1Prof.Madhura Tilak   1
Prof.Madhura TilakProf.Madhura Tilak                    2
Section 2(h)“An agreement enforceable by law is acontract”.Thus,Contract = Agreement + Enforceability atLaw               ...
   Section 2(e)       Promise/(s)                        Promise/(s)                                                   = ...
Section 2(b) Promise = Proposal/Offer + AcceptanceProposal? Section 2(a) Expression of willingness With a view to seek the...
Section 2(b)Giving of assent to the proposal.Enforceability by LawAgreements which are notenforceableIllegal/unlawful agre...
e.g.Agreement with or by a minorAgreement in restraint of tradeMarriage brokerage contractWagering/Betting Agreements ...
From the point of view ofEnforceability   Void   Voidable   Valid                                    8           Prof.M...
   Void Agreement    i.e., void-ab-initio i.e. unenforceable from    the very beginning    Becomes void (Void Contract) ...
Section 10     To be a valid contract, it must satisfy the     following:1.   Offer and Acceptance2.   Consensus-ad-idem (...
4.   Free and Genuine Consent, i.e., free from      coercion      undue influence      fraud      misrepresentation   ...
(‘Object’ and ‘Consideration’ usuallyoverlap. However, there may be differenceat times e.g., object may be to killcompetit...
7.   Agreement not declared void.8.   Certainty of Meaning: e.g. sale     and purchase of 100 tonnes of oil.     But which...
9.   Possibility of performance:    Impossibility whether known to the    parties or not, renders a contract    invalid.10...
Void Agreement Illegal Agreement1. Unenforceable 1. Unenforceable2. Not Punishable 2. Punishable (fine or3. Collateral    ...
   Specific Offer:    made  to a specified person or a group     of persons.    can be accepted only by the person     ...
   General Offer:    which  is not a specific offer.    made to the world at large.    can be accepted by anyone by   ...
   Illustrations of Invitation to Offer:    Prospectus  issued by a college.    Prospectus issued by a company.    Inv...
Examples: Dry cleaner’s receipt, courier’s  receipt, shipment receipt, insurance policy,  etc. Binding if communicated or...
   Cross Offers    Identical offers cross each other and none of    the parties is aware of the same. Doesn’t    result i...
   Communication of Offer    is complete when the offeree has    the knowledge of the same.   Communication of Acceptanc...
   Communication is complete as soon as a duly    addressed letter of acceptance is put into    the course of transmissio...
   Communication of revocation (of    offer or acceptance) is complete:    As against the person who makes it     when i...
   Comparing ‘offer’ to a ‘train of    gunpowder’ and ‘acceptance’ to a    ‘lighted match stick’ – How far    correct?  ...
Capacity to Contract means competence of parties    to enter into a valid contract.An agreement is valid contract if it is...
1.1 Who is minor?A minor is a person who has not completed    eighteen years of age.In the following two cases, he attains...
1.2 Fundamental rules governing Minor’s    agreements:1. To protect minors again their own    inexperience as against the ...
1.3: Legal position of Minors Agreements: 1. An agreement with or by minor is void and    inoperative i.e. void ab initio....
5. He can always plead minority.- Even if by misrepresenting his age, he  induced other party to contract with him. He  ca...
6. There can be no specific performance of the  agreements entered in to by him as they are  void ab initio.A contract ent...
7. He cannot enter in to a contract of  partnership. But he may be admitted for the  benefit of an already existing partne...
Even in such cases it is only the property of the  minor which is liable for meeting the liability  arising out of such co...
Necessaries include:1.Necessary of Goods.2. Services Rendered which include education,    training for a trade, medical ad...
10. He can be an agent.11. His parents/guardian are/is not liable for  the contract entered in to by him.12. A minor is li...
2.1 Who can be considered as Persons of Sound  mind?A person is said to be of sound mind for the  purpose of making a cont...
2.2 Who can be considered as Persons of    Unsound mind?There are two categories:1. A person who is always in the state of...
A person who is usually of sound mind, but  occasionally of unsound mind may not make  a contract when he is of unsound mi...
2.4 Agreements entered in to by persons of  unsound mind are void.2.5 The persons of unsound mind are liable for  necessit...
1. Alien enemies: Contracts with alien enemy  may be studied under the two heads:- Contracts during the war: During contin...
Contracts made before the war: may either be  suspended or dissolved. They will be  dissolved if they are against the publ...
An Indian citizen has to obtain a prior sanction   of the central government in order to sue   them in our law courts.3. C...
Corporations cannot enter in to contracts of a  strictly personal nature as it is an artificial  and not a natural person....
It is only the official receiver or official assignee   who can enter in to contracts relating to his   property and sue a...
1. What is Consent?It means an act of assenting to an offer. Two or    more persons are said to consent when they    agree...
3.3 Effect of Coercion: When the consent to an  agreement is caused by coercion, fraud or  misrepresentation, the agreemen...
3. Coercion:3.1 Meaning: When a person is compelled to enter  in to a contract by use of force by other party or  under a ...
4. Undue influence:4.1: Meaning: A contract is said to be induced by  undue influence where the relations subsisting  betw...
A person is deemed to be in a position to    dominate the will of the another:1. Where he holds a real or apparent authori...
4.3: Effect of undue influence: When consent  to an agreement is obtained by undue  influence, the agreement is a contract...
1.   Parent and Child.2.   Guardian and Ward.3.   Trustee and Beneficiary.4.   Religious advisor and disciple.5.   Doctor ...
4.5: There is however no presumption of undue      influence in the relationship of1. Landlord and Tenant.2. Creditor and ...
4.7: For proving undue influence, the plaintiff    has to prove that:1.The other party was in a position to    dominate hi...
4.8: The presumption of undue influence can    be rebutted by showing that:1.Full disclosure of facts was made.2.The price...
5. Misrepresentation and Fraud:5.1: What is representation?A statement of fact which one party makes in the   course negot...
5.2: What is misrepresentation?A representation, which wrongly made,  innocently, is misrepresentation.5.3: What is Fraud?...
1. It must be a representation of a material    fact.2. It must be made before the conclusion of    the contract with a vi...
5. It must be wrong but the person who made  it believed it to be true.6. It must be made without intention to  deceive th...
5.5: Consequences of misrepresentation:The aggrieved party, in the case of    misrepresentation by the other party can:1.a...
5.6: Fraud: Fraud exists when it is known that:1.a false representation has been made- Knowingly or- Without belief in its...
2. There is concealment of a material fact or  there is a partial statement of fact in such a  manner withholding of what ...
5.7 Essential Elements of Fraud:1.There must be a representation or assertion    and it must be false.2. The representatio...
4. The representation of a statement must have  been made with a knowledge of its falsity or  without belief in its truth ...
5.8: Consequences of fraud: A contract  induced by the fraud is voidable at the  option of the party defrauded. The party ...
2. He can insist on performance of the  contract on the condition that he shall be  put in the position in which he would ...
5.9: Loss of right of recession of contract in case of    either misrepresentation or fraud:The aggrieved party loses righ...
3. If a third party has acquired rights in the  subject matter of the contract in good faith  and for value.5.10: Exceptio...
1. When the consent of the party to a contract was    caused by misrepresentation or fraud and that    other party could d...
5.11: Effects of Silence as to facts:The general rule is that a person before  entering in to a contract need not disclose...
1.   Where the circumstances of the case are     such that, regard being had to them, it is     the duty of the person kee...
5.13 Distinction between fraud and   misrepresentation:The distinction can be discussed under   following heads:1. Intenti...
1.1: Meaning : Mistake may be defined as    erroneous belief about something.1.2: Types of Mistakes:- A mistake of law.-A ...
- Mistake of fact is categorized as follows:1. A Bilateral Mistake2. A Unilateral Mistake1.3: Bilateral Mistakes: Where bo...
The followings are conditions of bilateral    mistakes:1. The mistake must be mutual.2. The mistake must relate to a matte...
(i) Mistake as to the existence of the subject   matter.(ii) Mistake as to the identity of the subject   matter.(iii) Mist...
2. Mistake as to the possibility of performing   the contract:Impossibility may be:(i). Physical impossibility.(ii). Legal...
1.4: Unilateral Mistakes: When in a contract,  only one of the parties is mistaken regarding  the subject matter or in exp...
There are exceptions to this rule. In the   following cases, even though there is a   unilateral mistake, the agreement is...
1.1: When performance of a contract takes  place?Performance of a contract takes place when  parties to the contract fulfi...
