INDIAN CONTRACT ACT,
INDIAN CONTRACT ACT,
1872
Introduction
Introduction
The English Connection:
The English Connection:
Common law:
Common law:
precedents & customs.
precedents & customs.
Equity:
Equity:
natural justice.
natural justice.
Pacta sunt servanda:
Pacta sunt servanda:
agreements
agreements
must be honored.
must be honored.
Stare decisis:
Stare decisis:
settled law should not be
settled law should not be
disturbed.
disturbed.
Essential elements of a
Essential elements of a
valid contract: (
valid contract: (
Sec. 10
Sec. 10
)
)
Agreement - Offer & acceptance Agreement - Offer & acceptance
Legal consequences - rights & obligations Legal consequences - rights & obligations
Capacity of the Capacity of the contracting partiescontracting parties
ConsiderationConsideration
Legal object Legal object
Free consent Free consent
CertaintyCertainty
Possibility of performance Possibility of performance
Writing & registrationWriting & registration
Offer:
Offer:
Sec.2(a)
Sec.2(a)
Essentials of offer:Essentials of offer:
It must be an expression of the willingness to doIt must be an expression of the willingness to do
or abstain from doing something. or abstain from doing something.
Such expression must be to another person.Such expression must be to another person.
Such expression must be made with the intentionSuch expression must be made with the intention
to obtain the assent of the other person to such to obtain the assent of the other person to such an act or abstinence.
Rules regarding a valid
Rules regarding a valid
offer:
offer:
Offer may be express or implied.Offer may be express or implied.
Must give rise to legal consequences & beMust give rise to legal consequences & be
capable of creating legal relationship. capable of creating legal relationship.
Terms must be certain & not vague. Terms must be certain & not vague.
May be specific or general.May be specific or general.
Must not be an invitation to Must not be an invitation to offer.offer.
Can be made subject to aCan be made subject to any terms & conditions.ny terms & conditions.
Must be communicated to oMust be communicated to offeree.fferee.
Invitation to offer, cross Invitation to offer, cross offers & counter offers.offers & counter offers.
Communication of special termsCommunication of special terms
Lapse & revocation of an
Lapse & revocation of an
offer:
offer:
Lapse of stipulated or reasonable time.Lapse of stipulated or reasonable time.
Acceptance not in prescribed mode.Acceptance not in prescribed mode.
Rejection.Rejection.
Death or insanity of offeror or offeree beforeDeath or insanity of offeror or offeree before
acceptance. acceptance.
Revocation.Revocation.
Non-fulfillment of condition precedent.Non-fulfillment of condition precedent.
Subsequent illegality or destruction of subject-Subsequent illegality or destruction of
subject-matter. matter.
Acceptance: Sec 2(b)
Acceptance: Sec 2(b)
Acceptance must be given only by the personAcceptance must be given only by the person to whom the offer is
to whom the offer is made.made.
Must be absolute & Must be absolute & unqualifiedunqualified..
Must be in prescribed mode Must be in prescribed mode or reasonableor reasonable manner.
manner.
Must be communicated.Must be communicated.
Within reasonable time.Within reasonable time.
Acceptance must succeed an offer.Acceptance must succeed an offer.
Rejected offers can be accepted only if Rejected offers can be accepted only if renewed.
Consideration: Sec2(d)
Consideration: Sec2(d)
Essentials of consideration:Essentials of consideration:
Consideration must move at the desire of offeror.Consideration must move at the desire of offeror.
May move from offeree or any other person.May move from offeree or any other person.
Stranger to a contract cannot sue; except in caseStranger to a contract cannot sue; except in case
of trust created, an addressee of an insured article;
of trust created, an addressee of an insured article;
family settlement.
family settlement.
May be past, present or future.May be past, present or future.
Must be of some value.Must be of some value.
“No Consideration, No
“No Consideration, No
Contract”- Exceptions:
Contract”- Exceptions:
Natural love & affection.
Natural love & affection.
Agreement to compensate for past
Agreement to compensate for past
voluntary service.
voluntary service.
Payment of time-barred debt.
Payment of time-barred debt.
Completed gift.
Completed gift.
Contract of agency.
Contract of agency.
Capacity of parties:
Capacity of parties:
(Sec 11)
(Sec 11)
MinorMinor :: Void & inoperativeVoid & inoperative
No restitutionNo restitution
Beneficial agmts are validBeneficial agmts are valid
No ratification on attaining the age of majority.No ratification on attaining the age of majority.
Rule of estoppel does not apply.Rule of estoppel does not apply.
Minor’s liability for necessaries.Minor’s liability for necessaries.
Specific performance.Specific performance.
Minor partnerMinor partner
Minor agentMinor agent
Unsound mind: Sec 12
Unsound mind: Sec 12
Usually of sound mind.Usually of sound mind.
Usually of unsound mindUsually of unsound mind
Causes:Causes: idiocyidiocy LunacyLunacy DrunkennessDrunkenness HypnotismHypnotism
Mental decayMental decay
Effects:Effects:
Void & inoperativeVoid & inoperative
Disqualified persons:
Disqualified persons:
Alien enemies
Alien enemies
Foreign sovereigns & ambassadors
Foreign sovereigns & ambassadors
Convicts
Convicts
Married women
Married women
Free consent: Sec 14
Free consent: Sec 14
Coercion
Coercion
Undue influence
Undue influence
Misrepresentation
Misrepresentation
Fraud
Fraud
Mistake
Mistake
Coercion: Sec 15
Coercion: Sec 15
Committing or threatening to commit any actCommitting or threatening to commit any act
forbidden by the IPC with an intention to cause any
forbidden by the IPC with an intention to cause any
person to enter into an agreement.
person to enter into an agreement.
