INDIAN CONTRACT ACT 1872 PDF

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THE INDIAN CONTRACT ACT, ______. ARRANGEMENT OF SECTIONS. ______. SECTIONS. PREAMBLE. PRELIMINARY. 1. Short title. Extent. group of people to whom she gave green smoothies once a day while they stayed on their regular diet. Many of them showe. 1 The Indian Contract Act, UNIT– I: BACKGROUND Learning objectives After studying this unit, you would be able to - ♢ Understand the meaning of the.


Indian Contract Act 1872 Pdf

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Definition: According to section 2(h) of the Indian contract act, “An agreement enforceable by law is a contract. According to SALMOND, a contract is “An. PDF | On Apr 4, , Vivek Dhupdale and others published Indian Contract Act, The Contract Act, (1).pdf - Download as PDF File .pdf), Text File .txt) or 19A was inserted by section 3 of the Indian Contract (Amendment) Act. VIII of.

An executed contract is one in which both the parties have performed their respective obligation. Executory contract: An executory contract is one in which the parties have yet to perform their obligations. Unilateral or one-sided contract: Bilateral contract or Two-sided contract: It is a contract in which the obligations on the part of both the parties to the contract are outstanding at the time of the formation of the contract.

Explain the legal rules regarding agreement by a minor? The law becomes the guardian of minors to protect their rights because their mental capacity is not well developed.

An agreement by minor is absolutely void: Where a minor is charged with obligations and the other contracting party seeks to enforce these obligations against minor, in such a case the agreement is deemed as void-ab-initio. Mohiri Bibi vs Dharmodas Ghose A minor mortgaged his house in favour of money-lender to secure a loan of Rs.

Subsequently, the minor sued for setting a side the mortgage, stating that he was underage when he executed the mortgage. The mortgage was void and, therefore, it was cancelled. He can be a promisee or a Beneficiary: Any agreement which is some benefit to the minor and under which he is required to bear no obligation is valid.

Thus, a minor can be a beneficiary or a promisee. His agreement cannot be ratified by him an attaining the age of majority: An agreement by minor is void-ab-initio and therefore ratification by minor is not allowed. There is a fundamental principal in law i. If he has received any benefit under a void agreement, he cannot asked to compensate or pay for it: Under section 64 and 65 of the act, provides a minor cannot be ordered to make compensation for a benefit obtained in a void agreement.

Because section 64 and 65, which deals with restitution of benefit. Minor can always plead minority: Leslie vs Shiell There can be no specific performance of the agreement entered into by him as they are void- ab-initio: He cannot enter into a contract of partnership: He can be an agent: A minor can be an agent.

It is so because the act of the agent is the act of the principal and therefore, the principal is liable to the third parties for the act of a minor agent.

The parents can held liable for contracts for their minor children only when they are acting as agent. A minor is liable in tort A civil wrong: Minors are liable for negligence causing injury or damage to the property that does not belongs to them. A minor is liable for necessaries: Minor does not personally liable for the supply of necessaries.

The necessaries such as food, clothing, and shelter etc.. Person of unsound mind Ans: Soundness of mind of a person depends on two facts: Ability to understand the contract at the time of making. Ability to form a rational judgment about the effect of the contract on his interest. Unsoundness may arise from idiocy, lunacy, drunkenness, hypnotism, mental decay because of old age and delirium high temperature etc..

A person who is usually of sound mind and occasionally of unsound mind cannot contract when he is of unsound mind. Thus, the burden of proof will be lie upon the person who claims that he was not of sound mind at the time of making a contract. Thus, minor estate is liable for necessaries supplied to minor during minority.

The things supplied must be suited to his condition in life i. The things supplied must be necessaries of life i. Necessary goods are not restricted to articles which are required to maintain a bare existence, such as bread and clothes, but it also include goods which are reasonably necessary to the minor having regard to his station in life. Nash vs Imran Certain services rendered to a minor have been held to be necessaries.

These include education, training for a trade, medical advice, hose given to a minor on rent for the purpose of living and continuing his studies etc..

Roberts vs Gray Loans incurred to obtain necessaries: A loan taken by a minor to obtain necessaries also binds him and is recoverable by the lender as if he himself had supplied the necessaries. But the minor is not personally liable. It is only his estate which is liable for loans.

Contract by disqualified person. Or Person expressly disqualified other person.

Besides minors and persons of unsound mind, there are also other persons who are disqualified from contracting partially or wholly. So, the contracts by such persons are void. The following persons are disqualified from contracting; a Alien enemy. Under what circumstances is the object or consideration of a contract deemed unlawful?

Illustrate with examples? An agreement will not be enforceable if its objects or the consideration are unlawful. According to section, of the Indian contract Act, The consideration and objects are unlawful in the following cases: If it is forbidden by law: If the object or the consideration of an agreement is forbidden by law, in such a case the agreement is deemed to be unlawful and void.

An act is forbidden by law if, http: The agreement is void, as the consideration for it is unlawful. If it is defeats the provision of any law: If the object or consideration of an agreement is of such a nature that, though not directly forbidden by law, it would defeat the provisions of the law, in such a case the agreement is deemed to be unlawful and void.

An agreement between husband and wife to live separately is invalid as being opposed to Hindu law. If it is fraudulent: An agreement, whose object or consideration is to defraud others, is unlawful and hence it becomes void. The agreement is void, as its object is unlawful. If it involves or implies injury to the person or property of another: If the object or consideration of an agreement is to injure the person or property of another is void.

In such a case object or the consideration is deemed to be unlawful. Ram Saroop vs Bansi Mandar If the court regards it as immoral: An agreement, whose consideration and object is immoral, is deemed to be illegal and void. The word immoral includes sexual immorality.

Hence its object or consideration is unlawful. Pearce vs Brooks A firm of coach-builders hired out a carriage to a prostitute, knowing that it was to be used by prostitute to attract men. The coach-builders could not recover the hire as the agreement was unlawful.

Where the court regards it as opposed to public policy: An agreement whose consideration or object is such a nature that opposed to public policy. Thus it becomes void and it deemed to be unlawful.

Discuss the doctrine of public policy? Give examples of agreement which are opposed to public policy? An agreement is said to be opposed to public policy when it is harmful to the public welfare. An agreement whose object or consideration is opposed to public policy is void. Some of those agreements which are or which have been held to be, opposed to public policy and are unlawful as follows: Agreements of trading with enemy: An agreement made with an alien enemy at the time of war is illegal on the ground of public policy.

This agreement is based upon the two reasons: He can do so only after he receives a license from the central government. Agreement to commit a crime: An agreement is to commit a crime is opposed to public policy and it is void.

In such a case the court will not enforce the agreements. Where the firm was compelled to pay damages for a published libel. Agreements in restraint of legal proceedings: An agreement in restraint of legal proceeding is the one by which any party thereto is restricted absolutely from enforcing his right under a contract through a court.

Contracts of this nature are void because its object is to defeat the provision of the Indian Limitation act. Agreements which interfere with administration of justice: Where the consideration or object of an agreement of which is to interfere with the administration of justice is unlawful, being opposed to public policy. It may take any of the following forms: Trafficking in public offices and tittles: Trafficking in public offices means trading in public offices to obtain some gain which other wise cannot be obtained.

Trafficking in tittle means some such award from government in return of consideration. A contact of this nature is void and is against to public policy and also it is illegal.

Parkinson vs College of Ambulance, Ltd The agreement was against to public policy and also illegal. Agreement tending to creates interest opposed to duty: If a person enters into an agreement whereby he is bound to do something which is against to public or professional duty, in such a case the agreement is void on the ground of the public policy.

Agreements in restraint of parental rights: This right and duty of guardianship cannot be bartered away. Agreement in restraint of marriage: Every agreement in restraint of marriage of any person, other than a minor, is void and opposed to public policy. This is because the law regards marriage and marriage status as the right of every individual. Agreement restricting personal liberty: Agreement which unduly restricts the personal freedom of the parties is void and against to public policy.

Agreement in restraint of trade: Every agreement by which any one is restrained from exercising a lawful profession or trade or business of nay kind, is to that extent void and opposed to public policy. But this rule is subject to the following exceptions: In the above exceptions the court will enforce the agreements. Because only if there is any restrictions imposed on such agreements are reasonable.

Shaikh Kalu vs Ram Saran Bhagat The agreement amounted to restraint of trade and thus void. Marriage brokerage: As a public policy, marriage should take place with free choice of the parties and it cannot be interfered with by third party acting as broker. Agreement for brokerage for arranging marriage is void.

Similarly agreement of dowry cannot be enforced. Agreement to defraud creditors or revenue authorities: An agreement which object is to defraud the creditors or revenue authorities is not enforceable, being opposed to public policy.