1.2: What is an offer to perform?:Attempted performance or tender is an offer of   performance by the promisor in accordan...
1.3: Requisites of a Valid tender:1.  It must be unconditional.2.  It must be the whole quantity contracted for or    of t...
5. It must be made to proper person, that is, the  promisee or his duly authorized agent. It must  also be in proper form....
1.4: Reciprocal promises:Promises which form the consideration or the    part of consideration for each other are    calle...
1.5: Rules regarding performance of reciprocal    promises:1.  When reciprocal promises have to be    simultaneously perfo...
Further he is entitled to compensation from  the other party for any loss he may sustain in  consequence of the non-perfor...
1.6: By whom must contract be performed?:1. By promisor himself.2. By agent.3. By legal representatives – in case of death...
If any one of them dies, his legal   representative must, jointly with surviving   promisors, fulfill the promise. If all ...
When a person has made a promise to several persons, then, unless a contrary intention appears from the contract, the righ...
 1.8: Time and place of performance: Time and place of performance of a contract  are matters to be determined by the  a...
1.When time is of the essence: Eg.In a contract for purchase of tyres for the  car manufacturer to be supplies within two...
1.9: Time as the essence of contract:Time for the performance of a contract may be  fixed in the contract itself. In that ...
Time may be made the essence of a contract  by a subsequent notice.Any subsequent notice making time as the  essence of th...
   When a debtor owes several distinct debts to    a creditor and makes a payment insufficient    to satisfy the whole in...
   2.Where the debtor does not intimate and    circumstances are not indicative(sec 60),the    creditor may apply it at h...
Appropriation of payments:(to conclude)The debtor has, at the time of payment, right of  choice of appropriating the payme...
Whether a part payment should be treated towards principle or interest?On this question, the general principle, subject to...
1.11: Assignment of Contracts: To “Assign” means to” transfer”.   Assignment of a contract means transfer of    contractua...
1. Contracts involving personal skill or ability or    personal qualifications cannot be assigned.2. A promisor cannot ass...
2. Operation of law:This takes place in the case of death or insolvency  of a party to the contract.(a)Death(b)InsolvencyU...
1.12: Effect of refusal of a party to perform   promise wholly:1. When party to a contract refuses to   perform, or disabl...
2. When promisee puts an end to a contract,  being rightly entitled to do so, it shall be  deemed as if he has rescinded a...
1.13: Contracts which need not be performed:A contract need not be performed:1.When its performance becomes impossible.2. ...
4. When the person at whose option it is  voidable rescinds it.5. When the promisee neglects or refuses to  afford promiso...
1.1: Meaning: Discharge of contract means  termination of the contractual relationship  between the parties.A contract is ...
1.2: A contract may be discharged-1. By performance.2. By agreement or consent.3. By impossibility.4. By lapse of time.5. ...
1. Performance:-  Actual performance.-  Attempted performance,Implied consent may by any of these forms.               Pro...
2. By agreement or consent:-   By express consent.-   By implied consent:-   A.Novation-   B.Rescission-   C.Alteration-  ...
   1. Discharge by Performance:   Performance means doing of that which is    required by contract.   Discharge by perf...
   It may be:   1.Actual performance:When both parties    perform their promises the contract is    discharged.Performan...
   2.Attempted performance and Tender:   Tender is not actual performance but is an    only an offer to perform the obli...
(a). Novation: Novation takes place when:- A new contract is substituted for an existing  one between the same parties. or...
(b). Recession: Recession of a contract takes   place when all or some of the terms of the   contract are cancelled. It ma...
Mode of communicating or revoking recession:Same rules as apply to the communication of  revocation of a proposal.Any bene...
(c). Alteration: Alteration of a contract may  take place when one or more of the terms of  the contract is/are altered by...
(e). Waiver: Waiver takes place when parties  to a contract agree that they shall not be  bound by the contract. This amou...
3. Discharge by impossibility of performance:If an agreement contains an undertaking to   perform an impossibility, it is ...
1.  Impossibility existing at the time of    agreement:This is known as pre-contractual or initial    impossibility.This c...
ii. Unknown to parties.If at the time of making the contract, both the   parties are ignorant of the impossibility, the   ...
2. Impossibility arising subsequent to the formation  of the contract: Impossibility which arises  subsequent to the forma...
1.   Destruction of a subject-matter of     contract.2.   Non-existence or non-occurrence of a     particular state of thi...
3.1: Impossibility of performance- not an excuse:‘Impossibility of performance is, as a rule, not an  excuse for non-perfo...
1.   Difficulty of performance.2.   Commercial impossibility.3.   Impossibility due to failure of a third     person.4.   ...
3.2: Effects of supervening impossibility:1.  When the performance of a contract becomes    impossible or unlawful subsequ...
3.Where agreement is discovered to be void,  or when a contract becomes void, any person  who has received any advantage u...
4. Discharge by lapse of time: The Limitation  Act, 1963 lays down that a contract should  be performed within a specified...
5. Discharge by operation of law: A contract may  be discharged independently of the wishes of the  parties i.e. operation...
6. Discharge by breach of Contract:Breach of contract means breaking of the  obligation which a contract imposes. It  occu...
Breach of contract may be-1. Actual breach of contract.2. Anticipatory or constructive breach of    contract.6.1 Actual Br...
This refusal to perform may be by-(a). Express repudiation (by word or act).(b). Implied repudiation ( impossibility creat...
1.  By expressly renouncing his obligation    under the contract.2. By doing some act so that the performance    of his pr...
2. He can immediately take a legal action for   breach of contract or wait till such time the   act was to be done.6.4: An...
1.   The promisor may perform his promise     when the time for its performance comes     and the promisee will be bound t...
6.5: Measure of demages in anticipatory breach of   contract:If the contract is ended by the promisee at once,   he can su...
A remedy is the means given by law for the  enforcement of a right.A contract gives rise to correlative rights and  obliga...
When a contract is broken, the injured party   (i.e. party who is not in breach) has one or   more of the following remedi...
2. Demages: Demages are monetary  compensation awarded to the injured party  by court for the loss or injury suffered by  ...
Demages u/s 73 may be of four types:1. Ordinary demages: These are demages    which actually arise in the usual course of ...
Under Section 73, Compensation is not to be   given for any remote or indirect loss or   damage. Further Section 73 does n...
2. Special damages: Damages which may  reasonably be supposed to have been in  contemplation of both the parties at the  t...
3. Vindictive or exemplary damages: These  damages are allowed in case of the breach of  a contract to marry or dishonour ...
5. Liquidated damages and penalty:Liquidated damages represent a sum, fixed or  ascertained by the parties in the contract...
3. Quantum meruit: A right to sue on a  quantum meruit (as much as earned) arises  where a contract, partly performed by o...
4. Specific performance: In certain cases the court  may direct the party in breach a contract to  actually carry out the ...
Prof.Madhura Tilak   143
1.   Meaning: Consideration means something     in return. It is the price for which the     promise of the other is bough...
3.Legal rules as to consideration:1.It is essential to support every contract.2.It must move at the desire of the promisor...
4. Stranger to a Contract:The general rule is that a stranger to a contract cannot sue.Exceptions to this rule are as foll...
5. He enters into a contract through an agent.6. There are covenants running with the land.5. An agreement without conside...
2. A promise to compensate, wholly or in part,  a person who has already voluntarily done  something for the promisor.3. A...
1. An agreement is a contract if it is made for   a lawful consideration and with a lawful   object.Every agreement of whi...
3. If it is fraudulent.4. If it involves or implies injury to the person  or property of another.5. If the court regards i...
1.A Contract may be:(i). An absolute contract or(ii). A Contingent contract.An absolute contract is one in which the   pro...
2. Characteristics of contingent contract:1. Its performance depends upon the    happening or non-happening in future of  ...
3. Rules regarding contingent contracts:1.   If a contingent contract is to be performed, if     an uncertain future event...
3. If a contingent contract contemplates doing  of a thing if a specified event happens within  a fixed time, it becomes v...
1.   Meaning: In certain cases the law imposes     an obligation and allows an action to be     bought on it as if it aros...
2. Principle on the basis of which law considers     certain relations resembling those created    by contracts as Quasi-c...
3. Obligation to pay for non-gratuitous acts.4. Responsibility of Finder of the goods.5. Liability of person to whom money...
The claim for quantum meruit arises only when   the original contract is discharged. If the   original contract exists, th...
5. Compensation for failure to discharge  obligation created by quasi-contracts:When an obligation created by a quasi-cont...
