Indian Contract Act-I

8/12/2019 Indian Contract Act-I

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Indian Contract Act-I,

1872

By

Gaurav Mehta A036

Prem Shah A037

Ketul Shah A038

Nikita Paharia A039

Salil Gore A040

Aman Sanghvi A04

Pulkit Mittal A04!


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"he la# relating to $ontra$t% in &n'ia i% $ontaine' in Indian Contract Act, 1872( "he A$t #a%

)a%%e' *y Briti%h &n'ia an' i% *a%e' on the )rin$i)le% o+ ,ngli%h -ommon .a#( &t i% a))li$a*le

to all the %tate% o+ &n'ia e/$e)t the %tate o+ ammu an' Ka%hmir( &t 'etermine% the $ir$um%tan$e%

in #hi$h )romi%e% ma'e *y the )artie% to a $ontra$t %hall *e legally *in'ing on them( All o+ u%

enter into a num*er o+ $ontra$t% every'ay kno#ingly or unkno#ingly( ,a$h $ontra$t $reate%

%ome right% an' 'utie% on the $ontra$ting )artie%( 1en$e thi% legi%lation2 &n'ian -ontra$t A$t o+

87!2 *eing o+ %keletal nature2 'eal% #ith the en+or$ement o+ the%e right% an' 'utie% on the

)artie% in &n'ia(

-ontra$t e+ine'

An agreement en+or$ea*le *y la# i% a $ontra$t(

-ontra$t Agreement 5 .egal o*ligation

Agreement

Se$tion ! o+ the &n'ian $ontra$t A$t 'e+ine% the term agreement a% every )romi%e an' every

%et o+ )romi%e%2 +orming $on%i'eration +or ea$h other(

Promi%e

"he term )romi%e i% 'e+ine' in #hi$h %ay%2 A )ro)o%al :o++er;2#hen a$$e)te' 2*e$ome% a)romi%e( thu% 2a )romi%e im)lie% an a$$e)te' o++er(

Examples an agreement in the eye% o+ the la#(

A o++er% to) %ell hi% $ar to B +or a )ri$e a$$e)t% the o++er( &t ha% *e$ome a )romi%e an' $an

*e treate' a% an agreement *et#een A an' B(

The process of making of a contract

Ofer or

proposal

Acceptan

ce

Promis

e

Agreeme

nt

Contract


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Types of contract

!n the "asis of #alidity$

% &alid contract An agreement #hi$h ha% all the e%%ential element% o+ a $ontra$t i% $alle' a

vali' $ontra$t( A vali' $ontra$t $an *e en+or$e' *y la#(

!( &oid contract A voi' $ontra$t i% a $ontra$t #hi$h $ea%e% to *e en+or$ea*le *y la#( A $ontra$t

#hen originally entere' into may *e vali' an' *in'ing on the )artie%( &t may %u*%eoying *ene+it o+ non gratuitou% a$t

e%)on%i*ility o+ +in'er o+ goo'%


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.ia*ility o+ )er%on to #hom money i% )ai' or thing 'elivere'

!n the "asis of performance$

( Exec)ted contract An e/e$ute' $ontra$t i% one in #hi$h *oth the )artie% have )er+orme'their re%)e$tive o*ligation(

!( Exec)tory contract An e/e$utory $ontra$t i% one #here one or *oth the )artie% to the

$ontra$t have %till to )er+orm their o*ligation% in +uture( "hu%2 a $ontra$t #hi$h i% )artially

)er+orme' or #holly un)er+orme' i% terme' a% e/e$utory $ontra$t(

3( 'nilateral contract A unilateral $ontra$t i% one in #hi$h only one )arty ha% to )er+orm hi%

o*ligation at the time o+ the +ormation o+ the $ontra$t2 the other )arty having +ul+ille' hi%

o*ligation at the time o+ the $ontra$t or *e+ore the $ontra$t $ome% into e/i%ten$e(

4( *ilateral contract A *ilateral $ontra$t i% one in #hi$h the o*ligation on *oth the )artie% to the

$ontra$t i% out%tan'ing at the time o+ the +ormation o+ the $ontra$t( Bilateral $ontra$t% are al%o

kno#n a% $ontra$t% #ith e/e$utory $on%i'eration(

,%%ential ,lement% o+ ,%ta*li%hing a vali' $ontra$t

A$$or'ing to %e$tion 0 o+ the A$t 2All agreement% are $ontra$t% i+ they are ma'e *y the +ree

$on%ent o+ )artie% $om)etent to $ontra$t +or a la#+ul $on%i'eration an' #ith a la#+ul o*>e$t 2an'

are not here*y e/)re%%ly 'e$lare' to *e voi'(

"hu% 2to *e$ome a vali' $ontra$t 2an agreement ha% to meet $ertain re


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+egitimate consideration

An agreement to *e en+or$ea*le a% a $ontra$t inter alia mu%t *e %u))orte' *y $on%i'eration

unle%% the agreement i% *y mean% o+ #ritten 'ee'( ho#ever 2the $on%i'eration nee' not al#ay% *e

in term% o+ money( it may *e an a$t or +or*earan$e or a )romi%e to 'o or not to 'o %omething(

Capacity of parties

the )artie% mu%t *e legally $a)a*le o+ entering into $ontra$t( *ut ho# $an the $om)eten$y o+

$ontra$ting )artie% *e 'etermine'( in thi% regar' 2%e$tion %)e$i+ie% that every )er%on i%

$om)etent to $ontra$t #ho ha% attaine' the age o+ ma>ority a% )er the la# o+ hi% $ountry2 #ho i%

o+ %oun' min'2 an' #ho i% 'i%


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Consideration

Need for Consideration

-on%i'eration i% one o+ the e%%ential element% o+ a vali' $ontra$t( "he re


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him( "he $on%i'eration +rom her mother #a% %u++i$ient $on%i'eration(

ri#ity of Contract

A %tranger to a $ontra$t $annot %ue *oth un'er the ,ngli%h an' &n'ian la# +or #ant o+ )rivity

o+ $ontra$t( "he +ollo#ing illu%tration e/)lain% thi% )oint(In $unlop 'neumatic #yre %o. v( (elfridge )td. :9E; A(-( 847( %u))lie' tyre% to a

#hole%aler2 J2 on $on'ition that any retailer to #hom J re%u))lie' the tyre% %houl' )romi%e J2

not to %ell them to the )u*li$ *elo# H% li%t )ri$e( J %u))lie' tyre% to S u)on thi% $on'ition2 *ut

neverthele%% S %ol' the tyre% *elo# the li%t )ri$e(*eld& "here #a% a $ontra$t *et#een an' J

an' a $ontra$t *et#een J an' S( "here+ore2 $oul' not o*tain 'amage% +rom S2 a% ha' not

given any $on%i'eration +or SH% )romi%e t$ J nor #a% he )arty to the $ontra$t *et#een an' J(

"hu%2 a )er%on #ho i% not a )arty to a $ontra$t $annot %ue u)on it even though the $ontra$t i%

+or hi% *-G+it( A2 #ho i% in'e*te' to B2 %ell% hi% )ro)erty to -2 an' -

he )ur$ha%er o+ the )ro)erty2 )romi%e% to )ayo++ the 'e*t to B( &n $a%e - +ail% to )ay B2 B ha% no

right to %ue - +or there i% no )rivity o+ $ontra$t *et#een B an' -(

"he lea'ing ,ngli%h $a%e on the )oint i% #weddle v(Atkinson :86; Ban' Se$tion 393( &n

thi% $a%e2 the +ather o+ a *oy an' the +ather o+ a girl #ho #a% to *e marrie' to the *oy2 agree' that

ea$h o+ them %hall )ay a %um o+ money to the *oy #ho #a% to take u) the ne# re%)on%i*ilitie% o+

marrie' li+e( A+ter the 'emi%e o+ *oth the $ontra$ting )artie%2 the *oy :the hu%*an'; %ue' the

e/e$utor% o+ hi% +atherinla# u)on the agreement *et#een hi% +atherinla# an' hi% +ather(*eld&

the %uit #a% not maintaina*le a% the *oy #a% not a )arty to the $ontra$t(

+xception to te doctrine of pri!ity of contract& Both the &n'ian la# an' the ,ngli%h la#re$ogniLe $ertain e/$e)tion% to the rule that a %tranger to a $ontra$t $annot %ue on the

$ontra$t( &n the +ollo#ing $a%e%2 a )er%on #ho i% not a )arty to a $ontra$t $an en+or$e the

$ontra$t

:a; A *ene+i$iary un'er an agreement to $reate a tru%t $an %ue u)on the agreement2

though not a )arty to it2 +or the en+or$ement o+ the tru%t %o a% to get the tru%t e/e$ute' +or hi%

*ene+it( &n awa-a uammad v( *ussaini Begum, :90; 3! All( 402 it #a% hel' that

#here a Mohamme'an la'y %ue' her +atherinla# to re$over arrear% o+ allo#an$e )aya*le to

her *y him un'er an agreement *et#een him an' her o#n +ather in $on%i'eration o+ her

marriage2 %he $oul' en+or$e the )romi%e in her +avour in%o+ar a% %he #a% a *ene+i$iary un'erthe agreement to make a %ettlement in her +avour2 an' %he #a% $laiming a% *ene+i$iary un'er

%u$h %ettlement(

:ii; AnH a%%ignee un'er an a%%ignment ma'e *y the )artie%2 or *y the o)eration o+ la# :e(g( in

$a%e o+ 'eath or in%olven$y;2 $an %ue u)on the $ontra$t +or the en+or$ement o+ hi% right%2 title

an' intere%t( But a mere nominee :.e(2 the )er%on +or #ho%e *ene+it another ha% in%ure' hi%

o#n li+e; $annot %ue on the )oli$y *e$au%e the nominee i% not an a%%ignee(


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:iii; &n $a%e% o+ +amily arrangement% or %ettlement% *et#een male mem*er% o+ a 1in'u +amily

#hi$h )rovi'e +or the maintenan$e or e/)en%e% +or marriage% o+ +emale mem*er%2 the latter

though not )artie% to the $ontra$t2 )o%%e%% an a$tual *ene+i$ial right #hi$h )la$e them in the

