​Unit A

Topic 1: Contract
1. Meaning of Contract:
A contract is defined under Section 2(h) of the Indian Contract Act,
1872 as "an agreement enforceable by law." It is formed when two
or more parties agree to do or refrain from doing something,
supported by consideration, and intend to create legal obligations.
2. Characteristics of a Contract:
1. Agreement: An agreement consists of an offer by one party and
its acceptance by the other.
2. Legal Obligation: The agreement must be enforceable by law.
3. Free Consent: Consent of the parties must be free, i.e., without
coercion, undue influence, fraud, misrepresentation, or mistake
(Section 13 and 14).
4. Competent Parties: The parties entering the contract must be
competent to contract (Section 11), i.e., they must be of sound mind,
not disqualified by law, and above the age of majority.
5. Lawful Consideration and Object: The consideration and the
object of the contract must be lawful (Section 23).
6. Certainty of Terms: The terms of the contract must be certain and
not vague.
7. Possibility of Performance: The act agreed upon must be capable
of being performed.
8. Not Expressly Declared Void: The agreement must not be one
that is expressly declared void by the law (e.g., wagering
agreements).
3. Kinds of Contracts:
1. Based on Formation:
o Express Contracts: Terms are expressly stated (oral or written).
o Implied Contracts: Formed by conduct or circumstances.
o Quasi-Contracts: Imposed by law to prevent unjust enrichment.
2. Based on Performance:
o Executed Contracts: Fully performed by both parties.
o Executory Contracts: Performance is pending on one or both
sides.
3. Based on Validity:
o Valid Contract: Meets all essential elements of a valid contract.
o Void Contract: Not enforceable by law.
o Voidable Contract: Can be voided at the option of one party.
o Illegal Contract: Prohibited by law and punishable.
o Unenforceable Contract: Cannot be enforced due to procedural
defects.
4. Essentials of a Valid Contract:
1. Offer and Acceptance: A lawful offer and its lawful acceptance.
2. Intention to Create Legal Relationship: Social or moral
agreements do not constitute contracts.
3. Lawful Consideration: Consideration must not be unlawful,
immoral, or opposed to public policy.
4. Free Consent: Free consent is a prerequisite.
5. Capacity to Contract: Parties must be competent.
6. Certainty and Possibility of Performance: Terms must be clear,
and the contract must be capable of being performed.
7. Compliance with Legal Formalities: If the law requires the
agreement to be in writing, registered, or stamped, these
requirements must be met.
Key Case Laws:
• Balfour v. Balfour (1919): No intention to create a legal obligation
in a domestic arrangement.
• Carlill v. Carbolic Smoke Ball Co. (1893): Unilateral contracts can
also be valid.
• Mohori Bibee v. Dharmodas Ghose (1903): A minor cannot enter
into a contract.
Topic 2: Proposal/Offer
1. Meaning of Proposal/Offer:
Defined under Section 2(a) of the Indian Contract Act, 1872, an offer
is when one person signifies their willingness to do or abstain from
doing something to another with a view to obtaining their assent.
2. Types of Offers:
1. General Offer: Made to the public at large, and anyone who
fulfills the conditions can accept it. Example: Carlill v. Carbolic
Smoke Ball Co.
2. Specific Offer: Made to a specific person or group, and only they
can accept it.
3. Cross Offers: Two parties make identical offers to each other
simultaneously without knowing the other's offer.
4. Counter Offer: A response to an offer that modifies its terms. It
negates the original offer.
5. Standing/Open Offer: An offer that remains open for a specific
period or until withdrawn.
3. Essential Elements of a Valid Offer:
1. Must be communicated to the offeree.
2. Must show an intention to create legal relations.
3. Terms must be certain and not vague.
4. Must be made with the intention of obtaining acceptance.
5. Offer must not be conditional unless expressly stated.
4. Invitation to Proposal:
An invitation to a proposal is an indication by one party to
negotiate and invite offers from others. It is not an offer in itself
but a prelude to an offer.
• Example: Display of goods in a store or advertisements in
newspapers.
• Case Law: Pharmaceutical Society of Great Britain v. Boots Cash
Chemists (1953): Goods on shelves are an invitation to treat, not an
offer.
