50931575 Indian Contract Act

7/31/2019 50931575 Indian Contract Act

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The Contract Act 1872


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Index

Definitions

Classifications of Contracts

Essential Elements of a Valid Contract

Discharge of a Contract

Breach of Contract and its Remedies

Law Relating to Agency, Guarantee andPledge.


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Definitions

When one person signifies to another his willingness to door to abstain from doing anything, with a view to obtainingthe assent of that other to such act or abstinence, he is saidto make a PROPOSAL or OFFER

A Offer when accepted, becomes a PROMISE of the offerer

When a person to whom the proposal is made, signifies hisassent thereto, the PROPOSAL is said to be ACCEPTED

The person making the proposal is called the"PROMISOR", and the person accepting the proposal iscalled"PROMISEE


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Definitions

When, at the desire of the promisor, the promisee or anyother person has done or abstained from doing, or does orabstains from doing, or promises to do or to abstain fromdoing, something, such act or abstinence or promise is

called a CONSIDERATION for the promise;

Every promise and every set of promises, forming theconsideration for each other, is an AGREEMENT;

Promises which form the consideration or part of theconsideration for each other are called RECIPROCALPROMISES


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Definitions

When, at the desire of the promisor, the promisee orany other person has done or abstained from doing,or does or abstains from doing, or promises to do or to

abstain from doing, something, such act orabstinence or promise is called aCONSIDERATION for the promise;

Every promise and every set of promises, formingthe consideration for each other, is anAGREEMENT;

PAST

Consideration FUTURE

Consideration

PRESENT

Consideration


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Definitions

An agreement enforceable by law is aCONTRACT

Therefore CONTRACT = Agreement +

Enforceability by Law.

AGREEMENT = Offer + Acceptance

The law of contract is not the whole law of

agreements.(Balfour vs. Balfour) The law of contract is not the whole law of

obligations.


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Classifications of Contracts - An agreement becomes acontract when all the essential elements of a contract are present. In such case such agreement

becomes a contract. If any of the essential elements are missing then such contact is voidable, void,

illegal or unenforceable BASED ON THE VALIDITY:. VOIDABLE CONTRACT: An agreement which is enforceable by law at the option of one or more of

the parties thereto, but not at the option of the other or others, is a voidable contract.

VOID AGREEMENT: An agreement not enforceable by law is said to be void.A void agreement doesnot create any legal right or obligation. Such agreement is void-ab-initio from the beginning itself.

VOID CONTRACT: A contract which ceases to be enforceable by law becomes void when it ceases tobe enforceable. In this case when the contract was entered into, may be valid and binding on theparties as per law, but subsequently it has become void. E.g., in the case of import contract, theagreement is enforceable, but if subsequently war brakes out then the agreement becomes voidcontract.

ILLEGAL AGREEMENTS: an illegal agreement is one, which transgresses (against) some basic rule ofPublic Policy or is of criminal in nature or is immoral.ALL ILLEGAL AGREEMENT IS VOID, BUT ALL

VOID AGREEMENTS ARE NOT ILLEGAL. An illegal agreement is not only void between theimmediate parties but has its further effect that even the collateral transactions to it become tinted withillegality. A collateral transaction is one, which is subsidiary, incidental or auxiliary to the principalcontract.

UNENFORCEABLE CONTRACT: An unenforceable contract is one which cannot be enforced in acourt of law because of some technical defect such as absence of consideration or absence of contract inwriting. The parties to the contract may fulfill their obligations but in the event of breach of contract theother party cannot enforce it.

E.g., agreement with minor or an agreement without

consideration is void-ab-initio

Ex: Mr. B borrows Rs.5,000 from Mr. A and enters into acontract with an alien to import prohibited goods. Mr. Aknows of the purposes of agreement. The transaction

between Mr. B and Mr. A is collateral to the mainagreement. It is illegal since the main agreement is illegal.


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BASED ON FORMATION:

Express contracts: If the terms of the contract are expressly agreed upon(whether by words spoken or written) at the time of formation ofcontract.

Implied contracts: in this case the contract comes into existence by theacts or conducts of the parties -E.g., Getting into a Public bus.

Quasi contract: strictly speaking quasi contracts are not contracts. Theyare called Quasi because the obligations associated with suchtransactions are neither contractual nor tortious. A quasi contract isone, which is created by law. It is based on the principle that a personshall not be allowed to enrich himself unjustly at the expense ofanother.

Case Law: a fire broke out in Ss firm. He called upon theupton fire brigade to put out the fire which the latter did. Mr. Sfirm did not come under the free service zone although hebelieves to be so. Held, he was liable to pay for the servicerendered, since the services was rendered on the impliedpromise to pay (Upton Rural District Council vs. Powell)

ExampleTrader leaves the goods at Mr. A s house bymistake. Mr. A treats the goods as his own. Mr. A isbound to pay for the goods.


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BASED ON PERFORMANCE:

Executed Contract: A contract in which both the parties to thecontract have completely performed their share of obligation andnothing remains to be done by either of the parties

Executory Contract: A contract in which both the parties or any oneparty to the contract has to still perform their share of obligation

Unilateral Contract where any one party to the contract has to still

perform their share of obligation

Bilateral Contract - where any both the parties to the contract has to stillperform their share of obligation

Example Mr. A entered into a contract with the porterfor lifting his 5 bags. Porter agreed and lifts all the 5bags for Rs. 100. So here the porter has lifted the bagsand Mr. A has paid him.

Example Mr. A entered into a contract with the porterfor lifting his 5 bags. Porter agreed to lift all the 5 bagsfor Rs. 100. So here the porter has not lifted the bagsand Mr. A has not paid him.


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Essential Elements of a Valid ContractAll agreements are contracts if they are made with:

Offer and Acceptance

Intention to create a legal relationship

Lawful Consideration

Capacity of the Parties

Free Consent

Lawful Object

Certainty and Possibility of Performance Legal formalities

If any of the above is missing, the contract becomes void.


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Essential Elements of a Valid Contract -Offer and Acceptance

There must be minimum two parties to anagreement. I.e. one party making the offer (also called as

offerer/proposer/promisor)

and

the other accepting it (also called asofferee/proposee/promisee/acceptor)

The terms of offer must be definite

Acceptance must be unconditional.

E.g., Mr. A has 3 cars. He asked Mr. B are you ready

to purchase my car for Rs. 2 lakhs.


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Essential Elements of a Valid Contract OfferMeaning:

A person is said to have made aproposal/offer,

when he signifies to another his willingness

to do or to abstain from doing anything,

with a view to obtaining the assent of thatother to such act or abstinence


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Offer - Kinds of offer:

Expressed offer - When offer is made by express spoken or writtenwords

Implied offer - An offer may also be implied from the conduct of

the parties or the circumstances of the case.

Specific offer - When an offer is made to a definite person, it is saidto be Specific Offer. It can be accepted by the person to whom it ismade.

