THE INDIAN CONTRACT ACT, 1872CONTRACT - According to sec.2(h), a contract is defined as an agreement enforceable by law. AGREEMENT = According to sec.2(e), every promise and every set of promises forming consideration for each other. Consideration is the return benefit the parties to the contract get. Agreement = Offer + Acceptance PROMISE = According to sec.2(b), a proposal when accepted becomes a promise. _AGREEMENT Contract Offer + Acceptance Agreement + its legal enforceability May create social or legal Creates only legal obligations obligation between the parties. All agreement do not become All contracts are based on contracts agreements According to Sec.13, meeting of minds or identity of minds or receiving the same thing in same sense at same time.ESSENTIAL ELEMENTS OF A VALID CONTRACT (Sec.10) 1. A Valid Offer & acceptance. 2.Intention to create legal relationship. 3.Consensus - ad - idem. 4. Lawful Consideration. 5.Capacity to contract. 6.Free consent. 7.Legality of object. 8.Possibility of performance. 9.Writing & registration. aPep bu Classification of contracts Legal Effects Valid Contract Void Contract Voidable contract Unenforceable contract legal contract eepp Performance Formation Unilateral Contract 1. Express Contract Bilateral contract 2. Implied contract Executed contract 3. Quasi contract Executory contractTYPES OF CONTRACTS- Based on Legal Effects Valid contract - If all the condition are fulfilled it is called as a valid contract. Invalid contract - |n a contact if any one condition is not fulfilled. Is void (Void-ab-initio) - An agreement which is not valid from the beginning. Becomes void - An agreement which is valid in the be ag but due to some supervening impossibility the contract becomes void. Voidable contract - A contract which is valid unless until avoided by either the party. _Illegal contract - An agreement forbidden by law. It involves the commission of crime or violate public policy, or immoral in nature. Unenforceable contract - |t is valid but due to some technical defect the contract becomes void. In case defects are removed the contract is enforceable.(lack of registration, lack of signature etc.,)Based on formation Express contract - When contracts are either in writing or in oral. Implied contract - When contracts are neither in writing nor in oral but inferred from the acts or circumstances of a particular case. Quasi Contract: It is not actually entered into by the parties but is something imposed on a party by law.Based On Performance Executed contract - In a contract where both the parties have performed their obligation, there remains nothing to perform. contract - In a contract where both the parties are yet to perform their obligation. Unilateral contract - In a contract one party has performed his obligation and other person is yet to perform his obligation. Bilateral contract - In a contract where both the arties have performed their obligation. ilateral & Executory are same and inter - changeable. _a Offer According to Sec.2(a), when a person signifies to another his willingness to do or to abstain from doing something with a view to obtaining the assent of that other to such an act or abstinence, he is said to make a proposal. TYPES OF OFFER: Express offer Implied offer Specific offer General offer Cross offer Counter offer nding offerExpress offer - When offer is given to another person either in writing or in oral. Implied offer - When offer is given to another person neither in writing nor in oral. Specific offer - When offer is given to a specific person. General offer - When offer is given to entire world at a large.(Carlill Vs. Carbolic smoke ball Co.,) Cross offer - When both the persons are making identical offers to each other in ignorance of other’ offer. Counter offer — When a person to whom the offer is made, instead of accepting the terms of the offeror desires modification of the same. indin - An offer which remains continuously for a certain period of time.Carlill Vs. Carbolic smoke ball Co.,) (1) that the advertisement was not a unilateral offer to all the world but an offer restricted to those who acted upon the terms contained in the advertisement (2) that satisfying conditions for using the smoke ball constituted acceptance of the offer (3) that purchasing or merely using the smoke ball constituted good consideration and more people buying smoke balls by relying on the advertisement was a clear benefit to Carbolic (4) that the company's claim that £1000 was deposited at the Alliance Bank showed the serious intention to be r legally bound.LEGAL RULES FOR OFFER + Offer must be given with an intention to create a legal relationship.(Balfour Vs. Balfour) + Offer must be definite.