AL-AMEEN COLLEGE OF LAW

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MODEL ANSWER NOV-2017

I SEMESTER 3 YEARS LL.B/ V SEMESTER 5 YEARS B.A.,LL.B

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SUBJECT: CONTRACT I

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(Prepared by Ms Tasfia and Ms Sana)

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1. “All Contracts are Agreements but all Agreements are not Contracts”. Explain.

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Introduction

It is a valid and true statement. Law of contract applies to contractual obligations.

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Law of contract is not the whole of agreements nor is it the whole of law of obligations. It is

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the law of that agreement which create legal obligations and those obligations which have
their source in agreement before we can critically examine the statement, it is necessary to
understand the meaning of agreement and contract.
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Definition
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According to section 2(a) "every promise on every set of promises forming the
consideration for each other an agreement.
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Meaning of Contract
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According to section 2(h) of the Indian Contract Act, "An agreement enforceable by law
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is a contract.
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• All contracts are agreements

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• But all agreements are not contracts.

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(A) All Contracts are Agreements

For a Contract to be there an agreement is essential; without an agreement, there can be no

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contract. As the saying goes, "where there is smoke, there is fire; for without fire, there can
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be no smoke". It could will be said, "Where there is contract, there is agreement without an
 agreement there can be no contract". Just as a fire gives birth to smoke, in the same way, an

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agreement gives birth to a contract. Another essential element of a contract is the legal
obligation for the parties to the contract; there are many agreements that do not entail any

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legal obligations. As such, these agreements cannot be called contracts.

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For Example:

A gives his car to B for repair and B asks for Rs. 200 for the repair works. A agrees to pay the

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price and B agrees to repair the car. The agreement imposes an obligation on both. The third

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element of a contract is that the agreement must be enforceable by Law. If one party fails to
keep his promise, the other has the right to go the court and force the defaulter to keep his

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promises. There are other elements are:

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1. Offer and acceptance

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2. Legal obligation,

3. Lawful consideration,
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4. Valid object,

5. Agreement not being declared void by Law

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6. Free consent,
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7. Agreement being written and registered,

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8. Capacity to contract,
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9. Possibility of performance from what has been discussed.

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All Agreements are not Contracts :

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An agreement is termed a contract only when it is enforceable by law. All agreements are not
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necessarily legally enforceable. It can rightly be said that an agreement has a much wider
scope than a contract.
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For example that agreements are not legally binding are an invitation to dinner or to go for a
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walk and its acceptance. These are agreements not contracts.

 An agreement does not necessarily imply a legal obligation on the parties to the agreement. It

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is import here to clarify what exactly is an obligation. Obligation is a legal tie which imposes
upon a person or persons the necessity of doing or abstaining from doing definite act or acts.

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An agreement need not necessarily be within the framework of law and be legally

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enforceable. If it is, then it is a contract. A promises B to do physical harm to C whom, the
latter does not like and B promises to pay A Rs. 1000 to do that, it cannot be termed as a

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contract because such an act would be against the law. Any agreement of which the object or

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consideration is unlawful is void and cannot be called a contract.

Conclusion

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It would be clear from what has been said so far that an agreement has a much wider

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scope than a contract. An Agreement implies fulfilling some agreed condition. It does not
necessarily imply that the stipulated conditions conform to the law and are enforceable by it.

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It may be said that an agreement is the genus of which contract is the species. It also makes it
clear that all agreements are not contracts but all contracts are agreements.
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2. Define Offer. Explain the rules with regard to a valid offer with decided cases.

Introduction:
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Every day we directly or indirectly enter into agreements for the purpose of carrying out
various activities. Agreements can be for social/family or for legal relationships. An
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agreement entered for legal purpose which intends to have legal relationship can be termed as
Contract.
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It is the Contract which is considered to be legally enforceable in the eyes of Law as per
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section 2(h) of the Indian Contract Act, 1872.

Every Contract to be valid has to satisfy certain essential elements as laid down under the
Contract Act, 1872. The first and foremost essential element for a valid Contract if-
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Offer
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Meaning:
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An Offer is intimation by words or by conduct of a willingness to enter into a legally

binding Contract.
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Definition:
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Section 2(a) of the Indian Contract Act, 1872 defines the term "Proposal" as follows:
“when one person signifies to another his willingness to do or to abstain from doing
 something with a view to obtaining the assent of the other to such an act or abstinence, he is
said to make a proposal”.

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The person making the 'proposal' or 'offer' is called the 'promisor' or 'offeror' and the
person to whom the offer is made is called the 'offeree'.

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Kinds of offer:
There are three main types of Offer. They are,

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1. General Offer

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2. Specific Offer
3. Standing Offer.

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Essentials of valid offer:

1. Offer must be capable of creating legal relations:

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The Offeror must intend the creation of legal relations. He must intend that if his offer is
accepted a legally binding agreement shall result. A accepts an invitations to dine at B’s

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place on a certain date but fails to turn up on the appointed date, A cannot be sued for breach
of a contract, because in contracts regulating social or domestic arrangements the
presumptions is that parties do not intend legal consequences to follow from breach of
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contract.

(Balfour v. Balfour case)

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2. Offer must be certain, define and not vague:

No contract can come into existence if the terms of the offer are vague or loose and
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indefinite. Both the parties should clear about the contract.

3. Offer must be communicated to the Offeree:

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There can be no offer by a person to himself. It must always be communicated to the Offeree.
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If there is no communication of an offer, there is no acceptance resulting in the contract.

4. Offer must be made with a view to obtaining the assent of the other party:
An offer must be distinguished from mere expression of intention. It should be made only
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with an intention of getting assent or approval of the other party to whom offer is
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communicated.

5. An offer may be conditional:

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An offer can be made subject to a condition. In that case Offer can be accepted only subject
to that condition. A conditional offer lapses when the condition is not accepted by the
Offeree.
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6. Offer should be Clear and Certain:

 When the offeror makes an offer it should be very clear and the terms and conditions should
not be vague or uncertain. One cannot say while making the offer if the offer is not accepted

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before a certain date, it will be presumed to have been accepted.