)o%ition o+ *ene+i$iarie% un'er the $ontra$t2 an' $an there+ore2 %ue(

:iv; &n $a%e o+ a$kno#le'gement o+ lia*ility2 e(g(2 #here A re$eive% money +rom B +or )aying to

-2 an' a'mit% to - the re$ei)t o+ that amount2 then A $on%titute% him%el+ a% the agent o+ -(

:v; Fhenever the )romi%or i% *y hi% o#n $on'u$t e%to))e' +rom 'enying hi% lia*ility to )er+orm

the )romi%e2 the )er%on #ho i% not a )arty to the $ontra$t $an %ue u)on it to make the

)romi%or lia*le(

:vi; &n $a%e% #here a )er%on make% a )romi%e to an in'ivi'ual +or the *ene+it o+ thir' )arty an'

$reate% a $harge on $ertain immova*le )ro)erty+orthe )ur)o%e2 the thir' )arty $an en+or$e

the )romi%e ?though2 he i% %tranger to the $ontra$t(

Kinds of Consideration

-on%i'eration may *e

:a; +xecutory or ,future #hi$h mean% that it make% the +orm o+ )romi%e to *e )er+orme'

in the +uture2 e(g(2 an engagement to marry %omeone or

:*; +xecuted or )re%ent in #hi$h it i% an a$t or +or*earan$e ma'e or %u++ere' +or a

)romi%e( &n other #or'%2 the a$t $on%tituting $on%i'eration i% #holly or $om)letely

)er+orme'2 e(g(2 i+ A )ay% to'ay %( 00 to a %ho)kee)er +or goo'% #hi$h are

)romi%e' to *e %u))lie' the ne/t 'ay2 A ha% e/e$ute' hi% $on%i'eration *ut the

%ho)kee)er i% giving e/e$utory $on%i'eration a )romi%e to *e e/e$ute' the

+ollo#ing 'ay( &+ the )ri$e i% )ai' *y the *uyer an' the goo'% are 'elivere' *y the%eller at the %ame time2 $on%i'eration i% e/e$ute' *y *oth the )artie%(

:$; Pa%t #hi$h mean% a )a%t a$t or +or*earan$e2 that i% to %ay2 an a$t $on%tituting

$on%i'eration #hi$h took )la$e an' i% $om)lete :#holly e/e$ute'; *e+ore the )romi%e i%

ma'e(

A$$or'ing to ,ngli%h la#2 a $on%i'eration may *e e/e$utory or e/e$ute' *ut never )a%t( "he

,ngli%h la# i% that )a%t $on%i'eration i% no $on%i'eration( #e "ndian law recogni/es all te

abo!e tree kinds of consideration.

Rules Governing Consideration

:a; ,very %im)le $onta$t mu%t *e %u))orte' *y valua*le $on%i'eration other#i%e it i%+ormally voi' %u*>e$t to %ome e/$e)tion%(

:*; -on%i'eration may *e an a$t o+ a*%tinen$e or )romi%e(

:$; "here mu%t *e mutuality .e(2 ea$h )arty mu%t 'o or agree to 'o %omething( A gratuitou%

)romi%e a% in the $a%e o+ %u*%$ri)tion +or $harity2 i% not en+or$ea*le( or e/am)le2 #here

A )romi%e% to %u*%$ri*e %( E2000 +or the re)air o+ a tem)le2 an' then re+u%e% to )ay2 no

a$tion $an *e taken again%t him(


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:'; -on%i'eration mu%t *e real2 an' not vague2 in'e+inite2 or illu%ory2 eg(2 a %onH% )romi%e to

?%to) *eing a nui%an$e? to hi% +ather2 *eing vague2 i% no $on%i'eration(

:e; Although $on%i'eration mu%t have %ome value2 it nee' not *e a'e


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"he legal ma/im2 there+ore2 i% ?a contract to contract is not a contract6. &+ you agree

?%u*>e$t to $ontra$t? or ?%u*>e$t to agreement?2 the $ontra$t 'oe% not $ome into e/i%ten$e2 +or

there i% no 'e+inite or un


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I.!4IT6

A$$or'ing to Se$tion 3 o+ the &n'ian Ma>ority A$t2 87E2 a minor i% a )er%on #ho ha% not

$om)lete' 8 year% o+ age( 1o#ever2 in the +ollo#ing t#o $a%e%2 a minor attain% ma>ority a+ter

! year% o+ age

( Fhere a guar'ian o+ minor% )er%on or )ro)erty ha% *een a))ointe' un'er the Guar'ian% an'

Far'% A$t2 8902 or

!( Fhere the %u)erinten'en$e o+ minor% )ro)erty i% a%%ume' *y a -ourt o+ Far'%(

M&NIS -IN"A-"S

"he )o%ition o+ minor% $ontra$t% i% %umme' u) a% +ollo#%


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1% A contract 0ith or "y a minor is #oid and a minor2 there+ore2 $annot2 *in' him%el+ *y a

$ontra$t( A minor i% not $om)etent to $ontra$t( &n ,ngli%h .a#2 a minor% $ontra$t2 %u*>e$t to

$ertain e/$e)tion%2 i% only voi'a*le at the o)tion o+ the minor(1el' "hat in &n'ia minor% $ontra$t% are a*%olutely voi' an' not merely voi'a*le( "he

+a$t% o+ the $a%e #ere

Example $ ;harmodas hose ,a minor2 entere' into a $ontra$t +or *orro#ing a %um o+ %(

!02000 out o+ #hi$h the len'er )ai' the minor a %um o+ %( 02E00( "he minor e/e$ute'

mortgage o+ )ro)erty in +avour o+ the len'er( Su*%e


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Example $S2 a minor2 *orro#e' R400 +rom .2 a moneylen'er2 *y +rau'ulently mi%re)re%enting

that he #a% o+ +ull age( In 'e+ault *y S2 . %ue' +or return o+ R4002 an' 'amage% +or the tort o+

'e$eit(

9eld $. $oul' not re$over R4002 an' hi% $laim +or 'amage% al%o +aile'( "he $ourt 'i' not grant

the relie+ other#i%e2 it #oul' have *een an in'ire$t #ay o+ en+or$ing a voi' $ontra$t( ,ven one


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Examples

:; A )atient2 in a lunati$ a%ylum2 #ho i% at interval%2 o+ %oun' min'2 may $ontra$t 'uring tho%e

interval%(:!; A %ane man2 #ho i% 'eliriou% +rom +ever or #ho i% %o 'runk that he $annot un'er%tan' the

term% o+ a $ontra$t or +orm a rational >u'gement a% to it% e++e$t on hi% intere%t2 $annot $ontra$t

#hil%t %u$h 'elirium or 'runkenne%% la%t%(

rom the a*ove e/am)le% given2 it i% o*viou% that Soun'ne%% o+ min' o+ a )er%on 'e)en'% on

t#o +a$t%:i; hi% $a)a$ity to un'er%tan' the term% o+ the $ontra$t2 an'

:ii; 1i% a*ility to +orm a rational >u'gement a% to it% e++e$t u)on hi% intere%t%(

"he )o%ition o+ $ontra$t% *y )er%on% o+ un%oun' min' i% given *elo#(

1% +)natics

A lunati$ i% a )er%on #ho i% mentally 'erange' 'ue to %ome2 mental %train or other )er%onale/)erien$e( 1o#ever2 he ha% %ome interval% o+ %oun' min'( 1e i% not lia*le +or $ontra$t% entere'

into #hile he i% o+ un%oun' min'( 1o#ever2 a% regar'% $ontra$t% entere' into 'uring lu$i'

interval%2 he i% *oun'( 1i% )o%ition in thi% regar' i% i'enti$al #ith minor2 i(e(2 in general the

$ontra$t i% voi' *ut the %ame e/$e)tion% a% 'i%$u%%e' a*ove :un'er minor% $ontra$t%; arerelevant(

2% Idiots

An i'iot i% a )er%on #ho i% )ermanently o+ un%oun' min' +rom *irth( 1e 'oe% not havelu$i' interval%( 1e i% in$a)a*le o+ entering into a $ontra$t an'2 there+ore2 a $ontra$t #ith an i'iot

i% voi'( 1o#ever2 like a minor2 hi% )ro)ertie%2 i+ any2 %hall *e lia*le +or re$overie% on a$$ount o+

ne$e%%arie% o+ li+e %u))lie'( Al%o he $an *e a *ene+i$iary

u'gment a% to it% e++e$t on hi%

intere%t% $annot enter into vali' $ontra$t% #hil%t %u$h 'runkenne%% or 'elirium la%t%(


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An alien i% a )er%on #ho i% the $itiLen o+ a +oreign $ountry( "hu%2 in the &n'ian $onte/t2 an alien

i% a )er%on2 #ho i% not a %u*>e$t o+ &n'ia( An alien may *e :i; an alien +rien'2 or :ii; an

alien enemy(

An alien +rien' :i(e(2 a +oreigner; #ho%e $ountry i% at )ea$e #ith the e)u*li$ o+ &n'ia2 ha%

u%ually the +ull $ontra$tual $a)a$ity o+ a natural *orn &n'ian %u*>e$t( But he $annot a$e$t nor $an he %ue in an &n'ian $ourt e/$e)t *y li$en$e +rom the -entral Government(

"B 3oreign o#ereigns and Am"assadors

oreign %overeign% an' a$$re'ite' re)re%entative% o+ a +oreign State or Am*a%%a'or% en>oy %ome

%)e$ial )rivilege%( "hey $annot *e %ue' in our $ourt% unle%% they $hoo%e to %u*mit them%elve% tothe >uri%'i$tion o+ our $ourt%( "hey $an enter into $ontra$t% an' en+or$e tho%e $ontra$t% in our

$ourt%( 1o#ever2 they $annot *e )ro$ee'e' again%t in &n'ian $ourt% #ithout the %an$tion o+ the

-entral Government(

cB Insol#ent ersons D+egal stat)sB

&n%olvent )er%on% are in$om)etent to $ontra$t until they o*tain a $erti+i$ate o+ 'i%$harge(

-INS,N"

"he term $on%ent in'i$ate% meeting o+ min'% i(e( $ontra$ting )artie% un'er%tan'ing the %amething in the %ame %en%e( A$$or'ing to Se$tion 32 "#o or more )er%on% are %ai' to have

