Amendment & Revisionary Booklet

The Indian Contract Act, 1872

Essentials of Valid Contract Rules of Offer
1. Proper offer and proper acceptance with intention to create legal 1. Offer must be communicated to the
relationship offeree
2. Lawful consideration3. Capacity 2. The offer must be certain definite and
4. Free consent not vague
5. Lawful object 3. The offer must be capable of creating
6. Possibility of performance legal relationship
7. The terms of the agreements are certain or are capable of being 4. Offer may be express and implied
made certain 5. Communication of complete offer
8. Not declared Void 6. Counter offer:-
9. Necessary legal formalities 7. Cross offer:-
8. An offer must not thrust the burden
Types of Offer of acceptance on the offere
1. General Offer 9. Offer must be distinguished from
2. Special Offer invitation to offer
3. Counter Offer 10. Offeror should have an intention to
4. Cross Offers obtain the consent of the offeree
5. Open Offer 11. An answer to a question is not a offer.

Lapse of Offer
1. By Sending notice of revocation 2. By lapse of time 3. By Death or insanity of the Offeror 4. Counter Offer
5. By not accepting the condition precedent 6. By rejection of offer by the offeree 7. By destruction of subject-
matter 8. By Change in Law 9. By not accepting the offer in prescribed or usual mode

Rules for acceptance Rules regarding communication

1. Acceptance shall be absolute. Completion of Offer:-When it comes to the
2. Acceptance must be within time limit. knowledge of offeree
3. Acceptance must be within proper manner. Completion of Acceptance
4. Acceptance must be by proper person. ▪ On part of offeree:-when letter is duly posted by
5. Acceptance must be communicated him
6. Mere silence is not acceptance to offer. ▪ On part of offeror:-when it comes to the
Exceptions:-Custom of trade, Offeree himself agrees knowledge of Offeror

Rules regarding revocation Rules regarding consideration

Revocation of offer:-Until acceptance is completed
on part of offeree.
Revocation of acceptance:-until acceptance is
completed on part of offeror.
The letter first reaches, will be effective. If both the
letter reached together, then letter first read by the
offeror will be effective.
1. It must be at the desire of the promisor.
2. It may move from promisee or any other person.
3. it may be past, present or future.
4. It must be real.
5. It need not be adequate
6. It must be different from promisee’s existing obligation
7. Consideration must not be unlawful.

Doctrine of privity of Contract Doctrine of Validity of an agreement without

General Rule:-Stranger to the Contract can privity of consideration (Section 25)
not file a case. Consideration General Rule:-Void
Exceptions:- Stranger to Exceptions:-1. Natural love and affection
1. In case of contract of trust consideration can 2. Past voluntary Services 3. Agency
2. In case of Family settlement 4. Promise to pay time barred debt.
file a case
3. In case of Assignment 5. Bailment 6. Completed gift

CA Ankit Oberoi
 Amendment & Revisionary Booklet

Capacity to contract Consequences of an agreement with a minor

1. Major:-Age 18 years or
more, in two situation age
should be 21 years.
2. Sound Mind:-Who can
understand the terms of
contract & form a fair
judgement
3. Not disqualified by law
Alien Enemy, Insolvent,
Convicts, Foreign Diplomats
1. Void-ab initio 2. Altogether void as against the minor. 3.Minor can
be a beneficiary in any contract. 4. A minor can be admitted for the
benefit of partnership. 5. Minor can always plead minority (even in case
of fraud)
6. Ratification on attaining majority is not allowed 7. Contract by
guardian-how far enforceable. 8. Principle of Restitution doesn’t apply
9. No Specific Performance. 10. He cannot be adjudged insolvent 11. He
can be an agent. 12. Parent will not be liable. 13. A minor is liable in tort
(a civil wrong) 14. Minors’ property will be liable for necessaries

Coercion Undue Influence Fraud

▪ Committing any act which is forbidden by where the relation ▪ False representation of fact
the IPC subsisting between the ▪ Party making representation
▪ Threatening to commit any act which is parties is aware of false information
forbidden by the IPC. one party is in position to ▪ Intention is to deceive other
▪ Unlawful detaining of any property or dominate the will of the party
▪ Threatening to detain any property other. ▪ To induce other party for
coercion can move from third party. The dominant party use entering into contract
Coercioncan be directed against third party his position. ▪ The other party has actually
It is immaterial whether the IPC is or is not in Obtain an unfair been deceived
force at the time or at the place advantage over the other. ▪ Other party has suffered
loss

Misrepresentation Mistake
▪ False representation of fact Mistake as to Law:-
▪ Party making representation is not aware 1. Indian Law:-Valid 2.. Foreign Law:-Void
of false information Mistake as to fact
▪ Intention is not to deceive other party 1. Bilateral Mistake:-Void 2.Unilateral Mistake:-Valid
▪ The other party has actually been misled Unilateral is void if party is in mistake as to nature of contract or
identity of other party.