5. Revocation of Offer:
Under Section 6 of the Indian Contract Act, an offer can be revoked:
1. By communication of revocation before acceptance.
2. By lapse of time prescribed or reasonable time.
3. By failure to fulfill a condition precedent.
4. By death or insanity of the offeror before acceptance.
Topic 3: Acceptance
1. Meaning of Acceptance:
Acceptance is defined under Section 2(b) of the Indian Contract Act
as the act of one party assenting to the terms of the offer.
Acceptance transforms an offer into an agreement.
2. Effects of Silence on Acceptance:
As per Indian law, silence cannot amount to acceptance unless it is
clear from prior conduct or agreement between the parties.
• Case Law: Felthouse v. Bindley (1862): Silence does not constitute
acceptance.
3. Essential Elements of a Valid Acceptance:
1. Must be Absolute and Unqualified: Acceptance must match the
terms of the offer.
2. Must be Communicated: It must be communicated to the offeror
unless the offer specifies otherwise.
3. Made in Prescribed Mode: If a mode of acceptance is prescribed,
it must be followed.
4. Made within Time Frame: Acceptance must be within the
stipulated or reasonable time.
5. Made by the Offeree: Only the person to whom the offer is made
can accept it.
6. Must Show Intention to Fulfill Obligations: There must be a clear
intention to create legal relations.
4. Revocation of Acceptance:
Acceptance can be revoked before it reaches the offeror, as per
Section 5 of the Indian Contract Act.
Key Case Laws:
• Entores Ltd. v. Miles Far East Corporation (1955): Acceptance must
be communicated for it to be effective.
• Henthorn v. Fraser (1892): Postal rule for acceptance.
• Lalman Shukla v. Gauri Dutt (1913): Knowledge of an offer is
essential for valid acceptance.
Examples:
1. A offers to sell his house to B for ₹50 lakhs. B accepts this offer
within the stipulated time. A valid contract is formed.
2. A publishes an advertisement offering ₹1,000 to anyone who
finds his lost dog. B finds and returns the dog, thereby accepting the
general offer.
​Unit B
Topic 1: Consideration
Meaning
• Consideration refers to something of value exchanged between
the parties in a contract. It is the price paid by one party for the
promise of the other.
• It is a core element in the formation of a valid contract under the
Indian Contract Act, 1872 (Section 2(d)).
Definition
• As per Section 2(d) of the Indian Contract Act, 1872:
"When, at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing something, such
act, abstinence or promise is called a consideration for the
promise."
Kinds of Consideration
1. Past Consideration: An act done before the promise is made.
o Example: A helps B in the past, and B later promises to reward A.
2. Present Consideration: Consideration is exchanged
simultaneously.
o Example: Paying for goods at the time of purchase.
3. Future Consideration: A promise to perform an act in the future.
o Example: A promises to deliver goods to B next month, and B
promises to pay then.
Essential Elements of a Valid Consideration
1. Must move at the desire of the promisor: The act or abstinence
must be done at the promisor's request.
2. May move from the promisee or any third party: A third party
can provide consideration.
3. Must be real and not illusory: Consideration must have some
value in the eyes of the law.
4. Must be lawful: Illegal, immoral, or fraudulent consideration is
void.
5. Need not be adequate: Adequacy is not a requirement, but it
should have some value.
6. Can be present, past, or future: Consideration is valid
irrespective of timing.
Exceptions to Consideration (Agreements Without Consideration)
Under Section 25 of the Indian Contract Act, the following
agreements are valid even without consideration:
1. Natural Love and Affection: Made in writing and registered, and
between close relatives.
o Example: A father gifts property to his son through a registered
deed.
2. Compensation for Past Voluntary Services: A promise to
compensate for services voluntarily rendered.
o Example: A saves B's property during a fire, and B promises to
pay A.
3. Promise to Pay a Time-Barred Debt: A written and signed
promise to pay a debt barred by the Limitation Act.
4. Agency Agreements: No consideration is required for agency
creation.
5. Charitable Subscription: Promises made for charity are
enforceable under certain circumstances.
Agreements Without Consideration
Agreements without consideration are void unless they fall under
the above exceptions.
Case Law Example: Durga Prasad v. Baldeo (1880) - A promise to
pay was held unenforceable without valid consideration.
