Contracts – every answer write either a case law or an example. Sections of the contract act.

Proposal and offer are one and the same thing, in Indian law proposal is used and in English law offer
is used.

Assent – unilateral

Consent – bilateral

Proposal must be within the knowledge of the acceptor

Lalmon Shukla V Gauri Dutt – for contract to take place there has to be acceptance and for that
knowledge of the offer. Here, Lalmon Shukla did not know about the reward, so no contract.

Objective test of intention – what a reasonable person makes of the circumstance.

Harvey V Facey – Harvey wanted to buy a property in Jamaica, asked Facey to quote the lowest
price, he said 900 pounds, went to court. No intention to sell, contract did not conclude here. Only
mere information is provided.

Proposal can be express or implied and has to be certain. Proposal once rejected comes to an end.

Hyde V Wrench

Counter offer – two proposals exhaust each other, previous offer stands canceled.

Cross offer – identical parties, identical subject matters at the same time, both offers are valid, both
proposals do not exhaust each other.

Mirror rule – acceptance must be a mirror of the proposal

Invitation to offer or offer depends upon the intention of the party who is making it.

Pharmaceutical society of Great Britain V Boots Cash Chemist – customer picked up a drug from the
store and person declined to bill it. There will be no breach of contract because he did not accept the
offer of billing it.

Standing offer – for a certain period of time, a party cannot reject another party’s offer, it is called a
standing offer.

Jones v Padavatton – daughter clear Bar Exam, she will get allowance, later shifted to place to live.
Daughter said breach of contract. No contract because no intention to create legal relations.

Brogden v Metropolitan Railway Co – Brogden supplying coal since long time, no formal contract, he
suggested get into a contract, company drafted agreement along with arbitration clause and blank
spaces, Brogden signed sent to MRC, MRC didn’t sign or send it back but trade carried on, implied
that there was a contract in place. Implied acceptance.

Upton Rural District Council V Powell – fire on Powell’s farm, called for fire brigade, extinguished fire,
had to pay money, he assumed had to not pay money and free services, did contract arise? Services
were delivered under implied promise, liable to pay.

Consideration

Combe v Combe – husband and wife got divorced, husband decided to pay maintenance, she did not
go to the court, he stopped paying maintenance. No contract, no consideration, did no go from the
desire of the promisor (husband).
Durga Prasad V Baldeo – Baldeo built a market place at the order of the collector, shopkeepers
promised to pay commission to plaintiff for article sold, after sometime they stopped paying.
Contract between plaintiff and collector and not the shopkeepers and the plaintiff.

Promissory Estoppel

when one party has acted on a promise, the other party cannot go back on it. Essentials – promise,
reliance, injury.

Kedarnath V Gauri Mohammad – A wanted to construct a town hall, 100 Rs subscription per person,
based on this B engaged a contractor, A denied paying the contract. Promissory estoppel comes into
picture.

Abdul Aziz v Maussam Ali – defendant promised to pay Rs 500 to build a mosque, nothing started,
no construction, he did not pay 500.

Doraiswamy Iyer V Arunachala Ayyar – repairing of a temple was already in progress, A promised to
pay 125 as subscription amount, later denied it.

Privity of Contract

connection between 2 parties upon which rights and duties fall.

Dutton V Poole – father, son, daughter, father wanted to get daughter married, sold timber from his
farm, son promised to pay the amount of timber to the father on condition of not selling the timber,
son did not pay the amount, daughter wanted to sue, case it was held that as she was beneficiary
she could sue, but after this held that privity of contract in both India and UK, but privity of
consideration only in UK and not India.

Tweedle V Atkinson – overruled the previous case. Husband and wife, fathers of both entered into a
contract to pay a certain amount to husband, he can use it however he wants, both the fathers died,
wife’s father did not pay amount, husband sued executor of wife’s father. Husband is a stranger to
the contract, contract was between both the fathers, so husband could not sue, upheld the law that
there is privity of contract and privity of consideration in the UK.

Dunlop Pneumatic Tyre Co V Selfridge Co – Dunlop manufactured and sold tyres, he entered into a
contract with Duke to not sell tyres below a fixed price, Duke entered into a contract with Selfridge,
5 pounds penalty. In India, Dunlop could have got because no privity of consideration in India, only
contract.

Khwaja Mohammad V Hussaini Begum – Khwaja wanted his son Rustom Ali to get married to
Hussaini Begum, Khwaja and Hussaini’s father entered into a contract to pay maintenance every
month, they started living separately then, he stopped giving 500 as allowance. She can claim
because there is no privity of consideration in India.

Beswick V Beswick – A wanted to retire from business, transfer goodwill and tools if you promise to
make consultant for business, after he dies pay 5 pounds per week. He did not pay after sometime,
wife filled case in capacity of executor after husband’s estate, and also from her capacity. She could
claim not from her capacity but from her husband’s.