Example: A writes to B, “I offer to sell my house for Rs. 40000. If I do not receive a reply by

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Monday next, I shall assume that you have accepted the offer.” There will be no contract if B

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does not reply.

7. Lapse of an offer:

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An offer lapse-

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(a) If either Offeror or Offeree dies before acceptance.

(b) If it is not accepted within

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(i) The specific time, or
(ii) A reasonable time, if not time is specified

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(c) If the Offeree does not make a valid acceptance, for example makes a counter or conditional

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acceptance or if a particular manner of acceptance has been requested, he accepts in some
other manner.

(d) An offer can also lapse by revocation.

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8. An invitation to offer is not an offer:

An offer must be distinguished from an invitation to offer. In the case of an “invitation to
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offer” the aim is merely to circulate information of readiness to negotiate business with
anybody who on such information comes to the person sending it. Such invitations are not
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offer in the eyes of law and do not become promises on acceptance. (Harvey v/s Facey case)

Conclusion:
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Therefore, Offer is very important element for starting a Contract. Offer should be
clearly differentiated between invitation to offer. Offer is legal binding one whereas
invitation to offer is merely an invitation. Quotations, catalogues of prices or display of
goods with prices marked thereon do not constitute an offer. They are instead an invitation
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for offer and hence if a customer asks for goods or makes an offer, the shopkeeper is free to
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accept the offer or not.

3. “An Agreement without consideration is void”. State the exceptions.

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Introduction :
The consideration has important place in contract. It is important part of Contract. A
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valid contract requires a consideration. Agreement without consideration are void. The study
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of consideration in respect of the subject matter is required.

 Meaning and Defination.
Section 2 (d) of the Indian Contract Act- 1872 defines consideration. It says, “ When

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at the desire of the promisor, the promise or any other person has done or abstained from
doing or does or abstains from doing or promises to do or to abstain from doing-something,

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such act or abstinence or promise is called a consideration for promise.”
In other words when a the desire of one person, another person does sense act or

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abstains from doing, then it consideration for the first person.
Illustation :- ‘A’ purposes ‘B’ to buy his cycle for /rs.1000.00. ‘B’ agrees to buy that cycle for

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Rs.1000/-. Here Rs.1000/- is the consideration for cycle.
According to Pollock :- “ A party does or abstains from doing or promise to do or

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abstain from doing something, is a price for which the promise is bought, the promise thus
given for value is enforceable.
According to Auson :- “ Consideration is that which is to be done abstain from

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doing, to be bear or promises to do or which the promises abstains from doing in respect of
promise or bears it.”

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Elements Of Consideration :-
I. Consideration is necessary for every contract.
II.
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Consideration to be at the desire of promisor.
Consideration can be given by the promise or any other person.
IV. Consideration may be past, future or present.
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V. Consideration must be legal.

• Consideration is necessary for every contract.

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Consideration is essential for a valid contract. Agreement without consideration cannot be

imagined. Section 25 of Indian Contract Act-1872 clearly provides that “ Agreement without
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consideration is void.”
Illustration :- ‘A’ promises ‘B’ to pay him Rs.2000/- without any consideration. This is void
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agreement.
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Exceptions :- But the above rule have some exceptions also i.e. an agreement without
consideration in following situation is valid and enforceable :-
1. Agreement Under Natural Love and Affection:- Agreement without consideration due
to Natural Love and Affection are valid and enforceable provided that they are written and
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registered.
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Ilustration : ‘A’ promise to pay his son ‘B’ a sum of Rs. 5000.00 under the Natural Love and
Affection. A writes his promise toward B and gets it registered. This is contract. Natural love
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and affection includes relation between father-son husband-wife, brothers etc. Such relations
do not require consideration for a valid agreement. A case : ManaliSinghal V/s Ravi Singhal-
1999-Delhi), It was said by Delhi High Court that where any family agreement in relation to
the amount of maintenance has been made for love and affection, family peace, harmony and
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satisfaction there consideration shall not be required. Such agreement shall be enforceable by
Court.
 2. Agreement to pay compensation for past service: Where any person without the
knowledge of promisor or otherwise than his prayer, does any service or has done service and

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the promisor promise to compensate him, there consideration shall not be required, with the
following thing which are necessary :-

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i) An act has been voluntarily done already for the promisor
ii) At the time of commission of that act, promisor was competent to contract.

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Illustration ‘A’ at the desire of ‘B’ does service for the relatives of ‘B’. Later ‘B’ agrees to
pay Rs.1000/- to ‘A’ for the service. This agreement been result of earlier service is valid and

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enforceable. Such consideration is also called past consideration.
3.Agreement for payment of Time Barred Debt: Such an agreement for payment of a debt

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barred by time under limitation act, is considered to be lawful because a time barred debt is
also a good consideration as the debt remains ever after the completion of time of recovery. A
case: Tulsiram v/s Samey Singh AIR-1981 Delhi Delhi High Court held that an agreement

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for the payment of a time barred debt can be made under Se.25(3) but it requires that the
agreement shall mention that consent has been given for the payment of time barred debt

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• Consideration must move at the desire of the promisor.

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For a valid consideration, it is essential that the consideration for the promise must move
at the desire or request of the promisor. The desire of the promisor may express or implied
from the conduct of the parties.
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In DurgaParsad v/s Baldev The Plaintiff constructed certain shops in a market at the
instance of the Collector of that place. Subsequently the defendants occupied one of the shops
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in the market. Since the Plaintiff had spent money for the construction of market, the
defendants in consideration thereof, made a promise to pay the plaintiff commission on the
articles sold through their (defendant) agency in that market. The plaintiff failed to pay the
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promised commission. In an action by the plaintiff to recover the commission, it

was observed that the consideration for the promise to pay the commission was the
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construction of the market by the plaintiff. Such construction had not been done at the desire
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of the defendants, but on the order of the Collector. It was therefore held that since the
consideration did not moved at the desire of the defendants ( Promisors in this case), this did
not constitute valid consideration and therefore the defendants were not liable in respect of
the promise made by them.
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• Consideration may move from promisee or any other person.

