Contract Notes PDF

GLOBAL COLLEGE OF LAW NOTES CONTACT -1 Unit -1st Q.1 Define contract ex plain with the help of decided case Laws? Ans:- An agreement ,enforceable by law is called contract.. Definitions: Salmond defines a contract as “An agreement crea...

GLOBAL COLLEGE OF LAW NOTES CONTACT -1 Unit -1st Q.1 Define contract ex plain with the help of decided case Laws? Ans:- An agreement ,enforceable by law is called contract.. Definitions: Salmond defines a contract as “An agreement creating and defining obligations between the parties”. Pollock defines a contract as “Every agreement and promise enforceable by law is a contract”. Contract Section 2(h) of The Indian Contract Act, 1872 states that “an agreement enforceable by law is a contract”. Case :The case of Mohori Bibee vs Dharmodas Ghose was a landmark legal case in India. Dharmodas Ghose, a minor, had mortgaged his property to Brahmo Dutta. When he later sought to void the contract, the court ruled in his favor, declaring the agreement with the minor void ab initio, or void from the outset. Q2.Discus in detail the classification of contract? Ans:- Based on validity, the types of contracts are valid contracts, agreements or void contracts, voidable contracts, illegal contracts, and enforceable contracts. On the basis of formation, the types of contracts are express contracts, quasi-contract, implied contracts, and E-contract. valid contracts- A Valid Contract is defined as an agreement that can be enforced by law under the Contract Act, 1872. To consider a contract valid, it is essential that it can be enforced by law. All the essential elements should be there in the agreement. Example : Party A agrees to sell Rice crops to Party B. Both parties agree that Party A can cut the crops and take them, once he pays the  agreed price. Every kind of movable property is a good/s except for cash and actionable claims. void contracts A void contract is a contract that isn't legally enforceable, starting from the time it was created. While both a void and voidable contract are null, a void contract cannot be ratified. In a legal sense, a void contract is treated as if it was never created and becomes unenforceable in court. Illegal Contracts An illegal contract prevents claims based on a contract when a party seeks to enforce an agreement which the law prohibits. The illegality operates primarily as a defence to legal claims. Courts would not assist a claimant to recover a benefit from their own wrongdoing. Enforceable contracts Mutual assent, expressed by a valid offer and acceptance, adequate consideration, capacity and legality. Types of Contract 1)Express Contract- An express contract is an agreement where parties explicitly spell out the contract terms, either orally or in writing. In this type of contract, parties are fully aware of their agreed-upon terms.  2) Implied Contract- An implied contract is a legally binding obligation that derives from the actions, conduct, or circumstances of one or more parties in an agreement An implied contract is created by the actions, behavior, or circumstances of the people involved. An implied contract has the same legal force as a written or verbal contract.  3) Quasi contract A quasi contract is a legal obligation imposed by law to prevent unjust enrichment. This is also called a contract implied in law or a constructive contract.    4) Ecommerce Contract-It is one which is entered into between two parties via internet.This expands the area of operations in commercial transaction for any person. Q.3 An Agreement enforceable by law is a contract. Discuss this definition bringing out clearly all the elements of a valid contract? The Indian Contract Act, 1872 defines the term Contract under its section 2 (h) as “An agreement enforceable by law”. Essential condition of valid contract According to Sec 10 of Indian Contract Act all agreement are contracts if they are done by the free consent of parties, competent to contract ,for a lawful consideration and with a lawful object and are not declared in express terms to be void. To become a contract , an agreement should have the following essentials element: 1)Offer and acceptance- An offer is a clear and specific proposal made by one party (the offeror), with the intention of being accepted by another party, (the offeree), while acceptance is the unconditional agreement to the terms of the offer.The acceptance must be according to the mode prescribed in the agreement and must be communicated to the offeror. 2)Intention to create legal relationship-When two parties go into an agreement their intention should be create a legal relationship between them.If there is no such intention on the part of the parties there is no contract between them. Case Law-Balfour v Balfour - is a leading English contract law case. It held that there is a rebuttable presumption against an intention to create a legally enforceable agreement when the agreement is domestic in nature. 3) Lawful consideration- The consideration or object of an agreement is lawful, unless- it is forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. A agrees to sell his house to B for 10,000 rupees. Here Bs promise to pay the sum of 10,000 rupees is the consideration for As promise to sell the house, and As promise to sell the house is the consideration for Bs promise to pay the 10,000 rupees. These are lawful considerations. 4)Parties to be competent to contract- One of the most essential elements of a valid contract is the competence of the parties to make a contract. Section 11 of the Indian Contract Act, 1872, defines the capacity to contract of a person to be dependent on three aspects; attaining the age of majority, being of sound mind, and not disqualified from entering into a contract by any law that he is subject to. In this article, we will look at all aspects in a detailed manner. Capacity to Contract According to Section 11, “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject. Person of Sound Mind According to Section 12 of the Indian Contract Act, 1872, for the purpose of entering into a contract, a person is said to be of sound mind if he is capable of understanding the contract and being able to assess its effects upon his interests. It is important to note that a person who is usually of an unsound mind, but occasionally of a sound mind, can enter a contract when he is of sound mind. No person can enter a contract when he is of unsound mind, even if he is so temporarily. A contract made by a person of an unsound mind is void. Disqualified Persons Apart from minors and people with unsound minds, there are other people who cannot enter into a contract. i.e. do not have the capacity to contract. The reasons for disqualification can include, political status, legal status, etc. Some such persons are foreign sovereigns and ambassadors, alien enemy, convicts, insolvents, etc. 5)Free and genuine consent- Consent is said to be free when it is not caused by- (1) coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (4) misrepresentation, as defined in section 18, or (5) mistake, subject to the provisions of sections 20, 21 and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake. 6)Lawful Object-It must be lawful object not to be illegal, immoral,opposed to public policy. 7)Agreement not declared void-The agreement must not have been expressly declared void by law in force in the country Q4)”All contracts are agreements but all agreements are not contracts”. Explain the statement. Section 10 of this act says, “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void”. The essentials of a valid contract: 1. There must be two parties. 2. The agreement should be between the parties who are competent to contract. 3. There should be a lawful consideration. 4. The object of the agreement must be lawful. 5. There should be free consent between the parties. 6. The agreement must not be one that has been expressly declared to be void. “All agreements are not contracts” An agreement is a set of promises. Section 2(e) of The Indian Contract Act 1872 says, “Every promise and every set of promises, forming the consideration for each other, is an agreement”. In an agreement, there is a promise between both parties. For example, A promises to deliver his book to B, and in return of B promises to pay Rs. 1,000 to A. there is said to be an agreement between A and B. After acceptance of the offer/proposal it becomes a promise, promise is the result of offer acceptance. Thus, when there is a proposal/offer from the proposer and the acceptance of that proposal by the propose it results in a promise. Promise and reciprocal promise from promisor and promisee form an agreement. Hence, we can conclude only commercial agreements where parties are intending to shoulder responsibility upon each other and when they are entering into an agreement keeping in mind that in case of breach of agreement terms by one of the parties, the aggrieved party may go to court against the party who breaches the terms and compel him by the process of law to pay compensation as decided. Q.5 What is proposal? Examine the legal rule as to offer? The first step in the formation of a contract is the making of a proposal. Generally speaking t here must be at least two persons to make a contract. A person to make the proposal and the other person to accept it. The proposal has been defined in sec2(a) of Indian contract act. 