Contract – right of third-party act 1999 – when wives are the beneficiary of the contract, they can
claim even though they are third party. Law applicable in the UK.
MC Chacko V State Bank of Travancore – highland bank was indebted to State bank, M was manager
in highland bank, K – M’s father guaranteed on behalf of M that he will repay the loan, K made a gift
deed to distribute property among family members, clause was that if there is any loan it has to be
paid by K only, not other members to ensure doesn’t fall on other members, can bank claim under
this gift deed? No because family arrangement, bank is third party, cannot claim.

Exception to doctrine of privity

1. beneficiaries under trust

2. marriage

3. Estoppel/acknowledge

4. agency – principal agent

5. assignment – life insurance policy

6. covenants running with land – Turk V Moxhay – D had a property which he sold to E on condition
that one part has to be kept for public use, e kept his bargain but transferred some property to F and
also mentioned same to F, F used for personal use so here D can claim

Executed and executory consideration – ma’am asked Nandini to get cold coffee for her, will give
100 Rs for it, Nandini goes and gets coffee, this is executed consideration, money is still left to be
paid so this is called executory.

Past consideration – Teertha told Deepna to write notes for her in contracts, after writing notes
Teertha says I will give you Rs 500 for this, Deepna has already performed her contract so this is past
consideration. Promise is subsequent to the act. Under Indian law, past consideration is valid and
good but under English law it is no consideration but it is considered consideration in 2 cases – 1.
past consideration is at the request or desire of the promisor (both Indian law and English law) –
deepna wrote notes only because Teertha asked her to so condition valid in both the countries laws.
2. At the time of making such request, there was an intention to compensate for such past
consideration – no such requirement in Indian law.

Section 2 clause d has to be read with section 25 – agreement without consideration is void

Section 10 – 2 parties needed for contract, 2 people in different capacities can enter into a contract,
eg personal capacity and business capacity, intention to create a contract, contract capable of being
performed, should be in writing and registered wherever required by the law. Cannot enter into a
contract with an alien enemy, person not from India, alien enemy is a person from a country where
India is at war with.

Parties competent to contract – Chacko and Ors V Mahadevan – Chacko sold 1 cent of his land in
1982 for 18000, next year 3 cents of land for 1000 only, both went to court, wife said not right state
of mind when contract was entered. One month before sale Chacko was in hospital for alcohol
psychosis, M to whom land was sold administered a lot of alcohol to Chacko. Contract null and void,
unsound mind.

Indian majority act, 1875 – 18 or 18 or above is regarded as a major. Before 1903, contract with
minor was voidable.

Mohri Bifi V Dharmodas – Dharmodas was a minor and he mortgaged his property to B, and
Brahmodatt was a moneylender. D wrote on a piece of paper that I am a major even though he was
not, minor’s mother already said you are entering into a contract with a minor to moneylender, D
went to court, said contract is void based on minority. Major, declared he is a major, contract with
minor voidable, even want to cancel tell him to refund the money back, court rejected all this and
said contract with minor is void ab initio, will get nothing out of it. Landmark case which declared
that contract with minor is void ab initio and that section 64 and section 65 do not apply to minors.

Khan Gul V Lakha Singh – power to give equitable relief is wider in India than UK, therefore minors
are not allowed to unjustly gain an advantage in the agreement or contract. Law commission in the
13th report agreed to this, minors have to restitute or return the property in case of contract.

Raja Rani V Prem Adib – a film producer promised to give minor a role in movie, did not get role, he
said in court that minor so cannot be enforced, court agreed.

Indian law says that benefit consists of both money and property, but UK law says only relating to
property.

Leslie V Sheill – a minor misrepresented his age and got a loan amount, he spent all the loan
amount, matter went to court. Party said ask minor to restore the loan amount he took in court, if
we ask him to repay the money it means the contract is being enforced which defeats the purpose of
minor not entering into the contract.

BEFORE 1903 – VOIDABLE – THEN MOHRI BIBI’S CASE WHERE CONTRACT WITH MINOR IS VOID AB
INITIO + 64 AND 65 DO NOT APPLY, KHAN GUL’S CASE – RESTORATION RECORDING MONEY AND
PROPERTY, 1958 – 13TH LAW COMMISSION, KHAN GUL RESTORATION – 1963, SRA S 33(2)(6),
RESTORATION

ENGLISH LAW – MONEY DOES NOT INCLUDE – LESLIE V SHEILL CASE – PROPERTY APPLIES –
TRACEABLE + POSSESSION

Section 16 – undue influence – ingredients – position to dominate the will of others + uses that
position to obtain unfair advantage

Ladli Prasad V Karmal Distillery – both these essentials have to be fulfilled to amount to undue
influence.

Section 16 – clause 2 – talks about presumption – parties are under a presumption regarding the
domination of the will as they are in that position.

Manu Singh V Umadat Pandey – religious guru asked his devotee to transfer all his property in his
name, if you transfer property soul will be happy in next life. This is undue influence.