Consideration may move from promisee or any other person, if the promise has no objection.
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In other words, a stranger to consideration can sue on the contract, provided he is a party to
the contract. But a stranger to a contract is not entitled to enter into the contract because of
the privity of contract.
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• Consideration may be past, present or future:

There are three types of consideration which are as under :-
 i) Past consideration.
ii) Present consideration.

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iii) Future consideration.
Present consideration means such consideration which is paid to the promissory immediately.

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Example : ‘A’ offers to ‘B’ to sell his vehicle for Rs.50,000/-, ‘B’ pays to ‘A’ Rs.50,000/- at
that moment, and ‘A’ gives the possession of vehicle to ‘B’. This is present consideration.

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Past consideration is the consideration for the service or promise performed in past. Example
:- ‘A’ at the desire of ‘B’ takes care of the family of ‘B’. After three years ‘B’ promises o ‘A’

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that he shall pay him Rs.10000/- for his services given. Here, the services provided by ’A’ in
the past to ‘B’ shall be called past consideration.

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Future consideration means such consideration which shall be paid in future. Example:- ‘A’
promises to sell his house for Rs.75,000/- to ‘B’ on 5th.Feb 2003, and both parties decide that
possession of house shall be delivered on 1st.Dec.2003 and on that day he payment of

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Rs.755,000/- shall be made. This is future consideration, because the contract had originated
on 05.02.2003 but its consideration was to be paid on 1st December, 2003.

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• Consideration must be legal

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A valid contract requires the consideration to be valid or legal one. Contract with
illegal consideration is not enforceable. Sec.23 of Contract Act mentions those situations in
which the consideration shall be considered to be illegal. These situations are as under:-
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i) When it is prohibited by law.
ii) When it is of such nature that if followed would defeat the provisions of law.
iii) When it is fraudulent.
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iv) When it involves injury to the person or property of another.

v) The court regards it as immoral or opposed to public policy.
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Conclusion:
From above all reasons it can be concluded that without consideration a contract
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becomes void. But to enforce the contract it is necessary that there has to be a consideration
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and that consideration must be a valid one.

4. Who are competent to contract? Discuss the effects of minor’s agreement.

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Introduction:-
All agreements are not contracts. Only those agreements are contract which fulfil he
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conditions of section 10 and according to section 10 for a contract parties must be competent,
the consent must be free. Therefore the competency of the parties to a contract is most
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essentials element of a contract.

Meaning of Minor Agreement:
According to section 11 of Indian contract Act 1872 which provided, “That every
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person is competent to contract who is of the age of majority according to law to which is
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subject and who is sound mind and not disqualified from contracting by any law to which he
is subject.” The following persons are competent to contract -
 i) major.

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ii)sound mind.
It is evident that minor’s and unsound mind person cannot make a contract. A Major

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person means who has attained the age of 18 years. The age of majority has been decided by
Indian majority act 1875. In case of guardian appointed by the court, the age shall be 21

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years.
“ An agreement made by a minor is void.”, from the above statement we find that

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the minor is not competent to contract. Indian contract act is silent about whether it will be
void or voidable up to 1903. But it is decided by the Court that these are void. Agreement by

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a minor is void-ab-initio, such contract cannot be enforced by law. Further the minor cannot
authorise any other person to do a contract.
In Mohiri Bibi vs Dharamdass Ghosh (1903) A minor Mr. Dharamdas Ghosh

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executed a mortgage documents for Rs.20,000.00 in favour of a money lender Sh.
BrahmoDutt. The money lender actually paid Rs.8,000.00 to the minor. It is important that

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before this transaction the guardian of the minor informed the Attorney of Money lender that
he (Dharamdass Ghosh) is minor. Later on a suit was instituted by the minor Dharmadass

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Ghosh against the money lender Sh. Brahamodutt with the intention that the mortgage be set
aside. This suit was opposed by Money lender by saying that the above contract being
voidable, he has the right to receive the amount of the loan under section 64 and 65 of
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Contract Act i.e. minor is bound to return back the amount.
Privy council held that,“ the contract is void ab-initio which cannot be enforced.”
It was also held that the minor could not be asked to repay the loan taken by him. It was
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further held that law of estoppels cannot be applied against the minor Shri Dharmodas Ghosh
being mis-stated falsely his age because he was minor at the time of the agreement and the
agreement was void.
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Beneficial Contracts:
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A new concept of beneficial has come into existence now. It has been held in various
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cases. A minor is bound for the beneficial contract. The beneficial contract are those
contracts which are for the benefit of minor. The first case was S.Subramanyam v/s Subha
Roy-1948 - In this case transfer of inherited property of a minor affected by his guardian to
pay off an in-herited debt was binding on him for his benefit. Here is a list of beneficial
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contract
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i) Contract of Insurance Such contracts are in the benefit of minors.

ii) Contract to purchase the immoveable property Such contract are valid.
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iii) Contract of service - These are for the benefit for the monors
iv) Contract of apprentice ship Training period of any minor who is taking training from any
person, because of the training minor will case his livelihood. It is for his benefit and mono is
liable to compensate hat person.
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 v) Contract of Marriage When guardian made an agreement for the marriage of the minor
then another party cannot enforce it, but minor can enforce it. If agreement is made jointly

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by guardian and minor, it can be enforced again on majority age.
vi) Contract of Necessities- Under section 68 of the Contract Act-1872, minor is also liable

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for necessaries. Necessaries means the basic things of the life. These are mainly, ROTI –
KAPRA-AUR MAKAAN. If any person supplied necessaries to minor then the minor is

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liable o compensate the supplier. A case Chapple vs Cooper The court held that necessaries
are not only food, shelter, clothes but also education or religious and any such things which

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are necessary for life, comes under the definition of necessaries. The following two
conditions are necessary for liable

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1. The supply must not be more than sufficient.
2. The supply must be according to the standard of minor.
Case : Petress Vs Fleming

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The supply of a watch to a minor whose study was considered as the necessity because to
have a watch for graduate person is his necessity.

