in so doing. This is a contract.

Promise to reward voluntary services.- It will thus be seen that

a promise to compensate another for voluntary service can be
enforced. Where a person, without the knowledge of the promisor
or otherwise than at his request,
does the latter some service, and
the latter agrees to compensate the former for the same, the
agreement is covered by S. 25(2), and does not, therefore, need
consideration to support it.
Thus, A writes to B:"At the risk of your own life, you saved me
from drowning in the sea. I promise to pay you Rs. 1,000". A is
bound to pay B Rs. 1,000.

Act done must be for the promisor.- order to bring the case
In
within the provision of this sub-section, it must be shown that what
Was voluntarily done by the plaintiff was done "tor the promisor or
Something which the promisor was legally compellable to do". The
act voluntarily done must have been for the promisor. If it is done
any other person, the promise does not come within the
provisions of this sub-section. Thus, where the defendants, by a
written agreement, a commission on
promised to pay the plaintiff,
articles
sold by them in a market established by the plaintiff at his
BKpense, and it was found that the market was not erected at the
the defendarnts, nor for them, but at the request the:
desire of of

Collector,
the promise was held not to fall within the exception
Ourga Prasad v. Baldeo,
2 All. 221.

Find More at https://t. me/LawCollegeNotes_Stuffs

 106
THE LAW OF CONTRACTSs
Promisor must be in existence,-- Again, the act which
voluntarily done, must have been done for
a promisor who
was
existence when the act was done. Hence, work done by apromol,
of a company before its formation cannot be said to have
be
done for the company.
v. Chhotalal, 10 Bom. L.R. 14,
Ahmedabad Spinning, etc. Co.
A
promotes a company, B, and incCurs expenses for its formation
Co. is incorporated. Co. then promises
B
registration, etc. B

pay A's expenses. This is not a contract, as B Co. was pet

exístence when A rendered the services, i.e., he did not
something for the promisor."
Promisor must be competent to contract.– Further, the a
done must have been done for a promisor who shouldb
competent to contract at the time when the act was done. Hence
a promise by a person on attaining majority, to repay the mong
lent and advanced to him during his minority, does not com
under this clause, the promisor not being competent to contrag
when the loan was made to him.
Nanhi v. Dy. Comm., Kheri, 1950 A.L.J. 168.- Where, on the 1

occasion of the Mundan ceremony of the promisor's daughter, he

requested the promisee to perform the loi lena ceremony, and ar
her demanding a village to be given to her, the promisor agreed t
give a guzara and the ceremony was performed, and subsequenty
a sum of Rs. 30 per month was paid to the promisee, it was het
that there was a contract complete in all essentials. Even if the b
lena ceremony is taken to be performed voluntarily, the subsequet
promise to pay Rs. 30 was a promise according to S. 25(2) of th
Contract Act to compensate wholly or in part the promisee who hat
voluntarily done the lof lena ceremony for the promisor.

Exceptlon 3– Promise to pay time-barred debts [S. 25(31

The third exception to the general rule is when a proise S

made to pay a time-barred debt. Thus
An agreement made without consideration is valid when it
is

promíse, made in writing and signed by the person to be charg

therewith (or by his agent), to pay (wholly or in part) a dep
which the creditor might have enforced payment, but for the
of the limitation of suits.
llustration,- A owes B Rs. 1,000, but the debt ls barred by
Limitation Act. A
signs a written promise to pay B Rs. 500
account of the debt. This is a contract.

Find More at https://t.me/LawCollegeNotes Stuffs

 AGREEMENTS WITHOUT CONSIDERATION 107
promise to pay aa time-barred debt may be
A enforced under
exception. There must be a
promise made in writing and
this
signedbythe person to be charged therewith(or by his agent),
pay debt wholly or in part. Where it is sought to recover a
time-barreda
to debt on the strength of a subsequent promise to pay
or
made by the debtor his agent, the document relied on must
contain an express promise to pay.
a promissory note for Rs. 5,000 in favour of
Thus, A passed
B.

Afterthe
pro-note had become time-barred, wrote to Ba letter in
A

which he said inter alia, "l am quite willing to renew the note; come
me with it". did not renew the note. ls
A
entitled to B
and see
recover Rs. 5,000 from A?

No,Under S. 25(2), a promise to pay a time-barred debt must

hé an express promise to pay, and not merely
an unconditional
pay.
acknowledgement involving, as here, an implied promise to
Therefore, B is not entitled to recover Rs. 5,000 from A:
Balkrishna
Jayshankar, 40 Bom. L.R. 1010.
v.

to
PROBLEM.- The defendant, being heavily indebted, applied
plaintiff agreed to lend,
the plaintiff for a loan of Rs. 500. The
note for Rs. 300
provided the defendant passed a promissory
originally due by the defendant but which had
become time-barred.
The defendant finally passed
a promissory note for Rs. 800 on
plaintiff, having sued to
receiving a fresh loan of Rs. 500. The
as far as
recover Rs. 800 on note, the defendant contended that
the amount of Rs. 500 was
concerned, there was no consideration
and that the promissory note for
Rs. 800 was taken by undue
influence. Will the defendant succeed?
succeed because
will not
Ans.- The defendant
consideration; and
0) time-barred debt is good
on
of undue influence cannot be successfully pleaded
() the plea
the above facts. only bar
It is to be noted that the
debt should be such that the perfectly
should be
recovery is limitation, but otherwise the debt remedy for
O is
binding on the debtor, i.e., a lawful debt, the
amul and
recovery whereof is time-barred.
mere
pay cannot be inferred from a
Moreover, a promise to sub-section, the
come within this
acknowledgement of the debt. To or must
express promise to pay a debt, promise.
document must contain an express
as an
express an intention which can be construed

Find More at https://t.me/LawCollegeNotes Stuffs

 THE LAW OF CONTRACTSA
108
Thus, paper containing the words, "balance due afteraccou
a

are taken" is not a promise to

pay a time-barred debt; nor
statement of account or a balance of account
with
the words
isa
barn

dewa ("balance due") within the

section. statement with
A

thewora b
"examined account, it is correct" likewise does not amount
promise as required by this clause.
But there is a promise where a debtor writes, shall senda
a khata
b the debtor. wo
the end of next month"; or where in
are added "moneys of the khata are payable by me; I am
to h
are duet
whenever you demand" or "the rupees taken in hard cash
accou
Where a creditor sent to a debtor a statement of the
between them, and the debtor endorsed thereon an admission t
the correctness of the balance, it was held that this
was enouah th

bring the memorandum within this clause.

Validity of a gift already made (S. 25, Explanation 1)

Explanation 1 to S. 25 provides that nothing in S. 25 is to afted
the validity, as between the donor and the donee, of any gift actualy
made by the donor to the donee.
This is apparently provided only out of abundant caution, and t
clarifies that gifts actually made are not vitiated. By its very definition
a gift implies absence of consideration moving from the donee, and
once a gift is actually made, its validity cannot be questioned on the
ground tht the contract is void on the ground of absence
of

consideration.
Inadequacy of consideration (S. 25, Explanation 2)
Explanation 2 to S. 25 provides that an agreement to which
the consent of the promisor is freely given is not void merey
because the consideration is inadequate.
A agrees
lustration to sel a horse worth Rs. 1,000 for Rs
10. A's consent to the agreement was freely given. The agreemenu
is a contract, notwithstanding the inadequacy of the consideration.

Inadequacy of consideration, a matter for the parties

It may be noted that whether the consideration is adequate of N
is entirely a matter for the parties. It is not necessary (nor does thN
Act say so) that the consideration should be adeguate to the promise
the value of the consideration ls a matter. for the promisor himsel.

Find More at https://t.me/LawCollegeNotes Stufts

 AGREEMENTS WITHOUT CONSIDERATION 109
possibility of any benefit to the promisor, or any detriment to
So, the
promisee
the
will regarded in law as sufficient consideration.
be

The courts are not concerned with the adequacy or

inadequacy - of the consideration as long as agreement
the has
been entered into the free consent of both the parties.
with

is a rule of English law that consideration must have some

alue in the eyes of the law, though it may not be adequate, i.e., it
st be real. It is not enough that something, whether an act or a
oromise, appears, on the face of the transaction, to be given in
exchange for the promise. That which is given need not be of any
0articular value, but it must be something which the law can regard
as having some value, so that the giving of it effects a real change
in the promisee's position.
Under S. 25, considerationneed not be adequate. But inadequacy
of consideration in conjunction with the circumstances of
indebtedness and ignorance are facts from which it would be
permissible to infer the use of undue inluence. Inadequacy of
consideration may, at the most, be evidence that the promissor's
consent was not free, but it is not more; it is not of itself conclusive.
Anson's view.- Anson, in his Law of Contract, observes: "A
Court of Law will not make bargain for the parties to a suit, and if a
man gets what he has contracted for, will not enquire whether it
was equivalent to gave in return.
promise which
the he The
consideration may be a benefit to the promisor, or to a third party,
or may be of no apparent benefit to anybody, but merely a detriment
O the promisee; in any case, its adequacy is for the parties to
Consider at the time of making the agreement, not for
the Court,
when it is sought to be enforced".
aOequacy of consideration, how far indicative of consent that is not free
Explanation 2 to S. 25 further provides that although an Write a short note on:
agreement Consideration must be
not void
to which the consent of the promisor is freely given is real, but noed not be
only adequate.
theinadequacybecause the consideration inadequate, nevertheless,
is
M.U. Apr. 2016
of
the consideration may be taken into account by
the Court
in determining the question as to whether the consent of
ie promisor was freely given.
Illustration- B agrees to sell horse worth Rs. 1,000 for Rs.
a
10.B denies
that his consent to the agreement was freely given.
The inadequacy
of the consideration is a fact which the Court

Find More at https://t.me/LawCollegeNotes_Stuffs

110 THE LAW OF CONTRACTS
whether or not B's consem
must take into account in considering
was freely given.
an equity which is founded upon gross inadequacy .
There is
such
consideration, but it can only be where the inadequacy is
to lead to the conclusion that the party either did not understa
what he was about or that he was the victim of
The inadequacy must be such as to shock the
some impositi
conscience of .
Court, and the amount must constitute conclusive and decisi
found
evidence of fraud. Inadequacy of consideration when
h

e
conjunction with other circumstances, such as the suppression
the true value of property, misrepresentation, fraud, oppressin
or eve
urgent need of money, weakness of understanding,
a
ignorance, is an ingredient which weighs powerfully with Cout
or refuss
when considering whether it should set aside the contract
to decree specific performance.

Find More at https://t.me/LawCollegeNotes_Stuffs

 Law College Notes & Stuffs
Exclusive group for Law Students

Join Us Here for More Materials

Law College Notes & Stulfs
 9
seen earlier, under S. 10, one of the requirements Deline "void
[Note : As agreement'". State
valid contract is that the agreement should not be expressly
of a explain briefly
andagreements
declared to be void by the Indian Contract Act. Ss. 26 to 30 of the which

e Act declare the following agreements to be vold : have baen expressly

declared void by the
1. Agreements in restraint of marriage (S. 26) Indian contract Act.
M.U. Apr. 2011
2. Agreements in restraint of trade (S. 27)
Nov. 2012
3. Agreements in restraint of legal proceeding (S. 28) Apr. 2014
4. Agreements which are uncertain (S. 29) May 2018

5. Agreements by way of wager. (S. 30)

All these agreements are discussed in Chapters 9 to 13

of this book]

AGREEMENTS IN RESTRAINT OF MARRIAGE

(S. 26)
Every agreement in restraint of the marriage of any person
other than a minor is void : S. 26.
Contracts in restraint of marriage or those which interfere with the
freedom of choice in marriage are void. A person is not by law bound
to marry; but an agreement whereby a person is bound not to marry,
or whereby his freedom of choice is interfered with, is contrary to
public policy, and therefore, declared to be void. The Allahabad High
Court has, however, expressed doubt on the question whether partial
or indirect restraint on marriage is also within the scope of S. 26.
In an English case, Mr. X promised under seal (no consideration
WouIa therefore be necessary) not to marry any person besides What s the effect of
an agreement
pay to the said Catherine Lowe the restraint in
Gatherine Lowe; and if I do, to of marriage?
Sum of 2,000 pounds".The Court held that such an agreement was M.U. May 2012
Vord, as it was purely restrictive and against public policy. (Lowe v. Apr. 2015
Peers, (1768) 4 Burr Jan. 2017
2225)
In English law, a condition in restraint of marriage is void, but it
Was frequently
been decided in India, that conditions in restraint of
mariage imited as person are
to time, as to place, and as to
a

good, notwithstanding
restraints,
the rule of Englisth law. However, such partiala
ifthey are to be tolerated, must be reasonable. Thus,
111

Find More at https://t. me/LawCollegeNotes_Stuffs

112 THE LAW OF CONTRACTS

condition that should a legatee marry a Scotchman, or a domest.

servant, she would forfeit the legacy, has been held to be a va
condition.
Where a girl's father agreed to the expense of the education nt
his son-in-law, only on the condition that if the son-in-law maried
another woman, his tather would repay the sum so spent, tha
condition was held to be in restraint of marriage, as S. 26 is ne
restricted in its operation to the case of a first marriage only. (U Ga
v. Hari)

Find More at https://t.me/LawCollegeNotes_Stuffs

 10
AGREEMENTS IN RESTRAINT OF TRADE
(S. 27)
The next kind of void agreement is one in restraint
of trade. It is Write a short note on:
enacted solely tor the purpose of encouraging free trade. S. 27 of Agreementsin restraint
the Act, therefore, provides that every agreement
by which anyone of trade.
is restrained from exercising a lawful M.U. Jan. 2017
profession, trade or business
of any kind is, to that extent, void. May 2018

An exception is, however, carved out in respect of sale of

goodwill of a business, and it is provided
that one who sells the
goodwill of a business may agree with the buyer to What is the effect of
refrain from
carrying on a similar business, within specified an agreement in
local limits, so restaint of trade?
long as the buyer (or any person deriving title to
the goodwill (2 marks)
from him) carries on a like business therein. However, in
case, such limits must appear to the Court to such a M.U. Apr. 2011
Apr. 2013
be reasonable,
regard being had to the nature of the business.
PRINCIPLE OF S. 27.- Every man is entitled to exercise
any lawful trade as and when he
chooses. Even the Constitution
of India guarantees this as a fundamental right.
Therefore, every
agreement which interferes with this liberty is an agreement in
restraint of trade. Whether such restraint is general or partial,
qualified or unqualified, it is void. So, as a general rule, all
agreements in restraint of trade, being void pro tanto, are not
binding, except in the.case of a sale of the goodwill of a business.
Other exceptions to the general rule are to
be found in the
Indian Partnership Act, which are also discussed below.
In Madhub.Chunder v. Rajcoomar, (1874) 14 Beng. L.R. 76, the
parties carried on business in Calcutta as braziers. The defendant
suffered heavy losses from the plaintiff's competition, and
agreed
that if the plaintiff closed his business in tht quarter, they would
pay him all the advances he had made to his workmen. The plaintiff
complied, but the defendant failed to pay. The plaintiff sued to
recover the amount
of the advance, but the restriction, though
Confined toa particular quarter, was held to be void.
Similarly, in Nur Ali v. Abdul Ali, (1892) 19. Cal. 765, the plaintiff
agreed with the defendant not to carry on the business of dubash
o
three years, and to.act as stevedore only for flve ships assigned
O
him. by. the defendant. The agreement was held to be void.
113

Find More at https://t.me/ LawCollegeNotes_Stuffs

 114 THE LAW OF CONTRACTS
v. North Bengal, etc. 6 D.L.R. (Cal
So, also, in Crew & Co. Ltd.
an agreement whereh
75, two manufacturers of sugar entered into
procure sugarcane for meeting the needa
Zones were allocated to
factories underto
of their respective factories. Each of the said
facton.
not to draw any cane from the zones allotted to the other undo
The Court held that the agreement
was in restraint of trade
S. 27 of the Act. (To-day, such an
agreement would also be hit hu
the provisions of the Competition Act.)
PROBLEM.- A entered into the service of B company, who
were tea planters in Assam, for a term of years, and agreed not to
of any
be engaged in any other similar business within forty miles
of B company's premises in Assam at any time within five years
after the contract of service came to an end. A violates the
agreement. Advise B company.
Ans.– The Company will fail, as the agreement is in restraint of
trade.
RESTRAINT OF TRADE. Agreements in restraint of trade are
contrary to public policy, and therefore, void. This section is wider
than the English law, as it refers not merely to an absolute restraint
of trade, but to any restriction, and does away with the distinction
observed in England between partial and total restraint of trad,
and makes all contracts, falling within the terms of the section void,
unless they fall within the exception.
English law- In England, a partial restraint of trade is not
frowned upon, provided it is reasonable, and accompanied by good
consideration, and not opposed to the interest of the public. But the
restriction imposed must not exceed that which is neccesary for the
reasonable protection of the person in whose favour the agreement
is made. In India, whether the restraint is general, or
or unqualifed, if it is in the nature of a
partial, qualited
a
restraint of trade, it is void.
Agreements restraining freedom of action.An a sense, every
agreement for the sale of goods, is a contract in restraint of
for if A agrees to sell certain specified trade
goods to B, he precludes
himself from selling those goods to anybody
else. But a reasonabe
construction must be put upon the section, and not one whicil
would render void the most common form
of mercantile contracs.
Thus, a stipulation in an agreement whereby
that they would not sell to others, for a the plaintiffs agreeu
certain any go0ds
the same description as they were selling to period,
held not to be in.restraint of trade. Similarly, anthe defendants se
wa

all the salt manufactured by the defendant

agreement to
during a certain periou
at a certain price, was held not to
be in restraint of trade.

Find More at https://t.me/LawCollegeNotes_Stuffs

 AGREEMENTS IN RESTRAINT OF TRADE 115
So also, where A agreed with B to sell to B paper for a period of
years and further not to sell to others any paper
three during the said
period, it was held a
that such contract was not in restraint of trade.

Agreements to limit competition and keep up prices.- On the

same principle, it has been held that the fact that a scheme of
agreement would
limit competition and keep up prices does not
make it void under this section; if this were not so, many agreements
bich traders enter into for their own protection and to avoid
unfair competition would be voided. Thus, an agreement between
nufacturers not to sell their goods below a stated price, to pay
common
profits into a fund and to divide the business and profits
incertain proportion, is not hit by this section, and cannot be
impeached as opposed to public policy under section 23 : Fraser
Bombay lce Co., (1905) 29 Bom. 107.
In Frazer's case (above) certain ice manufacturing companies in
Bombay entered into an agreement relating to the manufacture and
sale by them of ice. Under the agreement, the minimum price at
which ice was to be sold was fixed, and the net profits were to be
paid into a general common fund, from which each was to receive a
certain proportion of the same. On a suit being instituted for breach
of the agreement by one of the companies against another, it was
held that the agreement was not in restraint of trade.
Likewise, a mutual agreement between two neighbouring land
Owners not to hold cattle markets on the same day is not in
restraint of trade.
The Calcutta High Court has held that a contract by a theatrical
party not to play anywhere else or in any theatre in any town till the
termination of the specified period is void, it being one which is in
restraint of trade.
Similarly, where one of two rival coolie-suppliers agreed not to
Supply coolies in consideration of the other one paying Rs. 50 to
him every month, the agreement was held to be void, as being one
in restraint of trade.

In another case, A & B, two beef-sellers, entered into an agreement

Wnereby A would sell beef for 14 days, and B would sell for the other
16 days in the month. The Court
held that as each party was prevented
Tom carrying on his trade for long periods at a time, there is a partial
Testraint of trade, and such agreement
is therefore void.
n an English case, Nagle v. Fieldon (1966 1 WLR 1027), the
BiEWards of a Jockey Club followed an unwritten
practice of admitting
Unly males to their Club. A lady. was a well-known and capable
who
ave-horse trainer, applied to this Club, but was refused to licence

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
116
THE LAW OF
above-mentioned reason. The Court held such
a rule .
for the
practice was void. a
agreement of service by which
Contract of service.- An
term of his agreement, not
to
employee binds himself, during the
not in restraint of trade
compete with his employer directly, is an injunction where it
agreement may be enforced by
Such an express or implied, providing that the
contains negative clause,
a

employee should not carry

on business on his own during the
term of his engagement.
v. MacDonald, (1.L.R. 1898 23 Bom.
103).
Thus in Charlesworth surgeon
plaintiff, a physician and
the defendant agreed to serve the years. The letter.
practising at Zanzibar, as an assistant for three
which stated the terms which the plaintiff
offered and the defendant
against
accepted, contained the words- "The ordinary clause was drawn up.
practising must be drawn up". No formal agreement
to act as the
and at the end of one year, the defendant ceased on
plaintiff's assistant, and began practíce in Zanzibar his own
account. It was held that the plaintiff was entitled to an
injunction
on his own
restraining the defendant from practising in Zanzibar
account during the period of the agreement.
contracts of service, the only point to be considered is to see
In

whether the restraint imposed is reasonable or not. This always

depends upon the particular facts of every case. Thus, a covenant
by an articled cierk of an attorney not to be concerned as attorney
with any person who had been with the attorney before and during
the continuance of the articles, was held to be reasonable.
Similarly, a covenant by an employee of a milk vendor, not at
any time to solicit persons who were customers of his master
during the employment was held to be reasonable.
But a covenant by a dentist's assistant with his employer not to
practise within a hundred miles from York (where his employer was
in business) during the lifetime of his employer, was held to be
unreasonable. On the same principle, an agreement by an employee
not to be engaged in the same business as that of the employer
within 25 miles for three years was held unenforceable, as being
unreasonably wider than was necessary for the protection of the
employer. Similarly, a contract restricting the defendant from engaging
in tea-cultivation within a distance of 40 miles from
the plaintiff's tea
gardens for a period of 2 years was held to be void.
In Fitch v. Dewes (1921 2 A.C. 158), solicitor's
clerk at Tamworth
agreed with his employer, that after leaving the employment, he
would not practise within 7 miles of Tamworth town hall. The House

Find More at https://t.me/LawCollegeNotes _Stuffs

 AGREEMENTS
IN RESTRAINT OF TRADE 117
Lords held that although the covenant not to practise was
not
limited any per.d of time, yet it was valid. The Court
of
to course of his duties, a solicitor's pointed out
thatin thegood clerk would naturally
an acquire a knowledge of the affairs of the clients,
restrained, he would be a and if not
to employer's in position to gravely impair the goodwill
business. The restriction was reasonable to secure
ofhis was valid.
this, and theretore, it
Niranjan Golikari v.
Century Spg. Wvg. Co.
Ltd. (A.l.R. 1967 S.C.
1098) In this case,
: an
employee was given special training by his
employer, on condition that he would serve
the Company for five
years, and that if he left his employment before
such period, he
not directly or indirectly engage in
would
liquidated damages.
the same business
and
also pay The Supreme Court held that negative
COvenants which operate during
the period of service are generally
not
regarded asrestraint of trade, and therefore, do not fall within
s
27 of the Act, unless the contract is unconscionable or
unreasonable. It was, therefore, held that this was a valid contract.
However, different considerations apply if a post-service restraint
is sought to be imp0sed on an employee. Thus, where the contract
provided that the employee could not engage in the same or
similar business for two years after he left the Company, the
Supreme Court held that such a stipulation would be void under
S.
27 of the Act. (Superintendence Co. of India v. Krishna Murgai, "An agre ement in
AJ.R. 1980 S.C. 1717) restraint of trade is
void."" Discuss and
EXCEPTION : SALE OF GOODWILL– As seen above, all state the exception to
agreements in restraint of a awful profession, trade or business of this rule. Is partial
any kind are void to
that extent (S. 27) except in the case of a sale restraint valid ?
M.U. Jan. 2017
of goodwill.

Now, what is goodwil? The Act has not defined the term goodwill. Give two exception to
I is a term which is easy to understand, but not easy to define. agreements in
Goodwillconsists of the benefit or advantage which a business has restraint of trade.
M.U. Nov. 2014
m its
connection with its customers. It is based on the probability
hat old customers willcontinue to resort to the old place of business,
or continue to
deal with the firm of the same name.
Ihe goodwill of a business may be a very valuable asset, and
may have been built up after incurring considerable expense and
May be the result of the labour, skill and industry exerted by a
person
during many years. It is only fair that if such a person wants
reire from the business, he should be permitted to sell the
80odwill for a consideration. At the same time, if it were not open to
him to bind himself by with the buyer to the effect that he
shall not agreeing
personally carry on the like business, there would be very
itle chance
of his realising any reasonable price for the goodwill.

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE LAW OF
CONTRACTS
118
one who sells
It has, therefore, been laid down that thegoodwi g9
of a
business may agree the buyer to refrain from carrying on
with
a
similar business, within specified local limits, so long as
the
from him, carries tt
buyer, or any person deriving title to the goodwill
on a like business therein, provided that such limits appear to
Court reasonable, regard being had to the nature of the busines*
.
Analysing the Exception to S. 27,. it is seen that in the case of
sale of the goodwill of a business, an agreement in restraint t i

business is valid, subject to the following conditions :

(0) the seller can be restrained only from carrying on a simia
business;
(ü) the restraint can apply only so long as the buyer is carryino
on a similar business;

(i) it can operate only within specified local limits; and

(iv) such limits must appear to the Court to be reasonable.
Chandrav. Parasullah, 48 1.A. 508.- was the owner of a fleet
A

of motor buses which he plied between Pune and Mahabaleshwar.