Q:1.Explain the following:   (Marks)1. Void and Voidable Agreement.           (5)2. Agreement without consideration       ...
(b). When we can say that consent is not free?  (5)(c). Explain the term ‘Offer’ and “invitation to  offer” & Distinguish ...
Q.5.(a). Explain the term consideration. ‘A  stranger to consideration can sue upon the  contract’. Explain the statement ...
Q.8. Answer the following, giving reasons for   your answer.1. A lends his car to B to be driven by B only. B   allows his...
Q.9. Explain the following;(a). Void Agreement.  (4)Q.10. Define agreement and discuss the types  of agreements.  (10)Q.11...
(b). What do you know about free consent and  when the consent is not free? Explain. (10)Q.13.(a). X sold his business inc...
Q.14. X of Delhi agreed to sell 100 bales of  cotton @ Rs.1,000 per bale and to deliver  within a fortnight at buyer’s god...
(c). If goods were destroyed by fire after the  formation of agreement.(d). If war was declared between India and  Pakista...
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  • Module 1

    1. 1. 1Prof.Madhura Tilak 1
    2. 2. Prof.Madhura TilakProf.Madhura Tilak 2
    3. 3. Section 2(h)“An agreement enforceable by law is acontract”.Thus,Contract = Agreement + Enforceability atLaw 3 Prof.Madhura Tilak 3
    4. 4.  Section 2(e) Promise/(s) Promise/(s) = Agreement (in exchange for) 4 Prof.Madhura Tilak 4
    5. 5. Section 2(b) Promise = Proposal/Offer + AcceptanceProposal? Section 2(a) Expression of willingness With a view to seek the assent of the other Thus, mere expression of willingness doesn’t constitute offer/proposal. 5 Prof.Madhura Tilak 5
    6. 6. Section 2(b)Giving of assent to the proposal.Enforceability by LawAgreements which are notenforceableIllegal/unlawful agreements, e.g.,to smuggle/to killSocial Agreements (Balfour vs.Balfour) 6 Prof.Madhura Tilak 6
    7. 7. e.g.Agreement with or by a minorAgreement in restraint of tradeMarriage brokerage contractWagering/Betting Agreements 7 Prof.Madhura Tilak 7
    8. 8. From the point of view ofEnforceability Void Voidable Valid 8 Prof.Madhura Tilak 8
    9. 9.  Void Agreement i.e., void-ab-initio i.e. unenforceable from the very beginning Becomes void (Void Contract) Voidable i.e., void + able i.e., capable of being declared void (unenforceable) at the option of one of the parties to the contract but not at the option of the other. 9 Prof.Madhura Tilak 9
    10. 10. Section 10 To be a valid contract, it must satisfy the following:1. Offer and Acceptance2. Consensus-ad-idem (Meeting of minds) i.e., persons must agree to the same thing in the same sense and at the same time.3. Intention to create legal relationship as against social relationship or illegal/unlawful relationship. 10 Prof.Madhura Tilak 10
    11. 11. 4. Free and Genuine Consent, i.e., free from  coercion  undue influence  fraud  misrepresentation  mistake5. Parties competent to contract6. Lawful consideration and object, i.e., something in return and that must be lawful. 11 Prof.Madhura Tilak 11
    12. 12. (‘Object’ and ‘Consideration’ usuallyoverlap. However, there may be differenceat times e.g., object may be to killcompetition and for that purpose in view, asenior manager of the competitor may bepaid a certain amount to give unrealisticallyhigh quotation.)Here: Object is to kill competition. Consideration is : (i) payment of money (ii) giving high quotations 12 Prof.Madhura Tilak 12
    13. 13. 7. Agreement not declared void.8. Certainty of Meaning: e.g. sale and purchase of 100 tonnes of oil. But which oil? Thus, agreement being uncertain – not valid. But, if the seller deals only in one kind of oil and one variety, then it shall be valid since it is capable of being made certain. 13 Prof.Madhura Tilak 13
    14. 14. 9. Possibility of performance: Impossibility whether known to the parties or not, renders a contract invalid.10. Necessary legal formalities: e.g. sale-deed of immovable property. 14 Prof.Madhura Tilak 14
    15. 15. Void Agreement Illegal Agreement1. Unenforceable 1. Unenforceable2. Not Punishable 2. Punishable (fine or3. Collateral imprisonment or transactions both) unaffected. 3. Collateral transactions are also void. 15 Prof.Madhura Tilak 15
    16. 16.  Specific Offer: made to a specified person or a group of persons. can be accepted only by the person to whom made. Thus, if offer is addressed to ‘A’, ‘B’ cannot accept it. Case Law: Boulton vs. Jones 16 Prof.Madhura Tilak 16
    17. 17.  General Offer: which is not a specific offer. made to the world at large. can be accepted by anyone by complying with the terms of the offer. Case Law: Carlill vs. Carbolic Smoke Ball Co. 17 Prof.Madhura Tilak 17
    18. 18.  Illustrations of Invitation to Offer: Prospectus issued by a college. Prospectus issued by a company. Invitation of bids in an auction. Price-catalogues, price lists, quotations Display of goods with a price-tag in a shop window. 18 Prof.Madhura Tilak 18
    19. 19. Examples: Dry cleaner’s receipt, courier’s receipt, shipment receipt, insurance policy, etc. Binding if communicated or attention drawn to the fact that there are certain special terms and conditions. Not binding if attention is not drawn and the other party not aware of. 19 Prof.Madhura Tilak 19
    20. 20.  Cross Offers Identical offers cross each other and none of the parties is aware of the same. Doesn’t result in a contract unless one of them is accepted. Counter Offer Instead of accepting an offer, the offeree makes a counter offer, i.e., accepts the same subject to certain conditions or qualification. 20 Prof.Madhura Tilak 20
    21. 21.  Communication of Offer is complete when the offeree has the knowledge of the same. Communication of Acceptance It has two aspects, viz.,  As against the proposer  As against the acceptor 21 Prof.Madhura Tilak 21
    22. 22.  Communication is complete as soon as a duly addressed letter of acceptance is put into the course of transmission. Whether the same reaches the proposer or not.As against the acceptor Communication is complete only when the proposer has received the letter and learnt the contents thereof. 22 Prof.Madhura Tilak 22
    23. 23.  Communication of revocation (of offer or acceptance) is complete: As against the person who makes it when it is put into the course of transmission. As against the person to whom it is made, when it comes to his knowledge. 23 Prof.Madhura Tilak 23
    24. 24.  Comparing ‘offer’ to a ‘train of gunpowder’ and ‘acceptance’ to a ‘lighted match stick’ – How far correct? William Anson’s observation though valid in the English context doesn’t hold good in India since in India acceptance is revocable. 24 Prof.Madhura Tilak 24
    25. 25. Capacity to Contract means competence of parties to enter into a valid contract.An agreement is valid contract if it is entered into between the parties who are competent to contract.The following parties are incompetent to contract:1. 1.Minors. 2.Persons of Unsound mind. 3.Persons disqualified by any law to which they are subject. 25 Prof.Madhura Tilak 25
    26. 26. 1.1 Who is minor?A minor is a person who has not completed eighteen years of age.In the following two cases, he attains majority after twenty one years of age.1. Where a guardian of minor person or property has been appointed under the Guardians and Wards Act, 1890 OR2. Where the superintendence of a minor’s property is assumed by a court of wards. 26 Prof.Madhura Tilak 26
    27. 27. 1.2 Fundamental rules governing Minor’s agreements:1. To protect minors again their own inexperience as against the possible designs of those experienced.2. To avoid unnecessary hardship to persons who deal with minors. 27 Prof.Madhura Tilak 27
    28. 28. 1.3: Legal position of Minors Agreements: 1. An agreement with or by minor is void and inoperative i.e. void ab initio. 2. He can be promisee or beneficiary. 3. His agreement cannot be ratified by him on attaining the age of majority. 4. He cannot be asked to compensate or pay for any benefit received by him under void agreement. 28 Prof.Madhura Tilak 28
    29. 29. 5. He can always plead minority.- Even if by misrepresenting his age, he induced other party to contract with him. He cannot be sued either in Contract or in tort for a fraud.- If minor is still in possession of property obtained by his fraud, he will be made to restore it to its former owner. But he cannot be made to repay money which he has spent even if such money is received under a contract induced by his fraud. 29 Prof.Madhura Tilak 29
    30. 30. 6. There can be no specific performance of the agreements entered in to by him as they are void ab initio.A contract entered into on his behalf by his parent/guardian or the manager of the estate can be specifically enforced by or against the minor provided the contract is:- Within the scope of authority of the parent/guardian/manager and- For the benefit of the minor. 30 Prof.Madhura Tilak 30
    31. 31. 7. He cannot enter in to a contract of partnership. But he may be admitted for the benefit of an already existing partnership with the consent of other partners.8. He cannot be adjudged as insolvent.9. He is liable for necessaries supplied or necessary services rendered to him or any one who is legally bound to support him. 31 Prof.Madhura Tilak 31
    32. 32. Even in such cases it is only the property of the minor which is liable for meeting the liability arising out of such contracts. He is not personally liable.The term Necessaries is not defined in the Indian Contract Act. The English law defines u/s 2 of the Sale of Goods Act as goods suitable to the condition of life of such infant or other person, and to his actual requirement at the time of Sale and Delivery. 32 Prof.Madhura Tilak 32