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Ratification Of The Minor’s Agreement

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A minor’s agreement being void ab-initio, it is incapable of being validated a
subsequent ratification after the minor has attained the age of majority. Here is minor accepts
the contract in some terms is entered during minority then also he is not liable. If a minor
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takes 2000.00 in minority and Rs.3000- after getting majority age and said major give back
Rs.5000- then this is valid and with consideration. After getting majority age if minor uses
his option to be a partner, he will be bound for all the responsibilities of minority period,
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which are against the firm.

Contract By Minor Guardians:

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1. If the agreement is on behalf of minor done by guardian.

2. With in his Power.
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3. Guardian is capable to enter into contract.

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4. The agreement will be in the interest of minor.

A case of Raj Rani vsPrem - Father agreed with the Director of Film, and
according to this agreement Director of Film will give a role to Indrani. It was held void
because no consideration was therein. It this agreement is with the daughter then it is void
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abs-intro. If it is with his father then it has no value even to think over it.
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Doctrine Of Restitution
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Restitution means if an agreement is declared void, benefit should be returned. Under

section 64 & 65 of contract Act, that section 68 is applies only on voidable agreements,
Section 56 is applies on the agreement which were valid at the time of formation but due to
some circumstances(as under sec.56) it becomes void. Under the equitable doctrine of
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restitution minor has to restore back the benefit so received by him the exact things but it is
 applicable in case of goods and property not in the case of money. Restitution stop where
repayments begins.

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Doctrine Of Estoppels

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According to rules contained in Sec.115 of Indian Evidence Act 1872, if you make a
statement today, which misleads another person, you are not allowed to deny the statement

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to-marrow when the question of your liability arises. A question whether a minor who has
made a false representation about his age is stopped from pleading his minority, was raised,

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but it was not decided in this case of Mohiri Bibi. Privy Council held that where the party
knows about the age of minor this principle could not apply. The question arises that whether

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minor can be stopped by false representation as to his age is now settled by this case.
A Case NawabSadiq Ali Khan vs Bibi Jai Kishori- 1928
It was held by Privy Council that if a minor makes a contract by fraudulently expressing his

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age more than actual then he cannot be stopped as per the rules of estoppels that he was
minor at the time of contract.

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Conclusion.
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Hence it is concluded that for a valid contact it is essential that the parties should be major
and sound minded. A minor agreement is a void ab initio which means that an agreement
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entered by the minor is void from its inception and cannot be made him personally liable.

5. Discuss about different kinds of injunctions.

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Introduction.
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Injunction is defined as a court order in which an individual is asked to perform a

particular act. It is also a writ which will be framed under certain circumstances of the case.
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Preliminary Injunction
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A preliminary injunction is a remedy that will be invoked for preserving the subject
matter in the existing conditions. The main of this injunction is is to prevent dissolution of the
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plaintiff’s rights. It is mainly used when there is a need for immediate relief.

This injunction is never granted automatically. The decision of the court will be
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needed, that maintains the status quo till the final trial. Such preference will be exercised
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against a temporary injunction when the issuance will alter the status quo.
 Mandatory Injunctions

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The court is vested with a variety of discretion that contains the injunctive relief. It
will restrict to restraint of the threatened action. It can compel Specific Performance of the

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act. In such situations, a mandatory injunction will be commanded for the performance of the

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positive action.

Mandatory injunctions are always considered to be harsh, This injunctions courts will

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never favor them, They are rarely granted. So it is issued to compel the removal of buildings

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or in cases where other structures are wrongfully placed on the land of his injunction are not
conclusive to the rights of the parties

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They will not be able to determine the merits of the case. Also, they cannot be used to

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decide the issues of controversy. It will always ensure the ability of the court to render the
meaningful decision. It always helps to prevent the change of circumstances which cause the

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hampering of the proper relief in the merits of the case.

Preventive Injunctions
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It is the injunction that will direct an individual for refraining from doing an act which will be
preventive and negative. This injunction prevents the threatened injury. It can preserve the
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status quo. Also, it will restrain the continued commission of an ongoing wrong. It cannot be
used to restore a or to undo anything which has already been done.
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Permanent Injunctions
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A permanent injunction is one that will grant the judgment which is ultimately disposed of
the injunction suit. It will be ordered at the time of final judgment. This injunction cannot be
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used for final relief. It will provide the conditions that will produce to remain permanent. It is
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granted to prevent the blasting of neighboring premises. It will ensure the dumping of earth or
other material depending on the land. It is also used to prevent pollution of the water supply.
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6. What is mean by damages? Discuss different kinds of damages available in

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Indian contract Act?

Introduction:
 A person who commits a breach of contract must make compensation therefore to the injured
party. The primary purpose of awarding damages is to put the injures person in as good a

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position as he would have been if performance had been rendered as promised

Meaning:

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The term damages is used to mean compensation in money as a substitute for the promised

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performance. Damages for the breach of a contract are intended to compensate the injured
party so far as money can do so.

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Kinds of Damages:

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a. General or Ordinary Damages:
A party who suffers by the breach of a contract is entitled to only such damages which

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arise naturally in the usual course of things as a result of such breach. Such compensation is
not to be given for any remote and indirect loss or damages sustained by reason of the breach

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Example: X was to provide Y with ship on a certain day to take a cargo of coal to Calcutta. X
failed in this. So Y had to charter another ship at advanced freight. He had also to by coal at a

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higher price. Y was entitled to recover from X both the increase in freight as well as increase
in the price of coal.
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b. Special Damages:
Where a party claims special damage for any loss sustained he must prove that the
other party knew at the time of the making of the contract that special laws was likely to
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result from the breach of the contract.