'When one person signifies to another, his willingness to do or abstain from doing anything with a view to obtaining the assent of the other, to such an act or abstinence, he is said to make a proposal'. A proposal to be valid must contain the following essential elements- 1)Every proposal must communicated 2)It must be made with a view to create legal relations 3)It must be certain and definite. Essentials of a valid proposal: 1)Every proposal must be communicated-For a proposal to be completed it must be clearly communicated to the offence. No offeree can accept the proposal without knowledge of the offer. The famous case study regarding this is Lalman Shukla v. Gauri Dutt. It makes clear that acceptance in ignorance of the proposal does not amount to acceptance. 2) Offer must create Legal Relations The offer must lead to a contract that creates legal relations and legal consequences in case of non-performance. So a social contract which does not create legal relations will not be a valid offer. Say for example a dinner invitation extended by A to B is not a valid offer. 3) Proposal must be certain and definite A proposal must be definite and specific in its terms, and it should be communicated to the other party with the intention of obtaining their acceptance. Once the other party accepts the proposal, it becomes a promise, and the terms of the contract bind the parties-A offers to sell B fruits worth Rs 5000/-. This is not a valid offer since what kinds of fruits or their specific quantities are not mentioned. Besides the above essential elements it will also be necessary and desirable to consider the following points relating to proposal: 1) General and specific offers 2 Offer and invitation to offer 3) Standing Offer 1)General offer A general offer is one that is made to the public at large. It is not made any specified parties. So any member of the public can accept the offer and be entitled to the rewards/consideration. Say for example you put out a reward for solving a puzzle. Specific Offers: An offer can be made either to (i) A definite person or a group of persons, or to (ii) the public at large. An offer made either to a definite person or a group of persons is a specific offer. The specific offer can be accepted by that person to whom it has been made. 2) Offer and invitation to offer- An offer is a clear and specific proposal made by one party to another party to enter into a legally binding contract, while an invitation to offer, also known as an invitation to treat, is an expression of willingness to negotiate or enter into a contract. 3)Standing Offer- A standing offer is one that is given to you by default if you don't choose a market offer or negotiate a plan. For example, if you choose a plan which expires after a year, you may then rollover onto a standing offer until you choose a new one. Q.4-What do you understand by Acceptance of an offer?Discuss the legal rules as to communication of Acceptance. Section 2(b) of Indian Contract Act 1872 defines acceptance as follow:When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted.A proposal when accepted becomes a promise. Example- A offers to buy B’s car for rupees two lacs and B accepts such an offer. Now, this has become a promise. Communication of Acceptance According to section 4: The communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor, as against the acceptor, when it comes to the knowledge of the proposal.  Example B accepts A's proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is posted, as against B when the letter is received by B. Communication to offeror himself-Further acceptance must be communicated to the offeror himself a communication to any other person is as ineffectual as if no communication has been made. Essentials of a valid acceptance Section 7: Acceptance must be absolute.-In order to convert a proposal into a promise the acceptance must,- (1) be absolute and unqualified, (2) be expressed in some usual and reasonable manner, unless the proposal prescribe the manner in which it is to be accepted, if the proposal prescribe a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner and not otherwise, but if he fails to do so, he accepts the acceptance. Another Essentials of Acceptance- Acceptance should be Communicated- or a valid contract, the acceptance must be communicated and moreover, such communication should be made to the offeror. If I decide to accept your offer but do not communicate my acceptance to you or after  having decided to accept your offer I tell my servant about my intention, that cannot give rise to a contract. Illustration.-A law book seller, without any order from A sent by post a costly law book to him with the note that if he did not return the book, he would presume that the same has been accepted by him. A was of course ready to return the book but the book-seller was not agreeable to accept the same inasmuch as a new edition of the book had been published during this period. Is A in any way liable to the book-seller? The court observed that the offeror cannot impose upon the offeree an obligation to accept nor proclaim that silence of the offeree shall be deemed acceptance. Therefore, A was not bound to return the book nor to communicate his refusal to accept. Since there was no concluded contract between A and the law book-seller, A was not in anyway liable to book-seller. Acceptance should be Expressed in Usual and Prescribed Manner According to section 7(2), the acceptance must be expressed in some usual and reasonable manner unless the proposal prescribed the manner in which it is to be accepted. It means that if the manner of acceptance has been prescribed by the proposal, the acceptance has to be in that prescribed manner, otherwise the same may be made in some usual or reasonable manner For example, if an offer is made by post and no mode is prescribed, the acceptance may also be made by post. But if A in Lucknow sends a proposal to B in Calcutta and B send a man with letter of acceptance of walk down from Calcutta to Lucknow to communicate it to A, it will not be usual and reasonable. MODE OF ACCEPTANCE A. Communication of Acceptance by an Act: This would include communication via words, whether oral or written. So this will include communication via telephone calls, letters, e-mails, telegraphs, etc. B. Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer through some action of his, or by his  conduct. So say when you board a bus, you are accepting to pay the bus fare via your conduct. Timing of Acceptance The communication of acceptance has two parts. Let us take a look A. As against the Offeror: For the proposer, the communication of the acceptance is complete when he puts such acceptance in the course of transmission. After this it is out of his hand to revoke such acceptance, so his communication will be completed then. So, for example, A accepts the offer of B via a letter. He posts the letter on 10th July and the letter reaches B on 14th For B (the proposer) the communication of the acceptance is completed on 10th July itself. B. As against the Acceptor: The communication in case of the acceptor is complete when the proposer acquires knowledge of such acceptance. So in the above example, A’s communication will be complete on 14th July, when B learns of the acceptance. Q.5-Discuss the law relating to lapse of an offer.Is acceptance irrevocable? Section 5 of the Indian Contract Act, 1872 deals with the communication, acceptance, and revocation of proposals (offers). This section lays down certain rules for the communication, acceptance, and revocation of proposals, which are essential for the formation of a valid contract. Revocation of proposal A proposal may be revoked at any time before the communication of its acceptance is complete. The revocation of a proposal is complete when it comes to the knowledge of the person to whom the proposal was made. It can be done by the proposer himself or through his authorized agent. However, the revocation must be communicated to the offeree in a reasonable manner and before the acceptance is complete. Once the acceptance is complete, the proposal cannot be revoked. Revocation of acceptance An acceptance may be revoked by the acceptor at any time before the communication of the acceptance is complete. The revocation must be communicated to the proposer in the same manner as the acceptance. If the acceptance has already been communicated, the revocation will not be effective. Modes of Revocation of an Offer Section 6 of the Indian Contract Act, 1872 deals with the revocation of an offer. It lays down the various modes of revocation of an offer, which are as follows: Revocation by communication from the offeror to the offeree before acceptance An offer can be revoked by the offeror at any time before it is accepted by the offeree. The revocation must be communicated by the offeror to the offeree. If the offeror fails to communicate the revocation, the offer remains valid and can be accepted by the offeree. Revocation by lapse of time An offer lapses if it is not accepted within the time specified in the offer or, if no time is specified, within a reasonable time. The determination of a reasonable time depends on the facts and circumstances of each case. Once the offer has lapsed, it cannot be accepted. Revocation by the failure of a condition precedent An offer can be revoked if it is subject to a condition precedent, and the condition precedent does not occur. For example, if an offer is made on the condition that the offeree obtains a license, and the offeree fails to obtain the license, the offer is revoked. Revocation by death or insanity of the offeror An offer is automatically revoked if the offeror dies or becomes insane before the offer is accepted. In such cases, the offeree cannot accept the offer. It is important to note that the revocation of