(Taylor Vs. Portington) + There is_a_ difference between offer, invitation to offer, invitation to sale. (Harris Vs. Nickerson) + Offer must be communicated. (Lalman Vs. Gauri Dutt). Communication of offer is complete only when it reaches the person to whom it is made. + Mere statement of price is not an offer.(Harvey Vs. Facey) _Harvey Vs. Facey First telegram from Harvey to Facey-"Will you sell us Bumper Hall Pen? Telegraph lowest cash price". Facey replied on the same day: "Lowest price for Bumper Hall Pen £900. " Harvey then replied in the following words. "We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession."Acceptance According to sec.2(b), when a person made a proposal to another to whom proposal is made, if proposal is assented there to, it is called acceptance. LEGAL RULES FOR ACCEPTANCE : Mocentance must be absolute and unconditional._(Neale Vs lerret - Acceptance must be given as per the mode prescribed by the offerer. Acceptance must be given before the lapse of time or within reasonable time. Acceptance may be given by any person in case of general offer- Acceptance must be given by the person to whom the offer is made or by an authorised person. ( Powell Vs Lee) - Acceptance must be communicated. (Bordgon Vs. Metropolitan Rly. Co.) - Mental acceptance is no acceptance or acceptance must not be derived from silence. - Acceptance must not be precedent to offer. aCommunication of Offer and Acceptance According to Section 4, The communication of offer is complete when it comes to the knowledge of the person to whom it is made. The communication of acceptance is complete- » As against the proposer- when it is put in to a course of transmission to him so as to be out of the power of the acceptor. » As against the acceptor - when it comes to the knowledge of the proposer. aRevocation of offer and acceptance » A proposal may be revoked at any time before the communication of acceptance is complete as against the proposer but not afterwards. » An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor but not afterwards. aM, by a letter posted on 1%t June, offers to sell his car to N for 5 lakhs. The letter reaches N on 3"4 of June. N accepts the offers by a letter posted on 5th, The letter reaches M on 7%, aCommunication of offer -3'4 June. Communication of acceptance- as against the proposer- 5" June As against the acceptor- 7* June Proposal can be revoked - before 5t June Acceptance can be revoked - before 7*" June Lapse of offer: » Revocation Lapse of time Death or Insanity of offerer Counter Offer Acceptance not as per the prescribed mode Destruction of subject matter of contract Rejection of offer by offeree. » » » » » »B offered to sell his house to A forRs.50,000. A accepted the offer by post. On the next day, A sent a telegram revoking the acceptance which reached B before the letter. Is the revocation of acceptance valid? What would be the effect if both the letter of acceptance and the telegram of revocation of acceptance reach B at the same time? _» Yes. The revocation of acceptance is valid because the acceptor may revoke his acceptance at any time before the letter of acceptance reaches the offeror. » If both letter and telegram reach B at the same time, the formation of contract will depend on the fact - which of the two is opened first by B. If B reads the telegram first, revocation is valid, but if the letter is read first, revocation is not possible. iCONSIDERATION » According to sec 2(d) consideration is defined as “when at the desire of the promisor , or 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 an act or absinence or promise is called a consideration for the promise A party to an agreement who promises to do something must gain something in return. This something in return is called consideration. aLEGAL RULES AS TO CONSIDERATION 1) Consideration must always be provided at the desire of the promisor. [Durga Prasad v. Baldeo ] 2It may be pro vided by the promisee or any other person. [Chinnaya v. Ramayya Hit may be past ,present or future. 4t need fot be adequate. /t must be of some value in the eyes of law. Sit must be real, certainand possible. (Harvey Vs Gibbons) (Stilk Vs Myrick). Ot ust not be illegal, immoral or opposed to public policy . aContract without consideration is void - Exceptions » Love & affection (Venkataswamy Vs Rangaswamy) » Compensation for voluntary service » Promise to pay a time - barred debt » Completed gift » No consideration is necessary to create an Agency » Charity (Kedarnath v. Gauri Mohamed ) (Abdul Aziz Vs Masum Ali) » Guarantee by surety aSTRANGER TO CONTRACT It is general rule of contract that only parties to contract can sue & be sued on that contract. This rule is known as ‘Doctrine of privity’ i.e relationship between the parties to contract. (Dunlop Pneumatic Tyre Co. Vs Selfridge and Co Ltd) Exceptions 1)A trust or a charge 2)Marriage settlement, partition or other family arrangements .