CONCEPT OF LAW  Definition and Meaning of Law: Austin, "A law is a rule of conduct imposed and enforced by the Sovereign". Salmond , "Law is the body of principles recognized and applied by the State in the administration of justice“.

Holland defines law as " a general rule of external human action enforced by a sovereign political authority, i.e., the State". The Oxford English Dictionary the term 'Law' means "rule made by authority for the proper regulation of a community or society or for correct conduct in life". In the words of Blackstone, "Law in its most general and comprehensive sense signifies a rule of action and is applied indiscriminately to all kinds of actions, whether animate or inanimate, rational or irrational“.

• Woodrow Wilson defines law as "that portion of the established habit & thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the Government”.

• From these definitions, it is clear that law refers to a code of conduct established and enforced by the Government for the proper, regulation of society and for the orderly conduct individuals.

• In other words, law is the body of rules and principles recognized and enforced by the Government to regulate the external human action and conduct of individuals in there dealings with other individuals and with the State (the Government).

• In short, law means the rules recognized and enforced by the State for regulating the rights and obligations of the people for securing justice, peaceful living and social security.

 

•  

Nature of Concept of Law:The nature of concept of law is indicated by its characteristics.

The essential features of law are: 1. Law is a code of conduct (i.e., a set of rules) relating to human action. 2. Law attempts to regulate the external action of human beings ( Man's contacts, associations, dealings or relationships with others and with the State). 3. Law is recognized and enforced by the State Government.. 4. It is enforced by the State on the people so as to secure social justice, Peaceful living and social security in the community 5. No doubt, the law is recognized and enforced by the State. But the State itself is conditioned (i.e, regulated) by the same law. That means, law applies to all without discrimination. In fact, law attempts to achieve uniform it in its application. 6. Law always remains supreme. (The supremacy of law is technically called the rule of law.)

CONCEPT OF BUSINESS LAW

Definition and Meaning of Business Law or Mercantile Law: Slater, "The phrase 'mercantile law' is generally used to denote “ those portions of the law which deal with the rights and obligations arising out of transactions between mercantile persons“. From this definition, it is clear that “business law or mercantile law is that branch of law which deals with the rights & obligations arising out of business transactions between businessmen”. In other words, business law is that branch of law which prescribes a set of rules for the regulation of certain transactions and relations between (a) businessmen themselves, (b) businessmen and their customers, dealers and suppliers and (c) businessmen and the state. In short, it is that part of the general law or civil law which regulates and governs trade, commerce and industry.

Scope of Business Law: The scope of business law is fairly wide and comprehensive. It is, generally, understood to include laws relating to contracts,partnerships,companies,sale of goods, negotiable instruments, insurance, insolvency, arbitration, carriage of goods,etc. 1. English Mercantile Law:Indian Mercantile Law or business law is largely based on the English Mercantile Law. Many rules of the English Mercantile Law have been incorporated (include) in the Indian Mercantile Law. Further, even now, Indian courts of law, generally take recourse to the English Mercantile Law, whenever an Act is silent on any point or when there is ambiguity.It is true that Indian mercantile law is largely based on the English Mercantile Law. 'However, certain deviations have been made in the Indian Mercantile Law to provide for local customs or usages of trader the peculiar conditions prevailing in India. 2. Statute Law: Statute law refers to the various Statutes or Acts passed by the Legislature (i.e. by the Parliament or State Legislature). The statute law is the most important source of the Indian Mercantile Law. The bulk of the Indian Mercantile Law is statute, law. The Indian Contract Act,1872,The Indian Negotiable Instruments Act, 1881, the Sale of Goods Act,1930, the Indian Partnership Act,1932, The Companies Act, 1956, etc. are examples of statute law.

3. Judicial Decisions, System of Precedents or Case Law: Judicial decisions are one of the important sources of the Indian Mercantile Law. Judicial decisions or precedents refer to previous judicial decisions (i.e,previous decisions of judges) which will be followed in similar future cases or circumstances. 4. Customs and Usages:Customs and usages are one of the important sources of the Indian Mercantile Law. Customs and usages refer to those mercantile customs and usages (i.e., customs and usages of a particular trade) which are established by long usage and recognized and incorporated by courts in judicial decisions.

LAW OF CONTRACT  Definition and Meaning of the Law of Contract: The Law of Contract maybe defined as" that branch of law, which deals with agreements, which can be enforced through courts of law”. In other words, it is that branch of law, which determines the conditions, and circumstances in which promises made by the parties to a contract will be legally binding on them. Its rules define the remedies that are available in a court of law, to the aggrieved party against the party who fails to perform his part of the contract, and the conditions under which the remedies are available.

Further, the law of contract deals with only those agreements which can be enforced through courts of law, i.e., only those agreements or promises which create legal obligations.Again, the law of contract applies only to those contracts, which create obligations between the parties to the contract, and not against the whole world.

CONTRACT Definition and Meaning of Contract: According to Fredrick Pollock, "Every agreement and promise Enforceable at law is a contract." Sir John Salmond, “A contract is an agreement creating and defining obligations between the parties”. Blackstone defines a contract as "an, agreement upon a, sufficient Consideration, to do or not to do a particular thing“.

Sir William Anson defines a ,contract as a "legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances on the part of the other or others.

“Halsbury :"A contract is an agreement between two or more persons which is intended to be enforceable at law and is constituted by the acceptance by one party of another made to him by the other party to do or abstain from doing some act".

Section 2 (h) of the Indian Contract Act, 1872 defines a contract as "an 'agreement enforceable by law".

From the above definitions, it is clear that a contract is an agreement between two or more parties which is enforceable at law. In other words, a contract is a legally binding agreement between two or more parties.

Elements of a Contract: On an analysis of the meaning of a contract, it is quite clear that a,

contract essentially consists of two elements, viz., (a)an agreement and (b) vinculum juries or legal Obligation (i.e., an

obligation created by an agreement and enforceable at law). (a) Agreement:

An agreement is defined in Section 2(e) of the Indian Contract Act, 1872 as "every promise and every set of promises, forming consideration for each other". According to this definition, an agreement is a promise or a set of promises (reciprocal or mutual promises).

That is, it is the promise made by one or more persons to the other or others, to do or not to do something.

What is a promise?. A promise is defined in Section 2(b) of the Indian Contract Act, 1872 thus: "When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise". As per this definition, a promise is an accepted proposal What is a proposal?. A proposal is defined in Section 2 (a) of the Indian Contract Act, 1872 thus: "When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal". According to this definition a proposal is intimation by one person to another of his willingness to Do or no to, do a specific act.

It is clear that an agreement come into existence only when one party makes a proposal or offer to the other Party to do or not to do something, and the other party signifies his assent, (i.e., gives his acceptance or consent) to that effect. In other words, it constitute an agreement, there must be a proposal or offer by one party, and an acceptance of that proposal or offer by the other.

In short, an agreement is the sum total of offer and acceptance. That is, an agreement is offer + acceptance.(b)Legal obligation (i.e., obligation enforceable at law): It is true that, to form a contract, there must be an agreement

between two parties. Between agreement alone cannot constitute a contract.The agreement must create legal obligation (an obligation enforceable at law). In short, the agreement must be legally enforceable. So, the second essential element of a contract is legal obligation or obligation enforceable at law.

All agreements are not contracts:It is true that an agreement may create a legal obligation or a social obligation. But, to become a contract, an agreement must give rise to a legal obligation Only an agreement which creates a legal obligation can become a contract. On the other hand, an agreement which cannot create a legal obligation ( an agreement which creates only on obligation of social, domestic, religious or moral nature) cannot constitute a contract. That means, all agreements are not contracts. Only those agreements which give rise to legal obligations (legal agreements) are contracts.All legal obligations do not constitute contracts:No doubt, legal obligations (i.e., obligations enforceable at law) may arise from agreements. But all legal obligations do not necessarily arise from agreements. There are certain legal obligations (i.e., obligations imposed by law), such as (1) obligations created by torts or civil wrongs, (2) obligations Created by quasi contracts, (3) obligations imposed by judgments of courts,(4) obligations imposed by status, Say, obligations of trustees to beneficiaries,etc,

which do not arise from agreements. That means, all legal obligations do not constitute contracts only those legal obligations, which arise from agreements constitute contracts.

Conclusion: All agreements are not contracts. It is only those agreements which give rise to legal obligations

and which are enforceable at law are Contracts.Again, all legal obligations (obligations enforceable at law) do

not constitute contracts.It is only those legal obligations,which arise,from agreements

(i.e.which are contractual in nature) constitute contracts.

Differences between an Agreement and a Contract: The terms 'agreement' and 'contract' are not one and the same. They differ from each other in some respects.  1. Every promise or every set of promises, forming consideration for each other is an agreement, on the other hand, an agreement enforceable at law is a contract.2 .An agreement is the sum total of offer and its acceptance. But a contract are the sum total of agreement and its enforceability at law (i.e., the sum total of offer, its acceptance and the enforceability of the obligation at law). 3. An agreement may or may not create legal relationship, whereas a contract necessarily creates legal relationship. 4. An agreement is a genus. But a contract is a specie of an agreement. That means an agreement is a wider concept than contract. 5. All agreements are not contracts, where as all contracts are agreements. 6. An agreement is not a concluded contract, where as a contract implies a concluded agreement.

ESSENTIALS OF A VALID CONTRACT IntroductionAccording to Section 2(h) of the Indian Contract Act, 1872, "A contract is an

agreement enforceable by law". To be enforceable by law, an agreement must satisfy certain conditions.

These conditions are called essentials of a valid contract.The essentials of a valid contract are laid down in Section 10 of the Indian

Contract Act, 1872. "All agreements are contracts if they are made by the free consent,of the parties competent to contract, for a lawful consideration and with a

lawful object and are not expressly declared to be void". The essentials or essential elements of a valid contract,

as laid down in Section 10 of the Indian Contract Act, 1872, are as follows 1. Plurality of parties:As stated earlier, a contract is an agreement enforceable by law. An

agreement is constituted by means of an offer by one party and an acceptance of that offer by the other party. That means there must be plurality of parties for a valid contract. In other words, there must be at least two parties for a valid contract, one to make an offer and the other to accept that offer.

