Contract Law: Promises and Performance

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Questions and Answers

What must a promisor do when a promise is to be performed on a certain day without an application from the promisee?

The promisor may perform it at any time during the usual hours of business on that day at the appropriate place.

When is the promisee required to apply for the performance of a promise?

The promisee must apply for the performance at a proper place within the usual hours of business when the promisor has not agreed to perform without an application.

What obligation does a promisor have when there is no fixed place for the performance of a promise?

The promisor must apply to the promisee to appoint a reasonable place for the performance of the promise.

How can the performance of a promise be made according to the wishes of the promisee?

The performance may be made in any manner or at any time that the promisee prescribes or sanctions. Signup and view all the answers

What is required of a promisee before a promisor must perform their promise?

The promisee must be ready and willing to perform their reciprocal promise. Signup and view all the answers

What should happen when the order of reciprocal promises is expressly fixed by the contract?

They shall be performed in the order expressly fixed by the contract. Signup and view all the answers

If the order of performance of reciprocal promises is not fixed by the contract, how should they be performed?

They shall be performed in the order which the nature of the transaction requires. Signup and view all the answers

What constitutes 'undue influence' in a contract?

Undue influence occurs when one party, holding a position of power over another, uses that power to gain an unfair advantage in a contract. Signup and view all the answers

In what situations can a person be deemed to have a position of undue influence?

A person may have undue influence if they hold real or apparent authority over another or engage in a contract with someone whose mental capacity is impaired. Signup and view all the answers

What determines the reasonableness of time and place for performance of a promise?

It is determined by the specific facts and circumstances of each case. Signup and view all the answers

What is the burden of proof in a contract alleged to be induced by undue influence?

The burden of proving that a contract was not induced by undue influence lies on the party in a position to dominate the other’s will. Signup and view all the answers

Define 'fraud' in the context of contract law.

Fraud includes acts committed with intent to deceive, such as suggesting false facts or actively concealing information. Signup and view all the answers

What types of actions are classified as misrepresentation?

Misrepresentation includes positive assertions that are untrue, breaches of duty that mislead without intent to deceive, and causing mistakes about essential contract terms. Signup and view all the answers

How does misrepresentation differ from fraud?

Misrepresentation occurs without intent to deceive, while fraud involves a deliberate intent to deceive a party in a contract. Signup and view all the answers

What role does mental capacity play in the definition of undue influence?

Mental capacity affects one’s ability to fully understand a contract, making them susceptible to undue influence when dealing with parties in a position of power. Signup and view all the answers

What must be proven to establish a claim of fraud in a contract?

To establish fraud, one must prove that false statements were made knowingly, or a fact was actively concealed with the intent to deceive. Signup and view all the answers

What are the rights of a promisee in a contract of indemnity when sued?

The promisee is entitled to recover damages, costs, and sums paid under a compromise related to the suit, provided they acted prudently and within the promisor's authority. Signup and view all the answers

Define a 'contract of guarantee' and identify its key participants.

A contract of guarantee is an agreement where one party (surety) promises to fulfill the obligations of another party (principal debtor) in case of default, with the creditor being the party who benefits from this arrangement. Signup and view all the answers

What constitutes sufficient consideration for a surety to give a guarantee?

Anything done or promised for the benefit of the principal debtor can be sufficient consideration for the surety's guarantee. Signup and view all the answers

Explain the extent of a surety's liability in a guarantee contract.

The surety's liability is co-extensive with that of the principal debtor unless otherwise specified in the guarantee contract. Signup and view all the answers

What is meant by a 'continuing guarantee'?

A continuing guarantee refers to a guarantee that covers a series of transactions over time rather than a single transaction. Signup and view all the answers

How can a surety revoke a continuing guarantee?

A surety can revoke a continuing guarantee for future transactions by providing notice to the creditor. Signup and view all the answers

What is the effect of a surety's death on a continuing guarantee?

The death of a surety revokes the continuing guarantee as it pertains to future transactions unless there is a contract stating otherwise. Signup and view all the answers

What conditions must be met for a promisee to recover costs in an indemnity claim?

The promisee must not contravene the promisor's orders and must act prudently as they would have without the indemnity contract. Signup and view all the answers

What happens when an agent exceeds their authority but part of the transaction is separable?

Only the part of the transaction within the agent's authority is binding on the principal. Signup and view all the answers

What occurs if an agent's actions beyond their authority cannot be separated from authorized actions?

The principal is not bound to recognize the transaction. Signup and view all the answers

What is the legal consequence of notice given to the agent during the course of business?

The notice has the same legal effect as if it had been given to the principal. Signup and view all the answers

Can an agent personally enforce contracts made on behalf of their principal?

