LAW ACADEMY

Introduction

INTRODUCTION

The law of contract affects to a great extent the

everyday affairs of an ordinary person, a business
entity as well as the State alike. Plainly speaking, a
contract is an agreement between two or more people
containing reciprocal set of obligations to be
discharged by the parties.
The Indian Contract Act, 1872 applies to the entire
territory of India except the State of Jammu &
Kashmir.

Key Definitions

S Secti Term Definition

N on
1 2(a) Proposal When one person
signifies to another
his willingness to do
or to abstain from
doing anything, with
a view to obtaining
the assent of that
other to such act or
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
abstinence he is said
to make a proposal;
2 2(b) Promise When the person to
whom the proposal
is made signifies his
assent thereto, the
proposal is said to be
accepted. A
proposal, when
accepted, becomes a
promise;
3 2(c) Promisee The person making
the proposal is called
the “promisor”, and
the person accepting
the proposal is called
the “promisee”.
4 2(d) Considerat When, at the desire
ion for the of the promisor, the
Promise promissee or any
other person has
done or abstained
from doing, or does
or abstains from
doing, or promises to
do or to abstain from
doing, something,
such act or
abstinence or
promise is called
consideration for the
promise;
5 2(e) An Every promise and
agreement every set of
promises, forming
the consideration for

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
each other, is an
agreement;
6 2(f) Reciprocal Promises which
Promises form the
consideration or part
of the consideration
for each other, are
called reciprocal
promises;
7 2(g) Void An agreement not
agreement enforceable by
law is said to be
void;
8 2(h) Contract An agreement
enforceable by
law is a contract;
9 2(i) Voidable An agreement which
contract is enforceable by
law at the option of
one or more of the
parties thereto, but
not at the option of
the other or others, is
a voidable contract;
10 2(j) When a A contract which
contract ceases to be
ceases to enforceable by law
be becomes void when
enforceabl it ceases to be
e. enforceable.

What is a contract?

A contract originates from an offer or proposal made

by one person to another. When that offer is accepted,
it becomes a promise.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
The person who makes the proposal is called promisor
and the person who accepts the proposal is called the
promisee.

Essentials of a Valid Contract

Not all agreements made between parties are called

contracts. Only certain agreements which the law will
honour and enforce, result into valid contracts. So, all
contracts are agreements but all agreements are not
contracts.
For an agreement to become a valid contract, the
following must exist:
 There must be some consideration;
 The parties must be competent by law to contract;
 Their consent must be free;
 The contract must be for a lawful object;
 The agreement must not be expressly declared to be
void by any law.
Some other requirements are:
 The agreement must be capable of being performed;
 The terms of the agreement must not be
vague/uncertain.

Kinds of Contract

On the basis of enforceability, agreements are of three

types broadly:
 Valid contract
It is an agreement which is enforceable by law.
 Voidable contract
It is an agreement which can be enforced at the option
of one or more of the parties to the contract.
 Void agreement

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
An agreement which is unenforceable or which ceases
to be enforceable by law becomes void. It is
considered to be a nullity in the eyes of law.
On the basis of execution, contracts are broadly of two
types:
 Executed Contract
When both the parties to contract completely perform
their respective obligations and nothing remains to be
discharged by either party, the contract is said to be
executed.

ILLUSTRATION

A agrees to sell his car to B for Rs. 3,00,000. When B

pays the money and A delivers the car to B, the
contract stands executed.
 Executory Contract – When the obligations of either
party are yet to be discharged, it is called executor
contract.

ILLUSTRATION

A agrees to give tuitions to B, a law student for a

period of 6 months for the total fee of Rs. 6,000 w.e.f.
1.4.2013 to 30.9.2013. A pays an initial sum of Rs.
2,000 and B starts teaching. It remains an executor
contract during the agreed period as both the parties to
the contract i.e. A & B are to discharge their respective
obligations.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Proposal/Offer

PROPOSAL/OFFER
Under the Indian Contract Act, ‘proposal’ is defined
as:
“When one person signifies to another his willingness
to do or to abstain from doing anything, with a view
to obtaining the assent of the other to such act or
abstinence he is said to make a proposal.”
A proposal is constituted-
(a)When one person signifies to another;
(b) His willingness to do or not to do anything;
(c)With the object of;
(d) Obtaining the assent of that other person;
(e)To his proposed act or for not doing that act;
(f) He is said to make a proposal.
ILLUSTRATION
 (a) & (b) – Ankur communicated to Brijesh that he
intends to sell his Maruti car bearing registration No.
DL2CA1245.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
(c) & (d) – Ankur intends by his communication that
he is willing to sell his specified Maruti car to Brijesh
and seeks his consent.
(e) & (f) – This act of Ankur constitutes a proposal.
Promisor – Promisee
The person who makes the proposal is the
promisor/offeror.
The person who accepts the proposal is called the
promisee/acceptor.

Other Requisites of a Valid Offer

A valid offer must also satisfy the following
conditions:
 The offer must be communicated to the other party to
enable him to accept it. An uncommunicated offer is
not capable of a valid acceptance and there for, a valid
contract cannot result from it.

ILLUSTRATION

A’s son is absconding since last two days. He sent his

domestic servants including B to search him in two
different places. After their departure from his home,
he announced a cash reward of Rs. 50,000 to anyone
who traces his son. B ultimately finds his son and
returns and claims the cash reward. A declines on the
ground that his offer of reward was intended for the
outsiders and was not communicated to him. A is
justified as the proposal made by him was not
communicated to B as such, there is no question of its
acceptance on the part of B.
 The proposal must be made with the intention of
creating a legal relationship

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
ILLUSTRATION
‘A’ & ‘B’ are married and they went to South Africa
to start a new venture. ‘A’ has to come back to India
to attend his urgent official assignments. While
coming back, he promised his wife ‘B’ that till he
returns, he will send her Rs. 50,000 every month for
her expenditure However, after one month, he stopped
sending money. In this case, ‘B’, his wife cannot claim
enforcement of the promise as the nature of the
promise does not show that they intended to create a
legal relationship.
 The proposal must be certain and definite.
If the terms of the proposal are uncertain and vague,
the resulting agreement is void.

ILLUSTRATIONS

 Ravi, a teacher agrees to sell ‘B’ his car. It is not a
valid offer as the identity, make etc of the car is not
certain. The consequent agreement even if entered
into shall be void.
 Shyam, a dealer in Maruti cars, agrees to sell Karan a
car. It is a valid offer as the nature of Shyam’s trade is
dealing in cars as such, it will constitute a valid
agreement.
Offer v/s Invitation to Offer
An offer is the expression of final willingness by a
person to do or to abstain from doing something.
An invitation to offer is when a person is
contemplating whether to make an offer or not. When
the person has not expressed his final willingness to
do or not to do something, it is an invitation to offer.
In such cases, the person is merely disseminating
information on the terms on which he may be willing
to negotiate.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
An invitation to offer is not an offer.
ILLUSTRATION
In a mall, a shop is owned by M/s Good Citizen Watch
Company. It displayed various costly watches on its
window with price tags attached to every watch.
Ramesh picks up a beautiful watch with the prince tag
of Rs. 5,000 in the showroom which was available in
the market for Rs. 10,000 and upwards. He asks the
shop owner to accept the cash and to issue the receipt
and guarantee card. The shopkeeper declines to accept
his offer. The act of shopkeeper is justified.
The act of displaying the watches is an invitation of
offer by the shopkeeper to its customers. The
customers may or may not decide to buy a watch.
When they finally decide to buy a watch, they will
make an offer to the shopkeeper which may or may
not be accepted by the shopkeeper.
Communication of Offer/Proposal
An offer is said to be communicated when it comes to
the knowledge of the person to whom it is made.

ILLUSTRATION
A, intends to sell his car so he sends a letter to B
offering him to purchase the car. The offer is complete
when the letter reaches B and B reads it. If B keeps the
letter in his room without reading it, the offer is not
complete as it has not come to his knowledge.

Revocation of Offer/Proposal
An offer can be revoked validly before the person to
whom it is made accepts the offer. Once the offer has
come to the knowledge of the other party and he has
dispatched his acceptance, it cannot be revoked.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
ILLUSTRATIONS
 Suppose in the above example, after A dispatches the
letter to B, he changes his mind and sends an e-mail
to B revoking his offer. B reads the letter first and then
sends the acceptance letter. Later, he reads the e-mail.
The offer has been accepted and cannot be revoked
now.
 Suppose in the above example, after A dispatches the
letter to B, he changes his mind and sends an e-mail
to B revoking his offer. B checks his e-mail and the
offer letter reaches him the next day. The revocation
is effective and now B cannot accept the offer.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Acceptance

ACCEPTANCE
The second element of a valid contract is acceptance
of the proposal. A proposal, when accepted, results in
an agreement.