(Shubbu ammal Vs Subramaniyam) 3) Estoppel (Acknowledgement) 4)Assignment of contract . 5)Contract with agent. il running with land .Capacity to contract Following are the condition for a person to enter into contract » He must be major » He must be sound mind » He must not be disqualified by any other law. _Disqualified persons to enter into a contract a) Minor ») unsound person ° others ie alien enemy, insolvent, convict, company/corporationagainst MOA / AOA. aMinor » According to Indian majority act sec(3) minor is defined as any person under the age of 18 years .In the following cases a person is said to be minor if he does not complete the age of 21 years a) any person under the guardian & wards act,1890 bj)any person who comes under superintendence of law/legal representative. —Rules governing minors agreement » Rule 1: judges are counsellors , jury is the servant, law is the guardian. » Rule 2:in case minor entered into a contract which is unlawful, illegal , immoral he is also prosecutable & punishable under the relevant law. aLegal rules » An agreement with minor is void ab initio and he is not liable to return the benefits received under a void agreement. [Mohiri Bibi v. Dharmadas Ghase] » Minor can be a beneficiary [Abdul Gaffar Vs Prem piar lal] » Minor cannot ratify his agreement on attaining the age of majority (Smith Vs King) » He can enter into contract for his necessary [Robert v. Gray ] » Minor can bea shareholder » Minor cannot act as a partner » Minor can act as an agent » A Minor is liable for punishment for criminal offences.Unsound person » According to sec(12) a person generally sound , occasionally unsound can enter into a contract when he of sound mind » A person generally unsound occasionally sound can enter onto contract when he is sound mind. Persons of unsound mind: 1)Lunatic , 2)Idiots , 3)Drunken or intoxicated persons. aA person is said to be of a sound mind for the purpose of making a contract, if ,at the time when he makes, he is capable of understanding it and forming a rational judgment as to its effect upon his interests. Lunatic: A lunatic suffers from intermittent conditions of sanity and insanity. Idiot: An idiot does not possess understanding power at all. It is a permanent condition and the contract is void. Drunken Person: When a person is drunk he losses his capacity to form a rational judgment during that time.Other persons disqualified from contracting » Alien Enemies- One whose country is at war with India. » Foreign Ambassadors- They are representatives of foreign countries. They can enter into a contract but legal action can be taken only with permission of CG. » Convicts- Convict is a person in jail. » Insolvents- A person whose debts are more than his assets. His property will come in to the possession of the official receiver.FREE CONSENT Sec 13 defines “consent” as “Two or more persons are said to consent when they agree upon the same thing in the same sense”. According to Sec 14, consent is said to be free when it is not caused by: 1.Coercion 2.Undue influence 3.Fraud 4.Misrepresentation 5.Mistake aCOERCION According to Sec 15 coercion means “Committing or threaten to commit any act forbidden by Indian Penal Code 1860 or unlawful detaining or threating to detaining any other persons property with a view to enter into an agreement. It is immaterial whether the IPC is or is not in force where the coercion is employed” The threat amounting to coercion need not necessarily be from a party to contract , it may also proceed from a stranger to the contract. aConsent is said to be caused by coercion when obtained by: 1.The committing or threatening to commit any act forbidden by the Indian Penal Code 2.The unlawful detaining or threatening to detain any property. Chikkim Ammiraju vs. Seshamma: In this case a person threatened his wife and son that he would suicide if she doesn’t transfer her property in his brother’s favour. The wife and son executed the release of the deed under the threat . Held the threat of suicide amounted to coercion within Sec 15 and the release deed was therefore voidable. This also is a very important case to prove that threat to commit suicide amounts to coercion. janayakamma vs. Alwar Setty:» 3.Muthia vs. Muthu Karuppa: An agent refused to hand over the account books of a business to the new agent unless the principal released him from all liabilities. The principal had to give a release deed. held the deed was_ given under coercion and was voidable at the option of the principal. aUNDUE INFLUENCE Sometimes a party is