Group5 LAWReport IndianContractAct1872

Indian Contract Act, 1872
A REPORT ON
THE INDIAN CONTRACT ACT, 1872
PREPARED FOR:
Mr. Prasen Naithani
PREPARED BY:
VIJAY B
SRIRAM D S
SUJATHA G
MOHIT GUPTA
TANVI GUPTA
KUMAR K
ABHINAY PANATI
HEMANTH S
D010
D017
D018
D024
D026
D034
D041
D049
25 MARCH 2014
Page 1
Table of Contents
INTRODUCTION .............................................................................................................................................................................. 3
FEATURES OF A CONTRACT...................................................................................................................................................... 3
ESSENTIAL ELEMENTS OF A CONTRACT ............................................................................................................................ 4
KINDS OF CONTRACTS ................................................................................................................................................................ 4
SPECIAL CASE OF QUASI CONTRACT .................................................................................................................................... 6
OFFER - SECTION 2(A)................................................................................................................................................................. 7
ACCEPTANCE SECTION 2(B) ................................................................................................................................................. 8
CONSIDERATION SECTION 2(D) .......................................................................................................................................... 8
CAPACITY OF PARTIES SECTION 11 ............................................................................................................................... 10
Minor ........................................................................................................................................................................................... 10
Persons of Unsound Mind ................................................................................................................................................... 12
Disqualified Persons.............................................................................................................................................................. 12
FREE CONSENT SECTION 14 .............................................................................................................................................. 14
Coercion ..................................................................................................................................................................................... 14
Undue Influence ...................................................................................................................................................................... 15
Misrepresentation .................................................................................................................................................................. 15
Fraud............................................................................................................................................................................................ 16
LEGALITY OF OBJECT AND CONSIDERATION ................................................................................................................ 18
Void Agreement....................................................................................................................................................................... 19
PERFORMANCE OF CONTRACT ............................................................................................................................................ 21
DISCHARGE OF CONTRACT .................................................................................................................................................... 23
REMEDIES FOR BREACH OF CONTRACT .......................................................................................................................... 26
INDEMNITY ................................................................................................................................................................................... 27
BAILMENT ...................................................................................................................................................................................... 28
PLEDGE OR PAWN ...................................................................................................................................................................... 30
AGENCY ........................................................................................................................................................................................... 31
CASES ............................................................................................................................................................................................... 33
REFERENCES................................................................................................................................................................................. 39
Page 2
INTRODUCTION
The law relating to contracts in India is contained in Indian Contract Act, 1872. It extends to the whole
of India except J&K. The Act was passed by British India and is based on the principles of English
Common Law.
The law of contract is the foundation upon which business is built. The Indian contract act defines a
contract as such: An agreement enforceable by law. A contract, therefore, is an agreement whose
objective is to create a legal obligation to fulfil a promise/duty. Each contract creates some rights and
duties on the contracting parties. Hence this Indian Contract Act deals with the enforcement of these
rights and duties on the parties in India.
A contract determines the circumstances in which promises made by the parties to a contract shall be
legally binding on them. Law of Contract forms the basis for other enactments like sale of goods,
negotiable instruments, insurance, insolvency, partnership etc. In other words, the contract law lays
down the legal rules relating to promises: their formation, performance and enforceability.
FEATURES OF A CONTRACT
A contract essentially consists of two elements: An Agreement & Legal Obligation.
1.
Agreement
A promise is an agreement. Section 2(b) explains a promise as thus: When the person to
whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A
proposal, when accepted, becomes a promise.
An agreement holds the following characteristics:
Plurality of Persons: There must be two or more persons to make an agreement
Consensus-ad-idem: Both parties to an agreement must agree about the subject-matter in the
same sense and same time
2.
Legal Obligation
An agreement to become a contract must give rise to a duty enforceable by law. The Act restricts
the use of the word contract to only those agreements which give rise to legal obligations
between parties. All contracts are agreements but not all agreements are contracts. There is a
presumption that the parties involved intend to create legal relations.
Example: Business agreements like sale of wheat bags at a specific agreed price to a person. An
action of breach of contract can be enforced in this case.
Agreements of moral, social nature like a promise to lunch together, date etc. are not a contract.
Also, obligation to maintain wife and child, obligation to observe laws of the land are not under
contract law.
Page 3
ESSENTIAL ELEMENTS OF A CONTRACT

To be enforced by law, an agreement must possess the essentials of a valid contract as contained in
section 10, 29 and 56. The essentials of a contract are:
01.
02.
03.
04.
05.
06.
07.
08.
09.
10.
Offer and Acceptance

Intention to create legal relations
Lawful Consideration
Capacity of Parties
Free Consent
Lawful object
Writing and Registration
Certainty
Possibility of performance
Not expressly declared void
KINDS OF CONTRACTS
Contracts can be classified based on 3 categories.
a)
From Point Of View of Enforceability

Valid Contract
It is an agreement enforceable by law when all essential elements are present
Void Contract
Such a contract is not void from its inception but subsequent to its formation becomes invalid and has
no legal effect either due to supervening impossibility or subsequent illegality.
A contract becomes void by impossibility of performance after the formation of the contract.
Example:
A and B contracts to marry each other. Before the time fixed for marriage, A goes mad. The contract to
marry becomes void.
A contract also becomes void by subsequent illegality.
Example:
A agrees to sell B 100 bags of wheat at Rs.650 per bag. Before delivery, the Government bans private
trading wheat. The contract becomes void.
Voidable Contract
According to section 2(i), an agreement which is enforceable by law at the option of one or more of
the parties thereto, but not at the option of the other or others, is a voidable contract. Simply put, it is
an agreement enforceable by law at the option of one of the parties/aggrieved party in case of
coercion, fraud etc.
Usually a contract becomes voidable when the consent of one of the parties to the contract is obtained
by coercion, undue influence, misrepresentation or fraud.
Illegal Contract
Illegal agreement, hence void ab-initio if the object or consideration:
forbidden by law
fraudulent
implies injury to person or property
is immoral/opposed to public policy
defeats provisions of law
Page 4
All illegal agreements are void but all void agreements are not necessarily illegal.
Unenforceable Contract
Valid contract but not capable of enforcement due to some technical defect such as absence of
registration etc., or time barred like a bill of exchange or promissory note. For example, an oral
arbitration agreement is unenforceable because the law requires an arbitration agreement to be in
writing.
b)
From Point Of View of Mode of Creation

Express Contract
When both the offer and acceptance constituting an agreement enforceable at law are made in words
spoken or written, it is called an express contract. For example, A tells B on telephone that he offers to
sell his car for Rs. 80000 and B replies in affirmative.
Implied Contract
When both offer and acceptance are made otherwise than words i.e., by acts and conduct of parties, it
is called an implied contract.
Example:
A, a coolie in uniform takes up the luggage of B in a railway station without Bs saying so, and B allows
him to do so, it is implied that B agrees to pay A.
Quasi Contract
Such a contract doesnt arise by agreement, but the law recognizes a contract under special
circumstances. It is based upon the equitable doctrine of unjust enrichment.
c)
From Point Of View of Extent of Execution

Executed Contract
A contract is said to be executed when both parties to a contract have completely performed their
share of obligation. Even when one party has performed their share of obligation and the other is still
to, the contract called executed as there comes into existence a contract.
Executable Contract
A contract in which obligations by both parties are outstanding, wholly or in part, at the time of
formation of the contract is called Executable contract.
E.g.: A agrees to tutor B from next month and B promises to pay A an amount of Rs.5000. The contract
is executory because it is yet to be carried out.
Page 5
SPECIAL CASE OF QUASI CONTRACT

A quasi contract is a contract recognized by law under special circumstances. Quasi contracts are
certain relations resembling those created by contracts. It is based upon the equitable principle that a
person shall not be allowed to retain unjust benefit at the expense of another.
The Indian Contract Law deals with the following quasi-contractual obligations:
01.
Claims for necessaries supplied to a person incapable of contracting or on his account
If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is
supplied by another person with necessaries suited to his condition in life, the person who has
furnished such supplies is entitled to be reimbursed from the property of such incapable person.
02.
Reimbursement of person paying money due by another, in payment of which he is interested
A person, who is interested in the payment of money which another is bound by law to pay, and who
therefore pays it, is entitled to be reimbursed by the other.
03.
Obligation of person enjoying benefit of non-gratuitous act
Where a person lawfully does anything for another person, or delivers anything to him, not intending
to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make
compensation to the former in respect of, or to restore, the thing so done or delivered
04.
Responsibility of finder of goods
A person, who finds goods belonging to another and takes them into his custody, is subject to the
same responsibility as a bailee.
05.
Liability of a person to whom money is paid, or thing delivered by mistake or under coercion
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must
repay or return it.
Exceptions to Quasi Contracts
This section does not cover a case where money has been paid in payment of a natural obligation.
Thus, when one has paid up a time-barred debt, he cannot recover it. Similarly, this section does not
apply when there is a deliberate disregard of law e.g., where moneys are paid voluntarily knowing
fully well that the contract has become void, it cannot be recovered.
Page 6
OFFER - SECTION 2(A)