$on%ente' #hen they agree u)on the %ame thing in the %ame %en%e( -on%ee$t matter o+ the $ontra$t2 they $annot *e

%ai' to have agree' u)on the %ame thing in the %ame %en%e( or e/am)le2 A ha% t#o hor%e% one i%

*la$k an' the other re'( 1e o++er% to %ell hi% *la$k hor%e to B +or %( E000( B #ho i% a#are o+ A%

re' hor%e2 a$$e)t% the o++er ma'e *y the latter thinking it to *e an o++er +or the re' hor%e( "he %o

$alle' agreement *et#een A an' B i% invali' on the groun' that there i% no $on%ent( "he t#o

)artie% are not thinking in term% o+ the %ame %u*>e$t matter(

,, -INS,N"

Ine o+ the e%%ential% o+ a vali' $ontra$t mentione' in Se$tion 0i% that the )artie% %houl' enter

into $ontra$t #ith +ree $on%ent( A$$or'ing to Se$tion 42 -on%ent i% %ai' to *e +ree #hen it i% not

$au%e' *y =


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( $oer$ion2 a% 'e+ine' in Se$tion E2 or

!( un'ue in+luen$e2 a% 'e+ine' in %e$tion62 or

3( +rau'2 a% 'e+ine' in Se$tion 72 or4( mi%re)re%entation a% 'e+ine' in Se$tion 82 or

E( mi%take2 %u*>e$t to the )rovi%ion% o+ Se$tion !02 ! an' !!(

-on%ent i% %ai' to *e $au%e' #hen it #oul' not have *een given *ut +or the e/i%ten$e o+ %u$h

$oer$ion2 un'ue in+luen$e2 +rau'2 mi%re)re%entation or mi%take( &+ the$on%ent o+ one o+ the )artie%

i% not +ree $on%ent2 i(e(2 it ha% *een $au%e' *y one or other o+ the a*ove %tate' +a$tor% the $ontra$t

i% not a vali' one( Fhen $on%ent to an agreement i% $au%e' *y +rau'2 $oer$ion2 mi%re)re%entation

or un'ue in+luen$e2 the agreement i% a $ontra$t voi'a*le at the o)tion o+ the )arty #ho%e $on%ent

#a% %o $au%e'( &+2 ho#ever2 the $on%ent i% $au%e' *y mi%take the agreement i% voi'(

C!E4CI!.

A$$or'ing to Se$tion E2 C-oer$ionD i% the $ommitting2 or threatening to $ommit2 any a$t

+or*i''en *y the &n'ian Penal -o'e2 or the unla#+ul 'etaining2 or threatening to 'etain2 any

)ro)erty2 to the )re>u'i$e o+ any )er%on #hatever #ith the intention o+ $au%ing any )er%on to

enter into an agreement(

-oer$ion i% %ai' to *e there #hen the $on%ent o+ a )er%on ha% *een $au%e' either *y

:i; $ommitting2 or threatening to $ommit any a$t +or*i''en *y the &n'ian Penal -o'e2 or *y

:ii; unla#+ul 'etaining2 or threatening to 'etain any )ro)erty2 to the )re>u'i$e o+ any )er%on

#hatever(Act for"idden "y the Indian enal Code

&t ha% *een note' that i+ a )er%on $ommit% or threaten% to $ommit an a$t +or*i''en *y the &n'ian

Penal -o'e #ith a vie# to o*tain the $on%ent o+ the other )er%on to %ome agreement2 the $on%ent

in %u$h $a%e i% 'eeme' to have *een o*taine' *y $oer$ion( or in%tan$e2 A threaten% to %hoot B

i+ B 'oe% not agree to %ell hi% )ro)erty to A at a %tate' )ri$e2 B% $on%ent in thi% $a%e ha% *een

o*taine' *y $oer$ion(

or $oer$ion to *e there it i% not ne$e%%ary that the &n'ian Penal -o'e %houl' *e a))li$a*le at the

)la$e #here the $on%ent ha% *een %o $au%e'( ,/)lanation to %e$tion E make% it $lear that to

$on%titute $oer$ion2 Cit i% immaterial #hether the &n'ian Penal -o'e i% or i% not in +or$e in the)la$e #here the $oer$ion i% em)loye'(D "he +ollo#ing illu%tration #oul' e/)lain the )oint

A2 on *oar' an ,ngli%h %hi) on the high %ea%2 $au%e% B to enter into an agreement *y a$t

amounting to $riminal intimi'ation un'er the &n'ian Penal -o'e( A a+ter#ar'% %ue% B +or *rea$h

o+ -ontra$t at -al$utta( A ha% em)loye' $oer$ion2 although hi% a$t i% not an o++en$e *y the la#

o+ ,nglan'2 an' although %e$tion E06 o+ the &n'ian Penal -o'e #a% not in +or$e at the time #hen2

or at the )la$e #here2 the a$t #a% 'one(


18/45

In 4anganayakamma &s%Al0aretti D188Bthe ) &s%Chikkameshama D118B the u'i$e o+ any )er%on #hatever2 #ith the intention o+ $au%ing any

)er to enter into an agreement( or e/am)le2 i+ an outgoing agent re+u%e% to han'over the

a$$ount% *ook% to the ne# agent until the )rin$i)al e/e$ute% relea%e in hi% +avour2 it i% $oer$ion(

:)thiahChettiar &s%Far)pan D127B &+ the 'etention o+ )ro)erty i% not unla#+ul there i% no

$oer$ion( "hu%2 i+ a mortgagee re+u%e% to $onvey the e


19/45

( A$$or'ing to %e$tion 92 Fhen the $on%ent to an agreement i% $au%e' *y $oer$ion2 the

agreement i% a $ontra$t voi'a*le at the o)tion o+ the )arty #ho $on%ent #a% %o $au%e'(

!( Se$tion 7! )rovi'e%2 A )er%on to #hom money ha% *een )ai'2 or anything 'elivere'

un'er $oer$ion2 mu%t re)ay or return it(

BQ,N I PII

"he onu% o+ )roo+ that the $on%ent #a% $au%e' *y $oer$ion in'ee' lie% on the )arty #ho #ant% to

re%$in' the $ontra$t on the groun' o+ $oer$ion("hu% the aggrieve' )arty ha% to )rove that it

#oul' not have entere' into thi% $ontra$t ha' the $oer$ion not *een em)loye'(

'.;'E I.3+'E.CE

A $ontra$t i% %ai' to *e in'u$e' *y un'ue in+luen$e #here the relation% %u*%i%ting *et#een the

)artie% are %u$h that one o+ the )artie% i% in a )o%ition to 'ominate the #ill o+ the other an' u%e%

that )o%ition to o*tain an un+air a'vantage over the other(A )er%on i% 'eeme' to *e in a )o%ition to 'ominate the #ill o+ another =

:a; #here he hol'% a real or a))arent authority over the other = e(g( relation%hi) *et#een

'o$tor an' )atient2 ma%ter an' %ervant(:*; #here he %tan'% in a +i'u$iary relation :relation o+ tru%t an' $on+i'en$e; to the other =

e(g( *et#een +ather an' %on2 %oli$itor an' $lient2 tru%tee an' *ene+i$iary an' )romoter an'

$om)any(:$; #here he make% a $ontra$t #ith a )er%on #ho%e mental $a)a$ity i% tem)orarily or

)ermanently a++e$te' *y age2 illne%% or mental or *o'ily 'i%tre%% = e(g( relation%hi)*et#een me'i$al atten'ant an' hi% )atient(

"he )rin$i)le a))lie% to every $a%e #here in+luen$e i% a$


20/45

ann) ingh &s% 'madatandey= in thi% $a%e2 %)iritual guru in'u$e' hi% 'evotee to gi+t him

the #hole o+ hi% )ro)erty in return +or )romi%e o+ %alvation :nirvana; = 1el'2 the $on%ent o+ the

'evotee #a% given un'er un'ue in+luen$e(

elation%hi)% #hi$h rai%e )re%um)tion o+ un'ue in+luen$e

( Parent an' $hil'!( Guar'ian an' #ar'

3( "ru%tee an' *ene+i$iary

4( eligiou% a'vi%er an' 'i%$i)le

E( o$tor an' )atient

6( Soli$itor an' $lient2 an'

7( ian$U an' +ian$Ue(

,,-" I QNQ, &N.Q,N-,

Se$tion 9A 'e$lare% that #hen $on%ent to an agreement i% $au%e' *y un'ue in+luen$e2 the

agreement i% a $ontra$t voi'a*le at the o)tion o+ the )arty #ho%e $on%ent #a% %o $au%e'( or

e/am)le2 A% %on ha% +orge' B% name to a )romi%%ory note( B2 un'er threat o+ )ro%e$uting A%

%on2 o*tain% a *on' +rom A2 +or the amount o+ the +orge' note( &+ B %ue% on thi% *on'2 the $ourt

may %et the *on' a%i'e(

Be$au%e o+ un'ue in+luen$e one )arty to the $ontra$t may take an un'ue a'vantage un'er the

$ontra$t2 or the )arty entitle' to avoi' the $ontra$t may have alrea'y re$eive' %ome *ene+it un'er

the $ontra$t( "he $ourt in $a%e% ha% *een em)o#ere' to %et a%i'e the $ontra$t either a*%olutely oru)on %u$h term% an' $on'ition% a% the -ourt may 'eem >u%t( Se$on' )ara to Se$tion 9A

in$or)orate% the +ollo#ing )rovi%ion in thi% regar'

CAny %u$h $ontra$t may *e %et a%i'e either a*%olutely2 or2 i+ the )arty #ho #a% entitle' to avoi' it

ha% re$eive' any *ene+it there un'er2 u)on %u$h term% an' $on'ition% a% to the -ourt may %eem

>u%tD

or e/am)le2 a 2 a moneylen'er2 a'van$e% %( 00 to B2 an agri$ulturali%t2 an'2 *y un'ue

in+luen$e2 in'u$e% B to e/e$ute a *on' +or %( !00 #ith intere%t at 6 )er $ent )er month( "he

$ourt may %et the *on' a%i'e2 or'ering B to re)ay %(00 #ith intere%t a% may %eem >u%t(

BQ,N I PII

Fhen the aggrieve' )arty $hoo%e% to re%$in' the $ontra$t on the groun' o+ un'ue in+luen$e2 it

#ill have to )rove the +ollo#ing t#o )oint%


21/45

"he other )arty #a% in a )o%ition to 'ominate it% #ill an'

By the u%e o+ %u$h 'ominant )o%ition2 the other )arty a$tually o*taine' an un+air

a'vantage over it(

I4E4EE.TATI!.