Agreement interfering with marital duties: Any agreement which interferes with the performance of marital duties is void, being opposed to public policy. Write a short note on unlawful and illegal agreements Ans: An unlawful agreement is one which, like a void agreement and is not enforceable by law. It is destitute lacking of legal effects altogether. If affects only the immediate parties and has no further consequences. An illegal agreement, on the other hand, is not only void as between the immediate parties but has this further effect that the collateral transactions to it also become tainted infect with illegality.

It is sometimes difficult to decide as to weather an act is illegal or unlawful because, as many of the illegal and the unlawful acts lie on the borderline. It may, however, be observed that http: These acts do not effect public morals nor do they results in the commission of crime. Meaning of unlawful and illegal agreements: Effects of illegality: The general rule of law is that no action is allowed on an illegal and unlawful agreement.

This is based on the following two maxims: No action arises from a base cause. The effect of this is that the law discourages people from entering into illegal agreements which arise from base. Ex-turpi causa non oritur action. In cases of equal guilt, the defendant is in a better position. In pari delicto, potior est condition defendentis. If an agreement is illegal, the law will help neither party to the agreement. This means that, as a result of refusal of the court, to help plaintiff in recovering the amount, i.

The court is, in fact, neutral opposite in such cases. The court allows the defendant to have that advantage, not because it approves of his conduct, but because it is not http: As a result of the neutrality the defendant stands to gain.

The effects of illegality may now be summed up as under: The collateral transactions to an illegal agreement become tainted infect with illegality and treated as illegal even though they would have lawful by themselves.

indian contract act, 1872

No action can be taken a For the recovery of money paid. Or property transferred under illegal agreement, and b For the breach of an illegal agreement. In cases of equal guilt on an illegal agreement, the position of defendant is better than that of the plaintiff i. Thus, every agreement by which any one is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void and opposed to public policy.

The general principle of law is that all restraints of trade are void. But in India it is valid if it is falls with in any of the statutory exceptions.

A seller of the goodwill of a business may agree with the downloader to refrain from carrying on a similar business, with in the specified local limits, so long as the downloader carries on a like business, provided that such limits are reasonable. In such a case an Agreement in restraint of trade is valid.

A partner shall not carry on any business other than that of the firm while he is a partner. An outgoing partner may agree with his partners not to carry on a business similar to that of the firm with in a specified period or with in the specified local limits. Any Partners may, upon the sale of goodwill of the firm, make an agreement with the downloader that such partners will not carry on any business similar to that of the firm with in a specified period or with in specified local limits.

An agreement in the nature of a business combination between traders or manufactures does not amount to a restraint of trade and is perfectly valid. But if an agreements attempts to create a monopoly it would be void. Such agreement does not amount to a restraint of trade nor opposed to public policy and is perfectly valid.

An agreement of service by which an employee binds himself, during the term of his agreement, not to compete with his employer is valid and does not amount to restraint of trade. Thus, in the above exceptions the court will enforce the agreements. Agreement in restraint of trade. Sale of goodwill. Trade combinations. Service agreements.

Write a short note on reciprocal promises. According to section 2 f of the Indian contract Act, These promises have been classified by Lord Mansfield based on the jones vs Barkley case they are as follows: Mutual and independent: Where each party must perform his promise independently and irrespective of the fact whether the other party has performed, or not, the promises are mutual and independent.

The promises are mutual and independent. Conditional and dependent: Where the performance of the promise by one party depends on the prior performance of the promise by the other party, the promises are conditional and independent. The promises are conditional and independent. Mutual and concurrent: Where the promises of the both the parties are to be performed simultaneously, they are said to be mutual and concurrent.

Immoral agreements. An agreement is unlawful for immorality in the following cases: Where the consideration is an act of sexual immorality. Where the object of the agreement is the furtherance of sexual immorality.

Wagering agreement. It is a wagering agreement. The event must be uncertain. There must be two parties.

Each party must stand to win or lose. No control over the event. No other interest in the event except winning or losing. The following transactions are not considered as wagering agreements. According to section 2 g of the Indian contract Act, A void agreement does not create any legal right or obligation. It is void-ab-initio i.

The following agreements have been expressly declared to void by the contract act: Agreements by incompetent parties. Section 11 2. Agreements made under mutual mistake of facts. Section 20 3. Agreements which the consideration or object is unlawful. Section 23 4.

Agreements which the consideration or object is unlawful in part. Section 24 5. Agreements made without consideration. Section 25 6. Agreements in restraint of marriage. Section 26 http: Agreements in restraint of trade. Agreements in restraint of legal proceedings.

Agreement which the meaning is uncertain. Agreements by way of wager. Agreements contingent on impossible events. Agreements to do impossible Acts. In case of reciprocal promises to do things legal and also other things illegal. The second set illegal of reciprocal promises is a void agreement. Write a short note on restitution. The principle of restitution is that a person who has been unjustly enriched at the expense of another is required to make restitution to that other.

In essence, restitution is not based on loss to the plaintiff but it is on benefit which is enjoyed by the defendant at the cost of the plaintiff which is unjust for the defendant to retain. Write a short note on void agreement and void contract. Void agreement: We may talk of such a contract as void agreement. Define wagering agreement and explain the essentials of a wagering agreement in detail? Essentials of a wagering agreement: The following are the essentials of a wagering agreement, they are follows: Uncertain event: The promise made between the partied must be conditional and uncertain event i.

Indian Contract Act, 1872

Generally a wager relates to a future event, but it may also relate to a past event provided the parties are not aware of its result or the time of its happening. Each party must stand to win or lose: Each party should stand to win or lose upon the determination of the uncertain event. An agreement is not a wager if either of the parties may win but cannot lose or may lose but cannot win. No control over the event: The wagering agreement is a game of chance. Therefore, no party should have control over the happening or non happening of an event.

If on the other hand one of the parties has control over the event, then the transaction lacks an essential ingredient of a wager. No other interest in the event: The parties should have no other interest in the subject matter of the agreement except winning or losing of the amount of the wager. They bet with each other over the result of the bout.

This is a wagering agreement. A crossword competition involving a good measure of skill for its successful solution. But if prizes of a crossword competition depend upon the correspondence of the competitors solution with a previously prepared solution kept with the editor of a newspaper, there it is treated as lottery and wagering transaction. According to prize competition act, , prize competition is game of skill are not wagers provided the amount of prize not exceed rs.

Contract of insurance is not wagering agreements even though the payment of money by the insurer may depend up on a future uncertain event. An agreement to contribute a prize of the value of above Rs. Explain the meaning of contingent contract? What are the rules related to contingent contract? According to sec 31 of ICA, , a contingent contract is a contract to do or not to do something, if the event, collateral to such contract, does or does not happen.

Thus it is a contract, the performance of which is dependent upon the happening or non happening of an uncertain future event, collateral to such events. Its performance depends upon the happening or non happening in the future of some event. The event must be uncertain 3. The following are the rules regarding performance of a contingent contract: Contingent contract upon the happening of a future uncertain event: The contract becomes void.

Contingent contract upon the non happening of a future uncertain event: When the happening of such event becomes impossible it becomes enforced and when such event has possible it becomes void. Contingent contract upon happening of an event within a specified time: When such event has happened within the specified time it can be enforced and if the happening of such event becomes impossible within the specified time it becomes void.

Contingent contract upon non happening of an event within a specified time: When the happening of such event becomes impossible within the specified time it can be enforced and if the happening of such event has happened within the specified time it becomes void. The contract may be enforced if the ship returns within a year, and becomes void if the ship is burnt within the year. Contingent contract upon impossible events: Such an agreement cannot be enforced since it is void.

Whether the impossibility of the event was known to the parties or not is immaterial. The agreement is void. Contingent contract upon future conduct of a living person: When such person acts in the manner as desired in the contract it can be enforced and if such person does not acts in the manner as desired in the contract it becomes void.

Differences between wagering agreement and contingent contract. The following are the differences between wagering agreement and contingent agreement: Wagering is an agreement where a person Contingent contract is one in which promisor agrees to pay money to the other person undertakes to perform the contract upon upon the happening or non happening of an happening or non happening of an uncertain uncertain event. Generally it is a reciprocal promise. There may be unilateral promises.

In a wager the parties are not interested in The parties have real interest in the happening or the subject matter of the agreement except non happening of an uncertain future event.

In a wager the future event is the sole In a contingent contract the future events is only determining factor. It is a game of chance. It is not a game of chance.