General offer When an offer is made to the world at large

E.g., When A says to B, Will you purchase my house

at Chennai for Rs. 3 lakhs. .

E.g., When a transport company runs a bus on a

particular route, there is an implied offer by the transport

co. to carry passengers for a certain fare. The acceptance

of the offer is complete as soon as a passenger boards

the bus.

E.g., If Mr. A asks to B, for his blue car for Rs.

2,00,000/-, Mr. C cannot accept the offer.


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Legal rules to offer The offer must be given with an intention to create legal relationship - A social invitation

even if it is accepted, does not create a legal relationship because it is not intended so.

The terms of the offer must be definite: the terms of the offer must be definite and certainand must not be ambiguous or vague.

Offer must be communicated: an offer to be complete must be communicated to theperson to whom the offer is made. Mere by acting to the terms of the offer without

knowledge, the offer cannot be treated as accepted. An acceptance of offer in ignorance ofoffer is no acceptance and does not confer any right on the acceptor.

Offer may be conditional: When the offer is subject to conditions, they must be clearlycommunicated to the offeree. If the person accepts the offer without the knowledge of theconditions the offeror cant claim the fulfillment of conditions. But the conditions areclearly expressed, then offeree can plead ignorance.

Offer must not contain a term that non-compliance of which may be assumed to amountto acceptance: the person making the offer cannot say that if acceptance is notcommunicated by a certain time, the offer would be considered as accepted

statement of price is not an offer: a mere declaration of intention or a a mere statement of

price is not construed as an offer to sell.

E.g., Mr. A has 3 cars. He asked Mr. B are you ready to

purchase my car for Rs. 2 lakhs. The offer is not definite.

Case Law: Lalmann v/s Gauri Dutt- E.g. G sent his servant L in search of his

missing nephew. Subsequently G announced a reward for information

concerning the boy. L brought back the missing boy, without the knowledge

of reward. It was held that there was no contract between L & G and the

reward cannot be claimed.

Case Law: A hotel put a notice in a bed room, exempting the proprietor from liability

for loss of clients goods. Held, the notice was not effective as it came to the

knowledge of the client only when the contract to take a room had already been

entered into.

P deposited a bag in the cloak room of a railway station. On the face of the ticket,

issued to him, was written see back. One of the printed conditions limited the

liability of the company for loss of a package to Rs.10/- The bag was lost and P

claimed Rs. 24.50/- as its value. Held, P was bound by the conditions on the back

of the ticket even if he had not read.

Eg: A offers his black kinetic to B for Rs. 20,000/- and tells him that if I

dont hear anything from you within 15 days, I will assume that you

have accepted my offer. This offer is not valid


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Offer and other forms

There is a clear difference between offer, invitation to offer or an announcement:An announcement: a declaration by a person that he intends to do something gives noright of action to another. Such a declaration only means that an offer will be made orinvited in the future and not that an offer is made now. E.g., Auction sale, will, etc.

An invitation to make offer: display of goods by the shopkeeper with a price marked

on it does not make an offer, but merely gives an invitation to the public to make anoffer to buy the goods at the price marked on it. E.g., quotations, catalogues,advertisements, prospectus issued by the company, etc.

Tender is an offer to the invitation of an offer. (public ad).

Tender can be definite offer to supply specified goods and services.

Tender can be standing offer.

Eg: A invites tenders for the supply of 100 bricks. X, Y, and Zsubmit the Tender. A accepts the tender given by X. There is

binding contract between A and X

Eg; a railway Co. invited tender for certain Iron articles which

it might require over a year. Ws tender was accepted. He

supplied goods for some time. He refused to supply at a later

time. But the contract is binding on W


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AcceptanceMeaning: When a 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

Acceptance may be implied or expressed. Inexpress acceptance, while that given by conduct istermed as implied acceptance.

E A ff hi t B f R 50 000/ B t d th ff d


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Legal rules to acceptance

Unconditional - An acceptance in order to be binding must be absolute/complete

and unconditional. The acceptance must be to all terms of offer. Communicated to the offeror

Must be given in the prescribed mode - if the acceptance is not according to modeprescribed, or some usual or reasonable, there is no contract.

Given in a reasonable time - if any time limit is specified, the acceptance must begiven within that time. If no time limit is specified by the offeror, then it must be

given within a reasonable time and it depends on the facts of the case Must be given by the parties, to whom the offer is made - When an offer is made to

a particular person, it can be accepted by him alone. If it is accepted by anotherperson, there is no valid acceptance

Must be given before the offer lapses or withdrawn

It cannot precede an offer

Once the offer is rejected it cannot be accepted by the offeree, unless the offeror

renews the offer It cannot be implied for the silence - the acceptance of an offer cannot be implied

from the silence of the offeree, unless the offeree has, by his previous conductinducted that his silence means the acceptance.

Eg; A offers his car to B for Rs. 50,000/- B accepted the offer and

paid Rs. 49,000/- cash down and promised to pay balance of Rs.

1,000/- by tomorrow. This is no acceptance

Case Law: Lalmann v/s Gauri Dutt - G sent his servant L in search of hismissing nephew. Subsequently G announced a reward for information

concerning the boy. L brought back the missing boy, without the knowledge

of reward. It was held that there was no contract between L & G and the

reward cannot be claimed.

Eg: a makes an offer to B and says if you accept the offer

reply by wire. B sends the reply by post. It is not a validacceptance.

Case Law: on 08th June, Mr. M offered to take shares in R Co. He received a

letter of acceptance from R Co. on November 23. He refuses to take the shares.

Held, Mr. M, was entitled to refuse, as his offer has lapsed as the reasonable

period during which it could be accepted had elapsed (Ramsgate VictoriaHotel Co., vs. Monteflore)

Company allotted the shares to a person who had notapplied for them. Subsequently, when he applied for

shares he was unaware about previous allotment. Thus,

previous allotment is void.


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Lapse or termination of offer

I. By communicating the notice of revocation - Offeror can give notice ofrevocation to offeree but before the acceptance is complete as against him. e.g., At an auction sale, A makes the highest bid of Bs goods. He withdraws the bid

before the fall of the hammer. The offer has been revoked before its acceptance.

II. Lapse of Time - If the time is fixed in the offer then offer revokes when thefixed time is over, otherwise after the reasonable time. e.g., A seller on Thursday offered wool to a purchaser and gave him 3 days time to

accept. The purchaser accepted the offer on Monday, by that time A had sold the wool.Held, the offer had lapsed.

III. By non-fulfillment by the offeree of a condition precedent to acceptance E.g., S a seller agrees to sell certain goods subject to the condition that B, the buyer,

pays the agreed price before a certain date. S had sold the wool. If before the date buyer

did not pay then the offer is revoked.

IV. By death or insanity of the offeror provided the offeree comes to know itbefore acceptance. But If he accepts an offer in ignorance of the death or insanityof the offeror, the acceptance is valid.