Mi%re)re%entation i% a +al%e re)re%entation ma'e inno$ently #ithout any intention o+ 'e$eiving

the other )arty(Fhen the $on%ent o+ a )arty to a $ontra$t ha% *een o*taine' *y mi%re)re%entation

it i% not +ree $on%ent an' the $ontra$t i% voi'a*le at hi% o)tion( Se$tion 8 'e+ine%

mi%re)re%entation a% un'er

CMi%re)re%entationD mean% an' in$lu'e%@

:; the )o%itive a%%ertion2 in a manner not #arrante' *y the in+ormation o+ the )er%on making it2

o+ that #hi$h i% not true2 though he *elieve% it to *e true

:!; any *rea$h o+ 'uty #hi$h2 #ithout an intention to 'e$eive2 gain% an a'vantage to the )er%on

$ommitting it2 or any one $laiming un'er him2 *y mi%lea'ing another to hi% )re>u'i$e or to the

)re>u'i$e o+ any one $laiming un'er him

:3; $au%ing2 ho#ever2 inno$ently2 a )arty to an agreement2 to make a mi%take a% to the %u*%tan$e

o+ the thing #hi$h i% the %u*>e$t o+ the agreement(

,SS,N"&A.S I M&S,P,S,N"A"&IN

( "here %houl' *e a re)re%entation or a%%ertion2 ma'e inno$ently2 *elieving it to *e true an'

#ithout an intent to 'e$eive the other )arty(!( "he re)re%entation or a%%ertion %houl' *e2 o+ +a$t%2 material to the agreement( A mere

e/)re%%ion o+ o)inion or hear%ay or $ommen'ation $annot *e regar'e' a% mi%%tatement o+

+a$t% even i+ the %ame turn out to *e untrue(

3( "he %tatement mu%t *e untrue or turne' out to *e untrue *ut #a% ma'e #ith an hone%t

*elie+ in it% truth(4( "he )er%on to #hom the mi%re)re%entation #a% ma'e mu%t have relie' on it in the %en%e

that it mu%t have in'u$e' him to enter into the $ontra$t(

E( A )arty $annot $om)lain o+ mi%re)re%entation i+ it ha' the mean% o+ 'i%$overing the truth

#ith or'inary 'iligen$e(

-.ASS&&-A"&IN I M&S,P,S,N"A"&IN

"he a*ove )rovi%ion% $la%%i+y a$t% o+ mi%re)re%entation into the +ollo#ing three grou)%


22/45

( Qn#arrante' %tatement o+ material +a$t%

!( Brea$h o+ 'uty that *ring% a'vantage to the )er%on $ommitting it

3( &n'u$ing mi%take a*out %u*>e$t matter

,,-" I M&S,P,S,N"A"&IN

"he e++e$t o+ mi%re)re%entation i% that the )arty mi%le' *y it $an avoi' the $ontra$t( A )arty to

$ontra$t #ho%e $on%ent #a% $au%e' *y mi%re)re%entation2 may2 i+ it 'eem% +it2 in%i%t that the

$ontra$t *e )er+orme'2 an' that it *e )ut in the )o%ition in #hi$h it #oul' have *een2 i+ the

re)re%entation% ma'e ha' *een true( "hu%2 the aggrieve' )arty ha% the +ollo#ing t#o alternate

right%

( &t may re%$in' the $ontra$t2 or

!( &t may $ontinue #ith the $ontra$t

AMAG,S I M&S,P,S,N"A"&IN

Mi%re)re%entation generally 'oe% not entitle the aggrieve' )arty to $laim 'amage%( 1o#ever2

'amage% $an *e $laime' in $a%e o+ mi%re)re%entation in the +ollo#ing e/$e)tion $a%e%

( Fhere the )ro%)e$tu% o+ a $om)any inviting the )u*li$ to %u*%$ri*e +or %hare% in the

$om)any $ontain% a mi%%tatement a*out a material +a$t2 an' %omeone relying on the

)ro%)e$tu% %u*%$ri*e% %hare% an' there*y %u++er% lo%%e%2 heT%he $an $laim 'amage% +rom

the )romoter% or 'ire$tor% o+ the $om)any(

!( Fhere an agent $ommit% a *rea$h o+ #arranty o+ authority2 heT%he e/)o%e%

him%el+Ther%el+ to )ay 'amage% to the in>ure' )arty(

3( Fhere the relation%hi) *et#een the )artie% i% that o+ a $on+i'ential nature an' one )arty

%u++er% lo%% 'ue to mi%re)re%entation ma'e *y another )arty2 the +ormer $an $laim

'amage% +rom the latter $au%e' *y %u$h mi%re)re%entation(

BQ,N I PII


23/45

"o avoi' a $ontra$t on the groun' o+ mi%re)re%entation2 the re)re%entee nee'% only to e/)lain that

the mi%re)re%entation #a% ma'e2 an' that it #a% $a)a*le o+ in'u$ing the $ontra$t( "he *ur'en

then )a%%e% to the re)re%entor to )rove that the re)re%entee #oul' have entere' into the $ontra$t

any#ay2 even i+ the mi%re)re%entation ha' not *een ma'e(

34A';

Fhen the $on%ent o+ a )arty to the $ontra$t ha% *een o*taine' *y +rau'2 the $on%ent i% not +ree

$on%ent2 #hi$h i% ne$e%%ary +or the +ormation o+ a vali' $ontra$t( &n %u$h a $a%e the $ontra$t i%

voi'a*le at the o)tion o+ the )arty #ho%e $on%ent ha% *een %o o*taine'( Se$tion 7 'e+ine% +rau'

a% +ollo#%Crau'D mean% an' in$lu'e% any o+ the +ollo#ing a$t% $ommitte' *y a )arty to a

$ontra$t2 or #ith hi% $onnivan$e2 or *y hi% agent2 #ith intent to 'e$eive another )arty thereto or

hi% agent2 or to in'u$e him2 to enter into the $ontra$t(

:; "he %ugge%tion2 a% a +a$t2 o+ that #hi$h i% not true *y one #ho 'oe% not *elieve it to *e true2

:!; "he a$tive $on$ealment o+ a +a$t *y one having kno#le'ge or *elie+ o+ the +a$t2

:3; A )romi%e ma'e #ithout any intention o+ )er+orming it2

:4; Any other a$t +itte' to 'e$eive2 an'

:E; Any %u$h a$t or omi%%ion a% the la# %)e$ially 'e$lare% to *e +rau'ulent(

,SS,N"&A. ,.,M,N"S I AQ

( al%e an' #il+ul re)re%entation or a%%ertion

!( Per)etrator o+ re)re%entation

3( &ntention to 'e$eive

4( e)re%entation mu%t relate to a +a$tE( A$tive $on$ealment o+ +a$t%

6( Promi%e ma'e #ithout intention o+ )er+orming it

7( e)re%entation mu%t have a$tually 'e$eive' the other )arty8( Any other a$t +itte' to 'e$eive

9( Ither a$t% or omi%%ion% %)e$ially 'e$lare' voi'

0( "he )arty mi%le' mu%t have %u++ere' %ome lo%%

I,S S&.,N-, AMIQN" "I AQV

&t ha% *een note' a*ove that +or $on%tituting +rau' there %houl' *e re)re%entation a% to $ertain

untrue +a$t%( A$tive $on$ealment ha% al%o *een $on%i'ere' to *e e


24/45

the min' o+ the other2 mere %ilen$e2 ho#ever2 a% to +a$t% i% no +rau'( ,/)lanation to Se$tion 72

in thi% $onne$tion2 in$or)orate% the +ollo#ing )rovi%ion%

CMere %ilen$e a% to +a$t% likely to a++e$t the #illingne%% o+ a )er%on to enter into a $ontra$t i% not+rau'2 unle%% the $ir$um%tan$e% o+ the $a%e are %u$h that2 regar' *eing ha' to them2 it i% the 'uty

o+ the )er%on kee)ing %ilen$e to %)eak2 or unle%% hi% %ilen$e i%2 in it%el+2 e


25/45

:; uty to %)eak

Fhen the $ir$um%tan$e% o+ the $a%e are %u$h that2 regar' *eing ha' to them2 it i% the 'uty o+ the

)er%on kee)ing %ilen$e to %)eak2 kee)ing %ilen$e in %u$h a $a%e amount% to +rau'( Fhen there i%

a 'uty to 'i%$lo%e +at%2 one %houl' 'o %o rather than to remain %ilent( By remaining %ilent one

may *e re%)on%i*le +or $reating a +al%e im)re%%ion in the min' o+ the other( -ertain $ontra$t% areu*errima +i'e%2 i(e(2 $ontra$t% o+ utmo%t +aith( &n %u$h a $a%e it i% %u))o%e' that the )arty in

#hom goo' +aith i% re)o%e' #oul' make +ull 'i%$lo%ure% an' not kee) %ilent( Su))re%%ion o+

truth in %u$h $a%e% i% e


26/45

ITAFE

"he term mi%take literally mean% in$orre$t2 or #rong i'ea or o)inion a*out %omething $au%e'

*y la$k o+ attention2 %kill2 or kno#le'ge2 et$( &n the $onte/t o+ la# o+ $ontra$t%2 mi%take 'e+ine'

a% the erroneou% *elie+ or mi%un'er%tan'ing in the min'% o+ $ontra$ting )artie% $on$erning the

la# or +a$t% a*out the $ontra$t(

&t u%ually take% )la$e #hen the $on$erne' )artie% are not #ell a$


27/45

Types of istake

"he mi%take% in relation to $ontra$t are o+ t#o ty)e%

( Mi%take o+ .a#

!( Mi%take o+ a$t

1% istake of +a0

A )er%on #hile entering into a $ontra$t mu%t have the kno#le'ge o+ regulatory

+rame#ork2 i(e(2 la# $on$erning the $ontra$t %o that he $an *in' him%el+ an' the other