Definition: When one person signifies to another (person) his willingness to do or abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence
A valid offer satisfies the following rules:
1.
An offer may be express or implied.
Examples:
A offers to sell apple to B at Rs.50 is an express offer.
A D.T.C bus plying on a route at a scheduled fare is an implied offer to its passengers.
2.
An offer may be specific or general
Example: Offers of rewards made by an advertisements is a general offer
3.
An offer must contemplate to give rise to legal consequences
Example: A boy asking a girl to come for a date
4.
The terms of an offer must be certain
Example: A offers B to sell his bungalow for a handsome amount
5.
An invitation to offer is not an offer
Example: Apparel with a price tag in a shop
6.
An offer must be communicated to the offeree
Example: A, without having knowledge of a reward declared on a criminal, informs the police about the
criminal. He cannot claim for the reward.
7.
An offer should not contain a term, the non-compliance of which would amount to acceptance
Example: A sends a mail to B that if he does not reply to the mail, he will get admission to XYZ College
and will have to pay the fee.
8.
An offer can be made subject to any terms and condition
Example: A can ask be to communicate the acceptance of his offer only through mail.
9.
Two identical cross- offers do not make a contract
Example: A wrote to B to offer a laptop at Rs.50000 and at the same time B wrote to A to buy the
laptop at Rs.45000
Lapse and revocation of offer
An offer is nullified in the following cases:
1.
2.
3.
4.
5.
6.
7.
After stipulated time

By not being accepted in the prescribed mode
By rejection
By death or insanity of the offeror or the offeree before acceptance
By revocation
Revocation by non-fulfilment of a condition precedent to acceptance
By subsequent illegality or destruction of subject matter.
Page 7
ACCEPTANCE SECTION 2(B)

Definition: When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted
An acceptance is valid if it satisfies the following rules:
1.
Acceptance must be given only by the person to whom the offer is made.
Example: If A accepts to sell a car for an offer of Rs 3lac from B, C cannot sell the car to B for 3 lac
unless authorized.
2.
Acceptance must be absolute and unqualified
Example: If A offers to sells his scooter to B for Rs.14000 as a whole, B cannot accept the
paying Rs.14000 in part.
scooter
by
3.
Acceptance must be expressed in some reasonable manner if the mode is not prescribed. Mental
acceptance will not suffice
Example: A offers to gives a flat on rent to B, B can accept the offer by word of mouth or can express his
acceptance by mail, if specified by A in the terms of offer. Say, if B writes the mail but forgets to send
the mail, the acceptance is not valid.
4.
5.
6.
Acceptance must be given within a reasonable time and before the offer lapses and/or is
revoked
Rejected offers can be accepted only, if renewed.
Acceptance must succeed the offer
Communication of offer, acceptance and revocation

1.
Communication of Offer: It is complete when the offeree has the knowledge of the same
2.
Communication of acceptance: As against the proposer/As against the acceptor
Example: A decides to accept offer from B in writing and posts it on 9th March and it reaches B on 10th
March. The offer is accepted as against B on 9th and as against A on 10th March
3.
Communication of revocation: As against the person who makes it when it is put into course of
transmission. As against the person to whom it is made, when it comes to his knowledge.
CONSIDERATION SECTION 2(D)

Definition: When at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstain from doing, or promises to do or to abstain from doing, something, such an
act or abstinence or promise is called a consideration for the purpose
Essentials of valid consideration
1.
Consideration must move at the desire of the promisor
Example: A sees Bs house on fire and helps in extinguishing it. He cannot demand payment for his
service because B never asked him to come and help
2.
Consideration may move from the promisee or any other person
Example: A, an old lady gifted the property to her daughter R, with a direction that R will pay annuity
to her maternal uncle C like A used to do. Also, the same day the daughter executed writing in favor of
her maternal uncle C. Now C has a legal right to demand annuity from R since he is party to the
contract.
3.
Consideration can be past, present and future

a) The salary offered at the end of the month is a consideration of past service.
b) Buying goods on credit is present consideration as delivery is executed while the payment is
executory
Page 8
c)
A contract where payment and delivery are to be made in future is called future
consideration.
4.
Consideration must be something of value, need not be adequate but lawful
Example: A might sell his Rs1Lac car at Rs1000 provided his consent is free. At the same time if A pays
Rs.1Lac to B in favor of a murder is not lawful
5.
Consideration may be an act to do OR not to do an act ( abstinence ) it may be in cash or in kind:

a) A agrees to sell his car to B for Rs. 2Lac. The consideration received by A is consideration in
cash.
b) A declares a reward in the newspapers for finding his son. The consideration received
by A is consideration in terms of the act of finding his son.
c) A agrees to give his car to B in return of a plot of his land. This is consideration in kind.
d) A agrees to pay money to B provided B does not sell his property. This is a
consideration by way of a promise not to do an act.
Exceptions to the rule No consideration, no contract

1.
Case of Love or Gift
Example: A, for natural love and affection, promises to give Rs.1000 to B and puts it in writing. Its a
valid contract. Similarly for gift, it does not require consideration
2.
Agreement to compensate for past voluntary service:
Example: A finds Bs purse and gives it to him. B promises to give A Rs.500. Its a contract. B may
deicide otherwise that the consideration was against his desire
3.
Case of donation
Example: If Mr. Shah promised to donate Rs.1 Lac for the repair of college. College principal did
nothing for repair. Mr. Shah is not liable because it did not result any loss to promisee. Otherwise if the
principle would have acted on it, Mr. Shah would have been liable.
4.
Case of Time Barred Debt
Example: A owes B Rs.1000 but the debt is barred by limitation Act. A signs a written promise to pay B
Rs.500 on account of debt. This is a contract.
5.
No consideration is required to create an agency
Page 9
CAPACITY OF PARTIES SECTION 11

Section 11 states that 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
A person is incompetent to contract if
a.
b.
c.
He is a minor, according to the law he is subject

He is of unsound mind
He is disqualified from contracting by any law to which he is subject
Each of these is discussed in detail below
Minor
A person, domiciled in India, who is under 18 years of age, is a Minor
Minors Agreements
01.
Agreement by a minor is absolutely void and inoperative as against him
Law acts as the guardian of minors and protects their rights. When a minor is charged with obligations
and the other convincing party seeks to enforce those obligations against minor, the agreement is
deemed as void ab initio.
Case: Mohori Bibi vs Dharmo Das
Dharmo Das, a minor executed mortgage for 20,000 rupees and received 8,000 rupees from the
Mohori Bibi, mortgagee. The mortgagee filed a suit for the recovery of his mortgage money and for sale
of the property in case of default.
Judgement:
Agreement by a minor was adjudged as absolutely void as against minor and hence the mortgagee
could not recover the mortgage money nor could he have the minors property sold under his
mortgage.
02.
Beneficial agreements are valid contracts
An agreement which is of some benefit to the minor and under which he is required to bear no
obligation, is valid. A minor can be a beneficiary i.e., a payee, an endorsee or a promisee. A guardian
can enter into a contract on behalf of a minor and the contract would be binding and enforceable if it is
for the benefit of the minor.
Example:
A promissory note through which a minor is to receive an amount of 2000 is a valid contract as it can
be executed in favour of minor.
03.
No ratification on attaining the age of majority
Ratification implies subsequent adoption and acceptance of an act or agreement. Minor cannot ratify
the agreement on attaining the age of majority which he has entered into when he is minor as minors
agreement is considered as void ab-initio and has no existence in the eye of law.
Example:
A gives B (minor) an amount of 5000 rupees during his minority. B makes an agreement to repay after
attaining majority. This agreement would not be enforceable.
Page 10
04.
Rule of estoppel doesnt apply to a minor
Estoppel is defined as Where one person has, by his declaration, act or omission, intentionally caused
or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his
representative, to deny the truth of that thing.
A minor is not estopped from pleading his infancy where he represents fraudulently that he is of full
age and induces another person to enter into a contract with him, provided an action is founded on the
contract. A minor is not liable to restore the property or goods if the identity of the property or goods
is lost. However, minors can be compelled to restore the goods if they are traceable in his possession.
Example:
A, being a minor, received a sum of 50000 rupees through fraudulent representation and purchased a
motorcycle. In the court of law, the loan transaction is considered invalid but however, minor will be
asked to restore the motorcycle to the lender.
05.
Minors liability for necessaries
Section 68 of the Contract Act provides that If a person, incapable of entering into a contract, or
anyone whom he is legally bound to support, is supplied by another person with necessaries suited to
his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the
property of such incapable person.
A minor is not personally liable but his property is. The minor is liable to pay a reasonable price for the
necessaries supplied to him from his property. In case minor owns no property, the supplier will lose
the price of necessaries. Food, clothing, medical attendance and lodging expenses fall under
necessaries whereas trading doesnt.
06.
Specific performance
Specific performance impales the actual carrying out of the contract as agreed. Since an agreement
made by a minor is absolutely void, the court will never direct specific performance of such an
agreement by him. The contract is valid in case guardians entered into a contract on behalf of minor
and if it is
within their authority and
for the benefit of minor
07.
Minor partner
A minor cannot be a partner in a partnership firm. However, he can be admitted to benefits of the
partnership with consent of all the partners by an agreement executed through his lawful guardian
with the other partners. He cannot be made personally liable for any obligations of the firm, however,
he may after attaining majority accept them if he thinks fit to do so.
08.
Minor agent
A minor can act as an agent. He shall bind the principal by his acts done in the course of such an
agency, but he cannot be held personally liable for negligence or breach of duty as an agent.
09.
Minor and insolvency
A minor cant be adjudicated an insolvent, for; he is incapable of contracting debts. Even for
necessaries supplied to him, a minor is not personally liable but his property is liable.
10.
Contract by minor and adult jointly
A minor can enter into a contract jointly with an adult. However, minor is not liable and the contract as
a whole enforced against the adult.
Page 11
11.
Surety for a minor
Where in contract of guarantee, an adult stands surety on behalf of minor, the adult would be liable,
although the minor is not. In fact, in such a case, there cannot be a contract of guarantee in the true
sense.
12.
Position of minors parents
The parents of a minor are not held liable for agreements made by minor even in the case of
agreement made for the purchase of necessaries. However, they are held liable only if minor is an
agent for the parents.
13.
Minor shareholder
A minor cannot become a shareholder. However, fully paid up shares may be transmitted to him
through his lawful guardian.
14.
Minors liability in tort
A tort is a civil wrong for which the ordinary remedy is damages. A minor is held liable unless the tort
in reality is a breach of contract.
Example:
A minor is not held liable where he hired a horse for riding and injured it by over-riding.
Persons of Unsound Mind

