Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,   1
Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,   2
Agenda Essentials of contract Offer Acceptance Consideration Free consent Voidable agreements Void agreements Kind...
Three Pillars of The Contract Offer Acceptance Consideration               Dr. Tabrez Ahmad,               Blog: http:/...
What is a contract?Section 2(h)“An agreement enforceable by law is acontract”.Thus,Contract = Agreement + Enforceability a...
Agreement? Section 2(e)     Promise/(s)                       Promise/(s)                                                ...
Promise? Section 2(b) Promise = Proposal/Offer + AcceptanceProposal? Section 2(a) Expression of willingness With a view to...
Acceptance Section 2(b) Giving of assent to the proposal. Enforceability by Law Agreements which are not enforceable Illeg...
Agreements Declared Voidunder ICA e.g.   Agreement with or by a minor   Agreement in restraint of trade   Marriage brok...
Kinds of Contracts  From the point of view of  Enforceability     Void     Voidable     Valid         Dr. Tabrez Ahmad,...
Void Agreement vs. Void Contract Void Agreement  i.e., void-ab-initio i.e. unenforceable from the very  beginning  Become...
Valid Contract   Section 10   To be a valid contract, it must satisfy the following:1. Offer and Acceptance2. Consensus-ad...
4. Free and Genuine Consent, i.e., free from      coercion      undue influence      fraud      misrepresentation    ...
Valid Contract (‘Object’ and ‘Consideration’ usually overlap. However, there may be difference at times e.g., object may b...
Valid Contract7. Agreement not declared void.8. Certainty of Meaning: e.g. sale and  purchase of 100 tonnes of oil. But wh...
Valid Contract9. Possibility of performance:    Impossibility whether known to the parties    or not, renders a contract i...
Void vs. Illegal Agreements Void Agreement      Illegal Agreement1. Unenforceable 1. Unenforceable2. Not Punishable 2. Pun...
Specific and General Offer Specific Offer:    made to a specified person or a group of     persons.    can be accepted ...
Specific and General Offer General Offer:   which is not a specific offer.   made to the world at large.   can be acce...
Offer vs. Invitation to offer Illustrations of Invitation to Offer:    Prospectus issued by a college.    Prospectus is...
Special Terms in a ContractExamples: Dry cleaner’s receipt, courier’s receipt,  shipment receipt, insurance policy, etc. ...
Cross Offers & Counter Offers Cross Offers  Identical offers cross each other and none of the  parties is aware of the sa...
Contracts through Post Communication of Offer  is complete when the offeree has the  knowledge of the same. Communicatio...
As against the proposer Communication is complete as soon as a duly  addressed letter of acceptance is put into the cours...
Communication of Revocation Communication of revocation (of offer or acceptance) is complete:   As against the person wh...
 Comparing ‘offer’ to a ‘train of  gunpowder’ and ‘acceptance’ to a  ‘lighted match stick’ – How far correct? William An...
ConsiderationSection 2(d) “When at the desire of the promisor the promisee or  any other person has done or abstained fro...
Consideration   At the desire of the promisor   Promisee or any other person   Past, present or future   Such act, abs...
At the desire of the promisorDurga Prasad V. Baldeo 1880 Facts: The plaintiff on the order of the collector of a town,   ...
Promisee or any other person As long as there is a consideration for a promise, it is  immaterial who has furnished it. I...
Privity of Contract and Privity ofConsideration          English LawIn the law of England certain principles are  fundamen...
English Law 1. Consideration must move from the promisee and the  promisee only. If it be furnished by any other person, ...
Tweddle v.Atkinson30 LJ QB218 1861The court of Queens Bench refused to allow a beneficiary  who is not a party to a contra...
Tweddle v.Atkinson30 LJ QB218 1861                  JudgmentThus, although the sole object of the contract was to secure a...
Dunlop pneumatic tyre Co., Plaintiff V.Selfridge & Co., Defendant, 1915 Facts: Plaintiffs sold certain goods to one Dew &...
Dunlop pneumatic tyre Co., Plaintiff V.Selfridge & Co., Defendant, 1915 Judgment: It was held by Lord Viscount  HALDANE t...
Sec 25. An agreement withoutconsideration is void unlessClause (i) It is in writing and registered.It is expressed in writ...
Sec 25. An agreement withoutconsideration is void unless Clause(ii) or is a promise to compensate, wholly or in part, a p...
Sec 25. An agreement withoutconsideration is void unless Clause (iii) or is a promise to pay a debt barred by  limitation...
Explanations 1. Nothing in section 25 shall affect the validity, as between  the donor and donee, of any gift actually ma...
Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,   41
Section 10 of Indian Contract ActWhat agreements are contracts .– All agreements arecontracts if they are made by the free...
By                                           Dr. Tabrez Ahmad,                                             Professor of La...
Vitiating Factors      A contract may be tainted by defects that could affect its validity      making it void, voidable, ...
Definition According to sec. 10 free consent is an essential  requirement of a contract. Sec. 14 defines “free  consent”....
Sec 14 “free consent”Sec 15 to 18               Dr. Tabrez Ahmad,               Blog: http://corpolexindia.blogspot.com,  ...
Vitiating factors and their effectWhere consent to an agreement is caused by coercion, undue influence, fraud or misrepres...
CoercionSec 15.“Coercion” is the committing, or threatening to commit, any  act forbidden by the Indian Penal Code (XLV of...
Techniques of causing coercionConsent is said to be caused by coercion when it is    obtained by pressure exerted by eithe...
DuressDuress = actual or threatened violence, or unlawfulrestraint or threats, directed towards the contracting partyor a ...
Economic duressEconomic duress = Apparent consent is induced byillegitimate economic pressure from the other partyPau On v...
Coercion                                        Duress or Menace1.   Indian Law                                 1.      En...
Undue influenceDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,                     53
Undue InfluenceSec. 16 of the Indian Contract Act 1872 defines Undue  Influence.              Dr. Tabrez Ahmad,           ...
Undue influence A party to a transaction, though consenting to it,  may not give a free consent because he is exposed  to...
More than mere influence must be proved, so as to  render influence as ‘undue’ in the language of law.In Lingo Bhimrao Nai...
Legitimate persuasion                         Undue influence1.   Persuasion, appeal to the                1. Pressure of ...
Legitimate persuasion                       Undue influence2. A party may be led but 2. Importunity or threats suchnot dri...
Undue InfluenceConditions:(1) A relationship between the parties;(2) One party acquired over another a measure of    influ...
Undue Influence2 types of undue influence:1. Actual undue influence2. Presumed undue influence             Dr. Tabrez Ahma...
Actual Undue InfluenceConditions:1. The wrongdoer had the capacity to influence the   complainant;2. Influence was in fact...
Actual Undue InfluenceWilliams v Bayley (1866) LR 1 HL200; Diners Club v Ng Chi Sing [1987] 1 HKC 78: father compelled to ...
Presumed undue influenceConditions:1.   A relationship of trust and confidence between the wrongdoer and the     innocent ...
Unconscionable contractsThe law takes a further step in protecting the innocent under the doctrine of “unconscionable cont...
Unconscionable contractsThe Unconscionable Contract Ordinance (Cap. 458)- A consumer protection legislation (others being:...
Doctrine of Inequality of BargainingPowerThere are cases under the English law, where equity intervened not because the te...
Lloyds Bank Ltd V Bundy[1974] 3 All ER 797A further guarantee and a charge were given by the father to a  bank on the advi...
“There are cases in our books in which the courts  will set aside a contract, or a transfer of property,  where the partie...
Central inland water transport corporation Ltd. VBrojonath Ganguly AIR 1986 SC 1571The Supreme Court considered the the qu...
FraudDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,           70
FraudSec 17 of the Indian Contract Act 1872 defines fraud.               Dr. Tabrez Ahmad,               Blog: http://corp...
Ingredients of fraudAnalysis of Sec 17(1) shows the following ingredients:(i) there should be a suggestion as to a fact ;(...
RepresentationA representation is a statement of fact, past or present; it is  distinct from a statement of opinion, thoug...
Ambiguous StatementWhere the representor makes an ambiguous statement, the person to whom it is made must prove that he un...
Active Concealment of FactsIt is a fraud where a party to the contract knows or   believes a fact to be true, but conceals...
Mere non discloser of some immaterial facts would not per se give a right to rescission, unless it is further found that t...
Mere Silence is no fraudWhen Silence is fraudDuty to Speak ( Contracts Uberrima fidei)Law of Caveat EmptorLaw of Caveat Ve...
Damages for fraudThe principles applicable in assessing damages for fraudulent misrepresentation have been stated by Lord ...
MisrepresentationDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,                       79
MisrepresentationSec. 18 of the Indian Contract Act 1872 defines  Misrepresentation.When a person making a false statement...
Breach of legal dutyFor example, section 57, Indian Easement Act, 1882 lays   down that the grantor of a license is bound ...
