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Definition of Terms
Sec. 2 (a) When a person signifies to the other, to do something or to abstain from doing something, with
a view to obtaining the assent of that other to such act or abstinence, he is said to make a Proposal.
Sec. 2 (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted. An accepted proposal becomes a promise.
Sec. 2 (c) The person making the promise is called Promisor, while the person accepting the promise is
called Promisee.
Sec. 2 (d) When, at the desire of the Promisor, the Pomisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act
or abstinence is called a consideration for the promise.
Sec. 2 (e) Every Promise and every set of Promises forming a consideration for each other, is an
Agreement.
Sec. 2 (f) Promises which form the consideration or part of consideration for each other are "Reciprocal
Promises".
Sec. 2 (g) An agreement not enforceable by law is void.
Sec. 2 (h) An agreement enforceable by law is a Contract.
Sec. 2 (i) An agreement that is enforceable by law at the option of one or more of the parties thereto but
not at the other or others is a voidable Contract.
Sec. 2 (j) A Contract that ceases to be enforceable by law becomes void when it ceases to be
enforceable by law.
From sec 2(e) and 2(h), it is clear that Agreement and Contract are two different things. For an agreement
to become a contract, it has to be enforceable by law.
Section 10 states that all agreements that are made by free consent of the people who are competent to
contract, for a legal object and legal consideration, and are not hereby expressly declared to by void, are
contracts and are thus legally enforceable. Thus, there are five factors that determine whether an
agreement can be legally enforced or not. These are discussed below:
In the case of Mohoribibee vs Dharmodas Ghosh in 1903, a minor had taken a loan and then he sued
to avoid the contract. Privy Council council held that any contract with a minor is void ab initio and so the
loaner cannot get any money that he gave as advance back. This rule is adopted all over India whether or
not it benefits the minor.
In the case of Mir Sarwarjan vs Fakhruddin Mohd. Chaudhary 1912, a contract to purchase a property
was done on behalf of minor. It was held that the minor could not sue for getting the possession of
property.
However, since in today's times minors are coming a lot in public life, it is not always possible to consider
an agreement with a minor to be always void. Therefore, in the case of Srikakulam Sbhramanyam vs
Kurra Sabha Rao 1949, Privy Council held that a sale of inherited property of a minor to pay off inherited
debt effected by the guardian was binding on the minor.
No liability in tort or in contract arising out of a contract - If a minor enters into a contract, he can
neither be held liable in contract nor in torts. In the case of Jennings vs Rundall 1799, when an
infant hired a horse for riding short distance but rode it for long distance resulting in injury to horse, he
was not held liable because it was a contractual obligation. In the case of Hari Mohan vs Dulu Mia 1934,
Calcutta HC held minor not liable in tort for money lent on bond.
However, in absence of a contract, a minor may be liable in tort. Thus, in the case of Burnard vs Haggis
1863, when a minor "borrowed" a mare only for riding and then lent it to a friend who jumped her and
killed her, he was held liable in tort.
Doctrine of restitution - If a minor obtains property or goods by misrepresenting his age, he can be
forced to return it but only as long as the goods are traceable in the minor's possession. This is
called doctrine of equitable restitution. If the minor sells or converts the property, the value of the goods
cannot be retrieved because that would amount to enforcing a void contract. In the case of Leslie vs
Sheill, a minor got 400 pounds from money lenders by misrepresenting his age. The money lenders
could not recover it under any of fraud, quasi-contract, or doctrine of restitution. This was followed in the
case of Mohoribibee vs Dharmodas Ghosh as well..
Beneficial Contracts - In contract where a minor has already supplied consideration, the minor can
enforce the contract. Thus, in the case of Ulfat Rai vs Gauri Shakar 1911, it was held that a minor can
sue to take possession of a property for which he has already paid. But where the contract is still executor
and consideration has not been given, the principle adopted in Mohoribibee will prevail. Thus, in the case
of Raj Rani vs Prem Adib 1949, it was held that the film producer was not bound by a contract with
minor's father to give a role to minor in his movie. This is because minor could not be forced to give
consideration and father had not given any consideration. However, a contract of marriage of a minor
enter into by the father is not void for want of consideration because it is for the benefit of the minor.
Liabilities for necessities (Section 68) - If a minor is supplied with necessaries that are in accordance
with his living standard, the supplier can get paid through the minors property.
a. Coercion (Sec 15): Coercion is committing or threatening to commit any act forbidden by the Indian
Penal Code, or unlawful detaining or threatening to detain the property, to the prejudice of any other
person, with an intention to cause that other person to enter into an agreement. It is immaterial whether
IPC is or is not in force where coercion is applied. Thus, an act that is unlawful as per IPC but not as per
England law and that has been used to induce the consent, will be considered coercion.