    33. 33. Necessaries include:1.Necessary of Goods.2. Services Rendered which include education, training for a trade, medical advice.A loan taken by a minor to obtain necessaries also binds him and is recoverable by the lender as if he himself had supplied the necessaries. But minor is not personally liable. It is only his estate which is liable for such loans. 33 Prof.Madhura Tilak 33
    34. 34. 10. He can be an agent.11. His parents/guardian are/is not liable for the contract entered in to by him.12. A minor is liable for a tort (a civil wrong) if it is not arising out of a contract. 34 Prof.Madhura Tilak 34
    35. 35. 2.1 Who can be considered as Persons of Sound mind?A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effects upon his interests. 35 Prof.Madhura Tilak 35
    36. 36. 2.2 Who can be considered as Persons of Unsound mind?There are two categories:1. A person who is always in the state of unsound mind e.g. Idiot cannot enter in to valid contract.2. A person who is usually of unsound mind but occasionally of sound mind, may make a contract when he is of sound mind. 36 Prof.Madhura Tilak 36
    37. 37. A person who is usually of sound mind, but occasionally of unsound mind may not make a contract when he is of unsound mind.Lunatics, Drunken or intoxicated persons are covered under these rules.2.3 Whether a party to a contract is of sound mind or not is a question of fact to be decided by the court. There is a presumption in favor of sanity. 37 Prof.Madhura Tilak 37
    38. 38. 2.4 Agreements entered in to by persons of unsound mind are void.2.5 The persons of unsound mind are liable for necessities supplied to them or to any one to whom they are legally bound to support. But even in such cases, no personal liability attaches to them. It is only their estate which is liable. 38 Prof.Madhura Tilak 38
    39. 39. 1. Alien enemies: Contracts with alien enemy may be studied under the two heads:- Contracts during the war: During continuation of the war, alien enemy can neither contract with an Indian subject nor can he sue in an Indian court. He can do so only after he receives a license from the central government. 39 Prof.Madhura Tilak 39
    40. 40. Contracts made before the war: may either be suspended or dissolved. They will be dissolved if they are against the public policy or if their performance would benefit the enemy.2. Foreign sovereigns, their diplomatic staff and accredited representatives of foreign states.They have some special privileges and generally cannot be sued unless they of their own submit to the jurisdiction of our law courts. 40 Prof.Madhura Tilak 40
    41. 41. An Indian citizen has to obtain a prior sanction of the central government in order to sue them in our law courts.3. Corporations: A Corporation is an artificial person created by law, having a legal existence apart from its members.It may come in to existence by a special Act of legislature or by registration under the companies’ Act, 1956. 41 Prof.Madhura Tilak 41
    42. 42. Corporations cannot enter in to contracts of a strictly personal nature as it is an artificial and not a natural person.4. Insolvents: When a debtor is adjudged insolvent, his property vests in the official receiver or official assignee.As such insolvent is deprived of his power to deal in that property. 42 Prof.Madhura Tilak 42
    43. 43. It is only the official receiver or official assignee who can enter in to contracts relating to his property and sue and be sued on his behalf.5. Convicts: A convict undergoing imprisonment is incapable of entering in to a contract unless permitted lawfully.This incapacity to contract or to sue on contract comes to an end when the period of sentence expires or when he is pardoned.Law of limitation is held in abeyance during the period of his sentence. 43 Prof.Madhura Tilak 43
    44. 44. 1. What is Consent?It means an act of assenting to an offer. Two or more persons are said to consent when they agree upon the same thing in the same sense.2. What is Free Consent?Consent is said to be free when it is not caused by:1.Coercion.2. Undue influence.3. Fraud.4. Misrepresentation.5. Mistake. 44 Prof.Madhura Tilak 44
    45. 45. 3.3 Effect of Coercion: When the consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so obtained.3.4 Threat to commit suicide amounts to coercion. 45 Prof.Madhura Tilak 45
    46. 46. 3. Coercion:3.1 Meaning: When a person is compelled to enter in to a contract by use of force by other party or under a threat, coercion is said to be employed.3.2 Definition: Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, 1860 or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatsoever with the intention of causing any person to enter in to an agreement. 46 Prof.Madhura Tilak 46
    47. 47. 4. Undue influence:4.1: Meaning: A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one party is in a position to exercise undue influence over the other.4.2: Definition: 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 position to dominate the will of the other and uses that position to obtain unfair advantage over the other. 47 Prof.Madhura Tilak 47
    48. 48. A person is deemed to be in a position to dominate the will of the another:1. Where he holds a real or apparent authority over the other.2. Where he stands in fiduciary relation( relation of trust and confidence) to the other.3. Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress. 48 Prof.Madhura Tilak 48
    49. 49. 4.3: Effect of undue influence: When consent to an agreement is obtained by undue influence, the agreement is a contract voidable at the option of the party whose consent was so obtained.4.4: Relationship which raise presumption of undue influence: The following relationships usually raise a presumption of undue influence viz. 49 Prof.Madhura Tilak 49
    50. 50. 1. Parent and Child.2. Guardian and Ward.3. Trustee and Beneficiary.4. Religious advisor and disciple.5. Doctor and Patient.6. Solicitor and Client.7. Fiancé and Fiancée. 50 Prof.Madhura Tilak 50
    51. 51. 4.5: There is however no presumption of undue influence in the relationship of1. Landlord and Tenant.2. Creditor and Debtor.3. Husband and Wife.4.6: Burden of Proof: Burden of Proof that contract is entered in to by recourse to undue influence lies on a plaintiff ( Person aggrieved). 51 Prof.Madhura Tilak 51
    52. 52. 4.7: For proving undue influence, the plaintiff has to prove that:1.The other party was in a position to dominate his will.2. The other party actually used influence to obtain plaintiff’s consent to contract.3. The transaction is unreasonable. 52 Prof.Madhura Tilak 52
    53. 53. 4.8: The presumption of undue influence can be rebutted by showing that:1.Full disclosure of facts was made.2.The price was adequate.3. That the party was in receipt of independent advice.4.9: A contract with a pardanashin woman is presumed to have been induced by undue influence. 53 Prof.Madhura Tilak 53
    54. 54. 5. Misrepresentation and Fraud:5.1: What is representation?A statement of fact which one party makes in the course negotiations with a view to inducing other party to enter in to a contract is known as representation.It must relate to some fact which is material to the contract.It must be expressed by words spoken or written or implied from the acts and conduct of the parties. 54 Prof.Madhura Tilak 54
    55. 55. 5.2: What is misrepresentation?A representation, which wrongly made, innocently, is misrepresentation.5.3: What is Fraud?A representation, which wrongly made, intentionally, is fraud.5.4: Requirements of misrepresentation: The followings are the requirements of misrepresentation. 55 Prof.Madhura Tilak 55
    56. 56. 1. It must be a representation of a material fact.2. It must be made before the conclusion of the contract with a view to inducing the other party to enter in to the contract.3. It must be made with the intention that it should be acted upon by the person to whom it is addressed.4. It must have been acted upon and must have induced the contract. 56 Prof.Madhura Tilak 56
    57. 57. 5. It must be wrong but the person who made it believed it to be true.6. It must be made without intention to deceive the party.7. It need not be made directly to the plaintiff. 57 Prof.Madhura Tilak 57
    58. 58. 5.5: Consequences of misrepresentation:The aggrieved party, in the case of misrepresentation by the other party can:1.avoid or rescind the contract.2. accept the contract but insist that he shall be placed in the same position which he would have been if the representation made had been true. 58 Prof.Madhura Tilak 58
    59. 59. 5.6: Fraud: Fraud exists when it is known that:1.a false representation has been made- Knowingly or- Without belief in its truth or-recklessly, not caring whether it is true or false, and the maker induced the other party to act upon it. 59 Prof.Madhura Tilak 59
    60. 60. 2. There is concealment of a material fact or there is a partial statement of fact in such a manner withholding of what is not stated makes that which is stated false.The intention of the party making fraudulent representation must be to deceive the other party to the contract or to induce him to enter in to contract. 60 Prof.Madhura Tilak 60
    61. 61. 5.7 Essential Elements of Fraud:1.There must be a representation or assertion and it must be false.2. The representation must relate to a material fact which exists now or existed in the past.3. The representation must have been made before the conclusion of the contract with the intention of inducing the other party to act upon it. 61 Prof.Madhura Tilak 61