Section 16 – clause 3 – 10000 worth watch sold for 1 lakh, if you don’t give 1 lakh for the watch then
class participation zero, this is undue influence.

Section 19A – power to set aside contract induced by undue influence – when consent to an
agreement is cause by undue influence, the agreement is a contract voidable at the option of the
party whose consent was so caused.

Section 10 – when agreements are contracts

Section 23 – when consideration/object is lawful

Section 24 – blue pencil rule

Section 17 – fraud – essentials – intend to deceive – induce someone to enter into a contract –

EX DOLO MALO NON ORITUR ACTIO – a right of action cannot arise out of a fraud

Concealment can be active or passive. Active concealment is something you do not know, you buy a
car and after driving 50kms you realize its spoilt, this is known as latent defect. Passive concealment
is when you can actually see the defect, eg – a dent on the car, also known as patent defect.

Derry V Peek – A company wrote a prospectus that their trams were powered by steams but in
reality, they were powered by horses. It was a formality that is why mentioned in prospectus, to get
permission from board of trade. Their claim got rejected, board did not approve of doing business by
trams run by steam. This is not fraud since there is no intention to deceive, it is only
misrepresentation.

Mere silence is not fraud but silence will amount to fraud in 2 situations – duty of the person to
speak and silence is equivalent to speech.

Duty of the person to speak - A and A’s father – father tells A buy a car from me for 1 lakh, he trusts
his father and enters into an agreement, in this situation it is the duty of the father to speak about
the car, if he does not speak it amounts to fraud.

Silent is equivalent to speech - A buys a house and goes to C and asks is there mold in this house, C
does not say anything, here silence is equivalent to speech, and therefore there is fraud.

Change of circumstances – A went to C asking if the house has mold and C says no, after some
months A again goes again and asks the same question, here C has to answer the question, if he
does not then it will amount to fraud.

Half-truths – when half things are told and person stops in between while saying a thing.

Section 19

Patent defect – it is the duty of the buyer to examine

Latent defect – concealment will amount to fraud only when asked

Rights in the case of fraud –

a. right to rescind

b. right to insist performance (s 19 para 2)

c. right to claim damage for non – performance

d. right to claim damage under law of tort

in the case of misrepresentation, only 1 and 2 are allowed.

No consent – agreement is void

No free consent – agreement is voidable – undue influence, coercion, fraud, misrepresentation

Misrepresentation – can only be of facts not of opinion, but only material facts,
18 1 – know about material facts but don’t inform then fraud but if don’t know and tell anyone then
it is not misrepresentation

18 2 – there was a breach of duty without intention to deceive and therefore it is misrepresentation

18 3 – you said something by which another party commits a mistake – that is also
misrepresentation

18 has to be read with section 22

Difference between fraud and misrepresentation

1. fraud – misrepresentation + intention to deceive

Section 20 – mistake has to go to the root of the agreement, for superficial mistake agreement
cannot be void. Talks about bilateral mistake – such agreements are void

Essential to the agreement –

Identity of the parties – police offer helped to arrest Chirag but arrested Srishti

Identity of the subject matter – A wanted to buy an iPhone but entered into a contract to buy a
Samsung

Character of the document – wanted to enter into a lease agreement but entered into a sale
agreement

Mistake regarding value of property doesn’t fall under mistake and will not make contract void.

Cundy v Lindsay – Lindsay wanted to enter into a contract with Blaenkarn but entered into a
contract with Blankiron, Blankiron did not pay and sold goods to third party, Linday went to court
said Blankiron had no right to do so, court said agreement is void, this is mistake as to identity of the
parties.

Bell V Lever Bros Ltd – Bell was an employee of Lever Bros, he was managing director, he traded for
personal profits which was forbidden by contract, Lever Bros provided compensation and told him to
leave the job, then they came to know about the personal profits and said money will be taken back,
company went to court and said void contract as mistake of fact, court said that this fact was not
important to the contract, as mistake was not essential to the contract so he can keep his money
with him.

Section 21 – ignorance of law is not excuse

Section 22 – unilateral mistake is a valid contract, does not make a contract void

Section 21 – foreign law – bilateral is void and unilateral is not voidable.

Mistake can negate the consent or nullify the consent. Negate consent is under section 13 – did not
agree on the same thing in the same sense that is mutual mistake. Nullifying consent is agreeing
upon the same thing in the same sense but due to an assumption it is nullified dealt under section 20
21 22

Section 25 – 3 conditions where agreement without consideration is not void.

Rajlukhy Dabee V Bhoothnath – husband and wife used to quarrel and disagree a lot, husband
executed a document where he agreed to pay separate maintenance to the wife, here consideration
moves from the husband but not from the wife, wife went to court and said there has to be
consideration. There is no love and affection so therefore it is a void contract.

Essentials – writing and registered – out of natural love and affection – near relation of parties to
each other.