According to Section 12 of the Contract Act, A person is said to be of Sound Mind for the purpose of
making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a
rational judgement as to its effects upon his interests.
The section also states that
-
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract
when he is of sound mind
Example:
A patient in a lunatic asylum may enter into a contract during the intervals of sound mind.
-
A person who is usually of sound mind, but occasionally of unsound mind, may not make a
contract when he is of unsound mind
Example:
A sane man who is so drunk that he cannot understand the terms of a contract, or form a rational
judgement as to its effect on his interest, cannot contract while such drunkenness lasts.
An agreement entered into by a person of unsound mind is treated on the same footing as that of
minors and therefore it is absolutely void and inoperative as against him but he can derive benefits
under it. However, the property of a person of unsound mind us always liable for necessaries supplied
to him or to anyone whom he is legally bound to support.
Disqualified Persons
The persons disqualified from any law to which they are subject are as follows:
01.
Alien enemies
An alien citizen of a foreign country living in India can enter into a contract with Indian citizens
only during peace and that too subject to any restrictions imposed by the Govt. in that respect. On the
declaration of war between his country and India, he becomes an alien enemy and cannot enter into
contracts. Alien friend can contract but an alien enemy cant contract. Contracts enter into before
Page 12
the declaration of war stand suspended during war and they can be retrieved once the war is over
provided they havent become time-barred.
02.
Foreign sovereigns and ambassadors
While entering into contracts with foreign sovereigns and ambassadors, one has to be cautious as they
can sue others to enforce the contracts entered upon with them but cant be sued without obtaining
prior sanction of the Central Government. They are in a privileged position and are considered to be
incompetent to contract.
03.
Convict
A convict is one who is found guilty and is imprisoned. During the period of imprisonment, a convict is
incompetent
-
To enter into contracts and

To sue on contracts before conviction
On the expiry of the sentence, he is in liberty to institute a suit.

04.
Married women
Married women are competent to enter into contracts with respect to their separate properties
(Stridhan) provided they are major and are of sound mind. However, they cant enter into contracts
with respect to their husbands properties. But they can act as an agent of her husband and bind her
husbands property for necessaries supplied to her, if he fails to provide her with them.
05.
Insolvent
An adjudged insolvent (before an order of discharge) is competent to enter into certain types of
contracts i.e., he can incur debts, purchase property or be an employee but he cant sell his property
which vests in the Official Receiver. Besides these, he suffers from certain disqualifications like he cant
be a magistrate or a director of a company or a member of local body. After the order of discharge, he
is just like an ordinary citizen.
06.
Joint-stock company and corporation incorporated under a special Act (like LIC, UTI)
A company or corporation is an artificial person created by law. It cant enter into contracts outside
the powers conferred upon it by its MoA or by the provisions of its special Act. Being an artificial
person, it cant enter into contracts of a strictly personal nature.
Example: Marriage
Page 13
FREE CONSENT SECTION 14

Section 13 defines the term consent and lays down that Two or more persons are said to consent
when they agree upon the same thing in the same sense. Hence, consent involves identity of minds or
consensus ad-idem. If there is no consensus ad-idem among the contracting parties, there is no real
consent and hence no valid contract.
Section 14 defines the term free consent and lays down that Consent is said to be free when it is not
caused by
Coercion (Section 15) or
Undue Influence (Section 16) or
Misrepresentation (Section 18) or
Fraud (Section 17) or
Mistake (Sections 20, 21 and 22)
In the absence of free consent, the contract may turn out to be either voidable or void depending on
the nature of flaw in consent. When consent is caused by coercion, undue influence,
misrepresentation or fraud, the contract is voidable at the option of the party whose consent was so
caused. But when consent is caused by bilateral mistake as to a matter of fact essential to the
agreement, the agreement is void.
Coercion
Section 15 of the Contract Act defines Coercion as Coercion is the committing or threatening to
commit, any act forbidden by the Indian Penal Code, 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.
Example:
A threatens to shoot B, if he does not let out his house to him. B agrees to let out his house to A. The
consent of B has been induced by coercion and the contract is voidable.
The act of coercion may be directed at any person and not necessarily at the other party to the
agreement. It may proceed even from a stranger to the contract.
Example:
A, threatens to shoot B, a friend of C if C does not let out his house to him. C agrees to do so.
A, threatens to shoot B if he does not let out his house to C. B agrees to let out his house to C.
In both the cases, the agreement has been caused by coercion and the contract is voidable.
Threat to commit suicide
Neither suicide nor threat to commit suicide is punishable under the Indian Penal Code; only an
attempt to commit suicide is punishable under it. Threat to commit suicide is deemed to be
forbidden by Indian Penal Code.
Example: Chikkam Ammiraju vs Chikkam Seshamma
Ammiraju threated his wife and son to execute a deed in favour of his brother in respect of some
properties which they claimed as their own. This transaction was set aside on the grounds of coercion
by Madras High Court.
Effect of Coercion
A contract brought out by coercion is voidable at the option of the party whose consent was so caused.
The burden of proof that coercion was used lies on the party who wants to set aside the contract on
the plea of coercion.
Page 14
Undue Influence
Section 16(1) defines the term Undue influence as A contract is said to be induced by undue influence
where
The relations subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other and
He uses the position to obtain an unfair advantage over the other
The phrase in a position to dominate the will of the other is clarified by the same section under subsection (2) as follows:
-
Holding a real or apparent authority over the other (Master & Servant)
Standing in a fiduciary relation to the other (Father & Son)
Making a contract with a person whose mental capacity is temporarily or permanently affected
by reason of age, illness or mental or bodily distress (Old illiterate persons)
In the above three cases, the undue influence is presumed to exist and there is no need to prove it.
However, it has to be proved in the following cases:
-
Husband & Wife

Mother & Daughter
Grandson & Granddaughter
Landlord & Tenant
Creditor & Debtor
Effect of Undue Influence

When consent is caused by undue influence, the contract is voidable at the option of the party whose
consent was so caused.
Misrepresentation
A representation means a statement of fact made by one party to the other, either before or at the time
of the contract, relating to some matter essential to the formation of the contract, with an intention to
induce the other party to enter into the contract. A representation when wrongly made, either
innocently or intentionally, is termed as misrepresentation. In law, the former is termed as
misrepresentation and the latter as fraud.
According to Section 18, misrepresentation means and includes
-
The positive assertion of unwarranted statements of material facts believing them to be true
Breach of duty which brings an advantage to the person committing it by misleading the other to
his prejudice
Causing mistake about subject matter innocently
Essentials of misrepresentation
For alleging misrepresentation, representation should
-
Be made innocently
Relate to facts material to the contract
Have become untrue
Have been instrumental in inducing the other party to enter into contract
Effect of misrepresentation
The aggrieved party has two alternative courses open to him
-
He can rescind the contract, treating the contract as voidable

Page 15
He may affirm the contract and insist that he shall be put in the position in which he would have
been, if the representation made had been true
Fraud
According to Section 17, fraud means and includes any of the following acts committed by a party to a
contract
-
Representation that a fact is true when it is not true by one who does not believe it to be true
Active concealment of a fact by a person who has knowledge or belief of the fact
Promise made without any intention of performing it
Any other act fitted to deceive
Any such act or omission as the law specially declared to be fraudulent
Mere silence without any legal duty to speak will not amount to fraud except where
-
The circumstances of the case are such that, regard being had to them, it is the duty of the person
keeping silence to speak; or
Silence is, in itself, equivalent to speech
Effect of fraud
A party, who has been induced to enter into a contract by fraud, has the following remedies open to
him:
-
He can rescind the contract i.e., he can avoid the performance of the contract; contract being
voidable at his option
He can ask for restitution and insist that the contract shall be performed, and that he shall be put
in the position in which he would have been, if the representation made had been true
The aggrieved party can also sue for damages
Mistake
Mistake may be defined as an erroneous belief concerning something. It may be of two kinds
-
Mistake of law
Mistake of fact
Mistake of Law
It may be of two types
-
Mistake of law of the country

Everyone is deemed to be conversant with the law of his country and hence the maxim
ignorance of law is of no excuse. Section 21 declares that a contract is not voidable because it
was caused by a mistake as to any law in force in India. Accordingly, no relief can be granted on
the ground of mistake of law of the country.
Example:
A and B make a contract grounded on the erroneous belief that a particular debt is barred by the
Indian Law of Limitation; the contract is not voidable (valid contract)
If one of the parties makes a mistake of law through the inducement, whether innocent or
otherwise, of the other party, the contract may be avoided.
Mistake of foreign law