When promisor has made a valid offer of performance to the promise and offer had not been accepted by the promise, the promisor is not responsible for non performance and he does not lose any rights under the contract. A valid tender of performance is equivalent to performance. It must be unconditional. It becomes conditional when it is not in accordance with the terms of the contract. This is not a valid tender. It must be the whole quality contracted for or of the whole obligation.

A tender of an installment when the contract stipulated payment in full is not a valid tender. It must be by a person who is in a position, and is willing to perform the promise. It must be made at the proper time and place.

A tender of goods after the business hours or of goods or money before the de date is not a valid-tender. He offers to pay on the 1st of July the amount with interest up to the 1st of July. It is not a valid tender as it not made at the appointed time. It must be made to the proper person and also in proper form.

It may be made to one of the several joint promises. In such a case it has the same effect as a tender to all of them. In case of tender of goods, it must give a reasonable opportunity to the promise for inspection of the goods. A tender of goods at such time when the other party cannot inspect the goods is not a valid tender. But in the following case, tender was held to be valid. Startup vs. MacDonald Delivery as tendered at 8.

The defendant refused to accept the goods owing to lateness of the hour. Though the hour was unreasonable, the defendant could still take delivery before midnight. In case of tender of money, the debtor must make a valid tender in legal tender money. In India in rupees, us-dollars etc.. By whom must contracts be performed?

The promise under a contract may be performed by; a.

Promisor himself: If there is something in the contract to show that it was the intention of the parties that the promise should be performed by the promisor himself, such promise must be performed by promisor himself. This means contracts which involve the exercise of personal skill or diligence or which are founded on personal confidence between the parties must be performed by promisor himself.

A contract to paint a picture or to sing or to marry. Where personal consideration is not the foundation of the contract, the promisor or his representative may employ a competent person to perform it. Legal Representatives: A contract which involves the use of personal skill or is founded on personal considerations comes to an end on death of the promisor.

As regards any other contract, the legal representatives of the deceased promisor are bound to perform it unless a contrary intention appears from the contract.

But their liability under a contract is limited to the value of property they inherit from the deceased. Third person: When a promisee accepts the performance of the promise from third person, he cannot afterwards enforce it against the promisor.

Joint promisors: When two or more persons have made a joint promise, then unless a contrary intention appears from the contract, all such persons must jointly fulfill the promise, if any of them dies, his legal representatives must jointly with the surviving promisor have to fulfill the promise.

If all of them die, the legal representatives of all of them must fulfill the promise jointly.

Contract act 1872 pdf

Reciprocal promises: These promises have been classified by lord Mansfield based on the Jones vs Barkley case as follows: Where each party must perform his promise independently and irrespective of the fact whether the other party has performed, or is willing to perform, his promise or not, the promises are mutual and independent. Sale of goods for cash. What are the rules of law relating to time and place of performance of contract? Time and place of performance: Section 46 to 50 of the contract Act lay down the rules regarding the time and place of performance they are follows: Where no application is to be made and no time is specified: It depends on the special circumstances of the case contract , the usage of trade, or the intention of the parties at the time of entering into the contract.

Where time is specified and no application is to be made: Application for performance on a certain day and place: In such a case it is the duty of the promisee to apply for performance at a proper place and time within usual business hours. Application by the promisor to the promisee to appoint a place: Performance in manner or at the time prescribed or sanctioned by the promisee: Explain the rules regarding the reciprocal promises?

According to section 2 f of Indian Contract Act, Rules regarding performance of reciprocal promises: Section 51 to 54 of the contract Act, lay down the rules regarding the order of performance of reciprocal promises; which are as follows: Simultaneous performance of reciprocal promises: According to section 51 such promises need not perform by the promisor unless the promise is ready and willing to perform his reciprocal promise.

Order of performance of reciprocal promises: According to section 52, where the order in which the reciprocal promises are to be performed is expressly fixed in the contract, they must be performed in that order. Where the order is not expressly fixed, they must be performed in that order which the nature of transaction requires. Effect of one party preventing another from performing promise: According to section 53, when a contract contains reciprocal promises and one party to a contract prevents the other from performing his promise.

In such a case the contract becomes voidable at the option of the party so prevented and is entitled to compensation from the other party for any loss which he may sustain in consequence of non performance of the contract. Effect of default as to promise to be performed first: According to section 54, where the performance of promise by one party depends on the prior performance of the promise by other party.

In such a case one of them cannot be performed till the other party has performed his promise then if the other party fails to perform it, he cannot claim off the performance of the reciprocal promise from the first party and the other party make compensation for any loss which the first party may sustain by the non performance of the contract. Reciprocal promises to do things legal and also other things illegal.

Section In the performance of a contract, time is crucial element. Contracts must be performed on time. Section 55, of the Indian Contract At, provides the effect of failure to perform at a time fixed in a contract in which time is essential as follows: If the promisor fails to perform on an agreed or specified time, the contracts will become voidable at the option of the promisee.

If the promisor fails to perform within the specified time, the contract will not become voidable at the option of the promisee. It means that in such a case the promisee cannot rescind the contract and he will have to accept the delayed performance. But the promisee is entitled to claim the compensation for any loss caused to him by the delay. If promisee accepts the delayed performance and intend to sue the promisor for compensation for delayed performance, promisee must give an oral or written notice to the promisor regarding his intention.

Discuss the law relating to the rights and liabilities of joint promisors in a contract? Also explain the devolution of joint liabilities?

By whom joint promises must be performed? When two or more persons have made a joint promise, they are known as joint promisors. Unless a contrary intention appears from the contract, all joint promisors must jointly fulfill the promise. If any of them dies, his legal representatives must, jointly with the surviving promisors, fulfill the promise. If all of them die, the legal representative of all of them must fulfill the promise jointly.

By whom joint promises must be performed: The following are the rules as regards performance of joint promises: All promisors must jointly fulfill the promise: According to section 42, when two or more persons have made a joint promise, then unless a contrary intention appears by the contract, all joint promises must jointly fulfill the promise.

Any one of the joint promisors may be compelled to perform: This means the liability of joint promisors is joint and several.

A, B, and C jointly promises to pay D Rs D may compel all or any or either A or B or C to pay him Rs If one of the several joint promisors is made to perform the whole contract, he may compel the other joint promisors to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.

A is compelled to pay the whole amount to D. Sharing of losses arising from default: Release of joint promisor: If one of joint promisor is released from his liability by the promisee, his liability to the promise ceases nut this does not discharge the other promisors from their liability. The released joint promisor also continues to be liable to the other promisors. D1, D2, and D3 jointly owe a debt to C.

C releases D1 from his liability and files a suit against D2 and D3 for payment of debt. D2 and D3 are not released from their liability nor is D1 discharged from his liability to D2 and D3 for contribution.

What conditions should be fulfilled for assignment of contract? It may take place: Act of the parties. Operation of law. I Act of the parties: Assignment is said to take place by an act of the parties when they themselves make the assignment.

This rule is based on sense and convenience. C, the creditor, can transfer his right to T to recover the amount from D. An actionable claims can be always be assigned but the assignment to be complete and effectual must be effected by an instrument in writing.

Notice of such assignment must also be given to the debtor II Operation of law: Assignment by operation of law takes place by intervention of law. Impossibility of performance: Section 56, of contract act, deals with the impossibility. If an agreement contains an underwriting to perform impossibility, it is void-ab-initio. It is of two types: Impossibility existing at the time of contract: Subsequent or supervening impossibility: In such a case the contract is void.

Impossibility of performance of a contract, as a general rule, is no excuse for the non performance of the contract. Section 56, of the contract act, deals with the impossibility of performance. Impossibility existing at the time of contract. In such a case the contract becomes void. Destruction of subject matter of contract: When the subject matter of a contract, subsequent to its formation, is destroyed without any fault of parties to the contract, then the contract is discharged.

Taylor Vs Caldwell C agreed to let out a music hall to T on a certain dates. But before those days the hall was accidentally destroyed by fire. Thus the contract was void. Non-existence or non occurrence of a particular state of things: Some times, a contract is entered into between two parties on the basis of a continued existence or occurrence of a particular state of things.

If there is any change in the state of things which formed as the basis of contract, the contract is discharged. Krell Vs Henry The coronation procession was cancelled due to the illness of the king. H was excused from paying the rent for the flat on the ground that existence of the procession was the basis to the contract. Its cancellation discharged the contract. Death or personal incapacity of the parties: Where the performance of a contract depends on the personal skill or qualification or the existence of a given person, the contract is discharged on the illness, incapacity, or death of that person.

On several occasions, A is too ill to act. The contracts to act on those occasions become void. Change of law: When a sub sequent change of law takes place or the government takes some power under some special power, so that the performance of a contract becomes impossible, the contract is discharges.