Example: P dealing in cattle food sent samples by train foe being exhibited at a particular
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agricultural show which fact was made known to the railway company. The goods reached
the destination after the show was over. It was held that the special circumstances having
been brought to the notice of the railway company, special damages namely the loss of profits
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were recoverable.
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c. Nominal Damages:
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Nominal damages are awarded where the injured party has sustained damage of a
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short but not of a substantial nature to be reckoned with. E.g.:

(1) Where the breach is technical and injured party has no intention of performing his part
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of the contract;
(2) Where the injured party has not suffered any actual damage or fails to prove that he
has;
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(3) Where though damage has been caused, it was more due to the fault of the injured
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party than that of the dependent.

 Example: D contracted to purchase a Vespa scooter from a dealer. But he fail to purchase the
scooter. However, the demand for Vespa scooters far exceeded the supply, and the scooter

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dealer could sell the scooter agreed to be purchased without loss of profit. The dealer is
entitles only to nominal damages.

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d. Vindictive Damages:

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These are awarded, rather to express indignation at the defendant’s wrong than as
representing the plain tiff’s loss. These damages are awarded in excess of the material loss

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suffered, by the plain tiff with a view to prevent similar behaviour in future. It is just like a
punishment of defendant. Therefore, these damages are known as exemplary damages.

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“These are also known as punitive damages” or “vindictive damages. The object of awarding
these damages is to prevent the repetition of such wrongful acts by the defendant.

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Example: the bank disobeyed the customer’s order to stop payment of a particular cheque and
as a consequence another cheque $3 15s 8d was dishonoured as a result of inadequate funds.
The code awarded $250 as damages to the plain tiff.

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Conclusion:

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The law of contract does not seek to punish the guilty, if by reason of his wrongful
act, the other party has suffered any pecuniary loss, and the court will compel the party in
breach to make good the loss by paying damage to the other party. Its purpose is
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compensation and compensation alone.
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7. What is breach of contract? State the effects of anticipatory breach of contract.

Introduction:
LE

Parties to a lawful contract are bound to perform their respective obligations. But
when one of the parties repudiates the contract, by refusing to perform his obligations he is
L

said to have committed a breach of the contract. The breach of contract maybe actual or
CO

anticipatory.

Meaning:
N

If any party fails to perform his obligation, there takes place a breach of contract.
EE

Breach of contract operates as a discharge of the contract.

Kinds of breach of contracts:

AM

a. Actual breach of contract:

(1) When performance is actually due; or

-

(2) When actually performing the contract

AL

b. Anticipatory breach of contract:

 When a party to a contract has refused to perform his promise in its entirety, the promise
may put an end to the contract. A refusal by the promiser to perform his part of the contract,

RE
before the due date of performance is known as anticipatory breach of contract. It is a breach
of contract occurring before the time fixed for performance has arrived either by the promiser

O
refusing to perform his promise or by disabling himself from performing his promise.
Anticipatory breach is pre-mature destruction of the contract rather than a failure to perform

AL
it. Repudiation of the betrothal is an anticipatory breach of contract of marriage.

Example: a contracts with alphabet B on 1st January to sell 500 mounds of wheat and to

G
deliver it on 1st May. O 15th April A writes to B and says that he is not going to deliver the

AN
wheat. B may immediately treat the contract at an end and file a suit for damages without
waiting 1st May.

Consequences of anticipatory breach:

,B
Section 39 provides that where a party to a contract refuses to perform his part of the

W
contract, before the due date of performance, promise has the option, either-

(1) To treat the whole contract as broken and to claim damages against the other party

LA
although the time for the performance for contract has not yet arrived, or
(2) To treat the contract as still operative and wait for the time of the performance and
then hold the other party responsible for all the consequences of non-performance but
OF
if he elects to take this course, the contract still remains operative for the benefits of
both parties. The party who has previously repudiated may still perform it if he can.
He can also take advantage of any supervening circumstances which would justify
him in declining to complete it.
GE

Example: D promised to marry P, as soon as D’s father should die. During the father’s
lifetime D absolutely refuse to marry P. although the time for the performance of the contract
LE

had not yet arrived, P was held entitled to sue for breach of promise of marriage.

Conclusion:
L
CO

8. “An Agreement in restraint of trade is void”. Explain with exceptions if any

Introduction:

One of the essentials of a valid contract is that the agreement must not have been expressly
N

declared to be void by law. If an agreement has been expressly declared to be void by law, it
EE

becomes void and cannot be enforced by law. So it is necessary to have a knowledge of

agreements which have been expressly declared to be void by law is void agreements.
AM

Meaning of Void agreements:

According to sec 2(g) if the Indian Contract Act, 1872 “an agreement not enforceable by law
is said to be void” So a void agreement is an agreement which cannot be enforced by law.
-
AL

Agreements expressly declared to be void:

 a. Agreements made by incompetent persons such as minors, lunatics, idiots etc.
b. Agreements made under a mutual mistake as to a matter of fact.

RE
c. Agreements in which object or consideration is unlawful.
d. Agreements made without consideration.

O
e. Agreement in restraint of trade.
f. Agreement in restraint of marriage.

AL
g. Agreement in restraint of legal proceedings

Agreement in restraint of trade:

G
Under the constitution of India, every citizen in India is free to carry on any lawful

AN
trade or commerce. To ensure this Indian Contract Act provides that “Every agreement by
which any one is restrained from exercising a lawful profession, trade or business of any kind
is to that extent void.

,B
Exception to the rule “An agreement in restraint of trade”

W
• Sale of goodwill of business:

LA
The seller of a goodwill of business can be restrained from carrying on a similar
business within a specified local limits so long as the buyer or his representative deriving
the title to the goodwill carries on a same business.
OF
• Partner’s Agreement:

An agreement in restraint of trade among the partners or between any

GE

partner and the buyer firm’s goodwill is valid if the restraint comes within any of the
following cases:
LE

I. An agreement among partners that a partner shall carry on any business other than
that of the firm while he is a valid partner.
II. An agreement by an outgoing or retiring partner with other partners that he shall not
L

carry in business within specified period or local limits is valid.