Negligent Misrepresenttaion Negligent misrepresentation is one made carelessly or without  reasonable grounds for believi...
In a later caseNocton v. Ashburton (1914-15) All ER 45, a solicitor was sued by his client for giving wrong advice  whereb...
In Hedley Byrne & Co. Ltd v Heller & Partner Ltd, (1963) 2  All ER 575.Advice given in the course of social relationships ...
MisrepresentationMisrepresentation = a false representation of fact made orally or in writing or by conduct.              ...
MisrepresentationRepresentation must be:1. On existing facts2. On false existing factsShum Kong3. On false material existi...
MisrepresentationDistinguish from:1. Future facts2. Intention of future conduct3. Opinion              Dr. Tabrez Ahmad,  ...
Misrepresentation2 types of misrepresentations:(1) Fraudulent(2) Innocent(3) Negligent               Dr. Tabrez Ahmad,    ...
Fraudulent misrepresentation= a false statement made by a person with a dishonest (“fraud”) intentFraud is proved if the m...
Fraudulent misrepresentationRemedies: depends on whether fraudulent misrep hadbecome a term of the contract :a. Become a t...
Innocent misrepresentation= false statement honestly believing to be true and has  reasonable grounds to believe so up to ...
Negligent misrepresentationElements to be proved:1.a duty on the representor to refrain from making a false statement;and2...
Mistakes3 types:1. Common mistakes2. Mutual mistakes3. Unilateral mistakes               Dr. Tabrez Ahmad,               B...
Common mistakesCommon mistakes as to the existence of the subject matter: Couturier v Hastie (1852) 8 Exch 40: contract fo...
Mutual mistakesNo meeting of minds – no contractScriven Bros v Hindley [1913] 3 KB 564: mistake as to the lots of goods – ...
Unilateral Mistakes     Mistake by one party while the other party knows the truth. Mainly     on identity of the parties....
Contracts made by correspondenceEffect: Contract voidCundy v Lindsay (1876) 1 QBD 348A ordered some handherchiefs from B a...
Contracts made face to faceContract may be voidable.Phillips v Brooks Ltd [1919] 2 KB 243  A pretended to be a rich and fa...
Void Agreements Agreement of which the consideration or the object is not    lawful (Sec. 23 and 24)   Agreement without...
Agreement in restraint of trade void Sec. 27 ofthe Indian Contract Act 1872 Exceptions    Sale of Goodwill    Partnersh...
Agreements in restraint of legal proceedings void         Dr. Tabrez Ahmad,         Blog: http://corpolexindia.blogspot.co...
Agreements in restraint of legal proceedings voidSec. 28 of the Indian Contract Act 1872.An agreement is void to the exten...
Restraint of legal proceedingsNo man can exclude himself from the protection of courts by contract. The citizen has the ri...
Adsolute restrictionThe sec. 28 does not apply where the restriction is not absolute. Where one out of two competent juris...
26. Agreement in restraintof marriage void. Every agreement in restraint of the marriage of any person, other  than a min...
 The Hindu law recognises polygamy, and as to Muhammadan law  a man may have as many as four wives at a time subject to F...
 There is a distinction between restraint on marriage generally and a restraint on remarriage; and a condition in a wakf ...
29. Agreements void for uncertainty. Agreements, the meaning of which is not certain, or capable of being   made certain,...
 (c) A, who is a dealer in coconut-oil only, agrees to sell to B "one hundred tons  of oil." The nature of As trade affor...
COMMENTS Ambiguous contracts.---The text and (with one addition) the illustrations of this section  follow the draft of t...
 Where the defendants, describing themselves as residents of a certain place,  executed a bond and hypothecated as securi...
 Similarly, where in an agreement for the sale of goods, the seller reserves the right to vary  the price at will, there ...
 Void agreement, connotation of---Agreements meaning whereof is not certain or capable of being made certain, held, would...
 Applicability---Agreement is void only when it is uncertain and  unascertainable---Agreement capable of being ascertaine...
 Vague contract---When not enforceable. Section 29 is based upon  the principle that the contracting parties must be show...
 Vague contract---When not enforceable. Section 29 is based upon  the principle that the contracting parties must be show...
 Terms of contract not ascertainable---Contract void and enforceable. Held: The document being incomplete, as its terms a...
30. Agreement by way of wagervoid. Agreements by way of wager are void; and no suit shall be brought for  recovering anyt...
Wagering contract.--- This section represents the whole law of wagering entracts now in  force.---There is no technical o...
    In a case of life insurance, Fulton J. said: "What is the meaning of the phrase    agreements by way of wager in S. 3...
 There is no wager unless both parties run the risk of loss  and both parties have a chance of gain. Where two  wrestlers...
By way of wager"---   There is no distinction between the expression "gaming and wagering," and the expression "by way of...
 On the other hand, the modus operandi may be such as to raise a presumption  against the existence of a common intention...
 The presumption against a wager was applied in a case where the transactions were in  Government paper to the extent of ...
Teji mandi transaction.--- Teji mandi contracts were thus described; "It would appear that what happens  in a contract of...
Agreements between Pakka Adatia and hisconstituents.--- It was at one time held in some Bombay cases that a Pakka adatia ...
 Agreement collateral to wagering contracts.---Thus for our observations are confined to suits between the principal part...
 There is no statute which declares agreements collateral to wagering contracts  to be void. Nor is there anything in the...
 Conversely, an agent who has received money on account of a wagering  contract is bound to restore the same to his princ...
 But the transaction in respect of which the brokerage, commission, or  losses are claimed must amount to a wagering agre...
 An agreement to settle differences arising out of a nominal  agreement for sale which was really a gamble is no less voi...
 Speculative transactions.---Speculative transactions must be distinguished from  agreements by way of a wager. This dist...
 There is no law against speculation, as there is against gambling. It may well be  that the defendant is a speculator wh...
   Oral evidence of agreement being by way of wager.---Though an agreement in writing may    ostensibly be for the purcha...
 ." In a still later case Davar J. said: "What the Court has to do is not simply to  look at the transactions as they app...
 To determine the general character of the plaintiffs business, the Court ought  to inquire how other contracts that may ...
 Promissory note for debt due on a wagering contract.---Agreements by  way of wager being void, no suit will lie on a pro...
Lotteries.---   S. 294.A of the Indian Penal Code makes it penal to keep any office or place for the purpose of    drawin...
 What is a Lottery?---"Lotteries ordinarily understood are games of chance in  which the event of either gain or loss of ...
 In a suit upon the bond it was contended that the transaction was illegal as  being a lottery within the meaning of the ...
 Default by Bank---Recovery of security by Bank---  Relationship between respondent Bank and appellant firm-  --One of ag...
Wagering Contract--- Such contracts are void---No suit for recovery of money can be  brought on such contract. A wagering...
Thanks we will continue…..Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,   143
What is a wager?--- A wager has been defined as a contract by A to pay money to B, on the  happening of a given event, in...
Contracts with the MinorDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com,                 145
Who are competent to contract  Sec 11 of the Indian contract Act 1872.    Who are   competent to contract –       Every ...
Cont…   Thus, the section declares the following persons   are not competent to contract  minors,  persons of unsound mi...
Cont..  Sec. 3 of the Indian Majority Act, 1875 provides as   follows: “Every person domiciled in India shall be deemed t...
Cont…  Sec 10 requires that the parties to a contract must be competent   and sec 11 declares that a minor is not compete...
Cont…  Sec 10 and Sec 11 had, therefore, quite naturally given   rise to a controversy about the nature of minor’s   agre...
Mohoribibi v Dharmodas Ghose (1903) PrivyCouncil  The plaintiff, a minor mortgaged his houses in favour of the   defendan...
 The money lenders only request was that the relief   should be made subject to the condition of the   minor’s repaying h...
Developments after Mohribibi case  In its subsequent pronouncement in   Subramanyam v Subba Rao AIR 1948 PC 25.  the Priv...
Cont… endowment of property for religious purposes by   guardians on behalf of minors, being within their   competence of ...
 In todays society it does not seem to be possible,   much less desirable for law to adhere to the categorical   declarat...
Cont..  The Privy council had therefore to modify its   earlier decisions.  This trend is evidenced by the decision of t...