)arty legally(

Fhen a )arty enter% into a $ontra$t2 #ithout the kno#le'ge o+ the la# in the $ountry2 the

$ontra$t i% a++e$te' *y %u$h mi%take% *ut it i% not voi'(


28/45

"he rea%on here i% that ignoran$e o+ la# i% not an e/$u%e at all(

Se$tion ! )rovi'e%2 A $ontra$t i% not voi'a*le *e$au%e it #a% $au%e' *y a mi%take a% to

any la# in +or$e in &n'ia *ut a mi%take a% to a la# not in +or$e in &n'ia ha% the %ame

e++e$t a% a mi%take o+ +a$t(

istake of la0, again, may "e of three types$

( Mi%take o+ la# o+ the $ountry(

&gnoran$e o+ la# i% no e/$u%e( ,very*o'y i% %u))o%e' to kno# the la# o+ the lan'( &t i%

ne$e%%ary other#i%e the very )ur)o%e o+ la# #ill *e +ru%trate'( 1en$e mi%take o+ la#

'oe% not give right to the )artie% to avoi' the $ontra$t(

A% )er %e$tion !2 &+ there i% a mi%take o+ la# o+ the $ountry2 the $ontra$t i% *in'ing(

Example$ A an' B make a $ontra$t groun'e' on the erroneou% *elie+ that a )arti$ular

'e*t i% time*arre' *y the &n'ian .a# o+ limitation( "he $ontra$t i% vali' an' notvoi'a*le(

!( Mi%take o+ +oreign la#(

Ine i% %u))o%e' to kno# the la# o+ the lan' i(e(2 hi% o#n $ountry *ut one i% not e/)e$te'

to kno# the la# o+ the #hole #orl'( "hu% i+ an &n'ian $ommit% a mi%take o+ ,ngli%h .a##hile in &n'ia2 he i% not )uni%ha*le( Mi%take o+ +oreign la# i% e/$u%a*le( &t i% treate' a% a

mi%take o+ +a$t( Partie% $an avoi' the $ontra$t on the groun' o+ mi%take o+ +oreign la#(

3( Mi%take o+ )rivate right o+ the )artie%(

Mi%take o+ )rivate la# o+ the )artie% i% al%o e/$u%a*le( A )er%on $annot kno# the )rivate

la# o+ other )artie% hen$e he i% given the *ene+it o+ %u$h ignoran$e( "hu% mi%take o+

)rivate la# i% treate' at )ar #ith that o+ mi%take o+ +oreign la#( 1en$e2 )artie% $an avoi'the $ontra$t on the groun' o+ mi%take o+ )rivate la# o+ )artie%(

2% istake of 3act

Mi%take o+ +a$t ari%e% #hen the )artie% enter into a $ontra$t #ithout un'er%tan'ing the

term% an' $on'ition% o+ the $ontra$t )ro)erly

istake of fact - It may "e of t0o types$

:A; Bilateral Mi%take

:B; Qnilateral Mi%take(


29/45

DAB *ilateral istake$

A% )er Se$( !02 #here *oth the )artie% to an agreement are un'er a mi%take a% to a mattero+ +a$t e%%ential to the agreement2 there i% a *ilateral mi%take an' the agreement i% voi'(

An agreement #ill *e voi' on the groun' o+ mi%take i+

:i; "he mi%take i% mutual2 i(e(2 $ommitte' *y *oth the )artie%( ,/am)le

In 6thA)ril2 A an' B agree' to )ur$ha%e the goo'% loa'e' on a %hi) #hi$h #a% $oming to

Bom*ay +rom .on'on( .ater on2 it #a% 'i%$overe' that the %hi) $arrying the goo'% ha'

alrea'y %unk in the %ea on 4thA)ril( Neither A nor B #ere a#are o+ it( "he agreement i%voi' on the groun' o+ mi%take(

:ii; "he mi%take relate% to a matter o+ +a$t e%%ential to the agreement( &t i% ne$e%%ary thatmi%take mu%t relate to a matter o+ +a$t #hi$h i% e%%ential to the agreement(

Example$

At an au$tion %ale2 A )ur$ha%e' a )ro)erty in -al$utta an' )ai' earne%t money( &t thentran%)ire' that nearly hal+ o+ the )ro)erty #a% to *e a$e$tmattero+ the $ontra$t2 the agreement i% voi'( &t may *e o+ the +ollo#ing ty)e%

DaB istake regarding the existence of the s)">ect-matter$

Fhere *oth the )artie% *elieve that the %u*>e$tmatter i% in e/i%ten$e2 *ut in +a$t the%u*>e$tmatter #a% not in e/i%ten$e at the time o+ $ontra$t2 the agreement i% voi'(

Example$A agree' to %ell to B hi% $ar )arke' in hi% garage( "he $ar ha' alrea'y *een 'e%troye' *y

+ire *e+ore the 'ate o+ $ontra$t( Both A an' B 'i' not kno# thi% +a$t( "he agreement i%

voi'(

D"B istake regarding the identity of the s)">ect-matter$


30/45

Fhere *oth the )artie% are un'er a mi%take a% to the i'entity o+ the %u*>e$tmatter2 i(e(2

one )arty think% to 'eal #ith one thing an' the other #ith %omething el%e2 the agreement

#ill *e voi'(

Example$

A ha% t#o %$ooter% a .am*retta an' a Ye%)a( A agree' to %ell one o+ them to B( &t i% not$lear #hi$h o+ the t#o %$ooter% he i% %elling( A might *e thinking to %ell .am*retta #hile

B might thinking to )ur$ha%e Ye%)a( "here i% no agreement(

DcB istake regarding the title of the s)">ect-matter, i%e%, its o0nership$

Fhere the %eller an' *uyer *elieve that the %eller ha% title to the )ro)erty2 *ut in +a$t it i%

'i%$overe' that the )ro)erty *elong% to a thir' )arty2 the agreement i% voi'(

Example$

A agree' to take a +i%hery on lea%e +rom B( Both o+ them *elieve' that B #a% the o#ner(

But later on it #a% 'i%$overe' that +i%hery in +a$t *elonge' to A( &t #a% hel' that theagreement #a% voi' W-oo)er v( Phi**%X2

DdB istake regarding the price of the s)">ect-matter$

Fhere *oth the )artie% are un'er a mi%take a% to the )ri$e o+ the %u*>e$tmatter2 theagreement i% voi'(

Example$

A agree' to hire BH% au'itorium :1all; at %( 800( But #hile #riting the agreement2 the

+igure #a% #ritten a% %( 2800 *y mi%take( "he agreement i% voi'( 1o#ever2 the -ourt

$an al%o re$ti+y thi% mi%take2 Waga'u v( BhanaX

DeB istake regarding the )antity of the s)">ect-matter$

Fhere *oth the )artie% are un'er a mi%take regar'ing the e$tmatter2

the agreement i% voi'(

Example$

A enect-matter$


31/45

Fhere *oth the )artie% are un'er a mi%take a% to the e$t matter2 the

agreement i% voi'(

Example$

A agree' to %ell to B a )ie$e o+ Mona .i%a )ainting in hi% gallery( A very high )ri$e #a%

)ai' +or the )ainting( But unkno#n to *oth o+ them2 a thie+ ha' %tolen the genuine Mona.i%a )ainting an' %u*%titute' a $o)y( A+ter taking the 'elivery2 B $ame to kno# that it #a%

not the genuine Mona .i%a )ainting( "he agreement i% voi' a% *oth the )artie% are un'er a

mi%take regar'ing the e$tmatter i(e(2 )ainting(

2% istake as to possi"ility of performance$

&+ *oth the )artie% *elieve that the $ontra$t i% $a)a*le o+ )er+orman$e2 *ut 'ue to

im)o%%i*ility it $annot to )er+orme'2 the agreement i% voi'2

DaB hysical impossi"ility$

"he a$t may *e )hy%i$ally im)o%%i*le to )er+orm an' hen$e voi'( "he la# 'oe% not$om)el any )er%on to 'o %omething #hi$h i% im)o%%i*le(

Example$

A agree' to hire HBH% room to #itne%% -or)oration Pro$e%%ion( Qnkno#n to *oth o+them2 the )ro$e%%ion ha' alrea'y *een $an$elle'( "he agreement i% voi'( WGri++ith v(

BrymerX

D"B +egal impossi"ility$"he a$t may *e legally im)o%%i*le to )er+orm an' hen$e voi'(

,/am)le

A agree' to %ell 00 kg o+ ri$e( "he Government *an the %ale o+ ri$e *y intro'u$ingrationing( "he $ontra$t i% voi'(

D*B 'nilateral istake$

Fhere one o+ the )artie% to the $ontra$t i% un'er a mi%take it i% $alle' unilateral mi%take(

Se$( !! )rovi'e% that a $ontra$t i% not voi'a*le merely *e$au%e it #a% $au%e' *y one o+the )artie% to it *eing un'er a mi%take o+ +a$t( "hu% a% a general rule2 unilateral mi%take

#ill not ren'er a $ontra$t voi'( A )arty $annot *e allo#e' to avoi' a $ontra$t on the

groun' o+ it% o#n mi%take #hi$h may *e 'ue to it% $arele%%ne%% or negligen$e(

Example$

A *uy% ri$e +rom B thinking that it i% ol' Ba%mati ri$e2 *ut in +a$t2 it i% ne# Ba%mati ri$e(A $annot avoi' the $ontra$t( 1o#ever2 #here mi%take #a% $au%e' *y +rau' or

mi%re)re%entation o+ the other )arty2 a $ontra$t #ill *e voi'a*le on that groun'(


32/45

Ir'inarily2 a $ontra$t $annot *e avoi'e' on the groun' o+ unilateral mi%take( 1o#ever2

#here $on%ent given *y a )arty un'er a mi%take i% %o +un'amental that it goe% to the root

o+ the $ontra$t2 the agreement #oul' *e voi' even i+ the mi%take #a% *e no $ontra$t(