The unlawful detaining or threatening to detain, any The unlawful detaining or threatening to detain, any
property with an intention to cause any person to
property with an intention to cause any person to
enter into an agreement.
enter into an agreement.
The act constituting coercion, may be directed at The act constituting coercion, may be directed at
any person
any person & not & not necessarily at necessarily at the other the other party toparty to
the agreement.
the agreement.
It does not matter whether the IPC is or is not inIt does not matter whether the IPC is or is not in
force where the coercion is employed. If suit is filed
force where the coercion is employed. If suit is filed
in India the said provision will apply.
Effects of Coercion:
Effects of Coercion:
VoidableVoidable Sec 64Sec 64 The party exercising coercion exposes The party exercising coercion exposes himself himself to criminal liability under the IPC, besides an to criminal liability under the IPC, besides an action in contract.
action in contract.
Burden of proof lies on the party Burden of proof lies on the party who wants towho wants to set aside the contract on the plea of coercion. set aside the contract on the plea of coercion.
Undue Influence: Sec 16
Undue Influence: Sec 16
A contract is said to be induced by
A contract is said to be induced by
undue influence when the relation
undue influence when the relation
subsisting between the parties is such
subsisting between the parties is such
that one of the parties is in a position
that one of the parties is in a position
to dominate the will of the other and
to dominate the will of the other and
he uses this position to obtain an
he uses this position to obtain an
unfair advantage over the other.
unfair advantage over the other.
Presumption of Undue
Presumption of Undue
Influence:
Influence:
In the following cases undue influence is presumed to exist &In the following cases undue influence is presumed to exist &
the burden of proof lies on the party
the burden of proof lies on the party who is in a who is in a position toposition to dominate the will of the other:
dominate the will of the other:
The person holds a real or apparent authority over the other, The person holds a real or apparent authority over the other,
e.g., master & servant, police officer & accused. e.g., master & servant, police officer & accused.
Fiduciary relationship e.g., father & son, doctor & patient.Fiduciary relationship e.g., father & son, doctor & patient.
The contracting parties mental capacity is temporarily or The contracting parties mental capacity is temporarily or
permanently affected due to age, illness, mental or bodily permanently affected due to age, illness, mental or bodily distress, e.g., old illiterate persons.
Contd..
Contd..
Undue influence implies mental & moral Undue influence implies mental & moral coercion in suchcoercion in such a way that the consent given is not
a way that the consent given is not free.free.
The person in a position to The person in a position to dominate the will of the otherdominate the will of the other need not be a party to the contract or be benefited by the
need not be a party to the contract or be benefited by the
contract; it is sufficient if t
contract; it is sufficient if the third party benefits as longhe third party benefits as long
as he is interested in the third party.
as he is interested in the third party.
Unreasonable bargains, high prices, high rate of Unreasonable bargains, high prices, high rate of interestinterest etc are instances of circumstances when undue influence
etc are instances of circumstances when undue influence
is presumed.
No presumption of
No presumption of
undue influence:
undue influence:
In the following cases law does not presumeIn the following cases law does not presume
undue influence & the burden
undue influence & the burden of proof lies onof proof lies on
the party alleging that undue i
the party alleging that undue influencenfluence
existed:
existed:
Mother & daughter
Mother & daughter
Grandson
Grandson &
&
grandfather
grandfather
Husband & wife
Husband & wife
Creditor & debtor
Creditor & debtor
Effects of Undue
Effects of Undue
Influence:
Influence:
VoidableVoidable Sec. 64: Court has the discretion to directSec. 64: Court has the discretion to direct
the aggrieved party to refund the benefit in the aggrieved party to refund the benefit in part or in whole or set aside the
part or in whole or set aside the contractcontract without any direction for refund of benefit. without any direction for refund of benefit.
There is no criminal liability in case of undue There is no criminal liability in case of undue
influence. influence.
Misrepresentation:
Misrepresentation:
A representation means a statement of fact madeA representation means a statement of fact made
by one party to the other either before or at the
by one party to the other either before or at the
time of contract, relating to some matter essential
time of contract, relating to some matter essential
to the formation of the contract, with an intention to
to the formation of the contract, with an intention to
induce the other party to enter into a contract.
induce the other party to enter into a contract.
It may be expressed by words spoken or written orIt may be expressed by words spoken or written or
implied from the acts or conduct of the parties.
implied from the acts or conduct of the parties.
In law, a representation when wrongly madeIn law, a representation when wrongly made
without an intention to deceive the other party is
without an intention to deceive the other party is
known as
Sec 18:
Sec 18:
Positive assertion of unwarranted statements of materialPositive assertion of unwarranted statements of material facts believing them to be true.
facts believing them to be true.
Where a statement when made was true butWhere a statement when made was true but
subsequently before it was acted upon, it became false to
subsequently before it was acted upon, it became false to
the knowledge of the person making it , then a duty is
the knowledge of the person making it , then a duty is
cast upon the person to disclose the change of
cast upon the person to disclose the change of
circumstances to the other party.
circumstances to the other party.
Effects of
Effects of
misrepresentation:
misrepresentation:
VoidableVoidable May choose to rescind the contract orMay choose to rescind the contract or
Affirm the contract & insist that he be put inAffirm the contract & insist that he be put in
a position in which he would have been, a position in which he would have been, if if the representation made had been true.
the representation made had been true.
The remedy is lost if the other party had The remedy is lost if the other party had
sufficient means of discovering the
sufficient means of discovering the truthtruth with ordinary diligence.