CO

• Trade or business combinations:

The primary objects of an agreement is to create a business and not to restrain it. An
N

agreement between traders and manufacturers in the same line of business to abide by
the regulation like:
EE

I. Opening and closing of business in the market.

II. Licensing of traders.
AM

III. Revision and control of dealers etc.

All these regulations are valid and does not amount to a restraint of trade.
-

• Service contract:
AL
 An agreement of service by which an employee is prevented for accepting any other
service during his employment is valid and does not amounts to restraint of trade.

RE
Conclusion:

O
From the above all discussions it is concluded that an agreement in restraint of trade

AL
is void. But certain agreements are exceptions though they restrain a person to carry on trade
or business according to the Indian contract Act 1872.

G
9. Discuss the remedies available for breach of contract.
Remedy means course of action available to an aggrieved party when other party

AN
breaches the contract.

,B
Remedies for Breach of contract

W
1. Rescission of contract
2. Suit for damage (SEC 73 TO 75)
LA
3. Suit for specific performance (THE SPECIFIC RELIEF ACT 1963)
4.Suit for Injunction
OF

5.QuantumMeruit
GE

RESCISSION OF CONTRACT – SEC 39

It means right to party to cancel contract.
LE

⇒ In case of breach of contract, other party may rescind contract.

L

Effect of Rescission of Contract

CO

Aggrieved party is not required to perform his part of obligation under contract.
Aggrieved party claims compensation for any loss.
N

Party is liable to restore benefit, if any.

EE

Court can rescind the contract in the following situation:

Contract is voidable.
AM

Contract is unlawful.
DAMAGES (Sec 73-75)
-

The amount of money allowed by a court as compensation for the violation of a duty is called
AL

damages.
 Kinds of damages:

RE
1) Liquidated
2) Un liquidated

O
3) Ordinary/general/usual course of things
4) Special

AL
5) Vindictive/ exemplary – no place of punishment( promise to marry)
6) Nominal- absence of concrete material to show the extent damage

G
7) Loss / reputation

AN
8) Inconvenience/ discomfort- equal to tortious liability.
SUIT FOR DAMAGES

,B
It means monetary compensation allowed for loss.
Purpose is to compensate aggrieved party and not to punish party as fault. It is to put

W
the injured party in the same position(doctrine of restitution).

LA
In India, rules relating to damages are based on English judgment of Hadley vs.
Baxendale.
The facts of case were – H’s mill was stopped due to the breakdown of the shaft. He
OF
delivered the shaft to common carrier to repair it and agree to pay certain sum of repair it and
agree to pay certain sum of money for doing this work. H has informed to B that delay would
GE

result into loss of profit. B delivered the shaft after reasonable time after repair. H filed suit
for loss of profit. It was held that B is not liable for loss of profit. The court laid down rule
LE

that damage can be recovered if party has breach of contract.

In fact the mill was already stopped due to the breakage of the shaft, with which the
L

defendant was nothing to do. It was the fault of the plaintiff not informing the real
CO

circumstances.
It was accrued in the nature and mechanical process. If the importance of the arranging new
one was told to the defendant, he might have arranged the substitute arrangements for quick
N

transportation of the shaft.

EE

Suit for Specific Performance

AM

It means, demanding an order from court that promise agreed in contract shall be carried out.
Recourse of alternative remedy instead of recovering damages.
-

It is contained in the Specific Relief Act, 1963.

AL

⇒When is specific performance allowed?

Where actual damages arising from breach is not measurable.
 Where monetary compensation is not adequate remedy.

RE
⇒When specific performance is not allowed?

O
When damages are an adequate remedy.
Where performance of contract requires numbers of minute details and therefore not

AL
possible for court to supervise.
Where contract is of personal in nature.

G
Where contract made by company beyond its power. (ultra – vires)

AN
Where one party to contract is minor
Where contract is inequitable to either party.

,B
Example: A agree to sell B, an artist painting for Rs.30,000. Later on, he refused to
sell it. Here B can file suit against A for specific performance of the contract.

W
Suit for Injunction

LA
It means stay order granted by court. This order prohibits a person to do particular
act. Restraining the other party from making a breach of contract.
Where there is breach of contract by one party and order, of specific performance is
OF
not granted by court, injunction may be granted.
Example: Film actress agreed to act exclusively for W for a year and for no one else.
GE

During the year she contracted to act for Z.

Compensation – fixed by the court
LE

Penalty – fixed by the parties

Damages- compensation and other losses
L
CO
N

10. Write short-note on any two of the following.

EE

a) Quasi contracts:
AM

The Indian Contract Act, 1872 is the law relating to Contracts in India. It came into
force on September 1, 1872 and is extended to the whole of India except to the state of
Jammu and Kashmir. The Act has 238 sections altogether. Sections 1 to 75 came into force
on September 1, 1872.
-
AL

Meaning:
 A quasi contract is a contract that exists by the Order of a Court, not by agreement of the
parties. A quasi-contract is not a contract at all. A contract is intentionally entered into

RE
whereas a quasi-contract is created by law.

O
Object:Courts create quasi contracts to avoid the unjust enrichment of a party in a dispute
over payment for a good or service.

AL
Definition:

G
Quasi- Contract is defined as “an obligation that the law creates in the absence of an

AN
agreement between the parties. It is invoked by the courts where Unjust Enrichment”.

Different Types Of Quasi-Contracts:

,B
Sections 68 to 72 deals with "certain relations resembling those created by contract" under
Indian contract act, 1872. It incorporates those obligations which are known as "quasi

W
contracts" under English law.