    62. 62. 4. The representation of a statement must have been made with a knowledge of its falsity or without belief in its truth or recklessly not caring whether it is true or false.5. The other party must have been induced to act upon representation or assertion.6. The other party must have relied upon the representation and must have been deceived.7. The other party, acting on the representation or assertion must have subsequently suffered some loss. 62 Prof.Madhura Tilak 62
    63. 63. 5.8: Consequences of fraud: A contract induced by the fraud is voidable at the option of the party defrauded. The party defrauded has following remedies:1. He can rescind the contract. He must act within reasonable time. If in the interval period, an innocent third party has acquired interest in the property for value, he cannot rescind the contract. 63 Prof.Madhura Tilak 63
    64. 64. 2. He can insist on performance of the contract on the condition that he shall be put in the position in which he would have been if the representation made had been true.3. He can sue for demages. 64 Prof.Madhura Tilak 64
    65. 65. 5.9: Loss of right of recession of contract in case of either misrepresentation or fraud:The aggrieved party loses right to rescind or avoid the contract in the following cases:1. If he, after becoming aware of the misrepresentation or fraud, takes a benefit under a contract or in some other way affirms it.2. If restoration to the original position of the parties is not possible, e.g. the subject matter of the contract has been consumed or destroyed. 65 Prof.Madhura Tilak 65
    66. 66. 3. If a third party has acquired rights in the subject matter of the contract in good faith and for value.5.10: Exceptions to the rule that contracts caused by misrepresentation or fraud are voidable at the option of aggrieved party:In the following cases contracts caused by misrepresentation or fraud are not voidable at the option of the aggrieved party. 66 Prof.Madhura Tilak 66
    67. 67. 1. When the consent of the party to a contract was caused by misrepresentation or fraud and that other party could discover the truth by ordinary diligence.2. Where a party enters in to a contract in ignorance of misrepresentation or fraud.3. Where a party to a contract, whose consent was caused by misrepresentation or fraud, cannot be put in the position in which he would have been if the representation made had been true.4. Where before the contract is avoided, the interest of third party intervene. 67 Prof.Madhura Tilak 67
    68. 68. 5.11: Effects of Silence as to facts:The general rule is that a person before entering in to a contract need not disclose other party material facts which he knows, but he must refrain from making active concealment.This means mere silence is not fraud.There are certain exceptions to the above rule: 68 Prof.Madhura Tilak 68
    69. 69. 1. Where the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak.2. If the seller fails to inform buyer as to latent defect.3. If the trustee does not make disclosure of facts to the beneficiary. 69 Prof.Madhura Tilak 69
    70. 70. 5.13 Distinction between fraud and misrepresentation:The distinction can be discussed under following heads:1. Intention.2. Belief.3. Recession and damages.4. Discovery of truth. 70 Prof.Madhura Tilak 70
    71. 71. 1.1: Meaning : Mistake may be defined as erroneous belief about something.1.2: Types of Mistakes:- A mistake of law.-A mistake of fact.-Mistake of law is categorized as follows:-1. Mistake of law of the country:Rule: Ignorance of law is no excuse.2. Mistake of law of the foreign country:Treated as mistake of fact and the agreement in such case is void. 71 Prof.Madhura Tilak 71
    72. 72. - Mistake of fact is categorized as follows:1. A Bilateral Mistake2. A Unilateral Mistake1.3: Bilateral Mistakes: Where both parties to an agreement are not under an agreement as to matter of fact essential to the agreement, there is a bilateral mistake. In such a case, the agreement is void. Prof.Madhura Tilak 72
    73. 73. The followings are conditions of bilateral mistakes:1. The mistake must be mutual.2. The mistake must relate to a matter of fact essential to the agreement.1.4: The various cases of Bilateral Mistakes:1. Mistake as to the subject-matter: covers following cases. Prof.Madhura Tilak 73
    74. 74. (i) Mistake as to the existence of the subject matter.(ii) Mistake as to the identity of the subject matter.(iii) Mistake as to the quality of the subject matter.(iv) Mistake as to the quantity of the subject matter.(v) Mistake as to the title of the subject matter.(vi) Mistake as to the price of the subject matter. Prof.Madhura Tilak 74
    75. 75. 2. Mistake as to the possibility of performing the contract:Impossibility may be:(i). Physical impossibility.(ii). Legal impossibility. Prof.Madhura Tilak 75
    76. 76. 1.4: Unilateral Mistakes: When in a contract, only one of the parties is mistaken regarding the subject matter or in expressing or understanding the terms of the legal effect of the agreement, the mistake is a unilateral mistake.An unilateral mistake is not allowed as defense in avoiding contract unless the mistake is brought about by other party’s fraud or misrepresentation. Prof.Madhura Tilak 76
    77. 77. There are exceptions to this rule. In the following cases, even though there is a unilateral mistake, the agreement is void.1. Mistake as to the identity of the person contracted with.This holds good only when the identity of the contracting party is important.2. Mistake as to the nature of contract. Prof.Madhura Tilak 77
    78. 78. 1.1: When performance of a contract takes place?Performance of a contract takes place when parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed.The parties to a contract must either perform or offer to perform their respective promises. Prof.Madhura Tilak 78
    79. 79. 1.2: What is an offer to perform?:Attempted performance or tender is an offer of performance by the promisor in accordance with the terms of the contract.If the promisee does not accept performance, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract.Thus, a tender is equivalent to actual performance. 79 Prof.Madhura Tilak 79
    80. 80. 1.3: Requisites of a Valid tender:1. It must be unconditional.2. It must be the whole quantity contracted for or of the whole obligation.3. It must be by a person who is in a position, and is willing to perform the promise.4. It must be made at proper time and place and in the manner specified, and where these are not specified, it must be made in a reasonable manner. Prof.Madhura Tilak 80
    81. 81. 5. It must be made to proper person, that is, the promisee or his duly authorized agent. It must also be in proper form.6. It may be made to one of the several joint promisees. In such a case, it has the same effect as a tender to all of them.7. In case of tender of goods, it must give reasonable opportunity to the promisee for inspection of the goods.8. In case of tender of money, the debtor must make a valid tender in the legal tender money. Prof.Madhura Tilak 81
    82. 82. 1.4: Reciprocal promises:Promises which form the consideration or the part of consideration for each other are called reciprocal promises.Reciprocal promises are classified as follows:1. Mutual and independent.2. Conditional and dependent.3. Mutual and concurrent. Prof.Madhura Tilak 82
    83. 83. 1.5: Rules regarding performance of reciprocal promises:1. When reciprocal promises have to be simultaneously performed, the promisor is not bound to perform, unless the promisee is ready and willing to perform his promise.2. The reciprocal promises must be performed in the order fixed by the contract.3. When a contract contains reciprocal promises and if one party to the contract prevents the other party to the contract from performing his promise, then the contract becomes voidable at the option of the party so prevented. Prof.Madhura Tilak 83
    84. 84. Further he is entitled to compensation from the other party for any loss he may sustain in consequence of the non-performance of the contract.4.Where the nature of reciprocal promises is such that one cannot be performed unless the other party performs his promise in the first place, then if the later fails to perform he cannot claim performance from the other, but must make compensation to the first party for his loss. Prof.Madhura Tilak 84
    85. 85. 1.6: By whom must contract be performed?:1. By promisor himself.2. By agent.3. By legal representatives – in case of death of the promisor.4. By joint promisors- When two or more persons have made joint promise, then unless contrary intention appears from the contract, all such persons must jointly fulfill the promise. Prof.Madhura Tilak 85
    86. 86. If any one of them dies, his legal representative must, jointly with surviving promisors, fulfill the promise. If all the promisors die, the legal representatives of all of them must fulfill the promise jointly.1.7: Who can demand performance?It is only the promisee, and in case of his death, his legal representatives, who can demand performance. Prof.Madhura Tilak 86
    87. 87. When a person has made a promise to several persons, then, unless a contrary intention appears from the contract, the right to claim performance rests with all of them. When one of the promisee dies, it rests with his legal representatives jointly with the surviving promisees. When all the promisees die, it rests with legal representatives jointly. Prof.Madhura Tilak 87
    88. 88.  1.8: Time and place of performance: Time and place of performance of a contract are matters to be determined by the agreement between the parties themselves. Where no time for performance is specified, the promisor must perform the promise within a reasonable time. If no time and place is fixed for the performance of the promise, the promisor must fix the day and time for performance. Prof.Madhura Tilak 88