B also carried on a similar trade at the same place. In
order to
avoid competition, B purchased the entire business of A, together
with the goodwill thereof. By the contract of sale, A
carry on a similar business in
agreed not to
the same place for a period of three
years. A received the consideration money.
At the end of one year,
A started the same
business at the same place. In these
circumstances, the Court held that the contract fell within the
exception to S. 27, and was therefore valid.
In another case, A bought from B
the goodwill of his business
of plying ferry boats between certain
places on a river, together
with the interest which he had
acquired by agreement for the use of
landing place and settlements for
the collecting of tolls at landing
places, Under the contract of sale, B
agreed that for three years, he
would not ply boats between the places in
to be an agreement for the sale of
question. This was held
the goodwill of a business and
enforceable as falling within the rule
stated in this sub-section.
The policy of the law in the application
of this principle to
modern conditions of trade is amply illustrated
in an English case
decided by the House of.Lords. Nordenfelt was
a maker of guns
and ammunition. He sold his business to
sum of money, reserving his the plaintiffs for a huge
right to manufacture explosives othel
than gunpowder. Later, however, he entered
into the business O
another company dealing with guns and ammunition,
The plaintits

Find More at https://t.me/LawCollegeNotes Stuffs

 AGREEMENTS IN RESTRAINT OF TRADE 119
prayed for an injunction to restrain Nordenfelt
from entering into the
business of smpany.
plaintiffs the
The defence was that the contract with
was void because it was
the in restraint of trade. It was
held that the contract between the plaintiffs and Nordenfelt was
valid, though it was in restraint of trade, because the contract was
ather unreasonable between the parties nor detrimental to public
interest, and as such, the defendant could be restrained
from entering
into the business company. v. Maxim
f
Nordenfelt (1894) A.C. 535.)
the other (Nordenfelt

Exceptions under the Partnership Act

The Indian Partnership Act, 1932, lays down three more
exceptions to the general rule that an agreement in restraint of
trade is void. These are as follows:
(0)
t a partner agrees with his other partner that, as long as the
partner remains a partner, he shall not carry on any other
business, the agreement will be a valid agreement under s.
11(2) of the Partnership Act.
(i) Likewise, a partner may agree with his partners, that on ceasing
to be a partner, he will not carry on any business similar to that
of the firm, within a specified period or within specified local
limits. Such an agreement would be valid, if the Court finds such
a restriction to be reasonable. (S. 36(2) of the Partnership Act)
(ii) So also, partners may, while, or in anticipation of, dissolving
the firm, agree that some or all of them shall not carry on a
business similar to that caried on by the firm within a specified
period or within specified local. limits. Such an agreement
would be valid, if the Court finds such a: restriction to be
reasonable. (S. 54 of the Partnership Act):

Find More at https://t.me/LawCollegeNotes Stuffs

 11
AGREEMENT IN RESTRAINT OF
LEGAL PROCEEDINGS
(S. 28)
What is the effect of Under S. 28 of the Act, every agreement,
an agreement in (a) (0 by which any party thereto is restricted absolutely from
restraint of legal enforcing his rights under, or in respect of, any contract.
proceedings? (2 or
by the usual legal proceedings in the ordinary tribunals.,
marks)
M.U. Nov, 2011
tan
(iü) which limits the time within which he may thus enforce
May 2017
his rights, or
s9 (b) which extinguishes the rights of any party thereto, or
or in
2
3discharges any party thereto from any liability under
respect of any contract, on the expiry of a specified period,
so as to restrict any party from enforcing his rights,
is void to that extent.
By way of an exception, it is provided that the above rule does
not render illegal a contract by which two or more persons agree
that any dispute
(0) which may arise between them, (in respect of any subject or

class of subjects), or
(üi) which has arisen, -
shall be referred to arbitration, and that only the amount awarded in
such arbitration shall be recoverable in respect of the dispute so
referred. (Exception to S. 28)
S. 28 EXPLAINED.– S. 28 consists of three parts- (1)
Agreements absolutely restricting the enforcing of rights in the
ordinary tribunals; (2) Agreements imiting the time allowed by the
Limitation Act; and
(3) Agreements extinguishing the rights of a party on the expiry of
a specified period.
The provisions of this section appear to embody a general rue
recognised in England, which prohibits all agreements purporting t0
oust the jurisdiction of the Courts. What the section prevents is that
the rights of the partles should not be withdrawn absolutely trom
the jurisdiction of a Civil Court.
Thus, if two persons enter into a contract that neither party to suc
contract should bring any action on the contract, it will
be void under the
120

Find More at https://t.me/LawCollegeNotes_ Stuffs

 AGREEMENTS
IN RESTRAINT OF LEGAL PROCEEDING
121

first part of the section, since it would restrict both parties from
entorcingtheirrights under the contract in
the ordinary legal tribunals.
But S. 28
will not apply where the agreement between
restricts the right of either party to sue a particular
the parties
who resided in Mumbai, entered
in Court oniy.
Thus, A, into an agreement with B in
Mumbai supply 500 tons of
to linseed to B, F.O.R. at Jalgaon. It was
term of the contract that all disputes arising between
a decided by a Court in Mumbai.
them should Writ a short note on:
the said term, filed a suit against A to Supply.
A
be
notwithstanding failed Agreement in restraint
B

in a Court at of legal proceedings.

Jalgaon. A objects to the jurisdiction
of
the Jalgaon Court. In this
M.U. May 2012
case, there is nothing in the agreement between A
Nov. 2013
contravene the provisions of S. and B
to Nov. 2014
competent tribbunals
28, as it merely selects one out of two
for the disposal of disputes between Jan. 2017
Therefore, the suit can be entertained only
the parties.
by a Court in Mumbai. A
can successfully
object to the jurisdiction of the Jalgaon Court.
Effect of agreement providing shorter
period of limitation,-Further,
an agreement which provides
that a suit should be brought for the
breach of any terms of the agreement within a
time shorter than th
period of limitation prescribed
by law is void to that extent under the
second part of the section. The effect of
such an agreement is to
absolutely restrict the parties from
enforcing their rights after the expiry
of the stipulated
period, though it may be within the period of limitation.
EFFECT OF RELEASE AND FORFEITURE AGREEMENTS
Formerly, the courts had
taken the view that agreements which
do not limit the time for
enforcing any rights, but only provide that
failure to enforce
them within a stipulated time would operate as a
release or forfeiture. of. such rights,
and they. would be binding
Detween the parties, as agreements
scope of S.
such would fall outside the
28.
Baroda Spinning Mills v.. Satyanarayn, (1914)
38 Bom. 344.–
One of the conditions in a policy of was
made and rejected and a suit is not
insurance that if a claim be
commenced within three months
er a
such rejection, "all benefits under this policy shall
be forfeited".
suit being filed after. the prescribed period, it was held
the
condition was that
holder may not one limiting the time within which the policy-
had
enforce his rights, but one by which the policy-holder
ose
contracted that on the happening of, a certain event, he shall
all his rights, was not
and that sucha
condition void.
However,
agreements by a recent amendment, release and forfeiture
Such have also been brought within the ambit of S.28, and today,
agree-ments will
ruing also be void.. (See clause (b) above.) So, the
in Baroda
applicable Spinning Mils v. Satyanarayan (above) would not be
today.

Find More at https://t.me/LawCollegeNotes_Stufts

 122 THE LAW OF CONTRACTS

VALIDITY OF AGREEMENT EXTENDING PERIOD Ot

in the
LIMITATION.- It may be noted that no provision is made
of limitation tor
section for an agreement extending the period
enforcing rights arising under it. Such an
agreement will not fall
no restriction imposet
within the scope of this section. There is
to keep the right te
upon the right to sue; on the contrary, it seeks
Nor is this
sue subsisting even after the period of limitation. second
agreement limiting the time to enforce legal rights under the
would, however, be void under Sec. 23. a
branch of the section. It
Limitation Act.
tending to defeat the provisions of the
Exception to S. 28
an exception
Give two exceptions
To the general rule stated in the section, there is a contract by
to an agreement in which lays down that S. 28 would not render illegal
may arise
restraint of Tegal which two or more persons agree that any dispute which
any subject (or
proceedings.(2 marks)
between them, or which has arisen in respect of
M.U. Apr. 2016 arbitration, and that only the
class of subjects) is to be referred to respect
amount awarded, in such arbitration, would be recoverable in
a contract whereby it is provided
of
the dispute so referred. Thus, referred to
that all disputes arising between the parties should be
two competent London brokers, and that their decision
should be
final, does not come within the purview of this section.
State the exceptions to. SCOPE OF EXCEPTION TO S. 28.- VWhat the exception
withdrawn
agreements in restraint prevents
is that the rights of parties should not be an
of legal proceedings.
absolutely from the jurisdiction of a Civil Court. However,
(2marks) not an attempt to oust
M. U. May 2018 agreement to refer disputes to arbitration is
an arbitrator himself is in the
the jurisdiction of a Court, because remitted
position of a Judge, and his award is liable to be modified, B
or set asíde, under certain circumstances. But, where A and
agree to refer to the arbitration of C,
the dispute pending between
them, stipulating that none of them shall object to the validity
of the
misconduct
award given by C on any ground whatsoever (including
of, the arbitrator) before any Court of law, such
a stipulation is void,
as it restricts the parties absolutely from enforcing their rights in
ordinary tribunals
EFFECT OF AGAEEMENT NOT TO APPEAL-- A, the plaintil,
and B, the defendant, agree that neither party shall appeal agains
the decision that the Court may give in the suit. The agreement S
valid, as it is covered by the Exception; the effect of the agreement
is to constitute the trial Court an arbitrator. Further, it operates a
an adjustment under O. 23, r. 3, C.P.C.:Anantdas v. Ashburner, l
All. 267 (F.B.).

Find More at https://t.me/LawCollegeNotes Stuffs

 AGREEMENTS
12
WHICH ARE UNCERTAIN
(AMBIGUOUS
AGREEMENTS)
(S. 29)
Under agreements, the meaning of which
S.
29, is not certain. What is the effect of
capable of being made certain, are void.
or an agreement in
MustrationsS- (a) A agrees to restraint of marriage?
sell to B "a hundred tonnes of oil". (2 marks)
There is nothing whatever to show what kind of oil was M.U. Nov. 2013
agreement is void for intended.
The uncertainty.
h) agrees to sell to B one hundred tonnes of oil of a
A

specified description,
known as an article of commerce. There
is no
uncertainty here to make the agreement void.

(c) A, who is a dealer in coconut oil only, agrees to sell to B

tnne hundred tonnes of oil. The nature of A's trade affords an
indication of the
meaning of the words, and A has entered into a
the sale of one hundred tonnes of coconut oil.
contract for

(d) A agrees to
sell to B "all the. grain in my granary at
Ramnagar." There is no uncertainty
here to make the agreement void.
(e) A agrees to sell to B "one thousand maunds of rice at a
pice to be fixed by C". As the price is capable of being made
certain, there is no
uncertainty to make the agreement void.
() A
agrees to sell to B,my white horse for rupees
five
nundred or rupees one
thousand.' There is nothing to show which
of the prices was
to be given. The agreement is void.
In this context, reference may be made to S. 13 of the Evidence
Act,
which
provides that where the language of a document is
aioiguous or. defective, no evidence can
be given to explain or
d Such
document. The Court will not take on itself to clarify the
anbiguities,
between
because that would amount, not to enforcing the contract
the parties, but to making a new contract for them.
An important
without exception to this principle. is when goods are sold
naming price, n such cases, there is a presumption of an
a
agreement
buyer to pay a reasonable price, and the Court compels the
to pay a
reasonable price.
123

Find More at https://t.me/LawCollegeNotes Stuffs

 124 THE LAW OF CONTRACTS

CASES
defendant executed
a
document favour
1. Where the
to pay
in
Agra Savings Bank whereby he promised to the Manager
the Bank, the sum of Rs. 10 on before a certain date
or
was and
similar sum monthly, every succeedinga month," it heldthat
instrument could not be regarded as valid promissory-note,
a
was not at all clear as to for what period such payment was
continue, and as to what was the total amount to be paid
such document. (Carter v. The Agra Savings Bank, 1883 5 AllB
2. A stipulation in
a
lease whereby a tenant agrees to.
If i w
whatever rent the landlord might fix, is void for uncertainty.
otherwise, the landlord might fix any rent he likes, and the terg
might become liable to pay an unreasonable or exorbitant amoa
as the rent. (Ramaswami v. Rajagopala,-1887 11 Mad. 200)
3. The proprietor of an indigo factory mortgaged to X al h
indigo cakes that might be manufactured by the factory from arg
t:
to be grown on the lands of the factory from the date of
mortgage upto the date of repayment of the mortgage money. T#
Calcutta High Court held that the terms of the mortgage were m
vague, and the mortgage was not void.

124

Find More at https://t.me/LawCollegeNotes_Stuffs

 AGREEMENTS
13
BY WAY OF WAGER(S. 30)
deals with wagering agreements, and provides as
S.30 Discuss
follows : relating the law
Agreements way to wagering
by of wager are void. agreements.
No suit shall
tor recovering
anything be brought M.U. Nov. 2013
Apr. 2015
alleged to be won on any wager, or May 2017
(a)
entrusted
(b) to any person to abide by the result of any
game or
other uncertain event on which any wager is
made.
# is als0 provided
that S. 30 does not render unlawful a
euhscriotion, or contribution,
made or entered into for or towards any
te nrize or sum of money,
of the value ot tive hundred rupees or What
is a wagering
upwards, to be awarded to the winner or
winners of any horse-race. agreement? marks)
(2
WAGER' DEFINED.- Wager is
defined as an agreement between M.U. Apr. 2014
wo parties to
the effect that if a given event is determined one way,
the first of them. shall pay a
certain sum to the other, and in the
contrary event, the
latter shall pay that amount to the first. A wagering
contract is thus a contract
"to give money or money's worth upon the
determination or ascertainment of an
uncertain event".
The peculiarity of such a contract is
that there must be mutual
chance of gain and loss, on
and the event, the happening of which
Something is to be paid, must
be.uncertain.Thus, if the contract
between A and
Bbe such that it rains on a particular day, A will
if
pay B, Rs.
500, and if it does not rain, B will pay the same amOunt to
A,t is a wagering contract, because the event on the happening of
Wich the money is to
be paid ís uncertain, and there is the mutual
a short note on:
Chance of gain
and loss. i.e. the gain of one is the loSs ofthe other. Write
Wagering agreement.
Ine: same. idea was expressed by Cotton. L.J. in M.U. Nov. 2011
Thacker v.
iaoy where he observed that the essence of wagering was
w
party is to win and the other is to
that
lose upon a future event,
which, at
the time of the contract, is of an uncertain nature.
The event in
which question may bea future event or a past event
election
is not known to the parties (as for instance, the result of an
or a
not known chess. tournament which is over, but the result whereof
which to
the bet is the parties). it is not necessary that the event on Write a short note on:
Agreement by way of
oi wager placed must be unlawful. The agreement by way wager.
is void even though the event to which it refers is ltself
M.U. Jan. 2017
125

Find More at https://t.me/LawCollegeNotes Stuffs

 126 THE LAW OF CONTRACTS

on which team would win a cricke

legal, as for instance, a wager m

side
match. Both sides must be parties to the wagerS; each
or unascertaine
stand to win or lose according to the uncertain
or risk is taken.
event in reference to which the chance
£ 200 each
wi

In one English case where A and B deposited

Iose
a stake-holder to abide the result of a walking match, and the
was to forfeit his £ 200, it was held that it was a pure waoer
(Diggle v. Higge, -1877 2 Ex. D. 442)

But, in Babasaheb Rajaram, (A.I.R. 1931 Bom. 264), the facte

v.
were as follows: TWo wrestlers agreed to have a wrestling match
out of the
between them, and the winner was to receive Rs. 1,125
was t
gate-money. If one of the wrestlers failed to turn up, he
to turn un
forfeit Rs. 500 to the other. When the defendant failed
High Court held
and the plaintiff sued him for Rs. 500, the Bombay
to lose accordino
that this was not a wage. Here, neither side stood
-3 to the result of the match; the stakes did not come from the
pockets
of the parties but from the gate-money. Hence, it was not
a wager

in the eyes of the law.

Thus, a prize cannot be recovered if it is subscribed by

the

competitors themselves. It is otherwise where the prize is contributed

by third parties.
a wagering
Even a contract of sale of goods would become
agreement if neither party intends to perform the contract itself, but,
only to pay the differences. In other words, there is, at the time
of
if
so
the contract, a common intention to deal only in differences, the
called "sale" agreement will amount to a wager.
Intention of both parties to gamble essential– It is not sufficient
if the intention to gamble exists on the part of only one of
contracting parties. Contracts are not wagering contracts, unless
e It

is the intention of both the contracting parties, at the time

0f

entering into the contract, under no circumstances to call for or gve

delivery rom or to each other. It is not necessary that such intente

should be. expressed. "If the circumstances are such as to
warranu

the legal inference that the parties never intended any actual trans
of goods at all, but only to pay or receive money between O
another, according as the market price of the goods should va
from the contract price at the given time, that is not a commerG
transaction but a wager on the rlse or fall of the market." (Kong e
Lone & Co., v. Lowjee,-28 I.A, 239) variety
FORMS OF WAGER,Wagering contracts may assume a
a
dealt
of forms, and type with whlch the Courts have constantly

Find More at https&//ttne/ LawCollegeNotes Stuffs

 AGREEMENTS BY WAY OF WAGER 127
which or without
colourable provides for the payment of differences, with
that
provisions for the completion of purchases. Such
provisions, inserted, will not
if prevent the Court from examining the
nature of agreement as a
realintention the whole. In order to ascertain the
of the parties, the Court must look at all the surrounding
real
circumstances, and must go even
behind the written provisions in the
contract, to judge for itself
whether such a provision was inserted for
purpOse of concealing the true nature of the transaction.
the
In Doshi alakshi v. Shah Ujamshi Velsi, (1899) | Bom. L.R. 786,
portain contracts were entered into in Dholera for the sale and
purchase of Broach cotton, a commodity
which, it was admitted,
never found its way, either by production or delivery, to Dholera. The
contracts were made on terms contained in a printed form which
incorporated the rules framed by the cotton merchants of Dholera.
Those rules expressly provided for the delivery of cotton in every
case and forbade all gambling in differences.
The course of dealing
was, however, such that none of the contracts was ever completed,
eXCept by payment of
the difference between the contract price and
the market price in Bombay on the vaida (settlement) day. It was
held upon these facts, that the contracts were by way of wager
within the meaning of this section.

THE TEST-The true test to distinguish between a wagering What is a wagering

transaction and one which is not so, is whether the same was agreement? What are
the essentials of a
essentially an agreement to pay differences. If the Court finds, as a wagering agreement?
fact, that the main intention was to settle dfferences, a term in the M.U. Nov. 2012
contract that either party may, at his option, require completion of the
purchase, i.., delivery, will not alter the character of the transaction.
Such a term is said to be inserted only to cloak the fact that it was a
gambling transaction and to enable the parties to sue one another for
gambling debts. It must, however, have been the intention of both the
parties that only the difference was to be given or taken.
OSTENSIBLE SALE.-A transaction, though apparently it
partakes of the nature.of a sale, may really be a wager.
Ihus, M agreed to sell his horse to B for £ 200 if it trotted 18
les an hour, but for 1 shilling only if it failed to do so. The horse
alled to trot, whereupon B demanded the horse for one shilling as
M refused. B brought a suit against him. The Court held that
eed.oUid not succeed as
the transaction which, though ostensibly a
e, was in reality a bet : Brogden v. Marriott (1836 3 Bing. NC 88)
GROSSWORD COMPETITIONS,In crossword puzzles, if skill
plays a
substantial part in the result, and prizes are awarded on the
meritsof a wager.
the solution, the transaction does not amount to

Find More at https://t.m/LawCollegeNotes _Stuffs

128 THE LAW OF CONTRACTS
applied, and
Thus, literary competitions where skill is to be wagers.
thebest
competitor gets the prize, are not
and most skilful m

WHAT ARE NOT WAGERS.– It

may be noted that the
a highiy speculati
fact that a contract for sale and purchase is of
character cannot alone vitiate the transaction as wagering
a contra
must be proof that the contract we

To produce the result, there

contract shoua
entered into upon the terms that performance of the payable.
not be demanded, but that differences oniy should be
Nature of forward purchases.- In commercial transactions, ot
it i

quite usual for parties to enter into contracts of

forward purchase
a future date
goods or for the sale of goods to be delivered at
purchaser
often happens that in case of a forward purchase, the
to take delivery of the
has neither the money nor the intention
goods, but the transaction has been entered into solely in the
hope

that the market will rise before the date fixed for delivery.
It was, at one time, the tendency of Courts in India to readily

hold such transactions as wagers and refuse to enforce them.

But

the later trend has been not to favour lightly a defence of wagering.
in case of such Commercial transactions. It has been held in numeroUS
cases that even speculation does not necessarily involve a contract
by way of wager, and that a wagering contract is only constituted
when there is common intention to wager. The Court will look al
at
the surrounding circumstances that may, in any way, throw light on
the question in order to ascertain the intention of the parties whether
they are genuinely and bona fide dealing in commodities or gambing
and speculating in differences depending more or less on the rise
and fall of the makret.
PROMISSORY NOTE FOR DEBT DUE ON A
WAGERING
CONTRACT Agreements by way of wager being void, no suit will
lie on a promissory note for a debt due on a wagering contraci.
Such a note must be regarded as made without consideration; tor a
contract which is itself null and void cannot be treated as ary
consideration for.a promissory note.
PROBLEM. and B were playing a game of billiards, and agreed
A

that he who lost the game should pay the other a sum of Rs. 1000.
lost the game and, as he did not have the amount of Rs. 1000 with
he agreed in writing to pay Rs. 1000 to B. Subsequently, B files a sul
against A on the written agreement. Advise B.
Ans.- Agreements by way of wager are void. A contract whic
itself void cannot be treated as any consideration. Thus, a promiss
note given for a wager therefore,
is without consideration, and
cannot, be sued upon. B's suit will be dismissed. (See. n

Damodar v. Lala Amirchand, (1871) 8 Bom, H.C.R. (A.C.J.) 131

Find More at https://t.me LawCollegeNotes Stuffs

 AGREEMENTS BY WAY OF WAGER 129
AWARD DEBT DUE ON A
WAGERING CONTRACT.-
ON
arbitration a
clause in wagering contract is void. Therefore, an
a
An resulting from reference in such a contract is also void,
award aside.
and can be set
CONTRACT
OF INSURANCE AND WAGER DISTINGUISHED.-
Contract of insurance is not a wagering contract, for
there is
A interest in the resulting event. Such interest is called an
insurable interest. In the case of fire and life insurance, such
insurable interest must exist at the time the policy
is made. In
marine insurance, the holder the policy must have acquired such
of

insurable interest at the time of loss. Thus, the point of distinction

contract
between a of insurance and a wagering contract is that in
is insurable interest which the law considers
the former there
Sutfficient to validate it; in the latter there is no such interest.

is a
In fact, a contract of insurance, without insurable interest,
wagering contract, and is, therefore, void under S. 30
of the Indian
Contract Act. Thus, policies effected for the benefit of persons, who
have no insurable interest were known as
wager policies or gambling
policies and are void. The distinction between
a life insurance and a
wagering contract is doubtlessly rather subtle and
probably lies
more in the intention of the parties than in the form of the
contract.
Le insurance is a wager, if a
person insures the life of another in
v. Positive Government
whom he has no insurable interest: Alamai
Security Lite Insurance Co., (1898) 23 Bom. 191.

In the above case, the High Court of Bombay

held that in India
an insurance for a term of years on the life of
a person in whom
tne insurer had no interest was void under this
section. In that
caSe, the defendant company issued a policy for
a term of 10 years
a clerk in the
or Hs. 25,000 on the life of Mehbub Bi, the wife of
a week after, Mehbub
pioyment of the plaintiff's husband. About a month later,
o assigned the policy to the plaintiff. Mehbub Bi died recover
policy, sued to Rs.
5plaintiff, as assignee of the
on the evidence, that the
25,000
from the defendants. It was held, own use and benefit,
policy was
not effected by Mehbub Bi for her use
but had husband for his own
been effected by the plaintiff's wagering transaction, he
and that it was void as
and benefit, a
having no Melhbub Bi.
insurable interest in the life of
Insurable person insures the life of one in
whom interest- But if a a master insuring the life of
he is interested, it is valid, e.g., of the
Servant, a wife the husband, a creditor that are
debtor, that of
and marine insurance
etc. It
contracts of should be noted that fire insurable interest
Srequired
indemnity and not
wagers. Here to
to make the contract binding.

Find More at https://t.me/LawCollegeNotes_Stuffs

 130 THE LAW OF CONTRACTS

"WAGERING' 'CONTINGENT' CONTRACTS.-

AND (This is
discussed fully under the Law as to Contingent Contracts in
next Chapter.)
TEJI-MANDI TRANSACTIONS.– The word Teji, which means
brightness' is used to signify
a
rise in the market price of goods
a fall in
stock. The word Mandi which means dullness, signifies
market price of goods or stock.
A tej-mandi contract is not an absolute contract of sale and
purchase on the day on which it is made. It is only an ostensibe
sale by A to B of a double opion of becoming either a purchasar
from or seller to him, of certain goods on some future date at a
A

price fixed at the time when the transaction is entered into. On the
a
settling day, the buyer has the right to declare himself either
buyer or a seller. If the market falls, he will declare himself a seler:
i it rises he will declare himself a buyer.
Thus, suppose the agreed price, or the "unit price" as it is caled
of a bale of cotton is Rs.100. A buys a double option or teji-mandi for
Rs. 20 from B on Rs. 100, the "unit price". If the price of the goods on
to be
the stipulated date (vaida day) is Rs. 130, A will declare himself
the purchaser, and will get the bale of cotton for Rs. 100. However,
his net profit will not be Rs. 30, but Rs. 10, as he had paid Rs. 20 to
purchase the option. Similarly, if the market price on the relevant date
was Rs. 65, A would declare himself to be the seller, and make a net
profit of Rs. 15 (Rs. 35 minus Rs. 20 paid for the purchase of the
double option). So long as the price fluctuate between the "unit price'
and the premium paid or payable thereon, A loses to the extent of
the

difference between the premium and the market rate prevailing on the
on the last
day on which A exercised his option, or the market rate
date on which A is bound to exercise that option. But if the príce a
of

the goods rises to Rs. 150 or falls to Rs. 50, will declare himself
A

buyer or a seller respectively, and will, in each case, make

a net

profit of Rs. 30 (Rs. 50 minus Rs. 20).

In teji-mandi transactions, the party selling the double option
s
against
really doing no more than backing the stability of the market
on te
its possible fluctuation. The party buying the double option is,
other hand, backing the fluctuation of the market against its stabilit
v. Tulsidas,
Their nature.- Formerly, it was held in Jessiram
Bom. L.R. 617, that tejl-mandi transactions were in the nature
are
gambling transactions, and that where it is alleged that they
so, the onus of proof lies heavily on the party who alleges down
Manilal v. Allibhai, Ag. C.J., laid
47 Bom. 203, however, Shah

Find More at https://t.me/LawCollegeNotes_Stuffs

 AGREEMENTS BY WAY OF WAGER 131
common
test of intention to take and give delivery was to
the
thatapplied; teji-mandi
that transactions cannot be held to be of a
wagering
bo nature
characteristics. merely because of their apparent nature and
If it is proved that the common intention of the
parties, at the time of the contract, was to deal only in differences
circumstances to call for or to give delivery,
in n0
andtransaction would amount a wager.
then alone
to This decision was approved
Privy Council in Sobhagmal v. Mukundchand, 51 Bom. I.P.C.
bythe
PUKKA ADATIA AGREEMENTS. Where an up-country merchant
wishes to enter into any transaction in the Bombay market, he
Sometimes employs an agent who is known as a pukka adatia. pukka A

person who undertakes or guarantees

adatia is a that on the due date,
delivery shall be given (or taken, as the case may be) at the contract
price, or the differences paid. In other words, he undertakes to find
nods for cash or cash for goods-or to pay the differences.
Atone time, the Bombay High Court was of the view that a pukka
adatia was merely the agent of the up-country merchant, and that,
therefore, no transaction between them could be a wager. This view,
however, was reversed by the Bombay High Court in Bhagwandas v.
Kanji (1905 30 Bom. 205), where it was held that as regards the up
country merchant, the pukka adatia was a principal, and not an
agent, and that the existence of this relationship does not of itself,
negative the possibility of a contract being a wager between them.
This principle was also later approved by the Privy Council.

(A detailed discussion on Pukka Adatia will be found in the

Chapter on Agency.)