1% istake as to the identity of the person contracted 0ith$

&t i% a +un'amental rule o+ la# that i+ & inten' to $ontra$t #ith 1ari2 am $annot $ontra$t#ith me( &+ & make an o++er to 1ari2 $an am a$$e)t itV I*viou%ly2 not( &+ he a$$e)t% it2

then there #ill *e no $ontra$t( ,/am)le%

:; A #omen +rau'ulently re)re%ente' to a +irm o+ >e#eler% that %he #a% the #i+e o+ a$ertain *aron :Lamin'ar;( She o*taine' t#o )earl ne$kla$e% un'er the )rete/t o+ getting

the >e#eler #ith a )a#n *roker( "he -ourt hel' that there #a% no $ontra$t *et#een the

>e#eler an' the #oman a% the >e#eler #ante' to 'eal #ith the #i+e o+ the *aron #hi$h%he #a% not( (1en$e the )le'ge ha' to return the >e#elry( W.ake v( Simon%X2

Examples$

A $heat2 $alle' Blenkaran2 #a% $arrying on *u%ine%% in the name o+ Blenkaran Z -o(2 372Foo' Street( Bom*ay( &n the %ame %treet2 another re)ute' +irm $alle' Blenkiron Z Son%2

#a% al%o $arrying on their *u%ine%%( Blenkaran imitate' the %ignature o+ Blenkiron Z

Son%2 an' )la$e' an or'er +or the %u))ly o+ goo'% on $re'it #ith .in'%ay( .in'%aythought that the or'er ha' *een )la$e' *y the re)ute' +irm o+ Blenkiron Z Son% an'

%u))lie' $ertain goo'% on $re'it( Blenkaran %ol' the%e goo'% to an inno$ent *uyer $alle'

-un'y( Fhen .in'%ay 'i' not re$eive the )ayment2 he +ile' a %uit again%t -un'y tore$over the goo'%(

"he -ourt hel' that there #a% no $ontra$t *et#een .in'%ay an' Blenkaran2 an' there+ore2

Blenkaran $oul' not tran%+er any title to -un'y( 1en$e .in'%ay #a% allo#e' to re$over

the goo'%( W-un'y v( .in'%ayX(

Examples$

"#o la'ie%2 #ho #ere the >oint o#ner% o+ a $ar2 a'verti%e' to %ell their $ar( A )er%onrea$he' their hou%e an' agree' to )ay an a$$e)ta*le )ri$e( Fhen he took out hi% $he


33/45

never inten'e' #ithout hi% o#n mi%take *ut 'ue to the mi%take or +rau' o+ the other )arty2

the $ontra$t i% voi'( &n %u$h a $a%e #hen he %ign% the 'o$ument hi% min' 'oe% not go #ith

hi% %ignature2 i(e(2 he 'oe% not inten' to %ign the 'o$ument at all( "here i% a*%en$e o+$on%ent an' the $ontra$t i%2 there+ore2 voi'( Su$h in%tan$e% are very $ommon in $a%e o+

illiterate )er%on% or )er%on% having )oor eye%ight 'ue to ol' age or other rea%on%(

Examples$

:; A hire' a ta/i on rea$hing hi% 'e%tination a%ke' the 'river to give him a re$ei)t +or the

ta/i +are )ai'( "he ta/i 'river tol' him that he #a% an illiterate )er%on an' A %houl' #rite

the re$ei)t him%el+ an' get it %igne' *y the ta/i 'river( A in%tea'2 got a )romi%%ory note+or %( 2000 %igne' +rom the ta/i 'river( Promi%%ory note i% voi' on the groun' o+

mi%take a% to the nature o+ $ontra$t( "a/i 'river #ante' to %ign the re$ei)t +or the +are

)ai'2 he never inten'e' to %ign the )romi%%ory note(

Examples$

A in'u$e' an ol' man o+ +ee*le %ight to %ign a )romi%%ory note *y telling him ?Ba*a ye)o#er o+ attorney hai(? :&t i% a )o#er o+ attorney;( Promi%%ory note i% voi' a% there i% a

mi%take a% to the nature o+ $ontra$t( "he min' o+ the ol' man 'i' not go #ith hi%

%ignature(

+EA+IT6 !3 !*GECT

Se$tion 0 o+ $ontra$t a$t %ay%2 All agreement% are $ontra$t i+ they are ma'e *y the +ree $on%ent

o+ the )artie% $om)etent to $ontra$t2 +or a la#+ul $on%i'eration an' #ith la#+ul o*>e$t2 an' are

not e/)re%%ly 'e$lare' to *e voi'(

&n a*%en$e o+ a la#+ul o*>e$t2 an agreement i% voi' an' $annot *e$ome a $ontra$t(

&n thi% regar' %e$tion !3 %)e$i+i$ally %tate%2 every agreement o+ #hi$h the o*>e$t or

$on%i'eration i% unla#+ul i% voi'(

hat considerations and o">ects are la0f)l, and 0hat not$

"he $on%i'eration or o*>e$t o+ an agreement i% la#+ul2 unle%%

( &t i% +or*i''en *y la# or

!( &% o+ %u$h a nature that2 i+ )ermitte'2 it #oul' 'e+eat the )rovi%ion% o+ any la# or


34/45

3( &% +rau'ulent or

4( &nvolve% an' im)lie% in>ury to the )er%on or )ro)erty o+ another or

E( "he $ourt regar'% it a% immoral2 or o))o%e' to )u*li$ )oli$y(

&n ea$h o+ the%e $a%e%2 the $on%i'eration or o*>e$t o+ an agreement i% %ai' to *e unla#+ul( ,veryagreement2 o+ #hi$h the o*>e$t or $on%i'eration i% unla#+ul2 i% voi'(

,/am)le

( A agree% to %ell hi% hou%e to B +or %( 02000( 1ere BH% )romi%e to )ay the %um o+ %( 02000

i% the $on%i'eration +or AH% )romi%e to %ell the hou%e2 an' AH% )romi%e to %ell the hou%e i% the

$on%i'eration +or BH% )romi%e to )ay %( 02000(

"he%e are la#+ul $on%i'eration%(

!( A )romi%e% to )ay B 2000 ru)ee% at the en' o+ %i/ month%2 i+ -2 #ho o#e% that %um to B2 +ail%

to )ay it( B )romi%e% to grant time to - a$$or'ingly( 1ere the )romi%eo+ ea$h )arty i% the$on%i'eration +or the )romi%e o+ the other )arty(

"hey are la#+ul $on%i'eration%(

3( A2 B an' - enter into an agreement +or the 'ivi%ion among them o+ gain% a$e$t i% unla#+ul(

4( A )romi%e% to o*tain +or B an em)loyment in the )u*li$ %ervi$e2 an' B )romi%e% to )ay 2000

ru)ee% to A(


35/45

"he agreement i% voi'2 a% the $on%i'eration +or it i% unla#+ul(

3or"idden "y +a0

I*>e$t o+ an agreement +or*i''en *y la# i% voi'( .a# = la# in +or$e in &n'ia2 )er%onal la#%

un#ritten )rin$i)le% o+ la#(

,/am)le

( Sale o+ lie$t or $on%i'eration i% voi'(

3ra)d)lent

An agreement ma'e +or a +rau'ulent )ur)o%e to 'e$eive thir' )artie% i% voi'(

Fhere the )artie% agree to )ra$ti$e a +rau' on a thir' )er%on2 not a )arty to the $ontra$t2 their

agreement i% unla#+ul an' voi'(

"o ren'er an agreement unla#+ul an' voi' on the *a%i% o+ +rau'ulent o*>e$t or $on%i'eration2 the

+rau' mu%t2 ho#ever2 *e e%ta*li%he' *eyon' rea%ona*le 'ou*t an' $annot *e *a%e' on mere%u%)i$ion an' $on>e$ture(

,/am)le

( Agreement #ith 'e*tor an' $re'itor that the $re'itor #oul' get %e)arate $ommi%%ion +orin'u$ing other $re'itor% to enter into $om)o%ition o+ their 'e*t%(

!( "#o 'e$ree hol'er% Pt2 'e$ree hol'er #ith )ro)erty atta$hment *rought it to %ale = agree'

#ith the 't to *uy +or le%%er )ri$e an' then )ay him a %um = )ro)erty #a% kno$ke' 'o#n to 't +ora %mall )ri$e(

9eld2 agreement voi'2 it 'e)rive' the other 'e$ree hol'er o+ #hat he #oul' have got i+ the %aleha' *een $om)etitive(

In>)ry to person or property

An agreement to in>ure the )er%on or )ro)erty o+ another i% unla#+ul an' voi'

,/am)le


36/45

A )er%on *arro#e' a %um o+ %( 00 an' agree' to %erve )t +or ! yr% #ithout )ay an' in $a%e o+

'e+ault to )ay the e/or*itant intere%t an' )rin$i)al at on$e(

1el'2 it involve' %lavery an' unla#+ul an' voi' agreement to $ommit a%%ault2 hurt2 'e+amation2

et$(

Agreement o+ in%uran$e = in%ure' $ommitting %ui$i'e to hel) 'e)en'ent%(

Immoral

Agreement tainte' immorality i% not en+or$e'

C&mmoralityD 'e)en'% on %tan'ar'% o+ morality )revailing in a %o$iety at a given time an' a%

a))rove' *y $ourt%(

Agreements opposed to p)"lic policy

An agreement i% unla#+ul i+ the $ourt regar'% it% o*>e$t or $on%i'eration a% o))o%e' to publicpolicy(

'ublicpolicy = vague Z un%ati%+a$tory term(

&n .a#2 the 'o$trine o+ )u*li$ )oli$y $over% many hea'% %u$h a% +ollo#ing

( "ra'ing #ith an alien enemy

!( &nter+eren$e #ith an a'mini%tration o+ >u%ti$e

3( Marriage *rokerage agreement

4( "ra++i$king in )u*li$ o++i$e%

E( Qn+air or unrea%ona*le 'ealing%(

Effect of artial Illegality

&+ any )art o+ a %ingle $on%i'eration +or one or more o*>e$t%2 or any one2 or any )art o+ any one o+%everal $on%i'eration% +or a %ingle o*>e$t i% unla#+ul2 the agreement i% voi'(