Section 25 and section 2 clause D have to be read together

Section 25 clause 2 - A building has caught fire, a girl is trapped inside the building, Niloy sees the girl
and goes to rescue her, he has done it voluntarily, the girl said since you saved me, I will go on a date
with you, contract is formed after the action has been done. It was not according to the desire of the
promisor, therefore its subsection 2 of section 25, if it would be according to the desire to the
promisor then it is past consideration (the girl asks to bring a rose then only she will go on a date).

Section 25 clause 3 – essentials – it must refer to a debt which the creditor might have enforced but
could not because of expiry of period of limitation. Limitation period is passed, you cannot claim the
money back and cannot go to court – there must be clear or distinct promise to pay wholly or partly
such debt – promise must be in writing and signed by the person or by his duly appointed agent.

Agreement without consideration is void – exceptions to this rule – section 25 – gift (explanation 1 to
section 25) – section 185 – gratuitous bailment (a type of bailment in which the bailee receives no
consideration).

Section 26 – agreement in restraint of marriage is void – father tells a daughter you cannot marry
anyone else except A, this is void. The essence is that there is restraint. Father tells daughter you
cannot marry for 2 years, mother and father of boy and girl agree but not the girls – this is partial
restraint so void. Boy says girl that I will marry only you and no one else, this is a valid contract
because there is no restraint.

U Ga Zan V Har Pru – father-in-law told his son in law I would pay for you education if you do not
bring a second wife – is this a contract? – so there is not a contract and it is void because there is
restraint of marriage.

Lowe V Peers – the defendant told plaintiff if I marry someone else other than you, I will give you
10000 pounds. The court held here that it is void – don’t write the case in the exam.

Section 27 – agreement in restraint of trade is void. Partial and full restraint both make the
agreement void. Only that part of the agreement which is void will be separated, the other part will
be carried on as a valid contract.

Madhu Chander V Raj Coomar – there was a shopkeeper who asked another shopkeeper to shut his
shop and he will pay him some amount, the shopkeeper did not pay him the amount, the other
shopkeeper went to court that he did not pay me, this is not a valid contract as it is in restraint of
trade.

Violative of article 19 (1)(g) of the constitution.

Restraint is divided into 2 parts – curb the competition – here the agreement is void – to protect
own personal interest – then restraint is not void.

Srishti comes for a job and owner says that if you come for a job, I will tell you secret recipes, you
cannot open own shop for 2 years – this is valid as it is to protect your interest.

Exception 1 – can’t open a similar business – within certain limits

Eg – want goodwill from Haldirams, after getting goodwill you say you will not open a shop within
these local limits – this is not in restraint of trade as it valid. For 2 years you will not open business in
this area – this is also valid and not in restraint of trade.

Restraint has to be reasonable

Chandra V Prasullah – plaintiff had a business where he used to run bus from Pune to
Mahabaleshwar and defendant also had the same business, plaintiff bought goodwill of defendant
and contract said cannot open a similar business for 3 years, defendant breached the contract. The
restraint is valid and the contract is also valid.

Three exceptions under the Indian partnership act

1. agreement with a partner of a firm to not open another business.

2. agreement with a partner to not open similar business.

3. in anticipation of closure of firm, the partners can come to an agreement together in restraint of
carrying out a similar business in similar area or similar type of business.

Exceptions evolved through judicial interpretations where restraint of trade is valid

1. trade combination – few companies come together and fix prices of a certain product, this is valid
restraint

2. sole dealing agreement – franchise of dominos says that you are restraining us from selling pizza
hut pizza.

Gujarat Bottling Co V Coca Cola Ltd – supreme court case – Gujarat bottling company entered into a
contract wit coca cola to manufacture bottles and trade mark painted goods, there was a condition
by coca cola that if you manufacture our goods cannot manufacture any other companies’ goods.
Contract can be canceled by one year notice or mutual consent. Another contract reduced the time
period to 90 days from 1 year. The shares of Gujarat bottling were bought by Pepsi so the ownership
also changed. Now Gujarat bottling company started manufacturing goods for Pepsi, coca cola
moved to the court and said to stop manufacturing Pepsi. Was this agreement in restraint of trade?
It is a valid contract.

M/S Stellar Information Technology Pvt Ltd V Rakesh Kumar – there are 2 companies A and B, now X
employees of company A founded company B, A went to court and said B is approaching our
customers and should not be allowed to do so. Court said that this information is available in public
domain and therefore it is not confidential, here no remedy will be allowed and there is no restraint
of trade.

3. contract exclusive service or restraint on employees – if a teacher is teaching in NMIMS there can
be a contract that cannot teach anywhere else. This is valid contract.

If there are 5 clauses in the contract and one is in restraint of trade, then that only will be void other
agreement will be valid, doctrine of severability will apply, blue pencil rule – to that extent void
meaning.

Section 28 – agreements in restraint of legal proceedings are void

In legal proceedings partial restraint is valid, full restraint will make the contract void. Tanishka
comes to buy Maggi from shop, seller cannot enter into contract with Tanisha that if he does not
give Maggi she cannot go to the court, this is void agreement.