Legal effect of a wagering agreement :

Effect on collateral
transactions
that wagering agreements are
tis to be rememberedassumes void, and
ega. This distinction cases of
importance in collateral
transactions. A principal can bring a suit against the betting agent
to recover
from him the money paid on bets made on his (principal's)
behalf. Money
even paid on bets by the agent on behalf of the principal,
if can be recovered. But in
Bombaythelatter has revoked his authority,
(.e. the areas covered by the former Bombay Presidency),
Act Ill
of 1865, moneypaid on wagers cannot be recovered.
As stated above, wagering transactions are void, not illegal,
except
in the State of Bombay. The result that though
Is
an
agreement erstwhile
way. of wager is void,
a contract collateral to
a

Wagering by
agreement is not void.

Find More at https://t.me LawCollegeNotes _Stuffs

 THE LAW OF
CONTRACTS
132
Collateral transaction not affected by wager.-
It must be noted
are collateral to wagers are
that agreements or transactions which money on
not affected by S. 30. So, an agent who has received
principal, even though the
behalf of the principal must pay it to the may be a wagerino
contract in connection with which he received it
agreement. When A enters into a wagering agreement with
B and
recover from B: but
becomes entitled to a certain amount, A cannot
must pay it to A, and
if B
has paid the amount to C, A's agent, C
he cannot plead the illegality of the agreement under
which the
an agent has
amount.has been received by him. Similarly, when
paid wagering loSses on behalf of his principal, he
can recover the
same from the principal, who cannot take shelter under the plea of
illegality of the original transaction.
Legal position of collateral contracts in Bombay. But in the
areas covered by the former Bombay Presidency, all such collateral
transactions are rendered illegal by Bombay Act IIl of 1865. The Act
embraces not only every conceivable form of wagering contracts,
but also contracts made in furtherance of wagering contracts, and
all contracts made by way of security or guarantee for the
performarnce of wagering contracts; it also prohibits all suits for
moneys paid or payable in respect of wagering contracts.
Where there is a perfectly lawful contest in a game of skill between
two persons, the prize of success in that contest is recoverable, if it is
subscribed by outsiders; it is otherwise, if the amount is subscribed by
the competitors themselves. Thus A and B each deposits Rs. 1,000
with X to abide by the result of a bet between them. Awins the bet. X
refuses to pay A. Can A or B recover the amount of deposit from X ?
It is to be remembered that the prohibition contained in S. 30 as
regards the recovery of money deposited pending the event of a bet
applies to the case of winners. Therefore, cannot sue to recover the
A

amount deposited by B with X, but B can get back his deposit from X
before the latter has paid it over to A. If the case is governed by the
Bombay Act, B cannot even recover the deposit.
EnglishLaw.: The position in England is the same as
Bombay, as the Gaming Act declares all collateral transactions to
be equally void.

More at
Find https://t.me/LawCollegeNotes Stufts
 14
CONTINGENT
CONTRACTS (Ss. 31-36)
pefinition (S. 31)
A
eontingent contract" is a contract to do or not to do something,
some event collateral to such contract does or does not happen.
if
Ilustration.- A contracts to pay B Rs.10,000 if B's house is
burnt. This is a contingent
contract.
WHAT IS A
CONTINGENT. CONTRACT- As seen earlier, a
contract constitutes a relation between the parties to it, and rights
arise out of the relation, but it does not follow that every contract
creates a right which is immediately enforceable. The right created
may be one which, the parties agree, would be enforceable only on
the happening ofsome future event as to which neither of the
parties makes any promise, and which is, therefore, collateral to the
contract. Such contracts are termed "contingent".
The event upon which such contracts are contingent may be What is a contingent
wholly beyond the power of the parties, as when a promise is made contract? (2 marks)
contingent on the death of some person, or it may be more or less M.U. Nov. 2011
within the power of one of the parties, as when it is made contingent Nov. 2012
Apr. 2014
on the promisee's marrying a certain person. The material point is
Apr. 2016
that it is collateral to the contract and forms no part of the reciprocal
promises of the contract.
CONTINGENT AND ABSOLUTE CONTRACTS. It is to be noted
tnat a contingent contract is quite different from an absolute contract.
When A
agrees to sell his house for Rs. 10 lakhs to B, it is an absolute
coract. But if A agrees to sell it to B for the same price if B married C
witin a period of six months, it would be a contingent contract.
In. F Ranchhoddas v. Nathmal Hirachand & Co. (51 Bom. L.R. What
is a contingent
contract? Discuss the
ne defendant contracted to sell to the plaintiff merchandise
law relating to
Shipped per
"s.s. City of Deihi'", and agreed "on arrival of the entorcements of
avove saíd steamer we:are bound to aive you dellvery of the contingent contract.
without the contracted goods, M.U. May 2017
SThe steamer having arrivedrecover
plaintiff sued the defendant to damages for breach of
act, In these circumstances, the Court held that when the
defendant
agreed "on arrival of the steamer, we are bound to give
yòudelivery of were dealing with the mode
the gooods," the parties
Performance. and not of the very obligation to
perform th question contract was an absolute
the Contract. Therefore the
133

Find More at https://t.me/LawCollegeNotes Stuffs

 134 THE LAW OF CONTRACTS

contract, and not a conditional contract. The defendant was, therefore,

liable for breach of contract.
a
CASE,- In one case, a conductor who was recruited by Bue
Company, deposited a sum of money with the Company as security for
the due performance of his duty. It was provided that this money was to
be forteited in case of any dereliction of duty on the conductor's part, as
to which a certificate (to this efect) from the Manager of the Bus
Company was to be final and conclusive. When the Company forfeited
the amount, the conductor sued to recover the deposit, and it was held
that he was bound by the certificate of the Manager.
The following are the six rules contained in Ss. 32 to 36 relating
to contingent contracts :
1. Contracts contingent on an event happening, when
enforceable (S. 32)
Contingent contracts to do or not to do anything if an
uncertain future event happens, cannot be entorced by law
unless and until that event has happened.
Define contingent If the event becomes impossible, such contracts become void.
Contracts. What are
the rules as to lustrations.- (a) A makes a contract with B to buy B's horse if
entorcement of A survives C. This contract cannot be enforced by law unless and
contingent contracts ? until C dies in A's lifetime.
a
b) A makes a contract with B to sell a horse to B at specified
M.U. Nov. 2013
Noy, 2014
price if C, to whom the horse has been offered refuses to buy him.
The contract cannot be enforced by law unless and until C refuses
to buy the horse.
(c)A
contracts to pay B a sum of money when B marries C. C
dies without being married to B. The contract becomes void.
2. Contract contingent on an event not happening when
enforceable (S. 33)
Contingent contracts to do or not to do anything if an
uncertain future. event does not happen can be enforced when
the happening of that event becomes impossible, and not before.
Illustration.- agrees to pay Ba sum of money if a certain ship
A

does not return. The ship is sunk. The contract can be enforced
when the shíp sinks.
3. Contracts contingent on conduct of person, when event
deemed Impossible (S. 34)
If the future event on which contract is contingent is the way
in which a person will act at an unspecified time, the event is
0

Find Móre at https://t.me/LawCollegeNotes_Stuffs

 cONTINGENT CONTRACTS 135
Considered
to become impossible when such person does
anything which renders it
impossible that he should so act within
definite time, or otherwise than under further contingencies.
any
MMustration.-
agrees to pay sum of money if B marries C.
A
Ba
marries D The marriage of to must now be considered
B C

impossible,
C although it is possible that may die and
that
D
may C

afterwards marry B. (If later, B

does actually marry C as D's widow, Write short note on:
a

contracts.
not revive the old obligation of
married
to pay the sum, for that Contingent
A

M.U. Apr. 2011

to an end
when C
D.)
came Apr. 2013
contracts become void, which are Jan. 2017
4. When contingent on
happening ofa specified event within fixed time [S.35(1)]

uncertain
o
Contingent contracts to or not to do anything a specified
event happens within a fixed time become void at
if
if,
the expiration of the time fixed, such an event has not happened,
or. if
before the time fixed, such event becomes impossible.
lustration.- A promises to pay B a sum of money if a certain
ship returns within a year. The contract may be enforced, if the
ship returns within the year, and
becomes void if the ship is burnt
within the year.
5. When contracts may be enforced which are contingent
on a specified event not happening within a fixed
time [S. 35(2)]
to do or not to do anything if a specified
Contingent contracts
uncertain event does not happen within a fixed time, may be
entorced by law when the time fixed 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.
llustration.- A promises to pay' sum of money if B a
certain a

ship does not return within a year. The contract may be enforced if
the ship
does not return within
6.
the year, or is burnt within the year.
Agreements
contingent on
impossible events vold (S. 36)

Contingent
impossible event
agreements to do or not to do anything, if an
ofthe event happens, are voidwhether the impossibility
the time when is krnown or not to the parties to the agreement at
llustrations.
it is made.
ines should (a) A agreesto, pay Rs.. 1,000 if two straight B

enclose a space. The agreement

(b) A agrees is void.
dead at to
Cwas pay B Rs. 1,000 if B will marry D's daughter C.
the time of the agreement. The agreement is void.

Find More at https://t.me/LawCollegeNotes Stuffs

 136 THE LAW OF CONTRACTS

'CONTINGENT CONTRACT' AND "WAGER' DISTINGUISHED

a contingent
There are six points of distinction between contrac
and a wager:
1. contingent contract is defined as "a contract to do or not
A

to
do something, if some event collateral to such contract
doesor
wager
does not happen". A wager is a contingent contract. A
on
t
been defined as
a
contract by to pay money to
A
the happening
B

of a
given event, in consideration of paying
B
to him money
inthe
event not happening. Thus, it is an agreement by mutual promises,
each of them conditional on the happening or not happening of a
unknown event. In the case of every contingent contract, it is n
necessary that there should be mutual promises.
2. contracts are contingent contracts, but all continget
Allwager
contracts are not by way of wager.
3. In a wager, the uncertain event is beyond the power of both
the parties, whereas in a contingent contract, the event may be
within the power of one of the parties.
4. In a wager, the parties are not interested in the occurrence of
the event, apart from the money earned or lost. In a continget
contract, they are so interested. For example, A insures the life of B;
the transaction is a wager if A has no interest in B's life or death; it is
a contingent contract if A has an insurable interest in the life of B.
5. In a wager, the future event is the sole determining factor of
the contract; in a contingent contract, the future event is merely
collateral or incidental.
6. Wagers are void (S. 30), but a contingent contract is no.
unless it is dependent on an impossible event (S. 36).
DIFFERENCE BETWEEN 'AMBIGUOUS' AND 'CONTINGENT
CONTRACTS.
1. Acontract is said to be ambiguous when its terms are n
clear. This is ordinarily due to defective or unintelligible wording. A
contract is contingent when it is made to depend upon the happeu
or non-happening of an event.
2. An ambiguous contract may become void due to ambiguyr
whereas a contingent contract is not void -except when maod
depend upon an impossible event under S. 36.

Find More at https://t. me/LawCollegeNotes_ Stuffs

 PERFORMANCE
15
THE OF CONTRACTS
(Ss. 37-67)
Chapter 37 to
pertormanceIV
Ss. 67, deals with various rules as to Explain the provisions
of contracts. This Chapter can be divided into the of the Indian contract
heads: act relating to perfor
llowing Seven mance of contracts.
Obligation of Parties to
1.
perform Contracts : Ss. 37-39. M.U. Apr. 2015
Contracts must be performed : Ss. 40-45.
2. By whom
Tine. Place and Manner of Performance : Ss. 46-50 & 55.
3
Performance of Reciprocal Promises : Ss. 2, 51-54 & 57.
s
Performance of Alternative Promises : S. 58.
A Rules as to Appropriation of Payments : Ss. 59-61.
7.
Modes of Discharge of Contracts : Ss. 37-39, 56, 62-64 & 67.

. OBLIGATION OF PARTIES TO PERFORM CONTRACTS,

(ie., CONTRACTS WHICH MUST BE PERFORMED)
(Ss. 37-39)
The following three topics fall under this head:
A Who must perform the promise (S. 37)
B. The law as to tender of performance (S. 38)
C. Efect of refusal of a party to perform the promise wholly
(Anticipatory breach of contract) (s. 39)
A Who must perform the promise (S. 37)
ne parties to a contract must
Tespective
perform, or offer to perform, their
promises unless such performance is dispensed with
excUsed under the provisions of this Act or of any other law.
a party is released from performing his part of the contract
S, e.g.,
bylaw,
an insolvent from or a person
whose paying his debtors,
performance of a transaction is declared by law to be illegal.
A
person's
oihisdeath, promises are binding on his representatives in case
unless a. contrary intention appears from the contract.
ltustration-Apromises
day on to deliver the goods to ona certain
B

payment of Rs. dies before. that day. A's

1,000. A

137:

Find More at https://t.me/LawCollegeNotes_Stufts

 CONTRACTS
138 THE LAW OF

representatives are bound to deliver the goods to B, and B

representatives.
bound to pay Rs. 1,000 to A's
But when the personal skill and
qualities are involved
relations are putinthe
performance of the contract, the contractual to an
end by the death of the promisor.
B

IlMustration.- A
promises to paint a
picture for by a certain
dies before that day. The Contract caannd
day, at certain price.
a A

representatives or by B.
be enforced either by A's
WHETHER THIRD PARTY CAN DEMAND PERFORMANCE
A OE,

CONTRACT
General Rule- Ordinarily,
a contract affects only the persons
person cannw
who are parties to it, and the general rule is that a
a party, As Se
acquire rights under a contract to whích he is not
upon the contract S
earlier, a stranger to the contract cannot sue
an agreement between A and B that B is to pay money
to or dh
or trustee for him
anything for C, in cases where Bis not C's agent
confers no right of action on C.
intended
Exceptions.- But where a contract between and B is
A

to secure a benefit to C, as a beneficiary (cestui que trust), C

can

right to enforce the trust; a third person

can claim i
sue in his on a trustee for such
the agreement is such as to make the promisor
third persons. In other words, the third person can claim
as a

beneficiary.
The following are seven cases, which are exceptions
to the

person who is nd
general rule stated above. In these cases, a third
a party to the contract can enforce the same
:

(a) where a contract between A and B creates an express or al

implied trust in favour of C;
pay or
(b) where a party is estopped from denying his liability to
something for a third person;
on Soli
(C) where money to be pald under the contract is charged
immovable property;
(d) where there is a family settlement;
secure
(e) where on a partition of a joint family, a benefit is maintenancs
female members of the family who were entitled to
or
marriage expenses; and contract
0
a
() where thero has been an assignment of rights underoperation oflaw
favour of a third person by act of a party or by
(g) under certain statutes, e.g. the lnsurance Act.

Find More at https://t.me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS 139
Assignments
of Contracts
Indian Contract Act does not
specifically deal with the
The
assignment contract. The general principle of
of a
can sue nor
the law is that a
perSon neither be sued in the case of contract,
third
under certain a
circumstances, contract may be assigned, either
but operation of law, or (2) by act of parties.
(1)by
Assignment by operation of law
/1)

An assignment of a contract can take place by operation of law,

namely, by purchase or lease of interest in land, or by
death or
bankruptcy.

(2) Assignment by act of parties

The burden or liability of a contract cannot be assigned without
the consent of the other party to contract. A promisor cannot assign
his liabilities, i.e., promisee cannot be compelled by the promisor
or by any other party to accept the performance of the contract
from any person other than the promisor.

So also, there can be no assignment of even the benefit under

acontract, if
there are obligations involving personal qualifications :
Gritfith v. Tower Publishing Co., (1877) 1 Ch. 21; Torkington V.
Magors, (1902) 2 K.B. 430.
But, if the contracts are not of a personal character, then
even if they are contracts of an executory character, they are
to
t assignable by the such a case, the assignee can sue
parties. In
in his own name :
Tod v. Lakhmidas, (1892) 16 Bom. 441. But,
where the contract is still executory, as for instance, if goods
are yet to be delivered, the burden of a contract cannot be
assigned without the consent of the other party.
yord Benefits under a contract of a personal nature are not assignable,
e.g., a contract of service. or marriage or where the parties rely on
me personal qualification or qualities of each other. Where the
parties, at the time of contracting, agree that the contract may be
eniorced by or against the representatives and assignees of each,
renthe burden along with the rights may be assigned: Tolhurt V.
uredi ASsociated
enga Cement Manutacturers, (1903) A.C. 441.
n cases it appears that the promisor was not selected
tradi opersSonal where qualifications, he may be permitted to perform the
contract agrees to
vicariously another). Thus, if
A

paint B's wagons, A (/.., through

elected
may have the work done by if A was not
G,

for his personal skill; but if the work should be ill-done, A

Find More at https://t.me/LawCollegeNotes_Stuffs

 140 THE LAW OF CONTRACTS
charoes
will remain liable to B. Also, B will be liable for the painting
Co. v. Lea, 5 Q.B.D. 149. However, if
only to A: British Wagon
original contract was that would paint B's portrait, A cannot have
A

as normally in such cases

h

the work done by C, another artist,

artist is chosen for his personal
skill.
a contract may be
Broadly speaking therefore, the benefit of
may, however, be assigned
assigned, but not the burden. Liability,
with the consent of the other party.

B. Tender (0ffer) of Performance Effect of refusal to

:

accept Tender of Performance (S. 38)

Tender of performance is not the same thing as
actual
may be an
performance, but an offer of performance. Thus, a tender
money. A contract to deliver
offer to deliver goods or to pay a Sum of
goods is completely discharged by tendering the goods they
for

acceptance according to the contract. If the goods are refused,

can bring
need not be offered again, and the seller is discharged. He
an action for non-performance, or defend an action for non-delivery,
In

a to
other words, tender is an attempted perfornmance of promise d,of
an offer
or pay. something by one party to the other. If such
performance is refused by the other party, the person making the
offer is not responsible to the other for non-performance
as regards
his own rights; nor does he lose his rights under the contract.
(S. 38)

In other words, if a valid tender is made, but the other party

refuses to accept it, the party tendering,
(i) is free from liability under the contract; and

(i) he does not lose his rights under the contract.

Its essentials
State the
two However, in order to
bea valid tender, it must fulfil the following
essentials of a valid three conditions:
tender. of perfor.
mance. (2 marks) 1. It must be unconditional.
M.U. Nov. 2014
May 2018
Thus M, a debtor, offers to pay a smaler sum of money (i
4,000) to N, his creditor, on condition that N should pass a rece
for the whole amount due (Rs. 5,000). This is not a valid tender, e
it must be of the whole sum due.
However, a tender of the whole sum due "under protest" 1S
good tender, as it s not a, conditional tender.
Scott v. Uxbridge Rly. Co. 1. (1865) 1.C.P. 596.-- 4, claiming
which B
only As.100 are due, offers to pay under protest, Rs.125

Find More at https://t.me/LawCollege Notes Stuffs

 THE PERFORMANCE OF CONTRACTS 141
dermands as being due. The tender is valid and unconditional, in

protest, which imposes no condition.

spiteofthe
Behari Lal v. Ram Ghulam, 24 All.
461.- A,
the debtor offers to
pay B the debt instalments
by and tenders the first instalment. This
valid tender, not being of the whole amount due, unless
nota the
contract provides for payment by instalments.
is
A
offers to pay B the principal amount of the loan. This is not
a valid tender,
as the whole amount of principal and interest is
offered.
not
A
OWes money to a joint family of B, C and D. He tenders the
amount loaned with interest to B, the karta. The tender is valid, as
having been made to one of several joint promisees. But, if a tender
made to a junior member of the family, it will not be a valid tender.
2. lt must be made at proper time and place, and under such
circumstances as to give the other party a reasonable opportunity of
ascertaining that the person offering to perform is able and willing
there and then, to do the whole of that which he has promised.

Veerayav. Sivayya, 27 M.L.J. 482.- offers, by post, to pay B

A

the amount A owes him. This is not a valid tender, as A is not able
"there and then" to pay. Actual production of money is necessary.

So also, A borrows from B, Rs. 1,000 promising to repay the

same with interest at 6% per annum after one year. Six months
after the date of the loan, tenders to B Rs. 1000 with interest
A

uptodate. B
is not bound to accept it. Tender must be made at the
proper time-neither before nor after the appointed time.
A is a tenant of B. B offers rent due by him to X, the manager
o E, at a fair. X is not bound to accept, as the ternder is not made
a a proper place: Raja Sati Prasad v. Manmath, 18 I.G. 442. (As to
Wnat is proper time and place, see
Ss. 46 to 50 below.)
3. If the offer. is an offer to deliver anything to the promisee, the
msee must have a reasonable opportunity of seeing that the
thing offered
deliver.
is the thing which the promisor is bound by his promise
contract a
Thus, tender of goods sold under
a made
under such
disposal circumstances that the buyer has very little time at his

to examine the goods tendered is not valid tender. a

llustration,-A contracts to deliver to at his warehouse, B on

the 1st March,

2013, 100 bales of cotton of
a
particular quality. In
order
to make an offer performance falling within this section,
of
A

Must
bring the cotton to B's warehouse on the appointed day, under
such
Circumstances may. have a reasonable opportunity
of
B
that

Find More at https://t.me/LawCollegeNotes Stuffs

 142 THE LAW OF CONTRACTS
cotton of the quality
satistying himself that the thing offered is
contracted for, and that there are 100 bales.
it may be
Offer to one of several joint promisees.– Lastly,
the sa
noted that an offer to one of several joint promisees has
them.
legal consequences as an offer to all of
As regards tender of a debt to one only of joint
creditors, thera
is a difference of opinion. According to the Madras High Court,
it is

valid and will discharge the debto. According to the Calcutta

Bombay, Allahabad and Patna High Courts, it is not valid.
FURTHER EXAMPLES.- A tender by cheque is not a "legal
tender" as it is not the current coin of the realm, but if the cheque
is accepted, the creditor cannot afterwards raise an objection.
When the contract provides for payments by instalments, a
tender of an instalment is a good tender. In the absence of such a
provision, as the creditor is entitled to the whole sum, a tender to
pay a loan by instalments is not valid.
A tender of goods made at such a late hour of the appointed
day that the buyer has no time to inspect them is not good. The
buyer must have a reasonable opportunity of inspection.
C. Effect of refusal of a party to perform promise wholly
(Anticipatory breach of contract) (S. 39)
S. 39 deals with the effect of breach of contract wilfully caused
by a party thereto. S. 39 can be analysed thus
When a party to a contract
(a) has refused to perform, or his promise in

(b) has disabled himself from performing. its entirety,

-the promisee may put an end to the contract, unless he has

signified (by words or conduct) his acquiescence in its continuance.
llustrations, (a) A, a singer, enters into a contract with B, the
manager of a theatre, to sing at his theatre two nights in every week
during the next two months, and B engages to pay her Rs. 100 tor
each nights performance. On the sixth night, wiltuly absents
herself from the theatre. B is at liberty to put an end to the contrau
(b) A, a singer, enters into a.contract with B, the manager O
theatre, to sing at his theatre two nights in every week during t
next two months, and B engages to pay her at
the rate of Hs.
for each night. On the sixth night, A wilfully absents herself. W

the assent of B,A sings on the seventh night. B has signified

acquiescence in the continuance of the contract, and cantnot ro

Find More at https://t.me/LawCollegeNotes Stufs

 THE PERFORMANCE OF CONTRACTS
:the end to it, but is entitled to compensation
143

put an
quait sUstained through A4's for the damage
by him failure to sing on the sixth
ANTICIPATORY night.

sitmay
of is
Where
BREACH OF CONTRACT.-
contract its breach or repudiation before
thesame oertormance. party to a contract
a
Anticipatory breach Write a short note on:
the time fixed for its Anticipatory breach of
contract before
refuses to perform his contract.
partof the the actual time arrives, the law gives the M.U. Nov, 2015
Apr. 2016
promisee an option whereby he may either (a) elect to rescind and
maythen
(aalthough the time for performance
contract as at an end, and at once sue
has not yet arrived),
treatthe for damages,; or (b)
to rescind, but to treat contract
elect
ete
not the as still operative, and
the time of performance, and then hold the other party
responsible for
the consequence of non-performance. But, if
e to
take this cOurse, the contract still remains operative for he
t of both parties, and the party who the
has previously repudiated
ay notwithstanding his repudiation, still perform it, if he wants to.
In Frost v. Knight,
L.R. 7 Ex. 111, the defendant promised to
marry the plaintiff as soon as
the defendant's father died. However.
even during
the father's lifetime, the defendant refused to marry the
plaintiff. Although
the time for performance had not arrived, the
plaintiff was
held entitled to sue for breach of a promise to marry.
So also, in Hochster v. De la Tour (22 L.J.
Q.B. 455), which is What is anticipatory
the leading English case on
the point, the defendant promised to breach of contract?
engage the plaintiff.as
his courier on a continental tour from June (2 marks)
1, for three months
at £ 10 a month. Before that day, the defendant M.U. May 2012
changed his mind, and wrote to
the plaintiff that he did not want
him. The plaintiff, without
waiting further, and before June 1, sued
he defendant for breach of contract. It was held
nad been broken by express
that the contract
renunciation, and the plaintiff was not
bound to wait until
the day of performance.
Similarly, A, a printer,
agrees to do all printing work for during B
What are
the reme-
Bhetof
B three years at certain rates. After one year, A writes to
that he would
dies available to a
not do any more printing work for B. B person aggrieved by
has his certainly an anticipatory breach
remedy
animmediate againstA, and he can accept A's renunciation as of contract? (2 marks)
breach of the contract, and sue him for damages. M.U. Apr. 2015
Refusal
must
have,
to perform, It is to be remembered that either party
Asto in clear terms, refused to perform his part of the contract.
what act
determined amounts to a refusal is a question of fact to be
in each particular case.
Thus,
defendantsin Sooltan Chand v. Schiller, (1878) 4 Cal, 252, the
Certain agreed to deliver to the plalntiffs 200 tons of linseed at a
price
in April and May, the terms as to payment being cash on

Find More at https://t.me/LawCollegeNotes Stuffs

 144 THE LAW OF CONTRACTS

delivery. Certain deliveries were made by the defendants between

1st and 8th of May, and
a
sum Rs. 1,000 was paid on account
bythe
plaintiffs, which left a large balance due to the defendants respecA
of linseed already delivered. This balance was not paid, and in
defendant thereupon wrote to the plaintiffs, cancelling the contrac
and refusing to make further deliveries under it. The plaintift
answered, expressing their willingness to pay on adjustment, a sin
which they claimed for excess refraction, (i.e. excess ofimpurities)
and an allowance tor some empty bags. The defendants stated tha
they would make no further delivery, and the plaintitfs thereube
bought in other linseed, and sued the defendants for damages tor
non-delivery of the remaining linseed. Upon these facts, it was ho
that there was no refusal on the part of the plaintiffs to pay for tha
linseed delivered to them, as they were willing to pay the sum due
as soon as their cross-claims were adjusted.
So also, in Rash Behary v. Nrittya Gopal, (1906) 33 Cal. 477, A
agreed to purchase from B, under two contracts, 300 tons of sugar
be delivered at different dates. A having failed to take delivery under
the first contract, B claimed to rescind both the contracts. It was held
that there was no refusal on the part of A within the meaning of this
section, and that B was not entitled to rescind the second contract.
ANTICIPATORY BREACH, HOW CAUSED.
An anticipatory
breach may take place in two ways: (A) By repudiation of the
contract or (B) By impossibility of performance
brought about by the
act of one of the parties.
(A) Anticipatory breach by repudiation.- When a party to a
contract expresses or communicates to the
other party, before the
due date of performance of the contract, his intention not to pertom
it, he is said to repudiate the contract. If a party repudiates
he
contract, the other party is not bound to wait in to
order Se
whether the contract is actually broken when
the time of pertormane
arrives. (See Frost v. Knight and Hochster V. De la Tour,
above.)
But a party is not bound to take such
advantage of repudiatio
He can keep the contract alive if
he so chooses, until the due a
of performance and then sue
the other party for damageS
rescission. But, it should be remembered
that if he fails to t
advantage of the repudiation by rescinding
the contract, itincidents
performance with all the normal reris
alive upto the due date of
attached to it. If, therefore, in
the interval between repudiations enables
the due date of performance, some
event happens which
the repudiating party himself entitledt0
to
do so, notwithstanding his prior act
avoid the contract, he is
of unaccepted repudiation.