LA
In case of Quasi Contract, there will be no offer and no acceptance either on express base or
on implied base. But under certain circumstances Court creates contract between the parties
artificially and thus binds over the parties. Such contracts which are created by virtue of law
are called Quasi Contracts.
OF

Section 68 to 72 of Contract Act read about the situations where court can create Quasi
Contract.
GE

Section 68 - when necessaries are supplied: When one party supplies necessaries to the
other (without request), a quasi contract comes into force.
LE

Section 69 - When expenses of one person are paid by the other: When expenses which
are to be paid by one party are paid by another party, the parties are said to be under quasi
L

contract.
CO

Section 70 - When one party is benefited by the activity of another party: When one
party conducts an activity and its benefit is attained by another party, then also Court can
N

create a quasi Contract.

EE

Section 71 - In case of finder of lost goods: Court can create a quasi contract in case of
finder of lost goods.
AM

Section 72 - When payment is made by mistake: When ever payment is made by mistake
or goods are delivered by mistake, Court can create a quasi Contract.
-
AL

The moment quasi-contract gets created; law imposes an obligation on the party so benefitted
to give in return money or money’s worth to the other party.
 Illustrations:

RE
1. ‘M’ a minor needs Rs. 1, 00,000/- money for his necessaries. He takes money from
‘Z’. Here quasi-contract gets created between ‘M’ and ‘Z’ and it becomes the duty of

O
‘M’ to repay the money to ‘Z’.
2. ‘P’ a courier person delivers by mistake a parcel to ‘C’. ‘C’ without inquiring about

AL
the true owner, tears open the parcel and starts using the goods. Quasi-contract gets
created between ‘P’ and ‘C’ and it is the duty of ‘C’ to pay the price of the goods so
used by him.

G
Case Laws:

AN
• DamodarModaliar Vs Secretary of State for India.
Facts: In this case ‘A’ is resident of a Village. The local government conducts repairs to the

,B
tank situated at ‘A`s village. As a result A gets benefited because the surrounding lands
belong to ‘A’.

W
Held: Court creates a Quasi Contract and decides that ‘A’ has to bear cost of repairs.

LA
b) Time for performance
OF

Time place and manner of performance [46–50]

The parties are free to decide as to when and where the performance of the contract is to be
GE

made.
1. No time is specified for performance [Sec 46]
LE

Time of performance is not specified + promisor agreed to perform without, a demand

from the promise the performance must be made within a reasonable time. Reasonable time –
L

in each particulars case – a question of fact.

CO

Sec 36(2) the sale of goods act also contains a similar provision:- when the seller is bound
to deliver the goods, but no time for sending them is fixed, the seller is bound to send them
within a reasonable time.
N

Time for performance of promise, where no application to be made and no

EE

time is specified. ( within a reasonable time)

2. Time specified but hour not mentioned [47].
AM

Time of performance specified + promisor agreed to perform without application by the

promisee
-

Performance must perform on the day fixed during the usual business hours and at the
AL

place at which the promise ought to be performed.


Time and place for performance of promise, where time is specified, and no

RE
application to be made.( during business hours on such day/ usual closing time)
A promise to deliver goods at B’s warehouse on 1st Jan. On that day, A brings the goods to

O
b’s warehouse, but after the usual hour for closing it, and they are not received. A has not
performed his promise.

AL
3. Where Time is fixed and application to be made [48]
Proper place and within the usual hour of business

G
Promisee to apply for performance

AN

When the promise is to apply for performance, he must do so at proper time
and place.(usual hours of business)

,B
4. Performance of promise where no place is specified and no application is to be made
by the promise [49]

W
It is the duty of the promisor to apply to the promise to appoint a reasonable place for

LA
the performance and perform it at such appointed place.

Place for performance of promise, where application to be made and no place
fixed for performance ( reasonable place)
OF
A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must apply to B to
appoint a reasonable place for the purpose of receiving it, & must deliver it to him at such
GE

place.
5. Performance in manner or at time prescribed or sanctioned by promise [50]
LE

In such prescribed manner and

Prescribed time
L

The performance of any promise may be made in any manner, or at any time
CO

which the promise prescribes or sanctions.

Ex: - ‘A’ desires ‘B’ who owes him Rs 10,000 to send him a promissory note for Rs
10,000 by Post. The debt is discharged as soon as ‘B’ puts into the post a letter containing
N

the promissory note duly addressed to ‘A’.

EE

B owes A 2,000 rupees. A desires B to pay the amount to A’s account with C, a banker. B
who also banks with C, orders the amount to be transferred from his account to A’s credit,
AM

and this is done by C.

-

c) Misrepresentation and Mistake.

AL

Misrepresentation (Sec 18)

 Misrepresentation is when a party (person) asserts something which is not true though
he believes is to be true. In other words misrepresentation is a falls representation made

RE
innocently.
An agreement is said to be influenced by misrepresentation if all the following conditions are
satisfied.

O
(a) The party makes a representation of a fact [The representation by a stranger (By
anyone with his connivance or by agent) to the contract does not affect the validity of the

AL
contract.
(b) The misrepresentation was made innocently i.e. if was not made with a view to deceive
the other party.

G
(c) The other party has actually acted believing the misrepresent to be true.

AN
Misrepresentation include:-
• Unjustified statement of facts – positive assertion – Believe true really not true no
basis misrepresentation

,B
• Breach of duty.
• Inducing other to make mistake as to qualify or nature of subject matter.

W
• Knowingly or without belief in its truth or recklessly careless whether it be true or
false.

LA
• making of unwarranted statements which are not true
• make a mistake as to the substance of the thing
• a false statement without any intention to deceive
• it does not involve dishonest intention
OF
• a mere expression of opinion can’t be regarded as a misrepresentation
• discovering the truth with ordinary diligence
• It need not be made directly to the plaintiff. it can made to a third person with the
GE

intention of communicating it to the plaintiff also amounts to misrepresentation.

• It may be express by words written in the form of plans, drawings.
• It must have caused the consent of the other party to contract.
LE

• It requires uberrima fides a fiduciary relationship exists.