    89. 89. 1.When time is of the essence: Eg.In a contract for purchase of tyres for the car manufacturer to be supplies within two months, time was held to be the essence of contract .2.When time is not of the essence: Eg.In a contract of sale of immovable property time is not of the essence unless it is shown that the intention of parties was that time should be the essence of contract. Prof.Madhura Tilak 89
    90. 90. 1.9: Time as the essence of contract:Time for the performance of a contract may be fixed in the contract itself. In that case the contract must be performed within that time when the time is the essence of the contract.The general rule is that in commercial contracts time is of the essence of contract.In other contracts stipulations as to time are, in the absence of express or implied evidence to the contrary, presumed not to be the essence of the contract. Prof.Madhura Tilak 90
    91. 91. Time may be made the essence of a contract by a subsequent notice.Any subsequent notice making time as the essence of the contract ought to fix a reasonably long time requiring other party to perform his contract.1.10:91 Prof.Madhura Tilak 91
    92. 92.  When a debtor owes several distinct debts to a creditor and makes a payment insufficient to satisfy the whole indebtedness,a uestion arises: To which debt should the patment be appropriated? Sec 59 to 61 lays down following 3 rules in this regards: 1.Where the debtor intimates:(sec 59) If debtor expressly intimate the time of actual payment that the payment should be applied towards discharge of particular debt, the creditor must do so. Prof.Madhura Tilak 92
    93. 93.  2.Where the debtor does not intimate and circumstances are not indicative(sec 60),the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor. 3.Where the debtor does not intimate and creditor fails to appropriate,(sec 61)the payment shall be applied in discharge of debts in chronological order,ie in order of time.(Rule of clayton’s law) Prof.Madhura Tilak 93
    94. 94. Appropriation of payments:(to conclude)The debtor has, at the time of payment, right of choice of appropriating the payment.In default of the debtor, the creditor has right to appropriate.In default of either, the law will allow appropriation of debts in order of time.Rule in Clayton’s Case:Where the parties have a current account between them, appropriation impliedly takes place in the order in which the receipts and payments take place and are entered in the account. The first item on the debit side of the account is discharged or reduced by the first item on the Prof.Madhura Tilak 94
    95. 95. Whether a part payment should be treated towards principle or interest?On this question, the general principle, subject to any contract to the contrary, is that payment should first be applied to interest and after the interest is fully paid off, to the principal. 95 Prof.Madhura Tilak 95
    96. 96. 1.11: Assignment of Contracts: To “Assign” means to” transfer”. Assignment of a contract means transfer of contractual rights and liabilities under the contract to a third party with or without the concurrence of the other party to the contract.It may take place by:1. Act of the parties: This is subject to the following rules: 96 Prof.Madhura Tilak 96
    97. 97. 1. Contracts involving personal skill or ability or personal qualifications cannot be assigned.2. A promisor cannot assign his liabilities or obligations under a contract.3. The rights and benefits under a contract may be assigned if the obligation under the contract is not of a personal nature.4. An actionable claim can always be assigned but the assignment to be complete and effectual must be effected by instrument in writing. Notice of such assignment must also be given to the debtor. 97 Prof.Madhura Tilak 97
    98. 98. 2. Operation of law:This takes place in the case of death or insolvency of a party to the contract.(a)Death(b)InsolvencyUpon death of a party to a contract, his rights and liabilities under a contract except in the case of contracts requiring personal skill or services devolve upon his heirs and legal representatives.In the case of insolvency of a person, his rights and liabilities incurred previous to adjudication pass to the Official Receiver or Assignee, as the case may be. Prof.Madhura Tilak 98
    99. 99. 1.12: Effect of refusal of a party to perform promise wholly:1. When party to a contract refuses to perform, or disables himself from performing his promise entirely, the promisee may put an end to the contract. But if the promisee has signified by words or conduct, his tacit assent in the continuation of the contract, he cannot repudiate it. 99 Prof.Madhura Tilak 99
    100. 100. 2. When promisee puts an end to a contract, being rightly entitled to do so, it shall be deemed as if he has rescinded a voidable contract and shall be bound to restore to the other party all benefits that he may have received under the contract. 100 Prof.Madhura Tilak 100
    101. 101. 1.13: Contracts which need not be performed:A contract need not be performed:1.When its performance becomes impossible.2. When the parties to it agree to substitute a new contract for it or to rescind or alter it.3. When the promisee dispenses with or remits, wholly or in part, the performance of the promise made to him or extends the time for such performance or accepts any satisfaction for it. Prof.Madhura Tilak 101
    102. 102. 4. When the person at whose option it is voidable rescinds it.5. When the promisee neglects or refuses to afford promisor reasonable facilities for the performance of his promise.6. When it is illegal. Prof.Madhura Tilak 102
    103. 103. 1.1: Meaning: Discharge of contract means termination of the contractual relationship between the parties.A contract is said to be discharged when it ceases to operate, i.e. when rights and obligations created by it comes to an end. Prof.Madhura Tilak 103
    104. 104. 1.2: A contract may be discharged-1. By performance.2. By agreement or consent.3. By impossibility.4. By lapse of time.5. By operation of law.6. By Breach of contract. 104 Prof.Madhura Tilak 104
    105. 105. 1. Performance:- Actual performance.- Attempted performance,Implied consent may by any of these forms. Prof.Madhura Tilak 105
    106. 106. 2. By agreement or consent:- By express consent.- By implied consent:- A.Novation- B.Rescission- C.Alteration- D.Remission- E.Waiver- F.Merger Prof.Madhura Tilak 106
    107. 107.  1. Discharge by Performance: Performance means doing of that which is required by contract. Discharge by performance takes place when parties to contract fulfill their obligations arising under the contract within time and manner prescribed. In such case parties are discharged and contract comes to an end. Prof.Madhura Tilak 107
    108. 108.  It may be: 1.Actual performance:When both parties perform their promises the contract is discharged.Performance should be complete,precise and according to the terms of agreement. Prof.Madhura Tilak 108
    109. 109.  2.Attempted performance and Tender: Tender is not actual performance but is an only an offer to perform the obligation under the contract.Where the promisor offers to perform his obligation but promisee refuses to accept the performance, tender is equivalent to actual performance. Prof.Madhura Tilak 109
    110. 110. (a). Novation: Novation takes place when:- A new contract is substituted for an existing one between the same parties. or- A contract between two parties is rescinded in consideration of a new contract being entered in to on the same terms between one of the parties and a third party.Novation should take place before expiry of time of the performance of the original contract. 110 Prof.Madhura Tilak 110
    111. 111. (b). Recession: Recession of a contract takes place when all or some of the terms of the contract are cancelled. It may occur by-(i). By mutual consent of the parties or(ii). When one party fails in the performance of his obligation. In such a case other party may rescind the contract without prejudice to his right to claim compensation for the breach of contract. 111 Prof.Madhura Tilak 111
    112. 112. Mode of communicating or revoking recession:Same rules as apply to the communication of revocation of a proposal.Any benefit accruing to a party where contract is rescinded at his option should be refunded by such party. Prof.Madhura Tilak 112
    113. 113. (c). Alteration: Alteration of a contract may take place when one or more of the terms of the contract is/are altered by the mutual consent of parties to the contract. In such a case, old contract is changed.(d). Remission: Remission means acceptance of a lesser fulfillment of promise made e.g. acceptance of a lesser sum than what is contracted for in discharge of the whole of the debt. 113 Prof.Madhura Tilak 113
    114. 114. (e). Waiver: Waiver takes place when parties to a contract agree that they shall not be bound by the contract. This amounts mutual abandonment of the rights by the parties to the contract. Consideration is not necessary for waiver.(f). Merger: Merger takes place when an inferior right accruing to a party under a contract merges into superior right accruing to the party under the same or some other contract. Prof.Madhura Tilak 114
    115. 115. 3. Discharge by impossibility of performance:If an agreement contains an undertaking to perform an impossibility, it is void ab initio.This rule is based on following legal principles:1.The law does not recognize what is impossible.2. What is impossible does not create an obligation.Impossibility of performance may fall into either of the following categories. Prof.Madhura Tilak 115