an offer must be communicated to the offeree before acceptance. If the offeree accepts the offer before receiving the revocation, the contract is formed, and the offeror cannot revoke the offer. Furthermore, an offer cannot be revoked if it has been accepted by the offeree and the parties have entered into a contract. Once a contract is formed, it can only be terminated by the methods provided for in the contract or by the Indian Contract Act, of 1872. Conclusion In conclusion, Section 6 of the Indian Contract Act, 1872 lays down the modes of revocation of an offer, which are revocation by communication from the offeror to the offeree before acceptance, revocation by lapse of time, revocation by failure of a condition precedent, and revocation by death or insanity of the offeror. UNIT 2 Q.1.What do you understand by Capacity to contract?State the position of a minor under the Indian Contract Act. Section 11 provides According to Section 11, “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” So, we have three main aspects: 1. Attaining the age of majority 2. Being of sound mind 3. Not disqualified from entering into a contract by any law that he Attaining the Age of Majority-According to the Indian Majority Act, 1875, the age of majority in India is defined as 18 years. For the purpose of entering into a contract, even a day less than this age disqualifies the person from being a party to the contract. Any person, domiciled in India, who has not attained the age of 18 years is termed as a minor. A Contract made with a Minor is Void Since any person less than 18 years of age does not have the capacity to contract, any agreement made with a minor is void ab-initio (from the beginning). Minor can be a Beneficiary of a Contract While a minor cannot enter a contract, he can be the beneficiary of one. Section 30 of the Indian Partnership Act 1932, also specifies that while a minor cannot become a partner in the partnership firm, the benefits of the firm can be extended to him. A Minor is always given the Benefit of being a Minor Even if a minor falsely represents himself as a major and takes a loan or enters into a contract, he can plead minority. The rule of estoppel cannot be applied against a minor. He can plea his minority in defence Contract by Guardian Under certain circumstances, a guardian of a minor can enter into a valid contract on behalf of the minor. Such a contract, which the guardian enters into, for the benefit of the minor, can also be enforced by the minor. However, guardians cannot bind a minor by a contract for buying immovable property. But, a contract entered into by a certified guardian of a minor, appointed by the Court, with approval from the Court for the sale of a minor’s property can be enforced. Insolvency A minor cannot be declared insolvent as he cannot avail debts. Also, if some dues are pending from the properties of the minor and he is not personally liable for the same. Joint contract by a Minor and an Adult In case of a joint contract between an adult and a minor, executed by the guardian on behalf of the minor, the liability of the contract falls on the adult 2] Person of Sound Mind According to Section 12 of the Indian Contract Act, 1872, for the purpose of entering into a contract, a person is said to be of sound mind if he is capable of understanding the contract and being able to assess its effects upon his interests. It is important to note that a person who is usually of an unsound mind, but occasionally of a sound mind, can enter a contract when he is of sound mind. No person can enter a contract when he is of unsound mind, even if he is so temporarily. A contract made by a person of an unsound mind is void. 3] Disqualified Persons Apart from minors and people with unsound minds, there are other people who cannot enter into a contract. i.e. do not have the capacity to contract. The reasons for disqualification can include, political status, legal status, etc. Some such persons are foreign sovereigns and ambassadors, alien enemy, convicts, insolvents, etc. Q.6 Two or more persons are said to consent when they agree upon the same thing in the same sense”Explain Section 13 of the Indian Contract Act 1872 defines the term free consent. When all the parties to a contract agree on the same thing in the same sense, it is called free consent. Free consent is based on the principle of Consensus-ad-idem. The agreement is invalid without free consent. Principal of Cobsensus ad idemConsensus ad idem is a Latin term that means “agreement to the same thing” or “meeting of the minds”. In the context of contract law, it refers to the principle that for a contract to be legally binding, both parties must have a clear and mutual understanding of the essential terms and subject matter of the agreement Elements Of Free Consent The consent of the parties in a contract is considered free when the following elements are fulfilled. o The contact should be free from undue influence. o It should be free from coercion. o The contract should not be entered into by mistake. o The contact should not be done through misrepresentation. o The contacts should be free from any kind of fraud. Importance Of Free Consent Free consent to an agreement has the utmost importance. A few of the important key points are discussed below. o It is based on the concept of consensus-ad-idem. o It protects the interest of the parties to a contract. o It reduces the impact of fraud, misrepresentation, coercion, and undue power of the parties to the contract. o When the contract is made out of free consent, it is both valid and enforceable by the law. Q.6 When is consent to be free? Section 14 of the Act. The section says that consent is considered free consent when it is not caused or affected by the following, 1. Coercion 2. Undue Influence 3. Fraud 4. Misrepresentation 5. Mistake Elements Vitiating Free Consent Let us take a look at these elements individually that impair the free consent of either party. 1] Coercion (Section 15) Coercion means using force to compel a person to enter into a contract. So force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent. Section 15 of the Act describes coercion as  committing or threatening to commit any act forbidden by the law in the IPC  unlawfully detaining or threatening to detain any property with the intention of causing any person to enter into a contract For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion. Now the effect of coercion is that it makes the contract voidable. This means the contract is voidable at the option of the party whose consent was not free. So the aggravated party will decide whether to perform the contract or to void the contract. So in the above example, if B still wishes, the contract can go ahead. Also, if any monies have been paid or goods delivered under coercion must be repaid or returned once the contract is void. And the burden of proof proving coercion will be on the party who wants to avoid the contract. So the aggravated party will have to prove the coercion, i.e. prove that his consent was not freely given. 2] Undue Influence (Section 16) Section 16 of the Act contains the definition of undue influence. It states that when the relations between the two parties are such that one party is in a position to dominate the other party, and uses such influence to obtain an unfair advantage of the other party it will be undue influence. The section also further describes how the person can abuse his authority in the following two ways,  When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary relationship with the other person  He makes a contract with a person whose mental capacity is affected by age, illness or distress. The unsoundness of mind can be temporary or permanent Say for example A sold his gold watch for only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) is not freely given, he was under the influence of his teacher. Now undue influence to be evident the dominant party must have the objective to take advantage of the other party. If influence is wielded to benefit the other party it will not be undue influence. But if consent is not free due to undue influence, the contract becomes voidable at the option of the aggravated party. And the burden of proof will be on the dominant party to prove the absence of influence. 3] Fraud (Section 17) Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent. So according to Section 17, a fraud is when a party convinces another to enter into an agreement by making statements that are  suggesting a fact that is not true, and he does not believe it to be true  the active concealment of facts  a promise made without any intention of performing it  any other such act fitted to deceive Let us take a look at an example. A bought a horse from B. B claims the horse can be used on the farm. Turns out the horse is lame and A cannot use him on his farm. Here B knowingly deceived A and this will amount to fraud. One factor to consider is that the aggravated party should suffer from some actual loss due to the fraud. There is no fraud without damages. Also, the false statement must be a fact, not an opinion. In the above example if B had said his horse is better than C’s this would be an opinion, not a fact. And it would not amount to fraud. 4] Misrepresentation (Section 18) Misrepresentation is also when a party makes a representation that is false, inaccurate, incorrect, etc. The difference here is the misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true. Misrepresentation can be of three types  A person makes a positive assertion believing it to be true.  