Topic 2: Capacity to Contract
Definition
Capacity to contract refers to the legal ability of a person to enter
into a valid contract under Section 11 of the Indian Contract Act,
1872.
Persons must be:
1. Major (above 18 years of age).
2. Sound mind (capable of understanding the contract and its
implications).
3. Not disqualified by law (e.g., insolvent or alien enemy).
Nature of Agreements
1. By a Minor:
o A contract with a minor is void-ab-initio (void from the
beginning).
o Minors cannot be held liable for contractual obligations.
Case Law: Mohori Bibee v. Dharmodas Ghose (1903) - The Privy
Council held that a contract with a minor is void.
o Exceptions:
 Minor's contracts for necessities (necessaries of life under Section
68).
 Contracts benefiting minors (e.g., scholarships, gifts).
2. By an Unsound Person:
o A person of unsound mind cannot enter into a valid contract
while unsound.
o Examples: Mentally ill, intoxicated, or delirious individuals.
o A contract made during lucid intervals (temporary sanity) is
valid.
3. By a Person Disqualified by Law:
o Examples: Insolvent persons, foreign sovereigns, or corporate
entities restricted by laws.
o Contracts with such persons are void.
Topic 3: Privity of Contract
Definition
The doctrine of privity states that only parties to a contract can
enforce its terms. A third party cannot sue or be sued under the
contract.
Case Law: Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd.
(1915)
The House of Lords held that Dunlop could not sue Selfridge as
there was no direct contractual relationship.
Exceptions to Privity of Contract
1. Beneficiary under a Contract: A third party benefiting from the
contract can enforce it.
o Example: Trust agreements.
2. Acknowledgment or Estoppel: If a third party is acknowledged in
the contract, they can enforce it.
o Example: An insurance policy beneficiary.
3. Covenants Running with Land: Certain rights or obligations
attached to land can bind subsequent owners.
4. Marriage Settlements, Partition, or Family Arrangements: Family
agreements can bind third parties involved.
5. Agency Relationships: Agents can enforce contracts on behalf of
principals.
6. Contracts through Assignment: Assigned rights can be enforced
by the assignee.
Examples
• If A contracts with B to pay C a sum of money, C can enforce the
contract if it falls under exceptions.
​Unit C
Topic 1: Free Consent – Its Need and Definition, and Factors
Vitiating Free Consent
Definition of Free Consent
• Section 14 of the Indian Contract Act, 1872 defines "free consent."
• Consent is said to be free when it is not caused by:
1. Coercion (Section 15)
2. Undue Influence (Section 16)
3. Fraud (Section 17)
4. Misrepresentation (Section 18)
5. Mistake (Section 20, 21, 22)
Need for Free Consent
• A contract is valid only if all parties agree voluntarily.
• Ensures fairness and prevents exploitation.
• Protects the autonomy and rights of the parties involved.
Factors Vitiating Free Consent
1. Coercion (Section 15):
o The use of physical or mental force to obtain consent.
o Includes threatening or committing acts forbidden by law.
o Case Law: Chikham Amiraju v. Chikham Seshamma
A threat to commit suicide amounts to coercion.
o Example: Forcing someone to sign a contract by threatening
harm.
2. Undue Influence (Section 16):
o When one party, in a position of power or trust, influences the
other unfairly.
o Key elements:
1. A relationship of trust (e.g., parent-child, doctor-patient).
2. Dominance by one party.
3. Unfair advantage.
o Case Law: Rani Annpurna v. Swaminathan
A husband influencing his illiterate wife to sign an agreement
unfairly.
o Example: A teacher forcing a student to enter into a contract.
3. Fraud (Section 17):
o Intentional deception to persuade another party.
o Key acts of fraud:
 False representation.
 Concealing material facts.
 Promising without intention to perform.
o Case Law: Derry v. Peek
Misrepresentation with intent to deceive constitutes fraud.
o Example: Selling a defective product while claiming it is in
perfect condition.
4. Misrepresentation (Section 18):
o Unintentional false statements made without intent to deceive.
o Case Law: In Re: Reese River Silver Mining Co.
Misstatements made in good faith but are still false.
o Example: Selling a car claiming it has no prior accidents,
unaware of past damage.