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Contract laws

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Essentials of contract
Offer
Acceptance
Consideration
Free consent
Voidable agreements
Void agreements
Kinds of contracts
Wagering agreements
Contingent Contract
Quasi contract
Performance of contract
Breach of contract
Remedies

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Contract laws

  1. 1. Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 1
  2. 2. Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 2
  3. 3. Agenda Essentials of contract Offer Acceptance Consideration Free consent Voidable agreements Void agreements Kinds of contracts Wagering agreements Contingent Contract Quasi contract Performance of contract Breach of contract Remedies Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 3
  4. 4. Three Pillars of The Contract Offer Acceptance Consideration Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 4
  5. 5. What is a contract?Section 2(h)“An agreement enforceable by law is acontract”.Thus,Contract = Agreement + Enforceability at Law Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 5
  6. 6. Agreement? Section 2(e) Promise/(s) Promise/(s) = Agreement (in exchange for) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 6
  7. 7. Promise? 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 7
  8. 8. Acceptance Section 2(b) Giving of assent to the proposal. Enforceability by Law Agreements which are not enforceable Illegal/unlawful agreements, e.g., to smuggle/to kill Social Agreements (Balfour vs. Balfour) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 8
  9. 9. Agreements Declared Voidunder ICA e.g.  Agreement with or by a minor  Agreement in restraint of trade  Marriage brokerage contract  Wagering/Betting Agreements Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 9
  10. 10. Kinds of Contracts From the point of view of Enforceability  Void  Voidable  Valid Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 10
  11. 11. Void Agreement vs. Void Contract 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 11
  12. 12. Valid Contract 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 12
  13. 13. 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 13
  14. 14. Valid Contract (‘Object’ and ‘Consideration’ usually overlap. However, there may be difference at times e.g., object may be to kill competition and for that purpose in view, a senior manager of the competitor may be paid a certain amount to give unrealistically high quotation.) Here: Object is to kill competition. Consideration is : (i) payment of money (ii) giving high quotations Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 14
  15. 15. Valid Contract7. 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 15
  16. 16. Valid Contract9. 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 16
  17. 17. Void vs. Illegal Agreements 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 17
  18. 18. Specific and General Offer 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 Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 18
  19. 19. Specific and General Offer 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 19
  20. 20. Offer vs. Invitation to offer 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 20
  21. 21. Special Terms in a ContractExamples: 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 21
  22. 22. Cross Offers & Counter Offers 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 22
  23. 23. Contracts through Post 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 Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 23
  24. 24. As against the proposer 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 24
  25. 25. Communication of Revocation 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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 25
  26. 26.  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. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 26
  27. 27. ConsiderationSection 2(d) “When at the desire of the promisor the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain form doing something, such act or abstinence or promise is called a consideration for the promise”. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 27
  28. 28. Consideration  At the desire of the promisor  Promisee or any other person  Past, present or future  Such act, abstinence or promise is called consideration Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 28
  29. 29. At the desire of the promisorDurga Prasad V. Baldeo 1880 Facts: The plaintiff on the order of the collector of a town, built at his own expense, certain shops in a bazar. The shops came to be occupied by the defendants who, in consideration of the plaintiff having expended money, in the construction, promised to pay him on commission on articles sold through their agency in the bazar. The plaintiffs action to recover the commission was rejected. The act was the result not of the promise but of the collector’s order. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 29
  30. 30. Promisee or any other person As long as there is a consideration for a promise, it is immaterial who has furnished it. It may move from the promisee, or,if the promisor has no objection, from any other person Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 30
  31. 31. Privity of Contract and Privity ofConsideration English LawIn the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it, consideration must have been given by him. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 31
  32. 32. English Law 1. Consideration must move from the promisee and the promisee only. If it be furnished by any other person, the promisee becomes a stranger to the consideration and, therefore, can not enforce the promise. 2. A contract can not be enforced by a person who is not a party to it even though it is made for his benefit. He is stranger to the contract and can claim no rights under it. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 32
  33. 33. Tweddle v.Atkinson30 LJ QB218 1861The court of Queens Bench refused to allow a beneficiary who is not a party to a contract to enforce the contract.Fact: The plaintiff who was to be married to the daughter of one G and in consideration of this intended marriage G and the plaintiffs father entered into a written agreement by which it was agreed that each would pay the plaintiff a sum of the money. G failed to do so and the plaintiff sued his executors. Whiteman judge considered it to be an established principle “ that no stranger to the consideration can take advantage of a contract, although made for his benefit”. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 33
  34. 34. Tweddle v.Atkinson30 LJ QB218 1861 JudgmentThus, although the sole object of the contract was to secure a benefit to the plaintiff, he was not allowed to sue as the contract was made with his father and not with him.The case laid the foundation of what subsequently came to be known as the doctrine of “ privity of contract”.This principle was affirmed by the House of Lords in Dunlop Pneumatic Tyre Co. V. Selfridge & Co. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 34
  35. 35. Dunlop pneumatic tyre Co., Plaintiff V.Selfridge & Co., Defendant, 1915 Facts: Plaintiffs sold certain goods to one Dew & Co. and secured an agreement from them not to sell the goods below the list price and that if they sold the goods to another trader they would obtain from him a similar undertaking to maintain the price list. Dew & Co. sold the motor tyres to the defendants who agreed not to sell the tyres to any private customer at less than the list prices. The plaintiff sued the defendant for breach of this contract. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 35
  36. 36. Dunlop pneumatic tyre Co., Plaintiff V.Selfridge & Co., Defendant, 1915 Judgment: It was held by Lord Viscount HALDANE that assuming that the plaintiffs were undisclosed principals no consideration moved from them to the defendants and that the contract was unenforceable by them Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 36
  37. 37. Sec 25. An agreement withoutconsideration is void unlessClause (i) It is in writing and registered.It is expressed in writing and registered under the law for the time being in force for registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other; Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 37
  38. 38. Sec 25. An agreement withoutconsideration is void unless Clause(ii) or is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which which the promisor was legally compellable to do ; Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 38
  39. 39. Sec 25. An agreement withoutconsideration is void unless Clause (iii) or is a promise to pay a debt barred by limitation-It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of the suits Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 39
  40. 40. Explanations 1. Nothing in section 25 shall affect the validity, as between the donor and donee, of any gift actually made 2. An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate ; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent to the promisor was freely given. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 40
  41. 41. Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 41
  42. 42. Section 10 of Indian Contract ActWhat agreements are contracts .– All agreements arecontracts if they are made by the free consent of partiescompetent to contract, for a lawful consideration andwith a lawful object, and are not hereby expresslydeclared to be void. Nothing herein contained shall affect any law in force in India and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 42
  43. 43. By Dr. Tabrez Ahmad, Professor of LawDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 43
  44. 44. Vitiating Factors A contract may be tainted by defects that could affect its validity making it void, voidable, illegal or unenforceable. Vitiating factors include:1. Mistake2. Coercion and Duress3. Undue Influence4. Unconscionable contracts5. Fraud6. Misrepresentation7. Mistake8. Minor9. Illegality10. Void agreements Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 44
  45. 45. Definition According to sec. 10 free consent is an essential requirement of a contract. Sec. 14 defines “free consent”. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 45
  46. 46. Sec 14 “free consent”Sec 15 to 18 Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 46
  47. 47. Vitiating factors and their effectWhere consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.Where consent is caused by mistake, the agreement is void. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 47
  48. 48. CoercionSec 15.“Coercion” is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (XLV of 1860), or the unlawful detaining, or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.Explanation- It is immaterial whether the Indian Penal Code (XLV 1860), is or is not in force in the place where the coercion is employed. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 48
  49. 49. Techniques of causing coercionConsent is said to be caused by coercion when it is obtained by pressure exerted by either of the following techniques:(1) Committing or threatening to commit any act forbidden by the Indian Penal Code; or(2) Unlawfully detaining or threatening to detain any property. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 49
  50. 50. DuressDuress = actual or threatened violence, or unlawfulrestraint or threats, directed towards the contracting partyor a member of his closed family.Effect : contract voidableBarton v Armstrong [1975] 2 All ER 465: former chairmanthreatened to kill the MD unless company bought back hisshares – co did so – held: voidableRationale: no free choice ; negate consent no genuineintention to contract Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 50
  51. 51. Economic duressEconomic duress = Apparent consent is induced byillegitimate economic pressure from the other partyPau On v Lau Yiu Long [1980] A C 614: consent isrevocable  contract is voidableRemedy: voidableRight to avoid may be lost if the innocent party chooses toaffirm (The Atlantic Baron [1979] QB 705)) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 51