Any breach of duty gives the person committing it an advantage by misleading another. But the breach of duty is without any intent to deceive.  when one party causes the other party to make a mistake as to the subject matter of the contract. But this is done innocently and not intentionally.   5] Mistake- One important factor of a valid contract is free consent. Both the parties involved in the contract must enter the contract willingly and under no pressure. There are factors which impair the free consent of either party. Once such factor is “mistake”, which includes a mistake of law and mistake of fact. Mistake of Fact Then there is the other type of mistake, a mistake of fact. This is when both the parties misunderstand each other leaving them at a crossroads. Such a mistake can be because of an error in understanding, or ignorance or omission etc. But a mistake is never intentional, it is an innocent overlooking. These mistakes can either be unilateral or bilateral. Mistake of Law This mistake may relate to the mistake of the Indian laws, or it can be a mistake of foreign laws. If the mistake is regarding Indian laws, the rule is that the ignorance of the law is not a good enough excuse. This means either party cannot simply claim it was unaware of the law. Bilateral Mistake When both parties of a contract are under a mistake of fact essential to the agreement, such a mistake is what we call a bilateral mistake. Here both the parties have not consented to the same thing in the same sense, which is the definition of consent. Since there is an absence of consent altogether the agreement is void. However, to render an agreement void the mistake of fact should be about some essential fact that is of importance in a contract. So if the mistake is about the existence of the subject matter or its title, quality, quantity price etc then it would be a void contract. But if the mistake is of something inconsequential, then the agreement is not void and the contract will remain in place. Unilateral Mistake A unilateral mistake is when only one party to the contract is under a mistake. In such a case the contract will not be void. So the Section 22 of the Act states that just because one party was under a mistake of fact the contract will not be void or voidable. So if only one party has made a mistake of fact the contract remains a valid contract. However, there are some exceptions to this. In certain conditions, even a unilateral For example, A agrees to sell to B his buffalo. But at the time of the agreement, the buffalo had already died. Neither A nor B was aware of this. And so there is no contract at all, i.e. the contract is void due to a mistake of fact. However, there are some exceptions to this. In certain conditions, even a unilateral mistake of fact can lead to a void or voidable agreement. Let’s see a few of these exceptions via some examples and case studies. 1. When Unilateral Mistake is as to the Nature of the Contract: In such a case the contract can be held as void. Let us see the example of Dularia Devi v. Janardan Singh(1990) Here an illiterate woman put her thumb impression on two documents thinking they were the same. She thought the document was to gift some property to her daughters. But the other document was a Sale deed to defraud the women out of more of her property. This contract was held void by the courts 2. When the Mistake is regarding the Quality of the Promise: There was an auction being held by A to sell hemp and tow. B thinking the auction was only for hemp, mistakenly bid for a tow. The amount bid was on par for hemp but very high for a tow. Hence the contract was held as voidable. 3. Mistake of the Identity of the Person contracted with: For example, when A wants to enter into a contract with B but mistakenly enters into a contract with C believing him to be B. Q.1-Define Consideration.Why is it essential in a contract.What are legal rules regarding consideration. According to Section 2(d) of the Indian Contract Act, 1872, consideration is defined as When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence is called a consideration for the promisee.” At the desire of the promisor if the promisee either  Does something (in the past, present or future) OR  Abstains from doing something (in the past, present or future) Essential for a valid consideration: 1) Consideration must move at the desire of the promisor. Consideration can be offered by the promisee or a third-party only at the request or desire of the promisor. If an action is initiated at the desire of the third-party, it is not a consideration. 2) Consideration may move from the promisee to any other person. If you look at the definition of consideration according to section 2 (d) of the Indian Contract Act. 1872, it explicitly states the phrase ‘promisee or any other person…’ This essentially means that in India, consideration may move from the promise to any other person. However, it is important to note that there can be a stranger to consideration but not a stranger to the contract. 3) It can be in the past, present or future. a)Past-Since consideration is the price of a promise, it is normally given to induce the promise. However,it can be given before the promise is made by the promisor. This is past consideration. It is important to note that past consideration is not considered for a new promise since it is not been given in lieu of the promise. Peter employs John to work on his field during the months of agricultural harvesting. He promises to pay John an amount of Rs 5,000 for his services when he sows the new crop in the fields. The services of John in the past constitute a valid consideration. b). Present-If the promise and consideration take place simultaneously then it is present or executed consideration. An example is Peter goes to a shop, buys a bag of chips and pays for the same on-spot. c)Future-When the consideration for a promise moves after the contract is formed, it is a future or executor. It is also valid if it depends on the condition. Peter promises to create architectural plans for John’s new house. John promises to pay Peter an amount of Rs 50,000 provided the plans are approved by his wife. (iv) It must have value in the eyes of the law While the law allows the parties to decide an ‘adequate’ consideration for them, it must be real and have value in the eyes of law. While the Court will not consider inadequacy, it will look at it to determine if the consent was given by the party with free-will or not. Peter’s wife agrees to withdraw the suit she has filed against him in return for his promise to pay her a monthly maintenance amount. This is a good consideration and holds value in the eyes of law. (v) It should be over and above the Promisors’ existing obligations If the promisor is already obligated either by his promise or law to perform or abstain from a certain act, then it is not a good consideration for a promise. Peter receives a summons from the Court to appear before it as a witness for John. John promises to pay him Rs 10,000 to appear in the Court. This contract is not valid because Peter is obligated by law to appear in the Court on receiving a summons. (vi) It cannot be Unlawful A consideration that is against the law or public policies is not valid. Peter offers Rs 10,000 to John to beat up his business rival. John beats him up but Peter refuses to pay him. John cannot file a suit for recovery since the consideration is against the law. UNIT 3 1)What are the different consideration and objects rendered as unlawful by sec 23 of Indian contract act? Section 23 of the Indian Contract Act clearly states that the consideration and/or object of a contract are considered lawful consideration and/or object unless they are  specifically forbidden by law  of such a nature that they would defeat the purpose of the law  are fraudulent  involve injury to any other person or property  the courts regard them as immoral  are opposed to public policy. So lawful consideration and/or lawful object cannot contain any of the above. Let us take a more in detail look at each of them. 1] Forbidden by Law When the object of a contract or the consideration of a contract is prohibited by law, then they are not lawful consideration or object anymore. They then become unlawful in nature. And so such a contract cannot be valid anymore. Unlawful consideration of object includes acts that are specifically punishable by the law. This also includes those that the appropriate authorities prohibit via rules and regulations. But if the rules made by such authorities are not in tandem with the law than these will not apply. Let us see an example. A received a license from the Forest Department to cut the grass of a certain area. The authorities at the department told him he cannot pass on such interest to another person. But the Forest Act has no such statute. So A sold his interest to B and the contract was held as valid. 2] Consideration or Object Defeats the Provision of the Law This means if the contract is trying to defeat the intention of the law. If the courts find that the real intention of the parties to the agreement is to defeat the provisions of the law, it will put aside the said contract. Say for example A and B enter into an agreement, where A is the debtor, that B will not plead limitation. This, however, is done to defeat the intention of the Limitation Act, and so the courts can rule the contract as void due to unlawful object. 