Find More at https://t.me/LawCollegeNotesStuffs

 THE PERFORMANCE OF CONTRACTS 145
agrees
enhe Thus,if A
February, and
on
if he informs
the 1st January to
B on
sell
horse to a
on the B

by the 15th January that he will

the
pers 2nd
sellhis horse at all, can atB
once sue A for damages. But if
notdisregards repudiation and waits
he
the till the 2nd February, and if
trac before that date, the horse dies, B
cannot recover any damages
contract comes to an end by the death of the horse,
ntts from A;for,the
and A
cantake advantage of
this fact.
Further ilustrations
rities
ha (1) agrees to sell certain goods to Y, delivery to be given at
2up X

very next day,

the end of the month. The
writes to X
and says Y

at he will not deliver Y

the goods; replies that he does not accept
Ve wrongful
repudiation of the contract. At the end of the month, X
delivers the goods to who refuses to accept them, on the ground
Y

hat had earlier repudiated his contract. X sues Y for breach of

X
contract. X succeed?
VWill

ar to i Yes. On the ground stated above, X will succeed. As Y has

nder elected to ignore the repudiation by X, and to wait until the time for
helt pertormance arrives, he remainsliable to perform his part of the
this contract, and X is entitled to complete the contract notwithstanding
act his previous repudiation.
tory (2) M has contracted to marry N in two years' time. Shortly
the after the contract, he breaks off the engagement without N's
the consent. N writes repeatedly begging him to adhere to his contract.
Just before the expiry of two years, a change in law makes it
Hegal for to marry N..On the expiry of the twO years, N sues
M_

for the breach of

tha
the promise.
or Here, M breaks off the engagement without N's consent. N does
the iOr put an end to the contract, but begs M to adhere to his
see Ontact. N could have put an end to the contract without waiting for
nce expiration of two vears' time. and could have sued contract, M for
damages. But
keeps on writing to
N to adhere to M
his
and thus contract. M

impliedly Consents. to the continuing

of the
on.
. any time within
ate
Could
have, therefore, chosen to fulfil the contract
two yyears, of the supervening
gnd and: he can. now take advantage
circumstances, which allow him to decline to completeit. is M

gke illegal
in the. law makes to pay
it
exÇused
from marrying
for Mto marry sincea changetherefore,
N,

not, liable
Camages (under S. 56). is, M

toN.
(3) By a defendant contracted to load a cargo
of wheat charter-party, the After the arrival of the
on at Odessa.
ship, the plaintiff's ship cargo. The. master of
the defendant's agent refused to load the
the ship did not repudiation' and continued
accept the refusal as a:

Find More at https:/t.me LawCollegeNotes_ Stufs

 146 THE LAW OF CONTRACTS

to demand the cargo. Before the last day on which the defendan
was entitled to load, war broke out between England and
Russia
and the contract was thereby dissolved. The ship-owner (by
agent, the master) having elected to treat the contract
operative, it was kept open for the benefit
of

both parties
war. There was
dissolved by the declaration of
consequently ng
breach, and the plaintiff would have no cause of action.
(4) A
agrees to supply straw from October to June, in
B

specified
quantities, payment to be made on delivery of each load.
The straw
is supplied till January, by which time B is in arrears for payment.
A
demands payment and B tenders the amount of arrears, excent th
price of the last load, which B wishes to keep in hand. A canoab
the contract, saying that he would not deliver except for cash c
delivery. B sues. His suit must fail, as he refused to perform he
contract in its entirely, i.e., totally or absolutely, by keeping back the
price of one load: Withers v. Reynolds, (1831) 2 B & Ad. 882.
(B) Anticipatory breach of contract by impossibility of

performance.- The second way in which an anticipatory breach may

take place is when it is brought about by either party to the contract

by his own voluntary act. There may also be an anticipatory breach of
contract (on account of the impossibility of performance) brought
about by the act of the parties. Thus, if a person contracts to sella
specific thing (as for instance, his white race-horse) to another on a
particular day, and ift, before that date, he sells it to somebody else,
the other party can at once bring a suit for rescission and damages
MEASURE OF DAMAGES IN AN ANTICIPATORY BREACH OF
CONTRACT.- If the contract is ended at once,
the damages Will e
measured by the difference of price prevailing on
the
and the contract price; but if such party elects to treat datecontract as
of brea
the
subsisting and waits till the date fixed for performance,
the damaye
contract
payable will be measured by
the difference between the
price and the price prevailing on
the date fixed for performance.
Thus, A sells 100 bales of cotton to B,
Rs. 500 per bale to be delivered on
a textile manufactuie
1st April. On 1st March, A short.
B
that he will not sell, supply of cotton
secures his requirement on in the market being
inA6
the
15th April at Rs. 650 per bale, but in
meanwhile his mill remains lacko
cotton and B suffers a closed for 10 days on account ot were
cotton
as follows : further loss of Rs. 10,000. Prices
1st March : Rs. 550 per perbale:
measured by the difference bale; 1st April Rs. 600 Apriland
:
between the market price on 1st date.On
the contract price as the contract was repudiaed.
1st March,: B could to be performed on that
have elected to treat
but as he did nothing, the contract as could
the contract continued to be alive and A

at
Find More https://t.me/LawCollegeNotes Stuffs
 THE PERFORMANCE OF CONTRACTS
147
despite his previous refusal, have performed
cancelled his notice of the contract on 1st April
and thus
refusal to perform. Damages
are, however, for
closure of the mill too remote. (See
S.
73.)
WHOM CONTRACTS MUST BE
BY PERFORMED
(Ss. 40-45)
e AO lays down the tirst rule, namely, that if it appears
from the
nature of the case that it was the intention
Contract that any promise contained
of the parties to any
promisor himself, such a promise must
in it should be
performed byy the
be performed by the promisor.
lhustration.-A promises to paint a picture for B. A must perform
this promise
personally.
B. a sculptor, agrees to make a statue for A, but before
completing it, B dies. X, B's son, an equally skilled artist, insists on
nertorming the contract and on A's paying him. He cannot, as
the
intention of A and B was that B should make the statue himself, as
this is a contract of a personal nature.
In other cases, the promisor or
his representatives may employ
a competent person to perform it.

llustration. A
promises to pay Ba sum of money. A may
perform this promise either by personally paying
the money to B or
by causing it to be. paid to B by another;
and, if dies before the
A

tine appointed for payment, his representatives must perform the

promise or employ some proper person to do so.
The second rule, laid down in S. 41, provides that when a
promisee accepts performance of the promise from a third person,
he cannot afterwards enforce it against the promisor.
TWO important topics need to be considered in this connection,
namely,
Devolution of joint rightss
Devolution of joint liabilities
Devolution of joint rights (S. 45)
orider S. 45, when a person has. made a promise to twO or Write a short note on:
th persons a appears
jointiy, then (unless contrary intention from Devolution of joint
rights and liabilities.
contract) the
right to claim performance rests with the joint
promisees
during their joint lives, and after. the death of any one of (2 marks)
hem, with person jointly with M.U. Apr. 2015
the
the Survivor or representative of
such deceased
survivors and after the death
of
the last survivo,
ith he representatives of all jointly. :
lustration, A, consideration of. Rs.. 5,000 lent to him by
B

and C. in sum with

promises jointly to repay them that
B
interest on andC
a day specified. B
dies. The right to claim performance

Find More at https://tme/LawCollegeNotes_Stufts

 CONTRACTS
148 THE LAW OF
C
during C's life.
rests with B's representatives jointly
with
andafter
of C, with the representatives of B and C jointly.
the death n

PROBLEM.- X and Y
execute a pro-note in favour of A
for Rs. 1,000. Will
A
succeed if
he sues
X
alone on the pro-note?
Ans.- Under S. 45, all the promisees during their joint lives
It is not open to one of
jointly entitled to claim performance.
joint promisees to sue alone either for
performance of the promise
A will not Siueo
in its entirety or to the extent of his share. Thus,
if he refuses to do so
if
he sues alone. B must join him, and
must be made a co-defendant.
ENGLISH LAVW- The general rule of English law is different froe
the rule contained in S. 45. Under the English law, joint contracts ara
enforceable by the survivors (or survivor) alone. The only exception
founded on grounds of equity, is in respect of debts due to partners

Devolution of joint liabilities (Ss. 42-44)

There are three rules relating to the law as to devolution of joint
liabilities.
1st rule (S. 42)
When two or more persons have made a joint promise, then
(unless a contrary intention appears from the contract), all such
persons during their joint lives, and after the death of any one
of them, his representative jointly with the survivor or survivors,
- and after the death of the last survivor, the representatives of
all jointly–must fulfil the promise.
It will be noticed
bl
that S. 42 has been worded in languaga
similar to that of S. 45, with this difference
that S. 42 deals with
joint liabilities whereas S. 45 deals with
joint rights.
ENGLISH LAW The Indian rule,
which is in accordance witn
the modern mercantile usage, makes the
representatives of the
deceased (so far as the assets go) liable
In England, upon the death of one equally with the survivols
of the several joint contractors,
the legal liability under the contract
devolves upon the survivOrS
The representatives of the deceased
alone or jointly with the survivors. cannot be sued at law euie

2nd rule (S. 43)

When two or. more persons
promisee may, (in the make a joint promise,
absence
contrary), compel any one or of an express agreementperform
more of
the whole of the promise. joint promisors to
Illustration, A, B 3,000. D
may compel and Cjointly promise pay
either A or B or C to pay to Rs.D

him Rs. 3,000.

Find More at https://t.me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS
149
jont promisor (S. 43)
Right of down the right of a joint promisor who
43 also lays
S. paythe whole amount. It provides as follows :
has been
made to or more joint
Each of two promisors may
compel every
joint promisor to contribute equally with himself to the
other
performance of
the promise (unless a contrary intention appears
contract). If any of
from the the joint promisors makes a default
contribution,- the remaining joint promisors must bear
in such
arising from such default in equal shares.
the loss
Mustrations. (1) A, B and C jointly promise to pay D Rs.
3000. D may compel either or
A or B
to pay him Rs. 3,000.
C

(2) A, B and jointly promise to pay

C

the sum of Rs. 3,000.

D
C

Compelled to pay the whole. A

is is insolvent, but his assets are
sufficient to pay one half of his debts. is entitled to receive Rs.
C

500 from A's estate, and Rs. 1,250 from B.

(3) A, Band C are under joint promise to pay D, Rs. 3,000. C

is unable to pay anything, and A is compelled to pay the whole. A
is entitled to
receive Rs. 1,500 from B.
t is to be noted that before the above rule can be applied, it must When two or more
be seen if there is a contract to the contrary'. Thus, A, B and C persons have made a
jOint promise, whom
jointlypromise to pay D Rs. 3,000. It is also stinulzted that the can
the promisee
amount is to be recovered by D from A, B and C jointly and not from compel to perform the
A or B or C
alone. Can D compel A to pay him the amount? No, D promise? (2 marks)
camot cormpel A to pay the whole amount. For here, the joint and M.U. Nov. 2011
Apr. 2013
several liability is
barred by an express agreement to the contrary. Nov. 2013
The Explanation to section 43 provides that nothing in May 2017
this
section
shall
Pevent a surety from recovering from the principal debtor,
Payment made by the surety on behalf of the principal debtor, or
U)
to recover anything from the surety
entitle the principal debtor
on account of payments
made by the principal debtor.
Thus, if A
called takes a loan from B, and C guarantees the loan, is A

the principal debtor, and C the surety. The above rule provides
hat if A
fecover
fails to pay. B, and therefore, C has to pay B, C can
the entire amount from A. So, also, if A. doespay
cannot recover he B,

any amount from C.

A, B
Bbeing and C are under a joint promise to pay. Rs. 3,000 to and D, A

pay only sureties As C fails to pay, A and B are compelled to

the whole sum, for
C,

They are entitled to recover it from C.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
150 THE LAW OF
B alleging that they
and C
PROBLEMS,– 1. X
sued A,
Were
admitted X's claim, and judgment
partners. At the hearing,
A
claimed. X

passed against for the amount

A wants
thereupon Advise B and C. to
against B and C.
proceed with the suit
and Their liability
C.

will succeed against

B

Ans.- Here, X

recovers from will A

But, whatever
X be taken
joint and several.
B and
into
ascertaining the amount to be paid by
account while
twO partners A and B,
owes a sum ofn
2. A firm consisting of recover the sum against A oly
5.000 to C. C filed a suit to
obtained a decree. The decree remains
unsatistied. C now wante t
recover the same amount.
file a suit against B to
Ans.- C will succeed, presuming that his suit against Bis n
time-barred. S. 43 makes the iability on all contracts
joint ad

several, and allows a promisee to sue

one or more of the several
of any of
joint promisors as he cho0ses, and excludes the right
or co-promisors. S. 43
them to be sued along with his co-promisor
co-contractors.
applies as much to partners as to the other
3. A, Band C jointly pass a promissory note in favour
P
of ior
a

Rs. 800, Out of this sum, takes Rs. 500, and B, Rs. 300. C
A is

surety for B and C. B becomes insolvent and recovers the

P

whole debt from A. Can A recover any contribution from C? if

sa,

to what extent ?

Ans.- The Explanation to S. 43 provides that nothing in S.4

entitles the principal debtor to recover anything from the surety on
account of payments made by the principal. Therefore, A camat
recover any contribution from C.

3rd rule-Effect of release of one joint promisor (S. 44)

The third rule declares the effect of release of one joint promsu
by the promisee. S. 44, which deals with the point, can
summarized thus :
The release of one of the joint promissors by the promisee promissors
i)
does not operate as a release of the other joint
fromhis
(ii) nor
does discharge the promisor
it so released
liability of the other joint promisors. judgmentdebtos
This would also apply in the case of Some
joint
Thus, it has been held that a release by a decree-holder of does nt d
the joint judgment-debtors from liability under the decree
operate as a release of the other judgment-debtors.

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE PERFORMANCE OF CONTRACTS
151
ENGLISH LAW.- The
position is different in England,
where the
discharge of one cerates
as a
release of all because it is construed
cOvenant not to sue. As observed by
Lord Herschell, the rule
a
asEngland not founded on any principle of
is or
justice equity, or
in
even
pUblic policy, justifying its extension
to the jurisprudence
of
countries. of

otherDIFFERENCE
BETWEEN INDIAN AND ENGLISH
LAW AS TO
JOINT PROMISES.– As seen above,
point of joint promisors and
the law differs from Indian
law on the promisees, as also on the
devolution of joint rights and liabilities.
The following are four points
of difference
between the two :

1. As to persons who have to perform a joint promise.- Under

42, all joint promisors must, during their joint lives and after the
death of any one of them, their representatives jointly with the
ervivor or survivors, and after the death of the last survivor, the
representatives of all jointly fulfil the promise.
In English law, a joint promise must be performed by all the
ioint promisors, but on the death of one of them, the liability of the
ioint contract (as to benefit) devolves upon the surviving promisors,
and the representatíves of the deceased are under no liability.
2. As to compeling a joint promisor to perform. Under S. 43,
when two or more persons make a joint promise, the promisee may,
(in the absence of an express agreement to the contrary), compel any
one or more of joint promisors to pertorm the whole of the promise.

In England, all joint promisors must be sued jointly for a breach

of a contract.

3. As to the effect of release of one joint promisor. In India,

under S. 44, the release of one joint promisor by the promisee does
not operate as a release of the others, nor does it discharge the
promisor so released from liability (to contribute) to the other joint
promísors.
In England, on the contrary, the release of one joint promisor by
ne promisee will, asa
rule, discharge the other joint promisors also.
4. As to person who can sue on a joint promise,-In India, in
vase f joint promises, the right to claim performance rests with
promisors during their joint lives, and after the death of
Oint
ay one of
them, with the representatives of the deceased jolntly
n the survivors -and after the death of the last survivor, with the
epresentatives of all jointly
S. 45.
In England, joint contracts are enforceable by the survivor or
Survivors
alone, except in case of debts due to. partners.

Find More at https://t.me/ LawCollegeNotes Stuffs

 152 THE LAW OF CONTRACTS

3. TIME, PLACE AND MANNER OF PERFORMANCE

(Ss. 46-50 and 55)
There are six rules applicable to the law as to time, place
performance. These are as under
:
manner of

Rule 1

Where by the contract,

a
promisor is to perform
Write a short note hispromise
on: Time and place without application by the promisee, and no time for pertormanca
of performance of is specified--the engagement must be performed withi
contracts. reasonable time. What is a reasonable time is a question
M.U. Apr. 2013 offact
and depends on the facts and circumstances of every particular
case : S. 46.
But, when a day for performance is fixed by the contr:an
the promisor must perform it at any time during the usual
business hours on the day fixed and at the place at which the
promise ought to be performed : S. 47.
lIlustration.-Apromises to deliver goods at B's warehousa
on the 1st January. On that day, A
brings the goods to Bs
warehouse, but after the usual hour for closing it, and they are
not received. A has not performed his promise.
Rule 2
When a promise is to be performed on a certain day and
only on the application by the promisee--it is the duty of the
promisee to demand performance at a proper place and time.
What is a proper time and place is, in each particular case, a
question of fact :S. 48. When a promise is to be performed
without application by the promisee and no place is fixed tor
the performance -it is the duty of the promisor to apply to
the promisee to fix a reasonable place for performance and t0
perform it at the place so fixed : S. 49.
Ilustration,- A undertakes to deliver a thousana
maunds of jute to B on a fixed day. A must apply to b
appoint a reasonable place for the purpose
of receiVing
and must deliver it to him at such place.
Rule 3
The performance of any promise may
manner, or at any time be made n
which the promisee prescribes
sanctions : §. 50.
Ilustratlons, (a) B owes A Rs. desires Bto
2,000. A
pay
the amount to As account with C. a banker. B, who also
banks with C, orders the amount from his
to be transferred

Find More at https://t. me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS 153
account to A's credit, and this is done by C.
Afterwards, and
before A knows of the transfer, C
fails. There has been a
payment by B.
good
(b) and B are mutually indebted.
A
and B settle an
A

account by setting off one

item against another, and B pays
A the balance found to be due from him upon such
settlement. This amounts to a payment by and A
B

respectively, of the sums which they owed

to each other.
(c) A owes B Rs. 2,000. B accepts some of A's goods in
reduction of the debt. The delivery of the goods operates as
part-payment.
a
(d) A
desires owes him Rs. 100 to send him a
B, who
note for Rs. 100 by post. The debt is discharged as soon as
B puts into the post a letter containing the note, duly
addressed to A.

Rules 4, 5 and 6
(When time is of the essence of the Contract)
4 When a party to a contract promises to do a certain thing at or What is the effect of
before a specified time or times, and fails to do any such thing tailure to perform at a
at or before the specified fixed time, a contract
time-the contract (or SO much oT it in which time is
as has not been performed) becomes voidable at the option of essential? (2 marks)
the promisee, if the intention of the parties was that time should M.U. May 2012
be of the essence of the contract :S. 55. Nov. 2013
If it was not
5.
the intention of the parties that time should be of
the essence of the contract, the contract does not become
voidable, by the failure to do such thing at or before the specified Writea short note on:
time; but the promisee is entitled to compensation from the Time the Essence
promisor for any loss occasioned to him by such failure:S. 55. of contract. is
M.U. Apr. 2016
When time is of the essence of the contract
may be noted that the law does not always regard a
sUpulation as to time as a rigid condition in an agreement,
and
not always allow a party.to rescind a contract because the
S er party has failed to perform his part of
the contract within
Sipulated time, but considers whether time was of the essence
ofthe contract or
not. At the same time, it may be observed that
in mercantile as a rule, deemed to be of
the essence transactions, time is,
shipping of the contract. This is so especially in the case of
contracts. Whether or not time is of essence of the
contract the
depends upon the intention of the parties.

Find More at https://t.me/LawCollegeNotes_Stuffs

 154 THE LAW OF CONTRACTS

If time is of the
essence of the contract, the failure
promisor to fulfil his promise within the specified time willrende by ta
of the promisee. But
the contract voidable at the option ifime
non-performance within
not of the essence of the contract, 'h
voidable, but will the
specified time will not render it entitle thepromisA
occasioned by such failure
only to compensation for the loss
In
Contracts relating to sale of land. England, the prevaling
judicial view is that if some time is named
in an agreement to
land, and the contract is not completed within that time sel
due
accidental delays, time is not to be of the essence of the
cort
cron
This is so because, very frequently, unexpected difficulties
at the time of verifying the seller's title, and this naturally resuhe
unexpected delay.
In India also, the same principles apply. The Privy Council a
held that S. 55 does not lay down any principle as regards contradt
to sell land, which are different from those which prevail under th
English law. This position has now been confirmed by the Supreng
Court in Govind Prasad Chaturvedi v. Hari Dutt Shastri (A.l.R. 197
S. C. 1005.)
The legal effect of S. 55 can be summed up as follows:
A. I# time is of the essence of the contract :
On failure to perform at or
the contract, (or so much of it asthe is

unperformed), becomes voidable at

before the specified time
option of the promisee.
B. If time is not of the essence of the Contract:
On failure to perform at the specified time, -the contract dos
not become voidable, but the promisee is entitled to compensatot
6. Lastly, if, in the case of a contract voidable on account of te
promisor's failure to perform his promise at the time agreed, ue
promisee accepts performance of such promise at any
other than that agreed, the promisee cannot claim compensa
for any loss occasioned by the non-performance of the pfo
at the time agreed, unless, at the time of such acceptance
gives notice to the promisor of his intention to do so : S 3
In one case, the defendant agreed to deliver his elepha
defendart
the plaintiff for Khedda operations on 1st October. The
later obtalned an extension of time upto 6th October, but a
deliver the elephant till 11th October, when the plaintiff re
to accept the elephant. The Court held that the very
the defendant asked for extension of time, pointed out
thelat tat

Find More at https://t.me/LawCollegeNotes _Stuffs

 THE PERFORMANCE OF CONTRACTS 155

thattime was intended to be of the essence of the contract. The

plaintilf was, therefore, justified
in refusing to accept the elephant
October, and was
on11th
contract. (Bhudra Chand
entitled to damages for breach of the
v.
Betts, 1915 22 Cal. L.J. 566)
Casesin which
contract becomes voidable
(Ss. 19-19A, 53
and55)
Under Contract
the Indiancases: Act, a
contract becomes voidable
in
the following three
consent
1. When a to an agreement is caused by coercion, undue
influence, fraud or misrepresentation, the agreement is a contract
unidable at the option of the party whose consent was so
caused: Ss. 19 and 19A.
fa party to an executory contract prevents the other party from
nerformíng his part of the contract, the contract becomes voidable
at the option of the party so prevented :
S. 53. (This will be
discussed later.)
3
lfa party to a contract, in which time is of the essence, fails to
perform his part of the contract at the fixed time, the contract is
voidable at the option of the other party : S. 55. (This
has been
discussed above.)
4. PERFORMANCE OF RECIPROCAL PROMISES
(Ss. 2, 51-54 and 57)
Definition (S. 2)
agreements contain mutual promises. A promise by X to
Most
deliver goods, in consideration of a promise by Y to pay for the
same, is the commonest
illustration of mutual or reciprocal promises.
Vide S. 2 of the Act,
promises which form the consideratíon (or part
ot the consideration) for
each other are called reciprocal promises.
Here, each party gives a
apromise
promise, in return for a promise, e.g.,
to sell and purchase between A and B.
a Each promise is
consideration for the other. When
the agreement consists of
Teprocal promises, as is usually
the case, there is an obligation
each party to perform his own promise
of the other's promise. and to accept performance
Pertormance of
With
reciprocal promises (Ss. 51-54 and 57)
regard to performance of reciprocal promises, five simple
UIes can
be laid down as follows:

Find More at https://t.me/LawCollegeNotes_Stuffs

 156 THE LAW OF CONTRACTS

1. Contracts which consist of reciprocal promises

simultaneously performed (S. 51)
consisting of reciprocal
In cases of contracts promisa,
no promisor need perform his promise, unlessthe promisa
perform his reciprocal promise.
is willing and ready to
Illustrations. (a) and B contract that A shall delivergoods
A

B to be paid for by B on delivery.

the goods, unless is ready
B
A
need not deliver andwiling
pay for the goods on delivery.
need not pay for the goods, unless is
A
B
ready andwilling
deliver them on payment. 'h
(b)
A
and contract that
B
shall deliver goods to B
A

first
at apia
instaiment to be paid ondeliven,
to be paid by instalments, the
need not deliver the goods, unless B is ready and wilinn .
A

pay the first instalment on delivery.

B need not pay the first instalment, unless A is ready ard
willing to deliver the goods on payment of first instalment.