It stands on the same footing as the mistake of fact. Here the agreement is void in case of
bilateral mistake only.
Page 16
Mistake of Fact
It may be of two types
-
Bilateral Mistake
There is a bilateral mistake where the parties to an agreement misunderstood each other and
are at cross purposes. Hence, there is no real correspondence of offer and acceptance, each party
obviously understanding the contract in a different way. In case of bilateral mistake of essential
fact, the agreement is void ab-initio.
Section 20 provides that where both the parties to an agreement are under a mistake as to a
matter of fact essential to the agreement, the agreement is void. Thus for declaring an
agreement void ab-initio, the following three conditions must be fulfilled:
Both the parties must be under a mistake
Mistake must relate to some fact and not to judgement or opinion
The fact must be essential to the agreement
Unilateral Mistake
When only one of the contracting parties is mistaken as to a matter of fact, the mistake is a
unilateral mistake. Section 22 provides information on the validity that a contract is not
voidable merely because it was caused by one of the parties to it being under a mistake as to a
matter of fact.
Accordingly, in case of a unilateral mistake, a contract remains valid unless the mistake is
caused by misrepresentation or fraud, in which case the contract is voidable at the option of the
aggrieved party.
Page 17
LEGALITY OF OBJECT AND CONSIDERATION

Any agreement with an unlawful object or consideration is void. The consideration or the object is
unlawful in the following cases:
1.
If it is forbidden by law
A) When it is punishable by the criminal law of the country

B) When it is prohibited by special legislation
Example:
Agreements for sale or purchase above the standard price fixed by the relevant law with regard to a
controlled article are illegal and hence void.
2.
If it is of such a nature that, if permitted, it would defeat the provisions of any law
Object or Consideration is not directly forbidden by law, but it would indirectly lend to a violation of
law
Example:
An agreement between husband and wife to live separately is invalid as being opposed to Hindu Law
3.
If it is fraudulent
Example:
A and B enter into an agreement for the division among them related to gains acquired by them by
fraud. The agreement is void, as its object is unlawful.
4.
If it involves or implies injury to the person or property of another
Example: An agreement to put certain property to fire is unlawful

5.
If it court regards it as immoral
Immorality as explained below:

A. Sexual Immorality
A Gift deed executed in consideration of illicit intercourse has been held void as its object was immoral
B. Furtherance of sexual immorality
A person who knowingly lets out his house for prostitution cannot recover the rent. The landlord
many however recover the rent if he did not know the purpose
C. Interference with marital relations
An agreement between a husband and a wife for future separation
D. If the court regards it as opposed to public policy
A few agreements which have been held to be against public policy are stated below:
Trading with an alien enemy

Agreements interfering with the course of justice
Agreements for stifling criminal prosecution
Agreements creating an interest opposed to duty
Agreements interfering with parental duties
Example: For monetary consideration, A agrees to place his daughter at the disposal of B to be married
as B likes. The agreement is illegal and void as it would interfere with As parental duty to select a
husband in the best interests of the girl.
Page 18
Void Agreement
An agreement not enforceable by law is said to be void. Agreement being void in nature does not give
rise to any legal proceedings. Following agreements are expressly declared as void.
1.
2.
3.
4.
5.
6.
7.
Agreements in restraint of marriage (Sec. 26).

Agreements in restraint of trade (Sec. 27).
Agreements in restraint of legal proceedings (Sec. 28).
Agreements the meaning of which is uncertain (Sec. 29).
Agreements by way of wager (Sec. 30).
Agreements contingent on impossible events (Sec. 36).
Agreements to do impossible acts (Sec. 56).
Other than these 7 there are few more agreements which are considered as void though not expressly
declared1.
2.
3.
4.
Agreement by a minor or person of unsound mind

Agreement made under a bilateral mistake of fact which is substantially important to agreement
Agreement of which object or consideration is unlawful
Agreement without any consideration
Exceptions to Illegal Agreements

It is necessary to mention here that the below agreements are void but not unlawful or illegal.
1. Agreements in restraint of marriage
Section 26 of Indian Contract act states every agreement in restraint of marriage of any person, other
than a minor is void. Marriage is considered as the basis of society and any contract that interferes
with the free choice of man or woman of their wives or husbands is considered as void. Any contract
between husband and wife for present separation are binding but those for future separation are void.
Example: A promises to marry B and if he marries anyone else he will pay B a sum of 10,000. A marries
C and B files case to recover 10,000. Court held that B cannot recover money as the agreement is in
restrain of marriage. [Law Vs Peers(1918)]
2. Agreements in restraint of trade
Section 27 of Indian Contract act states every agreement by which any one is restrained from
exercising a lawful profession, trade or business of any kind, is to the extent void. Every agreement in
restraint of trade is trade is against public policy.
Case: Mahbub Chander vs Raj Koomar 1874
Two shopkeepers A &B entered into an agreement where A will pay B to close his business in that
locality. B closed the business but A refused to pay him. Court held that the agreement was void.
However there are certain exceptions to this act where restraint of trade is considered as valid.
Sale of goodwill: Seller of a good will may agree with the buyer not to carry out the same business in
the specified are for a specified time, provided such limits appear reasonable to the Court considering
the nature of business.
Partners Agreement: An agreement which restricts partners from doing any business other than the
one in which they are. The outgoing partner may be restricted from entering in the same business.
Negative Stipulations in Service Agreement: An agreement that binds an individual to render
his/her services to someone during the term of the agreement is valid. However any agreement that
restricts an individual from taking any occupation for a stipulated time period is void.
3. Agreements in restraint of legal proceedings
Page 19
Any agreement which refrain an individual from taking any legal action is termed as void. Section 28
as amended in 1996 declares below agreements as void Agreement which restricts any party
absolutely from taking usual legal proceedings:
Agreement which limits the time within which one may enforce his contract rights
Agreement which provides for forfeiture of any rights arising from a contract
These agreements are held void as they are against the Public Policy. Following points are important in
terms of restraint of legal proceedings:
In case of any dispute between the parties, they may settle their dispute outside the court.
Even if parties agree to nominate a party to the contract as an arbitrator in case of dispute is valid.
Both the parties may decide, in case of dispute which Court will handle the matter.
4. Agreements the meaning of which is uncertain

Section 29 of Indian Contract Act states agreements, the meaning of which is not certain, or capable of
being certain, are void. In case the words use to define the object or the consideration are not certain
or expressed clearly the law cannot enforce the agreement. If the words used by the parties are vague
or indefinite, the law cannot enforce the agreement.
Example
1. A agrees to sell B a shirt, is an uncertain contract. Here the colour and cloth used are not
mentioned.
2. A agrees to sell B a white colour shirt, is an uncertain contract. Here the cloth is not mentioned
3. A agrees to sell B a white colour, cotton shirt of size 32, is a valid contract.
4. Carter promised to pay a certain sum of money on a specified date of the month against the
bank loan. The agreement did not mention the amount of loan and date of repayment and
hence termed as void.
5. Agreements by way of wager
Section 30 of Indian Contract Act states wagering agreement is a promise to give money or moneys
worth upon the determination or ascertainment of an uncertain event. An event is called uncertain if
it is yet to occur of if the event has occurred but the parties are not aware of the outcome.
Essential features of a wage
There must be a promise to pay money or moneys worth.

The promise must be conditional on an event happening or not happening
Event must be uncertain
Each party must stand to lose or gain under the terms of agreement.
Example: X & Y mutually agrees that if India wins the cricket match X will pay Y a sum of 200/- while if
India loses Y will pay X a sum of 200/-. This is a wagering contract since the outcome of the event is
uncertain. However there are some exceptions to this like horse race, speculative transactions, chitfund, and lottery (in some states).
6. Agreements contingent on impossible events
Section 36 of Indian Contract Act states agreements of to do or not to do anything, if an impossible
event happens, are void, whether the impossibility of the event is known or not to the parties to the
agreement at the time when it is made. Contingent contract which depends upon future event cannot
be enforced by law unless and until that event has happened.
Page 20
Examples
1. Ram makes a contract with Shyam to buy Shyams house if Ram survives Raghu. This contract
cannot be enforced by law unless and until Raghu dies in Rams lifetime.
2. A agrees to pay B 1,00,000/- if B can B can draw a triangle with sum of angles more than 180
degree.
7. Agreements to do impossible acts
Section 56 of Indian Contract Act states an agreement to do an act impossible in itself is void.
Impossibility of performance could be in terms of legal or physical. However it must be differentiated
from difficulty to comply or perform.
According to the act
Parties may be aware of the impossibility of the event before the contract
Parties to the contract may not be aware of the impossibility of the event before the contract
Contract might have become impossible after it had been made
Example: X agrees to sell his dog to Y for 5000 and Y agrees it, but no one is aware that the dog is
already dead. The contract is void.
X agrees to sell his house to B for Rs 5,00,00 after 6 months. House collapsed after 2 months. The
contract shall be void as soon as the house collapsed.
Causes of impossibility of performance
Change in Law
Destruction of subject matter
Personal incapacity of the promisor
PERFORMANCE OF CONTRACT
Who must perform?
Sec.37 states that The parties to a contract must either perform, or offer to perform their respective
promises, unless such performance is dispensed with or excused under the provisions of this Act, or of
any other law.
Representatives Liability: Promises bind the legal representative of the deceased promisor.
Example 1: A promises to deliver goods to B on a certain day on payment of Rs.1000. A dies before
that day. As representative is bound to deliver the goods to B who in turn is bound to pay the amount
to As representative.
Example 2: A promises to paint a picture for B by a certain day, at a certain price. A dies before the
day. The contract cannot be enforced either by As representative or by B.
What is Tender of Performance?
It is also called offer of performance. It is when the parties to a contract offer to perform their
respective promises.
Essentials of a valid tender of performance:
It must be unconditional: X offers to give his house to Y, if Z permits. Offer is conditional, hence not
a valid tender.
Offer must be made by promisor or representative.
Must be made at reasonable time & place.
Page 21
Offer cannot be of the part of performance. For example, a stakeholder not bound to accept less
than what is actually payable.
Promisor is bound by his promise to deliver the same thing and promisee has opportunity to
examine the same.
In case of joint promises, the tender is valid.
It must be made to promisee or his duly authorized agent.
Joint Promises
Several to Single e.g. A,B and C promise to pay D Rs.1000