Agreement opposed to public policy Wagering Agreement

1. Agreement to commit crime 2. Agreement with enemy Promise to pay money or money’s worth
3. Maintenance. 4. Champerty. 5. Stifling prosecution. Uncertain event
6. Agreement to create monopoly. 7. Marriage brokerage Each party must stand to win or lose:- No
Agreements 8. Agreement restricting personal liberty. control over the event
9. Agreements restricting parental rights 10. Trafficking in public No other interest in the event.
offices and titles 11. Agreement to defraud creditors.

Joint Promisors Reciprocal Promises

Joint promisors are Jointly and severally liable to
perform.
If any of JP performs, he can claim contribution
from other
A release of one of such joint promisors by the
promisee does not discharge the other joint
promisors.
The deficiency occurred due to default of any of
JP will be borne by remaining JPs in equal ratio.
Mutual and independent: In this case, each paty has to
perform his promise independently and irrespective of
the fact whether the other party has performed it o not.
Conditional and Dependent:- If the party who is bound
to perform his promise first fails to perform it, then he
cannot claim performance from the other party.
Mutual and Concurrent:- Mutual and concurrent
promises are to be performed simultaneously.

Appropriation of payments
Where manner is prescribed:-Debt must be appropriated in the prescribed manner.

CA Ankit Oberoi
 Amendment & Revisionary Booklet

Where manner is not prescribed:-‘Person receiving’ can appropriate any lawful debt (including time barred debt)
Where neither party appropriates:-Debt will be appropriated ‘in order of time’ including time barred debt. If
debts are of same day, then it must be appropriated proportionately.

Discharge of Contract
By Performance By Mutual By Lapse By Operation By Breach of By Impossibility
▪ Actual:-One Agreement of time of Law Contract of Performance
party ▪ Novation:- e.g. Time ▪ Death ▪ Anticipatory ▪ Initial
performed Substitution of barred ▪ Insolvency Breach:- Impossibility:-
and other old contract debt ▪ Merger Breach Void-ab-initio
accepted. with new one ▪ Unauthoris before the ▪ Supervening
▪ Attempted:- Alteration:- ed time fixed Impossibility:-
One party Change in T&C Material for Contract will
performed of Contract.. Alteration performance be void.
and other ▪ Rescission:- ▪ Actual Reasons:-
rejected. Cancellation of Breach:- 1. Destruction
contract Breach on of subject
▪ Remission:- time foxed matter.
Accepting for 2. Change in
lesser, other or performance Law
no 3. Outbreak
consideration. of war
▪ Waiver:- 4. Non
Extinguishment happening of
of Contractual certain things
rights 5. Death or
incapacity.

Types of Breach Remedies in case of Breach

Anticipatory Breach:-Breach before the time for performance has Rescission of Contract.
arrived. Then, A/P has the option either to cancel the contract & claim the Claim the damages
damages or he can continue the contract till the due date and even if Suit upon Specific Performance
contract is not performed, then he will claim damages accordingly. Suit upon Injunction
Actual breach of contract:-Breach on time fixed for performance or Suit upon Quantum Meruit
during the performance.

Contingent Contract Quasi Contract

Contract contingent on an event 'happening' : If that event Meaning:- Quasi Contracts are declared
becomes impossible, such contracts become void. by law as valid contracts on the basis of
Contracts contingent on an event 'not-happening': Such Principles of equity.
contract is enforceable only when the happening of that Types:-
▪ Claim for necessaries
event becomes impossible and not before.
▪ Finder of Goods
When shall an event on which contract is contingent be
▪ Money or thing delivered under
deemed impossible, if it is the future conduct of a living mistake or coercion
person ▪ Money paid on behalf of another
Agreement contingent on impossible event:void-ab-inition person
▪ Non-gratuitous Act

CA Ankit Oberoi
 Amendment & Revisionary Booklet

Contract of Indemnity
Meaning:-A contract by which one party promises to save the other from loss caused to him by the conduct of
the promisor himself, or the conduct of any other person is called a " contract of indemnity".
Parties:-
▪ Indemnifier:-Party who will compensate the loss of other party
▪ Indemnified/ Indemnity Holder:-Party whose loss is so compensated.