 

2. Offer and acceptance: An agreement is a preliminary to a contract. That is, to

constitute a valid contract there must be an agreement between the contracting parties.

To constitute an agreement, there must be a valid offer by one party, and a valid acceptance of that offer by the other party.3. Intention to create legal obligation:The agreement between the contracting parties must be intended to create legal obligation or legal relationship between them. In other words, when two parties enter into an agreement, their intention must be to create legal obligations legal consequences or legal relations between them. Balfour Vs Balfour-> Husband & Wife [30 pounds/month] Kalai Halder Vs Sheikh [Dinner] [failed to attend]

4. Lawful consideration: Section 23 of the Indian Contract Act, 1872, subject to certain exceptions, an

agreement, to be enforceable by law, must be supported by consideration. That means, an agreement is legally enforceable only when there is consideration.

An agreement must not only be supported by consideration,but the consideration must also be real and lawful.

5. Competency or capacity of the parties to enter into an agreement: The parties to an agreement must be competent to enter into an agreement.That

is, the parties to an agreement must have legal capacity to enter into an agreement. Otherwise (i.e., if the parties to an agreement do not have legal capacity to. enter in to an agreement), the agreement cannot be enforced in a court of law.

6. Free consent: An agreement must be based on the free consent of the parties thereto. This essential

signifies or implies two things First, the agreement must be based on the consent of the parties thereto.

Consent of the parties means that the parties to the agreement are ad idem or of the same mind on all the material terms of the agreement in other, words, consent of the parties means that the parties to the agreement agree upon the same thing in the same sense. (Section13of the Indian Contract Act).

Secondly, not only there must be the consent of the parties to the agreement, but the consent of the parties to the agreement must also be free. The consent of the parties to the agreement is said to be free, when their consent is not caused by (a) coercion (b) un due influence, (c) misrepresentation, (d) fraud & (e) mistake.

7. Legality of the object or lawful object:The object of the agreement must be lawful. In another wards, the purpose for which the agreement has been entered into by the parties must be lawful. If the object or purpose of the agreement is unlawful, then, the agreement will be void, and so, it cannot be enforced by law.

8. Certainty: The agreement must be certain. That is, the terms of the agreement must be certain or at

least capable of being made certain. In another wards, it must be possible to ascertain the meaning of the agreement.

9. Possibility of performance:The agreement must be capable of being performed. That is, the terms of the agreement must be capable of performance. An agreement to do an impossible act (an act impossible of performance either physically or legally) is void.

10. Not expressly declared void:To be enforceable at law, the agreement must not have been expressly declared void under the Indian Contract Act or under any other Act in force in the country.If an agreement has been expressly declared to be void under the Indian Contract Act orunder any other law in force in the country, it cannot be enforced at law.

11. Legal formalities as to Writing and Registration:In cases where the agreements are required to be in writing and registered by law, the legal formalities as to writing and registration must be complied with, if the agreements are to be enforced. If the legal formalities as to writing andregistration are not complied with the agreements cannot be enforced by law.

PROPOSAL OR OFFER  Introduction Sir William Ansan, "Every contract, when carefully analyzed, will resolve

itself in to an Offer by any party and the acceptance of that offer by the other".

Meaning of Proposal or Offer: The terms 'proposal' and 'offer' are considered synonymous, and are used

interchangeably. 'Proposal' in the Indian Law is synonymous with 'Offer' in the English Law. Section 2(a) of The Indian Contract Act defines a proposal as, "When One

person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal”.

It is an expression of the willingness or intention of one party to enter into a legally binding agreement with another party.

Section 2 (c)of the Indian Contract Act, the person who makes the proposal or offer is called the proposer, offeror or promisor and the person to whom the proposal is made is called the offeree or promisee.

Essentials of a Valid Offer or Legal Rules regarding a Valid Offer: The fallowing are the essential requirements of a valid offer or the legal rules relating to a Valid Offer as per the Indian Contract Act, 1872:-1. An offer must be an expression, by a party, of his willingness to do or to abstain from doing something. In other wards, the offer must indicate clear intention or willingness on the part of the offeror to be bound by his Proposal or Offer 2. The expression of willingness to do or to abstain from doing something must be to another person. 3. The expression of willingness to do or to abstain from doing something must be made with a view to obtaining the assent (consent or acceptance) of the other person to such act or abstinence, and not merely with a view to disclosing the intention of the party making the offer 4. The offer or proposal need not necessarily be for doing something( an act). It may be for not doing or abstaining from doing something.

5. The offer or proposal may be in the form of a statement or a question 6. An offer must be intended to create legal relationship ( must give rise to legal consequences or must impose legal obligations an the offeror). 7. The terms of an offer must be definite, certain or unambiguous, and not vague, loose or ambiguous. 8. An offer may be express by words, spoken or written, or may be implied from the conduct of the parties or from the circumstances of the case. 9. An offer may be specific or general. An offer made to a definite person or class of persons is a specific offer. Such an offer can be accepted only by the specific person or any of the class of persons to whom it is made. An offer made to the general public or public at large is a general offer. A public advertisement calling for some information is an example of general offer. Such an offer can be accepted by any member of the public.

10. An offer may be positive or negative. A positive offer is an offer to do something. A negative offer is, on the other hand, an offer to abstain from doing something. 11. An offer becomes effective only when it is communicated to the offeree. Until the offer is communicated or made known to the offeree, there can be no acceptance and no contract. 12. It must be an offer, and not a mere invitation to make offer or a mere statement of intention, or a mere answer to a question. 13. An offer can be conditional, i.e., an offer can be made subject to any special terms and conditions. 14. No doubt, an offeror can attach any special terms and conditions to the offer he makes. 15. An offer should not contain terms, the non-compliance of which would amount to acceptance. 16. When two parties make identical offers to each other in ignorance of each others offer, the offers are known as cross offers.

ACCEPTANCE Meaning of Acceptance: Section 2(b) of the Indian Contract Act defines an acceptance as: "When the person to whom the proposal is made signifies his

assent thereto, the proposal is said to be accepted". According to this definition, an acceptance is the expression, by the offeree, of his assent, consent or willingness to the terms of the offer and to the establishment of legal relations. In short, an acceptance is the offeree's willingness to be bound by the terms of the offer made by the offeror.

The offeree becomes the acceptor, when he accepts the offer Essentials of a Valid Acceptance or Legal Rules as to a Valid

Acceptance:-To be legally effective, an. acceptance must satisfy certain conditions or essentials. The essentials of a valid acceptance are:

 1. As per Section 7 (i) of the Indian Contract Act, the acceptance must be absolute and unqualified (i.e.unconditional).

2.Acceptance must be by the offeree ( the person to whom the offer is made), and not by anyone else. In other words, an offer can be accepted only by the person or persons to whom the offer is made. It cannot be accepted by any other person without the consent of the offeror. 3. An acceptance should follow or succeed the offer. It should not precede the offer. 4.To conclude a contract between the offeror and the offeree, the acceptance must be communicated to the offeror in some respectable form, expressly or impliedly. Mere mental acceptance (i.e., mere resolve on the part of the offeree to accept an offer) without any external manifestation ( indication) of his intention to accept the offer either by speech or by writing or by conduct is no acceptance. In short, an un communicated acceptance is no acceptance. 5. Communication of acceptance can be waived of dispensed with by the offeror. As the communication of acceptance is intended for his benefit, the offeror can waive the communication of the acceptance.

6. The acceptance must be communicated by the offeree in accordance with the mode prescribed by the offeror 7. No doubt, an offeror has the right to prescribe the manner in which the offer may be accepted. But the law does not allow an, offeror to prescribe silence as the mode of acceptance. 8.The acceptance must be given within the prescribed period or within a reasonable time. That means, if any time limit is specified by the offeror, the acceptance by the offeree must be within that specified period. If no time is specified, it must be given within a reasonable time. 9. Again, the acceptance must be given by the offeree while the offer in force, i.e., before the offer lapses or before the offer is revoked ( withdrawn) by the offeror .10.The acceptance must show an intention on the part of the acceptor to fulfill all the terms of the promise. If no such intention is present, the acceptance is, not valid.

11. Acceptance must be the whole of a proposal. That means, when an offeror makes a composite offer and each part of the offer is dependent on the other, the offeree must accept the whole of the offer, and not a part of it, unless the offeror himself accepts a part of the acceptance. 12.A proposal once rejected, cannot be accepted by the offeree, unless it is renewed by the offeror. 13. As per Section 4 of the Indian Contract Act, communication of an acceptance is complete as against the proposer when it is put in course of transmission to him so as to be out of the power of the acceptor, and as against the acceptor, when it comes to the knowledge of the proposer. 14. Acceptance once made concludes the contract. As such, under the English Law, acceptance is irrevocable. However, under the Indian Law, an acceptance can be revoked by the acceptor at any time before the communication of the acceptance is complete as against the acceptor ( before the communication of the acceptance reaches the offeror), and not afterwards. 15. If an offer is made through an agent, it is enough if the acceptance is communicated to him.

Differences between Offer and Acceptance:

There are some differences between an offer and an acceptance. They are:

1. Offer constitutes the first stage in the formation of a

contract, where as acceptance constitutes the second stage in the formation of a contract.

2. An offer is made by the offeror to the offeree. But an acceptance is given by the offeree to the offeror. 3. An offer is not held to be made until it is brought to the knowledge of the offeree (i.e., communicated to the offeree). 4. On the other hand, an acceptance may, in certain circumstances be held to be made, though it has not come to the knowledge of the offeror (i.e., though it is not communicated to the offeror).

CONSIDERATION Need for Consideration:

Section 10 of the Indian Contract Act, 1872 provides that an agreement becomes enforceable by law only if it is made for a lawful consideration. Section 25 of the Indian Contract Act, 1872 lays down that, subject to certain exceptions, an agreement made without consideration is void. It is clear that an agreement, which is not supported by consideration,is nudum pactum (a nude or bare agreement), & ex nudo pacto non oritur action( no cause of action arises from a nude or bare agreement). In other words, absence of consideration makes a promise gratuitous,& a gratuitous promise ( a promise made without any consideration) is not enforceable at law. It is only when a promise is made in return of something from the promisee that such promise can be enforced by law against the promisor. So, barring the exceptions as laid down in Section 25 of the Indian Contract Act, as a rule, consideration is necessary for the validity of an agreement.In fact, consideration is the very foundation of a valid contract.