Fraud: Sec 17
Fraud: Sec 17
Fraud means & includes any of the following acts committedFraud means & includes any of the following acts committed
by a party with an intention to deceive
by a party with an intention to deceive or induce the otheror induce the other party to enter into a contract:
party to enter into a contract:
1.
1. A false statement made intentionally is fraudA false statement made intentionally is fraud 2.
2. Active concealment of a material fact by a person havingActive concealment of a material fact by a person having
knowledge of the fact is fraud. However, mere non-disclosure knowledge of the fact is fraud. However, mere non-disclosure is not a fraud, if there is no duty to disclose.
is not a fraud, if there is no duty to disclose.
3.
3. A promise made without an intention of performing it.A promise made without an intention of performing it. 4.
4. Any cat or omission declared by law to be fraudulent.Any cat or omission declared by law to be fraudulent. 5.
Silence & fraud:
Silence & fraud:
Mere silence as to facts likely to affect theMere silence as to facts likely to affect the
willingness of a person to enter into a willingness of a person to enter into a contract is not fraud, unless:
contract is not fraud, unless:
1.
1. Such a person is under a dSuch a person is under a duty to speak oruty to speak or 2.
Effects of fraud:
Effects of fraud:
Right to rescind the contract.Right to rescind the contract.
Affirm the contract and ask for Affirm the contract and ask for restitution,restitution,
i.e., to be put in a position, he would have i.e., to be put in a position, he would have been, if the statement made had been true. been, if the statement made had been true.
The aggrieved party can also The aggrieved party can also claimclaim
damages. damages.
Fraud by a stranger to the contract does notFraud by a stranger to the contract does not
affect the contract. affect the contract.
Action for fraud:
Action for fraud:
Fraudulent statement must be instrumental in inducingFraudulent statement must be instrumental in inducing
the party to enter into a contract. the party to enter into a contract.
The plaintiff must have been actually deceived by the The plaintiff must have been actually deceived by the
fraudulent statement. fraudulent statement.
No action will lie if the plaintiff does not sustain any lossNo action will lie if the plaintiff does not sustain any loss
or injury. or injury.
The contra The contract is ct is not Voidable not Voidable if the if the party had party had enoughenough
means at its disposal to discover the truth with ordinary means at its disposal to discover the truth with ordinary diligence.
Loss of right of
Loss of right of
rescission:
rescission:
Affirmation:Affirmation: where the aggrieved party after becomingwhere the aggrieved party after becoming aware of his right to
aware of his right to rescind the contract, chooses torescind the contract, chooses to
affirm it, either by express
affirm it, either by express words or through his conduct,words or through his conduct,
which shows an intention to affirm it, loses his right to
which shows an intention to affirm it, loses his right to
rescind the contract.
rescind the contract.
Restitution not Restitution not possiblepossible:: where the party seeking towhere the party seeking to rescind the contract is not in a position to re
rescind the contract is not in a position to restore thestore the
benefits received under the contract, cannot exercise his
benefits received under the contract, cannot exercise his
right of rescission.
Contd..
Contd..
Lapse of time:Lapse of time: where the aggrieved party fails towhere the aggrieved party fails to
exercise his right of rescission promptly, may lose
exercise his right of rescission promptly, may lose
his right to rescind the contract.
his right to rescind the contract.
Right of third parties:Right of third parties: where third parties acquirewhere third parties acquire
bona fide rights in the subject matter of the
bona fide rights in the subject matter of the
contract, before it can be rescinded, then such
contract, before it can be rescinded, then such
rights are valid against the aggrieved party and the
rights are valid against the aggrieved party and the
right to rescind will no longer be available.
Mistake:
Mistake:
Mistake of law:
Mistake of law:
1.
1.
Mistake of law of the country.
Mistake of law of the country.
2.
2.
Mistake of foreign law.
Mistake of foreign law.
Mistake of fact:
Mistake of fact:
1.
1.
Bilateral mistake
Bilateral mistake
2.
Mistake of law:
Mistake of law:
Mistake of law does not give right to the parties toMistake of law does not give right to the parties to
set aside the contract & hence such a contract is
set aside the contract & hence such a contract is
not Voidable. This is based on the maxim
not Voidable. This is based on the maxim
“Ignorantia juris non-excusat”
“Ignorantia juris non-excusat” . Hence no relief . Hence no relief
can be granted on the grounds of mistake of law.
can be granted on the grounds of mistake of law.
However, if one of the parties makes a mistake of However, if one of the parties makes a mistake of
law, through the inducement, whether innocent or
law, through the inducement, whether innocent or
otherwise, of the other party, then the contract
otherwise, of the other party, then the contract
may be avoided.
Mistake of foreign law:
Mistake of foreign law:
Mistake of foreign law stands on the
Mistake of foreign law stands on the
same footing as mistake of fact. Here
same footing as mistake of fact. Here
the agreement is void in case of
the agreement is void in case of
bilateral mistake only.
Bilateral mistake:
Bilateral mistake:
Where the parties to an Where the parties to an agreementagreement
misunderstood each other & are at
misunderstood each other & are at crosscross purposes, there is a bilateral mistake.
purposes, there is a bilateral mistake.
In this case there is no agreement as there is noIn this case there is no agreement as there is no
consensus and hence the agreement is void. consensus and hence the agreement is void.
In case of In case of bilateral mistake of an essential fact,bilateral mistake of an essential fact,
the agreement is void ab initio. the agreement is void ab initio.
Essentials of bilateral
Essentials of bilateral
mistake:
mistake:
The mistake must be mutual, i.e., both the
The mistake must be mutual, i.e., both the
parties must misunderstand each other so
parties must misunderstand each other so
as to nullify consent.
as to nullify consent.