    116. 116. 1. Impossibility existing at the time of agreement:This is known as pre-contractual or initial impossibility.This can be further classified in to:i. Known to parties.This is also known as absolute impossibility. In the case of absolute impossibility, the agreement is void ab initio. Prof.Madhura Tilak 116
    117. 117. ii. Unknown to parties.If at the time of making the contract, both the parties are ignorant of the impossibility, the contract is void on the ground of mutual mistake. If, however, the promisor alone knows of the impossibility of performance at the time of making contract, he shall have to compensate the promisee for any loss which such promisee sustains through non- performance of the promise. 117 Prof.Madhura Tilak 117
    118. 118. 2. Impossibility arising subsequent to the formation of the contract: Impossibility which arises subsequent to the formation of the contract is called post-contractual or supervening impossibility. In such a case, the contract becomes void when the act becomes impossible or unlawful.This impossibility is caused by the circumstances beyond the control of the parties, the parties are discharged from further performance of the obligation under the contract.A Contract is discharged by supervening impossibility in the following cases: 118 Prof.Madhura Tilak 118
    119. 119. 1. Destruction of a subject-matter of contract.2. Non-existence or non-occurrence of a particular state of thing.3. Death or incapacity for personal service.4. Change of law or stepping in of a person with statutory authority.5. Outbreak of war. Prof.Madhura Tilak 119
    120. 120. 3.1: Impossibility of performance- not an excuse:‘Impossibility of performance is, as a rule, not an excuse for non-performance’.Ordinarily when a person undertakes to do something, he must do it unless performance becomes absolutely impossible due to any of the circumstances already discussed.In the following cases, a contract is not discharged on the ground of supervening impossibility. Prof.Madhura Tilak 120
    121. 121. 1. Difficulty of performance.2. Commercial impossibility.3. Impossibility due to failure of a third person.4. Strikes, lock-outs and civil disturbances.5. Failure of one of the objects. Prof.Madhura Tilak 121
    122. 122. 3.2: Effects of supervening impossibility:1. When the performance of a contract becomes impossible or unlawful subsequent to the formation, the contract becomes void.2. Where one person has promised to do something which he knew or, with reasonable diligence, might have known, and the promisee did not know to be impossible or unlawful, the promisor must make compensation to the promisee for any loss which the promisee sustains through the non-performance of the promise. Prof.Madhura Tilak 122
    123. 123. 3.Where agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation to the person from whom he received it.In England the doctrine of frustration is the parallel concept of supervening impossibility. Prof.Madhura Tilak 123
    124. 124. 4. Discharge by lapse of time: The Limitation Act, 1963 lays down that a contract should be performed within a specified period, called period of limitation. If it is not performed, and if no action is taken by the promisee within the period of limitation, he is deprived of his remedy at law. In other words, we may say that the contract is terminated. Prof.Madhura Tilak 124
    125. 125. 5. Discharge by operation of law: A contract may be discharged independently of the wishes of the parties i.e. operation of law. This includes discharge:(a). By death.(b). By merger.(c). By insolvency.(d). By unauthorized alteration of the terms of a written agreement.(e). By rights and liabilities becoming vested in the same person. Prof.Madhura Tilak 125
    126. 126. 6. Discharge by breach of Contract:Breach of contract means breaking of the obligation which a contract imposes. It occurs when a party to a contract without lawful excuse does not fulfill his contractual obligation or by his own act makes it impossible that he should perform his obligation under it. It confers right of action or demages on the injured party. Prof.Madhura Tilak 126
    127. 127. Breach of contract may be-1. Actual breach of contract.2. Anticipatory or constructive breach of contract.6.1 Actual Breach of contract:It may take place:1. At the time when performance is due.2. During the performance of the contract. Prof.Madhura Tilak 127
    128. 128. This refusal to perform may be by-(a). Express repudiation (by word or act).(b). Implied repudiation ( impossibility created by the act of a party to the contract).6.2: Anticipatory breach of contract: It occurs when a party to an executory contract declares his intention of not performing contract before the performance is due. He may do so: Prof.Madhura Tilak 128
    129. 129. 1. By expressly renouncing his obligation under the contract.2. By doing some act so that the performance of his promise becomes impossible.6.3: Rights of the promisee (the party not in breach or the aggrieved party) in the case of anticipatory breach are as follows:1. He can treat contract as discharged so that he is absolved of the performance of his part of the promise. Prof.Madhura Tilak 129
    130. 130. 2. He can immediately take a legal action for breach of contract or wait till such time the act was to be done.6.4: Anticipatory breach does not necessarily discharge the contract unless the promisee (the aggrieved party) so chooses.If the promisee refuses to accept the repudiation of the contract by the promisor and treats the contract as alive, the consequences are as follows: Prof.Madhura Tilak 130
    131. 131. 1. The promisor may perform his promise when the time for its performance comes and the promisee will be bound to accept the performance.2. If, while the contract is alive, an event ( say, a supervening impossibility) happens which discharges the contract legally, the promisor may take advantage of such discharge. In such a case, the promisee loses his right to sue for demages. Prof.Madhura Tilak 131
    132. 132. 6.5: Measure of demages in anticipatory breach of contract:If the contract is ended by the promisee at once, he can sue the promisor for demages. The amount of demages will be measured by the difference between price prevailing on the date of breach and the contract price.If the contract is kept alive till the date of performance of the contract, the measure of demages will be difference between the price prevailing on the date of the performance and the contract price. Prof.Madhura Tilak 132
    133. 133. A remedy is the means given by law for the enforcement of a right.A contract gives rise to correlative rights and obligations.A right accruing to a party under a contract would be of no value if there was no remedy to enforce that right in a Law Court in the event of its infringement or breach of contract. Prof.Madhura Tilak 133
    134. 134. When a contract is broken, the injured party (i.e. party who is not in breach) has one or more of the following remedies:1. Recession: When there is breach of contract by a party, the injured party may sue to treat the contract as rescinded. He is also absolved of all his obligations under the contract.The Court may grant recession in certain situations. The Court may also refuse to rescind the contract in certain situations. Prof.Madhura Tilak 134
    135. 135. 2. Demages: Demages are monetary compensation awarded to the injured party by court for the loss or injury suffered by him.The foundation of modern law of demages, both in India and England, is to be found in the judgment in the case of Hadley v Baxendale.Section 73 of the Indian Contract Act which deals with ‘Compensation for loss or damage caused by breach of contract is based on the judgment in the case of Hadley v Baxendale. Prof.Madhura Tilak 135
    136. 136. Demages u/s 73 may be of four types:1. Ordinary demages: These are demages which actually arise in the usual course of things from the breach of a contract.In a contract for sale of goods, the measure of demages on the breach of contract is the difference between the contract price and the market price of such goods on the date of the breach. Prof.Madhura Tilak 136
    137. 137. Under Section 73, Compensation is not to be given for any remote or indirect loss or damage. Further Section 73 does not give any cause of action unless and until damage is actually suffered.If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby. Prof.Madhura Tilak 137
    138. 138. 2. Special damages: Damages which may reasonably be supposed to have been in contemplation of both the parties at the time when they made the contract as the probable result of the breach of it, are known as special damages and may be recovered.These can be claimed only if the special circumstances which would result in special loss in the case of breach of a contract, are brought to the notice of the other party. Prof.Madhura Tilak 138
    139. 139. 3. Vindictive or exemplary damages: These damages are allowed in case of the breach of a contract to marry or dishonour of a cheque by a banker wrongfully.4. Nominal damages: where the party has not suffered any loss by reason of the breach of a contract, the court may award a very nominal sum as damages.Damage u/s 74 may be of following type: Prof.Madhura Tilak 139
    140. 140. 5. Liquidated damages and penalty:Liquidated damages represent a sum, fixed or ascertained by the parties in the contract, which is fair and genuine pre-estimate of the probable loss that might ensue as a result of the breach. A penalty is a sum named in the contract at the time of formation, which is disproportionate to damage likely to accrue as a result of the breach. The Courts in India allow only reasonable compensation. Prof.Madhura Tilak 140