Acceptance - Meaning
According to the Indian Contract Act, acceptance
means,
“When the person to whom the proposal is made,
signifies his assent thereto, the proposal is said to be
accepted.”
The essential elements of a valid acceptance are:
 The offer and its acceptance must be communicated;
 The acceptance must be made by the person to whom
the offer is made;
 The person must signify his assent to the offer as it is
made;
 Acceptance must be made in some usual and
reasonable manner, unless the proposal itself specifies
a particular mode of acceptance;
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
 Acceptance must be made while the offer is
subsisting.
Now, we shall discus each of the above in detail.

Communication of Acceptance

A contract contemplates an offer and its acceptance.

Unless the person knows about the offer, he cannot be
in a position to accept it.
Communication can be in several ways-
On the basis of medium used:
 Oral communication, when the parties are face to face
 Communication through letters, e-mail, fax etc.
On the basis of nature of acceptance:
 Express acceptance, when the acceptor states his
acceptance by words or some express medium.
ILLUSTRATION

 A tells B that he wants to sell his car. B says, “I will

buy your car.” This is express acceptance on B’s part.
 Implied acceptance, when the acceptor indicates
acceptance by his conduct.

ILLUSTRATION

A gets on a bus. This is implied acceptance of the

conductor’s offer to ride on the bus and to pay the fare.

When communication of Acceptance is

Complete?
Sometimes, the parties may be near each other. But,
in most commercial transactions the contract is
concluded via correspondence in the form of letters,

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
fax etc, It becomes important to know when the parties
become bound by the contract.
 When the parties are in the presence of each other
In such cases, when the offer is heard by the other
party and his acceptance is heard by the offeror, a
contract is concluded and the parties become bound
by it immediately.

ILLUSTRATIONS

 A and B are standing across the river from each other.
A shouts to B, “Will you buy my car for Rs. 50,000”.
B hears it and shouts back, “Yes, I accept your offer.”
Here, the parties become bound by the contract as
soon as A hears B’s acceptance.
 Suppose in the above example, A shouts, “Will you
buy my car for Rs. 50,000?”. B hears it and shouts
back, “Yes, I accept your offer.” Due to the noise of
the steam boat passing by, A could not hear B’s
acceptance. Here, no contract has formed as the
acceptance by B was not communicated to A as he
could not hear it.
 Suppose in the above example, A shouts, “Will you
buy my car for Rs. 50,000?”. B hears it and accepts it
but does not say anything. He thought that he will
write a formal letter to A the next day. The next day,
A sells his car to C. A is justified as there was no valid
contract between A and B. B accepted the proposal in
his mind. He did not communicate it to A which was
necessary.
 Communication by Post (Letter, E-mail, Telegram
etc.)
This happens when the parties are not in the presence
of each other and live at different place generally.
Here, the acceptance is complete in two stages – one
against the proposer and the other, against the
acceptor.
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
The communication of acceptance is complete against
the proposer when the acceptor dispatches the
acceptance so as to be out of his power.
At this stage, only the proposer is bound by the
acceptance. Now, he cannot revoke the offer. Since
the acceptor is not yet bound by his acceptance, he
may revoke his acceptance letter.

ILLUSTRATION

A writes a letter to B offering to sell him his

farmhouse. B accepts the offer and writes a letter the
next day. He posts the letter on the same day. At this
stage, the acceptance is complete against the proposer,
A and he is bound by it. He cannot revoke the proposal
now.
Please note that once the acceptance letter is posted,
the offeror becomes bound by it, even if the
acceptance letter is subsequently lost and cannot be
traced.

ILLUSTRATION
A writes a letter to B offering to sell him his
farmhouse. B accepts the offer and writes a letter the
next day. He posts the letter on the same day. The
letter is lost by the postman and never reaches B. The
acceptance is still complete as against A, the proposer.
The communication of acceptance is complete against
the acceptor when it comes to the knowledge of the
proposer.
At this state, the acceptor also becomes bound by his
acceptance. Effectively, both he proposer and the
acceptor are now bound and a contract has been
concluded. The acceptor cannot revoke his acceptance
now.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

ILLUSTRATION
A writes a letter to B offering to sell him his
farmhouse. B accepts the offer and writes a letter the
next day. He posts the letter on the same day. A
receives the acceptance letter 2 days letter At this
stage, B, the acceptor is also bound by his acceptance
letter. He cannot revoke his acceptance now.
Where is the contract made when parties correspond
via letters, e-mail?
The place where the contract is deemed to be made is
from where the letter of acceptance has been posted.
The place where the letter is received is not the place
of contract.

ILLUSTRATION
A, At Mumbai, writes a letter to B offering to sell him
his farmhouse. B, in Hyderabad accepts the offer and
writes a letter the next day. He posts the letter on the
same day. A receives the acceptance letter 2 days later
in Mumbai. Here, the place of contract is Hyderabad
as the ltter of acceptance was dispatched from there.
So, if any dispute arises regarding written contract, the
courts at Hyderabad will have jurisdiction unless the
written contract provides otherwise.
 Communication by Telephone
The same rules apply in the case when the parties are
in presence of each other.
Once the acceptance is heard by the offeror, the
contract is concluded.

ILLUSTRATION
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
A calls B on Sunday asking him if he is interested in
selling his farm house to B. B replies that he is willing
to sell the farm house to A. Here, as soon as A hears
B’s acceptance, the contract is concluded.
Where is the Contract Made when Parties
Communicate via Telephone?
The place where the contract is deemed to be made is
that where the acceptance is heard by the offeror. It is
not the place where the acceptance is made.

ILLUSTRATION
A, in Mumbai calls B, in Hyderabad, on Sunday
asking him if he is interested in selling his farm house
to A. B replies that he is willing to sell the farm house
to A. Here, the contract is concluded in Mumbai
where the acceptance is heard by A.
So, if any dispute arises regarding the contract, the
courts at Mumbai will have jurisdiction unless the
written contract provides otherwise.

Acceptance by Person to Whom Offer

Made
Acceptance of the offer must be made by the person
to whom the offer is made. The offer can also be
accepted by a person authorized by the person to
whom the offer is made.
Acceptance of the offer by unauthorized person or a
third party does not result in a contract.

ILLUSTRATION
A offers B to sell his car for Rs. 5,00,000. B tells him
that he will revert in a day or two. He accepts the offer
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
but decided to call A later. B’s wife, C knows of his
acceptance, and tells A that his offer has been
accepted. This is not a valid acceptance as the
authorized person has not communicated the
acceptance. If it is shown that C was authorized by B
to communicate the news to A, then a valid contract
will come into being.

Acceptance must be absolute and

Unqualified
The acceptance must be to the offer as it is. The
acceptor must not put any conditions while accepting
the offer. When additional conditions are put by the
acceptor, it is not a valid acceptance. Instead, it
becomes a counter-offer.
This rule is also called the ‘mirror image rule’.

ILLUSTRATION
A offers to sell his car for Rs. 5,00,000 to be paid in
lump sum without any instalments. B accepts his offer
and says that he will pay Rs. 4,50,000 in 4 instalments.
This is not a valid acceptance as B has put conditions
before accepting the offer.
This condition by B is a counter offer. Now, B
becomes the offeror and if A accepts the offer, it will
lead to a contract.

Acceptance in Usual and Reasonable

Manner
Sometimes, the offer may specify how the acceptance
is to be made. The, the acceptor must use that
procedure to signify his acceptance.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
When nothing is prescribed, the acceptance must be
made in some usual and proper manner depending
upon the nature of the contract and the parties.

ILLUSTRATION

 A offer to sell his house for Rs. 50,00,000 and states

that the acceptor must pay Rs. 5,00,000 as advance
money along with the acceptance. B accepts the offer
but does not pay Rs. 5 lakhs as advance. This is not
valid acceptance as the procedure was to send Rs. 5
lakhs as advace which B has not complied with.
 A agrees to sell 50 kgs. Of potatoes to B and asks B to
take delivery from his warehouse. B accepts the offer
but takes delivery of potatoes from A’s fields. This is
not valid acceptance as the prescribed procedure has
not been fulfilled.
 A agrees to buy 100 tables from B which he requires
B to deliver as soon as possible. B asks a truck carrier
to deliver the goods. This is valid acceptance as
transporting tables by truck is the usual and reasonable
way to deliver goods.

Acceptance when Offer Subsisting

A person can accept only when the offer is still open

to acceptance. Once the offer has lapsed, there cannot
be a valid acceptance.
There are several modes by which an offer may lapse:
 When the offeror has revoked the offer;
 When the offer has lapsed due to non-acceptance
within the time specified;
 Wher the acceptor fails to fulfil conditions precedent
to acceptance;

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
 When the offeror dies or becomes insane, provided the
acceptor has not dispatched the acceptance letter so as
to be out of his power.

Consideration

CONSIDERATION
Consideration is another essential element of a valid
contract. Subject to certain exceptions, an agreement
without consideration is void.