No, unless there is a specific contract allowing them to do so. Signup and view all the answers

What is presumed when an agent sells goods for a merchant abroad?

A contract allowing the agent to make the sale is presumed to exist. Signup and view all the answers

What rights does a third party have if they contract with an undisclosed agent?

They can require the performance of the contract from the principal. Signup and view all the answers

What happens if a principal discloses their identity to the other contracting party before the contract is completed?

The other party may refuse to fulfill the contract if they would not have contracted had they known the principal's identity. Signup and view all the answers

What is the effect of an agent not disclosing the name of their principal?

The agent is assumed to be acting in their own capacity, and the principal may be liable. Signup and view all the answers

What happens to a bailment contract if the bailee performs an act inconsistent with the conditions of the bailment?

The bailment contract becomes voidable at the option of the bailor. Signup and view all the answers

What liability does a bailee face if they use the bailed goods in a manner not authorized by the bailment conditions?

The bailee is liable to compensate the bailor for any damage arising from such unauthorized use. Signup and view all the answers

If a bailee mixes the bailor's goods with their own with the bailor's consent, how is ownership determined?

Both the bailor and the bailee have an interest in the mixture, proportional to their respective shares. Signup and view all the answers

What occurs if a bailee mixes the bailor's goods with their own without consent, when the goods can be separated?

The property in the goods remains with both parties, but the bailee bears the cost of separation. Signup and view all the answers

What rights does a finder of goods have regarding compensation for expenses incurred while preserving those goods?

The finder has no right to sue the owner for compensation but may retain the goods until receiving any specified reward for their return. Signup and view all the answers

What are the consequences if a bailee mixes the bailor's goods with their own, and separation of the goods is impossible?

The bailor is entitled to be compensated by the bailee for the loss of the goods. Signup and view all the answers

Under what circumstances is a bailor required to repay necessary expenses incurred by the bailee during the bailment?

The bailor must repay if the goods are kept, carried, or worked on by the bailee without remuneration. Signup and view all the answers

Under what conditions can a finder sell goods that are commonly the subject of sale?

A finder may sell the goods if the owner cannot be found with reasonable diligence or refuses to pay lawful charges, especially if the goods are at risk of perishing or the charges equal two-thirds of the goods' value. Signup and view all the answers

What is a bailee's particular lien?

A bailee has a right to retain goods until receiving payment for services rendered, provided there is no contract stating otherwise. Signup and view all the answers

Can a lender require the return of a gratuitously loaned item before the specified time, and under what conditions?

Yes, the lender can require its return at any time, unless the borrower has incurred significant losses due to reliance on the loan. Signup and view all the answers

What should a lender do if they compels the return of a loaned item before the agreed time, which causes losses to the borrower?

The lender must consider the borrower's losses that exceed the benefits gained from the loan. Signup and view all the answers

What is meant by the general lien of certain professionals like bankers and attorneys?

These professionals can retain any goods bailed to them as security for any balance of account if no contract states otherwise. Signup and view all the answers

Define the terms 'pledge', 'pawnor', and 'pawnee'.

A pledge is the bailment of goods as security for a debt; the bailor is called the pawnor, while the bailee is referred to as the pawnee. Signup and view all the answers

What rights does a pawnee have concerning the goods pledged to them?

The pawnee may retain the pledged goods for the debt's payment, interest, and any necessary expenses incurred for preserving the goods. Signup and view all the answers

Can a finder of lost goods recover compensation for the trouble of finding the owner, and if so, how?

No, a finder cannot recover compensation for trouble but can sue for a specific reward offered by the owner for the return of the goods. Signup and view all the answers

What happens if the charges incurred by a finder for a lost good exceed two-thirds of its value?

If the charges amount to two-thirds of its value, the finder may sell the lost good. Signup and view all the answers

Study Notes

Preamble

The Indian Contract Act, 1872, defines and amends certain parts of contract law
The Act extends to the whole of India, except Jammu and Kashmir
Existing statutes, acts, and customs not inconsistent with the Act remain in effect
The Act came into force on September 1, 1872

Interpretation Clause

Defines key terms used in the Act, to avoid ambiguity
A proposal is a willingness to do/ abstain from an act, seeking another's assent
An acceptance converts a proposal into a promise
A promisor makes a proposal; a promisee accepts it
Consideration is an act, abstinence, or promise done by a party, to fulfil a promise
An agreement is a set of promises
Reciprocal promises are promises that form consideration in an agreement
A void agreement is unenforceable by law
A valid agreement is an enforceable contract (A contract)
A voidable agreement is enforceable at one party's discretion but not others