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Lapse or termination of offer V. By counter offer - When offer is accepted with some modifications in the terms of the offer,

then it amounts to counter offer. By putting counter offer the original offer comes to an end.

E.g. A asks B, Are you ready to purchase my flat for 10 lakhs. B asks A, Are you readyto sell it to Rs. 8 lakhs. Bs question to A is a counter offer.

E.g. An offeree agreed to accept half the quantity of goods offered by the offeror on theterms and conditions as would have applied to the full contract. Held, there was nocontract as there was a counter offer to the offer.

VI. If an offer is not accepted according to the prescribed or usual mode provided the offerorgives notice to the offeree within a reasonable time that the acceptance is not according to theprescribed or usual mode. If the offeror keeps quiet, he is deemed to have accepted the

acceptance.

VII. If the law is changed. An offer comes to an end if the law is changed so as to make thecontract contemplated by the offer illegal or incapable of performance.

VIII. Destruction of subject matter: - A offers B his cow for Rs. 4500/- In the mean time, thecow dies due to snake bite. The offer is lapsed.

Rejection of offer: - An offeree may reject the offer. Once he does that he cannot subsequentlyaccept it.

Rejection of the offer may be express or implied. Express Rejection: The offeree may reject the offer expressly, i.e., by words written or

spoken. This is effective only when notice of rejection reaches the offeror. Implied Rejection: Rejection of the offer is implied by law- where the offeree makes a

counter-offer or where the offeree gives a conditional acceptance


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Communication of Offer.

The communication of a proposal is complete- when it comes to theknowledge of the person to whom it is made.

The communication of an acceptance is complete

as against the Proposer, when it is put in a course of

transmission to him so at to be out of the power of the acceptor;

as against the acceptor, when it comes to the knowledge of theProposer

E.g., A Proposes, by a letter, to sell a house to B at a certain price. The

letter is posted 10th July. It reaches B on 12th July. The communication

of the offer is complete when B receives the letter, i.e., on 12th July.

E.g., in the above case, when B accepts As Proposal, by a letter sent by post on

13th instant. The letter reaches on 15th instant. The communication of acceptance

is complete, as against A, when the letter is posted, i.e., on 13th, as against B,

when the letter is received by A, i.e., on 15th. (Case of NT Rama Rao)


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Revocation of Offer

Revocation means

taking back or

Withdrawal or

cancellation.


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Communication of Revocation of Offer

The communication of a revocation is complete -asagainst the person who makes it (i.e. for therevoking party), when it is put into a course oftransmission to the person to whom it is made, so asto be out of the power of the person who makes it;(i.e. when the letter of revocation is posted.)

(For the opposite party) as against the person towhom it is made, when it comes to his knowledge(when the letter reaches him)

E.g., A Proposes, by a letter, to sell a house to B at a certain price. The letter is

posted 15th May. It reaches B on 20th May. A revokes his offer by a telegram on

19th May. The telegram reaches B on 21st May. The revocation is complete as

against A when the telegram is dispatched, i.e., on 19th May. It is complete as

against B when he receives it, i.e., on 21st May.


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Time for Revocation of Proposals and

Acceptance

A proposal may be revoked at any timebefore the communication of its acceptance iscomplete as against the proposer, but not

afterwards.

An acceptance may be revoked at any time

before the communication of the acceptanceis complete as against the acceptor, but notafterwards.

Ex: Mr. A proposes by a letter sent by post to sell his house to Mr. B. the

letter is posted on the 1st of the month. Mr. B accepts the proposal by a

letter sent by post on the 4th. The letter reaches Mr. A on the 6th.

Mr. A may revoke his offer at any time before Mr. B posts his letter of

acceptance, i.e., 4th but not afterwardsMr. B may revoke his acceptance at any time before the letter of acceptance

reaches Mr. A, i.e., 6th, but not afterwards


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Loss of letter of acceptance in postal

transit: Acceptance is complete as against the offeror as

soon as the letter of acceptance is posted.

The contract is complete even if the letter of

acceptance goes astray or is lost through an accidentin the post.

But in order to bind the offeror, it is important thatthe letter of acceptance is correctly addressed,adequately stamped and posted,

Otherwise the acceptance is not complete


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Revocation how made

A proposal is revoked

(1) by the communication of notice of revocation by the Proposerto the other party;

(2) by the lapse of the time prescribed in such proposal for itsacceptance, or, if no time is so prescribed, by the lapse of areasonable time, without communication of the acceptance;

(3) by the failure of the acceptor to fulfill a condition precedent toacceptance; or

(4) by the death or insanity of the Proposer, if the fact of thedeath or insanity comes to the knowledge of the acceptor beforeacceptance.


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ConsiderationMeaning:

When a party to an agreement promises todo something,

he must get something in return.

This something in return is defined as

consideration.

.

E.g., A agrees to sell his car to B for Rs.15000/-, for As promise the

consideration is Rs.15000/- and forBs promise the consideration is the car.


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Legal Rules to Consideration

Move at the desire or request of promisor - An act constituting consideration must have been done at the desireor request of the promisor, if it is done at the desire of the third party or without the desire of the promisor it willnot be a good consideration.

It may move from the Promisee or any other Person This means that as long as there is a consideration for apromise it is immaterial who has furnished it. But a stranger to the consideration will be able to sue only if he is aparty to the contract

It may consist of an Act or Abstinence (means not doing something)

Consideration can be past, present or future -

It need not be adequate - Consideration as said something in return and something this something in returnneed not be equal in value to Something given. The law requires that the contract must be supported byconsideration and not the adequate consideration.

Must be real & not illusionary - There is no real consideration in the following cases: Physical impossibility: A promises to put life into Bs dead wife on the consideration of Rs.999. As promise

is physically impossible to perform. Legal impossibility: A owes Rs.500 to B, he promises to pay Rs.50 to C, the servant of B, who inreturn

promise to discharge A from the liability. This is legally impossible, because C cannot discharge A from thedebt due to B.

Uncertain consideration: A engages B for doing certain work and promises to pay a Reasonable some.There is no recognized method of ascertaining the ReasonableSome. The promise is unenforceable due touncertainty.

Should not be illegal - the consideration given for an agreement must not be unlawful. A consideration to thecontract must not be against Public Policy, Immoral and illegal

It must be something which the promisor is not already bound to do: a promise to do what one is already

bound to do, either by general law or under an existing contract, is not a good consideration for the new promise,since it adds nothing to the pre-existing legal or contractual obligation.

E.g.,A borrows Rs. 20,000/- from B at a rate of 10% p.a. but A fails to pay the amount. Bis now about to file a suit and A agrees now to pay a higher rate of interest. B agrees for

not filing a suit. This forbearance is a valid consideration.