Mistake must relate to some fact and not
Mistake must relate to some fact and not
an opinion.
an opinion.
The fact must be essential to
The fact must be essential to
the
the
agreement: mistake as to the existence,
agreement: mistake as to the existence,
identity, title, quantity, quality of the
identity, title, quantity, quality of the
subject-matter of the contract.
Unilateral mistake:
Unilateral mistake:
Where only one of the contracting parties is under aWhere only one of the contracting parties is under a
mistake, as to the matter of fact essential to the contract, it
mistake, as to the matter of fact essential to the contract, it
is a unilateral mistake.
is a unilateral mistake.
In case of unilateral mistake the contract In case of unilateral mistake the contract is:is: 1.
1. Valid:Valid: if the mistake is caused due to ones own neligence orif the mistake is caused due to ones own neligence or
lack of reasonable care.
lack of reasonable care.
2.
2. Voidable:Voidable: if the mistake is caused by fraud,if the mistake is caused by fraud,
misrepresentation, etc.
misrepresentation, etc.
3.
3. Void ab initio:Void ab initio: where the mistake is with regard to thewhere the mistake is with regard to the
identity of a person & where such identity is crucial to the
identity of a person & where such identity is crucial to the
agreement or the mistake is with regard to the nature of a
agreement or the mistake is with regard to the nature of a
written document
Lawful object &
Lawful object &
consideration
consideration
‘Object’ means the design or purpose of the‘Object’ means the design or purpose of the
contract.
contract.
‘consideration’ is said to be unlawful if ‘consideration’ is said to be unlawful if it involves anit involves an
act or price which is unlawful.
act or price which is unlawful.
“Illegal” or “unlawful’” means a transaction not“Illegal” or “unlawful’” means a transaction not
enforceable by courts. It does not necessarily refer
enforceable by courts. It does not necessarily refer
to a punishable offence, unless it is expressly
to a punishable offence, unless it is expressly
punishable by any criminal or special legislation.
Circumstances under which
Circumstances under which
object & consideration is held
object & consideration is held
to be unlawful:
to be unlawful:
Forbidden by law:Forbidden by law: an object or consideration isan object or consideration is
said to be forbidden by law when it is a said to be forbidden by law when it is a punishable by the criminal law of
punishable by the criminal law of the country orthe country or by any special legislation or regulation made by a by any special legislation or regulation made by a competent authority under the powers derived
competent authority under the powers derived from the legislature.
from the legislature.
If it is of such a nature that, if permitted it wouldIf it is of such a nature that, if permitted it would
defeat the provisions of any law, that is it would defeat the provisions of any law, that is it would indirectly lead to the violation of law.
indirectly lead to the violation of law.
Contd..
Contd..
Where it implies or involves injury to
Where it implies or involves injury to
the person or property of another.
the person or property of another.
If court regards it as
If court regards it as
immoral:
immoral:
immorality extends to:
immorality extends to:
1.
1.
Sexual immorality
Sexual immorality
2.
2.
Furtherance of sexual immorality
Furtherance of sexual immorality
3.
3.
Interference with marital relations
Interference with marital relations
4.
Contd..
Contd..
If court regards it as opposed to public If court regards it as opposed to public policy:policy:
public policy is an illusive concept & is generally
public policy is an illusive concept & is generally
governed by precedents. Some of the following cases
governed by precedents. Some of the following cases
have been held to be opposed to public
have been held to be opposed to public policy:policy:
1.
1. Trading with an alien enemy: as such trading tends to Trading with an alien enemy: as such trading tends to
aid the economy of the enemy country and is
aid the economy of the enemy country and is hencehence
considered unlawful. However such contracts can be
considered unlawful. However such contracts can be
entered into with the special permission of the govt.
Contd..
Contd..
2.
2. An agmt. interfering with the course of justiceAn agmt. interfering with the course of justice 3.
3. Agmts. for stifling criminal prosecution: any agmt. which seeksAgmts. for stifling criminal prosecution: any agmt. which seeks
to prevent the prosecution of a guilty party is opposed to to prevent the prosecution of a guilty party is opposed to
public policy & hence void. The court cannot give effect to an public policy & hence void. The court cannot give effect to an agmt. Which attempts to take away the
agmt. Which attempts to take away the administration of lawadministration of law out of the hands of the judges & put it in the hands of private out of the hands of the judges & put it in the hands of private individuals. However there is an exception in cases of certain individuals. However there is an exception in cases of certain compoundable offences under the CrPC which can be
compoundable offences under the CrPC which can be
compromised & agmts. For the compromise of such offences is compromised & agmts. For the compromise of such offences is valid.
Contd..
Contd..
4.
4. Traffic in public offices: an agmt. for sale or transfer of Traffic in public offices: an agmt. for sale or transfer of
public offices or appointments to such offices in
public offices or appointments to such offices in
consideration of money is void; cause
consideration of money is void; cause if permitted it wouldif permitted it would
result in inefficiency & corruption.
result in inefficiency & corruption.
5.
5. Agmts creating an interest opposed to duty.Agmts creating an interest opposed to duty. 6.
6. Agmts unduly restraining personal liberty.Agmts unduly restraining personal liberty. 7.
7. Agmts interfering with parental dutiesAgmts interfering with parental duties 8.
Object or consideration
Object or consideration
unlawful in part:
unlawful in part:
Where an agmt contains several distinct promises toWhere an agmt contains several distinct promises to
do certain legal things & also certain illegal things; do certain legal things & also certain illegal things; then, if the legal part cannot be
then, if the legal part cannot be separated from theseparated from the illegal part, i.e., there is a single consideration for illegal part, i.e., there is a single consideration for several distinct promises, then the entire agmt is several distinct promises, then the entire agmt is treated as illegal & hence void.
treated as illegal & hence void.