  52. 52. Coercion Duress or Menace1. Indian Law 1. English Law2. Definition is wide 2. Definition is Narrow3. It includes the unlawful 3. It consist in actual or detention of property also. threatened violence or Coercion may be committed by imprisonment of the contracting any person, not necessarily a party or his wife, parent or child party to the contract. It need by the other party or by any one not be directed against the acting with his knowledge and contracting party. It may be for his advantage directed against any person, even if he is a stranger. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 52
  53. 53. Undue influenceDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 53
  54. 54. Undue InfluenceSec. 16 of the Indian Contract Act 1872 defines Undue Influence. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 54
  55. 55. Undue influence A party to a transaction, though consenting to it, may not give a free consent because he is exposed to such influence from the other party as to deprive him of the free use of his judgment. In such a case, the transaction will be set aside. If property has passed, equity will order restitution, and, if necessary, follow the property into the hands of third parties. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 55
  56. 56. More than mere influence must be proved, so as to render influence as ‘undue’ in the language of law.In Lingo Bhimrao Naik V. Dattatraya Shripad Jamadagni, the diffrence between legitimate persuation and undue influence has been described: Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 56
  57. 57. Legitimate persuasion Undue influence1. Persuasion, appeal to the 1. Pressure of whatever affections or ties of character, whether acting on kindred, to a gratitude of the fear or the hopes, if so sentiment for past exerted as to overpower the services, or pity for volition without convincing the future destitution or the judgment, is a species of like are all legitimate and restraint under which no valid may be fairly passed on a contract or transaction can be promisor. made Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 57
  58. 58. Legitimate persuasion Undue influence2. A party may be led but 2. Importunity or threats suchnot driven and his will as the promisor has not the courage to resist, moral commandmust be the offspring of asserted and yielded for the sakehis own volition and not of peace and quiet, or of escapingsomeone else’s. from distress of mind or social discomfort, these if carried to a degree in which the free play of the promisor’s judgment, discretion or wish is overborne, will constitute undue influence, though no force is either used or threatened. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 58
  59. 59. Undue InfluenceConditions:(1) A relationship between the parties;(2) One party acquired over another a measure of influence or ascendancy; and(3) The ascendant person takes unfair advantage.(see Royal Bank of Scotland plc v Etridge (No.2) [2001] 3 WLR 1021, 1029; Bank of China (Hong Kong) Ltd v Wong King Sing [2002] 1 HKLRD 358) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 59
  60. 60. Undue Influence2 types of undue influence:1. Actual undue influence2. Presumed undue influence Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 60
  61. 61. Actual Undue InfluenceConditions:1. The wrongdoer had the capacity to influence the complainant;2. Influence was in fact exerted;3. Influence was undue;4. The effect: the complainant enter into the contract- sufficient: the influence was a significant reason for causing- no need to prove manifestly disadvantageEffect: Contract voidable Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 61
  62. 62. Actual Undue InfluenceWilliams v Bayley (1866) LR 1 HL200; Diners Club v Ng Chi Sing [1987] 1 HKC 78: father compelled to guarantee son’s debt – guarantee: voidable Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 62
  63. 63. Presumed undue influenceConditions:1. A relationship of trust and confidence between the wrongdoer and the innocent party;2. The nature of the relationship is of a nature that it is fair to presume that the wrongdoer had abused that relationship – a rebuttable presumption3. Procuring the innocent party to enter into contract; and4. The contract was manifestly disadvantageous to the innocent party.Undue influence can be rebutted by:a. The complainant had exercise free and independent will; orb. The complainant had full knowledge and could not have been misled; orc. The complainant had competent and independent advice from another. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 63
  64. 64. Unconscionable contractsThe law takes a further step in protecting the innocent under the doctrine of “unconscionable contracts”.Commercial Bank of Australia v Amedio (1983) 151 CLR 447 per Mason J: Undue influence: the will of innocent party was not independent Unconscionable contract: disadvantage position (e.g. poverty, sickness, age, sex, infirmity of body and mind, drunkeness, illiteracy, lack of education, lack of assistance or explanation where assistance is necessary) vis-à-vis the other party [and the other party knew it] Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 64
  65. 65. Unconscionable contractsThe Unconscionable Contract Ordinance (Cap. 458)- A consumer protection legislation (others being: SOGO, Control of Exemption Clauses Ordinance, MO)- Applies only in consumer sales- The court may refuse to enforce, enforce the remainder of the contract, limit/revise/alter the unconscionable part of the contract- The court may take the initiative to examine the unconscionble provisions- List of matters the court will consider: relative bargaining positions of the parties, etc.See Hang Seng Credit Card Ltd v Tsang Nga Lee & Others [2000] 3 HKC 269 : credit card debt plus costs on indemnity basis – falls under Cap 458 – “greedy bank” case – unconscionable contract Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 65
  66. 66. Doctrine of Inequality of BargainingPowerThere are cases under the English law, where equity intervened not because the terms were harsh or oppressive, but because it refused to allow one party to take advantage of the others weakness or need. The pressure in these cases was not of undue influence or personal pressure, but arose because the other party took advantage of its economic power and necessity of the vendor or the borrower which has been termed as pressure resulting from an inequality of bargaining position. This doctrine has been applied as an independent principle. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 66
  67. 67. Lloyds Bank Ltd V Bundy[1974] 3 All ER 797A further guarantee and a charge were given by the father to a bank on the advice of the bank manager in regard to the debt of his son. The father was held to have complete faith and did not get outside advice. The court of appeal held that a special relationship of confidence existed between the bank and the father and the last guarantee and charge were liable to be set aside for undue influence. Lord denning considered them voidable on the large ground of inequality of bargaiening powers. He stated: Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 67
  68. 68. “There are cases in our books in which the courts will set aside a contract, or a transfer of property, where the parties have not met on equal terms- when one is so strong in the bargaining power and the other so week that, as a matter of common fairness, it is not right that the strong should be allowed to push the weak to the wall” Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 68
  69. 69. Central inland water transport corporation Ltd. VBrojonath Ganguly AIR 1986 SC 1571The Supreme Court considered the the question whether relief could be granted for an unconscionable bargain, and under which head should it fall. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 69
  70. 70. FraudDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 70
  71. 71. FraudSec 17 of the Indian Contract Act 1872 defines fraud. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 71
  72. 72. Ingredients of fraudAnalysis of Sec 17(1) shows the following ingredients:(i) there should be a suggestion as to a fact ;(ii) the fact suggested should not be true;(iii) the suggestion should have been made by a person who does not believe it to be true; and(iv) the suggestion should be made with intent either to deceive or to induce the other party to enter into the contract. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 72
  73. 73. RepresentationA representation is a statement of fact, past or present; it is distinct from a statement of opinion, though in certain circumstances a statement of opinion may be regarded as a statement of fact. In order to enable the representee to avoid the contract, the fraudulent misrepresentation has to be material, i.e., such that a reasonable man would have been influenced by it in deciding whether or not to enter into the contract. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 73
  74. 74. Ambiguous StatementWhere the representor makes an ambiguous statement, the person to whom it is made must prove that he understood that statement in the sense that it was in fact false. The representor will be guilty of fraud if he intended the statement to be understood in that sense, and not if he honestly believes it to be true, but the person relying on it understands it in a different sense. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 74
  75. 75. Active Concealment of FactsIt is a fraud where a party to the contract knows or believes a fact to be true, but conceals it actively from the other party with a view to induce that person to enter into a contract. This clause must be read with the explanation, under which mere silence does not amount to fraud. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 75
  76. 76. Mere non discloser of some immaterial facts would not per se give a right to rescission, unless it is further found that the consent has been secured by practicing some deception.Where a seller sold a property already sold by him to a third person, his conduct amounted to active concealment and fraud, and the could recover the price despite the agreement that the seller could not be responsible for defect in title. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 76
  77. 77. Mere Silence is no fraudWhen Silence is fraudDuty to Speak ( Contracts Uberrima fidei)Law of Caveat EmptorLaw of Caveat Vendetta Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 77
  78. 78. Damages for fraudThe principles applicable in assessing damages for fraudulent misrepresentation have been stated by Lord Browne Wilkinson inSmith New Court Securities Ltd. V Scrimgeour Vickers ( Asset Management ) Ltd. [1996] 4 All ER 769 (HL) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 78
  79. 79. MisrepresentationDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 79
  80. 80. MisrepresentationSec. 18 of the Indian Contract Act 1872 defines Misrepresentation.When a person making a false statement believes the statement to be true and does not intend to mislead the other party to the contract, it is known as “Misrepresentation”. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 80
  81. 81. Breach of legal dutyFor example, section 57, Indian Easement Act, 1882 lays down that the grantor of a license is bound to disclose to the licensee any defect, which is likely to be dangerous to the person or property of the licensee, of which the grantor is aware but the licensee is not. Omission to make such a disclosure, if it is without any intention to deceive, would amount to misrepresentation.If one party, acting innocently, causes another party to make a mistake as to the substance of the thing which is the subject of the agreement, there is said to be misrepresentation. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 81