compelled to enter into a contract against his will as a result of unfair persuasion by the other party. Section 16 defines undue influence as follows A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other _Essentials of undue influence 1. There are two persons 2. The relations are satisfying between them 3. One must dominate the other 4 5. There must be unfair advantage It involves the moral pressure There is an undue influence between the following persons: -Principal and agent -Superior and and subordinate - Doctor and patient Father and son Teacher and student Promoter and company Master and servant - Spiritual advisor and devotee a» Among the following relations there is no undue influence 1.wife and husband 2.landlord and tenant 3.debtor and creditor CASE: Raniannapurna vs. Swaminathan A poor Hindu widow was persuaded by a money lender to agree to pay 100% rate of interest on money lent by him. She needed the money to establish her right to maintenance. It was a clear case of undue influence and the court reduced the rate of interest to 24%. » Mannu Singh Vs Umadat Pandey eo Vs Prithi SinghCoercion Undue Influence Law does not presume coercion Law presumes coercion under under any circumstances. some circumstances. It may be exercised bya stranger It is exercised only by a party to to a contract. the contract. It involves threat to one’s life or It involves the use of one’s property. position to advantage It amounts to commission of crime It does not amount to commission punishable under IPC. of crime punishable under IPCFRAUD According to Sec 17 fraud means and includes any of those acts committed by a party to contract or with his connivance or by his agent with an intent to deceive or induce a person to enter a contract. 1. The suggestion that a fact is true when it is not true and the person making it does not believe in it to be true 2. The active concealment of a fact by a person having knowledge or belief of the fact. 3. A promise made without any intention of performing it 4. Any other act fitted to deceive 5. Any such act or omission as the law i Y declares to be fraudulentThe essentials of fraud are: 1. There must be a representation or assertion and it must be false. 2.The representation must relate to a fact. 3.The representation must have been made with the intention of inducing the other party to act upon it. 4.The representation must have been made with a knowledge of its falsity. 5.The other party must have subsequently suffered some loss aWhat can the affected party do? » He can rescind the contract and he has to exercise the right of recession within a reasonable time. » He can insist on the performance of the contract upon the condition that he is put in the position in which he would have been had the representation be true. » He can claim damages.Right of rescission is not available if » where the affected party had the means of discovering the truth by ordinary diligence. » Where the party after becoming aware of fraud takes benefit under the contract. (Long Vs Lloyd). » Where before the contract is rescinded by affected party, a third party acquires interest in the subject matter. » Where the parties cannot be restored to their es inal position.MISREPRESENTATION According to Sec 18 there is misrepresentation: When a person positively asserts a fact is true when his information does not warrant it to be so, though he believes it to be true. When there is any Breach of duty by a person which brings an advantage to the person committing it by misleading another to his prejudice When a party causes however innocently the other party to the agreement to make a mistake as to the substance of the thing which is the subject of the agreementMisrepresentation is a false representation of fact made by a party to an agreement with out any intention to deceive the other party. Derry vs Peek Essentials of Misrepresentation: 1. There must be a representation or assertion and it must be false and his intention is not to deceive the other party. 2.The representation must relate to a fact. 3.The representation must have been made with the intention of inducing the other party to act upon it. 4.The person making it should honestly believe it to be true. 5.The other party must have subsequently sufferedWhat can the affected party do? » He can rescind the contract. » He can insist on the performance of the contract upon the condition that he is put in the position in which he would have been had the representation be true. aanRight of rescission is not available if » where the affected party had the means of discovering the truth by ordinary diligence. » Where the party after becoming aware of misrepresentation takes benefit under the contract. » Where before the contract is rescinded by affected party, a third party acquires interest in the subject matter » Where the parties cannot be restored to their ers inal position.Mistake » Mistake can be defined as “ an incorrect idea or opinion about something. Types of Mistake: 1) Mistake of Law a) Indian Law - Ignorance of law is no excuse. b) Foreign Law- Void 2) Mistake of Fact a) Bilateral Mistake b) Unilateral MistakeBilateral Mistake: According to section 20, where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. Bilateral Mistake as to the subject matter: 1. Mistake as to the very existence of the subject matter. 