Consideration – Meaning
The Indian contract Act defines ‘consideration’ as:
‘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
abstain from doing something, such act or abstinence
or promise is called consideration for a promise.’
Plainly speaking, ‘consideration is the price paid for a
promise.’
The essential elements of a valid consideration:-
 It is given at the desire of the promisor;
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
 It can be given by the promisee or any other person;
 Such promisee or other person had done or had
abstained from doing an act at the promisor’s desire,
or;
 Such promisee or other person does or abstains from
doing an act at the promisor’s desire, or;
 Such promisee or other person will do or abstain from
doing an act at the promisor’s desire.
This act or abstinence done by the promisee at the
promisor’s desire is called ‘consideration.’
We shall now discuss each of the above elements in
detail.

At the Desire of Promisor

Consideration must be given at the desire of the
promisor i.e. the person who makes an offer. If the
promisee decides to pay the promisor voluntarily, then
that amount will not be consideration for the promise.

ILLUSTRATIONS

 A offers to teach B’s son for a monthly salary of Rs.

15,000. Here, the consideration by B i.. Rs. 15,000 is
given at the desire of the promisor i.e. A.
 A sees B’s house on fire and helps in extinguishing
the fire. Later, A claims Rs. 500 for the help offered.
A cannot claim any payment since B did not ask A for
help or make an offer that if A helps, B will pay him.

Consideration by Promisee or Third

Party
Generally, when there are two parties to a contract, the
promisor makes an offer an the promise accepts it
upon payment of consideration.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Though consideration is determined at the instance of
the promisor, it can be given by the promisee or any
third party.

ILLUSTRATIONS

 A, an old lady, gifted certain property to R, her

daughter, with the direction that R shall pay some
money annually to A’s brother, B.R, on the same day,
executed a deed stating payment to B. Later, R refused
to pay saying that in lieu of her payment to B, B had
not pair her anything and being a contract without
consideration, it was void.
R’s act is not justified as for the contract between her
and B, the consideration had moved from a third
parson i.e. A, in the form of gift of property which is
valid. Consider can move from a third person.
 A goes to a mechanic, B for getting his car repaired.
B says that he will repair the car for Rs. 10,000. C pays
money on A’s behalf since A could not afford the
money. Here, though the contract is between A and B,
consideration is paid by a third person, C and it is
permissible.

Executed or Past Consideration – Has

Done or Abstained from Doing

It means that consideration has been given before the

promise is made. Simply, when something is done
before the date of agreement, at the desire of the
promisor, it is called ‘past consideration.’

ILLUSTRATIONS
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
S teaches M’s son at his father’s request in the month
of April and in May, M promises to pay S a sum of
Rs. 8000. The services of S are past consideration.

Present Consideration – Does or

Abstains from Doing
Consideration that is given simultaneously at the time
of promise is called ‘present consideration’.

ILLUSTRATIONS

A sells his pen to B and B pays the price immediately,

it is a case of present consideration.

Executory or Future Consideration –

Promises to Do or Abstain from Doing
When the promisor makes a promise in exchange for
the promise by the other side and their obligations are
to be performed after making the contract, the
consideration is ‘future consideration.’
A agrees to supply certain goods to B on a future date
i.e. 5 January and B agrees to pay for them on the same
day i.e. 5 January. Since their obligations are to be
performed subsequent to the contract at a future date,
this is future consideration.

Other Essential Elements

Consideration must be something of

value

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Consideration must be such act or abstinence which
has some value in the eyes of law. It must be
quantifiable in real term.
It may be inadequate according to the value of the
thing delivered but it must be real.

ILLUSTRATIONS

 A agrees to sell his car worth Rs. 5,00,000 for Rs. 50

to B. Here, if has freely exercised his will, this is a
valid contract. Though the consideration is
insufficient, it is real.
 A agrees to gift his house to his son if his son stops
irritating him. This is not a valid contract. The
consideration here is illusory, it cannot be quantified
in real terms.

Unlawful Consideration

Sometimes, the consideration for a promise may be

unlawful. In such cases, the agreement is void.

ILLUSTRATIONS

A offers to buy B’s house and as consideration offers

to kidnap C’s son, who was hated by B. This is a void
agreement as the consideration for the house is doing
an illegal act i.e. kidnapping a person.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Capacity of Parties

CAPACITY OF PARTIES

One of the important elements of a valid contract is

that the parties must be legally competent to contract.
The following persons can enter into a valid contract:
 A person who is not a minor:
 A person who is of sound mind;
 A person who is not disqualified under any law from
contracting.

Minor’s agreement

A minor is person who has not attained the age of 18

years.
Any agreement made by a minor is void ab initio i.e.
it does not have any existence in the eyes of law.
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
Law presumes that minors cannot make a sound
judgment about their interests and so law acts as their
guardian. So, whenever a minor enters into a contract
and the other party tries to enforce those obligations,
the law prevents such enforcement.

ILLUSTRATIONS

 A, a minor, representing himself to be major, agreed

to sell his house to B and took Rs. 25,000 as advance
money. Later, when B sought to enforce the sale
contract, A sets up his minority as a defence. This
agreement is void and the minor cannot be compelled
to sell his house.
 A minor executed a mortgage for Rs. 20,000 and
received Rs. 8,000 from the mortgagee. The
mortgagee filed a suit for recovery of his money and
sale of the property in case of non-payment. This
agreement is void and the minor’s property cannot be
sold to satisfy the mortgage.

Liability of Minor under Void Agreement

Minor as Plaintiff
When the minor enters into an agreement and later
approaches the Court to cancel the agreement, he is
approaching the Court as the plaintiff.
In such case, the Court will ask the minor to return any
benefit that he has taken under the agreement and may
also ask him to make compensation to the defendant.

ILLUSTRATIONS

A, a minor, representing himself to be major, secures

the job of a driver at B’s agency and also obtains Rs.
3,000 as token money. Later, A approaches Court to
cancel the agreement and pleads his minority as the

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
reason. The Court here will ask him to return Rs.
3,000.

Minor as Defendant
When the minor enters into an agreement and is later
sued by the other party to enforce the agreement, the
minor then is the defendant in the case.
In such case, the Court will ask the minor to return any
benefit that he has taken under the agreement. Please
note that if such benefit has permanently benefited the
minor’s property, only then he is bound to return such
benefit, and not otherwise.

ILLUSTRATIONS

 A, a minor, borrows Rs. 2,000 from B with a promise

to pay back in 2 instalments at 5% p.a. A spends this
money on entertaining his friends. Now, if B sues the
minor for repayment, he will not get anything because
a minor’s agreement is void and the benefit (i.e. Rs.
2000) has not added something to A’s property.
 Suppose in the above eample, A sues Rs. 2,000 to
purchase 2 tractors for his agricultural operations and
B sues him for repayment. Here, B will get his money
back as the money has been used by A to add
something of value to his estate.

Can a Minor Ratify the Agreement on

Attaining Majority?

Ratificatin means subsequently adopting or accepting

an act done before. A minor’s agreement has no
existence in the eyes of law. So, even when the minor
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
attain majority, he cannot ratify the agreement made
during minority and such agreement cannot be
enforced by him or against him.

Are there any Agreements with Minor

which can be Enforced ?

 Agreements made on minor’s behalf by his parents

Sometimes, the parents of minor may enter into
agreements on the minor’s behalf. Such agreements
can be enforced provided they are for the minor’s
benefit.

ILLUSTRATIONS

A, the mother of B, a minor, purchases a house in B’s

name, on his behalf, from C. Later, if C wishes to
enforce this contract, it is valid as it was made by B’s
guardian for his benefit.

Agreements made by a minor and adult

jointly

When a minor and an adult jointly enter into an

agreement, the minor has no liability but the contract
as a whole can be enforced against the adult.

Agreement for Necessaries

When a minor is supplied with necessaries by any

person, the minor’s estate is bound to reimburse such
person for the value of necessaries supplied.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Necessaries means things without which a person
cannot reasonably exist like food, clothing, shelter etc.
Sometimes. Whether a particular good is necessary or
not, has to be seen according to the circumstances of
the minor. For example, a minor who is writing the
CLAT, books may become necessaries.
It should be seen that the necessaries supplied to the
minor must be suited to his condition in life. For
example, a luxury car may not be necessary for a
minor who is not well-off. On the other hand, a car
may be necessary for a minor who has always been
accustomed to such luxurious life-style.

ILLUSTRATIONS

A is supplied a pair of formal shoes and a few suits by

B to enable him to appear for an interview with a
leading MNC. Later, the value of these goods has to
be paid to B from the minor’s property.

Agreements with Persons of Unsound

Mind

A person if of unsound mind if while making the

agreement, he is incapable of under-standing the terms
and their impact on his interests.
An agreement with a person of unsound mind is void
ab initio i.e. non-existent under the law.
A person who is usually of sound mind, but
occasionally of unsound mind, may not make
agreements when he is of unsound mind.
A person who is usually of unsound mind, but
occasionally of sound mind, may make agreements
during the lucid intervals.