A clear example would be force someone to consent on gun point or by hurting or threatening to hurt.
In Chikham Amiraju vs Chikham Seshamma Madras HC 1912 held that threatening to commit suicide
is coercion. In the case of Astley vs Reynolds 1771, the plaintiff had pledged his plate for #20 and when
he went to claim it back, the defendant asked for #10 more as interest. To redeem his plate, the plaintiff
paid the money but later sued to recover #10. The court allowed it.
b. Undue Influence (Sec 16): Undue influence occurs when because of the nature of the relationship
that exists between the parties, one party is able to dominate the will of the other and uses this
dominance to obtain unfair advantage over the other. A person is in a dominant position when he holds a
real or apparent position of authority for example manager employee, or stands in a fiduciary relationship
with the other for example money lender and loanee. A person could also be in a dominant position if the
mental capacity of other party is temporarily or permanently effected due or illness, age, or distress.
The burden of proof that undue influence has not occurred is on the person who is in the dominant
position, if the agreement is unconscionable otherwise it is on the party that alleges undue influence.
Examples:
Father (A) give some money to son (B) when B was a minor. Upon majority, A makes B execute a
bond for a much larger amount.
A person (A) who is old and sick is induced into paying an unreasonably large amount of sum to his
doctor (B).
A village moneylender (A) lends money to a villager (B), who is already in debt, at a very high interest.
It lies on A to prove that he has not used undue influence to induce the contract.
At a time of financial crises, a bank manager gives loan to a person at a substantially higher rate. This
is not considered to be undue influence but a simple business transaction.
In Mannu singh vs Umadat Pandey Allahbad HC 1890, a guru induced his devotee into giving all the
devotee's property to himself. This was considered undue influence.
c. Fraud (Sec 17): When a person intentionally tries to cheat another person, it is called as fraud in a
general sense. Section 17 defines fraud precisely as such - Fraud means and includes any of the
following activities done by a party or by his connivance or by his agent, with an intent to deceive another
party or his agent, or as to induce the other party to enter into the contract.
1. the suggestion of a fact, of that which is not true, by the one who does not believe it to be true.
2. active concealment of a fact by one who knowledge or belief of the fact.
3. making a promise without an intention to perform.
4. any act fitted to deceive
5. any such act or omission that the law declares to be fraudulent.
Mere silence as to facts likely to affect the willingness of a person to enter into the contract is not fraud
unless, according to the circumstances of the case, it is the duty of the person keeping silence to speak or
unless his silence itself is considered as speech.
Examples:
A sells a horse to B by auction without telling B that horse is unsound. This is not fraud.
B is A's daughter who has just come off age, then it is A's duty to tell B about the fact. So this is fraud.
B says to A, "if you do not deny it, I will assume that horse is sound". Here, silence is considered as
speech so this is fraud.
A and B, being traders, enter into a contract. A has private pricing information that will cause B to not
enter the contract. A is not bound to inform this to B. This is not fraud.
Concealing the disease history while obtaining insurance is fraud because it is the duty of the insured to
give this information to the insurer.
Derry vs Peek 1889 was not fraud, because the company honestly believed in what they said and there
was no intentional misrepresentation, which is the essence of fraud.
Sri Krishan vs. Kurukshetra Univ., AIR 1976 SC the student was not found to be fraud. Even though
he knew that he was short on attendance, he did not disclose it on examination form. He was let off
because 'mere silence' is not fraud.
Examples:
A claimed to B that the ship being considered under an agreement was below 2800 tonnage. But in
reality it turned out to be more than 3000 tonnage. It was held to be misrepresentation and B was entitled
to avoid the contract. Oceanic Steam Navigation vs Soonderdas Dharmasey. Bom HC 1980.
A land was purchased expressly for constructing duplexes. The seller claimed that he saw no
permissioning problems. However, later on the permission was denied. This was held to be
misrepresentation and even though the claim was innocent, the buyer was allowed to avoid the sale
Where the seller of a car stated the mileage of the car to be 20000, which turned out to be wrong, the
buyer of the car was allowed to recover compensation for misrepresentation.
Section 19 declares that a contract induced due to coercion, fraud, or misrepresentation is voidable at
the option or the party whose consent was obtained by coercion. An exception is that when the consent is
obtained by silence fraudulent under sec 17, and when the affected party had the means of discovering
the truth with ordinary diligence. In this case, the contract is not voidable. Further, if the fraud or
misrepresentation did not cause the party on which they were practiced to give consent, then the contract
will not be voidable.
Section 19A declares that the party whose consent was obtained by undue influence has the option to
avoid the contract.
Legal formalities: Certain agreements such as agreement for the sale of immovable property, or
agreement for insurance become a contract only when they are properly registered. For such
agreements, the procedure prescribed by law must be followed to make them a contract.