Where there is separate consideration for distinctWhere there is separate consideration for distinct
promises & the legal part can be separated from the promises & the legal part can be separated from the illegal part, then the legal part is valid contract &
illegal part, then the legal part is valid contract & hence enforceable.
Contd..
Contd..
In the case of alternative promises, where oneIn the case of alternative promises, where one
branch is legal & the other branch is illegal, then
branch is legal & the other branch is illegal, then
the legal branch alone can be enforced.
the legal branch alone can be enforced.
Transactions which are collateral or incidental to Transactions which are collateral or incidental to
illegal contracts are also tainted with illegality &
illegal contracts are also tainted with illegality &
therefore not enforceable, provided the parties to
therefore not enforceable, provided the parties to
the collateral transactions had knowledge of the
the collateral transactions had knowledge of the
illegal design of the primary agmt.
Effects:
Effects:
Void
Void
No restitution.
No restitution.
Void Agreements:
Void Agreements:
Agreements in restraint of marriage [Sec. 26]Agreements in restraint of marriage [Sec. 26]
Agreements in restraint of trade [Sec. 27]Agreements in restraint of trade [Sec. 27]
Agreements in restraint of legal proceedings [Sec. 28]Agreements in restraint of legal proceedings [Sec. 28]
Agreements the meaning of which is uncertain [Sec. Agreements the meaning of which is uncertain [Sec. 29]29]
Agreements by way of wager [Sec. 30]Agreements by way of wager [Sec. 30]
Agreements contingent on impossible events [Sec. 36]Agreements contingent on impossible events [Sec. 36]
Void Agreements:
Void Agreements:
Agreements in restraint of marriage [Sec 26]:Agreements in restraint of marriage [Sec 26]:
Exception :
Exception : an agreement restraining the marriage of a minor is valid.an agreement restraining the marriage of a minor is valid.
Agreements in restraint of trade [Sec 27]:Agreements in restraint of trade [Sec 27]: any kind of restraint of any kind of restraint of
trade, whether reasonable or not
trade, whether reasonable or not is void; however agreements restrainingis void; however agreements restraining freedom of action necessary for carrying on a business are not
freedom of action necessary for carrying on a business are not void.void. Exception:
Exception: Sale of goodwill (provided the restraint is reasonable in caseSale of goodwill (provided the restraint is reasonable in case of time &
of time & space), partners agreements, trade combinations, negativespace), partners agreements, trade combinations, negative stipulation in service agreements.
Contd..
Contd..
Agreements in restraint of legal proceedings [Sec 28]:Agreements in restraint of legal proceedings [Sec 28]:
i.
i. A A party party absolutely absolutely restricted restricted from from taking taking usual usual legal legal proceedingsproceedings
, in r
, in respect of espect of any rights any rights arising from arising from a contract.a contract.
ii.
ii. An agreement which limits the time within which a party canAn agreement which limits the time within which a party can
enforce his rights under a contract, without regard to the time enforce his rights under a contract, without regard to the time allowed by the Limitation Act.
allowed by the Limitation Act.
iii.
iii. An agreement which provides for forfeiture of any rights arisingAn agreement which provides for forfeiture of any rights arising
from a contract, if suit is
from a contract, if suit is not brought within a specified period,not brought within a specified period, without regard to the time allowed by the Limitation Act.
Contd..
Contd..
Agreements the meaning of which isAgreements the meaning of which is uncertain [Sec 29].
uncertain [Sec 29].
Agreements by way of wager [Sec 30]:Agreements by way of wager [Sec 30]:
The term ‘wager’ means a ‘bet. The essence of The term ‘wager’ means a ‘bet. The essence of
a wagering agreement is that, one party is to a wagering agreement is that, one party is to win & the other to lose upon a future event, win & the other to lose upon a future event,
which at the time of contract is of an uncertain which at the time of contract is of an uncertain nature. If the event turns out one way ‘A’ will nature. If the event turns out one way ‘A’ will lose & if it turns out the other way ‘A’ will win. lose & if it turns out the other way ‘A’ will win.
Essentials of wager:
Essentials of wager:
1.
1. There must be a promise to pay money or money’s There must be a promise to pay money or money’s
worth. worth.
2.
2. The promise must be conditional on an event The promise must be conditional on an event
happening or not. happening or not.
3.
3. The event must be an uncertain one. If one of the The event must be an uncertain one. If one of the
parties has the event in his own hands, then it is not parties has the event in his own hands, then it is not a wager.
a wager.
4.
4. Each party must stand to win or lose under theEach party must stand to win or lose under the
terms of agreement. terms of agreement.
5.
5. No party must have proprietary interest in the event.No party must have proprietary interest in the event.
The stake must be the only interest which the The stake must be the only interest which the
parties have in the agreement. parties have in the agreement.
Exception:
Exception:
“This sec. shall not be deemed to render
“This sec. shall not be deemed to render
unlawful a subscription, or contribution,
unlawful a subscription, or contribution,
or an agmt. to subscribe or contribute,
or an agmt. to subscribe or contribute,
made or entered into for or toward any
made or entered into for or toward any
plate, prize or sum of money, of the value
plate, prize or sum of money, of the value
or amount of 500 rupees or upwards, to
or amount of 500 rupees or upwards, to
be awarded to the winner or winners of
be awarded to the winner or winners of
any horse race.”
Agreements contingent on
Agreements contingent on
impossible events: [Sec.
impossible events: [Sec.