ILLUSTRATIONS
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
A patient in a lunatic asylum agrees to gift his property
to his friend. At the time of agreement, he was
suffering from delusions. This agreement is void and
cannot be enforced by or against the patient.
Agreement for Necessaries

When a person of unsound person is supplied with

necessaries by any person, his estate is bound to
reimburse such person for the value of necessaries
supplied.

Persons Disqualified Under any law

Sometimes, law creates categories of persons who

cannot enter into a valid contract. These persons are
said to be disqualified by law. When they enter into an
agreement, such agreement is void and cannot be
enforced.
For example, an insolvent person, alien enemies etc.
Are disqualified by law and cannot conclude a valid
contract.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Free Consent

FREE CONSENT
As discussed in previous chapters, consensus ad idem
is the most important requirement of a valid contract
between parties. It means identity of minds. Thus
consent given by parties must be free consent.
Consent of parties is free when it is not caused by:
 Coercion
 Undue Influence
 Fraud
 Misrepresentation
 Mistake
We will now discuss these factors in detail.

Coercion

A contract is induced by coercion when one party

obtains the consent of the other party:
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
 By committing an act which is a crime under the
Indian Penal Code (like assault criminal force etc.);
 Or, by threatening to commit a forbidden criminal act;
 Or, by detaining any property of a person illegally;
 Or, by threatening to detain any property of a person
illegally.

ILLUSTRATIONS

 A threatens to shoot B if he does not let out his house

to A. B complies due to the threat.
This is coercion as A has threatened to commit an act
forbidden by the IPC i.e. murder.
 A askes her husband B to transfer a property to her.
On B’s refusal, she threatens B that if not done, she
will commit suicide. This is coercion as A has
threatened to commit an act forbidden by the IPC i.e.
suicide.
 A knows that his neighbour, B has stolen C’s goods.
A tells B to supply some books to him at a price. B
refuses. A threatens to lodge a complaint against B for
theft due to which B agrees to enter into the contract.
This is not coercion since initiating a prosecution is
not an act forbidden by the IPC.
 Suppose in the above example, A coerces B to
contract with him by lodging a false complaint of theft
against B. This is coercion as filing a false charge is
an offence under the IPC.

Other Important Elements

 It is not necessary that the criminal act has been
committed or threatened against the party which has
to enter into the contract. Such criminal act can be
committed against a relative or a stranger.

ILLUSTRATIONS
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
 A threatens B in Mumbai to enter into a contract with
him, otherwise he will kill his wife residing in Delhi.
This is coercion.
 A threatens B in New York to enter into a contract
with him, otherwise he will kill his wife residing in
Delhi. This is coercion, even though the IPC is nt
applicable in New York.

ILLUSTRATIONS

A threatens B to enter into a contract with him.

Otherwise he will kidnap his neighbour’s son.
Intimidated by the threat, B concludes the contract
with A. This is not a valid contract as it has been
induced by coercion.
 It is not relavant whether the Indian Penal Code
applies at the place where the coercion has been done.

Effect of Coercion
A contract induced by coercion is voidable at the
option of the party whose consent was obtained by
coercion. This means that the wronged party can avoid
performing the contract if his consent was induced by
coercion.

Undue Influence

A contract is induced by undue influence:

 When one party is in the position to dominate the will
of another party;
 Such person having influence uses his position to
obtain an unfair advantage over the other party;
 The other party is induced to contract due to such
influence.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
ILLUSTRATIONS

 Chacharam Bapu, a spiritual advisor tells his follower,

B to donate his land worth crores of rupees to his trust
so that his soul may get salvation. B makes the gift.
This is undue influence on Chacharam Bapu’s part.
 A, an unemployed person meets B, the Managing
Director of a reputed organisation. A gifts B an
expensive lamp hoping to secure a job at B’s
organisation. This is not undue influence as even
though B has apparent authority over A, B did nothing
to use his position to get A to contract with him.

‘Position to Dominate the Will’

 Position of Authority
Sometimes one party may exercise authority over
another party. He may influence his decisions which
may not be in the best interest of the person
influenced. For example, relation between comployr
and employee; teacher and student, police and accused
are relations involving authority.

 Fiduciary Relationships
Fiduciary relationship means a relationship based on
mutual trust and confidence. In such situations, it is
likely that one person reposes trust and faith in another
person and his decisions may be influenced by that
other person. For example, doctor-patient, spiritual
adviser- follower, parent-child, insurer-insured
relationships are fiduciary relationships.

 Mentally Enfeebled Persons

A person whose mental capacity is affected may not
be able to think rationally about his best interests.
When such person contracts with another rperson who
has exercised his influence and authority, the contract
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
is induced by undue influence. A person’s mental
capacity may be affected, either temporarily or
permanently, due to age, illness etc.

 ‘Unfair Advantage’
Unfair advantage means taking a benefit when a
person is not entitled to such benefit. Not every
contract with the above mentioned categories is bad.
Only such contracts where a person has taken undue
benefit of his position are bad in law.
Please note that every influence is not undue
influence. Also, mere persuasion is not undue
influence.
To show undue influence, the party in influence must
actively use his position and the other party must be
completely led by such influence.

ILLUSTRATIONS

 A, a75-year old woman, has been taking services of

B, a doctor for over 10 years. She agrees to pay him
Rs. 10 lakhs as his fees. This is an unreasonable
amount and if B’s conduct is unfair, the contract is
induced by undue influence.
 Suppose in the above example, in the course of 10
years, A and B develop a mother-son relationship. A
loves B like her son and B also takes good care of her
health. Now, if A gifts B a house for his family. This
contract may not be induced by undue influence
unless it is shown that B has tricked A.

 ‘Unconscionable Bargains’
An unconscionable bargain is the bargain which is so
shocking to one’s conscience that a reasonable person
will never enter into it willingly. Whenever such
contracts are concluded between parties, the law

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
presumes that the contract is induced by undue
influence until it is proved otherwise.

ILLUSTRATIONS

 A, a poor farmer, takes loan from B, a money-lender,

of Rs. 800 at an interest of 40% per annum. This is an
unconscionable bargain.
 A, an old and illiterate woman without any means of
subsistence, gifts all her property to her advocate
without any reason. This is an unconscionable
bargain.

Effect of Undue Influence

A contract induced by undue influence is voidable at

the option of the party whose consent was obtained by
undue influence. This means that the wronged party
can avoid performing the contract if his consent was
induced by undue influence.

Fraud

A contract is induced by fraud when a person does the

following with an intention to deceive the other party:
 Suggestion of an untrue fact and the person suggesting
it is aware of its falsity.

ILLUSTRATION
A contracts to sell his house to B. A tells B that his
house is in excellent condition and had been recently

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
repaired. This is not true and his house is in a
dilapidated condition. This is fraud on A’s part.
 Active concealment of a fact and the person conceals
it intentionally.

ILLUSTRATION

A contracts to sell his house to B and tells him that it

is in excellent condition. A deliberately conceals the
cracks in the floor by spreading a carpet on it and so
B could not notice the cracks. This is fraud on A’s
part.
 Promise made without any intention of performing it.

ILLUSTRATION
A contracts to paint B’s portrait in 2 months and takes
Rs. 20,000 as advance, while contracting with B, A
knew that he will not be in India for the next 12
months. This is fraud on A’s part.
 Any other act by which one party intentionally
deceives the other party;
 Any other act which the law regards as fraudulent.

ILLUSTRATION

A sells his house to B telling him that the property is

free from any encumbrance. The house was actually
mortgaged to C for a debt that A took from C. In a
contract of sale of property, the seller must tell the
buyer about any material defect which may affect the
seller’s title over the property. Hence, A’s conduct is
fraudulent.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Silence as Fraud
Generally, while making a contract, a party is obliged
to disclose each and every fact about the contract. So,
if person enters into a contract without disclosing
some aspects, then, his silence is not fraud.

ILLUSTRATION
A contracts to sell B his horse who is unsound. A does
not tell B. His silence is not fraud. As a seller, he does
not have a duty to tell about the horse’s unsoundness.
B must have inquired about the fitness of the hosrse.
But, in some cases, silence may become fraud when:
 A person has a duty to speak;
 When silence itself is equivalent to speech.
 ‘Duty to speak’
Sometimes, the relation between parties is such that
one person is duty bound to tell the other about all
aspects of the contract. Such relationships include
fiduciary relationship.

ILLUSTRATION
Suppose in the above example, A sells the unsound
horse to his son, B. A does not tell B about the
unsoundness. Here, A’s silence is fraudulent. In this
contract, B reposes trust in his father and relies on
him. So, B was duty bound to tell this fact to A.
 ‘Silence as Speech’
Sometimes, a person’s silence may be equivalent to
speech. Then, such silence is fraudulent.

ILLUSTRATION

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
 Suppose in the above example, B, the buyer, asks the
seller, A, if the horse is unsound. A does not say
anything. This implies that the horse is sound. This is
fraud on A’s part.
 Or, the buyer tells the seller, ‘If you do not deny, I will
take this horse to be sound.’ The seller remains silent.
This is fraud on his part.
Effect of Fraud
A contracts induced by fraud is voidable at the option
of the party whose consent was obtained by fraud.
This means that the wronged party can avoid
performing the contract if his consent was induced by
fraud.