  82. 82. Negligent Misrepresenttaion Negligent misrepresentation is one made carelessly or without reasonable grounds for believing it to be true; but it can not be so regarded unless the representor owed a duty to the representee to be careful. There can be liability in negligence in respect of an innocent though careless misstatement which causes financial loss, but where there is specific disclaimer of responsibility there is no liability. The responsibility exists even where there is no fiduciary relationship between the parties. In Derry V Peek (1889) 14 A.C 337, it was held that the negligent misstatement was one made carelessly or without reasonable grounds for believing it to be true; but it could not be so regarded unless the representor owed a duty to the representee to be careful. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 82
  83. 83. In a later caseNocton v. Ashburton (1914-15) All ER 45, a solicitor was sued by his client for giving wrong advice whereby he was induced to release a part of the security and thereby the security became insufficient and it was also alleged that the advice was given to benefit himself ( the solicitor) and that the solicitor knew that the security will become insufficient.The House of Lords held that the mortgagee was entitled to relief for the breach of duty by the solicitor towards his clients, as the fiduciary relationship required a duty to take care. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 83
  84. 84. In Hedley Byrne & Co. Ltd v Heller & Partner Ltd, (1963) 2 All ER 575.Advice given in the course of social relationships would not be a ground of liability, they also made it clear that any special relationship will suffice. In case of professional relationship, even where there is no contract between the parties it would give rise to a duty of care whenever the representor knew that the representee was likely to act on the representation. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 84
  85. 85. MisrepresentationMisrepresentation = a false representation of fact made orally or in writing or by conduct. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 85
  86. 86. MisrepresentationRepresentation must be:1. On existing facts2. On false existing factsShum Kong3. On false material existing facts4. Induce the innocent contracting party to enter into the contract5. the innocent party has suffered loss as a result of such inducementSee Shum Kong v Chu Ting Lin [2001] HKEC 651 – sale of a village house (own property, 700 sq.ft) with garden (leased) under misrepresentation Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 86
  87. 87. MisrepresentationDistinguish from:1. Future facts2. Intention of future conduct3. Opinion Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 87
  88. 88. Misrepresentation2 types of misrepresentations:(1) Fraudulent(2) Innocent(3) Negligent Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 88
  89. 89. Fraudulent misrepresentation= a false statement made by a person with a dishonest (“fraud”) intentFraud is proved if the misrep is made by the maker:1.Knowingly2.Without belief in its truth, or3.Recklessly (don’t care if it is true or not)An honest belief at the material time is a good defence:Derry v Peek (1889) 14 App Cas 337: DIR rep that the company couldrun trams by steam or mechanical power – reality: it could not do so –DIR held an honest belief- Held: good defenceSmith New Court Securities Ltd v Scrimgeour Vickers (AssetManagement) Ltd [1992] BCLC 1104 : D said that there wereinterested parties to buy the shares and led P to purchase them –reality: no interested buyer and D knew that at the time of making repHeld: fraud Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 89
  90. 90. Fraudulent misrepresentationRemedies: depends on whether fraudulent misrep hadbecome a term of the contract :a. Become a term  the other party may: (1) rescind the contract, or (2) affirm the contract and claim damages for breach of contract, (3) affirm the contract and claim damages under the tort of deceit b. Not become a term  the other party may: (1) rescind the contract, and/or (2) claim damages under the tort of deceit Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 90
  91. 91. Innocent misrepresentation= false statement honestly believing to be true and has reasonable grounds to believe so up to the moment of contractingRemedies: Rescission (not plus damages) Misrepresentation Ordinance s. 3(2) : Damages in lieu of rescission if equitable Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 91
  92. 92. Negligent misrepresentationElements to be proved:1.a duty on the representor to refrain from making a false statement;and2.The representor is in breach of this dutyDuty exists with special relationships between representor andrepresentee, e.g. professionals in their areas of expertiseRemedies: rescission, damages and/or indemnityMO s.3(2): court has a wide discretion to affirm the contract and awarddamages in lieu of rescission Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 92
  93. 93. Mistakes3 types:1. Common mistakes2. Mutual mistakes3. Unilateral mistakes Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 93
  94. 94. Common mistakesCommon mistakes as to the existence of the subject matter: Couturier v Hastie (1852) 8 Exch 40: contract for the sale of corn – unknown to the parties, corn went bad – Held : no contractCommon mistakes as to ownership of the subject matter: Cooper v Phibbs (1867) 2 LR 2 HL 149: contract for sale of a fishery- mistake as to ownership – Held: voidCommon mistakes as to quality of the subject matter: Oscar Chess v Williams [1957] 1 All ER 325: unless of some fundamental nature, contract not void. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 94
  95. 95. Mutual mistakesNo meeting of minds – no contractScriven Bros v Hindley [1913] 3 KB 564: mistake as to the lots of goods – Held: no contract Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 95
  96. 96. Unilateral Mistakes Mistake by one party while the other party knows the truth. Mainly on identity of the parties. Normally 3 parties are involved:1. The innocent party who mistakens2. The rogue3. The innocent party who was being mistakened 2 situations:a. Contracts made by correspondenceb. Contracts made face to face Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 96
  97. 97. Contracts made by correspondenceEffect: Contract voidCundy v Lindsay (1876) 1 QBD 348A ordered some handherchiefs from B and sold them to C (being absolutely innocent)Held: A does not have a good title, cannot therefore transfer a good title to C. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 97
  98. 98. Contracts made face to faceContract may be voidable.Phillips v Brooks Ltd [1919] 2 KB 243 A pretended to be a rich and famous person, bought a diamond ring from B. He sold the ring to C, dishonoured the cheque and then disappeared. Held: valid contract and was bound. B cannot claim the ring from C.Levis v Averay [1972] 1 198 – similar result – voidableGist:(1) what the innocent contracting party thought he was contracting with? (2) is the identity vital influence his decision to contract or not ? Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 98
  99. 99. Void Agreements Agreement of which the consideration or the object is not lawful (Sec. 23 and 24) Agreement without consideration (Sec. 25) Agreement in restraint of marriage (Sec. 26) Agreement in restraint of trade (Sec. 27) Agreement in restraint of legal proceedings(Sec.28) Agreement which is ambiguous and uncertain (Sec. 29) Agreement by way of wager ( Sec. 30) Agreement to do an impossible act ( Sec. 56) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 99
  100. 100. Agreement in restraint of trade void Sec. 27 ofthe Indian Contract Act 1872 Exceptions  Sale of Goodwill  Partnership Act, sec. 11, 36, 54  Trade combination  Restraints during employment  Solus or exclusive dealing agreements Gujarat Bottling Co. v Coca Cola Co.(1995) 5 SCC 545 Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 100
  101. 101. Agreements in restraint of legal proceedings void Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 101
  102. 102. Agreements in restraint of legal proceedings voidSec. 28 of the Indian Contract Act 1872.An agreement is void to the extent it restricts absolutely a party from enforcing his contractual rights by usual proceedings in ordinary courts; or if it limits the time within which he may enforce his rights. It saves two types of contracts: (a) those with a stipulation that an arbitration award shall proceed a cause of action, and (b) a contract to refer existing disputes to arbitration. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 102
  103. 103. Restraint of legal proceedingsNo man can exclude himself from the protection of courts by contract. The citizen has the right to have his legal position determined by the ordinary tribunals, except ,subject to contract (a) when there is an arbitration clause which is valid and binding under the law ; and (b) when parties to a contract agree as to the jurisdiction to which dispute in respect of the contract shall be discharged. The section affirms the Common Law. Its provisions appear to embody a general rule recognised in the English Courts which prohibits all agreements purporting to oust jurisdiction of the Courts. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 103
  104. 104. Adsolute restrictionThe sec. 28 does not apply where the restriction is not absolute. Where one out of two competent jurisdictions are excluded by agreement, it does not amount to absolute of ouster jurisdiction, and such a clause does not violate sec. 28. ( ABC Laminart Pvt. Ltd. V AP Agencies, Salem AIR 1989 SC 1239.) Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 104
  105. 105. 26. Agreement in restraintof marriage void. Every agreement in restraint of the marriage of any person, other than a minor, is void. COMMENTS The wide and unguarded language of this section is taken from the draft Civil Code of New York (S. 8.36). It seems probable that a contract limited to not marrying a certain person or any one of a certain definite class of persons would be held good. Apparently such agreements must be held void in India. The Allahabad High Court expressed doubt on the question whether partial or indirect restraint on marriage was within the scope of S. 26. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 105
  106. 106.  The Hindu law recognises polygamy, and as to Muhammadan law a man may have as many as four wives at a time subject to Family Laws restrictions. But neither law binds a man to marry more than one wife. It would seem, therefore, that a provision in a Kabinnamah by which a Muhammadan husband authorises his wife to divorce herself from him in the event of his marrying a second wife is not void, and if the wife divorces herself from the husband on his marrying a second wife, the divorce is valid, and she is entitled to maintenance from him for the period of iddat. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 106
  107. 107.  There is a distinction between restraint on marriage generally and a restraint on remarriage; and a condition in a wakf that if the widow of a co- sharer remarried she should forfeit her right to the profits under the wakf was accordingly upheld. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 107
  108. 108. 29. Agreements void for uncertainty. Agreements, the meaning of which is not certain, or capable of being made certain, are void.Illustration (a) A agrees to sell to B "a hundred tons of oil." There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. (b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 108
  109. 109.  (c) A, who is a dealer in coconut-oil only, agrees to sell to B "one hundred tons of oil." The nature of As trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut-oil. (d) A agrees to sell to B "all the grain in my granary at Bhubaneswar. "There is no uncertainty here to make the agreement void. (e) A agrees to sell to B "one thousand maunds of rice at a price to be fixed by C." As the price is capable of being made certain, there is no uncertainty here to make the agreement void. (f) A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand." There is nothing to show which of the two prices was to be given. The agreement is void. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 109