Communication, Acceptance, and Revocation of Proposals

Communication of a proposal is complete when the recipient becomes aware of it
Communication of an acceptance is complete when sent in a way that is out of the sender's control
Communication of revocation is complete when sent; it's complete for the recipient when received
A proposal can be revoked before acceptance is communicated
An acceptance can be revoked before it's been communicated

Revocation

A proposal can be revoked by communicating the revocation to the recipient
A proposal can be revoked by time lapses(prescribed in proposal or a reasonable time)
A proposal can be revoked by the acceptor not fulfilling a condition
A proposal can be revoked by the death or insanity of the proposer(if recipient knows before acceptance)

Acceptance

Acceptance must be absolute and unqualified
Acceptance can be accepted in a usual or prescribed manner, otherwise proposer must object within reasonable time- otherwise, accepted

Promises, Express or Implied

Promises made in words are express promises; otherwise, implied
Performance of conditions, or consideration offered, are forms of acceptance

Chapter II - Of Contracts, Violable Contracts, and Void Agreements

Defines the conditions for an agreement to be considered a contract
Explains who is considered competent to contract
Explains the meaning of "sound mind" for contracting purposes
Defines "consent" and "free consent"
Lists the circumstances that may affect free consent (coercion, undue influence, fraud, misrepresentation, and mistake)
Defines "coercion"
Defines "undue influence"
Defines "fraud"
Defines "misrepresentation"

Special Cases of Contracts

Explains cases where agreements may be void due to mistakes of fact or law, or if consideration is unlawful

Contingent Contracts

Explains what a contingent contract is
Explains enforcement of contingent contracts based on future events happening or not happening
Explains when a contingent contract becomes void

Of the Performance of Contracts

Explains obligations of contracting parties to perform promises
Defines liability of promisor, and conditions for a valid offer
Explains effect of refusing performance
Explains performance by a person other than promisor, or where a promise is to be performed personally.
Covers consequences of one party refusing to perform an entire promise

Effect of Failure to Perform at a Fixed Time

Explains when a contract may become voidable if time is essential, if not, compensation is incurred
Explains how accepting performance later affects a party's right to compensation

Agreement to Do Impossible Act

Explains when a contract is void if an act is impossible
Explains situation where an act becomes impossible after the contract is made
Explains compensation for losses in these cases

Other Specialized Contracts and Agreements

Discusses circumstances where promises may be valid or void due to aspects of the contractual agreement
Covers situations relating to the application of payments, cancellation of contracts or amendments, and agreements relating to trade or agreements regarding marriage

Chapter V - Of Certain Relations- Resemblance to those Created by Contract

Claims for necessaries supplied to someone incapable of contracting
Reinbursement of payments made for a person
Obligations for a person who benefits from another person's act without gratuity
Discusses finders of goods and when they have the right to sell
Discusses liability for mistaken payment, delivery

Chapter VI - Of the Consequences of Breach of Contract

Addresses compensation for loss and damage from contract breaches
Covers when a penalty stipulates for a breach and the right to receive compensation.

Chapter VII - Sale of Goods (Repealed)

Section(s) in this chapter are repealed

Chapter VIII - Of Indemnity and Guarantee

Defines "Contract of Indemnity"
Explains rights of indemnity-holder when sued
Defines "Contract of Guarantee", "Surety", "Principal Debtor", and "Creditor"
Discusses consideration for guarantee
Discusses Surety's Liability.

Continuing Guarantees

Provides conditions around continuing guarantees
Describes revocation and when these cease to apply

Other Various Discharge Scenarios

Various scenarios where a surety is absolved from a contract
Discusses agreements with third parties that may release the surety
Covers when a creditor's non-action may discharge a surety

Chapter IX - Of Bailment

Defines "Bailment, Bailor, and Bailee".
Obligations of parties under a bailment.
Conditions around when a bailee may not be liable.
Circumstances of when goods are mixed(by consent or not)
Covers return of goods , obligations for expenses to the bailee.
Right to compensation for damages (in some cases).
Different bailments - when they end(death or conditions).

Chapter X - Agency

Defines "Agent" and "Principal".
Discusses who can be agent or principal and their respective obligations.
Covers how agency may be established - Expressly or Impliedly
Covers when an agent may be granted additional authority
Authority over an agent, and an agent acting beyond authority
Agent acting on principal's behalf - consequences and liabilities for both parties.
Compensation, revocation, and liability when actions are mismanaged
Notice and conditions for ratification

Chapter XI - Of Partnership (Repealed)

Sections 239-266 and the schedule are repealed.

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Test your knowledge on the intricacies of contract law, focusing on promises and their performance. This quiz covers obligations of promisors and promisees, undue influence, fraud, and the performance conditions of reciprocal promises. Perfect for law students and anyone interested in contract principles.