No agreement can stipulate a time within which they have to go to court. If statute of limitations is 3
years contract cannot restrain it to 2 years.

28b – blurs difference between right and remedy. No agreement can extinguish the right of any
party on expiry of a specified period. No agreement can discharge any party from liability on expiry
of a specified period.

When contract is entered into and it is said you have to come and claim Maggi in 2 days, contract is
void because time comes in the picture. Seller discharges himself from any liability therefore also
void.

28 + 23 void – can sue in any court without jurisdiction

ABC Laminart V AP Agencies – there was jurisdiction at 2 places, parties agreed that they would only
file at Kyra but the other party filed in Salem, it is a valid restraint if they have valid jurisdiction.

If in future there is an agreement that we will go for arbitration or mediation, such restraint is
allowed.

Exception 3 – NHAI invites tenders, a lot of people will apply and government will only select few
tenders of lowest cost, involves a lot of money, you as a party got the tender and give guarantee to
government that is there is dispute or anything then bank will cover the cost and indemnify us. The
bank will have to pay if there is a breach of contract by the party. There is always a stipulated time in
which you have to claim the indemnity. This goes against 28b because you cannot put a time limit,
but this is allowed under exception.

National insurance V Sujir Ganesh Nayak – plaintiff went to court to strike down a clause mentioned
in the insurance policy; the court held that it did not restrict absolutely so it is valid. It is because of
this section 28 came into place. Due to this, banks were threatened and then exception was
introduced.

Oriental Insurance Company V Sanjeesh and Ors –

By precedent it is void as it extinguishes the liability of the party but it is there in bare act and no
change in law so it is allowed.

Section 29 – agreements void for uncertainty.

Damodar Tukaram V State of Bombay – held that if there is machinery to ascertain vague terms, you
use that and make the terms valid. Then contract will not be void.

Contra Proferenten Rule – if there is ambiguity in the document, it will be resolved against the
person who created the document. Two companies entered into a contract where the value is in
dollars but different dollars, so whoever made the contract will be against it, example Australia
made the contract it will be in favor of the USA. In insurance company, it will be in favor of
customer.

Section 30 – agreements by way of wager are void

Essentials of a wager – mutual chance of gain and loss – divided into 2 sides – the subject matter of
the wager has to be an uncertain agreement – there should be no interest in the agreement except
you wanting to win the agreement.

If there is an insurance policy that A takes in favor of his wife, this is not a wagering agreement
because there is insurable interest here.

Collateral contracts are valid – A tells B I will give you 10k if it rains and if it does not then B has to
pay him 10k, he takes loan to pay the money from C, this is valid as it is collateral to the main
agreement.

Baba Saheb Rahim Saheb V Raja Ram Raghunath – 2 wrestlers agreed that whoever doesn’t come on
match day will pay 500 to the opposite party and also the gate money, one of them failed to appear
and lost the deal, the other party did not pay so they went to court. Court said this is not a wagering
agreement. There was no uncertainty, the party could decide if they wanted to come or no, there
was no equal chance of winning and losing.

exceptions – horse racing, insurance contract, share market trading, winning in sports and other
competitions, chit funds, mutuals funds

wagering agreements are void, they are unenforceable but not forbidden by law, any agreement
collateral to wagering agreement is valid.

Section 31 – contingent contract defined – contract to do or not to do something

Chandu Lal Harjivandas V CIT – the court held that all contracts of indemnity and insurance are
contingent contracts.

In contingent contracts, there are no reciprocal promises.

Section 32 – enforcement of contracts on an event happening, read with section 56 – talks about
internal frustration of contract. Anything which is void under section 32 is also void under section 36.

Section 33 – enforcement of contracts contingent on an event not happening.

Section 34 – when event on which a contract is contingent to be deemed impossible, it is the future
conduct of a living person.

Section 35 – section 36

Quasi contracts – s68 – 72

nemo debet locupletari ex aliena jactura – A’s son asks a painter to paint A’s house, painter comes to
paint house, A sees the painter painting knowing he expects money in return, after that he asks for
money, A says that you did not ask for money before painting, so no money. Although no contract
but A will get unjustly benefitted so he has to give money.

Moses V Macferlan – what was held in the case important not facts

Essentials – unjust enrichment, the defend has been enriched by the receipt of a benefit – this
enrichment is at the expense of plaintiff, that the retention of the benefit is unjust.

Section 68 – necessaries are supplied, to the person who is uncapable of entering into a contract, to
a person who is dependent upon such a person incapable of making a contract is a person whom the
incapable person legally bound to support, suited to that person’s condition of life.
How to determine necessaries – social status and standard of living – actual need for the items
supplied – reasonable market value of the necessities

Nash V Inman – minor went to tailor to get suits stitched, he did not pay money, tailor asked for
money, this is not a quasi-contract because it was fancy coat and luxuries, therefore contract is void
ab initio.