Definition and Meaning Of Consideration: The term 'consideration' has been defined in various ways by different authorities. In the case of Dunlop Pneumatic Tyre Co. Ltd. Vs.Selfridge & Co. Ltd. J Justice Pollock defines consideration as "The price for which the promise of the other is bought". According to this definition, consideration is the price for the promise of the other. In the case of Thomas Vs. Thomas, Justice Patterson has defined consideration as "Something which is of some value in the eyes of law. It may be some benefit to the plaintiff or some detriment to the defendant".

According to this definition, ‘consideration is something of value, which results in some benefit to the promisor, or detriment (loss) to the promisee’.In the English case of Currie Vs Misa, consideration was defined as "some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other".

According to this definition also, consideration is something of value, which results in some benefit to the plaintiff or the promisor, and some detriment to the defendant or the promisee or detriment to both Section 2 (d) of the Indian Contract Act, 1872 defines consideration thus: "When at the desire of the promisor, the promisee or any other person has done or abstained to do doing, or promises to do or abstains from doing, something, such act or abstinence or promise is called a consideration for the promise". According to this definition, consideration is (a) an act or doing something (doing an act

which one is not already legally bound to perform), (b) an abstinence or forbearance (not doing something) or a promise (a promise to do or not to do something) in return for a promise. It is quid pro quo or mutuality of benefit (something received in return for something given). 

Characteristic Features of Consideration: Section 2(d) of the Indian Contract Act, 1872, characteristic features of consideration. They are: l. Consideration need not necessarily be in cash or in kind. It maybe even an act, or abstinence or forbearance, or a promise to do or not to do something. 2. It must be something to which the law attaches value. That is, it must be something which has some value in the eyes of law. 3. It must be present in the sense of benefit to one party, and a detriment (loss) to the other party or a detriment to both. 4. It is quid pro quo, i.e,something in return for something. 5. It may have been already executed or it may be in the process of being done or it may be still executory.In other words, it may be past or present or future. 6. Consideration is given at the desire of the promisor. 7. It may be given by the promisee or by any other person.

Essentials of Valid Consideration or Legal Rules regarding Valid Consideration:

The essentials of valid consideration or the legal rules regarding valid consideration are:

l. Consideration is necessary for every contract: A bare promise(an agreement not supported by consideration) cannot be

enforced by law. In the words a promise without consideration is a gratuitous undertaking and

cannot create any legal obligation, while a promise supported by consideration is a bargain and can create legal obligation

Abdul Aziz Vs. Masum Ali. In this case, A promise B, the secretary of a Mosque Committee, to subscribe a sum of Rs.500 for rebuilding a mosque

Exceptions to the Rule –’No consideration No contract’ . (1) Contracts arising out of natural love and affection (2) Promise made to compensate for past voluntary services. (3) Promise to pay a time-barred debt. (4) Completed gift. (5)Promise to contribute to Charity. (6) Compromising or remission of a due debt and extending the time for the

performance of a contract by the promisee . (7) Contract of agency.

2. Consideration must move at the desire of the promisor. 3. Consideration may move from the promisee or any other person. 4.Consideration may be past, present or future. 5.Consideration may be Positive or Negative. 6.Consideration need not be adequate. 7.Consideration must be real & not impossible, uncertain. 8.Consideration must not be illegal or unlawful.

Consideration is considered to be unlawful in the following cases :

1.When it is forbidden by law.

2. When it is of such a nature that, if permitted, it would defeat the provisions of law.

3. When it is fraudulent.

4. When it involves or implies injury to the person or property of another.

5. When it is immoral.

6. When it is opposed to (i.e., against) public policy.

CAPACITY OFCAPACITY OF PARTIES TO CONTRACTPARTIES TO CONTRACT Introduction:The parties who enter into a contact must have the capacity to

contract. Section10 of the Indian Contract Act, 1872 lays down that an

agreement becomes a contract only if it is entered into between parties who are competent to contract. Contracts entered into by persons who are not competent to contract are void. So, capacity of the parties to contract is an essential element of a valid contract.

Meaning of Capacity to Contract: Capacity to contract means the competence or competency or the

parties to enter into a valid contract. Section 11 of the Indian Contract Act, 1872, which deals with the

capacity of the parties to contract, provides that every person (1) who is of the age or major according to the law to which he is

subject, (2) who is of sound mind and (3) who is not disqualified from contracting by any law to which he is subject( who is not subject to legal disqualifications) is competent to enter into contract.

Persons who are Incompetent to Contract: As per the provisions of Section 11 of the Indian Contract Act, 1872, the following persons are incompetent to contract: (1) Minors.(2) Persons of unsound mind.(3) Persons disqualified by any law to which they are subject. I. MINORSMINORS Meaning of a Minor: According to Section 3 of the Indian Majority Act, 1875, a minor is a person who is not a major. (A person attains majority, i.e., becomes a major, on completing his 21st year under the English Law). Under the Indian Law, a person domiciled in India attains majority on complet1ng his 18th year. However, if the superintendence (i.e., management) of a minor's property is assumed by a court of wards, or if a guardian of a minor's person or property is Capacity of Parties to contract appointed by a court of law, he attains majority only on his completing his 21st year

Law Relating to Minor's Agreements:-

The law (i.e., the rules) governing minor's agreements is based on two fundamental principles.They are:-

(1) The law protects minors against their own inexperience and against the possible improper designs of those of more experienced years. This is clear from the following statement:.

"The law protects their (minors) persons, preserves their rights and estates, excuses their mistakes (negligence, undue delay, etc.) in order to disentitle a person to a certain remedy) and assists them in their pleadings, the Judges are their Counselors the Jury are their Servants and Law is their Guardian. "

(2) In pursuing the above objective (i.e., in protecting the minors), the law should not cause unnecessary hardship to persons who deal with minors. The law (i.e., the rules) relating to a minor's agreements may be summarised as follows :-

1. Minor's agreements are void ab initio:Section11 of the Indian Contract Act, 1872 has laid down that a minor is not competent to contract. But the Indian Contract Act of 1872 has not made it clear whether a contract entered into by a minor is void or voidable. It was in the famous case of Mohiri Bibi Vs. Dharmodas Ghose, made it perfectly clear that a minor was not competent to contract, and an agreement entered into by a minor was void ab initio (right from the very beginning). 2. Minor's agreements cannot be ratified by him on his attaining majority:Since a minor's agreement is void ab initio (right from the very beginning), it cannot be ratified by him later on his attaining majority.This is based on the principle that an agreement which was void at the time when it was entered into cannot be made valid by subsequent ratification, &consideration given during minority is no consideration.So, a minor cannot ratify his agreement, even after attaining majority.3. No question of specific performance of minor's agreement: As a minor's agreement is void ab initio (right from the very beginning), there can be no question of specific performance of the minor's agreement.

4. No estoppels against a minor:There can be no estoppels against a minor. In other words, a minor cannot be estopped ( prevented) from pleading minority as a defence to avoid a contract. He can always plead minority. As such, even if a minor has, by fraudulently misrepresenting his age, induced the other party to enter in to contract with him, such a contract will be void and he(the minor) cannot be made liable on the same.

5. Restitution against a minor in certain cases: Sections 64 and 65 of the Indian Contract Act, which deal with restitution, apply only to contracts between competent parties. As such, ordinarily, there can be no restitution against a minor, who is incompetent to contract. That is, ordinarily, a minor cannot be made liable to repay any money received by him or to compensate for any benefit received by him under a void agreement.It is true that law gives protection to a minor (there can be no restitution against a minor).But law does not give him the power to cheat. ( legal actions can be taken )

6.Contract of service by a minor is void : A contract of service entered into by a minor is void. A contract of apprenticeship by a minor is valid and binding on him, provided he is not less than 14 years of age. So, a contract for apprenticeship is enforceable against a minor, if it is reasonable and is for his benefit.

 

7. Enforceability of contracts by a minor:No doubt, a minor is incompetent to contract. But the incapacity of a minor to enter into a contract made by means his incapacity to bind himself by a contract. It does not incapacitate him from enforcing a contract in his favour. In other words, there is nothing which debars a minor from enforcing a contract in which he is the beneficiary (the payee or promisee of a contract). That means, a contract wherein theminor is the beneficiary can be enforced at his option, but not at the option of the other party. 8. Surety for a minor: A loan to a minor is void. As such, if an adult stands surety for a loan to a minor, the guarantee of the loan must also be void. But, in some Indian cases, it has been held that the surety must be primarily liable. So, in India, if, in a contract of guarantee, an adult knowingly stands surety for a minor, although the minor is not liable on the contract, the adult surety is liable under the contract as a surety. This is because, in a contract of guarantee, there is a separate and direct contract between the surety and the third party

9. Contract entered into by a minor and an adult jointly:Where a minor and an adult jointly enter into a contract with another person, the

minor is not liable on the contract. But the contract as a whole can be enforced against the adult.

10. Minor and negotiable instruments: A minor can draw, make, endorse and deliver negotiable instruments so as to

bind all parties except himself.That means, he cannot be held liable to others on the negotiable-instruments to which he becomes a party.But he can enforce the negotiable instruments in his favour against others.

11. Minor's liability in torts:A minor is liable for his tort (civil wrong like assault), conversion ( wrongful use

of another persons property),Trespass over an immovable property, negligence. A minor is liable for his tort which is independent of the contract. 12. Contracts entered into by a minor do not bind his parents or guardians: A minor's parents or guardians are not liable for the contracts entered into by the

minor, even if the Contracts are for the supply of necessaries to the minor. However, if the minor is acting as an agent of the parents or guardians, the parents or guardians are liable for the minor's acts.

13. Minor's liability for necessaries of life supplied to him:As per Section 68 of the Indian Contract Act, 1872, if a person supplies necessaries of life or renders necessary services to a minor or his dependants (persons whom the minor is legally bound to support) or lends money to a minor to buy necessaries of life or to obtain necessary services for himself or his dependants, he is entitled to be reimbursed for the same out of the minor's property. That means, a minor is liable for the necessaries of life supplied or necessary services rendered to him or his dependants, and he is also liable or loans taken by him to obtain necessaries of life or necessary services for himself or his dependants. 14. Contracts entered into by a minor's parents, guardians or manager on behalf of the minor:Contracts, entered into by the parents or guardians of a minor or manager or the minor's estate on behalf of the minor are binding on the minor, provided the contracts are within the authority of the parents, guardians or manager, and they are made for the benefit of the minor.