E.g., supari to kill someone.CL: There was a promise to pay to the vakil an additional sum if the suit wassuccessful. Held, the promise was void for the want of consideration. The vakil

was under a pre-existing contractual obligation to render the best of his services

under the original contract. (Ramachandra Chintaman vs. Kalu Raju)


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Exception to the rules of consideration

Where an agreement is expressed in writing and registeredunder the law for the time being in force for the registration ofthe documents and is made on account of natural love andaffection between parties standing to the near relation to eachother, it is enforceable even if there is no consideration

Promise to pay a time-bared debt: A promise to pay a time-bared debt by the debtor is enforceable provided it is made inwriting and signed by the person to be charged therewith or byhis agent. The debt must be such of which the creditor mighthave enforced payment but for the law for the limitation of suits

Completed gifts Compensation for the past voluntary services

Charitable subscription

Eg: On a birthday party of A, his father Mr. B promises to give him Rs.

10000/-. Mr. B puts his promise in writing and gets it registered it. It is a

valid consideration.


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Completed gifts The rule No consideration, no contract does not apply to

completed gifts.

In order to attract this exception there need not be natural

love and affection or nearness of relationship betweendonor and donee. The gift must, however, be complete.

Compensation for the past voluntary services - isbinding. E.g. P finds Ss purse and gives it to him. S promises to give

P Rs. 100/- This is a contract i.e., A promise, to compensate,wholly or in part, a person, who has already voluntarilydone something for the promisor, is enforceable, eventhough without consideration.


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Contribution to Charity:

A person to contribute to charity , though gratuitous, would be enforceable,if on the faith of the promised subscription, the promisee takes definite stepsin furtherance of the object and undertakes a liability, to the extent of liabilityincurred, not exceeding the promised amount of subscription.

E.g. The defendant had agreed to subscribe Rs. 100/- towards theconstruction of a Town hall at Howrah. The plaintiff (secretary of the townhall) on the faith of the promise entrusted the work to a contractor andundertook liability to pay him. The defendant was held liable. But where thepromisee had done nothing on the promise, a promised subscription is notlegally recoverable.

E.g. The defendant promised to subscribe Rs. 500/- to a fund started forrebuilding a Mosque but no steps had been taken to carry out the repairs.The defendant was held not liable and the suit was dismissed.


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Doctrine of Privity of Contract

Meaning: The general rule is that only the parties to a

contract can sue and be sued upon the contract.

In other words, if a person is not a party to thecontract (i.e., a stranger to contract), he cannotsue.

It implies the mutuality of will and legal bondingbetween the parties.

It refers to the relationship between the partieswho have entered into a contract.

Stranger to Contract V. Stranger to Consideration

Dunlop Pneumatic Tyre Co. V Selfridge and Co.

# D entered into a contract of sale of certain tyres to P.

# The contract provided that P shall not sell the tyres below thelist price. Also, the contract provided that P shall, at time of resale,impose a condition on the retailer that sale by retailer shall not bemade below the list price.

# P sold certain tyres to S. S resold certain tyres below the listprice.

# In a suit instituted by D against S, the court held that such suitwas not maintainable since there was no Privity of contractbetween S and D.

A who is indebted to B, sells his property to C. C promises to payoff the debt to B. When C fails to pay; B has no right to sue C,because he is a stranger to contract.


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ExceptionsStranger to Contract has the

right to sue in the following cases:

Trust or Charge

Marriage Settlement, Partition and otherfamily arrangements; and such agreements is

reduced to writing. Acknowledgement of liability; by past

performance thereof

Assignment of a Contract

Contracts entered into through an Agent

Covenants running with land

Beneficiary, in whose favour a Trust or` other interest in someimmovable property has been created can enforce it, eventhough he is not a party to the Contract (Madhu Trading Co. VUOI).

A husband who was separated from his wife executed a separation deedby which he promised to pay to the Trustees all the expenses for hermaintenance. Held, the agreement created a trust in favour of his wife andcould be enforceable by her (Gandy V. Gandy).X receives money from Y for paying it to Z. X admits the receipt of thatamount to Z. Z can recover the amount from X, even though the moneyis due from y.

A holder in due course is entitled to the amount on a NegotiableInstrument, even though there is no agreement between him andthe maker/drawer.

The Purchaser of immovable property who has notice that the owner ofthe land is bound by certain conditions or covenants created by anagreement affecting the land, shall be bound by such conditions, eventhough he is not a party to the original agreement containing those

conditions or covenants.


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Free consentMeaning The consent of parties are said to be free when they are of same

mind on all material terms of contract. The parties are said to beof same mind when they agree on 3s

Same subject matter

Same sense

Same time

If any one of the following elements are in agreement, we can saythat there is absence of free consent

Coercion

Undue Influence

Fraud

Mistake

Misrepresentation


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Coercion

Coercion" is the committing, or threatening to commit, any

act/crime or

the unlawful detaining, or threatening to detain,any property or

any act forbidden by the Indian Penal Code 1860

with the intention of causing any person to enterinto an agreement.

Threat to commit Suicide amount to Coercion

E.g. A threatens B to shoot him if he does not release him from

debt which A owes to B. This is coercion.


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Undue Influence

Undue Influence means: When a special kind of relationship exists between the parties

such that one party is in a position to exercise undue influenceover the other.

And such party uses his position to dominate the will of the otherparty to obtain an unfair advantage over the other party

Essentials: There must be two persons.

There must be a relationship between them.

One should dominate the other.

There must be unfair advantage.

It is of moral character.


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Undue Influence

Some of the examples where undue influence existsbetween the following relations:

Superior and subordinate

Principal and agent

Doctor and Patient

Promoter and Company

Solicitor and Client

Father and Son Teacher and Student

Spiritual guru and devotee

Case Laws: A Spiritual guru induced his devotee to gift him the whole ofhis property in turn of a promise of salvation of the devotee. Held, theconsent of the devotee was given under the undue influence. (Mannu

Singh v/s Umadat Panday)


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Undue Influence

Under the following relationship there is noassumption of undue influence.