  110. 110. COMMENTS Ambiguous contracts.---The text and (with one addition) the illustrations of this section follow the draft of the Indian Law Commissioners with only formal variation. The Illustrations are plain, and sufficient to explain the meaning of the section. S. 93 of the Evidence Act provides that when the language of a document is ambiguous or defective no evidence can be given to explain or amend the document. Sec also Ss. 94-97 of the same Act. Neither will the Court undertake to supply defects or remove ambiguities according to its own notions of what is reasonable; for this would be not to enforce a contract made by the parties, but to make a new contract for them. The only apparent exception to this principle is that when goods are sold without naming a price, the bargain is understood to be for a reasonable price. This was probably introduced in England on the assumption that there was an ascertainable market price, and then extended to all cases. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 110
  111. 111.  Where the defendants, describing themselves as residents of a certain place, executed a bond and hypothecated as security for the amount "our property, with all the rights and interest", it was held that the hypothecation was too indefinite to be acted upon. The mere fact that the defendants describe themselves in the bond as residents of a certain place is not enough to indicate their property in that place as the property hypothecated. If they had described themselves as the owners of certain property it would then have been reasonable to refer the indefinite expression to the description. And where the defendant passed a document to the Agra Savings Bank whereby he promised to pay to the manager of the bank the sum of Rs. 10 on or before a certain date "and a similar sum monthly every succeeding month," it was held that the instrument could not be regarded as a promissory note, as it was impossible from its language to say for what period it was to subsist and what amount was to be paid under it. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 111
  112. 112.  Similarly, where in an agreement for the sale of goods, the seller reserves the right to vary the price at will, there is no contract. A compromise stating: "The following five gentlemen shall decide all matters relating to our movable and immovable property" was held to be too ambiguous to be enforced. An agreement to grant a lease when no date of commencement is expressly or impliedly fixed cannot be enforced. But when the commencement of a lease is dependent upon a contingency, which has occurred, the agreement can be enforced. An agreement to pay a certain amount after deductions as would be agreed upon between the parties is void for uncertainty. It has also been held that an agreement to refer an arbitration to a person, who has been described in uncertain terms is void. But where the proprietor of an indigo factory mortgaged to B all the indigo cakes that might be manufactured by the factory from crops to be grown on lands of the factory from the date of the mortgage up to the date of payment of tile mortgage debt, it was held that the terms of the mortgage were not vague, and that the mortgage was not void in law. It has been suggested that an agreement is too uncertain to be enforced if no limit to the time of performance is expressed or can be inferred from the nature of the case. This does not appear acceptable as a general proposition Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 112
  113. 113.  Void agreement, connotation of---Agreements meaning whereof is not certain or capable of being made certain, held, would be void---Where both contracting parties are at consensus ad idem with regard to essential terms of contract, any uncertainty or vagueness which is incapable of being ascertained, would have effect of vitiating contract---In letter of guarantee there was no vagueness or uncertainty, which could vitiate contract. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 113
  114. 114.  Applicability---Agreement is void only when it is uncertain and unascertainable---Agreement capable of being ascertained---Not void. Under section 29 of the Contract Act, it is only when the meaning of an agreement is not certain or capable of being made certain that the agreement becomes void. When, therefore, the sellers told the buyers that each shipment shall be treated as if separate contracts were made for it and they shall be bound to accept it even if this shipment was only in respect of a part of the goods and the buyers agreed to this condition, the agreement is not void as it is capable of being ascertained. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 114
  115. 115.  Vague contract---When not enforceable. Section 29 is based upon the principle that the contracting parties must be shown to be at ad idem with reference to the essential terms of the contract and, therefore, if there is any vagueness or uncertainty incapable of being made certain the contract fails for vagueness. For, in that case the parties cannot be said to agree to the same thing in the same sense. Therefore merely because the terms of the arbitration agreement are capable of different and various interpretations it cannot ipso facto be liable to be struck down as void. It can only be regarded as void for uncertainty if its meaning is not certain or capable of being made certain as provided by section 29. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 115
  116. 116.  Vague contract---When not enforceable. Section 29 is based upon the principle that the contracting parties must be shown to be at ad idem with reference to the essential terms of the contract and, therefore, if there is any vagueness or uncertainty incapable of being made certain the contract fails for vagueness. For, in that case the parties cannot be said to agree to the same thing in the same sense. Therefore merely because the terms of the arbitration agreement are capable of different and various interpretations it cannot ipso facto be liable to be struck down as void. It can only be regarded as void for uncertainty if its meaning is not certain or capable of being made certain as provided by section 29. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 116
  117. 117.  Terms of contract not ascertainable---Contract void and enforceable. Held: The document being incomplete, as its terms are not ascertainable with reasonable certainty, it comes within the mischief of section 29 and is void and by virtue of the provisions of S. 21 (a) of the Specific Relief Act cannot be enforced specifically. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 117
  118. 118. 30. Agreement by way of wagervoid. Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any Wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Exception in favour of certain prizes for horse-racing. This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards to be awarded to the winner or winners of any horse-race. Section 294-A of the Indian Penal Code not affected. Nothing in this section shall be deemed to legalise any transaction connected with horse racing, to which the provisions of section 294-A of the Indian Penal Code apply. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 118
  119. 119. Wagering contract.--- This section represents the whole law of wagering entracts now in force.---There is no technical objection to the validity of a wagering contract. It is an agreement by mutual promises, each of them conditional on the happening or not happening of an unknown event. So far as that goes, promises of this form will support each other as well as any other reciprocal promises. It would have been better if the Courts in England had refused, on broad grounds of public policy, to admit actions on wagers; but this did not occur to the Judges until such actions had become common; and, until a remedy was provided by statute, they could only find reasons of special public policy in special cases, which they did with almost ludicrous ingenuity. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 119
  120. 120.  In a case of life insurance, Fulton J. said: "What is the meaning of the phrase agreements by way of wager in S. 30 of the Contract Act? ...... Can it be that the words mean something different in India from what the corresponding words agreement by way of wagering mean in England? I do not see how such an argument can be maintained, or how the fact that 14 Geo. III. C. 48 is not in force in India affects the question. A certain class of agreements such as bets, by common consent, come within the expression agreements by way of wagers. Others, such as legitimate forms of life insurance, do not, though, looked at from one point of view, they appear to come within the definition of wagers. The distinction is doubtless rather subtle, and probably lies more in the intention of the parties than in the form of the contract. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 120
  121. 121.  There is no wager unless both parties run the risk of loss and both parties have a chance of gain. Where two wrestlers therefore agreed to a contest with a stipulation that the wrestler who failed to appear should forfeit Rs. 500 and that the winner, if the contest took place, should receive a fixed sum out of the gate-money, in a suit to recover the Rs. 500 the defence of gaming and wagering failed Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 121
  122. 122. By way of wager"--- There is no distinction between the expression "gaming and wagering," and the expression "by way of wager," used in this section. The cases therefore bearing on the expression used are still useful in construing the expression "by way of wager," used in the present section. Wagering contracts may assume a variety of forms, and a type with which the Courts have, constantly dealt is that which provides for the payment of differences in stock transactions, with or without colourable provisions for the completion of purchases. Such provisions, if inserted, will not prevent the Court from examining the real nature of the agreement as a whole. "In order to constitute a wagering contract neither party should intend to perform the contract itself, but only to pay the differences". It is not sufficient if the intention to gamble exists on the part of only one of the contracting parties. Contracts are not wagering contracts unless it be the intention of both contracting parties at the time of entering into the contracts under no circumstances to call for or give delivery from or to each other. It is not necessary that such intention should be expressed. If the circumstances are such as to warrant the legal inference that they never intended any actual transfer of goods at all, but only to pay or receive money between one another according as the market price of the goods should vary from the contract price at the given time, that is not a commercial transaction, but a wager on the rise or fall of the market. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 122
  123. 123.  On the other hand, the modus operandi may be such as to raise a presumption against the existence of a common intention to wager. This infrequently happens when agreements of a speculative character are entered into through the medium of brokers, and when, according to the practice of the market, the principals are not brought into contact with each other, nor do they know the name of the person with whom they are contracting, until after the bought and sold notes are executed. Under circumstances such as these, when a party launches his contract orders he does not know with whom the contracts would be made. And this presumption is considerably strengthened when the broker is authorised by the principal to contract with third persons in his (the brokers) own name; for the third person may in such case remain undisclosed even after the contract is made. But the presumption may be rebutted by evidence of a common intention to wager, though the contract has been brought about by a broker. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 123