3] Fraudulent Consideration or Object Lawful consideration or object can never be fraudulent. Agreements entered into containing unlawful fraudulent consideration or object are void by nature. Say for example A decides to sell goods to B and smuggle them outside the country. This is a fraudulent transaction as so it is void. Now B cannot recover the money under the law if A does not deliver on his promise. 4] Defeats any Rules in Effect If the consideration or the object is against any rules in effect in the country for the time being, then they will not be lawful consideration or objects. And so the contract thus formed will not be valid. 5] When they involve Injury to another Person or Property In legal terms, an injury means to a criminal and harmful wrong done to another person. So if the object or the consideration of the contract does harm to another person or property, this will amount to unlawful consideration. Say for example a contract to publish a book that is a violation of another person’s copyright would be void. This is because the consideration here is unlawful and injures another person’s property, i.e. his copyright. 6] When Consideration is Immoral If the object or the consideration are regarded by the court as immoral, then such object and consideration are immoral. Say for example A lent money to B to obtain a divorce from her husband C. It was agreed once B obtains the divorce A would marry her. But the court passed the judgement that A cannot recover money from B since the contract is void on account of unlawful consideration. 7] Consideration is Opposed to Public Policy For the good of the community, we restrict certain contracts in the name of public policy. But we do not use public policy in a wide sense in this matter. If that was the case it would curtail individual freedom of people to enter into contracts. So for the purpose of lawful consideration and object public policy is used in a limited scope. We only focus on public policy under the law. So let us look at some agreements that are opposed to public policy, 1. Trading with the Enemy: Entering into an agreement with a person from a country with whom India is at war, void be a void agreement. For example, a trader entering into a contract with a Pakistani national during the Kargil war. 2. Stifling Prosecution: This is a pervasion of the natural course of law, and such contracts are void. For example, A agrees to sell land to B if he does not participate in the criminal proceedings against him. 3. Maintainance and Champerty: Maintainance agreement is when a person promises to maintain a suit in which he has no real interest. And champerty is when a person agrees to assist another party in litigation for a portion of the damages or proceeds. 4. An Agreement to Traffic in Public Offices 5. Agreements to create Monopolies 6. An agreement to brokerage marriage for rewards 7. Interfering with the Courts: An agreement whose object is to induce a judicial or state officials to act corruptly and interfere with legal proceedings Q.2)Enumerate the void agreement given under the contract act Introduction Contracts and agreements are by far the most widely used legal devices and to some extent also govern most of our social relationships. However, those agreements which are legally enforceable can be termed as contracts whilst those which are unenforceable by law are called void agreements. Section2(g) of the Indian Contract Act, 1872 defines void agreements. Further, Sections 24 to 30 and 56 of the Act specify the particular kinds of agreements/contracts which are void. Since a void agreement is meaningless in the eyes of law, it does not cause any change in the position or relationship of the contracts. Agreements in which a part of consideration or object is unlawful This is mentioned in Section 24 of the Act. The basic essence of this statement is that if the consideration, as a whole or in part is unlawful or if the end product of the agreement is illegal then the agreement is declared void. The contract would, however, be considered valid after deleting the unlawful clauses. For example, if there is an agreement between A and B for the exchange of drugs and medicinal herbs for ₹5000, then the agreement stands void even though the consideration of the agreement is legal. This is because the object of the agreement is illegal. But in this case, if we remove the drugs from the object then the agreement would be termed valid. Agreements without consideration Section 2(d) of the Indian Contract Act, 1872, states, consideration may be furnished by ‘the promisee or any other person’ as long as it is ‘at the desire of the promisor’. In the case the court defined valuable consideration as “in the sense of the law may consist either in some right, interest, forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”. Section 25 of the Act mentions that all agreements devoid of consideration would be declared void unless they fall into the following categories:  If the agreement is made out of natural love and affection This is the first exception mentioned under Section 25(1). In Rajlukhy Dabee v Bhootnath Mookerjee , the Hon’ble court had held that “A written and registered agreement which is based on natural love and affection between kins is enforceable without consideration”. Examples of this involve a daughter taking care of her father , a brother giving away property to his siblings, etc. Essentials of an agreement like this involve : 1. The agreement made out of natural love and affection; 2. The agreement is registered;  3. The agreement is in writing; 4. Parties are in close relation to one another.  The person has already done something voluntarily for the promisor This is mentioned in Section 25(2) of the Act. Under this, the promisor performs the act in order to compensate the promisee either wholly or partially for some previously performed voluntary act of the promisee. For example, if there’s a contract between A and B where A’s expenses are taken care of by B for taking care of his son, then, it must be noted that the service provided wasn’t voluntary as B was legally bound to support his infant son. As per this exception, the promise must be to compensate a person who has himself done something for the promisor and not to a person who has done nothing for the promisor. Restraint of marriage Section 26 of the Act mentions that all agreements in restraint, either partial or full, of a marriage except that with a minor, would be void. For example, if Ria’s father provides Amit with some incentives only to prevent him from marrying his daughter, then such an agreement would stand void in the eyes of the law, provided the parties involved are not minors. Restraint of trade This is dealt with under Section 27 of the Act. Hence, any agreement in restraint of trade and occupation would be deemed as void. The restraint can be both partial and complete Exceptions to Section 27 Statutory exceptions  Sale of Goodwill According to this, a person who buys the business goodwill of another person is thereby privileged to impose certain restrictions on the business activities of the latter. The restrictions include preventing the seller from carrying out similar business within local limits only. This is done to protect the rights of the purchaser. However, the restraint should be reasonable according to the nature of the business under consideration. Partnership Act There are three provisions of the partnership act that provide for restriction of business. They are : 1. Section 11, which states that none of the partners would carry on any business till the continuity of the business. 2. Section 36, which provides the remaining partners to prevent the outgoing partner from opening any business similar to theirs’ in the same locality subject to certain restrictions. 3. Section 54, which prevents all the partners from engaging in any business of similar kind after dissolution of the firm/business. Example-Where two ice factory owners constituting a partnership agreed that only one factory will be worked at a time and its profits distributed among them. The restraint was held to be justified. Solus or exclusively dealing agreements This refers to trading agreements whereby the manufacturer strikes a deal with the consumer that he/she would purchase items only from him for a fixed period of time. However, if the manufacturer produces any surplus quantity, he/she is allowed to sell it to anybody. Restraint on employees  Restraint during employment: While an employee is engaged in a business, he/she is not allowed to work for any other business which is in direct competition with his employer. This is done for the protection of trade secrets, customer details, plans, etc.  