Husband and Wife

Landlord and tenant Debtor and Creditor


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COERCION UNDUE INFLUENCE

Consent is given under threat The consent is given by a person

who is so situated in relation toanother that the other person is ina position to dominate his will

Coercion need not proceed fromparties to the contract but can bedone thro/by a stranger

Undue influence is between theparties to the agreement

Contract is voidable at the optionof one of the parties of the contract

The contract is either voidable orthe court may enforce it in amodified form

Coercion is mainly of physicalnature Undue influence is of moral andpsychological nature


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Fraud

Essentials: There must be a representation There must be two persons There must be an active concealment of the fact

The person making the representation does not believe it tobe true There must be an intention of the proposer or the promiser

to deceive the other person The other person must have relied upon the representation

and must have been deceived and suffered loss The representation must have been made before the

Commencement of the contract The representation must relate to a material fact which

exists now or existed in the past


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Fraud

The party defrauded has the followingremedies:

The contract can be rescinded within reasonable

time limit He can insist on the performance of the contract

on the condition that he shall be put in theposition in which he would have been if the

representation made had been true He can sue for damages


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Misrepresentation

Essentials:

It must be representation of material fact

It must be made before the conclusion of the

contract It must be wrong but the person making it

believes it to be true

It must have been made without any intention of

deceiving the other Person

It need not be made directly made to the Plaintiff

CL: A companys prospectus contains a representation that it hasstatutory powers to run its tramways by steam provided that the consentof the government was obtained. The directors issued prospects statingtherein that the company had the right to use steam power. They honestlybelieved that the permission for the use of steam power would begranted. The permission was refused. The company was wound up. Held,

the directors were guilty of misrepresentation (Derry vs. Peek)


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MISREPRESENTATION FRAUDIt is a false statement

without any intention todeceive

It is a false statement

deliberately, or recklesslymade to deceive another

It is also called innocent

misrepresentation

It is also called intentional

misrepresentation

It makes the contractvoidable at the option of

the party injured

Besides avoiding thecontract, the aggrieved

party also has right to suefor damages


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Mistake

Mistake may be defined as an erroneous beliefabout something.

It may be of two kinds

mistake of law Law of own country

Law of foreign country

mistake of fact A bilateral mistake

Unilateral mistake


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Mistake of law

Mistake of law of the country is no excuse,is a well-settled rule of law. A Party to thecontract cannot be allowed to ask for relief on

the ground that the act was done inignorance of law.

Mistake of law of a foreign country: suchmistake is treated as mistake of fact, and suchagreement is treated as void.

E.g. A purchases and B sells a plot of land of 195 sq.mts. in Dublin,believing that a house can be constructed over it. Actually in Dublinhouse cannot be constructed on a plot less than 200 sq.mts. The contractcan be avoided.


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Mistake of fact Unilateral Mistake - Unilateral means only one party to a contract is under a mistake offact. A contract can be avoided on the ground of unilateral mistake, if it can be shown thatmistake was caused by Fraud or misrepresentation. Types:

A unilateral mistake may be- Mistake as to the nature of transaction Mistake as to identity of party

Bilateral Mistake - Where both the parties to an agreement are under a mistake as to a

matter of fact, the agreement is void. Types

Mistake as to existence of subject-matterIdentity of subject-matterTitle of subject-matterQuality of subject-matterQuantity of subject-matter

Price of subject-matterE.g. A agrees to buy a horse from B at certain price. The horse was dead at the time of

bargain and neither party was aware about the fact. Held, the agreement is void.

E.g. A person was induced to sign a gift deed (will), on the presentation that it

was a power attorney.

E.g. X goes to a shop and introduces himself as Y and purchases some goods

on credit. The contract is void.

E.g. X goes to a shop and introduces himself as Y and purchases some

goods on credit. The contract is void.


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Capacity To ContractMeaning Every person is competent to contract who is of:

the age of majority according to the law to which he is subject, sound mind, and is not disqualified from contracting by any law to which he is subject.

Section 11 declares the following persons to be incompetent to contract. Minors Persons of unsound mind Persons disqualified by any law for the time being in force. Idiot Lunatic with unsound mind Alien enemy Convicts


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Minor - Meaning Minors: according to Section 3 of the Indian Majorities Act, 1875, a minor is

a person who has not completed eighteen years of age. In the following twocases, he attains majority after twenty one years of age:

Where a guardian of a minors person or property has been appointedunder the guardian and wards Act, 1890, or

Where the superintendence of a minors property is assumed to be courtof wards.

The rules governing minors agreements are based on two fundamentalrules:

The first rule is that the law protects minors against their own

inexperience and against the possible improper designs of those moreexperienced.

The second rule is that, in pursuing the above object, the law should notcause unnecessary hardship to person who deals with minors.

Remember in the case we discussed, a minor mortgaged his house in favour of a

money lender to secure a loan of Rs 20 000/ Subsequently the minor sued for


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Legal rules of Minors:

An agreement with minor is void- ab-inito: He can be a Promisee or a Beneficiary: incapacity of minor to enter into a

contract means incapacity to bind him-self by a contract. There is nothingthat debars him from being a beneficiary. Such contract may be enforced atthe option of the minor and not the other party.

Minor cannot ratify his contract, on attaining majority: Consideration

which passed under earlier contract cannot be implied into the contractwhich the minor enter on attaining the majority. Thus consideration givenduring the minority is no consideration. If it is necessary a fresh contractmay be entered into by the minor on attaining the majority provided it issupported by a fresh consideration

He can always plead minority: even if he has, by misrepresenting his age,

induced the other party to contract with him, he cannot be sued either incontract or in tort for fraud because if the injured party were allowed to suefor fraud, it would be giving him an indirect means of enforcing the voidagreement.

money lender to secure a loan of Rs.20, 000/- Subsequently the minor sued for

setting a side the mortgage, stating that he was underage when he executed the

mortgage. Held, the mortgage was void and, therefore, it was cancelled. Furtherthe money lender requested for the repayment of the amount advanced to the

minor as part of the consideration for the mortgage was also not accepted (MohiriBibi vs. Dharamodas Ghose)

Case law: M, Aged 17, agreed to purchase a second hand scooter for Rs.5000/-

from N. he paid Rs.200/- as advance and agreed to pay the balance the next day

and collect the scooter. When he came with the balance money next day, N told him

that he has changed his mind and offered to return the advance. N cannot avoid the

contract, though M may, if he likes. (Sharafat Ali v/s Noor Mohd)Case law: M, A minor, borrowed Rs.5000/- from L and executed a Promissorynote in favour of L. after attaining the majority, he executed another Promissorynote in settlement of the first note. The second Promissory note is void for thewant of consideration. (Indran Rama Swamy v/s Anthiappa Chettiar)

Ex: Mr. M, a minor, obtains a loan by mortgaging his property. He is not liable torefund the loan not only that even his mortgaged property cannot be made liable


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If he has received any benefit under a void agreement, he cannot be

asked to compensate or pay for it: section 65 which provides forrestitution in case of agreements discovered to be void does not applyto the minor

There can be no specific performance of the contract with minor,since agreement with minor is void-ab-inito: Cant file a suit forspecific non performance. But if a contract is entered into on his

behalf by his Parents / guardian then the same can be enforced by oragainst the minor provided the contract is (a) within the scope of theauthority of the Parent / guardian, and (b) for the benefit of theminor.

He cannot enter into a contract of Partnership: a minor can beadmitted as a beneficiary of Profits of a Partnership firm already in

existence, with the consent of all the existing Partners. But he cannotbe admitted as a Partner He can be an agent: an agent is merely connecting link between

Principal and third Party. The movement the Principal and third partycomes into contract with each other, the agent drops out with anypersonal liability, hence a minor can act as agent.