15. Marriage contracts entered into by a minor are void: A contract to marry in future entered into by a minor is void. 16. Minor as an agent:A minor can be appointed as an agent of a principal. When a minor acts as an agent of a principal, all contracts entered into by the minor in the course of agency are binding on the principal, and not on the minor.It may be noted that, though the contracts entered into by a minor as an agent of a principal are binding On the principal, the minor cannot be held personally liable to the principal for his negligence or breach of duty. That means, in appointing a minor as an agent, a principal runs a great risk. 17. Minor cannot be adjudicated as an insolvent: A minor cannot be adjudicated (adjudged) as an insolvent. This is because he is incapable of contracting any debts.

18. Minor cannot enter into a contract of partnership: As a minor has no capacity to enter into a contract, he cannot enter into a contract of partnership. In other words, a minor cannot become a partner of a firm.Section 30 of the Indian Partnership Act, a minor can be admitted to the benefits of partnership by an agreement executed, through his guardian, with the other partners. When a minor is admitted to the benefits of a partnership, he will have a right to such share of the property and profits of the firm as may be agreed upon. Again, as regards his liability, the minor is not personally liable for the debts of the firm. Only his share in the partnership property will be 1iable, and that too up to his share in the partnership property. Of course, a minor may accept personal liability the debts or obligations of the firm after attaining majority, if he wishes to do so.

19. Minor as a shareholder:Since the membership of a joint stock company arises on the basis of a contract, a minor, being incompetent to contract, cannot apply for the shares of a company and be a shareholder or member of a company. In ,case a minor has been registered in the register of the company as a member by mistake, the company can rescind the transaction and remove his name from the register of members. The minor also can repudiate the transaction and get his name removed from the register.

2. PERSONS OF UNSOUND MINDPERSONS OF UNSOUND MIND Meaning of persons of unsound mind: Section 12 of the Indian Contract Act, 1872 deals with the question as to what is a sound mind for the purpose of entering into a contract. It lays down as follows: "A person is said to be of sound mind of or the purpose of making a contract, if at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests”. From this, it is clear that a person is said to be of unsound mind, if at the time when he makes a contract, he is incapable of understanding the terms of a contract & forming a rational judgment as to its effect up on his interests. Tests of soundness of mind of a person:

There are two tests of soundness of mind of a person. They are: (1) Capacity to understand the terms of the contract. (2) Ability to form a rational judgment as to its effect upon his interests.

Causes of unsoundness of mind:Unsoundness of mind arises from lunacy, idiocy, drunkenness or other factors, such as hypnotism (causing temporary unsoundness of mind) and mental decay brought about by old age or disease Persons of unsound mind: Lunatics and idiotsidiots are regarded as persons of unsound mind. Drunken personsDrunken persons also are regarded as persons of unsound mind Even persons who have been hypnotizedhypnotized, persons who are delirious delirious from feverfrom fever and persons who have suffered mental decay on account of old ageold age or diseasedisease become persons of unsound mind. Burden of proof of unsoundness of mind:Whether a party to a contract is of sound mind or of unsound mind is a question of fact to be decided by the courtcourt. However, there is a presumption in favor of soundness of mind. So, if a person relies on unsoundness of mind to set aside a contract, he must prove it sufficiently to the satisfaction of the court.

Capacity of persons of unsound mind to enter into contracts:A person who is usually of unsound mind, but occasionally of sound

mind may make contracts when he is of sound mind.

A person who is usually of sound mind, but occasionally of unsound mind

may make contracts when he is of sound mind. .A person who is usually of sound mind, but occasionally of unsound

mind cannot make contracts when he is of unsound mind. A person who is usually of unsound mind, but occasionally of sound mind

cannot make contracts when he is of unsound mind.3. Disqualified PERSONS Meaning of disqualified persons:

Disqualified persons refer to persons who are disqualified from Contracting by any law in force in the country. Such persons include:- (1) Alien EnemiesAlien Enemies. (2) Foreign SovereignsForeign Sovereigns, AmbassadorsAmbassadors and their Diplomatic StaffDiplomatic Staff. (3) ConvictsConvicts. (4) InsolventsInsolvents or BankruptsBankrupts. Besides the above persons, married womenmarried women and corporationscorporations also fall under

this category.

FREE CONSENTFREE CONSENT :- :-IntroductionIntroduction:: Section 10of the Indian Contract Act, 1872 lays down that an

agreement is a contract, if it is made up by the free consent of the parties to the agreement. That means free consent of the parties to an agreement is an essential element of a valid contract. For the enforceability of an agreement, it is not only necessary that the parties to the agreement should have given their consent, but their consent should also be free.

Definition and Meaning of ConsentDefinition and Meaning of Consent: Section 13 of the Indian Contract Act defines consent as "two or more persons are said to consent when they agree upon the same thing in the same sense".

According to this definition, consent involves consensus ad idem or perfect identity of minds between the contracting parties regarding the subject matter of the agreement. That is, the contracting parties must agree upon the same thing in the same sense at the same time for whatever reason, there is no consensus ad idem between the contracting parties, there is no real consent, and so, there cannot be any valid contract

Definition and Meaning of Free ConsentDefinition and Meaning of Free Consent::The consent of the contracting parties may be free or unfree (i.e., subject to flaw). It is the free consent that is necessary for the validity of a contract. So, it is necessary to know the meaning of 'free consent'. Free consent is the consent which is given by the free will of the parties of their own accord.. Section 14 of the Indian Contract Act, consentconsent is said to be is one, when it is not caused bywhen it is not caused by:(1) Coercion, as defined in Section 15 of the Indian Contract Act OR(2) Undue influence, as defined in Section' 16 of the Indian Contract Act OR (3) Fraud, as defined in Section 17 of the Indian Contract Act OR (4) Misrepresentation, as defined in Section 18 of the Indian Contract Act OR (5) Mistake, subject to the provisions of Sections 20, 21, and 22 of the Indian Contract Act If the consent or a party is obtained by any or the above causes, the consent is said to be not free or unfree (i.e., there is said to be flaw in consent).

Consequences of Flaw in ConsentConsequences of Flaw in Consent:When there is no free consent of the parties (i.e., when there is flaw in consent),

the contract may turn out to be voidable or void, depending upon the nature of the flaw in the consent. When the consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, there is no free consent, and so, the contract is voidable at the option of the party whose consent is so caused (at the option of the aggrieved party). But when the consent is caused by bilateral mistake as to a matter of fact essential to the agreement, there is no agreement at all, and so, the agreement is absolutely void

1. COERCION1. COERCION Definition and Meaning of Coercion: Section 15 of the Indian Contract Act defines coercion as "the committing or

threatening to commit any act forbidden by the Indian Penal Code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever with the intention of causing any person to enter into an agreement."

According to this definition, coercioncoercion means the committing or threatening to commit any act forbidden by the Indian Penal Code, or the unlawful detaining or threatening to detain any property, with the intention of obtaining the consent of any person to an agreement.

 

Essential Elements or Features of Coercion:1. Coercion includes threat, physical compulsion and menace (injury) to property.2. To constitute coercion there must be a clear utterance of threat or commission of an act.3. The threat or act constituting coercion must amount to an offence punishable under the Indian Penal Code. Threat to shoot, threat to cause hurt, rape, intimidation, defamation, giving wrong evidence, instigating to commit crime, theft, attempt to commit suicide, etc. are of the examples of acts forbidden under the Indian Penal Code. Any act which is not punishable under the Indian Penal Code say, a threat to charge high prices for the goods, a threat to charge high rate of interest on the amount due, a threat to prosecute or a threat to file a suit will not amount to coercion, as these threats are not offences punishable under the Indian Penal Code.

4. The act amounting to coercion must be committed with the intention of causing any person to give his consent to, the agreement.

5. It is not necessary that the act amounting to coercion must be committed by a party to the contract. It may proceed from (i.e., it may be committed by) any party, even from a stranger to the contract.

6. It is not necessary that the threat or act amounting to coercion must be directed against the other contracting party. It may be directed against any person, even against a third person.

7. As per Section 15 of the Indian Contract Act, it is not necessary that the coercion must be committed in a place where the Indian Penal Code is in force. In other words, it is immaterial whether the Indian Penal Code is of is not in force in the place where the coercion is employed

Effect of Coercion:As per Section 19 of the Indian Contract Act, when the consent of a party to an

agreement is obtained by coercion, the consent of the party cannot be regarded as

free. So, in such a case the contract becomes voidable at the option of the party whose consent is so obtained. That means, .the aggrieved party can set aside the contract OR refuse to perform his part of obligation on the contract.

Burden of Proving CoercionBurden of Proving Coercion:The burden of proving the fact that his consent has been obtained by coercion lies on the party who seeks to avoid the voidable contract on the ground of coercion.Restitution against the Aggrieved Party:Restitution against the Aggrieved Party:As per Section 64 of the Indian Contract Act, 1872, if the aggrieved party opts to rescind or avoid voidable contract on the ground of coercion, he must restore (to return) the benefit, if any, received by him under the contract to the other party ( the guilty party).

2. UNDUE INFLUENCE2. UNDUE INFLUENCE Definition and Meaning of Undue Influence: Holland has defined undue influence as "the un conscientious use of power over another person, such power being obtained by virtue of present or previously existing dominating control, arising out of relationship between the parties.'

Section 16(1) of the Indian Contract Act, 1872 defines undue influence as "an influence exercised by one party on the other where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other;“.

Relationships or Circumstances in which Undue Influence is Presumed by Relationships or Circumstances in which Undue Influence is Presumed by LawLaw

As per Section 16(2) of the Indian Contract Act, 1872, the law presumes a person to be in a position to dominate the will of the other:

(1) Where he holds a real or apparent authority over the other; e.g., where there is the relationship of master and servant ,police officer and accused, etc.