Misrepresentation

A contract is induced by misrepresentation when a

person does the following acts:
 Positively asserts an untrue fact to be true, without
properly enquiring about its truthfulness, even though
he believes it to be true;

ILLUSTRATION

A tells B who intends to purchase his land that his land

is very fertile and produces 10 quintals of wheat
annually. A, believes this is true, but does not have
actual knowledge of the production. Later on, it
transpires that the land produces only 7 quintals of
wheat. If B is induced by A’s statement to purchase
his land, this is misrepresentation on A’s part.
 Breaches any duty imposed on him and that adversely
affects the interest of the other party and benefits the
first party, even though the first party did not intend to
deceive the other;

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
ILLUSTRATION

A is hired by B to sell his house. A tells C, a

prospective buyer about the good qualities of the
house. A decides to tell C later about the sewage and
other problems of the house. A forgets about it and
does not tell C about them. C enters into the contract
based on A’s representation about the good qualities.
This is misrepresentation on A’s part.
 Causes, innocently, the other party to make a mistake
about the subject matter of the contract.

ILLUSTRATION
A contracts to sell 200 bags of wheat is which no
sulphur has been used to B. Sulphur, however, had
been used in 100 out of 500 acres of the land. B would
not have purchased the wheat had he know about the
use of sulphur. This is misrepresentation on A’s part.

Effect of Misrepresentation
A contract induced by misrepresentation is voidable at
the option of the party whose consent was obtained by
misrepresentation. This means that the wronged party
can avoid performing the contract if his consent was
induced by misrepresentation.

Mistake
Mistake can be of two kinds – mistake of fact and
mistake of law.
Mistake of Fact
Sometimes, when making a contract, a party may not
have the same information as the other party. There
may not be identity of minds. This mistake may be

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
about the chief subject of the contract or one about an
ancillary matter.

ILLUSTRATION
 A has two cars, one of which, he contract to sell to B.
A wanted to sell his white Rolls Royce but B thought
that A is selling his blue Mercedes. This mistake is
about the very subject of the contract of sale i.e. the
cars. This is a fundamental mistake of fact.
 A contracts with an art gallery to sell some paintings
that he has B, the owner of the art gallery thought he
will sell them immediately but A had to first get them
from his home at Paris. This mistake is not directly
related to the subject matter. It relates to the time of
delivery and is not a fundamental mistake that
substantially affects the contract.

Mistake about the Essential Subject Matter

As discussed above, when the mistake is
fundamentally related to the subject matter of the
contract, it is a mistake which goes to the root of the
contract.

Effect of Fundamental Mistakes

A contract based upon the mistaken belief which
fundamentally affects the consent of the parties is
void. This means that neither party can enforce the
contract i.e. seek performance of the contract. It is
deemed to be non-existent in the eyes of law.

ILLUSTRATION

A agrees to sell to B a specific cargo supposed to be

on its way from England to Mumbai. It turns out that
one day before the agreement, the ship carrying that

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
cargo had sunk and the goods where lost. Neither
party was aware about it. This agreement is void as the
mistake relates to the essential subject matter of the
agreement i.e. cargo.

Effect of Unilateral Mistake

Sometimes, the mistake about the contract may be
made only by one party. The other party may be fully
aware of all material facts. This is a case of unilateral
mistake.
A contract is not void or voidable due to the mistake
made by one party only. Such a contract is valid and
enforceable.

ILLUSTRATION

 A advertises for sale of his house. B sends his agent to

inspect the house. The house had 2 rooms and a
kitchen but B was under the belief that the house had
5 rooms and a kitchen. Thinking this to be the correct
description, B purchases the house. This contract is
valid as it was an unilateral mistake, even though it
was about an essential aspect of the contract.

Mistake of Law
A party may be mistaken about Indian law or the law
of any foreign nation. In both cases, the consequences
of mistake are different.

Mistake of Indian Law

A contract in which one party is mistaken about Indian
law is valid. Every person is presumed to know the
law of his country. He cannot give ignorance of law
as an excuse to avoid the contract.

ILLUSTRATION
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
A contracts with B to kill C for a consideration of Rs.
1,00,000. A kills C and then seeks the money. B
refuses to pay. Under Indian law, a contract whose
object is illegal are void and neither party can enforce
the contract. A was not aware of this provision. He
cannot seek the consideration promised by B on the
ground of ignorance of law.

Mistake of Foreign Law

A person cannot be expected to know the law of every
foreign country. Hence, a contract based on mistake
of foreign law is void.

ILLUSTRATION

Suppose, In Argentina, a contract to marry one’s child

for consideration is not allowed. A, an Indian marries
his daughter for Rs. 50,000 to C. This agreement is
illegal in Argentina but A was not aware of this. Later,
when he seeks Rs. 50,000 from C, he will not get
anything since this mistake of foreign law has made
the agreement void.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Void Agreements

VOID AGREEMENTS

As discussed earlier, a void agreement is one that the

law will not enforce. Some kinds of void agreements
have already been discussed in earlier chapters.
There are certain other agreements also which the law
declares to be void. They are:
 Agreements without consideration
 Agreements with unlawful object or consideration
 Agreements in restraint of marriage
 Agreements in restraint of trade
 Agreements in restraint of legal proceedings
 Agreements which are uncertain
 Wagering agreements
Each category is discussed in detail.

Agreements without Consideration

An agreement without consideration is void.
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
ILLUSTRATION

A offer to sell his house to B without any price. This

is a void agreement as it is without any consideration.
Sometimes, even an agreement without consideration
is valid. These instances are:
 Agreement based on Natural Love and Affection
An agreement without consideration is valid if:
 It is made in writing and registered under the law:
 It is made between parties due to natural love and
affection;
 The parties stand in a near relation to each other.

ILLUSTRATION

A promises to finance the education of his son to the

extent of Rs. 5,00,000. B, his son, is not to pay
anything in return. This will be a valid contract
provided it is made in writing and registered.

 Compensation for Past Voluntary services

An agreement without consideration is valid if:
 The promise is made to compensate the person;
 The person to whom the benefit is given had done
something voluntarily in the past;
 The thing done was for the benefit of the promisor.

ILLUSTRATION
A finds B’s purse and gives it to him. B promises to
give A Rs. 500 to express his gratitude. This is a valid
contract even though B’s promise of payment to A is
not supported by any reciprocal promise from A. But,

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
this payment is to compensate A for past voluntary
services rentered by him for B’s benefit.

 Promise to pay Time Barred Debt

When a debt is taken, the debtor is to pa it in the time
fixed for repayment. If the debtor fails to pay, the
creditor can take him to Court to seek prepayment.
The time to file a suit to get repayment through the
Court is limited, A specified period is provided to the
creditor and if the creditor does not approach the
Court within that period, the debt becomes time-
barred i.e. the creditor cannot take aid of the court to
get him money back. These periods to file the suit are
given in the Limitation Act, 1908.
An agreement without consideration is valid if:
 It is a promise by debtor or his agent;
 The promise is made in writing and signed by him;
 The promise is to pay the time barred debt.

ILLUSTRATION

A and B were partners of the firm A & B Electricals.

After dissolution of the partnership, A owed 10,000 to
B. Under the law of limitation, B has 3 years to
approach the court to recover the money if A refuses.
Suppose, B does not take any action for 4 years to take
back the money and the debt becomes time barred.
After 4-5 years, A promises in writing to pay Rs. 8,000
to B. This is a valid contract as even though without
consideration, it is a promise to pay a time barred debt.
 Agreements with Unlawful Object or Consideration
Whenever an agreement is made whose object is
unlawful or the consideration for it is nlawful, the
agreement is void.
The object or consideration of an agreement is said to
be unlawful if:

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
 It is forbidden by law;
 It is of such nature, that if permitted, it will defeat the
provisions of any law;
 It is fraudulent in nature;
 It involves injury to any person or property;
 The Court considers it as immoral;
 The Court considers it as opposed to public policy.
 A, B and C, who are thieves, enter into an agreement
to divide the money obtained by them from their last
robbery. This is a void agreement as its object is
unlawful.
 A promises to drop a prosecution which he has
instituted against B for robbery and B promises to pay
him some money. This is void agreement, as dropping
prosecution is something that is opposed to public
policy.
 A agrees to let her daughter for concubinage. The
agreement is void as being forbidden by law and
immoral.

Agreements in Restraint of Marriage

An agreement which restrains the marriage of a person

is void. If the agreement is to restrain the marriage of
a minor, it is valid. A Minor cannot marry legally so
an agreement which prevents his marriage forwards
the object of law, so, such agreements are valid.

ILLUSTRATION
A pays B, a major, a sum of Rs. 50,000 on he
condition that he shall not marry during A’s lifetime.
This is void as it restrains B’s marriage.

Agreements in Restrain of Trade

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Any agreement which prevents a person from
practicing any trade or occupation is void.