2. Order in which reciprocal promises are to be performed

(S. 52)
Where the order in which reciprocal promises are to be
performed is expressly fixed by the contract--they are to te
performed in that order, and, where the order is not express
fixed by the contract-they are to be performed in that order
which the nature of the transaction
requires.
llustrations.- (a) A and B contract that shall build a house A

for B at a fixed price. A's promise to build

the house must t:
performed before B's promise to pay
for it.
(b) A and B contract thatA shall make over
his stock-in-trade
Bat a fixed príce, and B promises to give security for the paymer!
of the money. A's
promise need not be performed until the securiy
shout
is given, for, the nature of the transaction that A

have security before he delivers up requires

his stock.
performanc#
3.Consequences where a party prevents
(S. 53)
When a contract contains reciprocal one
to party
promises, and promise,
the contract prevents the other from performing
contract becomes his party s
voidable at
the, option of the

Find More at httpss//t.me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS
157
prevente:
and he is entitled to compensation from the other
which
partyforloss, if any,
non-performance he may sustain in consequence of
ofthe contract.
the
Mlustration.-- B
contract that B shall execute
A
and certain work
a thousand rupees. is ready and willing to execute
B

for A
for
accordingly, but prevents him from doing so. The contractthe
A

is
WOrk
voidable at option of B and, if he
the elects to rescind it, he is
entitled recover fromn
A

to compensation for any loss which he has

incurred its non-performance.
by
This
section is based on the sound and equitable principle
that
no
man should be allowed to complain of another's failure to do
something which he himself has made impossible.
CASE.- A contracted with to remove waste
B
rock lying at B's
mine within two years, provided that B
supplied a
crusher, and further
provided that there were not more than fifty
thousand tons of such
R
did supply a crusher, but it was inadequate, as it was
capable
of crushing only three tons an hour. Therefore, A stopped the work.
and thereafter,
sued B for damages. The Court held that A was
antled to recover damages for the expense to which he was put in
preparing for the work, and
also for the loss of profit which he would
otherwise have made by: supplying
the crushed stones to a third
party. (Kleinert v.
Abosso Gold Mining Co., 1913 58 Sol. Jo. 45)
4. Eifect of.default in reciprocal promise (S. 54)
When a contract consists of
reciprocal promises, such that one
of them cannot be performed, or
that its performance cannot be
claimed till the other
has been performed, and the promisor of
thepromise last mentioned fails to perform
cannot claim the performance. it-such promisor
of the reciprocal promise, and
must make compensation
any loss
to. the other party to the contract for
which,such other party may sustain by
performance the non
of the contract.
ilustration.(a)
Calcutta
A hires B's ship to take in and convey from
certain
to.Mauritius,. a cargo to be provided by A, receiving a
B
treight for its Conveyance.
ship. A cannot does not provide any cargo for
A

make claim the

performance of B's promise, and must
compensation to B
Periormance for the loss which B
sustains by the non-
of the contract.
b) A contracts
with B to execute
WOrk.
price, Bsupplying certain builder's work for a
the scaffolding and necessary for the
B refuses
to furnish any scaffolding timber
or timber, and
the. work

FindMore at https;//t.me/LawCollegeNotes_Stuffs
 CONTRACTS
158 THE LAW OF

cannot be executed. need not execute the work, and B bound

A

make compensation to for any loss caused to him bythe non

A
is
to
performance of the contract.
(c) contracts with B to deliver to him, at a specified pica,
A
a ship which cannot
certain merchandise on board arrive
engages to pay for the merchandise within
month, and B aweek
of
the contract.
B
does not pay within a week.
from the date As
need not be performed, and
B
deliver must make
promise to
Compensation.
(d) promises
A to sell him one hundred bales of merchandise,
B

to be delivered next day, and B promises A to pay for them

within

promise t
month. does not deliver according to his promise. B's
A

pay need not be performed and A must make compensation.

othar
5. Reciprocal promise to do legal things, and also
illegal things (S. 57)
Where persons reciprocally promise, firstly to do certain
things
circumstances.
which are legal, and secondly, under specified
to do certain other things which are illegal-the first set
promises is a contract, but the second is a voíd agreement.
Illustration.-A and B agree that shall sell Ba house belonging
A
to A for Rs. 10,000, but that if B uses the house as a gambling
was to be
house, B shall pay, Rs. 50,000 for it. The consideration
paid at the end of one year. executes the conveyance in favour o
A

B. Three months thereafter, B uses the house as a gambling house.

Though one year passes away, B fails to pay any sum to A.
Here, the first set of reciprocal promises, namely, to sell
the
secono
house and to pay Rs.10,000 for it, is a contract. But, the may
part of the agreement is for an unlawful object, namely, that A
Use the house as a gambling hOuse, and is a void agreement.
In such cases, when the void part of an agreement Can
properly separated from the rest, the latter does not become invau
But if the parties themselves treat all the transactions (valla
void) as one integral whole, the Court will also regard them as S
and therefore, the contract wll be wholy void. unlawul
the consideration or object is partly lawtul and partly
If severed (.e.
then the question. will arise whether the two can be retain the
separated); if they can, one can reject the bad part and legal parl
good. But where one cannot sever the illegal from the serve
fixed
the contract is altogether void. Therefore, if A agrees to a
his house-keeper and also to live in adultery with him at

Find More at https://t.me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS 159
cannot sue even for service rendered as house-keeper, as
salary,Apossible
not
intercourSe to ascertain what was due on account of adulterous
tis and what was due for house-keeping. The whole
agreement void nothing--even for as a house-keeper
acting
is andAlice
recovered: v.
Clarke, (1905) 27 All. 266.
can be
PERFORMANCE
OF ALTERNATIVE PROMISES (S. 58)
ALTERNATIVE
PROMISE.- The Act has the not defined
expression"alternative promise". This
term may be defined thus.-An
alternative promise is one which offers one of two alternate things.
Thus, A and agree that
B shall pay Rs. 1,000 for which
A
shall B

afterwards deliver to either 20 kilos of rice or 22 kilos of wheat.

A

Alternative promises, one branch being illegal (S. 58)

In the case of an alternative promise, one branch of
which islegal and the other illegal, the legal branch alone
can be enforced.
lustration. and B agree that A shall pay B Rs. 1,000 for
A

which B shall afterwards deliver to A either rice or smuggled opium.

This is a valid contract to deliver rice and a void agreement as to
the opium.

Thus, A, a Hindu reversioner, agrees with B to execute a sale

deed of certain property which he expects to get on the death of C,
and promises in the alternative that if he cannot do so, he will
execute a sale-deed of certain Zamindari property which was Owned
by him. The agreement relating to
the reversionary right is void, but
the alternative promise is enforceable, the transfer of a reversionary

.ngntMathura-1932
being void under S.6 of the Transfer of Property Act. (Mahadeo
29 A.L.J. 195)
D. HULES AS TO APPROPRIATION OF PAYMENTS (Ss. 59-61)
Mnen there are several debts owing by a person to another, and Write a short note on:
yment is made, the question which at times arises is : "To which Appropriation of
of payment.
the debts is the payment to be appropriated?" To take an
tustration, M.U. May 2017
Rs: 400
A
borrows Rs. 200 from B in January. He then borrows
from B in March
Next
year, and later Rs. 200 in July of the same year.
a question may arise as to
whether he sends Rs. 400 to B. Now,
400) this amount is to be adjusted for the second debt (of Rs.
or
The answer for the first and third debts (also aggregating to Rs. 400)?
forhisbenefit, is that appopriation is a right, primarily the debtor and
of

apayment for a creditor would naturally be inclined to appropriate

to a debt which he is not likely to realise easily.

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
160 THE LAW OF

PRINCIPLE UNDERLYING THE RULES AS

Write a short note on: THE
Clayton's rule. APPROPRIATION OF PAYMENTS.– The three rules regarding
contained in Secs. 59-61 of
M.U. Nov. 2011 appropriation of payments are
Nov, 2012 sections enact the rule of English
Apr. 2015 Contract Act. These three modifications. lawas
Clayton's case, with certain
laid down in
appropriation of payments can be stated thus:
The rule relating to may appropriate it to any debt
a payment, he
When a debtor makes accordingly. The primary right
creditor must apply it o
a short note pleases,
and the debtor. If the creditor
disagres
appropriation, therefore, belongs to the
Write
on: Rules as to must refuse
appropria-tion appropriation made by the debtor, he to receig
of with the
right enforceable againeta
case he has his
payments. Nov. 2009
M.U. the amount, and, in thatcourse; no case can the creditor rera
debtor in the ordinary but in
protest cannot prevail against h
protest. His
the amount under by the debtor's
appropriat
debtor's desire, and he will be bound
protest. Failing any express appropriation by the debtor
despite his
appropriation shifts to the creditor, and if he
does r
the right of in discharge of the
debts h
exercise it, the payment is to be applied
are time-barred.
order of time, even if such debts
short, the law as to appropriation of payments. The
This is, in
in three cases:
question of appropriation will arise
Where the debt to be discharged is indicated : S. 59.
1.
60.
such debt is not indicated S.
:

2. Where
party appropriates :S. 61.
3. Where neither
to be discharged s
Application of payment where debt
1.
indicated (S. 59) perso
a debtor, owing several distinct debts to one
Where
with express
intimation,
makes a payment to him, either
to be apyi
payment is
under circumstances implying that the debt -the payment,
some particular
to the.discharge of
accepted, must be applied accordingly. 1,000uper
Rs.
IlMustrations.a) owes, B, among other debts,
A

note which falls due on the first June. He owes

a promissory B Rs.
other debt of that amount. On the first June,
A
to
pays promissory

The payment is to be applied to the discharge

of the 567.
of Rs. BRs8
among sum
(b)
A
owes to B
other debts, the
sum, A
sends
todebt
writes to and demands payment of this the
o
A

567. This payment is to be applied to the discharge

which B had demanded payment.

Find More at https://t.me/LawCollegeNotes Stuffs

 THE
PERFORMANCE OF CONTRACTS
161
SCOPE OF, S. 59. It is to be noted that this section deals only
case of several distinct debts, and does not apply where
aiththeonly one debt, though payable by instalments.
Thus, where
is
there amount
of a decree was
instalments, it was held that
by consent made payable by five
the
annual appropriate the decree-holder was not
the payments to the specific instalments named
boundto
judgment debtor.
by the
held that a monthly salary
had been payable to a servant is a
t debt arising
distinct appropriated
every month, and payments made by the master
canbe by the servant to his past salary.
PROBLEMS.-
1.
A
decree was passed in favour of against
A
B,

payable by instalments. failed to pay the first instalment, but paid

B

second,third and fourth instalments in Court, which gave him

the
instalments. A
receipts
for those
applied those payments towards the first,
second and third instalments, and applied to the Court for recovery
B
of
the
fourth instalment from B.

contended that A was bound to

a0Dropriate the payment towards the second, third and fourth
stalments, and that his claim to the first instalment being barred, his
aoolcation should be dismissed. Will B's contention prevail?
Ans.- B's contention will not prevail. S. 59 which
gives a right to
the debtor to appropriate any
the payment to debt he pleases only
apolies when there are
a case
several distinct debts. has no application to
It
where there is only one debt, though payable by instalments.
In such a case,
the decree-holder is not bound to appropriate the
payments to the specific
instalment named by the judgment-debtor.
2. A owes B three
debts of Rs. 100, Rs. 200 and Rs. 300. B
demanded all the three
a
debts from A. B sent a sum of Rs. 300 with
covering letter in which he
stated that he had sent Rs. 300 in
dscharge of the third debt of Rs.
300. B desires to appropriate the
SUm of Rs.
300 sent by A in discharge of the two debts of Rs. 100
nd Rs. 200, which had become time-barred. Can he
do so?
Ans: Here, A, the debtor, has expressly indicated
payment that the
of Rs. 300 was towards the debt of Rs. 300. B
has no
discretion the creditor,
oher two to appropriate the
time-barred
payment in discharge of the
covering debts. (If A
had sent Rs. 300 without the
letter, B could have appropriated the payment
G the other two
time-barred debts.)
in discharge
Application
not indicatedof payment where debt to be discharged is
Where
(S. 60)
other
the debtor has omitted are no
to intimate, and there
circumstances
indicating to which debt the payment is to

Find More at https://t.me/LawCollegeNotes_Stuffs

 162 THE LAW OF CONTRACTS

be applied, the creditor may apply it at hiS discretion t

from
lawful debt actualy due and payable to him the debto.
whether its recovery is time-barred or not.
SCOPE OF S.
60.–The rule contained in S. 60 lays downtha
where no appropriation is made by the
debtor, the creditor may
appy
payment to any lawful debt, even if it is barred by the
the law
running accound
a
limitation. This frequently happens where there is
may, in
extending over several years. The creditor Such a case,
appropriate the payment to the earliest items barred by limitatíon,and
may sue for such of the balance which is not so barred.

Thus, X has borrowed from Y, Rs. 800, Rs. 500, and Rs. 600..
of Pa
different occasions. Y's claim in respect of the earliest loan
800 becomes time-barred, and thereafter X pays Rs. 1,000
to y

without indicating how the said amount is to be appropriated.

Here

Y can treat Rs. 800 as being in discharge of the first debt of

Re

800, although the same is time-barred, and the remaining Rs.

200

may be appropriated to reduce the amount under the second delt

to Rs. 300 (Rs. 500 minus Rs. 200).
PROBLEM-A obtainstwo loans of Rs. 50,000 each from a bark,
one of which is guaranteed by B. A sends the bank a sum of Rs. 60,00,
but does not specifically mention how it is to be appropriated
towards
nat
the loan. The bank claims to take Rs. 50,000 towards the loan B
B.
guaranteed by B, and Rs. 10,000 towards the loan guaranteed by
objects to such appropriation. Can he succeed?
Ans. Barecannot Succeed. Where the debtor has omitted to intimate,
and there no other circumstances indicating to which debt the
to
payment is to be applied, the creditor may apply it, at his discretion,60).
any lawful debt actually due and payable to him from the debtor (S.
o
In this case, as A has failed to exercise his right of appropriation
payment, the bank is entitled to apply it to any of the two debts,
boul

no right to objeci
being due and payable. B, being onlya surety, has
D
t PROBLEM.Aowes B debts of Rs. 500 and Rs. 1000.

writes to
A
demanding payment of the debt of Rs. 1000. A Seriu
him Rs. 500, without intimating that the payment was oin
appropriated towards the debt of Rs. 1,000. B appropriates
payment,of the debt of Rs. 500, and after the debt of Rs. bu0
barred by limitation, sues A for. Rs. 1,000. debt
Ans, In this case,
payment of the
B
demands from A, the
of Rs. 1,000, and A sends him Rs. 500. It is clear that A sens Hence
only.
amount towards the discharge of the debt of Rs. 1,000 500. Ais
debt of Rs. liability
B
cannot appropriate the amount towards the
not, therefore, liable for the whole debt of Rs. 1,000;
his

Find. Morë at httpS://t.me/LawCollegeNotes Stuffs

 PERFORMANCE OF
THE CONTRACTS
163
The debt of Rs. 500 is already
only.
Rs. 500 time-barred,
to
extends
cannot be sued for the said amount.
andA, interest
Princjpal and
Where the debt
to be paid carries interest, money received
without any
definite appropriation is to be applied first in the
payment interest, and then towards
of with
the principal amount. Thus,
decreeis passed for Rs. 1,500 interest at 5% per annum,
&
payabie by three-yearly
jdgment-debtor
instalments of Rs. 500 each. The
pays Rs. 500 at the end of each of
without the three
indicating any appropriation. In such a case,
jears, appropriate Rs. 75 for the
decree holder may the interest due, and the
balance of Rs. 425 towards the principal amount.
Application of payment where neither
3 party appropriates
(S. 61)
Where neither party makes any appropriation, the payment is
o be applied in discharge of the debts in order of time.
whether they are time-barred or not. If the debts are of equal
standing, the payment is to be applied in discharge of each
proportionately.

has borrowed from Y, Rs. 200 in 2007, Rs. 300 in 2008

Thus, X
and Rs. 800 in
2011. In 2013, when the first two debts become
ime-barred, X sends Rs.
600 to Y. If neither X nor Y makes any
propriation the amount of Rs. 600 is to be first applied in
dscharging the first two
debts of Rs. 200 and Rs. 300 (although
tey are time-barred),
and the balance of Rs. 100 will reduce the
kabity in respect of
the third debt to Rs. 700.
Summary

Io put the
above three rules in a nutshell, it can be said that
debtor has, at the time of payment, the option of appropriating
,
Payment; in default, the creditor may appropriate as he
including deems
time-barred debts; in default of either, the law will
nake
the appropriation
inethertime-barred by applying the debts in order of time,
or
. MODES OFnot.DISCHARGE OF CONTRACTS
(i.e., CONTRACTS WHICH
NEED NOT BE PERFORMED)
According (Ss. 37-39, 56, 62-64, 67)
Ulowing to
fiveways Anson, a contract may be discharged in the
bedischarged
by mutual agroement.

Find More at https://t. me/LawCollegeNotes_Stuffs

 CONTRACTS
164 THE LAW OF

by either party may

Give two ways in (2) It may be performed: the duties undertaken
which a contract may rights satisfied.
be thereby fulfilled, and the
be discharged by a new Obligation arises
agreement. (2 marks) (3) It may be broken: when this happens,
a against the other
M.U. Nov. 2014 one party acquires the right to file suit
and circumstaneas
may become impossible, by reason of certain
(4) It obligatione
may exonerate the parties from their respective
which
discharged by operation of law.
(5) it may be
a contract may be
According to the Indian Contract Act,
ways:
discharged in the following eleven
1. By performance.
dispensed with or excused: (S. 37)
2. Where performance is
refusing tender of performance : (S. 38)
3. By
one party refusing to perform (S. 39)
:
4.By
impossible or unlawful : (S. 56)
5. By the act becoming
By novation, rescission or alteration of contract : (S. 62)
6.
7. By waiver
:
(S. 63)
:
8. accord and satisfaction (S. 63)
By
9. By rescission of a voidable
contract : (S. 64)
What are the various performance :

modes, of discharge 10. By the promisee failing to afford facilities for

of a contract? (S. 67)
M.U. Apr. 2015
11. By operation of law.
contracts wil
Each of the above eleven modes of discharge of
now be discussed in necessary details.

1. By performance
If both parties have performed their respective obligations
under
Explain briefly the
various modes of the contract, the contract is discharged. Contracts are norma
of. a IS the
discharge
contract. entered into with a view to performing them, and hence, this
M. U. May 2018 most normal mode of discharge.

2. Where the performance of the contract is dispensed

Contract
or
with or
excused by any other law by the
Act (S. 37)
(This has been. discussed earlier.)
3. By refusing tender of performance (S. 38)
(This has also been discussed earlier.)

Find More at https://t-me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS 165
refusal of party to perform promise wholly (S. 39)
a
By
4.
(This too has
aiso been discussed earlier.)
performed under
By the act to be
impossible
the contract becoming
5. or unlawtul (Doctrine of Frustration) (S. 56)
contract to do an act which, after the contract
impossible, is made,
A
or, by reason some event which the promisor
of

becomes
prrevent,
unlawful, becomes void when the act becomes
cOuld not
imoossible or unlawful : S. 56(2).

Mus.- (i) A and

B
contract to marry each other. Before the time
goes mad. The contract becomes void.
fixedfor the marriage,
A

A contracts
to take in cargo for B at a foreign port. A's
Government afterwards
declares war against the country in which
rt is situated. The contract becomes void when war is declared.

) contracts to act at a theatre for six months in consideration

A

paid in advance by B. On several occasions, A is too ill to

f a sum contract
act The to act on those Occasions becomes void

Frustration of Contract
s. 56 lays down that the contract becomes void upon the act
being (0) unlawful of (i) impossíble, though there is no condition to
that effect in the contract. By the Common Law earlier applied in
England, a man who promises without qualification is bound by the
terms of
the promise, if he is bound at all. If the parties do not
mean their agreement to
be unconditional, it is for them to qualify it
by such conditions as they think fit. Thus, J rented a house from P
and ocupied it. Later, he was expelled by the army of an enemy
(invader), and thus, without any fault, could not derive benefit from
was nonetheless held liable to pay rent, as the undertaking
JWas absolute.
J could have, in the contract, provided for such a
contingency : Paradine v.
Jane, (1947) Aleyn 26.
But, a
condition need not always be expressed in words; there
conditions which may be implied from the very nature of the
transaction. On
this principle, a promisee is discharged, without the
promisor's fault,
in three.cases:
the performance is rendered unlawful or
impossible by law;
a specified subiect-matter
assumed by the parties to exist is
accidentally destroyed;
(fi)
i thepromise was to perform something in person, and the
Pomisor dies or is disable by sickness or misadventure.

Find More at https://t.me/LawCollegeNotes_Stuffs

 166 THE LAW OF CONTRACTS
or being
in cases of such agreement becoming,
But discovered
to be, void, any person who has received any advantage under the
agreement or contract is bound to restore it, or
make compensation
it. (S. 65)
for it, to the person from whom he received
CASES OF IMPOSSIBILITIES.- There are several kinds of
impossibilities which may fall within the purview of the Doctrine of
Frustration embodied in S. 56 of the Act. (also known as "Frustration
of the adventure" under English law).
Impossibility created by change of law.- A contract is
discharged when its performance becomes impossible on account
of a change in the existing law. Persons generally contract on the
basis of the law existing at the time of the contract. If this law is
subsequently changed, they are not expected to honour their
obligations by committing a violation of the law.
v. De Crespigny (1869 LR QB 189), C had
Discuss the doctrine tn, Ihus, in Bailey
of agreed with B that neither C nor his assignee would build any but
of frustration
contracts with the help ornamental buildings on a small park in front of B's premises. The
of decided cases. park was acquired by a Railway Company under Parliamentary
M.U. Nov. 2012 powers, and they had built a station upon it. The Court held that C
Apr. 2014 was not liable for the failure of the covenant.
s
Apr. 2016
So also, where the plaintiff contracted to carry the defendant's
bales of cotton in his trucks, and before al the bales could be
carried, the trucks were requisitioned by Government under the
Defence of india Rules, it was held that the contract became
impossible of performance.
Frustration by delay,- The commercial frustration of
adventure by delay means the happening of some unforeseen delay
without the fault of either party to a contract, of such a character that
if the fulfilment of the contract is the only way in which the fulfilment
is. contemplated and practicable, and it is so inordinately postponed,
that its fulfilment, when the delay is over, will not accomplish the
objects which both the parties to the contract had in mind.
Jackson,v. Union Marine Insurance. Co., L.R. 10 C.P. 148.-A
charters from Ba ship to go to port X, take a cargo there and Cay
it to port Y.
The ship runs aground on the way to X, and soe
weeks pass. Then, A charters another ship. B sues the insurane
company for total loss of freight that B could have got from A. Hele
A was justified
in chartering another ship, as the long delay
would have been caused in taking the ship off and repairing
would have ended the contract In å commercial sense, and to com would
A
to perform his promise after such repairs had been done with B
be to compel him to perform a new contract. A's contract

Find More at https+//t.me/LawCollegeNotes Stuffs

 PERFORMANCE
THE OF CONTRACTS 167
rustrated when the ship ran aground, and B
is entitled to
Was damages rom the insurer.
recOver
JagoishPrasad V. Produce Exchange Corp. (1945) Cal. 41.–
plaintifentered into a contract with the defendant for the
purchase goods at a certain price. Before the goods were
The
of passed under the Defence of ndia Act,
delivered, an order was
maximum price of those goods at a rate lower than that
faxingthe contract. The Plaintiff sued to recover the difference
fixedin the
betweenthe contract price and the price fixed the Government.
by

Court held that the contract became void when the order
to
The Defence of India Act was passed, making it unlawful
under the
charge a
price exceeding the price fixed by the order, and therefore,
plaintiff was not entitled to recover the difference.
the
of the contract.-
A
Destruction of the subject-matter
discharged if a specific thing which is essential to the
contract
pertormance is is destroyed. Where person agreed to
of the contract
a

make and fit

machinery for a steam-ship to be paid for by
instalments, and after some of the machinery had been made and
instalments had been paid, the ship was lost by perils of the sea,
was held thereby dissolved, and both parties were
the contract
ischarged from further performance.
In Taylor Caldwell, (1863 3 B& S. 826) the defendants being
v.

the owners of a Music Hall, agreed to lend the use of the hall
to
the plaintiffs for the purpose of giving concerts therein. Before the

line came for the delivery of the hal, it was destroyed by fire, so
tat the contract had to be. abandoned after the plaintifs had
incurred considerable expenditure for its preparation. The plaintiffs
SUed the
defendants for damages for the breach of the contract. It
Was held
that the defendants were not liable. In delivering the
ógment, Blackburn, J.. observed:"The principle seems to be that
contracts in.which the performance depends on the continued
existence of a
given person or thing, a condition is implied that the
OSsiblity of performance arising from the perishing of the person
O the thing shall excuse
the performance." :
Non-existenceor non-occurrence, of a state of things
which
forms the basis of the contract.- If a state of things
onthe was not a
basis of which a contract was made (and which
mere
the partles to enter Into the
motive or
Contract)
inducenent to one of
does not exist the contract is discharged.
Krellv.
(or occur),
Henry, (1903) agreed to hire the use of
fooms in
London on 26th
2 K,B.
740.H
and 27th June, 1902, for the
purpose

Find More at https:/t.me/LawCollegeNotes Stuffs

 168 THE LAW OF CONTRACTS
reaen.
of seeing the intended coronation procession of the king. By
of the king's illness, no procession took place
on either of the:
we
days. Is H liable to K for the agreed rent? Here, the procession
the root-cause ofthe contract. The procession having been cancelled,
H is not liable to K for the rent.
Death or serious illness of promisor in
a
contract for persSonal
service,- An eminent piano player who had promised to perform
at a concert was held not liable for non-performance of the promise
non-performance being due to his serious illness: Robinson
Davison (1871) L R. 6 Ex. 269.
Supervening circumstances.- A contract is discharged, if
on account of supervening circumstances over which the parties
have no control, its performance becomes impossible within the
time or in the manner contemplated by the parties.
In Board v. Dick, Keer & Co. it was held that a contract to
construct a reservoir for the Metropolitan Water Board (a work
which wouid have taken six years for completion) came to an
end when the Ministry of Munitions ordered the contractor to
discontinue and suspend the erection of the work under the
authority conferred on that Ministry during the war with Germany.
(See "Effect of WNar on contracts" below.)
COMMERCIAL IMPOSSIBILITY- It is to be noted that the
impossibility contemplated in S. 56 of the Act does not include what is
called commercial impossitbility. To excuse a person from discharging
a contract,
there must be a physical or legal impossitbility. The word
"impossible' means 'impracticable' in the ordinary sense of the term.
An act becomes impossible when it cannot, by human means, be
done; but if it be only in a high degree improbable, then it is not
deemed impossible. So, a contract does not become impossibie
merely because it cannot be peformed except at a heavy loss.
Thus, on 1st January, A agreed to sell 100 bales of cotton to E,
at Rs. 500 a bale, delivery to be made on 1st February. A hoped to
procure this cotton from the wholesale market at Rs. 480 a bale, and
thus make a profit of Rs. 20 per bale. However, cotton prices shot up
(unexpectedly) to Rs. 520 a bale on 10th January, and on 1st
February, A found it imprudent to buy cotton bales at Rs. 520 and re
sell them at Rs. 500 a bale. So, he did not deliver the cotton to D
who sued him for damages for breach of contract. Will B succeed1
In the above case, it was only
uneconomical to supply
cotton to B. Performance of the contract had not
become imposs
(or illegal).Therefore, A would be liable to make compensation to
This is not a case of frustration of
the contract.