Single to Several e.g. A promises to pay Rs.1000 to B and C together.
Several to Several e.g. A,B and C promise to pat Rs.1000 to P,Q and R
Example: A is lent Rs.5000 by B& C, and promises to repay them with interest on a day specified. B
dies. The right to claim rests with Bs representative and C till C dies and the right to claim rests with
Bs and Cs representatives.
All promisors must jointly fulfil the promise

Anyone or more of joint promisors maybe compelled to perform e.g. A,B,C jointly promise to pay D
3000. D may compel either A or B or C or all or any two to pay 3000
Right of contribution inter-se between joint promisors e.g. If A is compelled to pay, he can realise
from B and C 1000 each
Sharing of loss by default in contribution
Example: If A is compelled to pay whole and C is unable to pay any, A is entitled to receive Rs.1500
from B. If C can pay Rs.500, they B has to pay Rs.1250
Effect of release of one joint promisor e.g. If promisor is released from promise by promisee, the
others are still liable to pay as per the promise
Reciprocal Promises
Bilateral Contracts A promises to sell certain goods to B and B promises to pay A for those goods.
Mutual and Independent
Example: A promises to deliver goods to B on 10th Apr and B promises to pay the price in advance on
1st Apr. As promise to deliver goods is independent of Bs promise to pay. A must deliver goods on
10th Apr. However A can sue B for payment of price and damages
Mutual and dependant
Example: A contracts with B to execute certain builders work for a fixed price, B supplying the timber
for the work. B refuses to furnish the timber and plan isnt executed. A need not execute the work and
B is bound to pay A compensation for loss caused by non-performance
Mutual and concurrent
Example: A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not
deliver goods unless B is ready and willing to pay on delivery. B need not pay unless A is ready and
willing to deliver them on payment
Page 22
Time & Place
Where no application is to be made and no time is specified

Where time is specified and no application is to be made
Application for a performance on a certain day and place
Application by the promisor to promisee to appoint place
Performance in manner or at time prescribed or sanctioned by the promisee
Appropriation of Payments
When a debtor owes several debts to the same creditor, makes payment which is insufficient to satisfy
the whole indebtedness, the question arises as to which of the debts the payment is to be applied.
Debtors express instructions must be followed
Example: A owes B among other debts 1000 upon a promisory note which falls due on 1st June. He
owes B no other debt of that amt. On 1st June A pays 1000 to B. The payment is to be applied to the
discharge of the promissory note
Debtors implied intention must be followed

Appropriation by creditor
Appropriation by law (in order of time)
Example: If no application is stated, the discharge is done in the order of the time when the debt was
started.
When principal and interest both due
Example: If a payment has been made without stating if it for interest or principal, payment is to be
applied to int. first and then principal
DISCHARGE OF CONTRACT
Definition: When the rights and obligations arising out of a contract are extinguished, the contract is
said to be discharged or terminated.
Ways of discharge of contract
1. Discharge by Performance
Actual Performance:
Each party to a contract fulfills obligation arising under the contract within the time and in the
manner prescribed
If one party only performs his promise, he alone is discharged and gets a right of action against the
other party
Attempted Performance or tender
The promisor offers to perform his obligation, but is unable to do so because promisee does not
accept the performance
Tender is not actual performance but only an offer to perform
Page 23
Effect of refusal to accept a valid tender
Contract is deemed to have been performed by the promisor

Promisee can be sued for breach of contract
2. Discharge By mutual Consent or Agreement (Sec 62 & 63)

Contract can also be discharged by another agreement between the same parties. The following
methods of discharging a contract by mutual agreement are:
a) Novation
A new contract is substituted for an existing contract, either between the same
or different parties
If parties are not changed, then the nature of the obligation must be altered substantially in the
new substituted contract.
Eg. - A is indebted to B and B to C. By mutual agreement Bs debt to C and Bs loan to A is cancelled and
C accepts A as his debtor. This is novation involving change of parties
b) Alteration
Change in one or more of the material terms of the contract

Material alteration alters legal effect of the contract eg. changing the duration of the project
Immaterial alteration has no effect on the validity of the contract e.g. correcting a spelling mistake
in the contract
c) Rescission
Agreement between the parties to the effect that it shall no longer bind them
Non-performance by both parties for long period - implied rescission
Eg.- A has to deliver 10 kg of rice to B on 15th March but on 10th both agree that contract will not
be performed.
d) Remission
Acceptance of a lesser sum than what was contracted for

There is no consideration for it
Eg.- A owes B Rs 10,000. But A pays only Rs. 8000 at the time and place at which Rs 10,000 was
payable and B accepts it.
e) Waiver
Giving up of a right which a party is entitled to under a contract

Eg.- A promises to fix Bs laptop, if B sings a song at As birthday and B accordingly sings the song
but afterwards B forbids A to fix the laptop to which A consents, the contract is terminated.
3. By subsequent or supervening impossibility or illegality

Impossibility at the time of contract
Agreement to do an act impossible in itself is void

It may or may not be known to both the parties at the time when contract is made.
If impossibility is not obvious, the promisor is bound to compensate promisee
Page 24
Eg.- A contracts to marry B while being already married to C. A must make compensation to B
Subsequent Impossibility
Act becomes impossible to do after the contract is made due to some event which the promisor
could not prevent
Eg. A and B contract to marry each other but before the time fixed for marriage B goes mad. The
contract becomes void.
Cases where applicable:
Destruction of subject matter
Failure of ultimate purpose
Death of promisor
Change of law
Outbreak of war
Cases where not applicable:
Difficulty of performance
Commercial impossibility
Impossibility due to default of a third person
Strikes and lock-outs
Failure of one of the objects
4. Discharge By lapse of time
In case of a breach of a contract, legal action should be taken within a specified period called the
Period of Limitation
In simple contracts, period of limitation is 3 years.
5. Discharge By operation of law
Death In contracts of personal nature, death of promisor discharges contract while in other cases
rights and liabilities are passed to the legal heir
Insolvency An insolvent is exonerated from liabilities on debts by the Insolvency Court
Merger eg. A part time employee is made a full-time employee, the former contract stands
discharged
Unauthorized material alteration Material alteration in a written document without the consent
of the other party makes the contract void.
6. Discharge By breach of contract
Anticipatory Breach Breach of contract before the time fixed for performance has arrived.
Eg. A agrees to appoint B as clerk but before the time of performance A refuses. B can sue A
foe damages without waiting until the time fixed for performance.
Actual breach Occurs when a party fails to perform his obligation upon the date fixed for
performance by the contract.
Page 25
REMEDIES FOR BREACH OF CONTRACT

Whenever there is a breach of contract, the aggrieved party can resort to the following remedies
against the guilty party:
1) Rescission of the contract (Sec. 75)
Aggrieved party may rescind the contract, not perform his part of the obligation and do not
take any action against the other party
Aggrieved party may sue the guilty party for damages
Necessary to apply to the court for rescission of the contract to claim damages
E.g. - A has to supply 10 kgs of wheat to B on 15th March. If A does not supply wheat on the
scheduled day, B need not pay the price and can either sit at home or apply for damages
2) Suit for Damages (Sec. 73)
Damages as monetary compensation allowed to the aggrieved party for the loss suffered as a
result of the breach of contract.
Different kinds of damages are:
a) Ordinary Damages
They arise naturally and directly in the usual course of things from the breach of contract
Eg.- A has to pay Rs 5,000 on 15th April to B. But he does not pay due to which B is unable to
pay his debts. A is liable to pay only principal amount along with interest applicable.
b) Special Damages
They arise on account of the special or unusual circumstances.
Eg.- A & B enter into a contract for the sale of a painting. The painting is worth Rs 5,000 and B
intends re-sell the painting at Rs 6,000. If A sells the painting to C, B is entitled to special
damages.
c) Exemplary Damages
They are awarded with a view to punish the guilty party and not by the way of compensation
for the loss suffered.
d) Nominal Damages
They are awarded when the aggrieved party has not actually suffered any real damage and
consist of a very small amount of money
3) Suit upon Quantum Meruit (Sec. 65 & 70)
It arises when after part performance by one party, the contract is discovered to be void.
Eg.- A is hired by B to construct a house. But halfway A is stopped from working further. A is
entitled to get compensation for work done.
4) Suit for Specific Performance
In special circumstances, court directs the defendant to actually perform the promise that he
has made
It is granted in cases of land, buildings, rare articles and unique goods
5) Suit for an Injunction
The court may issue an order to restrain a person from doing, what he promised not to do
Eg.- A agreed to provide consultancy services to only B but A later signed a contract with C
and refused to work with A. The court may issue injunction restraining A from working
anywhere else and award B for damages incurred.
Page 26
INDEMNITY
Definition
A contract, by which one party promises to save the other from loss caused to him by the conduct of
promisor himself or by the conduct of any other person, is called a contract of indemnity.
Rights of indemnity holder when sued
The following are the rights of the indemnity holder when sued
1. Recovery of all damages
2. Recovery of all costs
3. Recovery of sums paid under the term of any compromise
Time of commencement of Indemnifiers Liability
Indemnity is not repayment after payment but to be paid once the charge is proved; the party to be
indemnified shall never be called upon to pay.
Contracts of Guarantee
Definition
A contract of guarantee is a contract to perform the promise, or discharge the liability of a third person
in case of his default.
The three parties under the contract of guarantee are the debtor, the credit and the surety.
Nature and Extent of Suretys Liability (Section 128)
The nature and extent of the suretys liability are as follows:
The liability of a surety is secondary or contingent