Contract of Guarantee
Meaning Types of Parties Essentials Liability of Discharge of Rights of Surety
A contract of ▪ Surety:- The ▪ Essentials of Surety Surety Against the
guarantee is a person who a valid ▪ Surety’s By revocation principal debtor
contract to gives the contract liability is ▪ Notice by ▪ Right of
perform the guarantee ▪ Primary coextensive Surety Subrogation
promise made ▪ Principal liability of with liability ▪ Death of Surety ▪ Right of
or discharge Debtor:- The some of principal ▪ Novation indemnity
liability incurred person in person debtor By the conduct of Against the
by a third respect of ▪ The ▪ Commence the creditor creditor
person in case whose contract ment of ▪ By Variance in ▪ Right to
of his default. default the must be surety’s terms Security
guarantee is conditional liability ▪ Release of ▪ Right to set-
given ▪ No ▪ Surety’s Principal debt. off
▪ Creditor:-The misrepresen liability may By invalidation of ▪ Right to seek
person to tation be limited the contract dismissal
whom the ▪ There must ▪ Surety’s ▪ Guarantee Against the Co-
guarantee is not be any liability may obtained by Sureties
given concealmen be misrepresentat ▪ Right to Claim
t of facts. continuous ion Contribution
▪ Contract ▪ Surety’s ▪ Guarantee
may be oral liability may obtained by
or written. be concealment
▪ Joining of conditional ▪ Failure of co-
other co- surety to join a
sureties. surety

Contract of Bailment
Meaning Essentials Duties of bailor Rights of Duties of bailee Rights of
It is as an act ▪ It is always ▪ Duty to bailee ▪ To take care of bailor
whereby based upon a disclose faults ▪ To enforce the goods bailed ▪ To enforce
goods are contract. in the goods bailor's ▪ Not to make bailee's
delivered by ▪ Only for ▪ Duty to duties unauthorized duties
one person movable reimburse ▪ To Return use of goods ▪ To
to another goods. ▪ Indemnify the the Goods ▪ Not to mix terminate
for some ▪ It requires bailee for ▪ Recover bailor’s goods the contract
purpose on temporary defective charges with his own of bailment
a contract delivery of good incurred goods ▪ To demand
that the goods. ▪ Indemnify the ▪ To file a suit ▪ To return the back goods
goods shall, ▪ ownership is bailee for against goods bailed ▪ To file a suit
when the not transferred pre-mature wrongdoer ▪ To return any against
purpose is ▪ Goods are termination ▪ Right of lien accretion to the wrongdoer
accomplishe delivered upon ▪ Receive back goods bailed
d, be a condition the Goods ▪ Not to set up
returned. that they are to adverse title
be returned.

CA Ankit Oberoi
 Amendment & Revisionary Booklet

Contract of Pledge
Meaning Parties Duties of Rights of Duties of pawnee Rights of
It is the ▪ Pawnor:- pawnor pawnee ▪ To take care of pawnor
bailment of When goods ▪ Pay the Debt ▪ Pawnee's right the goods There is a right to
goods as have been ▪ Pay deficit on of retainer bailed recover to back
security for pledged, the sale ▪ Pawnee's right ▪ Not to use of the goods by
payment of bailor is ▪ Duty to of retention in goods making payment
called the disclose faults regard to ▪ Not to mix of the debt or
debt or
pawner. in the goods subsequent bailor’s goods performance of
performanc ▪ Pawnee:-
▪ Indemnify the advances with his own promise.
e of a When goods Pawnee for ▪ Pawnee's right goods
promise. have been defective to ▪ To return the
pledged, the goods extraordinary goods bailed
bailee is expenses ▪ To return any
called the incurred accretion to
pawnee. ▪ Pawnee's right the goods
where pawnor bailed
makes default ▪ Not to set up
adverse title

Contract of Agency
Meaning Essentials of Termination of Duties of Agent Rights of Agent Personal
It is the valid Agency:- ▪ Duty in ▪ Right to liability of
relationship Ratification:- ▪ By revocation conducting remuneration Agent
between ▪ Full by the Principal principal's ▪ Right of ▪ Foreign
two person knowledge ▪ On the expiry business. Retainer Right principal.
where one ▪ Whole of fixed period ▪ Requirement of Lien ▪ Undisclosed
person is transaction of time as to skill and ▪ Right of principal
employed ( ▪ Act on behalf ▪ On the diligence. Indemnificatio ▪ Principal
Known as of another performance of ▪ Agent's duty to n cannot be
Agent) by person. the specific account. ▪ Right to sued
another ( ▪ By the purpose. ▪ Payment of Compensation ▪ Exceeds
known as principal. ▪ Insanity or money. authority
Principal) to ▪ Existence of Death of the ▪ Duty to ▪ Where an
act on behalf principal. principal or communicate agent signs
of that ▪ Contractual agent. negotiable
another with capacity ▪ Destruction of instrument in
the third ▪ Lawful acts. subject-matter his own name
person. ▪ Acts within ▪ Object ▪ Agent with
principal’s becomes special
power. unlawful. interest
Communicati ▪ Insolvency of ▪ Guilty of
on. the Principal. fraud:
▪ Within
reasonable
time.

CA Ankit Oberoi