2. Mistake as to the identity of the subject matter. 3. Mistake as to the quality of the subject matter. 4. Mistake as to the quantity of the subject matter. 5. Mistake as to the title of the subject matter ( Cooper Vs Phibbs) 6. Mistake as to the price of the subject matter ( lebster Vs Cecil)Bilateral mistake as to the possibility of performing the contract: 1.Physical Impossibility 2. Legal Impossibility Unilateral Mistake: When one of the parties to the contract is under a mistake as to the matter of fact, it is known as unilateral mistake. A contract is not voidable merely because it was caused by one of the parties to it being under a mistake,Exceptions » When there is a mistake as to the identity of the person contracted with. ( Sowler Vs Potter) » When there is a mistake as to the nature of the contract. (Foster Vs Mackinnon) aAgreement with unlawful object According to section 23, The object of the agreement is lawful unless “it is forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law or is fraudulent or it involves or implies injury to the person or property of another or the court regards it as immoral or opposed to public policy. Every agreement of which the object or consideration is unlawful is void. a» Forbidden by law- Giving bribe to get a job, selling pirated movie cds. » Defeats the provision of any law- Ramamurthy Vs Goppayya » If it is fraudulent - Swindling the public money » If it involves or implies harm to the person or property - Ramsaroop vs Bansi Mandar » If the court regards it as immoral- Baivijli Vs Nansa Nagar » If the court regards it as opposed to public policy- black marketing, adulteration, agreement with alien enemy.Unlawful Agreement » An agreement in restraint of marriage. » An agreement in restraint of trade. » An agreement in restraint of legal proceeding. aWager Contract (Sec 30) A wager contract is a contract in which one person promises to another to pay money or money’s worth by the happening of an uncertain future event in consideration for other person’s promise to pay if the event does not happen. aEssential Elements of Wagering >» There are two persons. » There must be an uncertain future event. » No control over the event by both the parties. » There must be a reciprocal promise. » Others are not interested in the contract. In a wrestling bout, A tells B that wrestler no.1 will win. B challenges the statement of A. They bet with each other over the result of the bout. This is a wagering agreement. —Contingent Contract(sec 31) A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. It is also called a conditional contract. Essential Elements of a Contingent Contract: » There are two persons. » There must be an uncertain future event. » Some control over the event but not absolute control. » There is no reciprocal promise between the persons. » Others may be interested in the contract. » It is a valid contract. _Rules Regarding Contingent Contracts » Contingent contracts dependent on happening of an uncertain future event cannot be enforced until the event has happened.( Sec 32 ) » Where a contingent contracts is to be performed if a particular event does not’ happen, _ its performance can be enforced when the happening of that event becomes impossible.( Sec 33 ) If a contract is ener upon how a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.( Sec j 34)Rules Regarding Contingent Contracts » Contingent contracts to do or not to do anything, if a specified uncertain event does not happen within a fixed time, may be enforced if the event does not happen or its happening becomes impossible before the expiry of that time.