Legal rules of Minors:refund the loan not only that, even his mortgaged property cannot be made liableto pay the debt.


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Legal rules for a Minor His Parents / guardian are / is not liable for the contracts of the minor: the

exemption to this rule is that where the minor act as an agent of his Parent /

guardian, the Parent / guardian shall be liable for his acts.

He cannot be adjudged as an insolvent.

He cannot be a shareholder in a Company.

He can be member in a Trade union: A Person who attained the age of 14 years can

be admitted as a member.

Minors liability for necessaries: a minor is liable to pay out of his property fornecessaries supplied to him or to anyone whom he is legally bound to support(Section 68). The claim arises not out of contract but out of what are called Quasi-Contracts. Again it is only the property of the minor, which is liable for meeting theliability arising out of such contracts. He is not personally liable.

Case law: G, a minor, entered into a contract with R, a noted billiards player, topay him certain sum of money to learn the game and play matches with him duringhis world tour. R spent time and money in making arrangements for billiardsmatches. Held, G was liable to pay as the agreement was one for necessaries asit was in effect for teaching, instructions and employment and was reasonableand for the benefit of the infant.(Robarts v/s Gray)


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Legal rules for a Minor

No rule of Estoppelto minor Estoppel means A person making a statement by words spoken or

written which induces others to believe and acted upon.

Rule preventing a person from denying the truth of such a statementmade previously by words spoken or written, by which he has ledanother to believe and acted upon.

Therefore, he is stopped from denying the said statement.

i.e. cant say no, so should act.

Minor is liable for Tort

Surety for a Minor: a person who stands as surety for a minor can be suedthough the minor himself would not be liable


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Unsound Mind

A person is said to be of sound mind for the propose of making acontract, if, at the time when he makes it, he is capable of understanding the

terms of the contract and To form a rational judgment as to its effect upon his interest.

Therefore, if both of the above is not satisfied, then is a personsuffering of unsound mind.Eg: Idiots Lunatics Drunkards

A person, who is usually of unsound mind, but occasionally ofsound mind, may make a contract when he is of sound mind


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Lunatics

Lunatic is a person who suffers fromintermittent intervals of sanity and insanity.

All agreements made by lunatics duringintervals of sanity are valid

Property of lunatic is liable for necessities oflife contracts but a lunatic cannot be heldpersonally liable


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Idiots

Idiot is a person who has completely lost hismental balance.

An agreement with an idiot is absolutelyvoid.


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Drunkards

A high level of intoxication make adrunkards contract void

A contract made by a person so intoxicatedas not to know the consequences of his act isnot binding on him

h l hibi d


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Few other Persons are also Prohibited to

enter into a contract.

Alien Enemy.

Insolvent.

Foreign Sovereigns, their diplomatic staff

and accredited representatives of theforeign states.

Corporations (beyond MOA and AOA).

Convicts

C b h h di lifi d


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Contract by the other person disqualified

by law Alien enemy Contracts with an alien enemy (who is a citizen of a foreign country which

is not in peaceful terms with India) are void on the grounds of public policy.Contracts may be suspended during the war and may be revived after the war is over,provided they are not time-barred.

I Position of Contracts during War An alien enemy can neither enter into contract norcan be sued in an Indian Court except by the license by the Government.

II Position of contracts during the war:

If such contracts are against the public policy or are such that may benefit the enemy, then suchcontracts are dissolved.

If such contracts are not against public policy, then such contracts are merely suspended for theduration of the war and revived after the war is over unless they have already become time barredunder the Law of Limitation.

E.g. X, an Indian citizen, carries on a business in Pakistan. He enters into a contract with Ywho carries on business in India. Immediately after the formation of the contract, a warbroke out between India and Pakistan. In this case, X becomes an alien enemy though he isIndian and contract between x and y (if not against the public policy) will be suspended forthe duration of the war and revived after the war is over.

F h P l P hibi d


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Few other Persons are also Prohibited to

enter into a contract Foreign Sovereign and Ambassadors: - They can enter contract and enforce those

contracts in our courts but they cannot be sued in our courts without the sanction ofthe Central Govt.

Company under the companies act or statutory corporation under the special act ofparliament: - The contractual capacity of the company is determined by objectsclause of its Memorandum of Association, whereas that of the statutory corporationis determined by the statute creating it. Any act in excess of the power given is ultravires and hence void.

Insolvents - When a person is declared insolvent, it is only the Official Receiver orOfficial Assignee who can enter into contracts relating to his property and sue and besued on his behalf. Thus, as soon as a person is declared insolvent, he looses hiscontractual capacity.

Convicts: A convict cannot enter into a contract while he is undergoingimprisonment. Thus, this incapacity is only during the period of sentence.

Insolvent after the order of discharge he is competent to enter into contracts.

L f l bj


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Lawful objects The consideration or object of an agreement is

lawful, unless It is forbidden by law; or is of such nature that, if permitted it would defeat the

provisions of any law or is fraudulent;

of involves or implies, injury to the person or property ofanother; or the Court regards it as immoral, or opposed to public policy

Every agreement of which the object orconsideration is unlawful is void.

U l f l bj


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Unlawful objects It is forbidden by law - An act is forbidden by law when it is punishable

under the criminal law or is prohibited by special legislation or regulations

made by the competent authority.

is of such nature that, if permitted it would defeat the provisions of anylaw

is fraudulent - an agreement if any made for any fraudulent purpose isvoid. Thus, an agreement with an intention of fraud of creditors with aview to defeat their right is void.

involves or implies, injury to the person or property of another - injurymeans wrong, harm or damage. Person means ones body, propertyincludes both movable and immovable.

the Court regards it as immoral - an agreement, the consideration or objectof which is immoral, e.g., agreement between husband and wife for futureseparation, is unlawful (Sumitra Devi v/s Sulekha Kundu)

opposed to public policy An agreement which is injurious to the generalpublic or is against the interest of the society

VOID AGREEMENTS


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VOID AGREEMENTS

Agreements by incompetent parties Agreements under mutual mistake of fact material to the

agreement

Agreement with unlawful consideration or object (a) immoral& illegal agreements (b) agreements opposed to public policy

Agreements unlawful in part Agreements without consideration

Agreements in restraint of marriage

Agreements in restraint of legal proceedings

Agreements which are uncertain and ambiguous Agreement by way of wager or wagering agreements

Agreements to do impossible acts

B il B il d B il


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Bailment, Bailor and Bailee

Bailment is The delivery of goods, by one person to another, for some

purpose, Upon a contract that they shall, when the purpose is

accomplished, Be returned or otherwise disposed of, According to the instructions of the person delivering

them. (Section 148)

Bailor

is the person delivering the goods Bailee

is the person to whom the goods are delivered.