ILLUSTRATION
A, a shopkeeper is Karol Bagh, agrees to pay Rs.
1,00,000 to B, a rival shopkeeper in Karol Bagh, to
shut his shop and start working elsewhere. B closes
his shop and demands the promised money from A. B
cannot claim payment as the agreement is void
because it restrained B from practicing his trade in
Karol Bagh.
 Employment Contracts
Sometimes, employment contracts restrain their
employees from working anywhere else. These
clauses can be valid or invalid subject to the
following;
 A clause where a person is restrained from taking up
a job at any other place while he is currently serving
his employer is valid. This is because as an employee,
he is expected to devote his time and attention to his
present occupation. Also, this would prevent him from
passing any confidential information to rivals.

ILLUSTRATION

A, an employee of Shroff & Co. is prevented by his

employment contract to take up consultancy services
anywhere else, until he resigns from his job. This
agreement is valid as the restraint on practicing an
occupation an occupation is reasonable and for a
limited time i.. till A is with the firm.
 A clause where a person is restrained from taking up
a job at any other place while he is currently serving
his employer and also after he leaves them is invalid.
This restriction is unreasonable and would force the
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
person to work in the same place for his entire life
because if he leaves, he cannot take any other job.

Agreements in Restraint of Legal

Proceedings

An agreement will be void if:

 It restrains any person absolutely from enforcing his
legal rights in Court of law; or,
 It limits the time within which his rights under the
contract may be enforced.

ILLUSTRATION

 A, at Mumbai and B, at Ahmedabad contract to supply

corn flour at Mumbai. Here, if any dispute arises, then
under law, the courts at Mumbai or Ahmedabad will
have jurisdiction. But, suppose, under the contract, A
and B decide that only the courts at Mumbai will have
jurisdiction. This clause is valid as a party is not
absolutely deprived of his right to sue. He has an
alternative forum in the form of Mumbai.
 Suppose in the above example, A and B decide that in
case of dispute, no court will have jurisdiction. Here,
this clause is void as the party is restrained from
approaching any Court. So, the parties may disregard
this clause and ma approach either the Courts in
Mumbai or Ahmedabad.
 A, at Mumbai and B, at Ahmedabad contract to supply
corn flour at Mumbai. Here, if any dispute regarding
payment arises, then under law, it must be settled
within 3 years. A and B agree that in case of payment
disputes, the parties will get only 1 year to approach
the Court. Here, this clause is void as the parties have
cut short the time provided to them under law. So, the

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
parties may disregard this clause and may approach
the Court in 3 years.

 Exception in case of Arbitration

When the parties decide that they will refer their
disputes to arbitration and not approach the Courts,
this contract is valid even if it restrains the legal
proceedings in the Court.
Uncertain Agreements

Agreements the meaning of which is uncertain or

cannot be made certain are void.

ILLUSTRATION

 A agrees to sell B a ‘hundred tons of oil’. There is

nothing to show what kind of oil is intended. The
agreement is void for uncertainty.
 A agrees to sell B, “my white horse for either Rs. 500
or Rs. 1000”. There is nothing to show which of the
two prices was intended and so the agreement is void
for uncertainty.
Wagering Agreements

Wagering agreements are void.

Wagers are mere bets. It is an agreement by one
person to pay money to another person on the
happening of or non-happening of a given event,
without there being any real interest of either person.

ILLUSTRATION

A says that he will pay B Rs. 100 if it rains tomorrow

and B will pay it to A if it does not rain tomorrow.
This is a wager and hence a void agreement.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
A lottery is a game of chance. It is a wagering
agreement and hence void.

 Horse Races as Exceptions

If a person subscribes to a horse race and bets on the
winning or losing of a horse, it is protected under law
and so is not a wager. It is a valid and enforceable
agreement.

Performance of
Contract

PERFORMANCE OF CONTRACT
When a valid contract is made, the obligations under
it are to be fulfilled according to the terms and
conditions of the contract. This is called performance
of contract.

Who will perform?

Generally, a contract consists of reciprocal promises

and each promise must be performed by the respective
parties.

ILLUSTRATION
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
A contracts with B to supply him 500 books at a price
of Rs. 10,000.
Here, A has promised to supply books to B. A is the
promisor and B is the promisee.
The reciprocal promise is made by B to pay Rs.10,000
upon supply of books by A. Here, B is the promisor
and A is the promisee.
Under the law, each party must either perform or offer
to perform his part of the promise. This offer of
performance is called ‘tender’.
When one party is willing to perform or offers to
perform his promise, the other party is duty dound to
accept such performance.

Performance by Legal Representatives

Since the contract is concluded between the parties,
they must perform the promises contained in it.
Sometimes, the party to the contract may die before
the date fied for performance. Then, the intention of
the parties must be ascertained from the contract. If
performance by legal representatives is also
permitted, then they may perform the promise after
the promisor’s death.

ILLUSTRATION

A contracts to supply 100 tins of oil to B for Rs.

50,000. A supplies the required number and B is to
pay the money next week. B dies before the fixed date.
Here, the contract can be performed properly even by
B’s legal representative. So, even if B’s son pays the
money to A, the contract is discharged.
In some cases, performance of the contract by legal
representatives is not sufficient to effectively fulfil the

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
contract. So, if either party dies, the contract comes to
an end.

ILLUSTRATION

A agrees to paint a picture of B. Before the date fixed,

A dies. The contract is discharged due to impossibility
of performance. The nature of contract is such that
performance by A’s legal representatives cannot
discharge the contract. It is a contract dependant on
the personal qualities of A.
Suppose, A had performed his part and painted the
picture but the payment was due. A died shortly
thereafter. Now, A’s legal representatives can seek
performance from B and take the payment due to A.
Hence, the nature of contract must be seen in each
case.

Offer of performance or Tender

When one party offers to perform his promise, he must

ensure that:
 Tender must be unconditional;
 Tender must be made at a proper time and place;
 In case of delivery of goods, the promisee must have
a reasonable opportunity to see if the goods match the
description in the contract.

ILLUSTRATION

A contracts to deliver to B at his warehouse, on 1 st

March 1873, 100 bales of cotton of a particular
quality. In order to make a valid tender, A must bring
the cotton to B’s warehouse, on the appointed day,
under such circumstances B must have a reasonable
opportunity to see that the thing offered is the cotton
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
of the quality contracted for, and that there are 100
bales.

Refusal to Accept Performance or Offer

of Performance

When one party is willing to perform and offers to

perform the contract, and the other party refuses, the
first party is discharged. He need not perform his part
of the promise.

ILLUSTRATION

A contracts with B to supply him 500 books at a price

of Rs. 10,000. Now, when A asks B to tell the location
of delivery of books and B refuses performance, A is
discharged and need not perform his promise.

Joint Promisors

In a contract, when there are several persons who have

to perform the promise, they are called joint
promisors.

ILLUSTRATION

A, B and C jointly promise to pay D Rs. 3000 for

supply of a lamp by D. Here, A, B and C are joint
promisors.

Liability of joint Promisors

The liability of joint promisors is joint and several.

This means that all of them are jointly responsible for

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
the performance of the promise. It also means that if
one of the joint promisors is not able to perform the
promisee may seek the whole performance from any
one of them, who is capable of fulfilling the promise.

ILLUSTRATION

A, B and C jointly promise to pay D Rs. 3000 for

supply of a lamp by D. Here, D may take Rs. 1000
each from A, B and C. D may also compel only A to
pay the entire sum of Rs. 3000, if B and C are unable
to pay.

Contribution Between Joint Promisors

If one of the joint promisors perform the promise

wholly, he may seek contribution from the other
promisors.

ILLUSTRATION

 Suppose in the above example, A pays the entire sum

of Rs. 3000 to D. Later, A has the right to claim Rs.
1000 each from A and B since their liability is joint.
 Suppose, A is declared bankrupt and he cannot pay his
share of Rs. 1000. In such a case, it is B and C’s
responsibility to bear A’s default equally and to pay
Rs. 1500 each to D.

Joint Promisees

A person may make a promise to more than one

person jointly, then such persons to whom the promise
is made are called joint promises.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
ILLUSTATION

A has borrowed Rs. 1000 from B and C. In

consideration of this debt, he promises to repay the
debt in 4 instalments in 4 months. Here, B and C are
joint promises.
The other rules are similar to the rules in the case of
joint promisors.

Time and Place of Performance

The parties are free to decide the time and place of

performance of he contract. The parties then should
perform their promises accordingly.

Effect of Failure to Perform the

Contract in Time

Sometimes, performance of contract in the time fixed

is very important for effective discharge of the
contract. If contract is not performed within the time
fixed, it might injure the interests of the party to whom
performance was to be made. When this is the case, it
is a contract where time is of the essence.

ILLUSTRATION

A orders a shipment of cotton cloth in December for

stitching school uniform for the new session which
begins in March every year, from B.B knows that A
requires the shipment for the uniform. But, B does not
supply the goods until July. Here, from the
circumstances, it is clear that time is essence of the
contract. Supply of cotton cloth after March is of no

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
use as the session has already started and there would
not be adequate demand for the uniform now.