Section 69 – plaintiff should be interested in making the payment – plaintiff himself should not be
bound to make the payment – defendant should be under legal compulsion to pay – plaintiff should
have made the payment to another person and not to himself

HC Mukherjee V KP Goswami – the owners were required to pay for the excess water being used,
they did not pay amount and water supply was cut, tenants paid on behalf of the owner, now owner
had to reimburse the tenant because quasi contract.

Quantum merit – as much as one deserves

Essentials – a person should lawfully do something for another person or deliver something to him –
in doing so the said thing or delivering the said thing, he must not intend to act gratuitously – the
other person for whom something is done or to whom something is delivered must enjoy the
benefit.

A orders pizza, pizza delivery at the wrong address, he ends up having the pizza so he has to pay the
amount.

State of WB V BK Mondall and Sons – plaintiff made certain constructions at the request of the
government officer, work was done government said no money because no contract, however work
was done so he is liable to pay therefore it is a quasi-contract, only for the amount of work that was
done, not less, not more.

Section 71 – duties of the finder – take reasonable care of the property, attempt to find the true
owner of the property, not to use the goods for personal benefit, return the goods once the owner is
found, hand over any profits derived from the goods.

Rights – reimbursement for expenses, right to reward if any was offered, lien over goods for
expenses incurred.

Section 72 – not coercion as defined under section 15 of the contracts act, coercion means under
pressure

Ayurveda Pharmacy V State of Tamil Nadu

Article 298 and 299 of the constitution of India – government contracting party

299 (1) – for a government contract to be binding – contract must be expressed – contract must be
executed by such person and in such manner as the president or the governor may authorize –
contract must be executed on behalf of the president or the governor as the case may be.

If the form of the contract is not complying by the form under article 299 it is not a valid contract,
cannot be ratified.

UOI V NK Pvt Ltd – director of the railway board was to sign contract on behalf of the president, but
secretary signed, here it was held not a contract.
Bhikraj Jaipuria V UOI – division superintendent entered into a contract that it was on the behalf of
the governor general; here he did not mention so not government contract.

State of WB V BK Mondal And Sons

Discharge of contract – when a contract gets discharged, its no longer binding on the parties and
therefore contract is considered as being over

Discharge by 3 ways –

Performance – Impossibility – agreement

Any rights and liabilities are extinguished, then contract is considered to be discharged.

Section 37

In cases where contracts are based on skill – the legal representatives will not be bound.

Section 38 – effect of refusal to accept offer of performance – A promised B to sing at her event on
31st January, A goes on 31st January and says I will perform but B says I don’t need it, so here A is no
longer liable to perform the contract and cannot claim compensation.

Offer should be unconditional

I will perform at your house and at 3am not the venue, made at a proper time and place, A tells B to
deliver 100 bags of wheat, B can check if there are actually 100 bags so contract can be performed.

Section 39 – ma’am has to deliver car to Samiksha on 31st January, on 31st ma’am tells her I will not
give car this is breach covered in later section, but if said on 15th January then it is anticipatory
breach.

Ma’am promised Samiksha I will sing for 2 months 3 nights each, ma’am sang for 5 nights and said
6th day won’t come for singing, this is anticipatory breach. Option to either end the contract or wait
and see if turns up, if doesn’t turn up on 6th but turns up on 7th and allowed to perform then contract
continues.

Section 73 is actual breach and section 39 is anticipatory breach explanation, 75 deals with
compensation for anticipatory breach.

Section 75 - Party rightfully rescinding contract, entitled to compensation.

Read 39 + 75 together for anticipatory breach

Section 64, section 65 illustration c

Remedies – rescind contract and pay compensation, rescind and claim restitution, specific
performance – specific relief act – only the party who is ready and willing to perform their part of
the contract can get specific relief. Section 10 of specific relief act.

Hochster V De La Tours – plaintiff was a courier man and he was engaged by the defendant company
to accompany him to their tour, tour was commencing on 1st June, 1831, before this day the
company told the courier your services are not required. Courier went to court claiming anticipatory
breach of contract, the company said due date of performance is not come so no compensation.
Court said that they do not have to wait till the death of the contract to claim compensation, suit for
compensation can be filled immediately.
Frost V Knight – a man promised to marry a woman after her father’s death. While father was still
living, he married another woman. Woman went to court and said anticipatory breach of contract,
court held that no need to wait till due date as it is anticipatory breach and he is instantly liable for
the breach of the promise.

West Bengal Financial Corp V Gluco Series Pvt Ltd – WBFC granted a loan of Rs 438000 to GSPL,
condition was that if they annually paid 60000 on time then they will grant additional loan of
162000. Plaintiff failed to make the requirements and company rescinded the contract. Court held
contract is divided into 2 parts – 438000 and the second condition of additional loan. Since party has
failed to meet the required conditions, the company was right in rescinding the contract.