36]
36]
Such contracts can be performed only if Such contracts can be performed only if the contemplatedthe contemplated
event takes place. The performance of the contract depends on
event takes place. The performance of the contract depends on
the happenin
the happening or g or non-happening non-happening of of an event. an event. Such an Such an eventevent
should be of an uncertain nature. The
should be of an uncertain nature. The event must be incidentalevent must be incidental
to the contract, there should be a direct correlation between
to the contract, there should be a direct correlation between
the event & performance of the contract. If the event becomes
the event & performance of the contract. If the event becomes
impossible, the contract becomes void.
impossible, the contract becomes void.
If the contingent contract is to If the contingent contract is to be performed within a stipulatedbe performed within a stipulated
time & if the contingent event does not take place within the
time & if the contingent event does not take place within the
stipulated time, the contract becomes void.
Agreements to do
Agreements to do
impossible acts: [Sec 56]
impossible acts: [Sec 56]
An agreement to do an act impossible
An agreement to do an act impossible
in itself is void.
in itself is void.
Effects:
Effects:
Void
Void
No restitution : no restoration of
No restitution : no restoration of
benefit received is allowed in the case
benefit received is allowed in the case
of agreements, expressly declared
of agreements, expressly declared
void under the Indian Contract Act.
void under the Indian Contract Act.
Quasi contracts: [Sec
Quasi contracts: [Sec
68-72]
68-72]
In case of quasi contracts there is no offer,In case of quasi contracts there is no offer,
acceptance or consensus; in fact
acceptance or consensus; in fact there is no intentionthere is no intention on the part of either
on the part of either parties to enter into a contract;parties to enter into a contract; still the law, from the conduct
still the law, from the conduct & relationship& relationship
between the parties, implies a promise, imposing between the parties, implies a promise, imposing obligation
obligation on one on one party & party & conferring conferring a right a right in favorin favor of the other party. Thus
of the other party. Thus under certain specialunder certain special
circumstances, obligations resembling those created circumstances, obligations resembling those created by a contract are imposed by law although the
by a contract are imposed by law although the parties have never entered into a contract.
Doctrine of unjust
Doctrine of unjust
enrichment:
enrichment:
A quasi contract rests upon the doctrine of
A quasi contract rests upon the doctrine of
unjust enrichment which declares that a
unjust enrichment which declares that a
person shall not be allowed to
person shall not be allowed to enrich
enrich
himself unjustly at others expense.
himself unjustly at others expense.
A suit for damages for the breach of
A suit for damages for the breach of
contract can be filed in the case
contract can be filed in the case of a quasi
of a quasi
contract in the same manner as in the case
contract in the same manner as in the case
of a completed contract.
Quasi-contractual
Quasi-contractual
obligations:
obligations:
A claim for necessaries supplied to a person incapable of A claim for necessaries supplied to a person incapable of contracting [
contracting [Sec. 68Sec. 68]]
A person who is interested in the payment of money (inA person who is interested in the payment of money (in order to protect his
order to protect his own interest), which another personown interest), which another person
is bound by
is bound by law to paylaw to pay, and , and who therwho therefore pefore pays it, iays it, iss
entitled to be reimbursed [
entitled to be reimbursed [Sec. 69Sec. 69]]
Obligation of person enjoying non-gratuitous act [Obligation of person enjoying non-gratuitous act [Sec.Sec. 70
70] : the ] : the act must have been done lawfully in good faith;act must have been done lawfully in good faith;
the act must be non-gratuitous & the
the act must be non-gratuitous & the person for whomperson for whom
the act is done must have enjoyed benefit of the act.
Contd..
Contd..
Responsibility of finder of goods [
Responsibility of finder of goods [
Sec.
Sec.
71
71
]: law implies an agreement
]: law implies an agreement
between the owner & the finder of
between the owner & the finder of
goods. It casts duties upon the finder
goods. It casts duties upon the finder
of the goods.
of the goods.
Liability of a person to whom money
Liability of a person to whom money
is paid, or goods delivered by mistake
is paid, or goods delivered by mistake
or under coercion [
Contingent Contracts:
Contingent Contracts:
[Sec. 31]
[Sec. 31]
It is a contract, the performance of which depends upon,It is a contract, the performance of which depends upon, the happening or non-happening of
the happening or non-happening of an uncertain event,an uncertain event,
collateral
collateral to such a contract.to such a contract.
A collateral event is one which does not form part of A collateral event is one which does not form part of thethe consideration of the contract, and is independent of it.
consideration of the contract, and is independent of it.
An ordinary contract can be An ordinary contract can be converteconverted into d into a contingenta contingent contract, if its performance is made dependent on the
contract, if its performance is made dependent on the
happening or non-happening of an
happening or non-happening of an uncertain event,uncertain event,
collateral to such contract.
Essentials of contingent
Essentials of contingent
contract:
contract:
The performance of such a contract
The performance of such a contract
depend on the happening or
depend on the happening or
non-happening of a future uncertain
happening of a future uncertain
event.
event.
The future uncertain event is
The future uncertain event is
collateral or incidental to the contract.
collateral or incidental to the contract.
Rules regarding
Rules regarding
performanc
performanc
e
e
of
of
contingent
contingent
contracts:
contracts:
Contingent contracts to do or not to do any thing, if Contingent contracts to do or not to do any thing, if
an uncertain future event
an uncertain future event happens,happens, cannot becannot be
enforced by law unless & until the uncertain event
enforced by law unless & until the uncertain event
occurs. Where such an event becomes impossible,
occurs. Where such an event becomes impossible,
such contracts become void.
such contracts become void.
Contingent contracts to do or not to do any thing, if Contingent contracts to do or not to do any thing, if
an uncertain future event
an uncertain future event does notdoes not happen,happen, can becan be
enforced when the happening of that event becomes
enforced when the happening of that event becomes
impossible & not before.