5. Mistake (Sections 20, 21, 22):
o Bilateral Mistake (Section 20): Both parties misunderstand the
contract subject matter.
Example: Contracting to sell a piece of land that no longer exists.
o Unilateral Mistake (Sections 21 & 22): Only one party is mistaken.
Example: Typographical errors in price without other party’s
knowledge.
o Case Law: Smith v. Hughes
Mistake as to quality of goods does not void the contract.
Topic 2: Legality of Object and Consideration
Definition
• Under Section 23 of the Indian Contract Act, 1872, the object and
consideration of a contract must be lawful.
• A contract becomes void if the object or consideration is:
1. Forbidden by law.
2. Against public policy.
3. Immoral or fraudulent.
4. Injurious to another person or property.
Key Elements
1. Lawful Object: The purpose of the contract must not be illegal.
2. Lawful Consideration: The benefit or promise exchanged must be
legal.
Examples of Illegal Objects and Consideration
• Forbidden by Law: Contract for smuggling.
• Against Public Policy: Agreements to restrain legal proceedings.
• Immoral: Agreements involving prostitution.
• Fraudulent: Entering a partnership to defraud a third party.
Case Law
1. Gherulal Parakh v. Mahadeodas Maiya:
Wagering agreements are against public policy.
2. Nash v. Inman:
A minor’s contract to purchase luxury items was held void.
Topic 3: Void Agreements
Definition of Void Agreements
• Agreements not enforceable by law.
• Section 2(g) of the Indian Contract Act, 1872 defines void
agreements.
Void Agreements: Restraint of Marriage (Section 26)
• Agreements restraining a person’s right to marry are void.
• Exceptions:
o Marriage restrictions for minors or valid religious constraints.
• Case Law: Lowe v. Peers
A promise not to marry anyone other than a specific person was
held void.
• Example: A contract forbidding someone from marrying for life.
Void Agreements: Restraint of Trade (Section 27)
• Agreements restraining lawful trade or profession are void.
• Exceptions:
o Partner agreements during business dissolution.
o Trade restrictions within reasonable limits for protecting
goodwill.
• Case Law: Nordenfelt v. Maxim Nordenfelt Guns & Ammunition
Co.
Restriction on trade was upheld as it was reasonable and limited in
scope.
• Example: A clause in an employment contract prohibiting the
employee from joining competitors within a city for one year.
Other Examples of Void Agreements
1. Uncertain Agreements: Lack of clarity in terms (Section 29).
2. Wagering Agreements: Betting contracts (Section 30).
​Unit D
Topic 1: Wagering Agreements
Definition:
• A wagering agreement is an agreement between two parties
where one party promises to pay money or transfer something of
value to the other upon the occurrence or non-occurrence of a
specific uncertain future event.
• Section 30 of the Indian Contract Act, 1872, declares wagering
agreements void. They are neither enforceable by law nor can any
suit be brought for recovering anything alleged to be won.
Essentials of a Wagering Agreement:
1. Uncertainty of Event:
o The event upon which the wager is based must be uncertain at
the time of the agreement.
o Example: Betting on the outcome of a cricket match.
2. Mutual Chances of Gain or Loss:
o Both parties must stand to gain or lose based on the outcome of
the event.
o Example: If A bets ₹1,000 on a horse race with B, A will gain
₹1,000 if his chosen horse wins, and B will lose ₹1,000.
3. No Control Over the Event:
o Neither party should have control over the event on which the
wager is made.
o Example: Betting on the results of natural phenomena like
rainfall.
4. Lack of Interest:
o Neither party should have any interest in the event except the
stake they have wagered.
o Example: A bet on someone else’s marriage date.
5. Promise to Pay Money or Money’s Worth:
o The wager must involve a promise to pay money or a thing of
monetary value.
Exceptions to Wagering Agreements:
1. Contracts of Insurance:
o Insurance contracts are not wagers, as they are made to protect
an interest, not to speculate.
o Example: Life insurance policies.
2. Skill-Based Competitions:
o Competitions where winning depends on skill, such as chess
tournaments, are not wagers.
3. Horse Racing:
o Section 30 of the Indian Contract Act specifically allows wagering
on horse racing, provided the stakes exceed ₹500.
4. Stock and Commodity Markets:
o Agreements made for hedging or forward trading, where actual
delivery takes place, are valid.