,/am)le

A )romi%e% to %u)erinten' on *ehal+ o+ B2 a legal manu+a$ture o+ in'igo2 an' an illegal tra++i$kerin other arti$le%( B )romi%e% to )ay A a %alary o+ % 02000 )er month( "he agreement i% voi'2 a%

the o*>e$t o+ A% )romi%e2 an' the $on%i'eration +or B% )romi%e2 i% in )art unla#+ul(


37/45

Fhen the illegal )art $an *e %erve' or %e)arate' +rom the legal )art2 the $ontra$t i% not altogether

voi' *ut i% vali' in regar' to that )art o+ it #hi$h i% legal( &+ the 'i++erent )art% o+ the $ontra$t are

%o $lo%ely interknit that it i% not )o%%i*le to %e)arate the legal +rom the illegal )art% #ithout'e%troying the #hole2 the $ontra$t i% altogether voi'(

&oid Agreement$

An agreement en+or$ea*le *y la# i% a $ontra$t2 *ut #hen it i% not en+or$ea*le it i% %ai' to *e

voi'(A voi' agreement never mature% into a $ontra$t( &t i% unen+or$ea*le +rom the *eginning(

,/am)le An agreement #ith a minor( "he%e agreement% are $alle' voi' ab initio(

&oid Contract$

( A voi' $ontra$t i% en+or$ea*le #hen it i% ma'e( &t *e$ome% unen+or$ea*le later on(

!( A voi' $ontra$t $an *e en+or$e' *e+ore it *e$ome% unen+or$ea*le(3( &n a voi' $ontra$t the )artie% are entitle' +or re%toration o+ *ene+it% #hi$h they have e/$hange'uring the $ontra$t(

,/am)le A $ontra$t *et#een a +oreign national an' an &n'ian $itiLen i% en+or$ea*le in the

or'inary $our%e( But the %ame $ontra$t #oul' $ea%e to *e en+or$ea*le in the event o+ an out*reako+ #ar *et#een &n'ia an' the $ountry2 the +oreign national *elong% to2 an' *e treate' a% voi'(

;I33E4E.CE *ETEE. I++EA+ A.; &!I; A4EEE.T

The follo0ing are the points of difference "et0een the t0o$

Illegal Agreement

( An illegal agreement i% )rohi*ite' *y la# Z )uni%ha*le(!( An illegal agreement i% al%o voi' agreement(

3( &n illegal agreement the money )ai' $annot *e $laime' *a$k(

&oid Agreement

( A voi' agreement i% not )rohi*ite' *y la# Z not )uni%ha*le(

!( A voi' agreement i% not illegal agreement(

3( &n voi' agreement the money re$eive' mu%t *e returne' to the other )arty(

EHA+E$A *orro#% %( ! la$ +rom B to *uy a $ar +rom J +or *om* *la%t( B kno#% the )ur)o%e o+ the

loan( An agreement *et#een A an' B i% $ollateral to the agreement #ith J %o it i% al%o voi'agreement(

Agreements Expressly ;eclared &oid

"he +ollo#ing ty)e% o+ agreement% are e/)re%%ly 'e$lare' voi' un'er the &n'ian -ontra$t A$t


38/45

( Agreement% *y or #ith )er%on:%; in$a)a*le o+ $ontra$t(

!( Agreement% entere' into un'er a mutual mi%take o+ +a$t(

3( Agreement% o+ #hi$h $on%i'eration% an' o*>e$t% are unla#+ul in +ull or in )art(

4( Agreement% #ithout $on%i'eration(

E( Agreement% in re%traint o+ marriage(

6( Agreement% in re%traint o+ tra'e(

7( Agreement% in re%traint o+ legal )ro$ee'ing%(

8( Agreement% the meaning o+ #hi$h i% un$ertain(

9( Agreement% *y #ay o+ #ager(

0( Agreement% to 'o an im)o%%i*le a$t(

Agreements in restraint of marriage

,very agreement in re%traint o+ the marriage o+ any )er%on2 other than a minor2 i% voi'( "he

re%traint may *e general or )artial *ut the agreement i% voi'2 an' there+ore2 an agreement

agreeing not to marry at all2 or a $ertain )er%on2 or a $la%% o+ )er%on%2 or +or a +i/e' )erio'2 i%

voi'( 1o#ever2 an agreement re%training the marriage o+ a minor i% vali' un'er the Se$tion(

&t i% intere%ting to note that a )romi%e to marry a )arti$ular )er%on 'oe% not im)ly any re%traint o+

marriage2 an' i%2 there+ore2 a vali' $ontra$t(

Ill)strations$

:a; A agree% #ith B +or goo' $on%i'eration that %he #ill not marry -( &t i% a voi' agreement(

:*; A agree% #ith B that %he #ill marry him only( &t i% a vali' $ontra$t o+ marriage(

Agreements in restraint of trade

,very agreement *y #hi$h one i% re%traine' +rom e/er$i%ing a la#+ul )ro+e%%ion2 tra'e or*u%ine%%e% o+ any kin'2 to that e/ten' i% voi'( "hu% no )er%on i% at li*erty to 'e)rive him%el+ o+

the +ruit o+ hi% la*or2 %kill or talent2 *y any $ontra$t that he enter% into(

&t i% to *e note' that #hether re%traint i% rea%ona*le or not2 i+ it i% in the nature o+ re%traint o+

tra'e2 the agreement i% voi' al#ay%2 %u*>e$t to $ertain e/$e)tion% )rovi'e' +or %tatutorily(

Ill)stration$


39/45

An agreement #here*y one o+ the )artie% agree% to $lo%e hi% *u%ine%% in $on%i'eration o+ the

)romi%e *y the other )arty to )ay a $ertain %um o+ money i% voi'2 *eing an agreement i% re%traint

o+ tra'e2 an' the amount i% not re$overa*le2 i+ the other )arty +ail% to )ay the )romi%e' %um o+

money :Ma'hu* -han'er v%( a> Kumar -a%e Stu'y;(

But agreement% merely re%training +ree'om o+ a$tion ne$e%%ary +or the $arrying on o+ *u%ine%%are not voi'2 +or the la# 'oe% not inten' to take a#ay the right o+ a tra'er to regulate hi% *u%ine%%

a$$or'ing to hi% o#n 'i%$retion an' $hoi$e(

Ill)stration$

A% agreement to %ell all )ro'u$e to a $ertain )arty2 #ith a %ti)ulation that the )ur$ha%er #a%

*oun' to a$$e)t the #hole e$t the goo'% :i(e(2 #a% not *oun' to a$$e)t the #hole e#ellery in ,nglan'2 :*; in real >e#ellery

in ,nglan'2 an' :$; in real or imitation >e#ellery in $ertain +oreign $ountrie%( "he +ir%t )romi%e

alone #a% hel' la#+ul( "he other t#o )romi%e%2 namely :*; an' :$;2 #ere hel' voi' a% the

re%traint #a% unrea%ona*le in )oint o+ %)a$e an' the nature o+ *u%ine%% :Gol'%oll v%( Gol'man

-a%e Stu'y;(

2% artners agreements$

An agreement in re%traint o+ tra'e among the )artner% or *et#een any )artner an' the *uyer o+

+irmH% goo'#ill i% vali' i+ the re%traint $ome% #ithin any o+ the +ollo#ing $a%e%

:a; An agreement among the )artner% that a )artner %hall not $arry on any *u%ine%% other than that

o+ the +irm #hile i% a )artner(

:*; An agreement *y a )artner #ith hi% other )artner% that on retiring +rom the )artner%hi) he #ill

not $arry on any *u%ine%% %imilar to that o+ the +irm #ithin a %)e$i+ie' )erio' or #ithin %)e$i+ie'

lo$al limit% )rovi'e' the re%tri$tion% im)o%e' are rea%ona*le(


40/45

:$; An agreement among the )artner%2 u)on or in anti$i)ation o+ the 'i%%olution o+ the +irm that

%ome or all o+ them #ill not $arry on a *u%ine%% %imilar to that o+ the +irm #ithin a %)e$i+ie'

)erio' or #ithin %)e$i+ie' lo$al limit% )rovi'e' the re%tri$tion% im)o%e' are rea%ona*le(

:'; An agreement *et#een any )artner an' the *uyer o+ the +irmH% goo'#ill that %u$h )artner #ill

not $arry on any *u%ine%% %imilar to that o+ the +irm #ithin a %)e$i+ie' )erio' or #ithin %)e$i+ie'lo$al limit% )rovi'e' the re%tri$tion% im)o%e' are rea%ona*le(

e$t o+ kee)ing thetra'e in their o#n han'% i% not voi' merely *e$au%e it hurt% a rival in tra'e :Bhola Nath v%(

.a$hmi Narain;( But i+ an agreement attem)t% to $reate a mono)oly2 it #oul' *e voi' :Kame%har

Singh v%( a%in Khan;(

?% .egati#e stip)lations in ser#ice agreements$

An agreement o+ %ervi$e *y #hi$h a )er%on *in'% him%el+ 'uring the term% o+ the agreement2 not

to take %ervi$e #ith anyone el%e2 i% not in re%traint o+ la#+ul )ro+e%%ion an' i% vali'( "hu% a

$hartere' a$$ountant em)loye' in a $om may *e 'e*arre' +rom )rivate )ra$ti$e or +rom %erving

el%e#here 'uring the $ontinuan$e o+ %ervi$e :Maganlal v%( Am*i$a Mill% .t'(;( But an agreement

o+ %ervi$e #hi$h %eek% to re%tri$t the +ree'om o+ o$$u)ation +or %ome )erio'2 a+ter the

termination o+ %ervi$e2 i% voi'( "hu%2 #here S2 #ho #a% an em)loyee o+ Brahm)utra "ea -o(

A%%am2 agree' not to em)loy him%el+ or to engage him%el+ in any %imilar *u%ine%% #ithin 40

mile% +rom A%%am2 +or a )erio' o+ +ive year% +rom the 'ate o+ the termination o+ hi% %ervi$e2 it

#a% hel' that the agreement i% in re%traint o+ la#+ul )ro+e%%ion an' hen$e voi' :Brahm)utra "ea