Restraint after termination of employment: An agreement to restrain a servant from competing with his employer after the termination of employment may not be allowed by the courts. Q.3 What are agreement by way of wagers?What are the legal effects of such agreements?Is a contract of insurance a wager? The basic meaning of the term wager is betting. Section 30 of the Indian Contract Act specifically talks about agreements by way of wager, as void. The section read as follows: “Agreements by way of wager are void and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain events on which any wager is made TYPES OF WAGER: I. Moneyline Betting: This type of betting is one of the easiest types of betting. Betting through money line is very simple as it is done only on sports competitions and games and it is totally based upon the outcome/result of the match. This type of betting is illegal and this type of activity has been mostly seen in cricket that to the highest in the Indian Premier League. II. Spread Betting: This type of wager/ betting takes place where the person who is placing the bet on the most favored team playing in the match to win the match by a certain margin or on the team which is regarded as the underdog for it to win or even if it loses then with a very close margin. III. Over Betting: This type of betting is done in the game where the better places his bet on the total of number score or total of goals scored by both the teams through a combination of the certain number and which is totally a futuristic event uncertain and nobody has control over it. IV. Under Betting: This type of betting takes place when the better places his bet on the condition that the combination of the total number of goals and pints that are scored by V. Prop Betting: This type of betting is very unique and creative in nature as it is not related to the final result of the game. In this case, the better places his bet on something like the first half of the game or like whether there will be a super over in a cricket game etc. thus, this is also known as prop betting. CAN A WAGERING CONTRACT BE ENFORCED? The Effects and Enforceability of a wagering contract can be understood by the concept that under the Indian Contract Act it has been explicitly declared as a void ab initio and thus even section 65 of the Indian Contract Act does not apply to it as the contract is void but there is nowhere mentioned that these type of contracts have been forbidden by the law, which again implies that except the state of Gujarat and Maharashtra the wagering contracts are void and are legal in the other states. Thus, these agreements by way of wager are void and thus no suit can be brought for recovering anything alleged to be won on any wager or entrusted to any person to abide by the result of any game or any other such uncertain event on which any wager is made both the teams will be less or under a certain limit. This type of wager is also related to the final outcome of the game EXCEPTIONS TO THE WAGER AGREEMENT: As per the Indian Contract Act Section 30 states that there are also certain exceptions in the wagering agreements and thus the section read as follows: “This section shall not be deemed to render unlawful a subscription or contribution, made or entered to into for or towards any plate, prize or sum of money, of the value or amount of five hundred rupees or more, to be awarded to the winner of any horse race. Nothing in this section shall be deemed to legalize any transaction connected with horse- racing, to which the provisions of section 294A of the Indian Penal Code shall apply”. (see more) Since a wagering contract is a void contract, thus there are certain exemptions to it which are as follows: 1. Showcase of talent is not a wager: Using your talent or skill in front of people in some competition will not amount to wager(such as sports competitions, puzzles etc), but there is a winning the prize depend upon mere possibility then it will amount to wager. In the eyes of law prize competitions do not amount to wager but if the amount is not reasonable then it would amount to gambling and it will automatically become void. 2.Share Market: The transactions that take place under the share market shall not amount to wager where the shares are bought and sold and mere delivery of shares from one person to another will not be regarded as the wager. 3.Horse race competition: Sometimes, the state government may authorize certain horse race competition if the local laws permit it and if the people contribute with a sum of RS 500 or more towards the prize money which is to be given to the winner of the horse race then it will not consider a wager. 4.Insurance Contracts: The contracts of insurance are not wagering at all because these are contracts of Indemnity. These contracts are entered upon to safeguard and protect the interest of one party from any damage hence it is not a wager. 5.Commercial transactions: The Agreements that are done for sale and purchase of any commodity that is to be used on a commercial base in which there is genuine intention to do legitimate businesses which are valid and if they intend to do so they are required to pay the difference. DIFFERENCE BETWEEN WAGER AGREEMENT AND CONTINGENT CONTRACT:  WAGER CONTRACTS CONTINGENT CONTRACT 1)All wager contracts are void. 1)Contingent contracts are not void. 2)Wager contracts come under the 2)These contracts cover the concept ambit of Contingent contracts and of wager contracts and is a wider thus is a narrow concept. concept. 3)The happening of the uncertain 3)The happening of the event is not event is the sole condition of the the sole condition of the contingent wagering contract. contracts. 4)The parties have only one interest 4)The parties have there personal and in the contract i.e the winning or other motives attached to the losing depending upon the outcome. contract except for the profit or loss. 5)The parties are required to keep 5)The parties are not required to keep mutual promise under the rules of mutual promises under the contract the wagering contract. UNIT-4 Q.1 Explain the meaning and essential elements of a contingent contract?When can a contingent contract be enforced? Under Section 31 of the Indian Contract Act, 1872, contingent contracts are defined as follows: “If two or more parties enter into a contract to do or not do something, if an event which is collateral to the contract does or does not happen, then it is a contingent contract.” Example: Peter is a private insurer and enters into a contract with John for fire insurance of John’s house. According to the terms, Peter agrees to pay John an amount of Rs 5 lakh if his house is burnt against an annual premium of Rs 5,000. This is a contingent contract. Here, the burning of the house is neither a performance promised as a part of the contract nor a consideration. Peter’liability arises only when the collateral event occurs. Essentials of Contingent Contracts 1] Depends on happening or non-happening of a certain event The contract is contingent on the happening or the non-happening of a certain event. These said events can be precedent or subsequent, this will not matter. Say for example Peter promises to pay John Rs 5,000 if the Rajdhani Express reaches Delhi on time. This is a contingent event. 2] The event is collateral to the contract It is important that the event is not a part of the contract. It cannot be the performance promised or a consideration for a promise. Peter enters into a contract with John and promises to deliver 5 television sets to him. John promises to pay him Rs 75,000 upon delivery. This is NOT a contingent contract since John’s obligation depends on the event which is a part of the contract (delivery of TV sets) and not a collateral event. Peter enters into a contract with John and promises to deliver 5 television sets to him if Brazil wins the FIFA World Cup provided John pays him Rs 25,000 before the World Cup kicks-off. This is a contingent contract since Peter’s obligation arises only when Brazil wins the Cup which is a collateral event. 3] The event should not be a mere will of the promisor The event cannot be a wish of the promisor. Say for example Peter promises to pay John Rs 5,000 if Argentina wins the FIFA World Cup provided he wants to. This is NOT a contingent contract. Actually, this is not a contract at all. Peter promises to pay John Rs 50,000 if he leaves Mumbai for Dubai on August 30, 2018. This is a contingent contract. Going to Dubai can be within John’s will but is not merely his will. 4] The event should be uncertain If the event is sure to happen, then the contract is due to be performed. This is not a contingent contract. The event should be uncertain. Peter promises to pay John Rs 500 if it rains in Mumbai in the month of July 2018. This is not a contingent contract because in July rains are almost a certainty in Mumbai. Enforcement of Contingent Contracts Sections 32 – 36 of the Indian Contract Act, 1872, list certain rules for the enforcement of a contingent contract. Rule 1 – Contracts Contingent on the happening of an Event A contingent contract might be based on the happening of an uncertain future event. In such cases, the promisor is liable to do or not do something if the event happens. However, the contract cannot be enforced by law unless the event takes place. If the happening of the event becomes impossible, then the contingent contract is void. This rule is specified in Section 32 of the Indian Contract Act, 1872. Peter promises to pay John Rs 50,000 if he can marry Julia, the prettiest girl in the neighborhood. This is a contingent contract. Unfortunately, Julia dies in a car accident. Since the happening of the event is no longer possible, the contract is void. Rule 2 – Contracts Contingent on an Event not happening A contingent contract might be based on the non-happening of an uncertain future event. In such cases, the promisor is liable to do or not do something if the event does not happen. However, the contract cannot be enforced by law unless happening of the event becomes impossible. If the event takes place, then the contingent contract is void. This rule is specified in Section 33 of the Indian Contract Act, 1872. Peter promises to pay John Rs 50,000 if the ship named Titanic which leaves on a dangerous mission does not return. This is a contingent contract. This contract is enforceable by law if the ship sinks making its return impossible. On the other hand, if the ship returns, then the contract is void. Rule 3 – Contracts contingent on the conduct of a living person who does something to make the event or conduct as impossible of happening Section 34 of the Indian Contract Act, 1872 states that if a contract is a contingent upon how a person will act at a future time, then the event is considered impossible when the person does anything which makes it impossible for the event to happen. Peter promises to pay John Rs 5,000 if he marries Julia. However, Julia marries Oliver. Julia’s act thus renders the event of John marrying her impossible. (A divorce is still possible though but the happening of the event is considered impossible.) Rule 4 – Contracts Contingent on an Event happening within a Specific Time There can be a contingent contract wherein a party promises to do or not do something if a future uncertain event happens within a fixed time. Such a contract is void if the event does not happen and the time lapses. It is also void if before the time fixed, the happening of the event becomes impossible. This rule is specified in Section 35 of the Indian Contract Act, 1872. Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous mission returns before June 01, 2019. This contract is enforceable by law if the ship returns within the fixed time. On the other hand, if the ship sinks, then the contract is void. Rule 5 – Contracts Contingent on an Event not happening within a Specific Time Contingent contracts might be based on the non-happening of an uncertain future event within a fixed time. In such cases, the promisor is liable to do or not do something if the event does not happen within the said time. The contract can be enforced by law if the fixed time has expired and the event has not happened before the expiry of the time. Also, if it becomes certain that the event will not happen before the time has expired, then it can be enforced by law. This rule is specified in Section 35 of the Indian Contract Act, 1872. Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous mission does not return before June 01, 2019. This contract is enforceable by law if the ship does not return within the fixed time. Also, if the ship sinks or is burnt, the contract is enforced by law since the return is not possible. Rule 6 – Contracts Contingent on an Impossible Event If a contingent contract is based on the happening or non-happening of an impossible event, then such a contract is void. This is regardless of the fact if the parties to the contract are aware of the impossibility or not. This rule is specified in Section 36 of the Indian Contract Act, 1872. Peter promises to pay John Rs 50,000 if the sum rises in the west the next morning. This contract is void since the happening of the event is impossible. Q.2 Explain what is meant by Quasi contract and give illustrations of such contracts.Elaborate on the following kinds of quasi contractual obligations? The word ‘quasi’ means pseudo or partly or almost and that is why it can also be called a pseudo contract. A quasi-contract is an agreement that is retroactive in nature. These kinds of agreements take place between parties who have no prior contractual commitments or intention of getting into a contract. The judge simply develops the concept of a quasi-contract to rectify situations where one side acquires something at the detriment of the other side. In layman’s language, this type of contract aims to prevent one party from benefiting financially in a situation while financially draining the other party Example- Elements of a quasi-contract Listed below are the components required for a judge to issue a quasi-contract:  An individual or as the law recognizes, one claimant. There must also be a defendant who will be responsible and asked to pay the restitution.  The defendant must be willing to recognize or even acknowledge the value of the product/ service in question but has not made any efforts to return it/ pay for it or even made an effort to do something about it.  The complainant needs to prove that the defendant earned wrongful enrichment. Principle on which quasi-contracts are based The main principles on which these types of contracts work are justice, equity, and good conscience. This principle is based on a legal maxim ‘Nemo Debet Locupletari Ex Aliena Jactura’ which in literal terms means no man must grow rich out of another persons’ loss. Types of quasi-contracts Listed below are the 5 types of quasi-contracts that are recognized by law : Section 68 “Necessaries supplied to a person incapable of contracting” Necessities supplied to the person who is incapable of contracting is the first example of the situation under which a quasi-contract can be formulated and this situation is explained under Section 68 of the Indian Contract Act, 1872. To understand this easily, any person who is incapable of entering into a contract i.e. is a lunatic, minor, mentally incapable of understanding their surroundings, etc. If someone even supplies necessary supplies to such a person even is entitled to get a reimbursement from the property of the person who is incapable in this situation. This rule is applicable whether or not the person does help the incapable person because of an ulterior motive or purely out of humanity. Illustration: Every month, Pari supplies necessary items to Lata as per her requirement as Lata is a lunatic and is not capable of helping herself out. Even though Lata is broke and does not have money to pay Pari, Pari is entitled to reimbursement from the property of Lata and this is termed as a quasi-contract. To make sure that Pari is reimbursed, she needs to prove that Lata is a lunatic and that the goods she supplied to Lata were necessary items only and that they were given to Lata on time as per her requirements. Section 69 “Payment by an interested person” Payment by an interested person is the second situation under which a quasi- contract can be formulated and this situation is explained under Section 69 of the Indian Contract Act, 1872. To understand this type of quasi-contract, the main thing to keep in mind is that if a person pays the money on someone else’s behalf, the other person is bound to pay back the money and reimburse the person by law. Illustration: Pari is the owner of the land and has leased the land to Lata for a period of three years. Within two months of leasing the land, it was revealed that Pari couldn’t pay the tax revenue to the government and even after sending in notices, she wasn’t able to pay her dues. Thus, the government put out an ad to sell the land. As per the revenue laws, once the land is sold, Lata’s lease shall be annulled. Lata is not interested in letting go of the land therefore she decides to pay the amount due to the government for Pari. in this situation, Pari is obligated to reimburse Lata. Section 70 “Obligation of the person enjoying the benefits of a non-gratuitous act” When a person enjoys the benefits of a non-gratuitous act, that person is obligated to repay the person wronged. As per Section 70 of the Indian Contract Act, 1872 it is stated that if a person is legally giving out goods/ products/ services with no intentions behind it of performing a non-gratuitous act for anyone and the person in the wrong graciously uses the goods/ products or services is liable to pay the compensation to the former for the benefits they have been getting from the latter. They may be liable to give back monetary compensation or maybe simply asked to restore the goods used. To get reimbursed, the plaintiff must prove that the services/ goods they delivered were lawful, there was no intention to provide those products/ services graciously, and that the latter did enjoy the benefits of the products/ services. Illustration: Pari is the owner of a fruit shop. She placed baskets of her fruits on a rack outside her store to keep them fresh. Lata, who was around the store, picked up an apple from the rack and bit into it. This is a situation where Lata is liable to pay monetary compensation to Pari as Pari did not put out her fruits as a gratuitous favor for people. Section 71 “Responsibility of finder of goods” As per Section 71 of the Indian Contract Act, 1872, if a person finds an item that belongs to someone else and decides to take them into their custody, the former person has to adhere to the responsibilities that include taking good care of the goods, not appropriating the goods and returning it back to the owner in the same condition they found it in. Illustration: Pari is Lata’s neighbor. One day since Lata wasn’t home, she already paid and delivered the package lying on her doorsteps which was later on found by Pari. She knew that Lata was not going to be home for another 3 days so she picked it up and took it with her. In this situation, Pari is supposed to inform Lata why she picked her parcel and she is obligated as well as liable to return the parcel to Lata in the same condition and if she fails to do so, Pari is supposed to compensate late with either monetary compensation or a replacement of the goods/products that were in the parcel that belonged to Lata. Section 72 “Money paid by mistake or under coercion” As per Section 72 of the Indian Contract Act, 1872, if a person finds that they received money from someone by mistake or because of the fact that they were under coercion then the former is liable to repay or return the money they received in the due course. Illustrations: Pari received a payment of 5,000/- in her bank account via her UPI ID through Gpay by Lata. In reality, Lata intended to pay that money to Paresh, her brother. After Pari realized that she received the money by mistake, she is liable for the money back to Lata. In similar terms, if money is paid via coercion, oppression, or extortion it is recoverable under this Section of the Indian Contract Act, 1872. Q8. What do you mean by “Dis-charge” of contract? State the various ways in which a contract may be said to be discharged? State the circumstances under which a contract is said to be discharge. Ans: Discharge of contract means termination of the contractual relations between the parties to a contract. A contract is said to be discharged when the rights and obligations of the parties come to end under the contract. Modes of discharge of a contract: - Following are the various modes in which a contract may be discharged. 