( Sec 35 ) A Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether or not the fact is known to the parties. (Sec 36) aDifferences Between a Wagering Agreement and a Contingent Agreement: » Wager agreement » There is a reciprocal promise. » It is a void contract. » Others are not interested in the contract. » It is contingent in nature. Contingent agreement » There is no reciprocal promise. » It is a valid contract. » Others are interested in the contract. » It may not be wagering in nature. _DISCHARGE OF A CONTRACT » DISCHARGE BY PERFORMANCE » DISCHARGE BY AGREEMENT OR CONSENT » DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE » DISCHARGE BY LAPSE OF TIME » DISCHARGE BY OPERATION OF LAW » DISHARGE BY BREACH OF CONTRACT aPerformance of Contract ACTUAL PERFORMANCE When both parties perform their promises & there is nothing remaining to perform. ATTEMPTED PERFORMANCE : When the promisor offers to perform his obligation but promisee refuses to accept the performance. It is also known as tender. Conditions of Performance: » Unconditional: It is made as per the terms of contract. » Proper Time: It is performed within the stipulated time or during business hours. » Proper Place: Stipulated place or promisee’s place of business » Opportunity to examine: the whole obligation:Persons who must perform the contract » Promisor Himself » A person authorized by promisor » Legal Representative » Third Person » Joint Promisors aDevolution of Joint Liabilities » Devolution means transfer or passing over from one person to another. According to section 42, when a joint promisor dies his legal representatives must fulfill the promise jointly with the surviving promisor. According to section 43, When two or more persons make a joint promise, the promisee may in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise. a»When one of the joint promisors alone performs the whole of the promise, he may claim an equal contribution from the other joint promisors. » If any one of the joint promisors makes default in paying contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. —Devolution of joint rights When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, all such joint promisees can claim performance. If any of the joint promisees die, his legal representatives along with surviving joint promisees can claim performance. A, in consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B's representative jointly with C during C's life, and after the death of C with the representatives C jointly.Time and Place of Performance 1. where by the contract, a promisor is to perform his promise without the application by the promisee and no time for performance is specified, the promise must be performed within a reasonable time. 2. where a promise is to be performed on a certain day and the promisor has undertaken to perform with out the application by the promisee, the promisor may perform any time during usual hours of business and at the place at which promise ought to be performed.» where a promise is to be performed on a certain day and the promisor has _ not undertaken to perform without the application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business. » When a promise is to be performed without application by the promisee and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to fix a reasonable place of the promise. The performance of any promise may be made in any manner or at any time which the promisee prescribes or sanctions. aReciprocal Promises According to section 2(f), “ promises which form the consideration or part of the consideration for each other are called reciprocal promises. Rules regarding performance of reciprocal promises: » when a contract consists of reciprocal promises to be simultaneously performed, the promisor need not perform his promise unless the promisee is ready and willing to . perform his reciprocal promise.a Where the order in which the reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order. When a contract contains reciprocal promises and One party to the contract prevents the other from performing, the contract becomes voidable. where the nature of the reciprocal promises are such that one of them cannot be performed till the other party performs and if the other party fails to perform, he cannot claim from the first party and he has to compensate the first party for any loss sustained.Time as an essential factor in contract » when time is an important part of the contract, failure to perform makes the contract voidable. » when time is not an important part of the contract, failure to perform does not make the contract voidable but the promisee is entitled for compensation for any loss. aAppropriation of Payments > Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment if accepted, must be applied accordingly. Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him by the debtor whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits. Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of eac! proportionately.Assignment of Contract It refers to transferring one’s contractual rights and liabilities under a contract to a third party. It may take place due to- » By the act of parties. - Assignment of contractual obligations - Assignment of contractual rights » By operation of law. aAssignment of contractual obligation » Contractual obligation involving personal skill or ability cannot be assigned. » The promisor cannot compel the promisee to accept any other as being liable on the promise. Assignment of contractual rights: » The rights and benefits under a contract not involving personal skill can be assigned subject to all equities between the parties. Assignment by operation of law: » Death of a party- pass on to the legal heirs. Insolvency of a party- pass on to the official or receiver.DISCHARGE BY AGREEMENT OR CONSENT » NOVATION (Sec 62): New contract substituted for old contract with the same or different parties. RESCISSION (Sec 62) : Cancellation of contract by mutual consent or by the failure of one of the parties to perform. ALTERATION (Sec 62):When one or more terms of a contract is/are altered by the mutual consent of the parties to the contract REMISSION (Sec 63) : Acceptance of a lesser fulfilment of the promise made. » WAIVER : Not to insist on certain obligations of a person arising out of the contract » MERGER :When an inferior right accruing to a party to contract merges into a superior right accruing to theDISCHARGE BY IMPOSSIBILITY OF PERFORMANCE » KNOWN TO PARTIES- Void ab initio » UNKNOWN TO PARTIES- Void on the ground of mutual mistake. » When the’ promisor alone knows _ the impossibilty- compensate the loss suffered by the promisee. » SUPERVENNING IMPOSSIBILITY (Sec 56)- Impossibility subsequent to the formation of the contract. Destruction of subject matter Non-existance of state of things Death or incapacity of personal services Change of law , Outbreak of warDISCHARGE BY OPERATION OF LAW «DEATH + MERGER + INSOLVENCY «UNAUTHORISED ALTERATION OF THE TERMS OF A WRITTEN AGREEMENT + RIGHTS & LIABILITIES VESTING IN THE SAME PERSON —DISCHARGE BY BREACH OF CONTRACT + ACTUAL BREACH : . At the time of performance During the performance + ANTICIPATORY BREACH - party to the contact declares his intention not pertorm before the performance is due. By the act of promisor (implied repudiation) By renunciation of obligation (express repudiation) _DISCHARGE BYLAPSE OF TIME THE LIMITATION ACT 1963, CLEARLY STATES THAT A CONTRACT SHOULD BE PERFORMED WITHIN A SPECIFIED TIME CALLED PERIOD OF LIMITATION. IF IT IS NOT PERFORMED AND IF THE PROMISEE TAKES NO ACTION WITHIN THE LIMITATION TIME, THEN HE IS DEPRIVED OF HIS REMEDY AT LAW aREMEDIES FOR BREACH OF CONTRACT A remedy is a means given by law for th enforcement of a right Following are the remedies Ls wu npwn Rescission Damages Suit upon quantum meruit. Suit for specific performance. Suit for injunction. aRESCISSION When a contract is broken by one party, the other party may sue to treat the contract as rescinded and refuse further performance. In such case, the is absolved of all his obligations under the contract. The court may give rescission due to 1)contract is voidable.2)contract is unlawful The court may refuse to rescind if 1)Plaintiff has ratified the contract. 2)Parties cannot be restored to the original position. 3)The third party has acquired for value. > only a part is sought to be rescinded.DAMAGES » Damages are a monetary compensation allowed to the injured party by the court for the loss or injury suffered by him by the breech of the contract. » The objective of awarding damages for the breech of contract is to put the injured party in the same position as if he had not been injured. » This is called the doctrine of restitution. The fundamental basis is awarding damages for the pecuniary loss. aTypes of Damages Ordinary Damages: The damages that arise naturally in the usual course of business. Special Damages: The damages that the parties to the contract know, when they enter in to a contract and the loss are the result of the breach. (Simpsons Vs London and N.W. Rail co.) Vindictive Damages: - Breach of promise to marry - Wrongful dishonour of cheque by bank (I.V.Rajagopal Vs Canara Bank) Nominal Damages: Damages awarded to the affected party who has not actually suffered any loss due to the breach. (Brace Vs Calder) Damages for inconvenience and Discomfort y Damages for loss of reputationQUANTUM MERUIT The phrase quantum meruit literally means ‘as much as earned’. It means payment in proportion to the amount of work done. » When a contract becomes void » When a person does something without any intention to do so gratuitously. » When there is no specific agreement as to remuneration » When one party is prevented from completing the task. (Planchet Vs Colburn) » When the contract is divisible When an indivisible contract is fully but badly performed.SPECIFIC PERFORMANCE In certain cases of breach of contract damages are not an adequate remedy. The court may, in such cases, direct the party in breach to carry out his promise according to terms of the contract. This is a direction by the court for specific performance of the contract at the suit of the party not in breach Cases for specific performance to be enforced l1)when the act agreed to be done is such that compensation is not adequate relief. 