There was a contract of a sale of trees of a forest, subsequently by an act of legislature; the forest was acquired by the state government. The contract was discharged by impossibility created by subsequent change in law. Out-break of war: All contracts entered into with an alien enemy during war is un lawful and therefore impossible of performance. Contracts entered into before the out-break of war are suspended during the war and may be received after the war is over.

Effects of supervening impossibility: When the performance of a contract becomes impossible or unlawful to its formation, the contract becomes void. Where one person has promised to do something which he knew, or with reasonable diligence, might have known, and which the promisee did not know to be impossible or un-lawful, the promisor must make compensation to the promisee for any loss which the promisee incurred through the non-performance of a contract.

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage. Under such agreement or contract is bound to restore return it, or to make compensation to it, to the person from whom who received it.

A pays B Rs. C is dead at the time of promise. The agreement is void, but B must repay A Rs. Rights of joint promisors: According to section 45, when a person has made a promise to several persons jointly, these several persons are known as joint promisees.

Unless a contrary intention appears from the contract, the right to claim performance rests with all the joint promisees. When one of joint promisee dies his legal representatives jointly with the surviving joint promisees, has the right to claim performance with their legal representatives jointly. After the death of C, the right to claim performance rests with the representatives of B and C jointly.

Impossibility of performance is as a rule, not an excuse for non-performance of a contract. Section 56, of the contract Act; deals with the impossibility of performance. Difficulty of performance: A contract is not discharged merely because that it has become more difficult of performance due to some uncontemplated events or delays.

Tsakiroglou and Co. Vs Noblee Throl G. A agreed to sell to B tons of Sudan groundnuts c. The usual and normal route at the date of the contract was via Suez Canal. A refused to ship the goods via the cape of good hope on the plea that the contract had been frustrated by reason of the closing of the Suez route. The contract was not frustrated as A could have transported the goods via the Cape of Good Hope.

Commercial impossibility: A contract is not discharged merely because expectation of higher profits is not realized, or the necessary raw material is available at a higher price because of the outbreak of war, or there is a sudden depreciation of currency. Thus, performance cannot be excused on the ground of commercial impossibility.

Default of third person: Thus it is not discharged. Ganga Saran Vs Ram Charan A agreed to sell to B a specified quantity of cotton goods to be manufactured by a particular mill. B agreed to deliver as and when goods might be received from the mill. A time was named for the completion for the delivery. A could not fulfill the agreement as the mill failed to produce the goods. B was entitled to recover damages from A. Strikes, lock outs, and civil disturbances: A contract is not discharged by reason of strike by the workers, or outbreak of some civil disturbances interrupting the performance of promise.

However, the parties to a contract may agree to the contrary by making an express provision in this regard. Failure of one of the object: Herne bay steam Boat Company Vs Hutton The boat, therefore, could be used to sail round the fleet. The contract was not discharged, because failure of one of the object does not discharge the contract.

Self induced impossibility: Discharge by performance. Performance means the doing of that which is required by a contract. Discharge by performance takes place when the parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed. In such a case, the parties are discharged and the contract comes to an end.

Performance of a contract is the most usual mode of its discharge. It may be: Actual performance 2. Attempted performance or tender of performance. Actual performance: When both the parties perform their promises, the contract is discharged. Performance should be complete, precise and according to the terms of the agreement. Most of the contracts are discharged by performance in this manner.

The contract comes to an end by performance. Attempted performanc or Tender of Performance: In certain situations the promisor offers performance of his obligation under the contract at the proper time and place but the promise refuses to accept the performance. Where a valid Tender is made and is not accepted by the promise, the promisor shall not be responsible for non-performance and he doest not lose his rights under the contract. The general rule of law is a thing may be destroyed in the same manner in which it is constituted.

This means a contractual obligation may be discharged by a agreement which may be expressed or implied. Novation Section. Novation takes places: Insurance contracts are of the same type. A forbearance by the promisor should however be considered as an executed consideration provided the forbearance is sufficient at the time of contract.

The next issue is whether past consideration can be treated as consideration at all. This is because consideration is given and accepted along with a promise concurrently. But in the event of services being rendered in the past at the request or desire of the promisor the subsequent promise is regarded as an admission that the past consideration was not gratuitous.

The plaintiff rendered services to the defendant at his desire during his minority. He also continued to render the same services after the dependant attained majority. It was held to be good consideration for a subsequent express promise by the defendant to pay an annuity to the plaintiff but it was admitted that if the services had not been rendered at the desire of the defendant it would be hit by section 25 of the Act.

Bom ] v Adequacy of Consideration: Consideration need not necessarily be of the same value as of the promise for which it is exchanged. But it must be something which can be inadequate as well.

Inadequate consideration would not invalidate an agreement but such inadequate consideration could be taken into account by the court in deciding whether the consent of the promisor was freely given. In Chijjitumal Vs. In the said case, the father had died leaving his house to two sons. They had agreed to partition the house which did not admit the division in exactly equal parts and one of the sons had agreed not to construct a door at a certain place in his portion of the house.

The Supreme Court came to the conclusion that the motive for the said agreement at the time when it was made, was to avoid any dispute in future, and held that it was sufficient consideration. The above view is in tune with explanation 2 to section 25 of the Act, which provides that an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate.

Where there is valuable consideration, Court will not interfere and inquire into the adequacy of it but leave the matter to the parties to make their own bargain.

But inadequate consideration might raise suspicion about the free will of the promisor. Promisor could be treated as victim of some imposition but this would not render the agreement void.

The performance of an act by a person what he is legally bound to perform, the same cannot be consideration for a contract.

Hence, a promise to pay money to a witness is void, for it is without consideration. Hence such a contract is void for want of consideration. Similarly, an agreement by a client to pay to his counsel, a certain sum over and above the fee, in the event of success of the case would be void, since it is without consideration. But where a person promises to do more than he is legally bound to do, such a promise provided it is not opposed to public policy, is a good consideration.

For instance during a civil strike, a question arose as to how best to protect a coal mine. The police authorities thought that surveillance by a mobile force would be adequate but the colliery manager desired a stationary police guard. It was held that the promise to pay the amount was not without consideration.

The police, no doubt, were bound to afford protection, but they had discretion as to the form it should take. The undertaking to provide more protection than what they deemed to be necessary was a consideration for the promise of reward. Glamorgan Country Council A.

The doctrine says that only parties to a contract can enforce the contract. The parties stranger to a contract cannot sue and be sued. Example, a contract by the downloadr of a mortgaged property to pay off the mortgage cannot be enforced by the mortgagee who was not a party to the contract between vendor and vendee. However there are exceptions to the above principle. These are: In the case of a trust, the beneficiary can sue enforcing his right though he was not a party to the contract between the trustee and the settler.

It was held by the Privy Council that though the bride was not a party to the contract between her father and father in law, she could enforce her claim in equity. In the case of family settlement, if the terms of settlement are reduced in writing, members of the family who were not a party to the settlement can also enforce their claim.

Shuppu Vs Subramanian 33 Mad. In the case of certain marriage contracts a female member can enforce a provision for marriage expense based on a petition made by the Hindu undivided family Sunder Raja Vs Lakshmi Mad Where there is an assignment of a contract, the assignee can enforce the contract for various benefits that would accrue to him on account of the assignment.

In case of part performance of a contractual obligations or where there is acknowledgment of liability on account of estoppel, a third party can sue for benefits.

Where a piece of land which is sold to downloader with certain covenants relating to land and the downloader is kept on notice of the covenants with certain duties, there the successors to the seller can enforce these covenants.

Not only that, even inadequate consideration would render the enforceability of the contract quite difficult as the free consent of the parties would become suspect. The Act however contains certain exceptions to this important rule. A written and a registered agreement made between parties out of natural love and affection does not require consideration. Such an agreement is enforceable even without consideration.

It is important that parties should be of near relation like husband and wife to get this exemption Rajlukhee Devee Vs Bhootnath. A promise to compensate wholly or in part for past voluntary services rendered by someone to promisor does not require consideration for being enforced. However the past services must have been rendered voluntarily to the promisor. Further the promisor must have been in existence at that time and he must have intended to compensate.

Where there is a promise in writing to pay a debt, which was barred by limitation, is valid without consideration. In term of section of the Act, no consideration is necessary to create an agency v In case of completed gifts, no consideration is necessary. Move at the desire of promisor by promisee and any other person. It is must for every contract though not necessarily be adequate but must be real and not illusory and should be of some value in terms of money.

Contract without consideration is void subject to certain exceptions- agreement on account of natural love and affection, promise to compensate for voluntary services and promise to pay a time —barred debt, gift actually made, and in agency. In the previous units we discussed all aspects of offer, acceptance, revocation, and consideration. In this unit we will discuss other elements, which would constitute a contract.