Failure to perform when Time is of

Essence of the Contract

When one party fails to perform his promise under the

contract where time is of essence, the affected party
has two remedies:
 To avoid the contract;
 To claim damages for loss caused to him.

ILLUSTRATION

A agrees to deliver the bridal jewellery for Rs. 45,000

to B ten days before her wedding. A delivers the
jewellery 5 days after the wedding. B had to arrange
jewellery one day before her wedding which was
available only at Rs. 75,000. Here, time is clearly of
the essence. Due to A’s inability to perform, B can
avoid the contract and also claim damages for her loss
i.e. for Rs. 30,000.

Performance of Reciprocal Promises

In every contract, each party has an obligation to
discharge or a promise to perform. It is not wrong to
say that a contract consists of reciprocal promises.

Contracts requiring Simultaneous

Performance

LA contract may contain reciprocal promises which

have to be performed simultaneously. So, both parties
must be willing to perform their promises. If one of
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
the parties is not willing to perform the promise, the
other party also need not perform his promise.

ILLUSTRATION

A goes to a stationery shop to buy a notebook for Rs.

20. This contract requires simultaneous performance.
The seller must give A the book and A must pay Rs.
20. If A is not willing to pay the money, the
shopkeeper need not give him the notebook.

Fixed Order of Performance

The contract may specify the order in which the

parties have to perform their promises. Then, such
order must be followed.

ILLUSTRATION

The contract between A and B specifies that B must

pay Rs. 20,000 after A, the architect has submitted his
designs for B’s house. Here, A must perform his
promise first and then B is required to perform his
promise of payment.

One Party Preventing the Other from

Performance of his Promise

If a party prevents the other from performing his

promise under the contract, the party so prevented
may avoid the contract and also claim compensation
for the loss he has suffered due to non-performance of
the contract.

ILLUSTRATION
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
A contracts with B to supply 20 trucks at his
warehouse. A sends the trucks to the warehouse but B
refuses to take delivery or pay for them, When A sends
the trucks again, B’s servants prevent delivery at B’s
instructions. Now, A is not required to perform his
promise and he may avoid the contract and also claim
compensation for the loss due to non-delivery of
trucks.
Non-performance of Reciprocal Promises by the Party
who is to Perform First
When the nature of contract is such that one party
must perform before the other does, then upon the
non-performance by the first party, he cannot claim
performance from the second party and he also has to
compensate the second party for the loss sustained by
him.

ILLUSTRATION

A contracts with B to supply concrete and send to

construct a building on B’s land for a price of Rs.
65,000. Here, A is required to perform his promise
before B, and if he fails to do so, he cannot seek
payment from B. And, he also has to compensate B
for the loss to him.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Discharge of Contract

DISCHARGE OF CONTRACT

When the obligations imposed on the parties under the

contract come to an end, the contract is said to be
discharged. There are several ways in which a contract
can be discharged. They are:
 By performance;
 By breach;
 By mutual consent or agreement;
 By impossibility of performance.

Discharge by Performance

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
As discussed in the chapter on Performance of
Contract, the parties bound by the contract are
required to perform their respective promises
according to the terms of the contract. Once they
perform their respective obligations, the contract
ceases to bind them and stands discharged.

Discharge by Breach
Breach of contract means a situation when the parties
do not honour their obligations under the contract.
When a party breaches the contract, the other party is
no longer required to perform his obligations. The
other party also gets a right to sue the errant party for
damages (monetary sum) for breach.
Please note that every minor irregularity in
performance of the contract is not breach of contract.
The real purpose of the contract and the act of parties
must be considered.

ILLUSTRATION

A had contracted to supply 200 television sets to B at

his godown located in Malviya Nagar. A sends his
agent to deliver the goods to B. The agent knew about
B’s godown at Mukherjee Nagar and so he delivers
the goods there. This is not breach of contract on A’s
part. The contract has been substantially performed as
required by the nature of the contract.

Discharge by Agreement

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
The obligations under a contract may also come to an
end by an agreement between the parties. Such
agreement may take the following forms:

Novation
When the parties to a contract agree to substitute the
existing contract for another contract, it is called
novation. Then, their obligations under the first
contract come to an end and the obligations under the
new agreement and to be performed.

ILLUSTRATION

A owes B Rs. 10,000. A enters into an agreement with

B, and gives B a mortgage of A’s estate for Rs. 5,000
in place of debt of Rs. 10,000. This is a new contract
and the parties are bound by it. The old contract has
been extinguished.

Alteration
When the parties to a contract agree to change one or
more material terms of the contract, it is called
alteration. Then, their obligations are to be discharged
according to the new terms.

ILLUSTRATION

A contracts with B to sell him his car for Rs. 8,00,000.

Later, by mutual agreement, A decides to sell the car
for Rs. 8,50,000. This is alteration and the parties and
bound by the new contract.

Rescission or Cancellation

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
When the parties mutually decide that the contract
between them shall no longer bind them, their
obligations under it come to an end. The contract is
said to be discharged by cancellation.

ILLUSTRATION

A decides to sell the vacant plot at Mukherjee Nagar

to B for a consideration of Rs. 10,00,000. Later, A
needs it for his personal purposes and requests B to
find another seller. B agrees and both parties decide to
terminate the contract. Now, neither party is bound by
the contract.

Remission of Performance

The promisee in a contract may dispense with the

performance of the promise made to him, either
wholly or partially. Then, the promissory is not bound
to perform his part to the extent waived by the
promisee

ILLUSTRATION

 A employs B, an architect, to desigen his house for a

lump sum consideration of Rs. 12,00,000. Later, after
B prepared the layout of the first floor, A tells him that
he needn’t design the remaining rooms. B is no longer
bound by the promise.
 A owes B Rs. 8,000. B accepted Rs. 4,000 as full and
final satisfaction of debt. Now, A is not bound to pay
the remaining sum of Rs. 4,000.

Extension of Time

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
When a specific time has been fixed for performance
of the contract, it must be performed within the
stipulated time. However, sometimes, a party may
grant extension of time to another party for
performance of his promise.
Please note that one party cannot unilaterally extend
the time allotted to him for performance of his
promises under the contract. Only when the other
party grants him this extension can he claim it.

ILLUSTRATION
A owes B Rs. 10,000 which is to be paid within 4
months. Later, B allows A to repay the sum within 12
months. Now, A is bound by the subsequent condition
of repayment within 12 months.

Accord & Satisfaction

When parties conclude a contract, they are bound to

perform those obligations which they contracted for.
In some cases, a party may accept some other
performance as satisfaction of the contract. This is
called accord & satisfaction. Once the party accepts
such other performance, he cannot claim the
performance originally decided.

ILLUSTRATION
A owes B Rs. 15,00,000. Instead of the money, A is
willing to gift B some agricultural land in his village
to which B agrees. Now, once such gift has been
made, B cannot claim the money as the gift comes as
satisfaction of the debt.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Discharge by Impossibility of
Performance

Sometimes, the obligations under the contract become

impossible to perform. Then, the contract is said to be
discharged due to impossibility of performance.

‘Impossibility of Performance – Kinds’

Initial Impossibility
A contract may be impossible to perform from the
time it is made i.e. initial impossibility.

ILLUSTRATION

A agrees with B to discover treasure by magic. This is

an impossible act and so the agreement is void from
the moment it is made.
Sometimes, this impossibility may be physical. For
example, an agreement to bring a dead man to life is
void.
This impossibility may also be due to legal bars. For
example, an agreement to marry a person already
married to someone is void since the law prohibits
polygamy.

Subsequent Impossibility

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
A contract may be possible to perform and lawful
when it is made, but, later may become impossible or
illegal to perform i.e. subsequent impossibility.

ILLUSTRATION

A and B contract to marry each other. Before the date

fixed for marriage, A dies. This contract though lawful
when made has become impossible to perform and so
it becomes void when A dies.
Parties conclude a contract with the hope that the
obligations under it will be performed and their
interest will be served. At times, due to supervening
circumstances, the intention of parties may fail to
materialize and the contract may become impossible
to perform or even if possible, it may be utterly useless
for the parties. Then, the parties are not bound by their
obligations under the contract. This mode of discharge
is called discharge by frustration.

Grounds of Frustration of Contract

There could be many reasons due to which

performance of contract becomes impossible. Some
factors may include:

Destruction of subject matter

When the subject matter of the contract is destroyed,
the contract becomes impossible of performance. The
parties are released from their obligations.

ILLUSTRATION

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
Rachel gives Ross $ 500 to paint her house. Before
Ross could paint it, the house is completely destroyed
in a fire. The contract is frustrated.

Change of Circumstances
Sometimes, the circumstances change so drastically
that either the contract becomes impossible to perform
or the performance, if possible, becomes useless for
the parties. This does not mean that a party can avoid
his obligations due to every change in circumstance.
A party cannot se commercial hardship as a defence
to frustrate the contract. Even if the performance
becomes more expensive or more difficult for him, he
has to abide by it.