Contd..
Contd..
Contingent contracts to do or not to do any thing, if aContingent contracts to do or not to do any thing, if a
specified uncertain event
specified uncertain event happenshappens within a fixedwithin a fixed
time, becomes void, if, at the expiration of the time
time, becomes void, if, at the expiration of the time
fixed, such event has not occurred or before the time
fixed, such event has not occurred or before the time
fixed, such event becomes impossible.
fixed, such event becomes impossible.
Contingent contracts to do or not to do any thing, if aContingent contracts to do or not to do any thing, if a
specified uncertain event
specified uncertain event does not happendoes not happen within awithin a
fixed time, may be enforced by law when the time
fixed time, may be enforced by law when the time
fixed has expired & such event has not occurred, Or,
fixed has expired & such event has not occurred, Or,
before the time fixed has
before the time fixed has expired, it becomes certainexpired, it becomes certain
that such event will not happen.
Performance of contract:
Performance of contract:
Under a contract legal obligations Under a contract legal obligations are created, whichare created, which
both the parties to a contract are under a
both the parties to a contract are under a duty toduty to fulfill. Fulfilling of such legal obligations, or
fulfill. Fulfilling of such legal obligations, or
performance of the promise under a contract by both performance of the promise under a contract by both
the parties is known as performance of a contract. the parties is known as performance of a contract.
Performance of all the obligations arising out of a Performance of all the obligations arising out of a
contract, by all the parties to a contract is the
contract, by all the parties to a contract is the normal normal & natural mode of discharging a contract
Rules regarding performance:
Rules regarding performance:
Only the promisee can demand performance of theOnly the promisee can demand performance of the
promise under a contract, a third party cannot demand promise under a contract, a third party cannot demand performance, even though it was made for his benefit. performance, even though it was made for his benefit.
A contract involving personal skill, taste etc., must be A contract involving personal skill, taste etc., must be
performed by the promisor itself. Where it
performed by the promisor itself. Where it appears fromappears from the nature of the contract, that the parties intend th
the nature of the contract, that the parties intend that theat the promise of the contract should be performed by the
promise of the contract should be performed by the promisor itself; then it must be performed by the promisor itself; then it must be performed by the promisor only.
Contd..
Contd..
Where a contract is of an impersonal nature, thenWhere a contract is of an impersonal nature, then
either the promisor himself or his agent may perform either the promisor himself or his agent may perform the contract.
the contract.
Where death of the Where death of the promisor occurs, before thepromisor occurs, before the
performance of the contract, then in such case the performance of the contract, then in such case the
liability of performance falls on his legal liability of performance falls on his legal
representatives; unless a contrary intention appears representatives; unless a contrary intention appears from the contract.
from the contract.
Where a promisee accepts performance of the promiseWhere a promisee accepts performance of the promise
from a third
from a third person, however afterwards he cannot person, however afterwards he cannot enforce it against the
Performance of joint
Performance of joint
promises:
promises:
Where several joint promisor’s with a
Where several joint promisor’s with a
single
single
promisee.
promisee.
Where a single promisor makes a promise with
Where a single promisor makes a promise with
several joint promisee’s.
several joint promisee’s.
Where several joint promisor’s make a
Where several joint promisor’s make a
promise
promise
with several joint promisee’s .
with several joint promisee’s .
Rules regarding joint promises:
Rules regarding joint promises:
Unless a contrary intention appears from the contract,Unless a contrary intention appears from the contract,
the right to claim performance rests with all the the right to claim performance rests with all the
promisees jointly & a single promisee cannot claim promisees jointly & a single promisee cannot claim performance.
performance.
Unless a contrary intention appears from the contract,Unless a contrary intention appears from the contract,
all promisors must jointly fulfill the promise. all promisors must jointly fulfill the promise.
In the absence of an express agmt. to the contrary, the In the absence of an express agmt. to the contrary, the
promisee is entitled to compel any one or more of the promisee is entitled to compel any one or more of the joint promisors to perform the whole of the promise. joint promisors to perform the whole of the promise.
Contd..
Contd..
Where one of the joint owners is made to perform the wholeWhere one of the joint owners is made to perform the whole
contract, he may realize equal contribution from other joint
contract, he may realize equal contribution from other joint
promisors, unless a contrary intention appears from the contract.
promisors, unless a contrary intention appears from the contract.
Where any one of the joint owners fails to make a contribution,Where any one of the joint owners fails to make a contribution,
then the remaining joint promisors must bear the loss arising
then the remaining joint promisors must bear the loss arising
from such failure, in equal shares.
from such failure, in equal shares.
In case of a joint promise, if one of the joint promisors is released In case of a joint promise, if one of the joint promisors is released
from his liability by the promisee, his liability to the promisee
from his liability by the promisee, his liability to the promisee
ceases, but this does not discharge the other promisors from their
ceases, but this does not discharge the other promisors from their
liability; neither does it free the joint promisor so released from
liability; neither does it free the joint promisor so released from
his liability to contribute to the other joint promisors.
Assignment of contracts:
Assignment of contracts:
Assignment of contract means transfer of the
Assignment of contract means transfer of the
rights & liabilities arising under a contract, to
rights & liabilities arising under a contract, to
third party, with or without concurrence of the
third party, with or without concurrence of the
other party to the contract.
other party to the contract.
An assignee can bring an action on his own
An assignee can bring an action on his own
initiative, against the other party, without making
initiative, against the other party, without making
the assignor a party to the suit.
the assignor a party to the suit.