  124. 124.  The presumption against a wager was applied in a case where the transactions were in Government paper to the extent of about half a crore of rupees, and the plaintiff was both stockbroker and stockjobber, and the defendant was a stockjobber. The magnitude of the transactions in the case was set up by the defendant to support the contention that the transactions were by way of wager, and reliance was placed on the Privy Council decision. But the contention was overruled and the Court said: "In the Privy Council case the defendant was a rice miller or a producer by trade, and. the wager related to quantities of rice enormously out of proportion to his output and capital, deliverable at option from a number of specified mills. Here there is, I think, sufficient proof that the defendant was known in the market as the largest of jobbers, and the capital available for the purchases which he bargained for was at least presumably to be supplied by the constituents for whom a jobber is ordinarily supposed to be acting." Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 124
  125. 125. Teji mandi transaction.--- Teji mandi contracts were thus described; "It would appear that what happens in a contract of this nature is that one party pays a premium to the other party thus acquiring an option to buy and sell, as he decides, a certain quantity of gold at a certain rate on a certain date. Either on, or some date prior to, that date the put. chaser decides whether he will buy or sell. According to his decision, communicated to his broker, the broker enters into a contract with some third person in order to meet the situation. On the due date the parties can either take or give delivery of the stipulated quantity of gold or settle on the difference." In a Bombay case Beaman J. held that these transactions were by way of wager, and they were void under this section, and adhered to this view in a later case. But at present time the presumption is that a teji mandi is not a mere wagering transaction; and this, it is submitted, is the correct rule. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 125
  126. 126. Agreements between Pakka Adatia and hisconstituents.--- It was at one time held in some Bombay cases that a Pakka adatia was merely the agent of his constituent, and that therefore no transaction between them could be a wagering transaction. However, it was held on the evidence of custom that as regards his constituent the pakka adatia was a principal and not a disinterested middleman bringing two principals together. Since that decision it has been held by the High Court of Bombay in two cases that a transaction between a pakka adatia and his constituent may be by way of wager like any other transaction between two contracting parties, and that the existence of the pakki adat relationship does not of itself negative the possibility of a contract being a wagering contract as between them. One of those cases was taken to the Privy Council, and though the decree of the High Court of Bombay was reversed, the Privy Council taking a different view of the facts, the principle laid down by the Bombay High Court was affirmed by the tribunal. The same view has been taken by the High Court of Allahabad, and the East Punjab High Court. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 126
  127. 127.  Agreement collateral to wagering contracts.---Thus for our observations are confined to suits between the principal parties to a contract. Different considerations apply where the suit is brought by a broker or an agent against his principal to recover his brokerage or commission in respect of transactions entered into by him as such, or for indemnity for losses incurred by him in such transactions, on behalf of his principal. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 127
  128. 128.  There is no statute which declares agreements collateral to wagering contracts to be void. Nor is there anything in the present section to render such agreements void. It has accordingly been held that a broker or an agent may Successfully maintain a suit against his principal to recover his brokerage, commission, or the losses sustained by .him, even though contracts in respect of which the claim is made are contracts by way of wager. It does not follow because a wagering contract is void that contracts collateral to it cannot be enforced. The fact that a person has constituted another person his agent to enter into and Conduct wagering transactions in the name of the latter, but on behalf of the former (the principal) amounts to a request by the principal to the agent to pay the amount of the losses, if any, on those wageing transactions and if such payment is made, the agent is entitled to recover the amount from him. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 128
  129. 129.  Conversely, an agent who has received money on account of a wagering contract is bound to restore the same to his principal. A deposit made by one gambler with another, as security for the observance of the terms of a wagering agreement, can be recovered, unless the amount has in fact been appropriated for the purpose for which it has been deposited. On the same principle a suit will lie to recover a sum of money paid by the plaintiff for the defendant and at his request, though such sum represents the defendants loss on a bet. Similarly money lent for gaming purposes, or to enable the defendant to pay off a gambling debt is recoverable. Such transactions are neither against the provisions of the present section nor of S. 23. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 129
  130. 130.  But the transaction in respect of which the brokerage, commission, or losses are claimed must amount to a wagering agreement, and it is no answer to a suit by a broker in respect of such a claim against his principal that, so far as the defendant was concerned, be entered into the contracts as wagering transactions with the intention of paying the differences only, and that the plaintiff must have known of the inability of the defendant to complete the contracts by payment and delivery, having regard to his position and means. It must, further, be shown that the contracts which the plaintiff entered into with third persons on behalf of the defendant were wagering contracts as between the plaintiff and those third persons. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 130
  131. 131.  An agreement to settle differences arising out of a nominal agreement for sale which was really a gamble is no less void than the original wagering transaction. The result therefore is that though an agreement by way of wager is void, a contract collateral to it or in respect of a wagering agreement is not void. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 131
  132. 132.  Speculative transactions.---Speculative transactions must be distinguished from agreements by way of a wager. This distinction comes into prominence in a class of cases where the contracts are entered into through brokers. The modus operandi of the defendant in this class of cases is, when he enters into a contract of purchase, to sell again the same quantity deliverable at the same time in one or more contracts, either to the original vendor or to some one else, so as either to secure the profit, or to ascertain the loss, before the vaida day; and, when he enters into a contract of sale, to purchase the same quantity before the vaida day. This mode of dealing, when the sale and purchase are to and from the same person, has the effect, of course, of cancelling the contracts, leaving only differences to be paid. When they are to different persons, it puts the defendant in a position vicariously to perform his contracts. This is, no doubt, a highly speculative mode of transacting business; but the contracts arc not wagering contracts, unless it be the intention of both contracting parties at the time of entering into the contracts, neither to call for nor give delivery from or to each other. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 132
  133. 133.  There is no law against speculation, as there is against gambling. It may well be that the defendant is a speculator who never intended to give delivery, and even that the plaintiffs did not expect him to deliver; but that does not convert a contract, otherwise innocent, into a wager. Speculation does not necessarily involve a contract by way of wager, and to constitute such a contract a common intention to wager is essential. It is in cases of the above description that there is a danger of confounding speculation, or that which is properly described as gambling, with agreements by way of wager; but the distinction in the legal result is vital. The Contract Act in section 30 provides that agreements by way of wager are void; but that a transaction may fall within this provision of the law there must be at least two parties, the agreement between them must be by way of wager, and both sides must be parties to that wager. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 133
  134. 134.  Oral evidence of agreement being by way of wager.---Though an agreement in writing may ostensibly be for the purchase and sale of goods deliverable on a certain day, oral evidence is admissible to prove that the intention of the parties was only to pay the difference, the burden of proof, of course, being on the party who alleges that it was a wager. Such "intention" is a "fact" within the meaning of S. 3 of the Evidence Act (see cl. 1, illustration (d), and it may be proved by oral evidence under S. 92, proviso 1, of the same Act, as, if proved, it would invalidate the agreement under the provisions of the section now under consideration. The same principle has been reiterated in some cases. Thus in a Bombay case Jenkins C.J. said; "The law says that we must find, as best we can, the true intention of the parties; we must not take them at their written word, but we must probe among the surrounding circumstances to find out what they really meant.....We are not, and we must not be, bound by the mere formal rectitude of the documents if in fact there lurks behind them the common intention to wager, and parties cannot be allowed to obtain from the Courts any sanction for their wagers merely because they use a form which is not a true expression of their common purpose and intention. The surrounding circumstances and the position of the parities and the history of dealings of this class are legitimate, though not .exclusive, matters for our investigation into the true intention of the parties." Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 134
  135. 135.  ." In a still later case Davar J. said: "What the Court has to do is not simply to look at the transactions as they appear on the face of them, but to go behind and beyond them, and ascertain the true nature of the dealings between the parties by probing into surrounding circumstances and minutely examining the position of the parties and the general character of the business carried on by them." In this class of suits it would be almost idle to expect to get at the truth unless the Court takes the widest possible outlook consistent with the provisions of the Contract Act; otherwise the result would be that the statute could be violated with impunity by the simple and habitual device of cloaking wagers in the guise of contracts. There can be no question of a wager, if a substantial part of the goods has been delivered. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 135
  136. 136.  To determine the general character of the plaintiffs business, the Court ought to inquire how other contracts that may have been entered into by the plaintiff with the same defendant, or even with third parties, and relating to the goods in question, were previously performed by the plaintiff, whether by payment of differences or by delivery of goods. Thus where it appeared that at the vaida for which the contracts in question had been made the plaintiff had neither given nor taken any delivery of any cotton, it was held that the evidence tendered by the plaintiff to show that at other vaidas he had given and taken delivery of cotton was admissible, and that the lower Court was wrong in excluding this evidence. Upon the same principle, evidence is admissible to show that in the case of a particular class of contracts, or of contracts relating to a particular commodity, the normal course of dealing is to pay difference only. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 136