We have earlier seen that in terms of section 10 of the Indian Contract Act, a legally enforceable agreement should be made with the free consent of the parties who are competent to contract for a lawful consideration with a lawful object. Further the agreement should not have been expressly declared as void by law. These elements would be examined hereunder. Absence of identity of minds would arise when there is an error on the part of the parties regarding a nature of transaction or b person dealt with or c subject matter of agreement.

In such cases there would be no consent. However cases of fundamental errors have to be distinguished from cases of mutual mistakes. Where the persons refer to a ship of a name in the contract but each of them had a different ship in mind though of same name, there is no identity of minds and hence there is no consent.

That there is no contract in the absence of consent was considered in the case of Cundy Vs Lindsay. Blenkarn in turn sold the goods to Lindsay. Cundy discovered his mistake, brought a suit against Lindsay for recovery of goods. Hence there was no contract at all.

The suit was decreed against Lindsay. Consent is free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake Section When the consent is caused by mistake, the agreement is void, but when caused by other factors it is voidable. Now let us discuss each of these factors, which should not influence consent. But Y can enforce the contract if he finds the contract to his benefit.

An agreement induced by coercion is voidable and not void. That means it can be enforced by the party coerced, but not by the party using coercion.

It is immaterial whether the Indian Penal Code, is or is not in force at the place where the coercion is employed.

Where husband obtained a release deed from his wife and son under a threat of committing suicide, the transaction was set aside on the ground of coercion, suicide being forbidden by the Indian Penal Code.

Amiraju Vs. Seshamma 41 Mad, 33 A person to whom money has been paid or anything delivered under coercion, must repay or return it. A person is deemed to be in a position to dominate the will of the other, when he holds authority, real or apparent over the other, or when he stands in a fiduciary relation to other. The essential ingredients of undue influence are: One of the parties dominates the will of the other and i he has real or apparent authority over the other; ii he is in a position to dominate the will of the other and iii the dominating party takes advantage of the relation.

The burden of proof in situations like the above that there is no undue influence in an agreement would be on the person who is in a position to dominate the will of the other. The stronger party must act in good faith and see that the weaker party gets independent advice. The following two decisions would enable us to understand the law. Money lending operations and undue influence: This is because lenders are in a position to dominate the will of the borrowers. Such high rate of interest will be treated as unconscionable where parties are not on same footing.

Difference between Coercion and Undue Influence: Having discussed in detail the concepts of coercion and undue influence, let us understand the difference between the two: Coercion involves physical force and sometimes only threat.

Undue influence involves only moral pressure. Coercion involves committing or threatening to commit any act prohibited or forbidden by law, or detention or threatening to detain a person or property. In undue influence there is no such illegal act involved. In coercion there need not be any relationship between parties; whereas in undue influence, there must be some kind of relationship between parties, which enables to exercise undue influence over the other.

Coercion need not proceed from the promisor. It also need not be directed against the promisee. Undue influence is always exercised by one on the other, both of whom are parties to a contract. Where there is coercion, the contract is voidable. Where there is undue influence the contract is voidable or court may set aside or enforce it in a modified form.

In case of coercion, where the contract is rescinded by the aggrieved party any benefit received has to be restored back. Fraud means and includes any of the following act committed by a party to a contract or with his connivance or by his agent with intent to deceive another party thereto or his agent or to induce him to enter into the contract. The following can be taken as illustration of fraud: It was held any person who had downloadd shares on the faith of such misstatement can repudiate the contract on the ground of fraud.

A seller of a property should disclose any material defect in the property. Concealing the information would be an act of fraud. Any other act committed to deceive is fraud. Mere silence would amount to fraud under certain circumstances. Although a mere silence as to facts which is likely to affect the willingness of a person to enter into a contract is no fraud, where there is a duty to speak or where his silence is equivalent to speech, then such silence amounts to fraud.

This would be clearly seen from the explanation to Section 17 of the Indian Contract Act, This situation often arises in Insurance contracts. In the case of fire insurance contract between person standing in fiduciary relationship, non- disclosure of certain information would amount to fraud as there is a duty to make special disclosure. These are also know as uberrimae fidei contract. Similarly the insurer is not bound by the policy issued by him where he is misinformed about insurance policy previously taken by the insured.

A contract which is hit by misrepresentation can be avoided by the person who has been misled. For example, A makes the statement on an information derived, not directly from C but from M.

B applies for shares on the faith of the statement which turns out to be false. The statement amounts to misrepresentation, because the information received second-hand did not warrant A to make the positive statement to B [Section 18 1 ] Now let us analyse the difference between fraud and misrepresentation.

In case of misrepresentation, the person making the statement believes it to be true which might later turn out to be untrue. In spite of this difference, the end result is that the other party is misled. Fraud not only enables the party to avoid the contract but is also entitled to bring action. Misrepresentation merely provides a ground for avoiding the contract and not for bringing an action in court. In order to sustain an action for deceit, there must be proof of fraud.

As earlier discussed fraud can be proved only by showing that a false statement was made knowing it to be false or without believing it to be true or recklessly without any care for truth. One is for action against deceit and the other is action for recession of the contract. In the case of mis-representation the person may be free from blame because of his innocence but still the contract cannot stand. In case of misrepresentation, the fact that plaintiff had means of discovering the truth by exercising ordinary diligence can be a good defence against the repudiation of the contract, whereas a defence cannot be set up in case of fraud other than fraudulent silence.

The tenuous difference between fraud and misrepresentation was beautifully brought out in the famous case of Derry vs. In the said case the plaintiff brought an action of deceit against the promoters of a tramway company. According to him, the promoters in the prospectus had not mentioned that they had not obtained the permission of the board of trade which was necessary for using mechanical power [to run a train] and here this was deceit.

The Court verified the position and concluded that there was no deceit and the plea for action for deceit was dismissed. It is seen that in all these cases though the agreement amounts to a contract, it is voidable.

The injured party might insist on being placed in the same position in which he might have been had the vitiating circumstances not been present. But the estate is subject to mortgage. But, where it is possible to discover the truth with ordinary diligence, and though the consent might have been obtained by misrepresentation or silence, then the contract cannot be avoided. Where a party to contract perpetrates fraud or misrepresentation, but the other party is not misled by such fraud or misrepresentation, then the contract cannot be avoided by the latter.

Where for instance, the seller of specific goods deliberately conceals a fault in order that the downloader may not discover it even if he inspects the goods, but the downloader in fact does not make any inspection at all, the downloader cannot avoid the contract as he is not deceived by the seller.

Where a contract is voidable and the party entitled to avoid it decides to do so by rescinding it, he must restore any benefit which he might have received from the other party. Where the party seeking to rescind the contract had received only benefit, the contract will be set aside by the court upon such terms and conditions deemed fit. A student was induced by his teacher to sell his brand new car to the latter at less than the download price to secure more marks in the examination.

Accordingly the car was sold. However, the father of the student persuaded him to sue his teacher. State on what ground the student can sue the teacher? A contract brought about as a result of coercion, undue influence, fraud or misrepresentation would be voidable at the option of the person whose consent was so caused. Where parties to an agreement are under a mistake as to a matter of fact which is essential to the agreement, then the agreement is void.

As we all know a void agreement cannot be enforced at all. But in fact, just before the bargain was struck, the ship carrying the cargo was cast away because of storm and rain and the goods were lost. Neither of the parties was aware of it.

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The agreement is void. However a question on foreign law would become a matter of question of fact. Similarly the existence of a particular private right though depends upon rules of law, is only a matter of fact. For instance where a man promises to download a property which already belongs to him without him being aware of it, then such a promise is not binding on him. However a family arrangements or a compromise of doubtful rights cannot be avoided on the ground of mistake of law.

Yet another issue to remember in mistake is that it must be of an essential fact. Whether the fact is essential or not would again depend on how a reasonable man would regard it under given circumstances. A mere wrong opinion as to the value is not an essential fact.

Both the parties should be under mistake. A unilateral mistake would not render the contract invalid. From the foregoing it is clear that: Mistake should be a matter of fact b. Mistake should not be a matter of law c. Mistake should be a matter of essential fact d.

Mistake should not be unilateral but of both the parties, and e. Consent is said to be free when it has not been obtained by coercion, undue influence, fraud, misrepresentation or mistake. Such a contract is voidable. A contract caused by undue influence is voidable. Even court is also empowered to set aside such contract absolutely or conditionally.