Contracts involving personal skill, taste etc.,
Contracts involving personal skill, taste etc.,
cannot be assigned.
cannot be assigned.
Time & place for
Time & place for
performance:
performance:
Where time & place is prescribed by the
Where time & place is prescribed by the
promisee, the performance of the contract
promisee, the performance of the contract
must be at the specified time & place.
must be at the specified time & place.
Where it is not prescribed, then it must be
Where it is not prescribed, then it must be
within a reasonable time & at a proper place
within a reasonable time & at a proper place
Failure to perform
Failure to perform
within stipulated
within stipulated
time:
time:
Where time is the essence of the contract & there is aWhere time is the essence of the contract & there is a
failure to perform a contract within the stipulated time, failure to perform a contract within the stipulated time,
the contract becomes voidable at the option of the the contract becomes voidable at the option of the promisee.
promisee.
Where the promisee chooses to affirm the delayed Where the promisee chooses to affirm the delayed
contract, cannot claim compensation for the loss caused contract, cannot claim compensation for the loss caused by the delay afterwards, unless, at the time of affirming by the delay afterwards, unless, at the time of affirming the delayed performance, he has given notice to the
the delayed performance, he has given notice to the promisor of his intention to do so.
Contd..
Contd..
Where time is not the essence of the contract,
Where time is not the essence of the contract,
failure to perform the contract within the
failure to perform the contract within the
specified time does not render the contract
specified time does not render the contract
voidable. However the promisee is entitled to
voidable. However the promisee is entitled to
claim compensation for any loss caused to
claim compensation for any loss caused to
him by the delay. However, if the promisor
him by the delay. However, if the promisor
delays the performance beyond reasonable
delays the performance beyond reasonable
time then the contract will become voidable
time then the contract will become voidable
at the option of the promisee.
Mode of
Mode of
performance:
performance:
The promise must be performed by the promisor
The promise must be performed by the promisor
in
in the
the manner
manner prescribed
prescribed by t
by t
he pr
he pr
omisee.
omisee.
Such
Such
performance must be in strict accordance with
performance must be in strict accordance with
the mode prescribed.
the mode prescribed.
Contracts which need not
Contracts which need not
be performed:
be performed:
If parties to a contract agree to If parties to a contract agree to ‘alteration’, ‘nova‘alteration’, ‘novation’ ortion’ or
‘rescission’ , the original contract need not be ‘rescission’ , the original contract need not be performed.
performed.
Where the parties to a contract agree to Where the parties to a contract agree to remit theremit the
performa
performance of the promise, either wholly or nce of the promise, either wholly or in part, thein part, the original contract stands
original contract stands discharged.discharged.
In case of a Voidable contract, if the party who has theIn case of a Voidable contract, if the party who has the
option, chooses to rescind the contract, then the other option, chooses to rescind the contract, then the other party need not perform his promise.
Contd..
Contd..
Where there is neglect or refusal to
Where there is neglect or refusal to
provide the promisor with reasonable
provide the promisor with reasonable
facilities for the performance of his
facilities for the performance of his
promise, by the promisee; then in such
promise, by the promisee; then in such
a case the promisor is excused for the
a case the promisor is excused for the
non-performance of the contract.
Discharge of contract:
Discharge of contract:
Discharge of a contract refers to a
Discharge of a contract refers to a
process, by which the rights and
process, by which the rights and
obligations arising out of a contract come
obligations arising out of a contract come
to an end. Thus, discharge of a
to an end. Thus, discharge of a
contract
contract
means termination of a contract.
means termination of a contract.
A contract may be discharged in any of
A contract may be discharged in any of
the following ways:
Contd..
Contd..
1.
1.
By performance
By performance
2.
2.
By mutual consent or
By mutual consent or
agreement
agreement
3.
3.
By subsequent or
By subsequent or
supervening
supervening
impossibility or illegality
impossibility or illegality
4.
4.
By lapse of time
By lapse of time
5.
5.
By operation of law
By operation of law
6.
Discharge by mutual consent or
Discharge by mutual consent or
agreement:
agreement:
Novation:Novation: when a new contract is substituted for anwhen a new contract is substituted for an
existing contract, either between the same parties
existing contract, either between the same parties or or
different parties, the consideration for such
different parties, the consideration for such contract beingcontract being
the discharge of the old contract.
the discharge of the old contract.
Where the contract is between same parties, then theWhere the contract is between same parties, then the
nature of the
nature of the obligatiobligations must be ons must be altered substantially or altered substantially or
else it shall amount to
else it shall amount to alteration & not novation.alteration & not novation.
Novation cannot be compulsoNovation cannot be compulsory, it has ry, it has to be with theto be with the
mutual consent of all the
mutual consent of all the parties.parties.
The new contract must be valid & enforceable, if it suffersThe new contract must be valid & enforceable, if it suffers
from any legal flaw, then
Alteration:
Alteration:
Alteration of a contract refers to change in one or Alteration of a contract refers to change in one or
more of the material terms of a written contract. more of the material terms of a written contract.
Where such alteration takes place with mutualWhere such alteration takes place with mutual
consent, then the original contract is discharged & consent, then the original contract is discharged & the new altered contract comes into existence.
the new altered contract comes into existence.
The alteration should be material & alter the legalThe alteration should be material & alter the legal
effect of the contract, mere correction of clerical effect of the contract, mere correction of clerical errors does not amount to alteration.
Contd..
Contd..
Where such alteration is made by one party,
Where such alteration is made by one party,
without the consent of the other party, then such
without the consent of the other party, then such
alteration will render the entire contract void &
alteration will render the entire contract void &
none of the parties can
none of the parties can
maintain an action upon
maintain an action upon
it.
it.