(2)Where he stands in a fiduciary relation to the other. Fiduciary relation means a relation of mutual trust and confidence. Such a relation is supposed to exist il1 the relationship between a father and a son, solicitor and client, doctor and patient, trustee and beneficiary, spiritual or religious adviser and disciple, etc.

(3) Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of old age, illness, etc., e.g., when there is a contract between a medical attendant and a patient.

As per the provision of Section 16(2) of the Indian Contract Act, law presumeslaw presumes

undue influenceundue influence in the following relationshipsin the following relationships, circumstances or circumstances or casescases (examples )(a) Father and son, (b) Guardian and ward. (c) Master and servant. (d) Doctor and patient. (e) Solicitor (i.e., advocate) and client. (t) Trustee and beneficiary. (g) Promoter and company.(h) Teacher and student (i) Religious or spiritual adviser and disciple( j) Police officer and accused .(k) Income-tax officer and assessee. (l) Fiance and fiancée. (m) Husband and an illiterate wife.(n) Pardanashin woman and any other contracting party.(0) Illiterate lady and any other contracting party.Effect of Undue InfluenceEffect of Undue Influence: According to Section 19A of the Indian Contract Act, 1872, a contract procured by undue influence is voidable at the option of the party whose consent was obtained by undue influence. When a contract procured by undue influence is sought to be rescinded or set aside by the aggrieved party, the court has the discretion to set aside the contract

Differences between Coercion and Undue Influence: 1.In coercion committing or threatening to commit an act forbidden by law or

detaining or threatening to detain the property unlawfully obtains the consent of the aggrieved party.

On the other hand, in the case of undue influence, the consent of the aggrieved party is obtained from the domination of the will of one party over the other.

2, Coercion is mainly of physical character, involving mostly the use of physical force.

But undue influence is of moral character, involving mostly the use of moral force or mental press

3. In the case of coercion, the threat may be directed against the person or the property of a man,

In the case of undue influence, the threat is against the person, and. not against the property of the man.

4. In the case of coercion, there may be no relationship between the contracting parties,

In the case of undue influence, there is some sort of relationship between the contracting parties.

5. In the case of coercion, the consent of the aggrieved party is obtained under the threat of an offence.

In the case of undue influence, the consent of the aggrieved party is obtained without any threat of an offence.

6. Coercion may be committed outside India, i.e. anywhere in the world. But undue influence should have been committed in India, if it is to be taken notice of by Indian L7. Coercion may be directed against the other contracting party or against a third party. But undue influence is, generally, directed against the other contracting party.8. Coercion may proceed either from a third party or from the other contracting party. But undue influence is generally, exercised by the other contracting party.9. There is no presumption of coercion by law under any circumstances.ie,aggrieved party has to prove that coercion had been committed. But in the case of undue influence, there is the’ presumption of undue influence by law in certain relations, circumstances or cases, and in such cases, the aggrieved party need not prove that undue influence had been employed on him

10. In the case of coercion there is criminal liability, besides an action on the contract.

On the other hand, in the case of undue influence, there is no criminal liability. There is only an action on the contract.

11. In the case of coercion, the aggrieved party can not only set aside the contract but also claim compensation.

But in the case of undue influence, there is no liability on the guilty to pay compensation to the aggrieved party.

12. When a contract induced by coercion is rescinded or avoided by the aggrieved party, the aggrieved party is always required to surrender or restore the benefit received to the other party.

On the other hand, when a contract caused by undue influence is sought to be rescinded or avoided by the aggrieved party, the aggrieves party mayor may not be directed by the court to return the benefit received to the other party.

 

3. MISREPRESENTATION :-3. MISREPRESENTATION :- Introduction:A representation is a statement of act relating to some matter essential to the formation of the contract, made by one party to the other, either before or at the time of the contract, with an intention to induce the other party to enter into a contract. It may be expressed by words, written or spoken, or implied from the act or conduct of the parties. If a representation is made by a party wrongly a representation is made by a party wrongly, it is called misrepresentation. Meaning of MisrepresentationMeaning of Misrepresentation:

In ordinary sense, misrepresentation refers to a false statement made by a party innocently without any-intention of deceiving the other party.Essentials of Misrepresentation:. 1. There must be a representation or assertion made by one party to the other. 2. The representation must relate to some material fact essential to the formation of the contract. It must not be a mere expression of opinion or words of commendation

3. The representation must not relate to the law of the country.4. The representation must have been made either before or at the time of the contract. 5. The representation must be or must have become untrue.6. The representation must have been made innocently without intent to deceive the other party.7. The representation must have been made with a view to induce the other party to enter into the contract.8. The representation must have been made instrumental in influencing the other party to enter into the contract Effect of MisrepresentationEffect of Misrepresentation:As per Section 19 of the Indian Contract Act, 1872, a contract, which is vitiated

by misrepresentation, is voidable at the option of the aggrieved party.As per the provision of Section 19 of the Indian Contract Act, when a contract is vitiated by misrepresentation,the aggrieved party can rescind or avoid the contract, treating the contract, as voidable. Alternatively, he can accept the contract and insist that he should be put in the position in which he would have, been, if the representation made had been true.

4. FRAUD4. FRAUDDefinition and Meaning of FraudDefinition and Meaning of Fraud: Lord Herschell defined fraud in the case of Derry Vs. Peek as "a false statement made knowingly, or without belief in its truth, or recklessly, carelessly whether it be true or false."  According to Section 17 of the Indian Contract Act, 1872, fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent or induce him to enter in to a contract: (a) The suggestion as to a fact, of that which is not true, by one who does not believe it to be true (b) The active concealment of a fact by one having knowledge or belief of the fact (c) A promise made without any intention of performing it. (d) Any other act fitted to deceive. (e) Any such act or omission as the law specially declares to be fraudulent

In short, fraud includes all acts committed by a party to a contract or by anyone with his connivance or by his agent to induce the other party to enter into a contract or to deceive the other party.Essentials of FraudEssentials of Fraud: 1.The fraud must have been committed by a party to the contract or by anyone with his connivance or by his agent. 2. There must be anyone of the following ingredients or things in the act of fraud , (a)knowingly-intentionally (b)recklessly (c)active concealment (d)A promise made without any intention of performing it.(e)any act which is made to cheat a person.3.The act of fraud must have been committed by a party with a view to induce the other party to enter into the contract or to deceive him.4.The other 'party must have acted upon that fraud, i.e., the act of fraud must have been instrumental in inducing the other party to enter into the contract.5. The other party must have been actually deceived by the act of fraud. An act of fraud which does not deceive the other party is no fraud 6. The other contracting party, who has been deceived by the act of fraud, must have suffered some loss or damage

Consequences or Effects of FraudConsequences or Effects of Fraud: 1.He can avoid (cancel) contract within reasonable time.2.Insists to perform the contract.3.He can also sue for damage.Differences between Misrepresentation and Fraud:1. Intention:-In the case of misrepresentation, there is no intention to deceive the other party, whereas in the case of fraud, there is a clear intention to deceive the other party.2. Nature:-While misrepresentation is innocent, fraud is willful or deliberate. 3. Belief:-In the case of misrepresentation, the person making -the representation believes it to be true. But in the case of fraud, the person making the representation does not believe it to be true.

4. Rescission and Damage:In the case of misrepresentation, the aggrieved party can either

rescind (avoid) the contract or can insist on its performance. He cannot sue for damages ordinarily.

On the other hand, in the case of fraud, the aggrieved party can not only rescind the contract but can also sue for damages.

5. Rescission of the contract when the means of discovering the truth are available:

In the case of misrepresentation, the aggrieved party cannot avoid the contract, if he had the means of discovering the truth with ordinary diligence.

But in all cases of fraud, except fraud by silence the aggrieved party can avoid the contract, even if he had the means of discovering the truth with ordinary diligence. 

 

5. MISTAKE5. MISTAKE Meaning of MistakeMeaning of Mistake:Mistake may be defined as ‘erroneous belief concerning something’. It is a misrepresentation or an error committed while entering into an agreement.Effect of Mistake:

An agreement becomes a valid contract only when there is consensus ad idem or perfect identity of Minds, only when there is real and free consent. Consent cannot be said to be real and free, when an agreement is entered into under a mistake. That means, if the consent of the parties to an Agreement is obtained under a mistake there is no real and free consent, and as such, the agreement cannot become a valid contract. It will be void.Kinds of Mistake: Mistake is of two kinds. They are: (1) Mistake of Law & (2)Mistake of Fact. (I) MISTAKE OF LAW(I) MISTAKE OF LAW Mistake of law is of three types. They are:1.Mistake of general law of the country.2. Mistake of foreign law.3. Mistake of private rights.1. Mistake of General Law of the CountryMistake of General Law of the Country: Every citizen of a country is deemed to be conversant with the general or ordinary law of the country. Ignorantia juris non excusat, i.e., ignorance of law is not an excuse. As such, a party to a contract is not allowed to avoid the contract on the ground that he had done the act in ignorance of the law of the country.

2. Mistake of Foreign Law2. Mistake of Foreign Law: -Though ignorance of the law of the country is not excusable, ignorance of foreign law is excused; as an individual is not expected to know foreign law.Mistake of foreign law is treated as a mistake of fact, and so, an agreement based on the mistake of foreign law is considered void.

It may be noted that an agreement based on the mistake of foreign law becomes void, only when there is a bilateral mistake (i.e., only when both the parties to the agreement are under mistake).

3. Mistake of Private Rights3. Mistake of Private Rights:Mistake of private rights of a party relating to property is treated as a mistake of

fact,& so,an agreement based on the mistake of private rights is considered void ((II) II) MISTAKE OF FACTMISTAKE OF FACT:- Mistake of fact is of two types. They are (a) Bilateral mistake,(b)Unilateral mistake .a) BILATERAL MISTAKEa) BILATERAL MISTAKE:- When both the parties to an agreement

misunderstand each other, there is said to be bilateral mistake or mutual mistake. In other words, when each party to an agreement understands it in a different way, there is said to be bilateral mistake. In. short, when both the parties to an agreement commit mistake, there is said to be bilateral mistake.

b) UNILATERAL MISTAKE OR MISTAKE OF ONE PARTYb) UNILATERAL MISTAKE OR MISTAKE OF ONE PARTYWhere only one of the parties to a contract is under a mistake, the mistake is

called unilateral mistake. In the case of unilateral mistake, a mistake (of fact) takes place in the mind of

only one of the contracting parties.