Topic 2: Contingent Contracts
Definition:
• A contingent contract is defined under Section 31 of the Indian
Contract Act, 1872, as a contract to do or not to do something if an
uncertain future event happens or does not happen.
• Example: A promises to pay B ₹10,000 if B's house is destroyed by
fire.
Rules Regarding Enforcement of Contingent Contracts:
1. Happening of a Future Event (Section 32):
o The contract can only be enforced if the specified uncertain
future event occurs.
o Example: A agrees to sell goods to B if a ship carrying those goods
arrives safely.
2. Non-Happening of a Future Event (Section 33):
o If the contract is based on the non-occurrence of a future event, it
becomes enforceable only if that event does not happen.
o Example: A agrees to pay B if a train does not arrive by 5 PM.
3. Event Should Not Be Controlled by the Promisor:
o The occurrence or non-occurrence of the event must be beyond
the control of the promisor.
o Example: A's promise to pay B ₹1,000 if A does not marry by the
age of 25 is not enforceable.
4. Contract Becomes Void if Event Becomes Impossible (Section 34):
o If the event on which the contingent contract is based becomes
impossible, the contract becomes void.
o Example: A agrees to sell goods to B if a specific ship arrives, but
the ship sinks.
5. Dependence on a Future Event Must Be Clear:
o The future event must be clearly defined and possible to
determine.
o Example: A agrees to pay B ₹10,000 if India wins the World Cup.
Topic 3: Discharge of Contract
Definition:
• Discharge of a contract occurs when the obligations created by the
contract are terminated. This can happen by performance,
agreement, impossibility, breach, or operation of law.
Modes of Discharge:
1. By Performance:
o When both parties fulfill their obligations under the contract.
o Case Law: Startup v. MacDonald (1843)
 A seller delivered goods at 11 PM on the last day stipulated. It was
held to be valid performance.
2. By Agreement or Consent:
o The parties mutually agree to terminate the contract.
o Example: Novation, rescission, alteration.
o Case Law: Scarf v. Jardine (1882)
 Novation (replacing the original contract with a new one)
discharged the old contract.
3. By Impossibility:
o Performance becomes impossible due to unforeseen
circumstances.
o Example: Destruction of subject matter.
o Case Law: Taylor v. Caldwell (1863)
 A music hall was destroyed by fire before a concert, discharging
the contract.
4. By Lapse of Time:
o A contract is discharged if it is not enforced within the time
prescribed by the Limitation Act.
o Example: A creditor cannot sue for recovery of a loan after three
years.
5. By Breach of Contract:
o A contract may be discharged when one party fails to fulfill its
obligations.
o Case Law: Hochster v. De La Tour (1853)
 Anticipatory breach by the defendant discharged the contract.
6. By Operation of Law:
o Certain legal conditions can terminate a contract.
o Example: Insolvency of one of the parties.
Examples:
1. Performance: A agrees to deliver 100 kg of rice to B. A delivers
the rice, and B pays the agreed amount.
2. Impossibility: A agrees to perform in a concert, but the venue is
destroyed in a fire.
3. Breach: A agrees to build a house for B but abandons the project
halfway.
​Unit E
Topic 1: Quasi Contracts or Certain Relations Resembling Those
Created by Contract
Meaning of Quasi Contracts
• Quasi contracts are not actual contracts but are obligations
imposed by law to avoid unjust enrichment.
• They are based on the principle of equity, justice, and good
conscience.
• These obligations arise when one party benefits at the expense of
another without a formal agreement.
• Governed under Sections 68 to 72 of the Indian Contract Act, 1872.
Key Features
1. Absence of Agreement: There is no actual contract or agreement
between the parties.
2. Legal Obligation: Imposed by law, not by mutual consent.
3. Prevention of Unjust Enrichment: Ensures no party unfairly
gains at the expense of another.
Types of Quasi Contracts (Indian Contract Act)
1. Section 68: Supply of Necessaries
o If a person incapable of contracting (e.g., a minor or unsound
mind) receives necessaries, the supplier is entitled to
reimbursement from the property of the incapable person.
o Example: A minor hospitalized in an emergency; the medical
expenses can be recovered from their property.