Find More, at https://t.me/LawCollegeNotes_ Stutfs

 PERFORMANCE OF CONTRACTS
THE
169
Purshotam v. Purshotam (1897) 21 Bom.
23, A, a Hindu,
give his minor
contracted
In with B to marry B, and
daughter in marriage to B.
C

C declined to
A
However, informed B that he could
mind.
compel her to change her B
sued for breach of contract.
A

not agreement cannot be said to be impossible of performance,

Here,thebecause the girl changed her mind.
merely
Hurnandrai V. Pragdas, 25 Bom.
L.R. 537, the defendant
In contract with the plaintiff to sell him 864 bales of
enteredinto a
dhoties
manufactured by certain named mills. The seller could only
owing to the mills failing to manufacture
deliver part of the goods,
deliver the balance to the defendant-seller. It was held that there
or frustration of the contract, and therefore, the buyer was
was no
ontitled to recover damages from the
seller.
the same principle, it has been held that a lessee of salt
pans from the Government cannot excuse himself from repairing

the
salt-pans on the ground of a strike of workmen, and is liable for
the cost of
repairs.
A
contracts to let out a godown to B for a periodof one year
trom a future
date. At the date of the contract, C was the tenant of
A and was
occupying the said godown. C did not vacate the godown
though called upon to do so by A. B called upon A to hand over
vacant possession of the godown. A
pleaded impossibility to do so,
as C did not vacate
the godown. Here, it cannot be said that the
contract has become impossible to perform owing to C's retusal to
vacate. A must perform
the contract or pay damages to B.
By a contract
made with the plaintiff, the defendants agreed to
carry from
Bombay to Jedda in their steamer 500 pilgrims, who were
about to arrive in
Bombay from Singapore in the plaintiff's ship. The
plgrims arrived in Bombay.
But the defendants refused to receive
Vem on board
their steamer, on the ground that during voyage
the
the plaintiff's ship to Bombay,
there had been an outbreak of
Siai-pox on board, and that
with the pilgrims had been in close contact
those who
had been suffering from the disease, and that the
Plormance of the contract had,
unlawíul, under the circumstances, become
having regard to of sec. 269 of the Indian
Penal
Code. the provisions
negligently
(That section provides that whoever unlawfully and
to believe does any act which is, or which he knows or has reason
to be likely
dangerous to spread the infection of any disease
thatthe to life, shall be punished with imprisonment.) It was held
nothave carrying of the pilgrims
oxce been in contravention
in the defendant's steamer would
of law, and
prevent
of any law or regulation having the
infection, it
that if special precautions were necessary to
was the duty of the defendants to take those

Find More at https://t.me/LawCollegeNotes_Stuffs

 170 THE LAW OF CONTRACTS

precautions, and to perform the contract: Bombay

&

Persia, etc. v.
Rubatino Co., 14 Bom. 147.
Karl Ettinger
v.
Chhagandas, 40 Bom. 305.--A agrees to supply
freight for B's goods from Bombay to Karachi at Rs. 10 per ton. On
account of war being declared after the agreement, the shipping
company with whom had intended to arrange freight increased
B

their charges to Rs. 50 per ton. B thereupon pleads that the

agreement had become impossible of performance. Now, the
impossibility referred to in S. 56 is only physical or legal impossibility
and does not include commercial impossibility. Therefore, the
contract to supply freight did not become impossible, simply because
the freight could not be got except at prohibitive prices. B is not
justified in pleading the agreement has become impossible.

EFFECT OF WAR ON CONTRACTS

Numerous cases arose during the First World War (1914-1918).
where either the adventure became impossible
or the performance of the contracts due to enemy action,
became illegal, as trading with the
enemy during the continuance
of the war, and so, had to be suspended
till the end of the war. Performance
of the agreement after the long
delay of four years of the period of war,
when the impossibility would
have ceased, would have been under
entirely different circumstances.
Therefore, the contracts were held to
be frustrated on the declaration
of war, and the parties were discharged.
came to be classed as Both kinds of cases then
"frustrated contracts" and to
falling under the head impossibility". be regarded as
only a special case of "The doctrine of frustration is
the discharge of contracts by an impossibility
arising after the contract was
made." Constantine S. S. Line v. Imperial
Smelting Corporation, 1942 A.C.
154.
So far as the effect of war on
to consider two possibilities, contracts is concerned, one
has
enemy States (1) viz., contracts entered into between
before war, and (2) during war.
(1). Beforewar.-The general rule with regard to
between the citízens of.different contracts
entered into before belligerent (i.e. warring)
the outbreak of the hostilities States
not dissolved by is that they ae
the outbreak of the war,
the war is over. but are suspended un
There are two eXceptions
contract, but to the rule that war
enemy or whichdoes not dissolve only
it, namely, () contracts suspends a
involve any dealing which aid the
which, by their very with the enemy;
nature, are incapable and (i) contrav
of suspension.

Find More at https://t.me/LawCollegeNotes Stuffs

 PPERFORMANCE
THE OF CONTRACTS 171
Metropolian Water Board v. Dick,
Kerr & Co. Ltd. (1918)
Thus,in
British subject, entered into an agreement with
a B,
199, A,
British subject, build a reservoir
A.C
another to
agreement, war broke out,
for B in three years. After
and the work had
date ofthe
SUpended orders of the British to be
the under the Government
in pursuance
war terminated after a
special Act. The period of four years, and
a on A's completing the work. On A's refusal to complete the
ofinsisted
B sued for damages in respect of the breach of contract. The
A

Hork, B
that B's suit must be dismissed. The inordinate delay
Court held outbreak of the war would
caused by the make the contract, if
resumed, contract
different from the original contract.
a
During war.- During war, no performance of the contract is
permitted, nor will any action on it be entertained. All contracts
enlered into during a war between Indian citizens and citizens of a
war with India are illegal
state which is at and cannot be enforced.
Transactions with enemies during a period of war are void ab initio.
So, when peace returns, they are still void and of no effect.
Abdul Razak v. Khandia Raw, 41 Mad; 225.-A contract was
made, after the declaration of war, between merchants at Madras
and importers of German dyes in Bombay, whereby the defendants
agreed to sell and deliver the plaintiffs certain casks of dyes already
shipped from Germany. Are the defendants bound to deliver goods
to the plaintiffs? Now, as
the defendants could not lawfully take up
and pay for the goods, they could not lawfully agree to sell and
deliver them to
the plaintiffs. Therefore, the defendants are not
bound to deliver the goods to
the plaintiffs.
Two further provisions relating to impossible agreements
S. 56 lays down fin sub-sections (1) and (3)], two
provisions
further
relating to impossible agreements, as follows
Agreement to do an impossible act [(S. 56 (1)]
Under S.56(1), an agreement to do an act which is impossible
in itself
is void. Thus, A agrees with
magic. The
agreement to discover treasure by
B

This
is void.
section is based on the English Law on the point. Under
heEnglish
Common agree
Isobviously Law,
parties who to do something that
understand impossible must be deemed not to be serious or not to
promise what they, are doing.
Further, the law cannot regard a
s being
to do Something which is impossible in the nature of things
of any value, and
Consideration.
therefore, such a promise is no

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
172 THE LAW OF

Impossibility may appear on the face

of
the contract, of may
of making the contract
exist unknown to the parties at the time
may even arise after the
contract is made. If the act impossible
is
agreement is void ab initio; in siuoh
itself, physically or legally, the
case, the consideration cannot be said towhether be real, i.., it is
or not it
contract is void, is
existent, and hence the on maxim lex nonknown
based the
to the parties at the time. This is impossible).
impossibillia (the law does not compel the
ad
[S. 56(31
When impossibility is known only to the promisor
Under S. 56(3), where one person has promised hare
to
d
or with reasonable diligence, might
something which he knew,
to be impossible n
known, and which the promisee did not know
to such promisee
unlawful, such promisor must make compensation
through the non.
for any loss which such promisee sustains
performance of the promise.
mnarried to
IMlustration.- A contracts to marry B, being already
is subject to practise
C, and being forbidden by the law to which he to
polygamy. A must make compensation to B for the loss caused
promise.
her by the non-performance of his
It is to be noted that S. 56(3) deals with the
case of a person
a contract. The illustration
who knew of the impossibility or illegality of
an element of fraud.
makes this quite clear. In such cases, there is
6. By novation, rescission or alteration of contract (S. 62)
or a
deals with the effect of rescission a alteration
of
What is Novation? S. 62
agree to
(2 marks) contract. Under this section, if the parties to contract
substitute a new contract for it, or to rescind or alter it, the
original
M.U. NOV, 2015
contract need not be performed.
a contract. It is
llustrations,- (a) A owes money to B under
agreed between A, B andC, that shall thenceforth accept
B
as
a
A to B is at an end, and
his debtor, instead of A. The old debt of
new debt from C to B has been contracted.
(b) A
owes B Rs. 10,000. enters into an arrangement with B,
A

or
Rs. 5,000 in place
and gives Ba mortgage of his (A's) estate for
the debt of Rs. 10,000. This is a new contract, and extinguishes
the old.

rs (C) owes B Rs. 1,000 under a contract. B owes C Rs. 1,000.

A
b
n0
orders A to credit C with Rs. 1,000 in his books, but C does
assent to the agreement. B still owes C Rs. 1,000, and no
contract has been entered into.
NOVATIO.-S. 62 deals with the doctrine of novatio (or novation:
The term novation has been thus defined by the House of Lords

Find More at https://t.me/LawCollegeNotes Stuffs

 PERFORMANCE
THE OF CONTRACTS
173
contract in
a
there being either existence, some new contract is
svtstituteo
That, between the same parties or between
for it,
parties, the consideration
being mutually the discharge of
diterentcontract". India, there is novatio when
In the parties are
old
changed,orthe nature of the obligation is changed.
the
forms.- The parties to a
contract may substitute new
ts old ones, as
indicated by illustration (b); or it may be
ermsfor the
beween promisor,
Aareed the original will the original promisee and a
promisee look to the third party, instead of
partythatthe
thidoniginal promiso, for the performance the contract, as in
of

the
tustration (a). In the former case, there is a substitution of new
ones while
the parties remain the same; in the
lermsfor the old
case, a new party is Substituted for old one. In both the
later
cases,the old debt is at an end, and
a new one
takes its place;
contract is replaced by a new contract.
ld
It's
effect-In cases where there is a contract is
novation, the old
a suit based on the old contract
aopletely extinguished, and
is not
maintainable. Novation cannot
take place unless it
is effected with the
nnsent of all the parties. 1o effect a novation, the contract which is
shstituted must be one capable of enforcement in law. So, a fresh
ontract contained in a deed which, though compulsorily registrable,
tnot registered, does not operate as a novation. So also, where the
subsequent agreement cannot be sued upon, because it is
nsuficiently stamped, or where the promisor has disabled himself
fom performing his promise,
there will be no novation.
Moreover, S. 62 will not apply where the alleged agreement to
substitute a new contract for the old is made after the breach of the
oigjinal contract. In
that case, the original contract can be sued
Upon. This view of
the law is supported by Sir Frederick Pollock. But
n a Madras case, it
has been held that there can be a novation
unger S. 62 even
after breach of the original contract : N. M. Firm v.
ihe Perumal Chetty,
(1922) 45 Mad. 180.
CASES.- Angan Lal v. Write a short note on :
Saran Behari Lal, 1929, AI. 503.– A

vheS an obligation to Novatio.

B under formal instrument. A B agree
orallyy
to substitute for a mortgage a month fromthat and M.U. Apr. 2011
nonovation, it
as the old obligation has not
day. There is
Nov. 2012
Manohar
been extinguished.
tond. A v. Thakurdas, 15 Cal. 319. owes B Rs. 1,100 on a
A

and B agree,
acept Rs. after the bond becomes due, that B will
notpaid 400 in cash and a fresh bond for Rs. 700. Rs. 400 are
nor
Dleads is a fresh bond executed, sues for Rs. 1,100,
novation.
B A A

made His
after plea is not sound, because an agreement
breach of the old contract would not create novation.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
174
Court, stated above, quite
(However, the view the Madras High
of
is
the contrary.)
C.L.J. 264.-- A Owes a sum of
Ramjiban v. Dhikum Singh, 16
mortgage deed which
money to B under a bond. A executes a a
a pro-note or hundi which cannot
not registered (or gives no novation be
want of stamp.) There is
admitted in evidence for law. R

new contract intended to be created is not valid in

the consideration, the bond.
sue on the original
Novation and Assignment
to be distinguished from an assignment of a
Novation has also cases even
can operate in Some
debt. Whereas an assignment
a novation is effective only it tha
without the consent of the debtor,
debtor is a party to it.
is a transfer of
Further, in the case of an assignment, there
annulment of one debt and
property, whereas in a novation, there is
place.
a substituted debt is created to take its
7. By waiver (S. 63)
Under S. 63, a promisee may
(i) dispense with, or the performance of the
(ii) remit wholly or in part
promise made to him, or
(iil) extend the time for such
performance, or
(iv) accept, instead of it,
any satisfaction which he thinks fit.
B. B, afterwards,
llustrations.- (a) A promises to paint a picture for promise.
forbids him to do so. A is no longer bound to perform the
pays to B, and B accepts,
(b) A owes B Rs. 5,000, A
time and plat
satisfaction of the whole debt, Rs. 2,000 paid at the
whole debt is dischargeu
at which the Rs. 5,000 were payable. The
pays to B Rs. 1.000, and accêps
B

(C) A owes B Rs. 5,000.C

on A. This payment is a disChaly"
them in satisfaction of his claim
of the whole claim. amount
(d) A
owes B, under a
contract, sum
a of money, the
the a 2,000.
which has not been ascertained. A, without ascertaining
sum of Rs. amount
gives to B, and in satisfaction thereof., accopts the
B

its
This is a discharge of the whole debt, whatever may be creditors.A

(e) owes B, Rs. 2,000, and is also indebted to

A
other
pay them
demands. a
B, to
makes an arrangement with his creditors, including respective
composition of fifty paise in the rupee upon their
B's demand.
Payment to B of 1,000 rupees is a discharge of

Find More at https://t.me/LawCollegeNotes Stuffs

 THE PERFORMANCE OF CONTRACTS
175
WAIVER. a contract
agreemernt,
Since is created by means
may also be discharged by of an
it another agreement between
same parties, nulifying the previous one. An
discharging
the previous contract may take
agreement
the the form of waiver.
Waiveror release is the surrender of a Contractual right.
a
Thus, A gives loan of money to
B.

recover
A
has, of course, the right
money from B; but
the by an agreement he may give up
to right. This giving up of right is called a waiver. The agreement
thewaiver
need not be express; it may even be inferred from the
the parties.
of
oonduct of

By"Accord and satisfaction" (S. 63)

8.
a
When one of the parties to the contract, in order to obtain
release, agrees to do something other than what he
was bound to
do by the contract, and when he has discharged the obligation, and

has been set free, the contract is said to have been discharged by
ornord and satisfaction. The new agreement is the aCCord, and the
performance thereof is the satisfaction.
Thus, the idea of accord and satisfactíon involves the purchase
of a release from an obligation by means of any valuable
consideration, which is not the actual performance of that obligation.
As seen above, the accord is the fresh
agreement by which the
obligation is discharged, and the satisfaction
is the consideration

which makes the agreement operative.

For example, A owes B Rs. 300. Both the

parties agree that if A
satisfaction of his
pays Rs. 200, B will accept the amount in full
pays to B. The payment is a discharge of the whole
eot A Rs. 200
ciaim, the agreement to pay Rs. 200
being the accord, and the
aCual payment of the sum being the
satisfaction.
ACCORD AND
SATISFACTION DISTINGUISHED FROM
distinguished
is to be
PERFORMANCE. Accord and satisfactionperformance. When the
from obligation by
the dissolution of the dissolved, but
Contractual obligation performed, the contract essence is
is satisfaction. The of accord
thtís. not a case of accord and something
andsatisfactíon mutual consent, one party gives
is that by and the other
different was bound to give,
a house for
B
from that which he A builds
accepts claim. Thus, A. After the
it in satisfaction of his pay Rs. five lakhs to
n consideration Rs.
of B's promise to land to A instead of
construction Boffers a plot of lieu of Rs.
five
of
the house, accept the plot of land in lieu
lakhs. A not bound to accepts B's offer in
INelakhs is. But, if A

which eentitled to.

he is

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
176 THE LAW OF

is a case of dissolution of
of the money promised earlier,
it

contract by accord and satisfaction.

65)
9. By rescission of voidable contract (Ss. 64 and
a contract is voidable rescinds
#

When a person at whose option

liability under the contracd
the other party is discharged from
party rescinding a voidable contract has received an
However, theif

benefit from another party to such

contract, he must restore surh
person from whom it was received
benefit, so far as may be, to the
property belonging
Thus, where the step-mother of a minor sold
pay off a mortgage executed by his father
to the minor in order to
expenses of the minor, the minor could
and to meet the marriage
but, in that case.
after attaining majority, have the sale set aside,money
consideration by which his
he was also bound to refund the v. Bom. L.R. 621.
estate had benefited. Límbaji Ravji Rahi, 27
or
an agreement is discovered to be void,
S. 65 lays down that when
any person who has received any
when a contract becomes void,
or contract is bound to restore it.
advantage under such an agreement
person from whom he received it
or to make compensation for it, to the
consideration of B's
aiMustrations. (a) A pays B Rs. 1,000 in
promising to marry C, A's daughter, C is dead
at the time of the
promiSe. The agreement is void, but
Bmust repay A Rs. 1,000.
What is the obligation
to him 250 maunds of rice
of a person who has (b) A contracts with B to deliver
before the first of Mav. delivers 130 maunds only before that
A day,
received any advan May.
lage under a contract none thereafter. B retains the 130 maunds after
the first of
which becomes void? and
(2marks) He is bound to pay A for them.
manager of a theatre, o
(c) A, a singer, contracts with every
M.U. May 2012 B, the
Jan. 2017 week during the next two
sing at his theatre for two nights
in
one hundred rupees for
eacn
months and B engages to pay her
night, A willfully absents
herse
night's performance. On the sixth
consequence, rescinds the contraci. D
B, in
from the theatre and sung.
must pay A for the five nights on which she had
rupees Wu
(d)contracts to sing for B at a concert for 1,000
A
mane
advance. A is too ill to sing. is not bound to
A

are paid in would have ma

compensation to B for the loss of profits which B
rupe
must refund to C the 1,000
if A
had been able to sing, but
DEFENDANTIS
paid In advance.
agreements :
IN PARI DELICTO POITOREST CONDITIO
Further, the rule enunciated in S. 65 is applicable to
lailure or
or recovered
whích are rendered void by mistake, impossibility
can be
consideration. Money paid by one party to the other

Find More at httpss//t.me/LawCollegeNotes Stufs

 THE PERFORMANCE OF CONTRACTS 177
in such cases. However, the rule does not apply to agreements
which are void on account of illegality of the object known to the
parties. Therefore, money paid by one party cannot be recovered if
both the parties are in pari delicto (equally guilty).
But there are two exceptions to the rule:
(1) When one of the parties has been induced to enter into a
contract by fraud, coercion or undue influence, he can recover the
amount paid by him, .g., if a debtor, being in difficulties, pays Rs.
5.000to one of his creditors to induce him to sign a composition deed.
(2) When the contract is not performed and the illegal purpose
is not carried out, e.g., if a person who makes over his goods for
the purpose of defrauding his creditors, the goods can be recovered
before anything has been done with regard to the intended fraud.

Mode of communicating or revoking rescission (S. 66)

S. 66 provides that the rescission of a voidable contract may be
communicated or revoked in the same manner, and subject to the same
rules as apply to the communication or revocation of a proposal.
n this connection, one may also note S. 75, which entitles a
party rightfully rescinding a contract to compensation, and provides
as folloWs :

A person who rightfully rescinds a contract is entitled to

compensation for any damage which he has sustained through
the non-fulfilment of the contract.
lIlustration.- A, a singer, contracts, with B, the manager of a
theatre, to sing at his theatre for two nights in every week during
the next two months, andB agrees to pay her 100
rupees for each
night's performance. On the sixth night, A wilfully absents herself
trom the theatre and B, in consequence, recinds the contract. B is
entitled to. claim compensation for the damage which he has
Sustained through the non-fulfilment of the contract.

10. By the promisee neglecting or refusing to afford the

promisor reasonable facllities for the performance of
his promise (S. 67)
Under S. 67, any promisee neglects or refuses to afford the
if
promisor reasonable facilities for the performance of his
promise,
any non
ne promisor is exCUsed by such neglect or refusal as to
performance caused thereby.

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
178 THE LAW OF
repair B's house. Bneglecs
Iliustration.,- contracts with to
B
A

houserequires
refuses to point out to the places in which his contract
A
or
non-performance of the if
repair. excused for the
A is
caused by such neglect or refusal. section
good illustration
A the application of this
of
the case
his trade
workman who has promised to teach to an
of a master
apprentice. If the apprentice refuses to let the master teach
tim,
master cannot be held liable for non-pertormance
is evident that the
of his promise.

11. By operation of law

The last mode in which a
contract is discharged is by operalie.
following three ways:
of law. This can happen in the
acceptance of a higher security in p'axs
(a) By merger, i.e., the
of a lesser security.
contract. (S. 62)
(b) By any alteration of a
(c) By insolvency.
extinguishes a right by
(a) Merger is that operation of law which same
reason of its coinciding with another and greater right in the be
which would
person, e.g., a right of action on an ordinary debt
same debt. tis
merged in the right of suing on a mortgage for the
necessary that the parties must be the same, and the two securities
a
must be different in their legal operation, the one of
higher

efficacy than the other.

alternation of a contract : S. 62 (This has already
been
(b) By
dealt with above.)
a contract aso
(c) By insolvency : Insolvency of a party to
an insovent
discharges the contract. The result of a person becoming
is that when he gets his discharge, he is released
from all his ebis
mere
and liabilities that can be proved in his insolvency. The
that a person has become an insolvent, however, does
not
s
facto put an end to any contract that he may have entered into n
p

to his insolvency. The benefit of the contract would vest benefito

official assignee, who may complete the contract for the
the creditors.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CERTAIN
16
RELATIONS RESEMBLING
CREATED BY THOSE
CONTRACT
(QUASI-CONTRACTS)
(Ss. 68-73)
As seen earlier, contractual
created; but there are some
obligations are
obligations which generally voluntarily
but which are treated as such are not contractual,
Contract in fact, but by law, that
is to say, there is no
there is one in the contemplation
contracts are called
quasi-contracts. of law. Such
money to B, believing him Thus, if A pays a
B was not, B
to be his creditor, when, as a sum of
fact, is bound to return matter of
the money to A.
DIEFERENCE BETWEEN
CONTRACTS,– ORDINARY CONTRACTS
Contracts AND QUASL
result from
view to creating legal the
expressed with will of
the parties, Briefly discuss:
sses. even without obligations. But,
the volition of the parties, obligations in some "Certain relations
reaed by contract are imposed resembling resembling those
ie no contract between by law. Though, in fact, there created by contract"
the parties, the law deems such obligations dealt with
arise. as would
inAct.the
to Indian Contract
arise as it there were a contract. Such obligations are
eaid to arise M.U. Apr. 2016
quasi-ex-contractu, and such cases are, for want
better name, classified in of a
English law as quasi-contracts. They are not
contracts, as the
obligation does not arise from volition of the
there is no agreement, parties:
not even a formal expression of willI, The
essentials for the formation
of a contract are absent (- for instance,
there is no proposal
and no acceptance ); but as the results
resemble those of a contract,
they are called quasi-contracts.
The term "implied
contracts" (sometimes used in place of`quasi- "n a quasi-contact,
contracts") is, however, a misnomer.
when there is an
Such contracts do not arise the promise to pay is
agreement implied by the conduct of parties; in always an implication
quasi-contracts, there is no agreement at of aW and not of
all; only the law imposes fact." Discuss.
obligations similar to
obligations arising from contracts. M.U. Apr. 2013
n so
far as the obligations in such cases is imposed by law,
ao do not arise from volition of
the parties, a quasi-contract
a
embles tort; but in that the effect or result is similar to that of
acontracta
right in personam (and not a right rem, as in case
d atort) arises, a in
quasi-contract resembles a contract.
Aquasii-contract
arises where one person has received a benefit
0f asum money
of which, independently of any agreement, express
179

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
180 belonging better
regards as to another, and
implied, the law
or account for it to the latter or to Compensals
compels the former to
remembered that the Indian Contract Actavoids
him. It is to be "quasi-contracts" or "implied contracts". tha
use of the terms"relations resembling those created I speaks,
by contract
of five cases of
Frederick Pollock prefer to explain this
Jurists like Sir "constructive contract, an kind
relationship by the term expression
England. However, which d
Halsbury's Laws of it appears
is also used in acceptable name
better and
more is invented,
"quasi-contracts thesewil
that until a the term
continue to be grouped under
noted that in quasi-contracts, the Courts are not
"Courts of law shOuld It is to be
concerned with the
intention of the parties, and in many cases, they
prevent unjust intentions.
enrichment." Discuss, disregard of their known In all such cases, the
in independentiy of any agreement, and rests up0n
with reference to the
act
provisions of the liability exists doctrine of unjust
enrichment.
Indian contract Act. equitable principles and the
quasi-contract
M.U. Nov. 2011 five types of
Ss. 68 to 72 of the Act deal with
:
as under
to a person incapable of

State any 2 quasi- 1. Claim for necessaries supplied

contracts. (2 marks) contracting or on his account (S. 68)
M.U. Nov. 2014
Reimbursement a person paying money due by another in
2. of
the payment of which he is
interested (S. 69)
3. Obligation of a
person enjoying the benefit of a non-gratuitous
act (S. 70)
4. Rights and liabilities of a finder of goods (S. 71)
or a thing
Liability of a person to whom money is paid
is
5.
delivered by mistake or under coercion (S. 72)
1. Claim for necessaries supplied to a person incapable
of contracting, or on his account (3. 68)
a person, incapable of entering into a contract, or anyperson
If ole
another
whom he is legally bound to support, is supplied by
with necessaries suited to his condition in life, the person Wno
furnished such supplies is entitled to be reimbursed from the propety
of such incapable person.
necessaries
with
Ilustrations,- (a) A
supplies B, a
lunatic, from
suitable to his condition in life. is entitled to be reimbursed
A

B's property.
lunatic, with
(b) A
supplies the wife
and children of B, a
entitled to be
necessaries suitable to their condition in life. i is
A

reimbursed from B's property : S. 68.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CERTAIN RELATIONS RESEMBLING
CONTRACT 181
88 Drovides for liability
in respect of necessaries supplied
a
person incapable of entering into a contract. A
to
person incapable of contracting, and minor is a
his case. It will be
therefore, the provisions of
this section apply to observed that the minor's property
liahe for necessaries, and nopersonal liability is incurred by him.
Necessaries.- As to what are necessaries is a question
oach case.Thus, costs incurredin of fact in
successfully defending a suit on behalf
ofa minor, in which his property was in jeopardy are
necessaries"within
the meaning of this section. Costs incurred in
a prosecution for defending him in
dacoity are also similarly covered. So also is a loan
tn a minor to save his property from
Money advanced to a Hindu
sale in execution of a decree.
minor to meet his marriage expenses is
SUDDlied for
"necessaries', and may be recovered out of his property.
From S. 10 and the
decision of the Privy Council in Mohori What are the rights
Bibi's case, it is now of
quite clear that a minor or a person of a person who
unsound mind is not competent
to contract or, in the words of Supplies necessaries
incapable of entering into a contract"; a
section 68, is "a person who is to minor? (2 marks)
this section, therefore, M.U. Nov. 2012
does apply to such a person.
In order to render an
infant's contract for necessaries enforceable,
the plaintiff must prove
() that the contract was for goods reasonably
necessary for supporting a person in
his position, and (i) that the infant
had not already a sufficient
supply of these necessaries. The obligation,
is to pay a resonable,
and not the agreed, price for the goods.
The relief contemplated by this
contract, but is
section is not dependent on any
independent of it. It is not necessary that there
should be any agreement
a statutory claim
between the parties. The section creates
against the property of the person who is incapable
of entering into a contract
and has been supplied with necessaries
suited to his condition
in life.
Z. Reimbursement of person payingmoney
In the payment of which
due by another
he is interested (S. 69)
Under S. 69, a person who is interested in payment of
money which another is
bound by law to pay, and who
therefore pays it, is entitled to be reimbursed by the other.
ilustration.- B holds land in Bengal, on a
the
zamindar. The revenue lease granted by A

arrear, his payable by A

to the Government being
land
th revenue law, is advertised for sale by the Government. Under
of B's the consequence for such sale will be the annulment
lease. B,
his own ease,to
prevent the sale and the consequent annulment
bound pays to the Government the sum due from A A.
is
to make good to the amount so paid.
B

Find More at https://t. me/LawCollegeNotes_Stuffs

 THE LAW OF CONTRACTS
182
INGREDIENTS OFS 69, - The three importantingredients
69 ae as follows
o
S person whO is bound by law
1, There mIst be to makea
Alamelu Ammal, (1908) 31 Mad.
in Raghavan
v.
Thus,
inoome-tax authorities assessed the widow of a deceased Hindu
35,the
respect of outstandìng forming part
of the estate In
of the deceased,
nohwithstanding protests on her part that the outstanding
had not
come to her, but had been bequeathed under the will of the deecoased
to the detendants. The widow, however, paid the tax.
recover amount from It was held
that she could not the
not
the defendants under
this section, for the defendants, being the parties assessed,
were not bound by law" to pay the tax.
2. There must be another person who is interested in k

pnent being mRde.