LEGALITY OF OBJECT AND CONSIDERATIONLEGALITY OF OBJECT AND CONSIDERATION Introduction:Introduction: Section 10 of the Indian Contract Act, 1872 specifically provides that “an agreement becomes a valid contract only if it is made for a lawful consideration and with a lawful object”. That means, both the consideration and the object of an agreement must be lawful so as to make the agreement a valid contract. If either the consideration or the object of an agreement is unlawful for one reason or the other, the agreement becomes void. For instance if the consideration of an agreement is lawful but its object is unlawful agreement is void. So also, if the object of an agreement is lawful, but its consideration is unlawful, the agreement becomes void.It may be noted that the Indian Contract Act has provided that both the consideration and the object of an agreement must be lawful to make an agreement a valid contract, because the terms, 'considerationconsideration' and 'objectobject' do not mean the same thing. They refer to different things. The term 'consideration' means reward for the promise, whereas the term 'object' means the purpose or design. In this context, it may be noted that, in many cases, the object and the 'Consideration are different. But, in some cases, both the object and the consideration may be the same.

What & When considerations and Objects are Unlawful?What & When considerations and Objects are Unlawful?The unlawful considerations and objects are specified in Section 23 of the, Indian Contract Act, 1872. As per Section 23 of the Indian Contract Act, the object or the consideration of an agreement is unlawful in the following cases, and in those cases, the agreement becomes void: 1.If it is forbidden by law: When law forbids an act, the act or agreement becomes unlawful and void. Law forbids an act: (a) When it is punishable by the criminal law of the country or (b) When it is prohibited by any special legislation or regulation made by a competent authority under power derived from the legislature. 2. If it’s of such a nature that, if permitted, it would defeat the provision of any law: 3. If it is fraudulent. 4. If it involves or implies injury to the person or property of another: 5. If the court regards it as immoral.

6.If the agreement is regarded by the court as opposed to public policy .

An agreement opposed to public policy is unlawful and is void.Agreements opposed to public polices are :- (a) Agreements with

alien enemies (b) Agreements interfering with the course of justice (c) Agreements for stifling criminal prosecution,( for preventing criminal proceedings already instituted from running their normal course)

Agreements for stif1ing prosecution are opposed to public policy, and so are void

(d) Maintenance and champerty(Champerty is an agreement whereby a person agrees to provide financial assistance or any other assistance, say, professional assistance, to another person involved in litigation in exchange for his promise to hand over a portion of the gains of the litigation. In other words, when a person agrees to help another person involved in litigation with financial or any other assistance in exchange for his promise.

(e) Trafficking in public offices, titles and honors. (f) Agreements unduly restraining personal liberty or freedom of

individuals.(g) Agreements creating an interest opposed to duty.(h) Agreements in restraint of parental rights or duties.Agreements interfering with marital duties.(j) Marriage brokerage agreements(k) Agreements in restraint of marriage.(l) Agreements tending to create monopolies. (m) Agreements in restraint of trade. (n) Agreements to influence elections to public offices.(o) Agreements to defraud creditors.(p) Agreements to defraud revenue authorities.

UNLAWFUL AGREEMENTS AND ILLEGAL AGREEMENTS

IntroductionIntroduction: The Indian Contract Act, 1872, does not make any distinction between

unlawful agreements and illegal agreements. Section 23 of the Indian Contract Act, 1872 only uses the term "unlawful object or consideration". However, in the context of the study of legality of object and consideration, it is better to know the distinction between unlawful agreements and illegal agreements. Before we take up the study of the distinction between unlawful agreements and illegal agreements, let us have some ideal about the meanings of unlawful agreements and illegal agreements

Meaning of Unlawful AgreementsMeaning of Unlawful Agreements:Unlawful agreements are agreement which are not enforceable by law.Unlawful

agreements are less vigorous in effect and involve non-criminal breach of law.They do not affect public morals, nor do they result in the commission of a crime. They are simply disapproved on some ground of public policy.

They include agreements in restraint of trade, agreements in restraint of marriage, agreements in restraint of legal proceedings, etc.

 

Effect of Unlawful Agreements :An unlawful agreement is void ab initio, and is without any legal effects. However, an unlawful agreement affects only the main transaction (i.e., the transaction between the immediate parties), i.e., it makes only the main transaction void. It does not affect the collateral transactions, i.e., it does not make the collateral transactions void.Meaning of Illegal AgreementsMeaning of Illegal Agreements:

Illegal agreements are agreements or acts which are tortuous or criminal in nature. They result in commission of a crime or affect public morals. Illegal agreements include acts forbidden by law and acts opposed to public morals. They also include some of the acts which are opposed to public policy. Trading with alien enemies, an agreement to assault somebody, an agreement to publish a libel against some body, granting of loans to procure smuggled. goods, granting of loans for financing the marriage of a minor, etc. are examples of illegal agreements.

Effects of Illegal AgreementsEffects of Illegal Agreements: 1. An illegal agreement makes the main transaction illegal and void. 2. An illegal agreement makes not only the main transaction illegal and void, but also taints the collateral transaction. 3. In the case of an illegal agreement, no restitution is allowed. That is, nothing can be recovered under an illegal agreement, and if something has already been paid, it cannot be recovered, whether the illegal object has been carried out or not. VOID AGREEMENTSVOID AGREEMENTS Introduction:One of the essentials of a valid contract is that the agreement must not have been expressly declared to be void by law. If an agreement has been expressly declared to be void by law, it becomes void, and cannot be enforced by law. So, it is necessary to have knowledge of agreements, which have been expressly declared to be void by law, i.e., void agreements. Meaning of Void AgreementMeaning of Void Agreement:As per Section 2(g) of the Indian Contract Act,” an agreement not enforceable by law is said to be void". So, a void agreement is an agreement, which cannot be enforced by law . 

Effect of Void AgreementEffect of Void Agreement :A void agreement is void ab initio. That is, it is no agreement at all right from its very inception. So, it does not give rise to any legal consequences. That is, it confers no legal rights on one person, and creates no legal obligations on the other. Agreements Expressly Declared to be Void by the Indian Agreements Expressly Declared to be Void by the Indian Contract ActContract Act Certain agreements have been expressly declared to be void by the Indian Contract Act, 1872. Such agreements (i.e., the agreements which have been expressly declared to be void by the Indian Contract Act) are, 1. Agreements made by incompetent persons, such as minors, lunatics, idiots, etc. (Section 11).2. Agreements made under a mutual mistake also a matter of fact, i.e., where both the parties to the agreement are under a mistake as to a matter of fact essential to the agreement. (Section 20),

3. Agreements, the object or consideration of which is unlawful. (Section 23).4. Agreements, the object or consideration of which is unlawful in part, and the unlawful part cannot be separated from the lawful part. (Section 24).5. Agreements made without consideration. (Section 25)6. Agreements in restraint of marriage. (Section 26).7. Agreements in restraint of trade. (Section 27),8. Agreement in restraint of legal proceedings. (Section 28).9. Agreements, the meaning of which is uncertain or not capable of being made certain, (Section 29 of the Indian Contract Act).10. Agreements by way of wager.11. Agreements to do impossible acts, i.e., acts impossible in themselves (Section 56 ).12. Agreements contingent on impossible events. (Section 56).13.1n case of reciprocal promises to do things legal and also other things illegal, the second set of reciprocal promises is a void agreement. (Section 57).

Wagering Agreements or Wagers:Wagering Agreements or Wagers: Meaning of Wagering Agreement:Literally, the term "wager" means a bet (i.e., something staked to be lost or won on the result of a doubtful issue) .So, a wagering agreement is nothing, but an ordinary betting agreement.In law, a wagering agreement or a betting agreement is an agreement between two parties by which one party promises to pay money or money's worth on the happening of some uncertain event in consideration of the other party's promise to pay, if the event does not happen. In other words, it is an agreement between two parties to the effect that if a given uncertain event is determined one way, one of them shall pay a sum of money or money's worth to the other. 

CONTINGENT CONTRACTSCONTINGENT CONTRACTS A contract may be an absolute contract or a contingent contract.

Absolute ContractAbsolute Contract: An absolute contract (also known as an unconditional contract) is a contract in

which the promisor undertakes to perform the contract in any case or circumstance without any conditions. When a promisor undertakes to perform the contract in any case or circumstance, the promise is absolute or unconditional.

Definition and Meaning of a Contingent ContractDefinition and Meaning of a Contingent Contract:Section 31 of the Indian Contract Act, 1872 defines a contingent contract thus: "A contingent Contract is a contract, to do or not to do something, if some event,

collateral to such contract, does or does not happen". According to this definition, if the performance of a, contract depends ( if the

promisor binds himself to perform the contract)only on the happening or non happening of some future uncertain event, collateral ( incidental) to the contract,the contract is called a contingent contract.

Essential Characteristics of a Contingent ContractEssential Characteristics of a Contingent Contract: A contingent contract has certain essential characteristics. They are:-1. The performance of a contingent contract depends upon a contingency (the happening or non-happening of a certain event in future). It is this dependence on a future event which distinguishes contingent contract from an absolute contract.2. The contingency (the future event) must be uncertain. If the event, on the happening of which the contract is to be performed, is certain, then, it is not a contingent contract. In other words, if the contingency or future event is bound to happen, and the contract is to be performed, as in the case of life insurance, then, it is not a contingent contract. 3. The future uncertain event must be collateral (incidental) to the contract.:-A collateral event is an event which is independent of the contract and which does not form part of the consideration of the contract. 4. If the contingency (the performance of the promise) is contingent upon the discretion (i.e., will and pleasure) of the promisor, it will not be a contract at all

Rules regarding the Performance of Contingent ContractsRules regarding the Performance of Contingent Contracts:Sections 32 to 36 of the Indian Contract Act contain the rules

regarding the performance of contingent contracts. Those rules are:1.As per Section 32 of the Indian Contract Act; a contingent

contract, contingent upon (dependent upon) the happening of an uncertain future event, cannot be enforced by law unless and until that event happens. If the event becomes impossible, the contingent contract becomes void.2. Under Section 33 of the Indian Contract Act,a contingent contract, contingent upon the non-happening of an uncertain future event, can be enforced, when that event does not happen or if that event becomes impossible, and not before.