2)when there is no standard for ascertaining the actual damage 3)when it is probable that compensation cannot be agreed to be done.INJUNCTION Injunction is an order of the court preventing a person from doing a particular act. It is also called a stay order. (Warner Bros Vs Nelson) Quasi Contract: A quasi contract is not a contract entered into intentionally by the parties. It is an obligation created by law on a person in the absence of any agreement. _TYPES OF QUASI CONTRACTS ° Supply of necessaries (Sec 68) ° Payment by a interested person (Sec 69) ° Obligation to pay for non gratuitous acts (Sec 70 ) ° Responsibility of finder of goods (Sec 71) aanSUPPLY OF NECESSARIES According to sec 68 a minor is liable to pay out of his property for ‘necessaries’ supplied to him or to anyone whom he is legally bound to support. The significance of this is that it does not arise out of a contract as much so as it arises out of a contract. The minor is not personally liable and ‘necessaries’ include food clothing as well as education, They also include watch bicycle etc. aOBLIGATION TO PAY FOR NON GRATUITOUS ACTS According to Sec 70 when a person lawfully does or delivers anything for the other ,not intending to do so gratuitously, and the person derives any benefit from it, he is liable to compensate, or restore the thing so done or delivered. Here three conditions must satisfy [1] The thing must have been done lawfully [2] The person intending to do it must not have done it gratuitously [3] The person must have derived benefit from the act aPAYMENT BY A INTERESTED PERSON According to Sec 69 a person who is interested in the payment of money which another is bound by law to pay,and who therefore pays it, is entitled to be reimbursed by the other. The essential elements center around [1] The payment made should be bona fide of ones interest [2] The payment should not be a voluntary one [3] The payment must be such that the other is bound by law to pay anRESPONSIBILITY OF THE FINDER OF GOODS According to Sec 71 a person who finds goods belonging to another and takes them into his custody is subject to the same responsibility as the bailee is bound to take as much care of the goods as a man of ordinary prudence would, In addition to that he must make efforts to trace the owner. If he does not he will be guilty of wrong conversation, and till the owner is foun out the property will vest with the finder. He can sell in case of [1] goods are perishable in nature [2] owner cannot be found out [3] when owner refuses to pay for the lawful charges [4] when the lawful charges amount to two thirds P ing.INDEMNITY (Sec 124) A CONTRACT BY WHICH ONE PARTY PROMISES TO ANOTHER TO SAVE HIM FROM LOSS CAUSED TO HIM BY THE CONDUCT OF THE PROMISOR HIMSELF , OR BY THE CONDUCT OF ANY OTHER PERSON IS CALLED A CONTRACT OF INDEMNITY aESSENTIAL FEATURES OF INDEMNITY v There are two persons , the indemnifier the indemnified or the indemnity holder v There must be loss either by the promisor’s conduct or by any other person’s conduct vIt is a contingent contract by nature v It may be express or implied Sec125 deals with the commencement of the indemnifier’s liability. His liability commences when the event causing the loss occurs or when the event saving the indemnified y from the loss becomes impossibleGUARANTEE (Sec 126) A CONTRACT OF GUARANTEE IS A CONTRACT TO PERFORM THE PROMISE, OR DISCHARGE THE LIABILITY,OF A THIRD PERSON IN CASE OF HIS DEFAULT. THE PERSON WHO GIVES THE GUARANTEE IS KNOWN AS_ THE ‘SURETY’, THE PERSON IN RESPECT OF WHOM THE GUARANTEE IS GIVEN IS KNOWN AS THE ‘PRINCIPAL DEBTOR’, AND THE PERSON TO WHOM THE GUARANTEE IS GIVEN IS CALLED THE ‘CREDITOR’. A GUARANTEE MAY BE EITHER ORAL OR WRITTEN. aESSENTIAL FEATURES OF GUARANTEE » Concurrence of three contracts » Primary liability is that of the principal debtor » In case the debtor is a minor , the surety’s liability becomes primary » All the essentials of a valid contract » It may be in writing or oral » There need not be full disclosure of facts to the surety before he gives the guarantee aTYPES OF GUARANTEE » SPECIFIC GUARANTEE : When a guarantee extends to a single transaction or debt it is known as a specific or simple guarantee » CONTINUING GUARANTEE : When a guarantee extends to a series of transactions It is called continuing guarantee _