Section 40 - Person by whom promise is to be performed – promisor, legal representative, anyone

employed by the promisor – these 3 can perform a contract. Contracts based on skills and personal
qualifications fall under this where the person himself has to perform the contract.

Section 41 - Effect of accepting performance from third person. —When a promisee accepts
performance of the promise from a third person, he cannot afterwards enforce it against the
promisor. Eg – if A accepts performance from B, then cannot enforce the performance from C.
waived right to take compensation from C.

Section 42 – joint promises – the persons are jointly liable, not more or not less

Section 43 – if 4 people have to give money to A, then A can ask 2 people to give money, no
compulsion that all should play.

Section 44

Section 45

Section 50 - Performance in manner or at time prescribed or sanctioned by promisee. —The

performance of any promise may be made in any manner, or at any time which the promisee
prescribes or sanctions.

Section 51 - Promisor not bound to perform, unless reciprocal promisee ready and willing to
perform.

Section 52 - Order of performance of reciprocal promises. —Where the order in which reciprocal
promises are to be performed is expressly fixed by the contract, they shall be performed in that
order; and where the order is not expressly fixed by the contract, they shall be performed in that
order which the nature of the transaction requires.

Section 53

section 54

Section 55

When time is of essence – one does not accept performance if it is not done on time - party can
claim compensation and the contract becomes voidable.

Time is of essence – accepts performance if it is not done on time– not voidable+ cannot claim
compensation unless prior notice

Time is not of essence – not voidable but the party can claim compensation.
In case of immovable property assumption is that time in not of essence while in case of movable
property, it is assumed that time is of essence.

Gomathinayangam Pillai vs Palaniswamy Nadar (1967 SC) – the contract should make it clear that
the parties’ intent to make time an essence in contract

KS Vaidyanathan vs Vaira Van (1997) – purchaser delayed the payment – not automatically operate
that time is of essence in case of immovable property – rule that time is of essence in case of
immovable property should be relaxed.

Section 56 – frustration

Frustration under English law means the same thing as impossibility under Indian law

Doctrine of frustration Is based upon the legal maxim – lex non cogit an imposssibilia – law does not
recognise what is impossible

Impossibilium nulla obligatio est – what is impossible does not create obligation

Absolute contract theory – once you have bound yourself to a contract absolutely, you have to
perform the contract.

Paradine vs jane – absolute contract theory was laid down

Taylor vs Caldwell (1863) – subsequent impossibility – a person booked a music hall – before the
performance the hall burnt – court held that defendant was not liable to pay for the compensation
since the contract was frustrated due to a supervening event.

Satyabrata Ghose vs Mugneeram Bangur (1954) – court interpreted the term impossible –
respondent had a land in Kolkata – scheme to develop drains – after the completion of the
development plan the remaining amount was to be pain and they were to be given the ownership of
the plot – government took over the land – bijoy moved to the court – pleaded indefinite delay -
court said that no frustration since the work has not started yet – no time limit expressed in the
contract

Different kinds of impossibility under section 56 para 2

1. Physical impossibility – subject matter itself got destroyed, non-occurrence of event (Krell vs
henry 1903), death or disability (Robinson vs Davidson 1871), war (metropolitan water board V Dick
Kerr and Co Ltd), pandemic or epidemic

2. Legal impossibility – any subsequent change in law which would render the contract
unlawful, would frustrate the contract. (Man Singh vs Khazan Singh (1961) – parties enter into an
agreement for sale of trees from specific forest, since government of Rajasthan held cutting of trees
as unlawful, contract was frustrated, parties were relieved of their obligations)

3. Practical impossibility – Sushila devi vs Hari Singh (1971) – lease agreement – due to
partition the property went to Pak – contract became frustrated – practical impossibility because it
strives at the core of the contract – make the purpose of the contract impractical.

Mistake deals with miscomprehension whereas frustration occurs when an event makes the contract
impossible to perform.

Section 65 - Obligation of person who has received advantage under void agreement, or contract
that becomes void —When an agreement is discovered to be void, or when a contract becomes
void, any person who has received any advantage under such agreement or contract is bound to
restore it, or to make compensation for it to the person from whom he received it.

Raja Dhruv Dev Chand vs Raja Harmohinder Singh (1968 SC)

Boothakinga Agencies vs VTC Poriaswamy Nadar (1969)

Effects of doctrine of frustration

1. Contract automatically gets frustrated

2. Future obligations get discharged

3. Compensation can be granted for Obligations performed

Exceptions to the doctrine of frustration:

1. Force majeure – wider than vis major – also includes acts done by man like lockdown, strikes
etc (when the contract itself provides for a force majeure clause, it won’t get void under 56 but
under 32)

2. That the parties relying on the doctrine of frustration assumed the risk of the unforeseen
event

3. Commercial impossibility – just because the contract has become less profitable or will incur
a loss, it is not a ground to declare the contract frustrated.

4. Failure of the third party – contract does not automatically become frustrated if a third party
fails to perform their part.