The liability of the surety arises immediately on the default of the principal debtor, unless
otherwise stated
The creditor need not first resort to the debtors securities before suing the surety, unless
otherwise agreed
The surety will not be liable where the creditor has obtained guarantee by misrepresenting a
material part of the transaction or keeping silence as to material circumstance
The law does not treat the surety and the debtor as the same person, i.e., while one may be liable
the other may not.
Continuing Guarantee (Section 129)

The features of continuing guarantee are as follows
A continuing guarantee is not exhausted by the first advance

Whether or not a guarantee is continuing or not depends upon the agreement of the parties,
terms of the contract, circumstances
Continuing guarantee applies to a series of distinct and separable transactions. As such a
guarantee given for an entire consideration not a continuing guarantee
Revocation of Continuing Guarantee (Section 130)

The continuing guarantee can be revoked by the following means
Page 27
By notice of revocation of the surety

By death of surety
In the same manner as the surety is discharged, viz., i. Variance in terms of contract, ii.
Release/discharge of debtor, iii. Arrangement with debtor, iv. Creditors action or omission
impairing suretys eventual remedy, v. by loss of security.
Rights of Surety
The rights of surety are as follows
Suretys right against creditors
Right to benefit of creditors securities (Section 141)

Right to claim set-off, if any
Right of subrogation (Section 140)
Right to claim indemnity (Section 145)
Suretys rights against co-sureties (Sections 146-147)
For the same debt for similar amount, both surety owe equal contribution
For the same debt for different sums, the contribution is subject to the limit fixed by his
guarantee
Discharge of Surety
The surety is discharged under the following conditions:
Notice of revocation (Section 130)

Death of surety (Section 131)
Variance in terms of contract (Section 133)
Release or discharge of principal debtor (Section 134)
Arrangement by creditor with principal debtor without suretys consent (Section 135)
Creditors act or omission impairing suretys eventual remedy (Section 139)
Loss of security (Section 141)
Invalidation of the contract of guarantee (Section 143)
BAILMENT
Definition
A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they
shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions
of the person delivering them.
Essential features
It is a delivery of movable goods by one person to another person (not being his servant).
The goods are delivered for some purpose, and not by some mistake
The goods are to be returned in specie or disposed of according to the directions of the bailor
either in their original form or altered form.
Page 28
Kinds of Bailment
Bailments are classified under the following types
Kinds from benefit point of view
1. Bailment for the exclusive benefit of the bailor
2. Bailment for the exclusive benefit of the bailee
3. Bailment for the mutual benefit of the bailor and the bailee
Kinds from reward point of view
4. Gratuitous
Eg: Loaning a book to a friend
5. Non-gratuitous
Eg: Sending a motor car for repair
Bailment
Bailment
Duties of Bailee
The duties of the bailee are as follows
Duty to take reasonable care of goods delivered to him

Duty not to make unauthorised use of goods entrusted to him
Duty not to mix goods bailed with his own goods
Duty to return the goods
Duty to deliver any accretion to the goods
Duties of Bailor
The duties of the bailor are as follows
Duty to disclose faults in goods bailed

Duty to repay necessary expenses in case of gratuitous bailment
Duty to repay any extraordinary payments in case of non-gratuitous bailment
Duty to indemnify bailee
Duty to receive back the goods
Rights of Bailee
The following are the rights of a bailee
Enforcement of bailors duties

Right to deliver goods to one of several joint bailors
Right to deliver goods, in good faith, to bailor without title
Right
of
Bailees
particular
- Bailees general lien
Rights of Bailor
The following are the rights of a bailor
Enforcement of bailees duties

Right to terminate bailment if the bailee uses the goods wrongfully
Page 29
lien
lien
Right to demand return of goods at any time in case of gratuitous bailment
Termination of Bailment
A bailment is terminated under the following conditions
Specific period
Specific purpose
Bailee acts inconsistent with terms of bailment
Gratuitous bailment
Gratuitous bailment death of bailee/bailor
Finder of Lost Goods

If a person happens to find any lost good(s), the law bestows him with certain duties
Duties of finder
The duties of the finder are as follows
Right to retain possession

Right to lien over the goods for expenses
Right to sue for reward
Right of sale
PLEDGE OR PAWN
Definition
The bailment of goods as security for payment of a debt or performance of a promise is called pledge.
The bailor in this case is called the pawnor. The bailee is called pawnee.
Rights of Pawnee
The following are the rights of a pawnee
Right of retainer
Right of retainer for subsequent advances
Right to extraordinary expenses
Right to sue the pawnor or sell the goods on default of the pawnor
Duties of Pawnee
The duties of the pawnee are as follows
To make reasonable care of the goods pledged

Not to make any unauthorised use of the goods pledged
Not to mix the goods pledged with his own goods
Not act in violation of the terms of the contract
To return the goods pledged on receipt of his full dues
To deliver any accretion to the goods pledged
Rights of Pawnor
Page 30
The following are the rights of a pawnor
Enforcement of pawnees duties

Defaulting pawnors right to redeem
Duties of Pawnor
The duties of the pawnor are as follows
To compensate the pawnee for any extraordinary expanses

To meet his obligation on stipulated date
AGENCY
An agent is a person employed to do any act for another or to represent another in dealings with third
persons. The party who employs the agent is called the principal. The agent enters into the contract on
behalf of the principal and the principal is liable for legal action for violation of any part of the
contract.
General Rules of Agency:
Everything a person competent to contract can do by himself, he can do through agent. However,
acts involving personal skills are not allowed i.e., a person cannot employ an agent to draw a
painting or he cannot employ an agent to marry someone. The principal has to undergo the same
consequences as if the contracts had been entered into and the acts done by the principal in
person
Test of Agency: When the person has authority to act on behalf of other and make contractual
relations with third person, then he is an agency
Difference between Agent and Servant
Agent
Servant
Not subject to direct

control & supervision
Creates relations between
principal & third parties
Subject to direct control &

supervision
Cannot create relation. If he
does so, then to that extent
alone he is an agent
Other Rules
Any person competent to contract i.e., major and one of sound mind can be a principal. Any
person can become an agent i.e., even a minor or a person of unsound mind can become an agent.
This is because principal will be liable and thus he runs a great risk if he employs a minor or
person of unsound mind as agent. It is not necessary that an agent be given consideration.
However, agents are generally given consideration for their contribution.
Kinds of Agents
A General Agent is employed to do all acts connected with a particular business or employment
He can bind the principal by doing anything which falls within the scope of the business
Page 31
A Special Agent is employed to do a particular act or represent his principal in some particular
transaction such as selling a car .Principal will not be held liable if they agent signs a contract
outside his authority
A Universal Agent has unlimited authority i.e., he is authorized to do all the acts which the
principal can lawfully do and can delegate. Enjoys extensive powers to transact every kind of
business on behalf of his principal
Other classifications of agents include Classification by nature of work: Mercantile: Factor,
Commission agent, Del credere agent, Broker, Non Mercantile: Attorneys, insurance agent, wife
etc.,
Creation of Agency
This includes the different kinds of agreements to create agencies:
An Express Agreement is an Oral or written agreement by specifying scope of authority Certain

cases such as executing a deed for sale or purchase of land require agent must be appointed by
executing a formal power of attorney on stamp paper
An Implied Agreement is No express agreement, however, agency is implied by the conduct of
parties in different situations Eg: Agency by Estoppel: An agency by estoppel is created when the
alleged principal by his conduct leads willfully the other contracting party into an honest belief
that the supposed agent had authority to act as such and bind the principal
Illustration: B is As agent to sell good X. A instructs B not to sell it below a particular price. C,
unaware of As instructions, buys product at lower price from B. A will be hound by the contract.
Other implied agreements include Holding out and necessity.
An Agency by Ratification is an agency which is created by retrospective effect.
Illustration: A buys 5 bags of wheat on behalf of B but A is not agent of B. But B, upon hearing
may accept or reject it. If he accepts it, the act becomes ratified and A becomes As agent with
retrospective effect
Authorities, Rights and Duties of an Agent
Authorities: The authorities of an agent include actual authority, ostensible or apparent