1. By performance. 2. By agreement or consent. 3. By lapse of time. 4. By operation of law. 5. By impossibility of performance. 6. By breach of contract  1. Discharge by performance: After the formation of a valid contract the next step is the fulfillment of the object that the parties had agreed to do. For the fulfillment of the object the parties become liable to perform their respective obligations. When the parties performance their respective obligations the object is fulfilled and the liability of the parties come to end. After the performance the contract is said to be discharged. Performance may be performance or attempted performance. 2. Discharge by agreement: A contract may be discharged by mutual agreement of the concerned parties. The rights and obligations created by an agreement can be discharged without their performance by means of another agreement between the parties, which provide for the extinguishments of the earlier rights and obligations. The parties may agree to terminate the existence of the contract by any one of the following ways. a. Novation Novations means new contract. Substitution of a new contract for the existing contract is called novation. The new contract may be either between the same parties or between different parties. The consideration for the new contract is the discharge of the old contract. Novation should take place with the consent of all parties. It must take place before the breach of the original contract. Eg: ‘A’ owes ‘B’ a certain sum of money under a contract. It is agreed between ‘A’, ‘B’ and ‘C’ that ‘B’ should accept ‘C’ as his debtor, instead of ‘A’. The old debt of ‘A’ to ‘B’ is discharged and a new debt from ‘C’ to ‘B’ is contracted. b. Alteration: Alteration means a change in one or more terms of the contract. The alteration is valid when it is made with the consent of all the parties. And the valid alteration discharges the original contract and the parties become bound by the new contract. Eg: ‘A’ enters into a contract with ‘B’ for the supply of 1000 bales of cotton at his warehouse on 1st July 2003. Later both ‘A’ and ‘B’ agreed to postpone the date of delivery to 1st September 2003. This change amount to alteration of the contract. c. Rescission: The term. Rescission: The term ‘Rescission’ means the cancellation of the contract. The contract may be rescinded by the agreement between the parties at any time before it is discharged by the performance or in some other way. If the parties agree to rescind a contract, the contract needn’t be performed. Rescission of the contract requires mutual consent..Waiver: Waiver means the abandonment of a right. A party to a contract may waive his rights under the contract. There upon the other party is released from his obligations. Neither an agreement nor a consideration is required to constitute a wavier. 3.Discharge by lapse of time: Every contract must be performed with in a fixed or reasonable period that is the period specified by the limitations act. The limitations Act lays down different limitations periods for different kinds of contract. If the contract is not performed and the agrrived party doesn’t enforce his rights with in the limitation period, then he is debarred from enforcing the contract. 4 Discharge by operation of law: Under the following circumstance the contract is discharged by the operation of law. Material Alteration: In cases where contracts are contained in a written document and makes any material alteration, without the consent of the other party, the contract is discharged. Change in the amount to be paid, date of payment, place of payment etc are examples of material alteration. Eg: ‘A’ entered into a contract with to sell his house to ‘B’ for Rs.5,00,000. The sale deed before registration was lying with ‘A’. He made alteration in the amount and made it Rs.5, 50,000. ‘B’ is not bound to purchase the house. 5 Discharge by impossibility of performance: Contracts must be capable of being performed. An agreement to do an act impossible in itself is void. Impossibility is one of the valid grounds under which a contract would be discharged. 6 Discharge by breach of contract: Every contract imposes obligations on both the parties to it. When one of them fails or refuses to perform the obligations imposed upon him by the contract, this is known as “Breach of contract”. In otherwords breach means failure or refusal of a party to perform his obligations under the contract. UNIT 5 Q.9 Explain breach of Contract.What do you understand by anticipatory breach of Contract? A contract consists of a promise or a set of reciprocal promises that are legally enforceable by law. Section 37 of the Indian Contract Act, 1872, provides that it is mandatory for parties to perform the promise or at least offer to perform the promise made by them in a contract. Thereby, when any of the parties refuses or fails to fulfil the promise made by him, it is said to be a breach of contract. A. Actual breach of contract An actual breach of contract occurs when a party fails to perform their obligations as specified in the contract at the time performance is due. Examples of actual breach include non-payment, incomplete performance, or delivering substandard goods or services. B.Anticipatory breach of contract An anticipatory breach of contract, also known as a constructive breach, occurs when a party indicates their intention not to perform their obligations before the performance is due. This can happen through clear communication or actions that make it impossible for them to fulfill the contract. ANTICIPATORY BREACH OF CONTRACT In India, the doctrine of anticipatory breach of contract has been embodied in Section 39 of the Indian Contract Act, 1872, and Section 60 of the Sale of Goods Act, 1930. Both Sections provide that the consequence of the anticipatory breach of contract will be to make the contract voidable at the instance of the promisee, wherein the option of repudiating the contract can be exercised by the promisee until the actual date of performance. Section 39 of the Indian Contract Act provides that the promisor is said to have caused an anticipatory breach of contract when he refuses to perform his promise in its entirely or disables himself from performing the promise in its entirely.Essentials of anticipatory breach of contract Section 39 of the Indian Contract Act lays down the following essentials for anticipatory breach of contract: 1. There should be a contract with a future date for performance. 2. Either of the parties should either refuse to perform the promise made on their part or should have wilfully induced such circumstances that the performance of the promise becomes inevitable. 3. The performance of the promise should not merely be unlikely or economically infeasible; rather, it should have become impossible. 4. Such refusal or self-induced impossibility should occur before the actual performance date. 5. Refusal can be expressed or implied. 6. Q.10 State then remedies allowed to the aggrieved person in case of breach of contract? If a party refuses to perform this respective obligation, the breach of contract takes place and the other party (aggrieved party) can enforce his rights in the courts of law. The process of enforcing the rights is known as remedies for breach of contract. The right can be enforced in various ways. Types of remedies or remedies for breach of contract: 1. Suit for Recission: Recession means the cancellation of a contract. When one of the parties to a contract commits breach, the other party may treat the contract as cancelled and refuses to perform his part of the contract 2. Suit for specific performance: It may be defined as the actual carrying out the respective obligations of both the parties. Under certain circumstances, a person aggrieved by the breach of the contract can file a suit for specific performance 3. Suit for injunction: It may be defined as an order of the courts restraining a person from doing something, which he promised not to do. It is also at the discretion of the court. It is usually issued incases where the compensation in terms of money is not an adequate relief. Where a party to a contract does something, which he had promised not to do, In such cases the aggrieved party may file a suit for injunction. 4. Suit for damage: It is the monetary compensation payable by the defaulting party to the aggrieved party for the loss suffered by him. The aggrieved party may therefore bring an action for damages against the party who is the guilty of the breach of the contract. And the party guilty of breach is liable to pay damages to the aggrieved party. 5. Suit for restitution: It means return of the benefit received by one party to the contract from the other party under a void contract. When a contract becomes void either party needn’t perform it. 6. Suit for quantum meruit: According to this doctrine, a person ca recovers compensation in proportion to the work done. The general rule in this connection is that where a party to contract hasn’t fully performed what the contract demands, he can bring no action for payment that which he has done...  o