-o( v%( S$arth -a%e Stu'y;(

Agreements in restraint of legal proceedings

Se$tion !8 'e$lare% the +ollo#ing t#o kin'% o+ agreement% voi'

( An agreement *y #hi$h a )arty i% re%tri$te' a*%olutely +rom taking u%ual legal )ro$ee'ing%2 in

re%)e$t o+ any right% ari%ing +rom a $ontra$t(

!( An agreement #hi$h limit% the time #ithin #hi$h one may en+or$e hi% $ontra$t right%2 #ithout

regar' to the time allo#e' *y the .imitation A$t(

4estriction on +egal roceedings$


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ollo#ing are the re%tri$tion% on legal )ro$ee'ing%

:a; "he Se$tion a))lie% only to right% ari%ing +rom a $ontra$t( &t 'oe% not a))ly to $a%e% o+ $ivil

or $riminal #rong% or tort%(

:*; "hi% Se$tion 'oe% not a++e$t the la# relating to ar*itration e(g(2 i+ the )artie% agree to re+er toar*itration any 'i%)ute #hi$h may ari%e *et#een them un'er the $ontra$t2 %u$h a $ontra$t i%

vali'(

:$; "he %e$tion 'oe% not a++e$t an agreement #here*y )artie% agree Hnot to +ile an a))ealH in a

higher $ourt( "hu% #here it #a% agree' that neither )arty %hall a))eal again%t the trial $ourtH%

'e$i%ion2 the agreement #a% hel' vali'2 +or2 %e$tion !8 a))lie' only to a*%olute re%tri$tion on

taking the legal )ro$ee'ing%2 #herea% here the re%tri$tion i% only )artial a% the )artie% $an go to

$ourt o+ la# alright an' the only re%tri$tion i% that the lo%ing )arty $annot +ile an a))eal :-a%e

Stu'y Ke'ar Nath v%( Sita am;(

:'; .a%tly2 thi% Se$tion 'oe% not )revent the )artie% to a $ontra$t +rom %ele$ting one o+ the t#o$ourt% #hi$h are e


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Agreements "y 0ay of 0ager

"he #or' H#agerH mean% Ha *etH %omething %tate' to *e lo%t or #on on the re%ult o+ a 'ou*t+ul

i%%ue2 an'2 there+ore2 #agering agreement% are nothing *ut or'inary *etting agreement%(

"hu% #here A an' B mutually agree that i+ it rain% to'ay A #ill )ay B %( 00 an' i+ it 'oe% not

rain B #ill )ay A %( 002 there i% a #agering agreement( An' nothing $an *e re$overe' *y the

#inning )arty un'er the agreement2 it *eing a #ager(

&n the +ir%t )la$e2 #ager i% a game o+ $han$e in #hi$h the $ontingen$y o+ either gain or lo%% i%

#holly 'e)en'ent on an Hun$ertain event(H An event may *e un$ertain2 not only *e$au%e it i% a

+uture event2 *ut *e$au%e it i% not yet kno#n the )artie%(

A lottery i% a game o+ $han$e( 1en$e the lottery *u%ine%% i% a #agering tran%a$tion( Su$h a

tran%a$tion i% not only voi' *ut al%o illegal( &+ a lottery i% authoriLe' *y the Government2 the only

e++e$t o+ %u$h )ermi%%ion i% that the )er%on% $on'u$ting the lottery #ill not *e guilty o+ a $riminal

o++en$e2 *ut the lottery remain% a #ager alright(

Agreements to do impossi"le acts

Impossi"le Acts$

Se$( E6 )rovi'e% that an agreement to 'o an a$t im)o%%i*le in it%el+ i% voi'( "he la# 'oe% not

$om)el any )er%on to 'o an im)o%%i*le a$t(

Examples$

:; A agree% #ith B2 to 'i%$over trea%ure *y magi$( "he agreement i% voi'(

:!; A $ontra$t% to marry B( *eing alrea'y marrie' to -2 an' +or*i''en *y the la# to #hi$h he i%

%u*>e$t to )ra$ti$e )olygamy( "he $ontra$t i% voi'( But A mu%t make $om)en%ation to B +or the

lo%% $au%e' to her *y non)er+orman$e o+ the )romi%e(

Again2 a %uit $an *e +ile' to re$over the )re%ent% or ornament% given2 i+ the marriage 'oe% not

take )la$e( But i% the marriage ha% taken )la$e2 neither a %uit $an *e +ile' to re$over the amount

o+ $on%i'eration )romi%e' i+ the )romi%or 'oe% not +ail to )ay nor the )arty )aying the

$on%i'eration $an get it *a$k(

-ontingent $ontra$t%


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A $ontingent $ontra$t im)lie% a $ontra$t2 the )er+orman$e o+ #hi$h 'e)en'% on the ha))ening or

nonha))ening o+ an un$ertain event2in$i'ental to %u$h $ontra$t( Se$tion 3 'e+ine% a $ontingent

$ontra$t a% +ollo#%

A $ontingent $ontra$t i% a $ontra$t to 'o or not to 'o %omething2 i+ %ome event2$ollateral to %u$h

$ontra$t 2'oe% or 'oe% not ha))en(

Example,A $ontra$t% to )ay to B r%(02000T i+ B% hou%e get% *urnt 'o#n2or J $ontra$t% to )ay

%(E000 i+ hi% %$ooter i% 'e%troye'(

"he nature o+ *oth the a*ovementione' $ontra$t% i% $ontingent ($ontra$t% o+ in%uaran$e2

in'emnity an' guarantee are $ommon in%tan$e% o+ $ontingent $ontra$t%(

ule% egar'ing $ontingent $ontra$t%

&n'ian -ontra$t A$t ha% lai' 'o#n variou% rule% regar'ing $ontingent $ontra$t% #hi$h are a%+ollo#%

1% Contracts contingent on the happening of a f)t)re )ncertain e#ent$

-ontingent $ontra$t% 'e)en'ent u)on the ha))ening o+ an un$ertain +uture event $annot *e

en+or$e' until the event ha% ha))ene'( &+ the event *e$ome% im)o%%i*le %u$h $ontra$t% *e$omevoi' :Se$( 3!;

Examples$

:; A )romi%e% to )ay B %( 2000 i+ he marrie% -( %( 2000 are )aya*le only i+ B marrie% -

:!; A )romi%e% to )ay B %( 2000 i+ he marrie% -( - 'ie' *e+ore the marriage( "he $ontra$t*e$ome% voi'(

2% Contracts contingent on the non-happening of a f)t)re )ncertain e#ent$

-ontingent $ontra$t to 'o or not to 'o anything i+ an un$ertain +uture event 'oe% not ha))en2 $an*e en+or$e' #hen the ha))ening o+ that event *e$ome% im)o%%i*le2 an' not *e+ore( :Se$( 33;

Example$

A )romi%e to )ay %(Ine lakh to B i+ BH% %hi) 'oe% not return( "he %hi) i% %unk( "he $ontra$t $an

*e en+or$e' a+ter the %hi) i% %unk an' not *e+ore(


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Example$

A agree% to )ay B %( 02000 i+ B marrie% -( - marrie% ( 2 then the marriage o+ B #ith - mu%t

*e $on%i'ere' im)o%%i*le although it i% )o%%i*le that may 'ie an' that - may a+ter#ar'% marry

B(

?% DiB Contracts contingent on the happening of an e#ent 0ithin a fixed time$

-ontra$t $ontingent on the ha))ening o+ an event #ithin a +i/e' time *e$ome% voi' i+ %u$h event'oe% not ha))en or the event *e$ome% im)o%%i*le *e+ore the time +i/e'(

Example$

A )romi%e% to )ay B a %um o+ money i+ a $ertain %hi) return% #ithin a year( "he $ontra$t may *een+or$e' i+ the %hi) return% #ithin the year2 an' *e$ome% voi' i+ the %hi) i% *urnt #ithin the year(

DiiB Contracts contingent on the non-happening of an e#ent 0ithin a fixed time$

-ontra$t% $ontingent on the nonha))ening o+ an event #ithin a +i/e' time may *e en+or$e' *yla# i+ %u$h event 'oe% not ha))en2 or it *e$ome% im)o%%i*le *e+ore the e/)iry o+ +i/e' time(

:Se$( 3E;(

Example$

A )romi%e% to )ay B a %um o+ money i+ a $ertain %hi) 'oe% not return #ithin a year( "he $ontra$t

may *e en+or$e' i+ the %hi) 'oe% not return #ithin the year2 or i% *urnt #ithin the year(

@% Contract contingent on an impossi"le e#ent #oid$

-ontingent agreement% to 'o or not to 'o anything i+ an[ im)o%%i*le event ha))en% are voi'2

#hether the im)o%%i*ility o+ the event i% kno#n or not to the )artie% to the agreement at the time#hen it i% ma'e( :Se$( 36;(

Examples$

:; A agree% to )ay B %( 2000 i+ t#o %traight )arallel line% %houl' $ut ea$h other(

:!; A agree% to )ay B %( 2000 i+ B #ill marry AH% 'aughter -( - #a% 'ea' at the time o+ the

agreement( "he agreement i% voi'(

-ontingent $ontra$t ver%u% #agering$ontra$t

Although the o$$urren$e o+ a %)e$i+ie' un$ertain event i% e%%ential to *oth $ontingent an'#agering $ontra$t%2 therei% %ome +un'amental% )oint o+ 'i++eren$e *et#een them( ollo#ing are

the )oint% that 'i%tingui%h a $ontingent $ontra$t +rom #agering $ontra$t

( A $ontingent $ontra$t i% a vali' $ontra$t2 #herea% a #agering agreement i% voi'(


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!( A $ontingent $ontra$t may not $on%i%t o+ re$i)ro$al )romi%e%2 #herea% an agreement *y #ay o+

#ager i% $om)o%e' o+ re$i)ro$al )romi%e%(

3(&n a $ontingent $ontra$t 2the +uture un$ertain event i% merely $ollateral 2#herea% in a #agering

agreement 2the +uture un$ertain event i% the %ole 'etermining +a$tor(

4("he )artie% to a $ontingent $ontra$t have real intre%t in the o$$urren$e or nono$$urren$e o+ the$ontingen$y(

Documents

Indian Contract Act-I