It is neoeSsary that
the person paying must have interest in the
payment being made. Under this section, if a man is
interested in the
payment of money, and has proper
grounds for thinking that another.
who is bound to pay the money,
pay, he hìmself is either cannot pay or does not intend to
entitied to pay that money, and is allowed to recover it,
Ram Tuhut Singh v. Bisheswar,
money to B. C voluntarily pays 23 W.R. 305 (P.C.). A owes
off A's debt to B. C cannot recover
this amount from B, as he was
not interested in the payment.
Nand Kishore v. Paroo Mian,
land to B. Before completion 2 Pat. L.J. 676.-Aagrees to sellhis
of
creditor. B deposits the amount the sale, this land is attached by As
the sale.B cannot recover in Court. Later, A refuses to complete
the sum paid, as at
had no interest in the
land, not having either the time of
payment, ne
A person whose possession or tite.
payable by another immovable property is attached
person, is interested for a deOl
the property,
and can recover in paying the debt to save
payment made from the person by whom it is due..A
by a person
properties in which in order to avoid sale of certain
the person he himself the
had an interest, can be recovered,
paying had a
in the property reasonable
wouldbe adversely affected.apprehension
that his interest
Similarly,
obtained by awhere in execution of a money against A
B third person, decree
deposited
the amount property sold, and
afterwards of the mortgaged to was B

was sued for the recovery decree to set aside and

not a mere of the sale,
entitled to volunteer, the amount, it was held that he
be reimbursed. but an interested person, and
theretore,

Find More at https://t. me/LawCollegeNotes_Stuffs

 CERTAIN RELATIONS
RESEMBLING CONTRACT
CNGLISH
LAW- The section lays 183
England. There, in yrder down a rule wider
toinvite the application than that in
reimbursement, it of
compelled to pay
is necessary that a person the rule regarding
the debt or discharge must have
been
whereas in India, it is sufficient if the liability of another,
interested in the payment the person making
being made person
the payment was
by the ultimately
3. Lastly, a payment liable.
must have actually
Thus, when litigation was been made.
pending between the
Ownership of
certain property, the plaintiffs parties as to the
revenue of
the property under compulsion paid to the Government,
suit. it was held
that they were entitled and to
eventually lost their
recover
defendant. The reason it fromn the
given was that they were
bona fide belief litigating under a
that they were entitled to
enough that they were the property, and it was
interested in making the payment
when the payment was made. at the time
3. Obligation of person
enjoying benefit of a non
gratultous act (S. 70)
S. 70 deals with
the next kind of quasi-contract,
follows: and provides as
Where a person lawfully
or delivers anything does anything for person,
to him, not intending to doanother
so
and such other person enjoys gratuitously,
bound to make compensation to
the benefit thereof,-the latter is
restore the thing so done or the former in respect of, or to
delivered.
Illustrations. (a) A, a tradesman,
mistake. B treats the leaves goods at B's house by
goods as his own. He is bound to pay A for them.
(b) Asaves B's property from
fire. A is not entitled to compensation
from B, if the circumstances
showthat he intended to act gratuitously.
S. 70 EXPLAINED,– Where
A lawfully does anything for B, not
intending to do so gratuitously,
Same, he is bound to compensate
and B enjoys the benefit of the
A for the thing so done.
t is not in every case, however, in which a man has benefited
Dy the act of
another that an obligation to compensate
Observed by the Privy Council in arises. As
Ram Tuhul v. Bisheswar Lal,
(1875) L.R. 2 1.A. 131 (which is
the leading case on the point):
iS not in every case in which a man has benefited by the money
O another, that an obligation to repay
sUGn a suit,
that money arises. To support
there must be an obligation, express or implied, to repay".
ESSENTIALS OF :
S. 70
(a) The thing must have been done lawfully, i.e., the act must
be lawful. A
payment made by a person dishonestly with the intention

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
184
land
to which belonged
manufacturing evidence of title tothe
of no claim,
which he knew he hadlawful is not
defendant, and to
within the meaning of this section.
not have
Secondly, the person who did it must intended to
(b)
act gratuitously.
813.- Where two CO-OWners
Upendra v. Naba, 25 C.W.N. of

ignoring an order of h
insanitary tank were sued criminally tor one tun
up tank, whereupon of them filled
corporation to fill the
a suit for contribution against the other, who also
tank, and brought filled-up tank. the
was in receipt of rents from tenants settled on theup lawfully withed
was filled
defendant was held liable, as the tank person for whom the ad
intending to be done gratuitously and the
was done was enjoying the benefit thereof.
(c) Lastly, the person for whom the
act is done must haye
enjoyed its benefit.
In Damodar Mudaliar v. Secretary of State for India,
(1894) 18
some of
Mad. 88, eleven villages were irrigated by a certain tank,
which were zamindari villages, and others were held by
Government.
The Government effected certain repairs necessary for the
preservation of the tank, and it was found that they did not intend
to do so gratuitously for the zamindars, and that latter had enjoyed
the benefit thereof. The zamindars were, under the circumstances,
held liable to contribute to the expenses of the repairs.
Upon the same principle, where a mortgagee threatened to sell
the land mortgaged to him, and one of the co-sharers paid up the
mortgage debt, to prevent the property from being sold, it was heid
that he was entitled to contribution from the other co-sharers. It is,
however, different if the person paying the amount has n0 inieies
in the property at all.
Governor-General in Council v. Madras Municipality, 15 Bom, LR.
In
927, the Provincial Government exercise their
wrongly purported to
powers under the Railways Act
and reguired the Railway Compaly
widen a culvert. The the
Railway Company, while stating that culvert,
Government had no power
to require such widening of the
agreed to do the work orthe
and charge either the Government filed
Municipality. After the work was
a suit completed, the Railway CompanyRaiway
against the Municipality. the
Company did not It was held that althoughMunicipality did
intend to do the work gratuitously,
not benefit from
it, andtherefore
the upon.
section 70 could not be relied
PROBLEM,-P enters the of
town into a contract with the Municipality
L
to construct a
market. The contract but does not
is in writing,

Find More at https://t.me/LawCollegeNotes_Stuffs

 CERTAIN RELATIONS RESEMBLING CONTRACT
185
hear the seal of the Municipality, in the absence of which
the contract is
3not bindingon the Municipality according to the District Municipalities
Act. P constructs the market
and the said Municipality takes possession
of it and enjoys its rent, but refuses to pay
P as agreed for the
construction. P sues to recover his dues. How will you
decide?
Ans.- must sUCceed. His case is covered by S. 70. In
P

case. the person for whom this

the non-gratuitous act was done (i.e.,
the Municipality), has enjoyed the benefit of such act.
The fact that
there was no enforceable contract does not make any
ne perst Pallonjee and Sons v. Lonavala Municipality, 69 Bom.
difference:
L.R. 835.
eof. In Secretary of State v. G.T. Sarin & Co. (11 Lah. 375), A
entered into a contract for the supply of fodder for
the officer commanding the Depot of a
horses with X,
cavalry regiment in India. X
had no authority to enter into any such contract on
behalf of the
Government, as he had purported to do.
J
Slate tr , accepted and used for
The fodder, however, was
the horses belonging to the cavalry regiment.
by catza a claimed the price of the fodder from
A

the Government. Here,

were
hetb although X had no authority to enter into such a contract on behalf
of Government, the fodder was in
paiis a2 Government, and A was, therefore, fact accepted and used by
Td that thej of held entitled to claim the price
i the fodder from the Government.
and tiat
tIn similar circumstances, in Secretaty
under ra Co., where a of State V. G. T. Sarin &
Commanding Officer ordered food for horses,
of the reçz3 supplier was entitled to succeed
the
under S. 70, althought the contract
rigagee
Phe cost
tr was void, as it did not comply

4. Rights and liabilities

with the statutory requirements.
of finder of goods (S. 71)
Dm
beig st
otheras An agreement is also implied by law where a person finds Write a short note on:
he goods belonging to another and takes them into his custody, Although Rights of finder of
there is, in
fact, no agreement between the owner and the finder of gooa8.
the goods, the latter is, for certain purposes, deemed in law to be a M.U. Nov. 2014
balee, and must take as much care of the goods as a man of
Ordinary prudence would take of similar goods of his own. S. 71 of
Fsig the Act deals with this topic, and provides as follows
the person who finds goods belonging to another and
A State any 2 rights of
takes them into his custody, is subject to the same a finder of goods.
(2 marks)
responsibility as a bailee.
M.U. Apr. 2015
A inder of goods is subject to the responsibility of a bailee to take
u care of the goods, and try and find out the true owner; but he is
entitedtoits
possession as against everyone except the true owner.
H found a diamond on the floor of K's shop and handed it to K
ep till the owner claimed it. In spite of wide advertisement in
t

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
186 THE LAW OF

newspapers, no one appeared to claim it. After thelapse

the cost of the advertisement ot
some weeks, tendered to the
K
H

return the diamond andan

indemnity bond and requested him to to H.K.
is entitled.to retain the goodsas
H

damages. H

refused; is liable in
K

against
everyone except the true owner; so if Hiafter wide
up, and if
advertisement, the real owner does not turn diamond to prepared
must deliver the
to give an indemnity to
K, K

liabilities of a bailee are contained in Ss. 168

The rights and
the Act, discussed in a later Chapter.
and 169 of
person to whom money is paid or thing
5. Liabilities of

delivered, by mistake or under coercion (S. 72)

runs thu.
quasi-contract mentioned in S. 72 which
The last kind of
What is the liability of money been paid or anything deliverod
a person to whom person to whom has
repay or return it.
A

money is paid by or under coercion must

mistake or under by mistake
owe 100 rupees to CA
coercion? (2 marks) Ilustrations.- (a) A and B jointly
M.U. Apr. 2013 and B not knowing this fact, pays 10
amount to C,
alone pays the to repay the amount to B.
rupees over again to C. C is bound
to the
company refuses to deliver up certain goods
(b) A railway payment an illegal charge for cariage.
upon the of
consignee, except to obtain the goods.
He
pays the sum charged in order
The consignee charge as was illegally
excessie.
recover so much of the
is entitled to money paid in fulfilment of a
Under S. 72,
SCOPE OF S. 72.– paid up a
e.g., where one haserroneousy
recoverable,
natural obligation is not payment of a debt,
time-bared debt. A person makingcontribute, cannot sue under ths
supposing that he was liable to purely voluntary
paymeni,
person who has made a
section; nor can a
recover under this section.
money paid may be one
has been
The mistake under which was paid by mistake toand A
money due to B representative of B, it
law or fact; so where was legal
he the
the supposition that C, and not A, was B's legal
represenla
COuldbe
was afterwards found that mistake
was held that the amount paid to
A
under a
it
recovered under this section. Government, an andthe
wouldbe
Under the section, if tax has been paid to the tax paid.
voluntarily
the
was illegal,
Supreme Court later holds that such levy
even if such tax was
refundable. It makes no difference
as long as a payment was made under
a mistake of law.
entered intoa
starch at
In one case,
on 16th September, 1943, P maize
contract with for the purchase of one
A wagon of

Find More at https://t.me/LawCollegeNotes _Stufts

 CERTAIN RELATIONS RESEMBLING CONTRACT 187
per cwt. On
the ratewore
of Rs. 77 16th December, 1943, before the
goods delivered, an Order was passed by
Defence the Government
of India under the
of India Act making
Rs. 48 per cwt.
maximum price. The Order was made applicable to all contracts
the
in which delivery was to be given on or after 1st January, 1944. p
paid the contract price and took delivery of the goods on 3rd
danuary, 1944. Subsequently, P sued R to recover the difference
between the contract price of Rs. 77 per cwt. and the maximum
orice of Rs. 48 per cwt. as fixed by the new Government Order, P
must succeed on the above-mentioned ground.

Lastly, payment "by mistake" in S. 72 must refer to a payment

which was not legally due, and which could not have been enforced,
the "mistake" being in thinking that the money paid was due when
in fact it was not due. Every case
depends upon its own facts.
Thus, upon a misconstruction of a term of the lease, A, the lessee,
makes an over-payment of Rs. 500 to B, the lessor. Is A entitled to
the refund of the over-payment under S. 72 of the Contract Act?
Their Lordships of the Privy Council held in the affirmative.

The Privy Council has also laid down that the word "coercion"
used in this section is not to be understood in its
sense as defined in S. 15. Rather, it strict legal
is used in its general and
ordinary sense.

Compensation for failure to discharge obligations

resembling those created by contract (S. 73, para. 3)
Itis also to be noted that when an obligation resembling
those created by contract has been incurred and has not
been discharged, any person injured by the failure to
discharge it, is entitled to receive the same compensation
from the party in defauit as if such person
had contracted to
discharge it and had broken his contract.
In other words, the rights and liabilities of
contract are parties to a quasi
the same as those of parties who have actually entered
into a contract.

Find More at https://t.me/LawCollegeNotes_ Stufts

 17
CONTRACT
BREACH OF
(Ss. 73-75)
CONSEQUENCES OF BREACH OF CONTRACT,-
Thelan
perform their respective obligations,
expects parties to a contract to
upon a breach by either party. Therefore,
and naturally frowns assoon
a breach of the contract,
as either party commits the law givestothe
may seek to obtain (1) damages for
other, three remedies. He theloss
a decree for specific performance,
or
or
sustained, (2) (3) an injuction.
The law as to damnages is regulated by the
Contract Act, whereas
the
performance and injunction is
regulated
law as to specific therefore, discussed below
bythe
only in briaf
Specific Relief Act, and is,
damages an
What is breach of Specific performance can be granted only when the
contract? (2 marks) an inadequate remedy, or when the Court can supervise the execution
Specife
M.U. May 2017 of the contract, or when the contract is certain, fair and just.
performance cannot be enforced of contracts of personal
service.
or a
Injunction is used as a means of enforcing a contract
means of enforcing the
promise to forbear, or it may be the only
What is specific per- specific performance of a contract where damages are an inadequaea
formance of contract? agrees to sell a picture by
M.U. Apr. 2016 remedy. Thus, A agrees to buy and B
may compel B specificaly
May 2017 dead painter and two rare China vases; A ascertaining
to perform the contract for there is no standard for
its non-performance.
the actual damage which would be caused by
manager of a theatre, to
So also, A, a singer, contracts with B the
from singing at other
sing at his theatre for one year, and to abstain
cannot compel Ao
theatres during the period. She absents herself. B may sue her tu
sing at his theatre (as it is a personal contract), but he
theatres. thts
an injunction restraining her from singing at other
to be performeo 9
personal contracts, (that is, contracts which have specificaly
cannot be
the person himself or herself and by no one else), a case.
enforced. However, an injunction can be issued in such permanent. A
Injunctions are of two types : temporary and Relief Act)can
What is Temporary permanent injunction (which is governed by the Specific at endofthe
passed, i.e. thegoverned ty
injunction? (2 marks) be issued when the final order or decree is
a (which is
M.U. Apr. 2016 suit. On
the other hand, temporary injunction any stage of thesuit.
permanet
the Code of Civil Procedure) can be issued at

(For the law relating to specific

performance and
injunction, kindly refer to the Specific Relief Act.]
188

Find More at https://t.me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT
189
NOMINAL AND EXEMPLARY DAMAGES.– Where no loss arises
trom the breach ot contracI, the party claiming compensation is
ntitled to nominal damages only. A special loss which
naturally and obviously flow from
does not
the breach cannot be recovered
unless expressly stipulated tor in the contract. It must
be borne in
mind that damages are given by way of
way of punishment.
compensation, and not by
So, the party wronged can recover only the
Rctual pecuniary losS Sustained by
him (compensatory damages),
and not exemplary damages. Formerly,
exemplary damages were
granted in cases of breach of
promise of marriage, where the
feelings of the perSon injured were taken into consideration.
The law relating to damages for breach of contract can
be
discussed under the following four heads :
A. Rules governing the measure of damages (S. 73)
B. Compensation for
breach of contract where penalty is stipulated
for (Difference between penalty
and liquidated damages) (S. 74)
C. Rights of party rightfully rescinding a contract
(S. 75)
D. Quantum Meruit.
A. RULESGOVERNING THE MEASURE OF DAMAGES
(S. 73)
S. 73 lays down four important rules governing
the measure of What is breach of
damages. It contains eighteen illustrations, which will be discussed with contract? What are
AE appropriate and necessary comments, alongwith
the decided cases. the principles on
which damages are
First rule (S. 73(1)] assessed for breach
of contract?
The first rule governing the measure of damages is laid down in M.U. Apr. 2011
S. 73, thus Apr. 2013
May 2017
When a contract has been broken, the party who
suffers by
Such breach is entitled to receive, from the party who
has
broken the contract, compensation for any or When can special
loss damage damages be granted?
caused to him thereby,
(2 marks)
(0) which
naturally arose in the usual course of things from M.U. Nov. 2015
such breach, or
(ü) which the parties knew, when they made the contract,
to be likely to result from the breach of the contract.
llustrations
(a) A contracts to sell and deliver 50 maunds of
saltpetre to B,
a a certain price to be paid on delivery. A
breaks his promise. B is
enttied to receive from A, by way of compensation,
the sum, if any,
y Which the contract price falls short of the
price for which B might

Find More at https://t.me/LawCollegeNotes_ Stuffs

 CONTRACTS
THE LAW OF
190
maunds of saltpetre delivered
of like quality
at
have obtained
50 thetime
ought to have been
when the saltpetre
establishes the principle that under a contract tor
IMlus. (a) measure of damages upon a breach
sale of goods, the contract price and the market price atthe
the
difference between the necessary in such th he
however, not
date of the breach.
It is,
buyer should have actually bought like goods fromthe
that the illustration by the use of the
made clear in the above
market. This is
bought".
words, "might have Bombay, and there take onboard,on
B's ship to go to
(b) A hires A
is to provide, and to bring it to
January, a cargo which B's ship does not go
the first of freightto be paid when earned. to
Calcutta, the opportunities of procuring suitable conveyance for

Bombay, but A has advantageous as those on which he

ha4

upon terms as opportunities, but is ot

the cargo avails himself of those
chartered the ship. A
to receive
expenses in doing so. A
is entitled
expense.
to trouble and respect of such trouble and
compensation from B in
A contracts
with B
L.R. Ex. 122.-
Featherson v. Wilkinson, (1873) receive a cargo of coal to be
on a certain day to to
to provide a ship provide ship in time, and B has
fails to the
carried to Havra. coal at a higher
A

advanced freight and also buy

charter vessels at an can recover from the increase of
A

remedy?- B show that, by

price. What is B's
increase of freight, unless A can
as the
price as wellcorresponding market price at the port of
increase in the
reason of a compensated, wholly or in part.
delivery or otherwise, the loss is
price, 50 maunds
O

contracts to buy of B. at a stated

(c) A
delivery. A afterwards informs B that he
fixed for to recee
rice, no time being tendered to him. B is entitled whichthe
rice if
will not accept the compensation, any, by
from A, by way of
the amount, if rice atthe
can obtain for the
B
contract price exceeds that which
will not accept it. contract
time when A informs B that he breach of
an anticipatory
(Note:This is an example of breaks
discussed earlier.] rupees, but eNCeSS
contracts to buy B's ship for 0,000
compensation,
60,
(d) A
the
obtain
k
must pay to B, by way of
his promise. B can
A

over the price which

if any, of the contract price Cargo
the ship at the time of the breach of promise. of
specified
a
B to take
day
(e) A, the owner of
a
boat, contracts with
on a start at
jute to Mirzapur, for sale
at
that place, starting not Mirzapur
some avoldable cause, does
The boat, owing to
cargo at boathad
time appointed, whereby the arrival of
the arrived the
delayed beyond the time when it would have if
190

Find More at https://t.me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT 191
according to the contract. After that
sailed date, and before the
arival of the
compensation
cargo, the price of
jute falls. The measure of the
payable B by A
to is the difference between the price
o
which B could have obtained for the cargo at Mirzapur at
arrived if forwarded the time
when it would have in due course, and its
market price at the time when it actually arrived.
an
[Note- Mus. (e) is illustration of a case of measure of
damages in case of delay.]
(0 contracts to repair B's house in a certain manner and
A
recelves payment in advance. A repairs the house, but not according
n
the contract. B is entitled to recover from A, the cost of making
the repairs conforming to the contract.

(a) A contracts to let his ship to B for a year, trom the first January,
t for a certain price. Freights rise, and on the first January, the hire
obtainable for the ship is higher than the contract price. A breaks his
promise. He must pay to B, by the way of compensation, a sum
equal to
the difference between the contract price and the price tor which B
could hire a similar ship for a year on and from
the first of January.
(h) contracts to supply B with a certain quantity of iron at a fixed
A

price, being a higher price than that for which A could procure and
deliver the iron. B wrongfully
refuses to receive the iron. B must pay to
A, by way of compensation
the difference between the contract price of
the iron and the sum for which A could have obtained
and delivered it.
() delivers to B, a common carrie, a machine, to be conveyed,
A

without delay, to A's mill, informing B

that his mill is stopped for want
of the machine. B
unreasonably delays the delivery of the machine,
and A in consequence, loses a profitable contract with
A is
the Government.
entitled to receive from B, by way of compensation,
the average
aiount of profit which would have been made by the working of the
mill during
the time that the delivery of it was delayed, but not the loss
sUstained through the
loss of the Government contract.
RULE IN HADLEY
facts of Hadley BAXENDALE, (1854) 9 Ex. 354.- The
V.

73, except
V. Baxendale were similar to those in llus. (i) to S.
that the defendants did not know (in that famous English
case)
which
that the plaintiffs' mill was stopped for want of the machinery
profit.
they were to supply. They were held not liable for loss of
But they would
about have been held so liable had they known
the stoppage of
the mill.
S. 73,
Observationsin fact, is based
on Hadley Baxendale and thev.

made therein.

Find More at https://t.me/LawCollegeNotes_Stuffs

192 THE LAW OF CONTRACTS

case was stated by the Court

The wel-known rulein this astollows t
Where two parties have made
a contract which one
themhas
of :
which the other party ought receivinrespectt
to
broken, the damages mayfairly and
such breach of contract shouldbe erthersuchas reasonably
naturally, i.e., according tothe usual Coursect
be considered as arising itself,
contract or
as may reasonably
things, from such breach of contemplation suchboth parties at th be

the of
supposed to have been in
probable result of the breach i
of

they made the contract as the

contract ws
Now, it the speca circumstances under which the
were communicated by the plaintiffs to the defendants
actually made
resulting from ha
and thus known to both parties, the damages reasonably contemplata
breach of such a contract, which they would
ordinarily follow rom a
would be the amount of injury which would
circumstances so known and
breach of contract under these special circumstances
communicated. But on the other hand, if these special
contract, he, at the
were wholly unknOwn to the party breaking the contemplation, the
most, could be supposed to have had in his b
in the great
amount of injury which would arise generally, and
multitude of cases not affected by
any special circumstances, trom
special circumstancas been
such a breach of contract. For, had the
parties might have specially provided for the breach of
known, the case; and of this
contract by special terms as to the damages in that
adantage, it would be unjust to deprive them."
v. Baxencdale were
FACTS OF THE CASE– The facts of Hadley
crankshaft. and H
as follows : mill belonging to H had a broken
A

common carrier. to take it to 2

delivered the shaft to B, a
a new One.
manufacturer at Greenwich to copy and make
a reasonable time, s
negligently delayed delivery of the shaft beyond period. He did n
a
result of which the mill was idle for a longer by
make known to B that delay would result in loss of profits.
In a suit
proft
of
loss grounds
H
against B claiming to recover by way of damages the two
were only course
caused by the delay, it was held that there USual
upon which H could sustain his claim. First, that in the the
altogether for want of
of things, the profit of the mill would cease might
for, H
shaft. But this wouid not be the normal occurrence, the
spe
have had a spare shaft in reserve. Secondly, that proft
loss of
Therekre
circumstances were so fully disclosed that the inevitable case.
was made apparent
to B.
This however, was not the
B was
not liable for loss of profit during period of delay. dela
the who
Pwas a
English case, D agreed to sell a boiler to day.business
P
in one
the delivery for twenty weeks beyond the scheduled
dyeing the
dyer, and D knew
that the boiler was required for hiscontracts with
In fact, P required the boiler
for certain lucrative

Find More at https://t.me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT
Government, but based his 193
claim for damages
profits from ordinary dyeing
contracts. The merely on the loss of
that
was entitled
P
to succeed. (Victoria Court of Appeal
Laundry v. Newman
held
Industries Ltd., (1949) 2 K.B. 528)
) A,
having contracted with B to
supply B with
1,000 tons of
iron at
100 rupees a ton, to be delivered at a
with C for
the purchase of 1,000 tons of ironstated at
time, contracts
telling C
that he does so for the purpose 80 rupees a ton,
with B. C fails to of
perform his contract with A,
performing his contracts
other iron, and B, in consequence, who cannot procure
rescinds contract. C must
Day 20,000 rupees
to A, being the profits whichthe A would have made
by the performance of his contract
with B.
(k) Acontracts with
B to make
a specified price, a machinery. and deliver to B, by a fixed day, for
A does not deliver
machinery at the time the piece of
specified, and in consequence
obliged to procure of this, B is
another at a higher price than
to have paid to A, that which was
and is prevented from performing a contracthe
B had made with a
third person at the time of which
which had not his contract with A (but
been then communicated to A),
make compensation for and is compelled to
way of compensation
breach of that contract. A must pay to B, by
the difference between the contract price
piece of machinery and of the
the sum paid by B for another, but not
Sum paid by Bto
third person by way of compensation. the
() A, a builder, contracts to erect
first of January, in and finish a house, by the
order that B may
give possession of it at the
time to G, to whom B
contract between B
has contracted to let it. A is informed of the
and C. Abuilds the house so badly that, before
the first of January, it falls down
consequence, loses
and has to be rebuilt by B, who in
the rent which he was to have received from C,
and is obliged to make
compensation to C for the breach of his
Contract. must make compensation to B for
A

the house, for the cost of re-building

the rent lost, and for the compensation made to C.