ILLUSTRATION

 A flat was hired by B from A to view the coronation

ceremony of the Queen. Later, the ceremony was
cancelled. Now, even though the lease of A’s flat is
possible, it is useless because the sole purpose of such
hiring was to view the coronation. The contract is
discharged by frustration.
 A shipped his cargo through B’s ship using the Suez
Canal route. Due to security issues, some portions of
the navigable route were closed, and for transporting
the cargo, the ship had to take a detour of 200 kms. B
pleaded impossibility of performance. This is not
frustration as it can still be performed, though it has
become more expensive for B to perform.

Death or Incapacity of Party

Generally, the parties to the contract should personally

perform their obligations. Sometimes, as explained in
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
previous chapters, a third party may also perform the
contract.
But, in some cases, where the contract is linked with
the personal qualities of the parties, it must be
performed by them only. In case of their death or
incapacity which affects their ability to perform the
contract, the contract is discharged by frustration.

ILLUSTRATION

 A hire B, a painter to paint a picture for him. Before

the date fixed for performance, B becomes paralysed.
The contract is frustrated.
 A hires B, a painter to paint a picture for him. Before
the date fixed for performance, B goes deaf in one ear.
The contract is not frustrated as B’s inability does not
affect his obligations under the contract and he can
still paint.

Government or Legislative Intervention

Sometimes, the Government makes such changes in
law that it directly affects the performance of the
contract and may render it impossible to perform.

ILLUSTRATION

A contracts with B, a dealer in jute based in

Bangladesh, to export jute to B next month. Later on,
the Government bans export of jute. The contract is
frustrated.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Quasi-Contracts

QUASI-CONTRACTS
What are quasi-contracts?

A contract is formed when proposal is made by one

party and accepted by the other party. Contract, is

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
therefore, and agreement involving mutual promises
between the parties.
Sometimes, parties may have to fulfil obligations even
without any formal and explicit offer or acceptance by
the parties. These agreements resemble a contract and
are called quasi-contracts.

ILLUSTRATION

A, a trader leaves 5 kgs. Of pice outside B’s house by

mistake, thinking it to be C’s house. B consumes the
rice even though he did not order it. Now, it would be
unjust that B used the rice without paying for it. It
would cause a loss to A. Hence, even without a proper
offer by A and acceptance by B, a quasi-contract
comes into existence and B is bound to pay for the
rice.

Why do these contracts exist?

The basis of imposing obligations on parties which

they did not voluntarily undertake is to ensure fairness
and equity in transactions. Law tries to prevent ‘unjust
enrichment’ i.e. benefit to one person at the cost of
another.
Hence, law has created a category of ‘quasi-
contracts’.

Kinds of Quasi-Contracts

 Supply of Necessaries
When a minor or a person of unsound mind or a person
otherwise disqualified by law to contract is supplied
with necessaries by any person, his estate is bound to
reimburse such person for the value of necessaries
supplied.
23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj
Contact No. 9628088855, 9307088855
 LAW ACADEMY
This has been discussed in detail in the chapter on
Capacity of Parties.
 Reimbursement of Money
A person is entitled to reimbursement of money:
 When he has paid the money which he was not bound
to pay;
 But, he is interested in the payment of such money;
The person on whose behalf money was paid shall
reimburse the person who has made the payment.

ILLUSTRATION

A has taken a land on lease from B, a zamindar. B is

bound to pay revenue to the Government. The revenue
remaining unpaid, B’s land is advertised for sale by
the Government. If the land is sold, A’s lease will be
cancelled. Now, to avoid sale of B’s land and
consequent cancellation of his lease, A pays the
revenue due from B. B must reimburse A for the
payment made.
‘Interested In payment’ v/s ‘Bound by law to pay’
This provision for reimbursement will apply only
when a person is interested in payment but is not
bound by law to pay.
When someone is bound by law to make a payment, it
is a positive duty imposed on him by law and there
would be legal liability if he does not pay.
When someone is interested in payment, it is not a
positive duty by law and there would not be any legal
liability though there may be adverse consequences
other-wise.

Benefit of Non-Gratuitous Act

‘Non-gratuitous act’ – Meaning

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
An act which is not done with the intention of charity
is a non-gratuitous act. When a person expects
payment or return for an act done by him, his act is
non-gratuitous.
This provision applies when:
 One person does something lawfully or delivers
something to another;
 His act is non-gratuitous;
 The other person enjoys the benefit of the act;
Then, the other person is required to compensate the
former for the benefit enjoyed or to restore the thing
delivered to him.
This is also called the principle of quantum-meruit.

ILLUSTRATIONS

 A saves B’s property from fire. A is not entitled to

compensation from B, if the circumstances show that
A intended to act gratuitously.
 A, a trader leaves 5 kgs. Of rice outside B’s house by
mistake, thinking it to be C’s house. B consumes the
rice even though he did not order it. B is bound to pay
for it.
 Suppose in the above example, B uses 2 kgs. Of rice
and returns the rest. B is bound to pay for 2 kg. Rice
used.

Responsibility of Finder of Goods

Whenever a person finds goods belonging to someone

else, he has the following duties:

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
 He must take care of the goods like a reasonable man
would care for his own goods. If he has taken adequate
care, then he will not be responsible for any damage
or deterioration in the value of the goods.
 He must not use the goods which do not belong to him.
 He must not mix his goods with the goods found.

Can a finder of goods sell the goods?

The finder may sell the goods if he cannot find the

owner after taking diligent steps, in the following
situations only:
 When the thing found is in danger of perishing or
losing its value.
 When the lawful charges of finding the goods are two-
thirds or more of the value of goods.

Thing delivered by Mistake or under

Coercion

If a thing is delivered or money has been paid by

mistake or coercion, to someone, such person must
return the thing or repay the money.

ILLUSTRATION

A owes Rs. 200 to B. Having paid B the money

already, he pays him again by mistake. B must repay
A the sum of Rs. 200.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY

Remedies for Breach of

Contract

REMEFIES FOR BREACH OF

CONTRACT

Breach of Contract

Breach of contract means a situation when the parties

do not honour their obligations under the contract.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
When a party breaches the contract the aggrieved
party has following options:
 Rescission of contract and filing suit for damages;
 Filing suit for quantum meruit (discussed in the
chapter on Quasi-Contract)
 Filing suit for specific performance
 Filing suit for injunction

Suit for Damages

When a contract has been broken by one party, the

other party need not perform his obligations. He can
also sue for damages for breach.
The injured party must show that :
 The other party has breached the contract;
 Loss has been caused to the injured party due to such
breach;
 Loss caused was a natural and probable result of the
breach or the parties knew that such loss will occur
on breach when they entered into the contract;
Then, such party is entitled to damages for breach.

 Damages for Direct & Probable Injuries

Breach of contract may cause many injuries to a party
– some could be direct, some ould be indirect and
unforeseeable. Law provides remedy in cases of
injuries which directly arose from the breach and
which could be predicted by the parties.
Injuries which were not in the contemplation of parties
when the contract was made will not fetch damages
for the injured party.

ILLUSTRATION

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
 A was a well known tailor who specialized in stitching
school uniforms for children. A contracted with B for
supply of 500 cotton bales by end of January. B did
not supply the cotton until November. A con claim
damages for non-supply of cotton and the loss of
profits due to not being able to stitch the uniforms.
Being a known player in the market, B was aware that
the cotton was sourced for the uniform and once the
session starts, the cotton could be sued only next year,
resulting in loss to A. This is a likely and probable
result of the breach so B has to account for it.

 Damages within the Special Knowledge of Parties

Sometimes, the consequences of breach may be
unforeseeable or indirect. Generally, damages are not
given for such indirect injury. But, if these factors
were in the knowledge of parties or if one party had
told the other of these special circumstances, damages
can be given for these indirect injuries also.

ILLUSTRATIONS

 Western Airways contracts with B to take him to

Canada with a stop over at Brussels. At Brussels, the
airline refuses to take B to the onward flight to
Canada. As a result, B could not reach Canada in time
and missed his lecture that he was to deliver in
Ontario. The airline was aware that B is a noted
physicist and he was to deliver a lecture on that day.
Here, B can claim damages for missing his flight to
Canada and also the loss of reputation caused to him
due to missing his lecture.
 Suppose in the above example, the airline was not
aware that B had an engagement in Ontario. Then,
upon breach, B can claim damages only for missing

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855
 LAW ACADEMY
his flight as the reason for B’s journey was not known
to the airline.
 Duty to Mitigate Loss
The injured party claiming compensation has a duty to
take reasonable steps to mitigate the loss due to the
breach. If he suffers further damage due to his own
neglect, he cannot claim damages for this loss.

23A/2A/1, Tashkent Marg, Near JK Palace Hotel, Civil Lines, Prayagraj

Contact No. 9628088855, 9307088855