authority, Delegation of authority, sub-agent, and substituted agent
Duties: Duty to follow principal's directions or customs, to carry out work with reasonable skill
and diligence, to render accounts , to communicate, not to deal on his own account, not to make
profit, not to terminate agency on principals death and not to delegate authority
Rights: Retainer, Lien, Indemnified against consequences of lawful acts, indemnified against
consequences of acts done in good faith, compensation, stoppage of goods in transit
Duties of a principal are indirectly the rights of an agent and vice-versa.
Termination of Agency
Agency can be terminated by an agreement between the two parties or revocation by either of
the parties. In the case of one of the parties opting out of the agreement before the agreement
time is complete, the withdrawing party has to pay proportional compensation.
Agency can also be terminated by an operation of law in the following ways: Completion of
business of agency, expiry of time, death of either party, insanity of either party, insolvency by
principal, Destruction of subject-matter, dissolution of company, either party becomes alien
enemy.
Page 32
CASES
1. Percept DMarkr (India) Pvt. Ltd. v. Zaheer Khan & Anr.
Percept DMarkr (Plaintiff) entered into an agreement with Zaheer Khan & Anr (Defendant), to manage
its media affairs. As per agreement plaintiff had the first right of refusal. Such that before accepting
any proposal from third party defendant has to offer the same proposal to plaintiff, and if rejected by
plaintiff, defendant can accept third party proposal. However on termination of this agreement, the
defendant entered into an agreement with the third party and plaintiff claims permanent injunction.
Issue: Is the agreement in conjunction of restraint of trade act?
Held: Accepting the plaintiff request would mean forcing the defendant to enter into contract with
only plaintiff, even after the lawful termination of the agreement. This will be against the restraint of
trade act section 27 of Indian Contract Act.
2. Fateh Chand vs. Balkishan Das
Appellant: Fateh Chand
Respondent: Balkishan Das
According to the contract dated March 21, 1949, the appellant was contracted to sell the leasehold
rights of the land and the building constructed on it to the defendant. The appellant received
Rs.25000/- under the contract and delivered possession of the building and the land to the
defendant, but the sale was not completed before the expiry of the period stipulated in the
agreement, and for this default each party blamed the other.
The trial Judge held that the plaintiff had failed to put the defendant in possession of the land
agreed to be sold and could not therefore retain Rs.25000
The High Court of Punjab modified the decree passed by the trial Court and declared 'that the
plaintiff' was entitled to retain out of Rs.25000/- paid by the defendant under the sale agreement,
a sum of Rs.11250/- being compensation for loss suffered by him and directed that the plaintiff do
get from the defendant compensation for use and occupation at the rate of Rs.265/-per mensem
The appeal was thus filed in Supreme Court against the order that respondent was entitled to
retain out of Rs.25000 paid by appellant under sale agreement a sum of Rs.11250 being
compensation.
The Supreme Court observed that there was no evidence that any loss was suffered by the plaintiff
inconsequence of the default by the defendant by keeping him out of the possession of the
property.
The Supreme Court then ordered that the plaintiff was entitled to retain only a sum of Rs1000 out
of Rs25000 and he was entitled to compensation at the rate of Rs.140 as ordinary damages.
3. State Bank of Saurashtra vs. Chitranjan Rangnath Raja and Anr.
Facts:
The appellant-bank allowed a cash credit facility limited to Rs.75,000/- to the Principal Debtor (PD) on
his pledging 5,000 tin of groundnut oil under the lock and key of the Bank and on personal guarantee
of the Respondent-Surety. However, afterwards when the Bank lost the pledged tins and sued the legal
representative of PD (after the death of PD) and the Surety to repay the debt, Surety contested
discharge of his liability.
Contentions:
Page 33
BANK- By Cl.5 of guarantee, surety could not claim discharge from the guarantee contract even when
the Bank had released any other security; such that in instant case, surety remains liable. Moreover,
under Cl.7, Surety cannot claim discharge even if the creditor Bank has any other guarantee, security
or remedy from the principal debtor.
SURETY- The Bank was negligent in parting away with the security such that the Surety was
discharged to the extent of the value of tins of oil.
Held:
Trial Court- The trial court held that there was negligence on the part of the Bank with regard to the
safe custody of the pledged oil tins but as the contract of guarantee entered into by the surety with the
Bank was independent of the pledge of goods given by the principal debtor, the surety is not discharged
from his liability under the guarantee.
High Court- On account of the conduct of the parties, the pledge of the goods and subsequent
contract of guarantee (entered into within the same time frame) were part of the one composite
transaction and they evidenced that the principal debtor had offered two securities, one the pledge of
oil tins and another personal guarantee of the surety: since the bank was utterly negligent in dealing
with the pledged goods leading to their loss, therefore, surety is discharged under Section 139 and 141
of the Indian Contract Act.
Issues:
1. Whether the pledge of the goods and the guarantee contract amounted to one single transaction.
2. Whether Section 141 is applicable here. If yes, to what extent is the Surety discharged?
Judgment:
In order to attract section 141 of the Contract Act, it must be shown that the creditor had taken more
than one security from the principal debtor at the time when the contract of guarantee was entered
into and irrespective of the fact whether the surety knew of such other security offered by the
principal debtor, if the creditor loses or without the consent of the surety parts with the other security,
the surety would be discharged to the extent of the value of the security. The letter of guarantee
executed by the Surety and the pledging of the goods evidenced one composite transaction; such
that, as found by the High Court, the principal debtor had offered two securities, (i) the pledge of
goods, (ii) personal guarantee of the Surety. The Surety himself agreed to give personal guarantee on
the specific understanding and with the full knowledge of the Bank that the principal debtor was
offering another security, namely, pledge of goods. First security, namely, the pledged goods are lost to
the Bank on account of its negligence. As the current market price of 5000 oil tins would have satisfied
the Banks entire claim, the Surety would be released to the whole extent.
With regard to contention upon Cl.5, release of security implies a volitional act on the part of the Bank.
In the present case, the bank had lost the security on account of negligence which cannot be equated
with release. Further, w.r.t Cl.7, the expression any other guarantee, security or remedy therein
mentioned must be security other than the pledged goods
4. Lalman Shukla vs. Gauri Dutt
Gauri Dutt sent his servant Lalman to find his lost nephew. The servant left and after that Gauri Dutt
announced a reward for the person who finds his nephew. Lalman, who was not aware of Gauri Dutts
Page 34
offer found Gauris nephew and brought him back. When Lalman came to know about the offer Gauri
had made, he claimed for the reward.
Judgement:
Lalmans plea for the reward was not accepted since he was not aware of the offer when he left to find
the servant. Since he was not aware of the offer, he was not allowed to accept it after performing the
job.
5. M/S. Vijay Traders (P) vs M/S. Bajaj Auto Ltd (D)

P Plaintiffs (Vijay Traders), D Defendants (Bajaj Auto Ltd who made Vespa Scooters
and Vespa Auto-Rickshaws)
FACTS
P is a trading firm registered under the Indian Partnership Act, having Office at Station Road,
Ahmednagar. D are a Company registered under the Indian Companies Act as a Public Limited
Company having its Registered Office at Pune,
The D are the manufacturers of Scooters called Vespa Scooters and Vespa Auto-rickshaws,
further referred to as Vespa Commercials.
The P alleged that the D wanted to secure proper distribution and sale of their products
mentioned above and, therefore, wanted to appoint Agents at different places including
Ahmednagar.
By order dated 9/12-10-1964, appointed the P as their permanent sole selling agent for Vespa
Scooters and December 12, 1966 for the Vespa Commercials in the district of Ahmednagar and
thus they were the sole distributors of the said vehicles and the appointment was irrevocable.
The P took the plea that the appointment constituted an agency coupled with interest and the
relationship between the parties was that of principal and agent.
D wrongfully terminated the distributorship with effect from 1.7.1968 for Vespa Scooters by
their letter dated 4/7.8.1968 and by a subsequent letter dated 28.8.1968 the D terminated the
distributorship for Vespa commercial also with effect from 1.10.1968
The P alleged that this termination was wrongful, illegal and without proper notice, causing
loss to the P and, therefore, filed the suit for damages for wrongful termination and rendition
of accounts.
Defendant (D)s denial of the appeal:
The D contested the suit by denying the allegation that they and appointed the P as their agent. The D
denied the relationship of agent and principal as alleged by the P. The D pleaded that they had never
appointed the P as their sole, permanent and irrevocable agents but their relationship was that of
principal to principal. The P used to pay for the said automobiles and sell them independently. The D
asserted that it was not a fact that P were appointed distributors. The defendant's took the plea that
the P were appointed as ordinary distributors which could be terminated at any time. But the P were
never required to procure any orders from the customers on behalf of the D and that the D had a right
to terminate the contract with a particular dealer at their sole discretion and their decision to that
effect was final. The D, in their pleadings refuted the claim of the P firm.
Page 35
Section 182:
Under Section 182 of the Contract Act an agent is defined thus:
"An `agent' is a person employed to do any act for another of to represent another in dealings with
third persons. The person for whom such act is done or who is so represented is called the "principal".
Therefore in the present case, it has to be determined the P were employed by the D to sell their
products i.e. Vespa Scooters and Vespa Commercials to the customers on their behalf or while so
dealing they represented the D in the transaction with third parties i.e. the ultimate purchasers of the
vehicles so as to bring the D in the category of the principal and the P as their agent.
Court Verdict:
Court held that the P had failed to establish that there was any relationship of agent and principal
between the parties and the termination of distributorship was lawful and, therefore, dismissed the
suit of the P except for an amount of Rs. 4419.81 which was admitted by the D
Examining the evidence on record the Court found that there was no material to establish relationship
of principal and agent between the parties and that the documents and the evidence on record
indicated that the P purchased from the respondents the vehicles allotted to them at the net dealer's
price, and retained the difference as their profit
So the relationship between the P and D in respect of sale by the P' was not the relationship of agent
and principal. With these findings the High Court dismissed the appeal but without any order as to
costs.
6. Union of India & Ors. (Plaintiff) vs M/S. Bhim Sem Walaiti Ram
(Defendant)
FACTS
An auction was held for the sale of license of liquor shop and the bid of the defendant which
was the highest was provisionally accepted.
Subject to the confirmation of Chief Commissioner who may reject any bid without assigning
any reasons.
Since defendant failed to deposit the required amount, Chief Commissioner rejected the bid.
The defendant was held liable for the difference between the bid offered by him and the
highest bid accepted in the re-auction, plaintiff started proceedings against him under a statute
of the Delhi Liquor License Rules
Section 7 of the ICA
Under Section 7 of the ICA "the acceptance must be absolute and unqualified, leaving no ground for
doubt or uncertainty. If the acceptance is conditional, no valid contract is formed, and the offer can be
withdrawn at any moment till the absolute acceptance has taken place within reasonable time of such
offer."
Page 36
Court Verdict
In this case the contract for sale was not complete till the bid was confirmed by the chief
commissioner and till such confirmation; the bidder was entitled to withdraw the bid. Since there was
never any sale of the license of the liquor shop to the defendant, therefore, he cannot be held liable.
The court dismissed the appeal.
7. Aries Advertising (Appellant) vs C.T.Devaraj (Respondent)