Remedies in the above cases are same, except the right to claim damages in case of fraud. It may be either of fact or of law. Mistake renders the contract void. Unilateral mistake made by one of the parties. It is a valid contract, unless it is caused by misrepresentation or fraud. Even unilateral mistakes as to fact renders the contract void. Every person who a has attained the age of majority b is of sound mind and c is not otherwise disqualified from contracting, is competent to contract.

Now let us discuss each one of these requirements. In terms of the Indian Majority Act, , every domiciled Indian attains majority on the completion of 18 years of age. However where a guardian is appointed by a court to protect the property of a minor and the court takes charge of the property before the person attains 18 years, then he or she would attain majority on completion of 21 years. An agreement entered into by a minor is void against the minor and the question of its enforceability does not arise.

The Privy Council in Mohiri Bibee vs. Dharmodos Ghose [] LR 30, Cal , decided that an agreement where minor is a party is altogether void. In this case a minor executed a mortgage in favour of the husband of Mohiri Bibee.

The question for consideration is whether the mortgage is valid. The main reason for such a view is that a minor is incapable of performing his part of the contract imposing a legal obligation.

Though a minor is not competent to contract, nothing in the Contract Act prevents him from making the other party bound to the minor. Thus, a promissory note duly executed in favour of a minor is not void and can be sued upon by him, because he though incompetent to contract, may yet accept a benefit.

A minor cannot become partner in a partnership firm. However, he may with the consent of all the partners, be admitted to the benefits of partnership Section 30 of the Indian Partnership Act, Any money advanced to a minor cannot be recovered as he can plead minority and that the contract is void.

Even if there had been false representation at the time of borrowing that he was a major, the amount lent to him cannot be recovered. Privy Council concurred with the views of Calcutta High Court that no discretion could be used even under that Act to grant any kind of relief to the lender of money. When the mortgage documents had to be cancelled at the instance of minor who mortgaged the property fraudulently, Courts have ordered compensation under Specific Relief Act, to the other party to the instrument [Dattaram vs.

Vinayak 28 bom. Exchange Loan Co. N ] If a minor had obtained payment fraudulently by concealing his age, he may be compelled to restore the payment but he cannot be compelled for an identical sum as it would amount to enforcing void contract. A minor on his attaining majority cannot validate any agreement which was entered into when he was minor, as the agreement was void.

Similarly a minor cannot sign fresh promissory notes on his attaining majority in lieu of promissory notes executed for a loan transaction when he was minor, or a fresh agreement without consideration. Necessaries of life not only include food and clothing but also education and instruction. Though an agreement with minor is void, valid contract can be entered into with the guardian on behalf of the minor. The guardian must be competent to make the contract and the contract should be for the benefit of the minor.

For instance a guardian can make an enforceable marriage contract on behalf of the minor. Similarly father of bride can enter the contract with the father of bridegroom for payment of certain allowance to the bride. But not all contracts by guardian are valid. A guardian cannot bind a minor in a contract to download immovable properties [Mir Sarwarjan vs.

Fakharuddan However, a court appointed guardian can bind a minor is respect of certain sale of property ordered by the court.

A person is competent to contract , where he is — i Major ii of Sound mind iii not disqualified by any other law of the land. Dharmodas Ghose]. A person will be considered to be of sound mind if he at the time of entering into a contract is capable of understanding it and forming a rational judgment as to its effect upon his interest.

A person who is of unsound mind but occasionally of sound mind can enter into a contact when he is in sound mind though for temporary periods.

For example a person who is in lunatic asylum during intervals of sound mind can enter into contracts. Similarly, a person who is generally of sound mind, but occasionally of unsound mind cannot enter into a contract when he is of unsound mind. From the above it is clear that the period of lucidity would be crucial as much as the periods of lunacy.

The basic test for lunacy or lucidity is to see whether the person is able to understand the implications of a contract which he enters into on his interest.

Idiots, lunatics and drunken persons are examples of persons of unsound mind. Necessaries of life supplied to a person of unsound mind: In term of section 68 of the Indian Contract Act, if a person incapable of entering into a contract is supplied by another person with necessaries of life, the person who has furnished such supplies is entitled to be reimbursed from the property of such a person. Apart from minors and persons of unsound mind, these are the others who are not capable of entering into contract either wholly or partially.

Contract by such persons are void. An alien enemy, during war cannot enter into a contract with an Indian subject, unless he is permitted by Central Government to do so he cannot sue in Indian Courts. This disability to an alien enemy arises on account of public policy. Statutory corporations or Municipal bodies cannot enter into contracts on matters which are beyond their statutory powers or ultra vires the memorandum or articles through which they are created.

An Advocate in India can enter into contracts with his clients for recovery of fees or payment of fees in certain manner unlike his counterpart in U. K where barristers are prohibited to enter into contracts for recovery of fees from their clients [Nichal chand vs. Dilawar Khan All ] Before entering into contract with the government, certain procedure and formalities are required to be complied with.

On default of it, such contract will be void. Union of India 2 S. However, they can, at their will enter into contracts which may be enforceable in India. Speaking generally all persons enjoy freedom for entering into contracts of their choice. But this contractual freedom or their right to enter into agreements is not absolute.

There is a limitation on such contractual freedom as they are bound by certain general provisions of law. The above observation can be illustrated with the following example: Every agreement where the object or consideration is unlawful is void. Thus section 23 has set out the limits to contractual freedom. Following are examples of agreement which are void because the object is unlawful. The agreement is void because the object being commission of fraud, is unlawful. There are seven such circumstances namely - i Agreement forbidden by law: Acts forbidden by law means acts that are punishable under any Statute or Rules or Regulations made under any Statute.

Where an agreement is entered into with the object of defeating any provision of law then it is prohibited. This is a situation not very different from point ii discussed above. The issue covered by this point can be explained by following two examples: A mere consent of parties by way of agreement to except this requirement of proof of genuineness or proper execution of will is not lawful and therefore cannot be enforced under C. Therefore his remuneration has to be fixed by the court.

Parties to certain litigations cannot add or deviate of the power of the receiver. Similarly they cannot fix salary of a receiver without the leave of the court however unconditional it may be. Such an act would be in contravention of law. They agree to defraud a Government department by submitting a tender in the individual name and not in the firm name. This agreement is void as it is a fraud on the Government department. Following are the illustrations where the object or consideration is unlawful as it involves injury either to person or property.

He is unable to pay either the principal or interest. Therefore he agrees to render manual labour for certain period failing which he agrees to pay exorbitant interest. This agreement is void as rendering labour as consideration amounts to agreeing to be a slave. Slavery is opposed to public policy as well. Hence the agreement is void. Following are illustration where the agreement is void because the object or consideration is unlawful being immoral.

He also promised to marry her after divorce. Agreement, either because of their object or consideration being opposed to public policy are void and not enforceable.

It can be interpreted in a narrow sense or in a broad sense. If it is understood in a narrow sense, it would cut into rights of people to enter into even genuine agreements. But framing public policy itself is a difficult exercise since a too restrictive approach would stifle the rights of people and a too liberal approach would open the gate for many illegal transactions.

This is because such a trade would be against the interest of Government of India and people of India. Any agreement made during peace time would be suspended automatically and cannot be carried on further until hostilities come to an end.

Any agreement to stifle or prevent illegally any prosecution is void as it would amount to perversion or abuse of justice. The principle is that one should not make a trade of felony. It must be understood however that under the Code of Criminal Procedure, many offences are compoundable. Therefore any agreement towards compounding of an offence to avoid prosecution is not void but is very much enforceable.

Maintenance is promotion of litigation in which the litigant has no interest. Champerty is bargain whereby one party agrees to assist the other in recovering property with a view to sharing the profit of litigation. These agreements for maintenance and champerty are void in England but not in India. Hence these are not opposed to public policy.

But where such advances are made by way of gambling in litigation, the agreement to share the subject of litigation is certainly opposed to public policy and therefore is void.

Any agreement with the object of inducing a judicial officer or administrative officer of the state to act corruptly or not impartially is void. Similarly an agreement to use influence in a litigation in a underhand manner is void.

But an agreement to pay for to a holy man for prayers for success of a suit is valid. An agreement to negotiate a marriage for reward is void. Such marriage brokerage contracts are opposed to public policy.

The following are examples of agreement that are void as they tend to create an interest against obligation. The object of such agreements is opposed to public policy. While appointing a person to certain important and high public office, merit alone should be the criteria. This is for the reason presence of money consideration would convert the situation as sale of public office. Following are illustrations in this regard.

Agreements having for their object the establishment of monopolies are opposed to public policy and therefore void. Every agreement in restraint of marriage of any person other than a minor, is void. So if a person, being a major, agrees for good consideration not to marry, the promise is not binding.