  137. 137.  Promissory note for debt due on a wagering contract.---Agreements by way of wager being void, no suit will lie on a promissory note for a debt due on a wagering contract. Such a note must be regarded "as made without consideration"; for "a contract which is itself null and void cannot be treated as any consideration for a promissory note." Suit to recover deposit.---The prohibition contained in this section as regards the recovery of money deposited pending the event of a bet applies only to the case of winners. The winner of a wager or a bet cannot sue to recover the amount deposited by the loser with the stake-holder, but it is quite competent to the loser to recover back his deposit before the stake-holder has paid it over to the winner. In case, however, governed by the provisions of Bombay Act for Avoiding of Wagers (Amendment) Act, 1865, even a loser cannot recover back the deposit Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 137
  138. 138. Lotteries.--- S. 294.A of the Indian Penal Code makes it penal to keep any office or place for the purpose of drawing any lottery not authorised by Government or to publish any proposal to pay any sum, or to deliver any goods, or to do or forbear doing anything for the benefit of any person on any event or contingency relative or applicable to the drawing of any ticket, lot, number, or figure in any such lottery. Before the enactment of this section of the Code, lotteries not authorised by Government were prohibited by the Private Lotteries Act, 1844. The Act declares all such lotteries "common and public nuisances and against law." The Act was repealed by the Indian Penal Code Amendment Act, 1870, and in its place S. 294-A was inserted in the Code (see S. 10 of the amending Act). Where a particular association was authorised by the Government by a letter to hold a lottery, the effect was that no prosecution would lie under the criminal law. But a sale or purchase of a ticket in such a lottery would still be a wagering contract under this section as well as under the Bombay Act; for the Government could not by a letter overrule the Central Act of the Acts of the Provincial Legislature. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 138
  139. 139.  What is a Lottery?---"Lotteries ordinarily understood are games of chance in which the event of either gain or loss of the absolute right to a prize or prizes by the person concerned is made wholly dependent upon the drawing or casting of lots, and the necessary effect of which is to beget a spirit of speculation and gaming that is often productive of serious evils." It was so stated in a Madras case where an agreement was entered into between twenty persons whereby it was provided that each should subscribe Rs. 200 by monthly installments of Rs. 10, and that each in his turn, as determined by lot, should take the whole of the subscriptions for one month. The defendant contributed Rs. 10 every month for a period of ten months, and in the tenth month he got his lot of Rs. 200. Thereupon a bond was taken from him by the plaintiff, who was the agent in the business, for the remaining Rs. 100 in order to ensure the furture regular payment of monthly installments for the further period often months. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 139
  140. 140.  In a suit upon the bond it was contended that the transaction was illegal as being a lottery within the meaning of the Private Lotteries Act, 1844, and that the suit therefore could not be maintained. It was held that the transaction did not amount to a lottery. The Court said: "Here no such lottery appears to have taken place: It is not the case of a few out of a number of subscribers obtaining prizes by lot. By the arrangement all got a return of the amount of their contribution. It is simply a loan of the common fund to each subscriber in turn, and neither the right of the subscribers to the return of their contributions nor to a loan of the fund is made a matter of risk or speculation. No loss appears to be necessarily hazarded, nor any gain made a matter of chance." A "chit fund" plan under which all subscribers are repaid their capital by "a fixed date, though some determined by lot get more and sooner, is not a lottery. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 140
  141. 141.  Default by Bank---Recovery of security by Bank--- Relationship between respondent Bank and appellant firm- --One of agency---Respondent Bank under obligation to present three bills of lading of foreign Bank before a specified date alongwith Bill of Exchange---Bill of Lading and Bill of Exchange being most integrated parts of same transaction, failure to present full set of bills of lading being immediate cause of non-payment of Bill of Exchange, respondent Bank, held, marred security and not entitled to any decree on basis of bills of exchange Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 141
  142. 142. Wagering Contract--- Such contracts are void---No suit for recovery of money can be brought on such contract. A wagering contract is one by which two persons mutually agree that on determination of a future uncertain event one shall win from the other and the other shall pay a sum of money, there being no other real consideration for the making of such contract. In cases of such contract the intention of the parties .is to be determined as a question of fact. It is to be seen whether actual delivery of the goods is contemplated or only the differences are required to be paid. All contracts by way of gaming or wagering are void and no action can be brought by the winner on a wager, either against the loser or the stake-holder to recover what is alleged to be won. Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 142
  143. 143. Thanks we will continue…..Dr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 143
  144. 144. What is a wager?--- A wager has been defined as a contract by A to pay money to B, on the happening of a given event, in consideration of B paying [this should be "promising to pay"] to him money on the event not happening. But Sir William Ansons definition, "a promise to give money or moneys worth upon the determination or ascertainment of an uncertain event," is neater and more accurate. To constitute a wager "the parties must contemplate the determination of the uncertain event as the sole condition of their contract. One may thus distinguish a genuine wager from a conditional promise or a guarantee": Anson, Law of Contract, 17th ed. 221,222 (i). "But if one of the parties has the event in his own hands, the transaction lacks an essential ingredient of a wager". "It is of the essence of a wager that each side should stand to win or lose according to the uncertain or unascertained event in reference to which the chance or risk is taken." Dr. Tabrez Ahmad, Blog: http://corpolexindia.blogspot.com, 144
  145. 145. Contracts with the MinorDr. Tabrez Ahmad,Blog: http://corpolexindia.blogspot.com, 145
  146. 146. Who are competent to contract  Sec 11 of the Indian contract Act 1872. Who are competent to contract –  Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co146 m,
  147. 147. Cont… Thus, the section declares the following persons are not competent to contract  minors,  persons of unsound mind  persons disqualified by law to which they are subject. Age of majority: The age of majority is generally eighteen years. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co147 m,
  148. 148. Cont..  Sec. 3 of the Indian Majority Act, 1875 provides as follows: “Every person domiciled in India shall be deemed to have attained his majority when he shall have completed his age of eighteen years, and not before. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co148 m,
  149. 149. Cont…  Sec 10 requires that the parties to a contract must be competent and sec 11 declares that a minor is not competent but neither section makes it clear whether, whether if a minor enters into an agreement, it would be voidable at the option or altogether void. What agreements are contracts –  Sec 10- All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co149 m,
  150. 150. Cont…  Sec 10 and Sec 11 had, therefore, quite naturally given rise to a controversy about the nature of minor’s agreement.  The controversy was only resolved in 1903 by the judicial committee of the Privy Council in their well- known pronouncement in Mohoribibi v Dharmodas Ghose. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co150 m,
  151. 151. Mohoribibi v Dharmodas Ghose (1903) PrivyCouncil  The plaintiff, a minor mortgaged his houses in favour of the defendant a money lender, to secure a loan of Rs. 20,000/-. A part of this amount was actually advanced to him. While considering the proposed advance, the attorney, who was acting for the money-lender, received information that the plaintiff was still a minor. Subsequently the infant commenced this action stating that he was under age when he executed the mortgage and the same should, therefore, be cancelled.  The relief of cancellation had to be granted as the plaintiff was entitled to it. .( Under sec 39 of the original Specific relief Act 1877 courts were authorised to order cancellation Dr. Tabrez of void contracts. Now Sec. 31 of the Act of 1963). Ahmad, Blog: http://corp olexindia.b logspot.co151 m,
  152. 152.  The money lenders only request was that the relief should be made subject to the condition of the minor’s repaying him the sum of Rs. 10,500/- advanced as a part of the consideration for the mortgage.  Sec. 64 and sec 65 of the Indian contract act 1872 and Sec 41 of the Specific Relief Act 1877 [ S. 33 of 1963] were in question.  Arguments: Dr. Tabrez Ahmad,  Judgment: Blog: http://corp olexindia.b logspot.co152 m,
  153. 153. Developments after Mohribibi case  In its subsequent pronouncement in Subramanyam v Subba Rao AIR 1948 PC 25. the Privy council overruled earlier decisions and entertained no doubt that it was within the powers of the mother of a minor as a guardian to enter into a contract of sale for the purpose of discharging his fathers debts. Following this decision the Orissa HC in the case of Durga Dr. Tabrez Thakurani v Chintamani, AIR 1982,158, held thatAhmad, Blog: http://corp olexindia.b logspot.co153 m,
  154. 154. Cont… endowment of property for religious purposes by guardians on behalf of minors, being within their competence of was specifically enforceable. The other High Courts have also expressed the view that the doctrine of mutuality should not have been imported into the matter where the contract was within the competence of the guardian and that there is no scope for this doctrine under sec. 20 of the Specific Relief Act 1963. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co154 m,
  155. 155.  In todays society it does not seem to be possible, much less desirable for law to adhere to the categorical declaration that a minors agreement is always “ absolutely void”.  Minors are appearing in public life today more frequently than even before. Dr. Tabrez Ahmad, Blog: http://corp olexindia.b logspot.co155 m,
  156. 156. Cont..  The Privy council had therefore to modify its earlier decisions.  This trend is evidenced by the decision of their Lordships in Srikakulam Subramanyam v Kurra Subba Rao (1949) 75. Lord Morton held that Sec. 11 of the Indian Contarct Act 1872 and the Mohribibi case leave no doubt that a minor can not contract and that if the guardian and the mother had taken no part in this transaction it would have been void. The contract being for the benefit of the minor and within the power of the guardian was held toTabrez Dr. Ahmad, be binding upon him. Blog: http://corp olexindia.b logspot.co156 m,

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