3.Under Section 34 of the Indian Contract Act, if a contingent contract is contingent upon how a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.

4. Under Section 35(1) of the Indian Contract Act, a contingent contract, contingent upon the happening of a specified uncertain event within a fixed time, becomes void, if, at the expiration of the time fixed, such event has not happened, or if, before the time expires, such event becomes impossible. 5. Under Section 35(2) of the Indian Contract Act, a contingent contract to do or not to do anything, if a specified uncertain event does not happen within a fixed time, may be enforced, if the event does not happen or if its happening becomes impossible before the expiry of the fixed time.6. As per Section 36 of the Indian Contract Act, a contingent agreement to do or not to do anything, if an impossible event happens, is void, whether the impossibility of the event is known or not known to the parties to the agreement at the time when it is made.

DISCHARGE OR TERMINATIONOF A CONTRACTDISCHARGE OR TERMINATIONOF A CONTRACT Meaning of Discharge of a Contract: Discharge or termination of a contract means the termination of the

contractual relationship between the contracting parties. A contract is said to be discharged or terminated, when the rights and the obligations of the contracting parties arising out of the contract, are extinguished. (Come to an end).

Different modes or ways in which contract may be discharged:Different modes or ways in which contract may be discharged:A contract may be discharged in any one of the following ways: 1. By performance - actual performance or attempted performance. 2. By mutual agreement or mutual consent of the parties to

terminate the contract. 3. By impossibility of performance. 4. By lapse of time. 5.By operation of law. 6.By breach of contract.  

1. Discharge by performance1. Discharge by performance:Discharge by performance is the most usual method of discharging a contract. The performance of a contract may be: (a) Actual performance. (b) Attempted performance or tender. (a) Actual performance: “When both the parties to a contract fulfill their respective promises or obligations under the contract within the time at the place it in the manner prescribed, the contract is said to have been discharged by actual performance. "In this context, it may be noted that, if only one party performs his promise or his part of the obligations, he alone is discharged, and he also gets a right of action against the other party who is guilty of breach.(b) Attempted performance or tender:

When a party to a contract (i.e., the promisor) offers to perform his part of the, obligations under the contract, but his offer of performance is not accepted by the other party to the contract (the promisee), it is called attempted performance, tender of performance, offer of performance or tender

It may be noted that tender is not actual performance. It is only an offer to perform one's obligation. But, in law, a valid tender is considered equivalent to actual performance. That is, a valid tender has the same effect as actual performance as far as the tenderer or promisor ( the party who offers to perform his part of obligations under the contract) is concerned. So, when there is a valid tender (when the promisor offers to perform his part of the obligations under the contract, and his offer of performance is not accepted by the promisee), the contract is deemed to have been performed by the promisor or tenderer, and as such, the promisor is discharged from his ob1igation without losing his right. of action against the promisee. (Section 38 of the Indian Contract Act).

2. Discharge by Mutual Agreement or Mutual Consent2. Discharge by Mutual Agreement or Mutual Consent:Since a contract is created by means of an agreement, it may also be discharged by mutual agreement or mutual consent between the contracting parties .The parties to a contract may agree to terminate their contract either expressly or impliedly.That means, a contract may be discharged by mutual agreement or mutual consent, and the discharge of contract by mutual agreement or consent may be express or implied. Sec62 and 63 of the Indian Contract Act, 1872 deal with the various methods of discharging a contract by mutual agreement or mutual consent.

The various methods of discharging a contract by mutual agreement or mutual consent are: (a) (a) By NovationBy Novation: A Contract may be discharged by novation. :- Substituting a new contract for an existing contract, known as novation.The new contract may be between the same parties or between different parties. (If the new contract is between the same parties then, material terms of law contract must be altered .substantially in the new substituted contract. On the other hand, if the new contract is between new parties, the terms of the contract can remain the same). The consideration for novation, i.e. for the new contract, is the discharge of the old contract. When there is novation, i.e., substitution of a new contract for an existing contract, the old contract is extinguished or discharged, and it new contract is created. (a) Novation cannot be compulsory. It can be only with the mutual or tripartite consent of all the parties concerned.

(b) The new contract must be valid and enforceable. If the new contract suffers from any legal flaw, such as, want of stamp or want of registration, and consequently, becomes unenforceable, then, the original contract revives.

(c) Novation should take place before the expiry of the time of performance of the original contract. In other words, novation should take place when the original contract is subsisting.

(d) For a valid novation, when the parties are not changed, then, the nature of the obligation (the material returns of the contract) must be altered substantially in the new substituted contract. Mere variation of some of the terms of the contract, while the parties remain the same is not novation. It is only an alteration.

(b) (b) By AlterationBy Alteration:: A contract may also be discharged by alteration.:-Alteration of a contract means change of one or more of the material terms of a contract with the consent of all the parties to the agreement. It maybe noted that, in the case of alteration, only the material terms of the contract are changed, but the parties continue to be the same. It may also be noted that when there is an alteration of the contract, the old contract is discharged and a new contract in its altered form takes its place. (c) By Rescission: A contract may be discharged by rescission. Rescission means the cancellation of all or some of the terms of the original contract by the consent of all the parties to the contract. (It may be noted that, in the case of rescission, the existing contract is cancelled by mutual consent without substituting a new contract in its place). A contract may be discharged before the date of performance by agreement between the contracting parties to the effect that it should be no longer bind them (it should be rescinded or cancelled).(i) Rescission may be total or partial.:-Total rescission is the cancellation or discharge of the whole contract. Partial rescission is the variation of the original contract (a) by rescinding or canceling same of the terms of the original contract or (b) By substituting new terms far those which are rescinded or (c) By adding new terms without rescinding (any of the terms of the original contract).  

(ii) (ii) Rescission may be express or impliedRescission may be express or implied. Rescission may be implied from the conduct of the parties, For instance where both the parties fail to perform the contract for a long

time without complaint, it amounts to an implied rescission. iii) Rescission may take place either by mutual consent of the parties or by

the failure to perform his obligation by one of the parties to the contract. (d) By Remission:

A contract may be discharged by remissionA contract may be discharged by remission. Section 63 of the Indian Contract Act provides for discharge of a contract by remission. Remission is the acceptance of a lesser sum than what was contracted for, or a lesser fulfillment of the promise made in discharge of the whole debt or obligation. (e) By Waiver:By Waiver:

Waiver is one of the methods of discharge of a contract by mutual agreement or mutual consent. Waiver means deliberate or intentional abandonment, relinquishment or giving up of a right, which a person is entitled to under a contract.

 

(f) Merger:Merger:Merger is also one of the methods of discharge of a contract by mutual agreement or mutual consent.Merger takes place (there is said to be merger) when an inferior right accruing to a party under a contract merges into a superior right accruing to him under the same or any other contract by the mutual agreement between the parties to the contract.

3. Discharge by Impossibility of Performance3. Discharge by Impossibility of Performance:

Section 56 of the Indian Contract Act lays down that "an agreement to do an act impossible in itself is void ". From this provision, it is clear that impossibility of performance makes a contract void, and the parties to the contract will be discharged from their obligations. In short, a contract is discharged when its performance becomes impossible.

Types of impossibility of performanceTypes of impossibility of performance Impossibility of performance may be of four types. They are: 1. Impossibility of performance existing at the time of the

formation of the contract and known to both the parties to the agreement.

2. Impossibility of performance existing at the time of the formation of the contract but unknown to both the parties to the contract.

3. Impossibility of performance existing at the time of the formation of the contract but known to only one of the parties to the contract.

4. Impossibility of performance arising after the formation of the contract .

Impossibility of performance arising after the formation of the Impossibility of performance arising after the formation of the contractcontract. (a). Impossibility of performance existing at the time of the formation of the contract and known to both the parties to the agreement. (Absolute Impossibility) (Void ab initio). (b). Impossibility of performance existing at the time of the formation of the contract, but unknown to both the parties to the contract. (Void). (c) . Impossibility of performance existing at the time of the formation of the contract, but known to only one of the parties .(Void) (Compensate). (d). Impossibility of performance arising after the formation of the contract or supervening or subsequent impossibility of performance. (I) Destruction of the subject matter of the contract . (II) Failure of the ultimate purpose or object of the contract, or non recurrence or non-existence of a particular state of things. (III) Death of a personal incapacity of a contracting party (the promisor) (IV) Change of law. (V) Outbreak of war.

4. 4. Discharge by Lapse TimeDischarge by Lapse Time: As per the Limitation Act, every contract must be performed

within the specified period called the period of limitation. All such, if a contract is not performed by the promisor, and if no action is taken by the promisee against the promisor, in a court of law, within the period of limitation, the contract is discharged, and the promisee is deprived of his remedy (i.e., right of action) under the law against the promisor.

5. Discharge by Operation of LawDischarge by Operation of Law:A contract comes to an end (i.e., gets discharged) also by operation

of law. (1) By death: In the case of a contract involving Personal skill, ability or

qualifications.The contract is terminated or discharged on the death of the promisor; Of course, in the case of other contracts (" contracts which do not involve personal skill, ability or qualification), the contracts remain un discharged and the rights and liabilities of the deceased under the contracts pass on to his legal representatives.

 

(2) By insolvency: Under the law of insolvency, when a person is adjudicated insolvent, his rights and liabilities are transferred to the official assignee or official receiver as the case may be, and when he is discharged by the insolvency court he will. be discharged from all the liabilities arising from the contracts entered into by him during his solvency. That means, the insolvency of a party to the contract discharges a contract  (3) By merger: When an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under the same or some other contract, the process is known as merger. When there is a merger, the original contract gets discharged. (4) By unauthorized material alteration of the terms of a written contract: A material alteration is an alteration or change in the terms of a written contract or document, which affects, in a significant manner, the rights and liabilities of the parties to the contract. Ex:-amount to be paid, time of payment, place of payment, rate of interest, party to whom the payment is to be made, etc. in the case of a debt, and the quality, quantity, the make, the place of delivery, etc: in the case of goods.