    141. 141. 3. Quantum meruit: A right to sue on a quantum meruit (as much as earned) arises where a contract, partly performed by one party, has become discharged by the breach of the contract by the other party. This right is funded on an implied promise by the other party arising from the acceptance of a benefit by that party. Prof.Madhura Tilak 141
    142. 142. 4. Specific performance: In certain cases the court may direct the party in breach a contract to actually carry out the promise, exactly according to the terms of the contract. This is called specific performance of the contract.5. Injunction: Where a party is in breach of a negative term of a contract ( where he is doing something which he promised not to do), the Court may, by issuing an order, restrain him from doing what he promised not to do. Such an order of the Court is known as injuction. Prof.Madhura Tilak 142
    143. 143. Prof.Madhura Tilak 143
    144. 144. 1. Meaning: Consideration means something in return. It is the price for which the promise of the other is bought. It must result in a benefit to the promisor and/or a detriment to the promisee or both.2. Definition: 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 something, such an act or abstinence or promise is called a consideration for the promise. Prof.Madhura Tilak 144
    145. 145. 3.Legal rules as to consideration:1.It is essential to support every contract.2.It must move at the desire of the promisor.3.It may move from promisee or any other person.4.It may be past, present or future.5.It need not be adequate.6.It must be real and not illusory.7.It must not be something which the promisor is already legally or contractually bound to do.8. It must not be illegal, immoral or opposed to public policy. Prof.Madhura Tilak 145
    146. 146. 4. Stranger to a Contract:The general rule is that a stranger to a contract cannot sue.Exceptions to this rule are as follows:But he may sue where –1. A trust or charge is created in some specific immovable property in favor of him.2. A provision is made in a marriage settlement, partition or family arrangement for his benefit.3. There is an acknowledgement of a liability by the promisor or promisor constitutes himself as agent.4. He is assignee of rights and benefits under a contract not involving personal skill. Prof.Madhura Tilak 146
    147. 147. 5. He enters into a contract through an agent.6. There are covenants running with the land.5. An agreement without consideration is void:The followings are the exceptions to this rule i.e. no consideration is required in case of1. A written and registered document based on natural love and affection between parties standing in a near relation to each other. Prof.Madhura Tilak 147
    148. 148. 2. A promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor.3. A promise by a debtor to pay a time barred debt if it is made in writing and is signed by the debtor or by his agent.4. An agency.5. A completed gift. Prof.Madhura Tilak 148
    149. 149. 1. An agreement is a contract if it is made for a lawful consideration and with a lawful object.Every agreement of which object or consideration is unlawful is void.2. When consideration or object is unlawful:The consideration or object of an agreement is unlawful:1. If it is forbidden by law.2. If it is of such a nature that, if permitted, it would defeat the provisions of any law. Prof.Madhura Tilak 149
    150. 150. 3. If it is fraudulent.4. If it involves or implies injury to the person or property of another.5. If the court regards it as immoral.6. When the court regards it as opposed to public policy. Prof.Madhura Tilak 150
    151. 151. 1.A Contract may be:(i). An absolute contract or(ii). A Contingent contract.An absolute contract is one in which the promisor binds himself to performance in any event without any conditions.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. Prof.Madhura Tilak 151
    152. 152. 2. Characteristics of contingent contract:1. Its performance depends upon the happening or non-happening in future of some event.2. The event must be uncertain.3. The uncertain future event must be collateral to the contract. Prof.Madhura Tilak 152
    153. 153. 3. Rules regarding contingent contracts:1. If a contingent contract is to be performed, if an uncertain future event happens, it cannot be enforced until the event has happened. If it is to be performed if a particular event does not happen, its performance can be enforced if the event becomes impossible.2. If a contingent contract depends for its performance on doing of an act by the promisor, the contract becomes void where the promisor makes the performance impossible. Prof.Madhura Tilak 153
    154. 154. 3. If a contingent contract contemplates doing of a thing if a specified event happens within a fixed time, it becomes void if the event does not happen within that time.4. If a contingent contract contemplates to do anything if an impossible event happens, it is void.There is a difference between a wagering agreement and a contingent contract. Prof.Madhura Tilak 154
    155. 155. 1. Meaning: In certain cases the law imposes an obligation and allows an action to be bought on it as if it arose out of an agreement, though none was present in fact. Such cases, strictly speaking are not contracts, but the law recognizes them as ‘certain relations resembling those created by contracts’. In English law, such relations are called ‘Quasi-Contracts’. Prof.Madhura Tilak 155
    156. 156. 2. Principle on the basis of which law considers certain relations resembling those created by contracts as Quasi-contracts :Quasi contracts rest on the ground of equity that a person shall not be allowed to enrich himself unjustly at the expense of the other.3. Kinds of Quasi-Contracts:1. Supply of necessaries.2. Payment by an interested person. Prof.Madhura Tilak 156
    157. 157. 3. Obligation to pay for non-gratuitous acts.4. Responsibility of Finder of the goods.5. Liability of person to whom money is paid or thing delivered by mistake or coercion.4. Quantum meruit: means as much as earned.This requires person to claim compensation from another person in respect of work done by him till such time contract was discharged. Prof.Madhura Tilak 157
    158. 158. The claim for quantum meruit arises only when the original contract is discharged. If the original contract exists, the party not in default cannot have quantum meruit remedy, he has to take resort to remedy in damages.It is a claim on the quasi-contractual obligation which the law implies in the circumstances. Prof.Madhura Tilak 158
    159. 159. 5. Compensation for failure to discharge obligation created by quasi-contracts:When an obligation created by a quasi-contract is not discharged, the injured party is entitled to receive the compensation from the party in default, as if the person had contracted to discharge it and had broken his contract. Prof.Madhura Tilak 159
    160. 160. Q:1.Explain the following: (Marks)1. Void and Voidable Agreement. (5)2. Agreement without consideration (5)3. Quasi Contract (5)Q:2(a). Explain the term consideration. A stranger to consideration can sue upon the contract. Explain the statement in brief. (5) Prof.Madhura Tilak 160
    161. 161. (b). When we can say that consent is not free? (5)(c). Explain the term ‘Offer’ and “invitation to offer” & Distinguish them. (5)Q.3. Explain the types of contract and essentials of Valid contracts. (10)Q.4. Distinguish the following:(a). Liquidated Damages and Penalty (5) Prof.Madhura Tilak 161
    162. 162. Q.5.(a). Explain the term consideration. ‘A stranger to consideration can sue upon the contract’. Explain the statement in brief. (5)Q.6. Explain the following:(a). A contract of marine insurance is a contingent contract. (5)Q.7. What is meant by frustration of contract? Enumerate the situations where a contract can get frustrated? Prof.Madhura Tilak 162 (5)
    163. 163. Q.8. Answer the following, giving reasons for your answer.1. A lends his car to B to be driven by B only. B allows his daughter C, who is an expert car driver to drive it. C drives the car carefully but its axle suddenly breaks and the car is damaged. Is B liable to A for the damage? (5) Prof.Madhura Tilak 163
    164. 164. Q.9. Explain the following;(a). Void Agreement. (4)Q.10. Define agreement and discuss the types of agreements. (10)Q.11. Explain the rules regarding offer under the Indian Contracts Act, 1872. (10)Q.12. (a). Who can enter in to a contract? Discuss. Prof.Madhura Tilak 164
    165. 165. (b). What do you know about free consent and when the consent is not free? Explain. (10)Q.13.(a). X sold his business including goodwill to Y for Rs.5,00,000/- by an agreement. The agreement provided that X should not engage himself in the similar business in the whole of India for next 10 years. X started the same business in the same city after one month. State the legal position. (10) Prof.Madhura Tilak 165
    166. 166. Q.14. X of Delhi agreed to sell 100 bales of cotton @ Rs.1,000 per bale and to deliver within a fortnight at buyer’s godown at Lahore. X failed to supply these goods, State the legal position in the following cases:(a). If unknown to both the parties, the goods were destroyed by fire at the time of agreement.(b). If X knew that goods were destroyed by fire at the time of agreement. Prof.Madhura Tilak 166
    167. 167. (c). If goods were destroyed by fire after the formation of agreement.(d). If war was declared between India and Pakistan.(e). If goods were to be manufactured by Z who did not manufacture those goods.(f). If goods could not be delivered because of strike of transport operators. (20)Q.15. Write short note on:(a). Consideration. (4) Prof.Madhura Tilak 167

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