Any agreement through which a person is restrained from exercising a lawful profession, trade or business of any kind is to that extent void. The object of this law is to protect trade. The restraint, even if it is partial, will make the agreement void. The principle of law however has a number of exceptions which are discussed hereunder.

Such an agreement is valid. Such an agreement will be valid. Similarly any agreement which abridges the usual period for commencing the legal proceedings is also void. Further these agreement are also void in view of section 23 of the Indian Contract Act, as the object of the agreements are to defeat the provision of law.

Nevertheless, a clause in an fire insurance policy stipulating that if the claim is made and rejected and if no suit is instituted within three months after such a rejection, all the benefits under the policy will be forfeited, is valid. However, there are certain exceptions to the above rule: For instance, in agreement between the holder of a fire insurance policy and the insurance company that no suit shall be instituted until the question of the amount of damage sustained by the assured has first been ascertained by a reference to an arbitrator is a perfectly valid agreement.

In addition to the above, there are also other agreements which are expressly declared as void. This Section is obviously a corollary to Section 23 of the Act. Where the consideration is unlawful, the entire agreement is void as the agreement has to be looked as a whole.

The general principle of law is where the legal part of an agreement can be separated from the illegal part, then the legal part if it can be given effect by rejecting the bad part and retaining the good part, then the good part is given effect. But where no such separation is possible, the contract is altogether void. He also has interest in illegal traffic of other goods. Where the meaning of the terms of an agreement is uncertain or if it is not capable of being understood with certainty, then the agreement is void.

But where the meaning is capable of being made certain, then the agreement is valid. Let us discuss wagering contract. Wagering agreement is one which involves payment of a sum of money upon the determination of an uncertain event. The essence of wagering agreement is where there are two parties, one wins, the other loses upon an uncertain event taking place in which neither of them has legitimate interest.

This is a classic case of a wagering agreement. But where one of the parties has control over the event, the agreement is valid. An agreement by way of a wager is void. A good definition of wagering agreement would be the one given by Anson: Section 30 of the Act provides that an agreement [to download lottery tickets] is one by way of wager and is void.

While as clearly seen, wagering contracts are void, speculative transactions are valid. It is often difficult to distinguish between the two. There are two bare elements of a speculative transaction. They are a mutual intention of parties to acquire or deliver goods or commodities and b undertaking of risk arising from movement of prices.

In wagering contract, only the element of risk is seen. Now let us take an example: In the above example if the original intention of the parties was only to settle the difference in price, than it would be a wagering contract which would be void.

Thus by now it would be clear that wagering postulates only incurring of risk. It is void because it is opposed to public policy. While gambling and wagering are prohibited by law, speculation is not. Now let us consider other peculiar situations to see whether they are wagering contracts or speculative contracts or valid contracts. Insurance policy: An insurance policy is a valid contract. But if an insurance policy is taken by a person who has no insurable interest, then it is void.

For instance a person who has no insurable interest in a ship, takes a policy against it being sunk, then the contract is void. Promissory notes on a wagering contract: While a wagering contract is void ab initio, it is but automatic that a promissory note given out of a wagering contract is not enforceable by way of a suit.

A promissory note of this character is one without consideration and hence is null and void. Suit to recover deposit: A winner of bet cannot recover the amount which he has won even if the amount is kept by way of deposit by the loser with the stakeholder. Such earmarking or identification of funds does not enhance the validity of the contract which is void. In the above example the loser can recover the amount from stakeholders as long as the amount has not been made over by the stakeholder to the winner.

Wager and collateral transactions: For instance in a wagering contract, the broker is entitled to collect his brokerage. Similarly the principal can recover the prize money from his agent received by him on account of a wagering transactions. The acid test of validly of a collateral transaction is whether the main transaction is illegal or legal but void. If the main transaction is illegal, the collateral transaction cannot be valid.

For example security given for regular payment of the rent of a house let out for the purpose of gambling cannot be recovered; the recovery of security being tainted with the illegality of original transaction cannot be enforced. A promise made by the loser of a wager to pay the amount lost in consideration of the winners forbearance to sue him as defaulter can be enforced as a fresh contract, separate and distinct from original wagering contract though collateral to it.

In the public interest, some of the agreements have been expressely declared to be void under the Act. Contract of insurance is not a wager, it falls under the category of contingent contract. A contract being an agreement enforceable by law, creates a legal obligation, which subsists until discharged. Performance of the promise or promises remaining to be performed is the principal and most usual mode of discharge. This unit explains, who must perform his obligation; what should be the mode of performance; and what shall be the consequences of non performance.

Basic tenet of performance: In a contract where there are two parties, each one has to perform his part and demands the other to perform. This obligation is the primary tenet. The parties would be treated as having been absolved only under the provisions of any law or by the conduct of the other party. Until such time, the performance is neither excused nor dispensed with. Not only the promisor has a primary duty to perform, even the representative in the event of death of a promisor, is bound by the promise to perform, unless a contrary intention appears from the contract [Section 37].

Invariably the promise has to be performed by the promisor where the contracts are entered into for performance of personal skills, or diligence or personal confidence, it becomes absolutely necessary that the promisor performs it himself. Where personal consideration is not the foundation of a contract, the promisor or his representative can employ a competent person to perform it. Generally upon the death of promisor, the legal representatives of the deceased are bound by the promise unless it is a promise for performance involving personal skill or ability of the promisor.

However the liability of the legal representative is limited to the value of property inherited by him from the promisor. The question here is whether a total stranger to a contract who is identified as a third person can perform a promise. Where a promisee accepts performance from a third party he cannot afterwards enforce it against the promisor. Where two or more persons jointly promise, the promise must be performed jointly unless a contrary intention appears from the contract. Where one of the joint promisors dies, the legal representative of the deceased along with the other joint promisor s is bound to perform the contract.

Where all the joint promisors die, the legal representatives of all of them are bound to perform the promise. The law set out above can be illustrated with the following examples: A may perform this promise either himself or causing someone else to pay the money to B.

If A dies before the time appointed for payment, his representative must pay the money or employ some other person to pay the money. A promises to paint a picture for B for a certain price. A is bound to perform the promise himself. He cannot employ some other painter to paint the picture on his behalf. Later on B expresses his inability to clear the dues. Before making this payment C did tell B nothing about it. Now A can sue B only for the balance and not for the whole amount.

This became the law that legal representatives are successors. When the benefits of a contract are succeeded by a process of law, both the burden and the benefit would some times devolve on the legal heir. Unlike succession, the assignor can assign only the assets to the assignee and not the liabilities.

Because when a liability is assigned, a third party gets involved in it. The debtor cannot through assignment relieve himself of his liability to creditor. In terms of section 38 of the Act, where the promisee has not accepted the offer or tender of performance by the promisor then the promisor is not responsible for non performance. In this case the promisor does not also lose his rights under a contract.

The promisor should however ensure that his tender or offer to perform his part should satisfy following conditions. The above legal principles were settled in the famous English case Start up vs. Macdonald 6 Man. An offer to any one of the several joint promisees has the same legal consequence as an offer to all of them. Thus from the above it could be seen that the following two rights accrue to the aggrieved party- i to terminate the contract and ii to indicate by words or conduct that he is interested in its continuance.

In either case, the promisee would be able to claim damages that he suffers as a result of the breach for it is not incumbent on the promisee to decide immediately in case of an anticipated breach that the contract may be ended.

He may, however, choose to do so. In that event, the loss if any suffered by him will have to be made good by the promisor. On the other hand, if he indicates that he is interested in the performance of the contract, then he would be entitled to claim damages which accrue on the date the contract is due to be performed.

It would, therefore, be clear that the rights that we have just stated above accrue to a promisee when the promisor decides not to perform the promise. It has been held by the Privy Council in Muralidhar Chatterjee vs. International Film Company 47 Cal. In view of Section 64 of the Act, the promisee, in the events of his putting an end to the contract, is bound to return all the benefits received under the contract and in turn is entitled for compensation for all damages sustained by him for breach of contract by the promisee.

The above law can be illustrated with the following example. Now let us consider the position whether the promisee can enforce his right against any one of the joint promisors and if so what are the rights and duties of the other promisors to make contributions.

In terms of Section 43 of the Act, i when two or more persons make joint promise, the promisor can compel any one of the joint promisors to perform the whole of promise. From the above, it is clear that the liability of joint promisors is joint and several and in the absence of any special contract to the contrary, the amount due can be recovered from any one of the joint promisors.

A joint promisor cannot claim that he be sued along with all other joint promisors only. If, however the promisee sues one of the promisors and obtains a decree against him, he is precluded from bringing a fresh suit against the remaining borrowers.