FACTS
Respondent was a financer to run the circus which had incurred a huge loss.
The appellant had advertised for the circus run by the second defendant Balakrishnan.
The appellant laid a suit for recovery of a sum of Rs.27,000/and odd towards the
advertisement charges impleading the respondent, as first defendant ,along with Balakrishnan
as second defendant.
This case was concerned only with the liability of the first defendant-respondent C.T.Devaraj.
Section 70 and the appellants charge:
Section 70 states that "Where a person lawfully does anything for another person, or delivers anything
to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter
is bound to make compensation to the former in respect of, or to restore, the thing so done or
delivered. "
Under an agreement between the respondent and Balakrishnan, a clause stated the respondent
undertaking to pay the advertisement charges. Also proposal sent for advertisement by the appellant
approved by the respondent. Thereby there emerged a concluded oral contract.Also since the
respondent agreed to receive the benefit of 30% of the profit from the income derived by running of
the circus, he had derived benefit pursuant to the advertisement made by the appellant.
Therefore, the respondent is bound by s.70 of the Act.
Court Verdict:
The agreement was bilateral between the respondent and Balakrishnan. The appellant is not a party to
the agreement. So, there is no privity of contract between the appellant and Devaraj.
It is also an admitted fact that though proposal sent for the advertisement by the appellant was
approved by Devaraj, he did it on behalf of Balakrishnan. The approval sought by the appellant was not
given in writing so as to bind Devaraj with the expenditure incurred for advertisement. The High Court
had concluded that in the absence of any approval in writing by the respondent he could not be held
responsible for the expenditure incurred by Balakrishnan for advertisement to run the circus.
The High Court found as a fact that the respondent did not derive any benefit out of the contract
entered into between the respondent and Balakrishnan. The respondent was only a financer to run the
circus and pursuant to the contract the respondent had suffered huge loss. In the absence of any
benefit derived by the respondent pursuant to the advertisement made by the appellant, the High
Court found that s.70 is not applicable to this case.
Page 37
The High Court dismissed the appeal but without costs.
8. Chairman L.I.C & Ors. vs Rajiv Kumar Bhasker

FACTS:
Rajiv Kumar was an employee of BHEL.
As per L.I.C salary saving scheme the employer was to deduct the premium from the salary of
the employee and deposit with L.I.C. All the related procedures were the responsibility of the
employer.
Upon death of the concerned employee, the heirs found the employer had defaulted in
payment causing policy to lapse. L.I.C relied on a clause in the acceptance letter by the
employer which said he would act not as the agent of L.I.C but as an agent of his employees.
Issue:
Whether the employer can be treated as the agent of the L.I.C despite the express agreement to the
contrary?
Contentions:
L.I.C: As the policy was in the name of individual employee, in the event of non-payment of premium
either by employee or employer would result in lapse of the policy.
Court Verdict:
The expression agent in this case may not mean to be one within the meaning of the LIC of India
(Agents) Regulation, 1972; but would mean an agent in ordinary sense of the term. Corporation did
not make any offer to the employees nor would directly make any communication with them
regarding payment or non-payment of the premium or any other matter in relation thereto and the
inability of the employee to approach the insurer directly, show that they were to treat their
employers as agents of the Corporation and the employer had a key role to play in this whole affair.
Furthermore, even the terms and conditions of the policy were to be performed only through the
employer. This only points to the fact that the employers would be the agents of the insurer. When the
existence of an agency relationship would help to decide an individual problem and the fact permits a
court to conclude that such a relationship existed at a material time, then whether or not any express
or implied consent to the creation of an agency may have been given by one party to another, the court
is entitled to conclude that such relationship was in existence at that time for the purpose in question.
9. R.S. Amarnath Mehra(Appellant) & Co. vs Union Of India And

Ors(Respondent)
FACTS
Appellant was a registered partnership firm, which was in contract with 3 respondents with
Union of India (No.1), Divisional Superintendent, Commercial, Northern Railway and General
Manager (No.2), Northern Railway, New Delhi (No.3)
No. 3 invited tenders for goods handling contract at Lucknow
Page 38
Proposal Accepted, a 3-year contract awarded, which was endorsed by Divisional

Superintendent and Divisional Accounts
Appellant received a notice that contract will be held in abeyance. Fresh quotations were
invited and Appellant applied again. Appellant got selected again.
No. 3 communicated that one of the items given in the schedule of rates for handling goods
traffic at Lucknow would be treated as withdrawn from the appellant's contract. On the same
date, by another letter addressed to the appellant by the respondents, the entire contract was
rescinded.
Appeal:
As the respondents failed to pay the amount to the appellant in spite of the notice, a suit for the
recovery was filed by the appellant
Respondents claimed that only certain parts of contract were changed, hence it didnt constitute a
change in contract. The respondents pleaded that they had the authority either to stop or cancel the
contract in respect of all or any of the items covered by the contract, and this is what exactly had been
done.
The appellant was, therefore, entitled to compensation in respect of item that was cancelled earlier
and also compensation for the loss suffered by the appellant by the impugned cancellation of the entire
contract.
Court Verdict:
The court urged that appellant was entitled to compensation under doctrine of 'quantum meruit'. Thus
it directed the respondents to pay the amount claimed (Rs. 29000), along with the requisite interest
amount.
10.
Abdul Aziz vs. Masum Ali, (1914).
The secretary of a Mosque Committee filed a suit to enforce a promise which the promisor had made
to subscribe Rs. 500 to the re-building of a mosque.
Held: the promise was not enforceable because there was no consideration in the sense of benefit, as
the person who made the promise gained nothing in return for the promise made, and the secretary
of the Committee to whom the promise was made, suffered no detriment as nothing had been done to
carry out the repairs. Hence the suit was dismissed.
REFERENCES
http://judis.nic.in/
http://indiankanoon.org/
Page 39

Group5 LAWReport IndianContractAct1872

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Group5 LAWReport IndianContractAct1872

Caricato da

Copyright:

Formati disponibili

Indian Contract Act, 1872

Indian Contract Act, 1872

Indian Contract Act, 1872

Indian Contract Act, 1872

ESSENTIAL ELEMENTS OF A CONTRACT

Offer and Acceptance

From Point Of View of Enforceability

It is an agreement enforceable by law when all essential elements are present

Illegal agreement, hence void ab-initio if the object or consideration:

Indian Contract Act, 1872

From Point Of View of Mode of Creation

From Point Of View of Extent of Execution

Indian Contract Act, 1872

SPECIAL CASE OF QUASI CONTRACT

Claims for necessaries supplied to a person incapable of contracting or on his account

Reimbursement of person paying money due by another, in payment of which he is interested

Obligation of person enjoying benefit of non-gratuitous act

Responsibility of finder of goods

Indian Contract Act, 1872

OFFER - SECTION 2(A)

After stipulated time

Indian Contract Act, 1872

ACCEPTANCE SECTION 2(B)

Communication of offer, acceptance and revocation

CONSIDERATION SECTION 2(D)

Consideration can be past, present and future

Indian Contract Act, 1872

Consideration may be an act to do OR not to do an act ( abstinence ) it may be in cash or in kind:

Exceptions to the rule No consideration, no contract

No consideration is required to create an agency

Indian Contract Act, 1872

CAPACITY OF PARTIES SECTION 11

He is a minor, according to the law he is subject

Each of these is discussed in detail below

Agreement by a minor is absolutely void and inoperative as against him

Beneficial agreements are valid contracts

No ratification on attaining the age of majority

Indian Contract Act, 1872

Rule of estoppel doesnt apply to a minor

Minors liability for necessaries

Minor and insolvency

Contract by minor and adult jointly

Indian Contract Act, 1872

Surety for a minor

Position of minors parents

Minors liability in tort

Persons of Unsound Mind

Indian Contract Act, 1872

Foreign sovereigns and ambassadors

To enter into contracts and

On the expiry of the sentence, he is in liberty to institute a suit.

Indian Contract Act, 1872

FREE CONSENT SECTION 14

Indian Contract Act, 1872

Husband & Wife

Effect of Undue Influence

He can rescind the contract, treating the contract as voidable

Indian Contract Act, 1872

Mistake of law of the country

Mistake of foreign law

Indian Contract Act, 1872

Indian Contract Act, 1872

LEGALITY OF OBJECT AND CONSIDERATION