• It made should have become untrue.
L

Effect of Misrepresentation:-
CO

Rescission –sec 19
Remedy- sec 75/sec 30/sec 66/sec 64/sec 35(sra)
N

(1) Right to Rescind contract:-

EE

Discovering the truth with ordinary diligence.

Give consent in ignorance of misrepresentation
Become aware of misrepresentation takes a benefit
AM

Where an innocent third party before the contract is rescinds acquires consideration
some interest in the property passing under the contract.
Where the parties can’t be restored to their original position.
-

(2) Right to insist upon performance.

AL

Ex.:- Unlike Fraud he cannot sue for damage

 Mistake

RE
Sec-20 agreement void where both parties are under mistake as to matter of fact
Sec 21 – effect of mistakes as to law
Sec 22- contract caused by mistake of one party as to matter of fact.

O
Illustration:
A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of

AL
bargain, though neither party was aware of the fact. The agreement is void.
• The court may reform the contract & rectify the written instrument.
• Ignorantia juris non excusat( ignorance of law is no excuse)

G
AN
Classification of mistake:-
1) Common mistake
2) Mutual mistake- subject matter/ title/ substance of thing/ root/ identity/ price
3) Unilateral mistake

,B
Mistake of fact-----
1) Error in the expression of contract(language )

W
2) Error with regard to the nature or terms of the contract
3) Error may relate to reason or in cause
 Mistake with regard to the law of the country
 Mistake ---------------------to foreign law
Mistake --------------------- to private rights. LA
OF
d) Anticipatory Breach Of Contract:
Section 39 of the Act provides for the Anticipator Breach of Contract which means
“That before the performance of the contract, any party to contract refuse to perform the
GE

promise or contract or makes itself disable for performance is breach of contract.

Illustration :- A singer enters into a contract with B the manager of theatre to sing at his
theatre for two nights in every week during the next two months and B agrees to pay her
LE

Rs.1000/- for each night’s performance. On the sixth night A wilfully absents herself from
the theatre. B is at liberty to put an end to the contract. In such cases promisee can cancel the
L

contract.
CO

The base of section 39 is “ when a party to a contract has refused to perform or

disable himself from performing his promise in its entirety, the promisee may put an end to
the contract, unless he has signified by words or contract his acquiescence in its continuance.
Remedies :
N

The following remedies are available against the anticipatory breach of contract :-
EE

1. The promisee can file a suit for the breach of contract considering it to be actual breach.
2. The promisee shall wait till the actual date of performance and then file the suit.
3. Specific performance and Injuction : sometimes a party to the contract instead of
AM

recovering damages for the breach of contract may have protection to the alternative remedy
of specific performance of the contract.
4. Damages : Remedy by way of damages is the most common remedy available to the
-
AL

injured party. This entitles the injured party to recover compensation for the party who causes
the breach. Sec.73 to 75 incorporate the provisions in this regard. A case : Hadley V/s
 Baxendale-1854: It was held that the special circumstances were not communicated by the
plaintiffs to the defendants. The plaintiffs were therefore not entitled to recover the loss.

RE
5. Quantum Meruit:- When the injured party has performed a part of his obligation under the
contract before the breach of contract has occurred, he is entitled to recover the value of what

O
he has done under this remedy.
6. Measure of Damages :- That after certain result of the breach of contract in nearest time is

AL
to be compensated. Damages are therefore, to fix amount of that basis if a party takes security
deposit from the other for the due performance of the contract.

G
11. Solve any two of the following problems.

AN
a. Sunil (husband) promised to pay Rs. 3000 as a household allowance every
month to his wife Sunitha. Later Sunil defaulted in his promise. Sunita sued

,B
for allowance. Decide.z
No, Sunita is not entitled for the allowance. According to Indian Contract Act 1872,

W
an agreement to become a contract must give rise to a legal obligation. But there are other
kinds of obligations which do not constitute a contract such are agreements meet between

LA
husband and wife because they are purely domestic and are not intended to create legal
relationship.
OF
In support of this, one of the leading cases balfour vs balfour. The fact of this case is
similar to the above case and the court had held that it is a mere domestic agreement and the
promise made by the husband in this case was not intended to create legal relationship.
GE

Thus it is clear that Sunita is not entitled to claim allowance in the above case.
LE

b. Rajesh has agreed to deliver the goods to Suresh at kolar on a specified day
L

for a certain price. Time is the essence of the contract. Rajesh fails to deliver
CO

the goods on the specified day to Suresh. Suresh rescinds the contract and
files a suit to recover damages. Decide.
Yes, Suresh is entitled to rescinds the contract and recover the damages. According to
N

Indian Contract Act, 1872 parties are expected to perform their respective obligations. If any
EE

party fails to perform his obligation, there takes place a breach of contract.

Breach of contract may actual or anticipatory. Actual breach may takes place in the
AM

following ways:

• When the performance is actually due

• When actually performing the contract
-
AL
 Thus in the above case it is clear that Rajesh performance to the contract is actually
due because he did not deliver the goods on the time specified in the contract. Hence Suresh

RE
is entitled to recover the damages from Rajesh for actual breach of contract.

c. ‘A’ sells by auction to ‘B’ a horse which ‘A’ knows to be unsound mind. ‘A’

O
says nothing to ‘B’ about the unsoundness of the horse. Is the sale valid?

AL
No, the sale is invalid. According to Indian Contract Act 1872, one of the essentials of
a valid contract is a free consent. A consent is said to be free consent if it is not obtained by
coercion, undue-influence, fraud, misrepresentation and mistake.

G
AN
In the above case ‘A’ sold the horse to ‘B’ without disclosing the fact that the horse is
unsoundmind which actually amounts to fraud on the part of the ‘A’. Because active
concealment of the facts by having knowledge of the fact amounts to fraud. Hence in the

,B
above case ‘A’ has concealed the facts in order to commit fraud on ‘B’. Therefore the sale
made by ‘A’ to ‘B’ is invalid.

W
LA
OF
GE
L LE
CO
N
EE
AM
-
AL