In the matter of release of one of the joint promisors, by another joint promisor, it must be understood that such a release does not discharge other joint promisors nor does the released joint promisor would stand released to other joint promisor or promisors.

The above principle of joint promises is applicable for partners, joint mortgagees and members of a Hindu Undivided Family. In all these cases there is no single promisee. Therefore in order to enforce a promise all the joint promisees should sue the promisor. If any one of the joint promisees refuses to sue the promisor he would not be a plaintiff but be treated as defendant.

Mad 26,35, Mohammed, Isaq vs. Shekh Haq 12 C. Where no time is specified for performance of a promise, it must be performed within a reasonable time. What is reasonable time would depend on the facts and circumstances of each case [section 46]. Where a promise is to be performed on a specified date but no time is mentioned, then it can be performed any time on that day but during business hours only.

A promisee may refuse to accept delivery of goods , if it is delivered after business hours. For example if the promisor wishes to deliver goods at a time which is beyond business hours, the promisee can refuse.

As regards the place of performance, where no place is fixed for the performance of a promise, it is the duty of the promisor to ask the promisee to fix a reasonable place.

No distinction is made between an obligation to pay money and an obligation to deliver goods or discharge any other obligation. But generally the promise must be performed or goods must be delivered at the usual place of business. Where the promisor has not undertaken to perform the promisee without an application by the promisee and the promise is to be performed on a certain day, it is the duty of the promisee to apply for performance at a proper place and with in usual hours of business.

The above are subject to the position that promisor can perform any promise at any place, in any manner, at any time which the promisee prescribes or sanctions. General observation: A contract may consist of i an act and a promise or ii two promises one being the consideration for the other.

This can be illustrated with the following. These promises are reciprocal promises. The above is in contrast to another situation. This is not a reciprocal promise. The performance of reciprocal promise can take in different forms- i Simultaneously performance of reciprocal promise [Section 51]: In this case, promises have to be performed simultaneously.

The conditions and performances are concurrent. If one of the parties does not perform his promise, the other also need not perform his promise. Where the order of performance is expressly fixed, the promise must be performed in that order only. Where the performance of reciprocal promise is not fixed expressly, some times the order is understood by implication. When in a contract consisting of reciprocal promises one party prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented.

The person so prevented is entitled to get compensation for any loss he may have sustained for the non-performance. The above can be illustrated with the following illustrations by way of two case laws.

Armstrong, an Englishman was engaged by the Captain of a Japanese ship to act as fireman on a voyage from England to Japan. During the course of the voyage Japan declared war against China.

The Englishman had to leave service because had he continued in service he would have incurred penalties under Foreign Enlistment Act. In effect because of the war, the Englishman was prevented from discharging his part of the contract. The suit filed by him was decreed in his favour in spite of being opposed by the Japanese shipping company. It should be appreciated that the Captain of Japanese ship could not have brought a case against the Englishman for non-performance as the Japanese themselves were responsible for preventing the Englishman from performing his part of the contract.

Sometimes the parties would be prevented from discharging a part of the contract but not the entire contract. In such a case, the party so prevented need not avoid the full contract but perform the rest of it. Section 54 of the Act provides that promises may be such that: This peculiar position arises because of default on the part of one of the parties. Reciprocal promise to do certain things that are legal and certain others that are not legal — Section 57 of the Act provides that if reciprocal promises have two parts, the first part being legal and the second part being illegal, the legal part is a valid contract and the illegal part is void.

In this case the first part is valid as it is legal, the second part is void as it is illegal. For example, in the nearest reversionary heir of B, agreed to transfer his inheritance to C, if he succeeded to B; and he did not transfer his own estate to C. It was held that first promise was not enforceable, as it amounted to an agreement to transfer an estate on the mere chance of succession prohibited by Section 6 of the Transfer of Property Act, but the second promise was enforceable under Section 58 as an alternative promise.

Mathura L. In terms of this Section, where it is understood between parties that time is an essential element, and where one party is unable to perform his part of the promise either in full or in part within the time specified, then the contract is voidable at the option of the party either in full or in part to the extent of non performance of the contract within the time. In these cases the contract is not voidable if time is not of essence of the contract, but the promisee is entitled for compensation for loss if any suffered on account of such failure.

In a contract where time is of essence and promisor is unable to perform his part within the time, as already stated the contract becomes voidable at the option of the other party. The next question for consideration is how to determine whether time is essence of a contract? Ordinarily from a plain examination of a contract it would be difficult to ascertain from the terms of the contract whether time is essence of the contract.

A promisee may have failed to perform his contract within the specified time. Yet time may not be treated as essence of the contract in that case. Whether time is essence of a contract has to be decided from the terms of the contract.

The general principles that are followed can be enunciated as under. Here time will be treated as essence of contract. Of course even in sale of land, time can be made as on essence of contract by express words. Contract cannot be avoided where time is not of essence: When there is delay in performing promise on executing a contract where the time is not of essence, parties concerned cannot avoid the contract. However in such cases promises must be performed with in a reasonable time other wise it becomes voidable at the option of the promisee.

Effect of acceptance of performance out of time: A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Even at the time of entering into the agreement, it may be impossible to perform certain contracts at the beginning or inception itself.

The impossibility of performance may be known or may not be known to the parties i If the impossibility is known to the parties: Even where both the promisor and the promisee are ignorant of the impossibility the contract is void. Where the promisor alone knows it is impossible to perform or even if he does not know but he should have known about the impossibility with reasonable diligence, the promisee is entitled to claim compensation for the loss suffered because of failure of the promisor to perform.

When performance of a promise becomes impossible on account of subsequent developments of events or change in circumstances, which are beyond the contemplation of parties, the contract becomes void. Supervening impossibility can arise due to a variety of circumstances as stated below. The music hall was destroyed before the specified dates and hence it became impossible to hold stage concerts. It was held that as the music hall ceased to exist; it is a case of supervening impossibility and both the parties were excused from the performance of the contract [Taylor vs.

It was agreed to by the defendant through a contract to have from the plaintiff a flat for specified days for witnessing the coronation procession of King Edward VII. The said procession was cancelled and it did not take place.

Therefore the defendant refused to pay the balance rent. It was held that the foundation of the contract had totally failed and here the balance of rent amount cannot be recovered from the defendant.

Henry 2 KB. In case of contract of personal service, disability or incapacity to perform, caused by an Act of God e. Davison L. Performance of a contract may also become impossible due to change in law subsequently.

The law passed subsequently may prohibit the act which may form part as basis of contract. Here the parties are discharged from their obligations. If the business of sale of lottery ticket is banned by a subsequent law, parties need not keep up their legal obligations. Out break of war may affect the enforceability of contracts in many ways like a emergency legislations controlling prices b relaxation of trade restrictions and c prohibiting or restraining transaction with alien enemy.

Doctrine of Frustration: Impossibility of performance must be considered only in term of section 56 of the Act. What would not constitute ground of impossibility: But it was held that there was no ground of impossibility. The defendant could not supply the material as the mill failed to make any production at that time. The defendant pleaded on the ground of impossibility which was not approved by the Privy Council and held that contract was not performed by the defendant and he was responsible for the failure.

It was held by Supreme Court that the contract between defendant and plaintiff was not frustrated because of failure on the part of Victoria Mills to supply goods [Ganga Saran vs Finn Rama Charan, A. R S. In the given case the plaintiff had agreed to download immediately after outbreak of war a plot of land. This plot of land was part of a scheme undertaken by the defendant who had agreed to sell after completing construction of drains, roads etc.

However the said plot of land was requisitioned for war purpose. The defendant thereupon wrote to plaintiff asking him to take back the earnest money deposit, thinking that the contract cannot be performed as it has become impossible of being performed.

The plaintiff brought a suit against the defendant that he was entitled for conveyance of the plot of land under condition specified in the contract. It was held that the requisition order did not make the performance impossible. While judging the impossibility of performance issue, the Courts would be very cautious since contracting parties often bind themselves to perform at any cost of events without regard to price prevailing and market conditions.

Key Points: A contract is discharged by impossibility of its performance. Where a debtor owes a number of debts and he pays an amount with express or implied instructions towards appropriation, the debtor is at will to appropriate to any debt and the creditor is bound by it.Strikes, lock outs, and civil disturbances: In case of breach by downloader, In case of breach by downloader, the seller cannot sue the the seller has the legal right 6. It is the duty of an agent.

B revokes his acceptance by telegram. Illustrations a A agrees to sell to B "a hundred tons of oil". It is generally given by way of compensation for loss suffered and not by way of punishment for wrong inflicted. Promises, express and implied.

IRIS from Lakeland
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