(5) By rights and liabilities being vested in the same party:

When the rights and liabilities under a contract are vested in the same party, the other party or parties to the contract are discharged from their obligations. That means the contract is discharged

(6). Discharge by Breach of Contract : Meaning of breach of a contract: When a party to a contract fails or disables himself to perform the contract, there is said to be a breach of contract. In other words, there is said to be a breach of contract, when a party to a contract either fails or disables himself to perform his obligations under the contract .

Kinds of breach of contract: Breach of contract may be:

(A)Actual breach of contract. (b) Anticipatory or constructive breach of contract. Actual breach of contract:Actual breach of a contract occurs when a party to a contract fails

to perform his obligations under the contract on the date when the performance is due or during the time of the performance of the contract.

 

Anticipatory or Constructive Breach of Contract:Anticipatory breach of a contract occurs when a party to the contract declares his intention of not performing the contract before the time fixed for its performance (before the due date of the performance of the contract), or by his own voluntary act, disables him self from performing the contract before the time fixed for its performance. In the former case, there is said to be an express anticipatory breach of contract, and in the latter case, there is said to be an implied anticipatory breach of contract.

Effects of anticipatory breach of contract:Section 32 of the Indian Contract Act, 1872 provides that ,“Where party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract unless he has signed, by words or conduct, his acquiescence in its continuation”.  

REMEDIES FOR BREACH OF CONTRACTREMEDIES FOR BREACH OF CONTRACT Meaning of Breach of Contact : The parties to a contract are required to perform or fulfill their

respective promises. But, sometimes, one of the parties to the contract may break the contract,i.e. may fail or refuse to perform his promise, this is known as breach of contract. (The person breaking the contract is called the defaulter or the guilty, and the other party to the contract, is called the aggrieved party or the injured party).

Breach of contract may be, committed by anyone of the parties to the contract, i.e., either by the promisor or by the promisee.

Remedies Available to the Aggrieved Party on the Breach of Contract: Whenever there is a breach of contract by one party, the other party (the aggrieved party) is entitled to one or more of the following remedies against the defaulter or the guilty:

1. Rescission of the contract 2. Suit for damages.

3. Suit upon quantum meruit. 4. Suit for specific performance of the contract. 5. Suit for the injunction.It may be noted that the Indian Contract Act,1872 regulates the first three remedies, and the last, two remedies are regulated by the Specific Relief Act, 1963.

1. Rescission of the ContractRescission of the Contract: Rescission of the contract means setting aside the contract: When there is a breach of contract by one party, the other party may rescind (set aside) the contract. When the aggrieved party rescinds the contract, he is absolved (freed) from all his obligations under the contract. He need not perform his part of the contract.( his part of the obligation under the contract).

When an aggrieved party decides to rescind the contract, he may carry out the rescission of the contract in anyone of the following, two ways: (a) He may rescind the contract by merely communicating his decision to rescind the contract to the guilty or the defaulter immediately without taking any legal action against the guilty.In this case, he is, no doubt, freed from all his obligations under the contract. But he will not be entitled to compensation for any damaged which he might have suffered through the breach of contract. (b)Alternatively, if he desires to take legal action against the guilty (if he desires to sue the guilty for damages for breach of contract), he has to file a suit in a court of law (or rescission of the contract.) At the option of the aggrieved party, damages for breach of contract can be claimed even without a suit for rescission of the Contract by merely communicating the rescission of the contract to the guilty.

2. Suit for damages:When there is a breach of contract by one party, the other party (the aggrieved party) has not only the right to rescind (set aside) the contract, but it also entitled to claim damages. As such, when there is a breach of contract by one party, the other party (the aggrieved party) may sue the other party for damages for breach of contract. Damages are monetary compensation allowed by the court to the aggrieved party for the loss or injury suffered by him as a result of the breach of contract.

3.Suit upon Quantum Meruit:

The term "quantum meruit“, literally means as much as merited or "as much as he deserved" or "as much as earned". In other words it means

payment in proportion of the value or amount of work done. In law suit upon quantum meruit means suing on its own merit, i.e., suing for the value of such' part 'or portion of the work as is done. When a contract has been partly performed by one party and has become discharged by the breach by the other party to the contract, the party who has partly performed his part of promise or circumstances file quantum meruit against the other party (the guilty), claiming payment for the portion of work done or goods supplied before the breach of contract.

The aggrieved party may file a suit upon quantum meruit in the following cases: 1. Where work has been done in pursuance of a contract, which has been discharged by the breach of contract or default by the defendant. 2. Where work has been done in pursuance of a contract, which is discovered to be void or becomes void for some reason, the person who has done something under it can claim reasonable payment upon quantum meruit in spite of the fact that the agreement has become void. (Section 65 of the Indian Contract Act.) 3. Where a person lawfully does something for another person or delivers something to him without any intention to do so gratuitously and the other person enjoys the benefits thereof, the latter is bound to pay to the former in respect of the act so done or restore the thing so delivered.

It may be noted that a suit for payment upon quantum meruit does not arise in the following cases:1.When a contract is not divisible in to parts and a lump sum of money is proposed to be paid for the entire work, part performance does not entitle a party to claim payment upon quantum meruit.

2. If a definite job is agreed to be done for a lump sum, no money is to be paid till the whole job is done, and therefore, the question of quantum meruit does not arise.3. Nothing can be recovered upon quantum meruit when there is no express or implied promise to pay for work already done. 44. . Suit for Specific Performance of the ContractSuit for Specific Performance of the Contract : :In certain situations or cases of breach of contract, damages may not be an adequate remedy. In such cases the court may direct the party in breach for the specific performance of the contract. specific performance of a contract means the actual performance of the promise by the party in breach exactly according to terms of the contract as agreed upon. 5. 5. Suit for Injunction Suit for Injunction :-(Injunction is a preventive relief ). It is particularly useful in cases of anticipatory breach of contract, where damages could not be an adequate relief. Injunction is an order of the court restraining a party from doing a particular act which he promised not to do. It is a mode or method of securing the specific performance of the negative terms of the contract

Where it party is in breach of a negative term of the contract, the court may issue an injunction and restrain the party from doing what he promised-(not to do).Injunction is, generally, granted by the court where damages would be inadequate, and at the same time, enforcement of the contract, under the Specific Relief Act, is also difficult.Injunction may be (a) temporary injunction or (b) perpetual or permanent injunction. Temporary injunction is a provisional injunction which, prohibits a partly from doing some act for the time being till the question of the right of the aggrieved party is settled. This is issued to ensure that much harm is not done to the aggrieved party by the other party before the question of the right of the aggrieved party is settled,Perpetual injunction is a permanent injunction which restrains a party permanently from doing some act. It is granted only when the aggrieved party has established his right to the satisfaction of the court.

DAMAGES FOR BREACH OF CONTRACTDAMAGES FOR BREACH OF CONTRACT Introduction.When there is a breach of contract, the aggrieved party can claim damages from the defaulting party. Meaning of Damages:Damages are “monetary compensation allowed by the court to the aggrieved party” for the injury or loss suffered by him as a result of the breach of contract. Principle Underlying the Award of Damages:The fundamental principle underlying “the award of damages by the court is compensation to the aggrieved party, but not punishment of the guilty or the defaulting party”. Damages are awarded to the injured party so as to put him in the same financial position in which he would have been, had there been the performance of the contract, and not its breach. 

Kinds of Damages: Damages awarded by a court for breach of contract are of different kinds. The various kinds of damages are: 1. Ordinary, general or compensatory damages. 2. Special damages. 3. Exemplary, vindictive or punitive damages. 4. Nominal or contemptuous damages.1.Ordinary, General or Compensatory Damages: When a party breaks a contract, the injured party can, as a rule, always recover from the defaulting party ordinary, general or compensatory damages. Ordinary damages are damages awarded to the aggrieved party, for losses arising naturally and directly, in the usual course of things from the breach of contract itself. In other words, these are damages allowed to the injured party for the losses sustained by him from direct and proximate consequences of the breach of contract. It may be noted that in the awarding of ordinary damages, remote or indirect losses, which are not the natural and probable consequences of the breach of contract (i.e., losses resulting from the remote or indirect consequences of the, breach of contract) are not taken into account. These damages are allowed with a view to compensate the insured party for the loss sustained by him from the breach of contract. For this reason, ordinary damages are also known as compensatory damages.

2. Special Damages: Special damages are those damages, which are allowed to the injured party for losses arising from the special or unusual circumstances when there is a breach of contract. In other words, they are damages allowed to the aggrieved party for the losses suffered by him from indirect and remote consequences, and not the direct and proximate consequences of the breach of contract. Unlike ordinary damages, special damages cannot be claimed as a matter of right i.e., as a general rule. They can be claimed only when both the parties to the contract know the special circumstances, which would result in the special loss, and the special damages are in the contemplation of the contract in parties at the time of entering into the contract. It may be noted that subsequent knowledge of the special circumstances by the defaulting party will not give rise to special damages.

3.Exemplary, Vindictive or Punitive DamagesExemplary, Vindictive or Punitive Damages: Exemplary damages are those damages,which are awarded with a

view to punish the defaulting party for the breach of contract, and not with a view to compensate the injured party for the loss suffered by him. These damages are called exemplary damages, as the object is to set an example to others that they would be punished in case they commit a breach of contract. These damages are not just restricted to the actual loss suffered by the injured party.

However, there are two exceptional circumstances or cases in which vindictive, damages are awarded.

The two exceptional cases in which vindictive or exemplary damages are awarded are:

     1.In the case of breach of contract to marry, the injured party is entitled to exemplary damages.

In this case, the amount of exemplary damages awarded to the injured party would depend upon the extent of injury caused to the feelings of the injured party and also upon his reputation.

      

2.  In the case of wrongful dishonor of a cheque by a banker, the aggrieved customer is entitled to exemplary damages. In this case, the amount of exemplary damages awarded to the injured customer would depend upon the loss of prestige and reputation resulting to him from the wrongful. Dishonor and his status

4. Nominal or Contemptuous Damages:Nominal damages are damages, which are awarded only for name sake. These are damages of very small amount, say, a rupee or a few paise. The other party awards nominal damages to a party, when there is a breach of contract, but the plaintiff has not suffered any real loss.Nominal damages are, awarded neither by way of compensation to the plaintiff nor by way of punishment to the guilty; but just to establish the right of the plaintiff to claim damages for breach of contract, when he has not actually suffered any real loss.