E i l f B il


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Essentials of Bailment

Contract Delivery of the Goods Delivery of

possession of goods by Bailor to Bailee

Possession (not ownership) is transferred Modes of Delivery

Purpose (goods must be returned after aspecific purpose is accomplished)

Consideration (generally in the form ofmoney payment)


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Duties of the Bailor

Disclose faults in goods (Sec 150)

Bear Expenses (Sec 158)

Indemnify(secure in respect of harm) Bailee

(Sec 159 & Sec 164)

Receipt of Goods back on termination ofbailment


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Ri h f B il


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Rights of Bailee

Enforcement of Bailors duties

Delivery of goods to Joint Bailors

Delivery of goods when Bailors title is

defective (Sec 166)

Right of Lien (Secs 170 & 171)

Wrongful deprivation of goods (Secs 180 &

181)

Pl d


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Pledge

Pledge is a Bailment of goods as security forpayment of a debt or performance of apromise

Pawnor is the Bailor of such goods Pawnee is the Bailee of the goods

Eg., A borrows Rs.200 from B and keeps his

watch as security for payment of the debt, thebailment of watch is a pledge.

E ti l El m t f C tr t f


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Essential Elements of a Contract of

Pledge

Delivery of Goods (may be actual orconstructive)

Security

Goods Only goods can be pledged. Goodsincludes Shares, Documents, PromissoryNotes, Bills of Exchange or Valuable things.

However, money i.e., currency notes, cannotbe pledged.

Ri ht f P /Pl d


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Rights of a Pawnee/Pledgee

Right of Retainer (Sec 173) Retainer for subsequent advances (Sec 174)

Reimbursement of Expenses (Sec 175)

Rights in case of default by Pawnor (Sec 176) Suit

Retention/Sale of Goods

Surplus/Deficit on Sale

No Notice

Right against true owner (Sec 178A)

Ri ht f P


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Rights of a Pawnor

To get back goods

To redeem goods before sale (Sec 177)

Right to Notice of Sale

Goods in proper condition

Pl d V B il t


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Pledge V. Bailment

Pledge Purpose: specific

Sale of goods: Pledgeehas a right of sale of

pledged on default ofpawnor

Use of goods: No right

Bailment Purpose: other purposes

like repairs, safe custody,etc.,

Sale of goods: No right Use of goods: Can use as

per the terms of thecontract

L f A


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Law of Agency

Definitions (Sec 182) Agent Is a person employed

To do any act for another, or

To represent another in dealings with third parties

Principal Is the person

For whom such act is done, or

Who is so represented

Who can appoint Agent (Sec 183)


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Who can appoint Agent (Sec 183)

Any person who Has attained the age of majority

and

Is of sound mind,can appoint another person as his agent to

act on his behalf with an authority to bind him.

Who may become Agent (Sec 184)


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Who may become Agent (Sec 184)

As between Principal and the third party,any person can become an Agent.

Even a person who

Has not attained majority; or Is of unsound mind, can become an agent of

another.

Essentials of a Contract of Agency


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Essentials of a Contract of Agency

Test for Agency

Rules as to Agency (Maxim: qui facit peralium facit per se)

Elements of Agency Intention

Express/Implied Agreement

Consideration not necessary Capacity to employ agent

Capacity to be employed as agent

Kinds of Agents


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Kinds of Agents

Based on Authority Universal Agent

General Agent

Special Agent Based on Nature of Work

Commercial or Mercantile Agents

Non-mercantile Agents

Duties of an Agent/Rights of the Principal

The Principal instructed his agents to deliver goods only against


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Duties of an Agent/Rights of the Principal

To act as per Principals directions (Sec 211) Skill and diligence (Sec 212)

Render proper Accounts (Sec 213)

Communicate with Principal (Sec 214) Not to deal on his own account (Secs 215 &

216)

Pay all sums received (Sec 218) No remuneration for business misconducted

(Sec 220)

p g g y gcash but agent delivered them on credit. Held Agent was liable forthe price which the purchaser failed to pay (Paul Bier V. Chottalal)A, an agent for sale of goods, having authority to sell on credit,

sells to B on credit, without making proper and usual enquiries asto his solvency. B, at the time of such sale is insolvent. A must

make compensation to his principal in respect of any loss therebysustained.

A employs B to recover Rs. 1 lac from C. Through Bs misconductthe money is not recovered from C. B is not entitled toremuneration for his services, and shall make good the losssustained.

Contd


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Contd.,

Not to make secret profits

Not to disclose information

Upon termination of agency (Sec 209)

Not to delegate authority (Sec 190)

Liable to pay damages

Rights of an Agent/Duties of the Principal


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Rights of an Agent/Duties of the Principal

Right of Retainer (Sec 217)

Right to Remuneration (Secs 219 & 220)

Right of Lien (hold property to recover debt

Sec 221) Right to be indemnified (Secs 222, 223, & 224)

Right to compensation (Sec 225)

Right of stoppage in transit

Liability of Principal inducing others (Sec237)

Mode of creation of Agency


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Mode of creation of Agency

Express Agreement

Implied Agreement

Agency by Estoppel

Agency by Holding Out Agency in case of Necessity

Agency by Ratification

By operation of Law

A residing in Delhi and has a house at Kolkata. Heappoints B in Kolkata, by a Power of Attorney, as acaretaker of his house.A owns a shop in Noida but lives in Delhi. He visits the shop

occasionally which is managed by B. B usually orders from C inAs name for the shop, and pays them out of As funds with Asknowledge. B has an implied authority from A to order goods fromC in his name for the shop.

P consigns goods to N with instructions not to sell below a fixed price. Jenters into an agreement with N (who also does not indicate the reserveprice) for the purchase of entire lot at a sum below reserve price. P keepsquiet. P is stopped from later denying that N did not have the authority tosell below the reserve price.

P allows his servant A to buy goods for him on credit from C and pays forthem regularly. On one occasion, P pays A cash to purchase goods. Apurchases goods on credit and pockets the money. C can recover the price

from P since through previous dealings, P has held out A as his Agent.

* Partners are considered as Agents of each other and also of theFirm.* The management of a Company is considered to act as anAgents of the Company.

Meaning: When a person does some act on behalf of anotherwithout such others knowledge, the act may be ratified(toapprove or sanction or confirm) or disown by the other person.

When he opts to ratify the same, he is bound by the acts as if hehad expressly authorised the person to do the act on his behalf(Sec 196).

A without authority, buys goods, for B. Later B sells them to C on hisown account; Bs conduct implies a ratification of purchase made forhim by A.

* Agent may have to sell goods instantly if it is of perishable natureand cannot withstand until further instructions from Principal.* A horse sent by rail was not taken delivery at the destination. Thestation master has to feed the horse. The Station master becomesan Agent by necessity and hence the owner shall compensate him.

Conditions for a Relationship to be an


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Conditions for a Relationship to be an

agency by necessity:

Agent should neither be in a position nor have anyopportunity to communicate with his Principalwithin the time available.

Actual and definite commercial necessity to actpromptly.

Acted bonafide and for the benefit of his Principal.