2. Section 69: Payment by Interested Person
o A person who pays money for another person, which the latter is
legally bound to pay, can recover the amount from the benefited
person.
o Case: Govindram Gordhandas v. State of Gujarat
3. Section 70: Obligation of a Person Enjoying Benefit
o If a person voluntarily delivers something to another without
intending to act gratuitously, the beneficiary must return or
compensate for the benefit received.
o Case: State of West Bengal v. B.K. Mondal & Sons
4. Section 71: Finder of Goods
o A finder of goods has the same responsibility as a bailee and must
return the goods to the owner or compensate for losses if lost due
to negligence.
5. Section 72: Money Paid by Mistake or Under Coercion
o Money paid by mistake or coercion can be recovered.
o Case: Sales Tax Officer v. Kanhaiyalal Mukundlal Saraf
Case Law
1. Moses v. Macferlan (1760)
o Landmark case defining unjust enrichment and quasi-contractual
obligations.
2. State of Gujarat v. Shantilal Mangaldas (1969)
o Clarified the scope of quasi contracts in Indian law.
Topic 2: Remedies for Breach of Contract
1. Damages
• Damages are monetary compensation awarded to the aggrieved
party for the breach of contract.
Types of Damages
1. Ordinary Damages
o Compensation for losses arising naturally from the breach.
o Rule: Hadley v. Baxendale (1854)
o Example: Late delivery of machinery causing production loss.
2. Special Damages
o Arise from unusual circumstances known to both parties at the
time of the contract.
o Case: Simpson v. London & North Western Railway Co.
3. Exemplary Damages
o Awarded to punish the wrongdoer for breach of trust or
malicious intent.
o Case: Adderley v. Dixon
4. Nominal Damages
o Awarded when there is a breach, but no actual loss is proved.
5. Liquidated Damages and Penalty
o Liquidated damages: Pre-estimated amount agreed upon in the
contract.
o Penalty: A sum disproportionate to actual damages, meant to
deter breach.
o Case: Fateh Chand v. Balkishan Dass (1964)
2. Rules Regarding Measurement of Damages
1. Damages must not be remote or speculative (Hadley v.
Baxendale).
2. Compensation is for actual losses and reasonably foreseeable
damages.
3. Duty to mitigate losses: The aggrieved party must minimize the
impact of the breach.
3. Quantum Meruit
• Latin for "as much as earned."
• Arises when a contract is terminated, and one party has already
partially performed.
• The performing party can claim reasonable compensation for the
work done.
• Case: Craven-Ellis v. Canons Ltd.
Topic 3: Standard Form of Contracts
Meaning
• Standard form contracts are pre-drafted agreements where terms
are set by one party, and the other has little or no opportunity to
negotiate.
• Often used in insurance, banking, telecom, and service industries.
• Example: A mobile service provider’s terms of service.
Features
1. Unilateral Terms: Drafted by the stronger party (e.g.,
corporations).
2. Take-it-or-leave-it Basis: Weaker party cannot negotiate terms.
3. Mass Use: Designed for efficiency in repetitive transactions.
Problems with Standard Form Contracts
1. Lack of bargaining power for the weaker party.
2. Unfair and one-sided clauses.
3. Hidden terms and complexity.
Rules for Protection of the Weaker Party
1. Reasonable Notice of Terms
o The drafting party must ensure terms are brought to the notice of
the other party.
o Case: Parker v. South Eastern Railway (1877)
2. Exclusion of Unfair Terms
o Courts can strike down unconscionable or unfair clauses.
o Case: Central Inland Water Transport Corp. v. Brojo Nath Ganguly
(1986)
3. Doctrine of Contra Proferentem
o Ambiguous terms are interpreted against the party who drafted
the contract.
4. Legislative Safeguards
o Consumer protection laws ensure fair practices in standard form
contracts.
Case Laws
1. L’Estrange v. F Graucob Ltd. (1934)
o Established that signing a contract binds a party to its terms.
2. Union of India v. N.K. Private Ltd.
o Highlighted the need for fair and reasonable terms in
government contracts.
Examples
1. Insurance Policies: Non-negotiable standard terms regarding
coverage and claims.
2. Railway Tickets: Terms printed on the ticket often limit liability.
3. Employment Agreements: Standard clauses regarding
termination and confidentiality.