5. Self-induced frustration – the parties seeking to rely on the doctrine of frustration has
themselves contributed to the frustration, self-induced impossibility

Energy watchdog vs CERC & Ors (2017)

Ramanand & Ors vs Dr. Girish Soni & Anr (2020) – frustration would not apply on a lease agreement
since lease is an executed agreement

Section 62 – Lata construction & Ors vs Ramesh Chandra Ramniklal (2000)

Requirements of novation:

1. Previous valid contract

2. Parties must agree to create a new contract

3. Old contract must be extinguished

4. New contract formed

2 types of novation:

1. Involving change of parties

2. Involving substitution of new contract in place of old

Section 63 – Kapur Chand Godha vs Mir Nawab Himayat Ali Khan (1963) – state took over assets
worth 27 lakhs – pays only 20 lakhs in return – held that it is valid

Hari Chand Madan Gopal vs St. of Punjab – state agreed to recover only 40% - SC held after they
accepted 40% now, they can’t sue later for 60%.

Keshav Lal vs Lalbhai Trikumal Mills Ltd. (1958) – 2 conditions were proposed for the extension of
time – one condition was accepted while the other was refused – court held that both should be
accepted for the extension of the time

Section 73 – damage should 1. Naturally arise in the course of breach,2. Knew likely to result from
breach

General damages – foreseeable damage, damages that occur naturally due to the breach of the
contract

Special damages – given when special circumstances are within the knowledge of the party

Hadely vs Baxendale (1854) – plaintiff owned a flour mill – hired defendant who was a carrier to
repair a broken shaft – told the defendant to repair it urgently but did not tell him why – did not
repair shaft in time – court held they will get only general damages, not entitled to special damages

Brace vs Calder (1895) – it was the duty of the petitioner to mitigate his losses, awarded nominal
damages.

Remedies available in the case of breach

1. Damages

2. Specific performance

3. Restitution

4. Injunction

5. Rescission

6. Quantum merit damages

Section 74 – talks about penalty and liquidated damages

Penalty is an exorbitant unreasonable amount with the main purpose of ensuring fulfilment of the
contract and to ensure performance.

Can either claim compensation, penalty or liquidated damages.

Liquidated damages – pre estimated amount of loss a party incurs during the time of breach of
contract. Even if exorbitant amount of money is put in the contract, then more compensation cannot
be given than that amount and it has to be reasonable.

A owes B 1000, B says that within 6 months he will pay debt with 12 percent interest, if he doesn’t
pay in 6 months, then he will pay 1000 + 75 percent interest. This is penalty???????

Fateh Chand V Balkishan Das

ONGC V Saw Pipes – ONGC placed an order for offshore exploration project with Saw Pipes for the
equipment’s. The company could not procure due to strike happening in Europe where goods were
coming from. ONGC applied for breach. Court held - there was no need to prove loss, forfeiture
clause can either be a penalty or a compensation, liquidated damages is reasonable compensation
while penalties are not reasonable compensation.

Kailash Nath Associates V DDA – party must prove actual loss and damage in accordance with
section 73.

4 cases talk about different things – Fateh Chand, Maula Bux V UOI, ONGC V Saw Pipes – party can
take benefit of clause and no need to give proof of damage if there is pre estimated amount under
the contract.

Kailash Nath – held the opposite.

UOI V Rampur Distillery Chemical Co Ltd.

Specific relief act

A and B live adjacent to each other, B throws garbage outside A’s house, can go court but needs
injunction, contract act does not provide whole remedy. To get whole relief along with contract act,
specific relief act exists. SRA is complimentary to other acts.

UBI JUS IBI REMEDIUM – where there is a right (substantive law), there is a remedy (remedial law).

SRA gives equitable relief, based on equity

Principles – he who comes to the court must come with clean hands; he who seeks equity must do
equity.

It is not a consolidated and exhaustive law. does not create any right, but complements and
supplements other rights to create a remedy.

Defences + remedy under Sra and contracts can be claimed together.

12(2) – part left unperformed is only a small portion – suit for SP of that part can be filed by either
party – suit under 12(2) can only be filed when it admits of compensation money – that is, in suit
under 12(2), deficiency shall be adjusted.

A and B enter into a contract to sell 100 acres of land to B, it turns out 50 acres belong to A and
other 50 to C. B can claim specific relief if he only takes 50 acres of land from B and waive the right
of compensation of the other land. This is what 3A says.

3B – H entered into a contract with D to buy a house + garden. Garden belonged to D’s brother. H
can enforce part contract if he pays for that house and garden, but relinquishes his right to
compensation.

12(3) – part left unperformed forms a considerable portion. Suit can be filed only by the party who is
not at fault. Part left unperformed may admit compensation.

A) – party seeking relief will pay after making the desired reductions.

B) – part left unperformed may not admit for compensation. Party seeking relief will pay the amount
without any abatement.

In the last 2 cases, party seeking relief will have to relinquish all claims with respect to performance
of part not performed OR any right to compensation.