Adopted the most reasonable and practicable cause.

Possession of the goods belonging to his principaland which are subject of contract.

Termination of Agency


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Termination of Agency By Act of Parties

Agreement (mutual agreement) Revocation by Principal thro notice Renunciation by Agent thro reasonable notice

By Operation of Law Completion of Business

Impossibility of performance Expiry of fixed period of time Insanity or death of Principal or Agent Destruction of subject matter Insolvency of Principal

Termination of Sub-agents authority Dissolution of a Company Principal or Agent becoming Alien enemy

Performance of Contract


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Performance of Contract

Obligations of Parties to Contracts Actual Performance: If the promisor makes an

offer of performance to the promisee and the offerto perform is accepted by the promisee.

Attempted Performance: If the promisor makes anoffer of performance to the promisee; but the offerto perform is not accepted by the promisee (also

called offer to perform or tender)

Persons liable for and entitled to


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Persons liable for, and entitled to,

Performance (Sec 40 & Sec 42)

Persons liable forPerformance: Promisor

Agent of Promisor

Any of the several jointpromisors

Legal Representatives ofa Promisor

Persons entitled toPerformance: Promisee

Agent of Promisee

All the joint promiseestogether

Legal Representatives ofa Promisee

Performance of Joint Promise


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Performance of Joint Promise

Jointly and severally liable unless otherwiseprovided

Claim from other joint promisors, if he is

compelled to perform the whole promise ormakes a default in performance of hispromise

Where one of the joint promisors is released,other joint promisors shall continue to beliable.



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Means termination of contractual relationsbetween the parties to a contract.

Modes of Discharge of Contract:

By performance By impossibility of performance

By mutual agreement

By lapse of time By operation of law

By breach of contract

*A agrees to sell his bicycle to B and both performed theirrespective obligations, the contract is said to be discharged.* In case of Attempted Performance, since the offer is notaccepted by the other party, the promisor is discharged.

Where the time of performance by a party is due but the partyfails to perform within the time specified, the contract isdischarged by non-performance provided that the contractcontained such specific mentioning.

Discharge by Impossibility of


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Discharge by Impossibility of

Performance

Meaning: If no impossibility existed at thetime of formation of the contract; but theimpossibility arises subsequent to theformation of the contract; and theimpossibility is of such nature that it makesthe performance of contract is impossible orillegal is called supervening impossibility.

Reasons for SI: may arise because of changein law or of change in circumstances beyondthe contemplation of parties.

E.g.,Destruction of subject matterIncapacity to perform a contract of personal serviceOutbreak of warNon-existence or non-occurrence of things forming the basis of a

contract, etc.,Krell V Henry Case law:X hired a room from Y for viewing the coronation process of KingEdward.The procession was cancelled because of Kings illnessSince the ultimate and only purpose of the contract was defeated,the contract was discharged.

Not called as supervening impossibility:Commercial impossibility (rise in prices, currency fluctuations)Default by third partyStrikes, Civil disturbancesSelf induced impossibility (deliberate act or negligence)

Partial failure of objects or partial impossibilityIn H.B.Steamboat Co., V Hulton Case law:X agreed to hire a boat from Y for the purpose of viewing thenaval review on the eve of coronation of king and for sailingaround the fleet.Due to Kings illness, the naval review was cancelled, but the fleetwas assembled.X used the boat for sailing around the fleet.Although the primary purpose of the contract was defeated, thesecondary purpose was fulfilled and, therefore, the contract wasnot discharged by supervening impossibility.

Discharge by Mutual Agreement

means substitution of a new contract in place of the originalt t Th id ti f th t t i th


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Discharge by Mutual Agreement

Novation

Alteration

Remission

Rescission (cancellation of a contract by oneor all the parties to the contract)

Merger (conversion of an inferior right into a

superior right and the effect is due toconversion inferior right is discharged)

contract. The consideration for the new contract is thedischarge of the original contract.

* means a change in one or more of the terms of a contract with mutualconsent of parties.

* Discharges the original contract and creates a new one* Parties remain the same

Where a promisee agrees to dispense with the performance of apromise made to him orExtend the time of performance due by the promisor orAccept any other consideration than agreed to in the contract,etc.,


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Discharge by Breach of Contract


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Discharge by Breach of Contract

Meaning: Failure of a party to perform hispart of contract

Consequences:

The other party is relieved from performing itspart of obligation.

The other party is entitled to proceed against theparty at fault.

Actual Breach (on the due date or duringperformance)

Anticipatory Breach

Where the promisor declares his intention of not performing thecontract even before the time stipulated for performance ofcontract has arrived, it is called as anticipatory breach.Express Repudiation: If before the time or performance ofcontract has arrived, a party expressly refuses to perform thecontract, it is called as express repudation.Party disables himself: Impossible for him to perform thecontract, this is called as anticipatory breach by disablement of

a party.Effects Option 1: The aggrieved party may wait till the due date,i.e., it may treat the contract as operative.Option 2: The aggrieved party may decide not to wait till the duedate. It may immediately rescind the contract and claimdamages for breach.

Remedies for breach of a contract


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Remedies for breach of a contract

Rescission (means a right available to anaggrieved party to terminate a contract)

Suit for damages

Suit for specific performances Suit for injunction

Suit for Quantum Meriut

Effects: - The aggrieved party is not required to perform his partof obligation;

- The aggrieved party can claim compensation for any loss caused tohim.

If a party prevents the other party from completing his obligationunder the contract, the aggrieved party may claim payment onquantum meriut for the part of contract already performed by him.

Injunction means an order of the court restraining a party from

carrying out a particular act.The remedy is available when the court has the discretion whetheror not to grant injunction; where a party to the contract promisesto do an act which requires personal performance but afterwardsrefuses to perform such act resulting in breach of contract, the

.Specific performance means seeking an order from the court thatthe promise specified in the contract shall be carried out.. When actual damages arising from breach are not measurableand monetary compensation is not an adequate remedy, then SP is

allowed.. Where damages are an adequate remedy; where the performanceof contract involves numerous or minute details, and, therefore, itis not possible for the court to supervise the performance of thecontract

Meaning: Monetary compensation allowed for loss suffered bythe aggrieved party due to breach of a contract.Object is Not to punish the party at default and To make goodthe financial loss suffered by the aggrieved party due tobreach of contract.

A promises B to perform a concert for 3 weeks continuously. Awilfully absents on the third week. B rescinds the contract. B can

claim for loss sustained for loss sustained due to non-performance.

e.g., N, a film star, agreed to act exclusively for a particularproducer, for one year. During the year, she contracted to act forsome other producer. Held, she could be restrained by aninjunction (Warner Bros. V Nelson)

E.g., A contracts with B to deliver to him 250 kilos of rice before1st may. A could deliver only 130 kilos before 1st may, and couldnot deliver anything later. B retains 130 kilos after that date. He is