(m) A sells certain merchandise to B,

particular quality, warranting it to be of a
with a and B, in reliance upon this warranty, sells it to C

similar warranty. The

goods prove to be not according to the
Waranty, and becomes liable to pay Ca sum of money by way of
B

COmpensation. B is entitled to
be reimbursed this sum by A.
(n) A contracts to pay a sum of money on a specified day.
A
does not pay money on to B

receiving that day. in consequence of not

B

the money on that day is unable to pay his debts and is

totally ruined. A
is not liable to make good to B
anything except the

Find More at https://t.me/LawCollegeNotes_Stuffs

 THE LAW OF CONTRACTS
194
sum he
contracted to pay, together with
interest
principal up
payment. tothe
day of above llustration
INTEREST AS DAMAGES.- The (n) led
among the High Courts on
conflict of opinion the question whether
as damages. The conflict was settled
interest can be allowed B.
Council decision
Rly. Co. v. Ruttonji,
N.
Bom. by the
Privy in 40 LA.74%,
down that, subject to certain exceptions,
in which it laid interest
cannot be recovered as damages for wrongfui detention of money
now only in the following four cases
Interest can be recovered or
when there is
an express implied agreement to pay interest,
() or trade usage allows interest; (i) under
(iü) where a custom
Goods Act
Interest Act; and (iv) under S. 61 of the Sale of
on the
A contracts to deliver 50 maunds of saltpetre to B
(o)
afterwards, before the first d
first of January, at a certain price. B
a price higher than
January, contracts to sell the saltpetre to C at
A breaks his promise.
h
the market price of the first of January.
B, the market prioe
estimating the compensation payable by A and to
which would have arisen
of the first of Jarnuary, and not the profit
account.
B
from the sale to C, is to be taken into
on a fxed
contracts to sell and deliver 500 bales of cotton to B
(P) A

conducting his business. A breaks

day. A knows nothing of B's mode of A is ndt
promise, and B, having no cotton, is obliged to close his mill.
his closing of the mil.
responsible to B for the loss caused to B by the
January
(g) contracts to sell and deliver to B. on the first of
A

cloth, which B intends to manufacture into caps of a particua

certain
for which there is no demand except at that season. The clot
kind, too late to be Use
delivered till after the appointed time, and
is not way

year in making caps. B is entitled to receive from A, by

that of the g
compensation, the difference between the contract price
not the prois w
and its market price at the time of delivery, but expenses which he
he expected to obtain by making caps, nor the
manufacture. Calcuta
has been put to in making preparation for the
from
A, a ship-owner, contracts with B, to convey him paystoA
() andconsequençe
B does
to Sydney in A's ship sailing on the first January. money. The ship
by way of deposit one-half of his passage expense
not sail on
the first of January, and
B,
after being in
some ariviy
detained in Calcutta for some put to
time and thereby Consequence, repay
proceeds to Sydney, in another vessel, and in to
too late in Sydney, loses a sum of money. A is liable to byhs
put money
his deposit with interest, which he is
and the expense to passage
detention in Calcutta, and any the
the excess, it of

Find More at https://t.me/LawCollegeNotes _Stuffs

 BREACH OF CONTRACT
195
paidlorthe second ship over that agreed upon for the first, but not
sum of money which B
lost by arrivingin Sydney too late.
the
Second rule (S. 73(3))
as to measure of
The second rule damages is to be found in
second clause of S. 73.. It deals with what
the
remoteness of damage'. It runs thus:
is known as
Such compensation is not to be given for any remote and
or damage sustained by reason of the breach.
indirect loss
CEMOTENESS OF DAMAGES,– Damages are
measured by
the loss actually suffered by the party. The loss must naturally arise
in the usual course of things from the breach; or it must be such as
the parties knew, when they made the contract, to be likely to result
trom the breach of it. It follows, therefore, that a party is not liable
br loss which is too remote, i.e., which is not the natural or
probable consequence of the breach of the contract.
other words, the measure of damages is the estimated loss
In
directy and naturally arising in the ordinary course of events from the
breach of contract. Compensation is not to be given for any remote
and indirect loss or damage sustained by reason of the breach.
In Madras Rly. Co. v. Govinda, (1898) 21 Mad. 172, the plaintiff,
who was a tailor, delivered a sewing machine and some clothes to
the defendant railway company, to be sent to a place where he
expected to carry on his business with special profits by reason of a
forthcoming festival. Through the fault of the company's servants, the
goods were delayed in transmission, and were not delivered until
some days after the conclusion of the festival. The plaintiff had not
gven any notice to the railway company that the goods were required
to be delivered within a fixed time for any special purpose. On a suit
y ne plaintiff to recover a sum on account of his estimated profits,
was
held that the damages claimed were too remote.
PROBLEM.- The plaintiff entrusted the defendant with a
telegraphic message in cipher (i.e., a coded message) for
transmission
to America. The message, not being intelligible to the
defendant, message, in consequence of
which
he omitted to send the
would have
the plaintiff lost a large sum of money which he no
message had been delivered. The defendant had
made
if the
knowledge
of the contract of
or telegram, and hence
purpose the
he could not as likely to result
from his have contemplated any damages was held that the
not sending it. In the circumstances, it.
plaintitf
was entitled to nominal damages.
only

Find More at https://t.me/LawCollegeNotes _Stuffs

 CONTRACTS
THE LAW OF
196
v.
Merryweathe, (1895 I.Q.B. 640), A, a stevedore,
Mowbray
In discharge the cargo
a shipowner, to
of
his
with B, ship,
agreed necessary and proper chains (amongand8
agreed to supply all purpose. A chain supplied by other
gearing) reasonably fit for that Bwas
use, Z, a workman of A was thereby
defective and broke in and
reasonable compensation. The hur.
A was compelled to pay
Zamake good to A
the
Cout
compensation which
B was liable to
held that
as damages naturally resulting from B's breach A
had paid to Z
of his
was entitled, as between himself and
B,

warranty. A to rely on Bs
as againet 7
warranty, though such reliance was no excUse for A

Third rule (Expln. to S. 73)

measure of damages is to
The third rule as to the be foundin
Explanation to S. 73, which provides as
follows:
a
Inestimating the loss or damage arising from breachc
contract, the means which existed of remedying tha
inconvenience caused by the non-performance of the contract
must be taken into account : Explanation to S. 73.
Thus, if a railway company having contracted with a passenger
to take him to a particular station fails to do so, the passenger is
ary
entitled to damages for the inconvenience of having to walk and
reasonable expense he has been put to, as by staying at an inn, ard
he may get some other conveyance, and charge the raikay
company with the expense if in the circumstance it is a reasonable
thing to do so; but he is not ordinarily entitled to charter a specis
train to save himself from the tedium of waiting, and charge the
railway company with the expenses.

Fourth rule (S. 73)

Lastly, it is to be noted that damages payable for the breach
cf

an
a
quasi-contract are exactly the same as those for the breach of
ordinary contract. In other words, all the above rules also appy
quasi-contracts.
DAMAGES
SUMMARY OF RULES GOVERNING MEASURE OF
THE
breach ot
1. When a
party sustains a of a
loss by reason Compensation
contract, he is entitled, is
(so far as monetary damages
concerned) to be put in
as the contract the same situation with regardto qualificatin
if
that loss or damage
has been performed, subject to the naturally in the
usual course of is such (a) as has arisen when they
things, or
(b) as the parties knew
made the contract
to be likely to result breach of it, and
(c) as is not remote from the
and indirect.

Find More at https://t.me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT 197
2. When a party claims special damagos, (which would not
ordinarily flow froi the breach), he must prove that such loss was
in the contemplation of both the partios at the time of tho contract
and expressly provided for.
means which existed of
3. In estimating the loss or damage, the
remedying the inconvenience caused by the breach must be taken
into
account.
4, When noloss arises from the breach of contract, only nominal
damages are to be given.
5. It is also to be noted that damages are given by way of
restitution and compensation only, and not by way of punishment.
The aggrieved party can, therefore, recover the actual loss caused
to him (compensatory damages), and not exemplary damages.

6. The above rules relating to damages apply to quasi-contracts

dy
also.
MEASURE OF DAMAGES IN CASE OF BREACH OF
cONTRACT FOR SALE OF LAND The rule in Hadley v.
Baxendale does not apply in English law to contracts for the sale
of immoveable property. The leading case on this point is the
decision of the House of Lords in Bain v. Fothergill, (1874 L.R. 7
H.L. 158), where it was held that the intending purchaser of land
cannot recover any damages for the loss of his bargain; but he
can recover deposit and the expenses incurred by him.
The Bombay High Court had, at one time (in Pitamber v.
Cassibai, 1886 11 Bom. 272), held that the rule in Bain v. Fothergill
was also the law in India. However, it willbe seen that Section 73 is
very general in its terms, and does not exclude cases of immoveable
property. As observed in a later case decided by the said High
Court, The legislature has not prescribed a different measure of
1 damages in the case of contracts dealing with land from that laid

down in the case of contracts relating to commodities".

In later cases, the Bombay High Court has reversed its decision in
Pilamber v. Cassibai, (above) and has held that Section 73 would
govern cases of sale of land also. Thus, where an intending purchaser
land claims damages for the loss of his bargain, he would ordinarily
OT

De entitled to damage caused to him which "naturally arose in the usual

course of things from such breach". The High Courls of Calcutta,
Lahore and Madras have also taken a similar view.
MEASURE OF DAMAGES IN AN ANTICIPATORY BREACH OF
CONTRACT- In the event of an anticipatory breach, the innocent

Find More at https://t.me/LawCollegeNotes_Stuffs

 198 THE LAW OF CONTRACTS

party may either

contract
(0) accept the repudiation, treating the as at an
enforce the appropriate remedy at once, (in which end,
case,
measure of damages will be the difference between the
on of the contracA
the date therepudiation);
price and the market príce or
until the time
(i) ignore the repudiation,
and wait
for performance
which case, the measure
of
damages will be
arrives (in
n
difference between the contract price and the market
the date of performance).

B. COMPENSATION FOR BREACH OF

cONTRACT WHERE PENALTY IS STIPULATED FOR
(DIFFERENCE BETWEEN PENALTY AND
LIQUIDATED DAMAGES) (S. 74)

Write a note on: MEANING OF PENALTY AND LIQUIDATED DAMAGESA

Liquidated damages a general rule, compensation must be commensurate with the loss
and penalty. or damage sustained. Acting upon this principle, when the injury
M.U. Nov. 2012
consists of a breach of a contract, the Court would assess damages
with a view to restore to the injured party, such advantages as he
might reasonably be expected to have derived from the contract,
had the breach not occurred. But, at times, the parties themselves,
at the time of entering into a contract, agree that a particular sum
will become payable by a party in case of breach of the contract.

Thus, for instance, X may agree to sell his house to Y on 1st

April, for Rs. 20 lakhs, and one of the clauses of the agreement
may provide that if either party commits a default, he would pay Rs.
50,000 to the other.
Such a sum is sometimes agreed upon by the parties by way of
what is known as liquidated damages, that is, it is a sum payabie y
a party as damages, the amount of which, instead of being left to the
determination of the Court, is previously determined by the pare
themselves. At other times, such a sum is named as a penaly, u
is, it is an amount stipulated as in terrorem of the offending pary
In English law, a distinction is made between liquidated
damy
recovared,
and penalty. Whereas
liquidated damages are allowed to beagainstthe
in cases of penalty, the courts In England can grant relief
does
penalty. This distinction is not significant in
India, as Indian law
the
not recognize
the same. The rule under S. 74 of the Act isthatinthe
has been broken, if a sum is named in
case of a contract which

Find More at https://t.me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT

contract as the amount to be paid 199

case of in
contract contains any other
stipulation way
such
breach, or if
complaining of by
the breach entitled (whether or of penalty, the
to have
is not actual
party the
proved been causedthereby)
or lossis damage
party who has broken the
contract, to
receive
reasonable Compensationfromthe
amount so named or, as
the case may not
Stipulations of
be, the penalty the
stipulatedfor.
this nature are usually
money to be found
lending.
Ba for
A
gives
with interest at 12 per cent at
bond in cases
the repayment of Rs. of
stijpulation that in case of the end of six months, 10,000
default, interest with a
rate of
75 per cent from the
date of
shall be payable
way of default. This at the
penalty, and B
is only entitled is a stipulation
compensation as the Court to recover by
considers reasonable. from A
It is further such
clarified by
from the
date of default may S. 74 that a stipulation
for
be a stipulation by way increased interest
Mustrations.- of penalty.
to oay B (a) Acontracts
with B pay Rs.
given day. A failsto
Rs. 500 on a
day, B 1,000, if he fails
is entitled to recover to pay
exceeding
Rs.1,000, as from A, such B Rs. 500 on that
(b) A contracts
the Court considers compensation, not
with B that
reasonable.
Calcutta, if A practises
he will pay B, as surgeon
Calcutta.
B is entitled Rs. 5,000. A practises a within
5,000, as to such as a surgeon
the Court considers compensation, not in
(c) A gives reasonable. exceeding Rs.
interest B a bond
at 12 per cent for
the repayment
that, in case at
of default, the end of six months,of Rs.1,000, with
75 per cent interest shall with a stipulation
from the be payable at
0f penalty, date of default. the rate of
compensationand B is only This is a stipulation
as the Court entitled to recover by way
(0) A, who owes money considers reasonable.
from A,
Tepay
such
him by delivering to B, a money-lender,
Uate, and to him 10 maunds of undertakes to
stipulated stipulates that, grains on a certain
deliver amount in the event of
20 maunds. by the stipulated date, his not delivering
only
entitled This is a he shall the
be liable to
to reasonable stipulation by way of penalty,
(e) A Compensation in case and B is
monthly undertakes of breach.

any
instalments, to repay Ba loan of Rs. 1,000
with a stipulation by five equal
not instalment, the whole that, in default of
payment
toitsby
way of shall become due. This stipulation
terms. penalty and the contract may be enforced is
according

Find More at https://t. me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
200
B, and gives him a bondfor
borrows Rs. 100 from
(6) A
instalments of Rs. 40, with a stipulationRs.2)
payable by five yearly instalment, th
payment of any the whole shallbecms
default of
in
a stipulation by way of penalty.
due. This is penalty is a sum mentioned
PENALTY DEFINED.-
A

Sumin
secure performance, the
agreement with a view to a beira
true intention of the parties, only maximum
according to the d
essence of penaltyis a payment of money sipulate
damages. The
terrorem the offending party. Liquidated damages, on the
as in of covenanted pre-estimate of damages.
are a genuine
other hand,
made no attemptto
words, if it is found that the parties
In other on
might occur to them breach of the contract
estimate the loss that
a sum to be paid in case of its breach, with ta
but still stipulated contrac t
ensuring that both the parties would perform the
object of words, a sum mentioned
in the

would be treated as a penalty. In other treated

the contract wouldcompaison
contract as compensation for breach ofunconscionable
be
extravagant and in
as a penalty if it is flow from the breach.
greatest loss that could possibly
with the

Higher rate of interest, when

a penalty
may be noted
following rules regarding a higher rate of interest
The
payment of interest at a higher rate from the
(1) A stipulation for debtor to repay the
on default on the part of the
date of the bond, always amounts to a penalty. In
sucn
amount on the due date
Court may relieve be
cases, the provisions of S. 74 apply, and the
award only such compensation to the creditor ds
debtor, and
considers reasonable. payment of interest ata
generaly
(2) If, however, the stipulation is for the provision is not certan
hígher rate from the date default, such a
of
could, independs
a stipulation
as a penalty. However, such not
regarded penal or
cases, be regarded as penal, and whether it is
on the facts and circumstances of the case.
caseso!
payable,
(3) A
payment of
stipulation for
compound interest, in s
interest was
default, at the same rate at which simple
case
not a penalty within the meaning of S. 74. amoutt
compound interest, in
(4) However, a stipulation to pay interest would
default, at a higher rate than that of simple
under S. 74. rate the
to a penalty, and relief would be granted specified under if $
(5) If a bond provides for interest at a would fall
necessary
money is not repaid on case
the due date, thegranted, if
74, and the appropriate relief would be

Find More at https://t. me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT
201
bond provides for payment of
(6) If a interest at a lower rate,
interest paid regularly on the due dates, such a if
isa penalty. Thus, if a bond clause is not in
the
nature of provides for payment of
p.a., with a stipulation that if the debtor pays interest at
18% interest punctually
end of every year, the creditor would accept
at the interest at 15%
such a clause would not amount
pa., to penalty.
a

Difference between part-payment and earnest money

Earnest money is sum of money
performance of a
deposited as security for
contract. Such sum may be
forfeited if there is
perform contract. Such forfeiture, it
failure to the has been held in
several cases, will not amount to a
penalty. On the other hand, part-
payment part of the price paid
is otherwise than a deposit. Such part-
payment can be recovered even
though the contract is not performed,
subject, of Course, to the claim for
damages of other party. the
EORFEITURE OF EARNEST MONEY- It must be noted that
forfeiture ofearnest money of a defaulting purchaser is not a penalty:
but a term that a lump sum shall be paid in addition is penal, and
only actual damages can
be recovered. Thus, A contracts with B to
Durchase a house for Rs. 2,00,000
and pays Rs. 20,000 as earnest
money. The contract
provided that should A refuse to buy, the deposit
would be forfeited; and
that should B refuse to sell, he will refund the
money deposited
and pay Rs. 20,000 as damages. On breach by A,
B may forfeit the
deposit. This is not a penalty. Earnest money is
cOunted towards discharge of part
of the price if the transaction goes
through, but is forfeited if it fails
due to purchaser's default. But, if
earnest money forms a major portion
of the price, or is totally
disproportionate to the balance left (as for instance, if it is Rs.
80,000,
out of a total price of Rs.
90,000), it cannot be forfeited; forfeiture in
Such a case is regarded as penal,
and is not enforced. The vendee
S, In such cases, entitled to treat it as a part-payment
towards price
and can have it refunded, after deducting
reasonable compensation
Peyable to the vendor : Raghbir Das v. Sundar Lal,
11 Lah. 699.
LIQUIDATED DAMAGES DEFINED.- The stipulated sum is to
regarded as liquidated damages, if it be found that parties to the
Contract conscientiously
loss which tried to make a genuine pre-estimate of the
might be occasioned to them in case the contract was
broken
by any of them. Hence, liquidated damages are "a genuine
COvenanted
of damages". Liquidated damages are
an
assessment pre-estimate
of
which, in the opinion of the parties, will
compensate the amount
the wronged party for the breach.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
202
contains only a single stipulation,
Thus, where a contract
a specified sum is to become
breach of which payable,Suuch
the damages, if there is no adequate means
a sum is liquidated
damages which may
ascertaining the precise result from of
a contractor
undertakes the
to complete a Wortk
breach, e.g., where
date and in
default of such completion, promises
a specified
by
1,000 for every day
during which the work remains
to pay Rs.
incomplete after the said date.
DIFFERENCE BETWEEN 'PENALTY' AND 'LIQUIDATED
GO
DAMAGES- The following are the points of distinction between he
'Penalty' and 'Liquidated
Damages':
a.
the
1. The essence of penalty is
a payment of money stipulated
terrorem offending party; the essence of liquidated damarae
in of the
pre-estimate of damages.
is a genuine covenanted
any amount can be
2. If the clause is construed as a penalty,
not necessariy
recovered, not exceeding the sum mentioned, but
the whole; whereas if it is construed
as iquidated damages, the
actually arising
whole sum is recoverable, even though the loss
or lesser than anticipated
from the breach may turn out to be greater
Go
Englisth
by the parties. (This distinction is very important under
law, as stated above.) br
or liquidated
In considering whether a named sum is a penalty
SU

damages, the Court does not go by the name by which e.g., if the
the parties
have called it but looks to the actual nature of the thing,
50

sum fixed is extravagant, exhorbitant or unconscionable, the

Gourt

will regard it as a penalty, even if it is termed as liquidated

damages
or
in the contract. The Court is not bound by the terminology
parties, i.e., the actual technical terms used, but will inquire
into Uie
ln ya
circumstances, e.g., even though
a
contract mentions thatdamages
"liquidated
of
breach, a particular sum shall be payable as "liquidated
the Court will not be bound by the use of the term case and
damages', but will inquire into the circumstances of the
decide for itself whether the clause is penal or not.
payable forthe
3. When terms a sum atrises
the of contract specify construction
regarded,as
non-performance of a contract, a question of
under English law as to whether
the sum should be importantin
a
penalty or liquidated damages. The question is
conclusion that
the
this sense, that if the Court comes to Court has
sum provided in the contract the
is a penalty, the In
amount.option
the
discretion to grant, or not entire plalntilt it
case of liquidated damages,to grant, the Court has no
however, the
the matter. It is bound to grant amount to the
the entire

Find More at https://t.me/LawCollegeNotes_Stuffs

 BREACH OF CONTRACT
203
may be noted that the above distinction
It is peculiar to English
la, No such distinction is recognised in India. In India, the Court
has not to
go into the question whether the sum named a
is penalty
or liquidated damages, but has to award reasonable
compensation,
not exceeding the amount so named, or, as the case may
be, the
penalty stipulated for in the contract. The only
exception made is in
the case of any bail-bond, recognizance, or other instrument of the
eame nature given
under the provisions of any law or order of
Government for the performance of any public duty; upon breach of
the condition of any such instrument, the whole sum
mentioned
therein is to be paid by the person liable. (See below.)

Exception to S. 74
SPECIAL PROVISIONS FOR BAIL-BONDS,
that when any person
ETCS. 74 provides
enters into any bail-bond, recognizance or
other instrument of thesame nature, or, under the provisions of any
law or under the orders of the Central Government or of any State
Government, gives any bond for the performance
of any public duty
or act in which are
the public interested, he becomes liable, upon
breach of the condition of any
such instrument, to pay the whole
Sum mentioned therein.
Thus, A gives a recognizance binding him
in a penalty of Rs.
500 to appear in Court on a
certain day. He forfeits his recognizance.
He is liable to pay
the whole penalty. (Ullustration to S. 74)
Bail-bonds, recognizances, or other
bonds for the performance
a
of public duty or acts in
which the public are interested form an
exception to the general rule
enunciated in this section, that a party
COmplaining of a breach can
only recover reasonable compensation,
i not any sum that is named in
paid
contract as
the the amount to be
in case of such
bonds are
breach. Persons who have executed such
liable to pay the whole sum mentioned therein upon
breach
ofthe condition of any such instrument.
This
exception does not, however, apply to ordinary contracts
with
the Government. A
dealer contract, therefore, by a builder or cattle-
which
to do work for, or to supply cattle to the Government, in
he binds himself
subject to pay a fixed sum in case of breach, will be
governs
to precisely the same rule of construction as that which
cases of this
description between private individuals.

Find More at https://t.me/LawCollegeNotes_Stuffs

 CONTRACTS
THE LAW OF
204
RIGHTFULLY
C. RIGHTS OF PARTY RESCINDING
A CONTRACT (S. 75)
person who rightfully rescinds
S. 75 lays that a
down acontrac
entitled to compensation for any damage which he has sustained
is non-fulfilment of the contract.
through the
contracts with B, the manager of a
Illus.- A, a singer, nights every week theatre,
to sing at his theatre for two in during the next
engages
B to pay her 100 rupees for
each nights
two months, and wilfully absents
performance. On the sixth night, A
herself fromthe
consequence, rescinds the contract. B entitled
theatre and in B
is to
claim compensation for the damages which he has sustainedthrough
contract.
the non-fulfilment of the
D. QUANTUM MERUIT
"Quantum meruit" means "as much as he has earned". Where
a
short note on:
ntum Meruit. one person has expressly or impliedly requested another to render
P.U. Apr. 2011 him a service without specifying any remuneration, but the
circumstances of the request imply that the service is to be paid
for, there is implied a promise to pay quantum meruit, that is, so
much as the party doing the service deserves.
Thus, the claim of quantum meruit can only arise upon a promise,
to be implied
(1) from a request by the defendant to the plaintif tb
perform services for him, or
(2) from the acceptance of such services as the plaintt
rendered, so as to imply a promise to pay tor
same : Liladhar v. Mathurdas, 39, Bom. L.R. 119.
e
certain
Further, if a person by the term of a contract a
is to do work,
piece of work for a lump sum, and he does only a part of the may
but he
something different, he cannot claim under the contract,completion
has
be able to claim on
quantum meruit, as for example, it
been prevented by the act of the other party to the contracl.
meruit
SUING ON QUANTUM is
MERUIT.- Suing on quantum partycan
the suit for the value of so much as done. The injured part
sue for quantum is party has
done a
meruit.Thus, if the injured breach
of what he was
bound to do under the contract, the if
done can
operates as discharge, has
and if what the injured party either or
be estimated
in a money value, the injured party can Suemeruit,ie.
damages for
the breach of the contract or for quantum A places
for the value of so delivered by
an order with B formuch as he has already done, Thus,
supply of be
100 chairs to

Find More at https://t.me/LawCollegeNotes Stuffs

 BREACH OF CONTRACT
205
instalments. chairs when A informs him that
B delivers 20 he will
require no more. In this case, A's repudiation
discharges B
from
to supply orthe remaining chairs. He can sue A for the
obligation
breach of contract, for the value of the
20 chairs already supplied.
As observed by
Best, C.J. in Mavor v.
Pyne, "lf a man agrees
me one hundred quarters of corn, to
deliver to and after I have
quarters, I decline taking any more, he is at received
ten all events entitled to
recover against me the value of the ten that I have
received.
In order to avail
of
this remedy, two important conditions must
fulfilled.
be
Firsty, the right to claim quantum meruit is available only if the
niainal contract has been discharged. The contract must have been
hroken by the defendant in such a way that the plaintiff
should be able
to regard himself as discharged
without any further performance, and
he must elect to do so. Hence, if the contract is still "open",
he cannot
arail himself of this remedy, and would have to sue
for damages.
Secondly, such a claim can be enforced only by
the party who
is not in default. The party who
breaks the contract is not entitled to
sue quantum meruit for
the work which he has done, although he
may have
performed some part of his obligation.
CASES. Planche v. Colburn. (1831) 8 Bing. 14.- In this case,
the defendants had commenced a periodical
publication called "The
Jvenile Library, and had engaged Mr. X to write a volume on
ancient armour for the periodical, for which
on completion of
he was to receive £ 100
the work. When Mr. X had completed a part, but not
the whole, of the volume, the defendants
abandoned the publication.
Ihe Court held that Mr. X was to recover quantum meruit,
entitled
and award him £ 50, which
the jury found to be payable to him.
De Bernardy v. Harding, (1853) 8 Ex.
822. The Defendant
Ppointed the Plaintiff as his agent to advertise and sell tickets tor
seats to view
of the Duke of Wellington, on commission
basis. After the funeral
the Plaintiff had already incurred certain expenses in this
Connection,
Inthe
the Defendant wrongfully revoked the Plaintiff's authority.
circumstances, the Court held that the Plaintif was entitled to
recover
quantum meruit for
the expenses incurred by him.
Clay v. Yates,
(1865) 25 L. J. Ex. 237.A agrees to execute
a
printing
job for B. After doing a part of the work, he finds that it
contains
defamatory material. He is justified in refusing to complete
the work, and work
already is entitled to payment quantum meruit for the
done.

Find More at https://t.me/LawCollegeNotes_Stufs