ICA QUESTION BANK BY CA INDRESH GANDHI

Q.1. Ramaswami proposed to sell his house to Ramanathan. Ramanathan sent his Acceptance by
post. Next day, Ramanathan sends a telegram withdrawing his Acceptance. Examine the
Validity of the Acceptance According to the Indian Contract Act, 1872 in the light of the
following:
a. The telegram of revocation of Acceptance was received by Ramaswami before the letter
of Acceptance.
b. The telegram of revocation And letter of Acceptance both reached together.

Ans:-Provision: [Section 4 of Indian Contract Act, 1872]

1. The problem is related with the communication and time of Acceptance and its revocation. As
per Section 4 of the Indian Contract Act, 1872, the communication of An Acceptance is
complete as against the Acceptor when it comes to the knowledge of the proposer.
2. The communication of an acceptance is complete, as against the proposer, when it is put in a
course of transmission to him so as to be out of the power of the acceptor;
3. The communication of a revocation is complete, as against the person who makes it, when it is
put into a course of transmission to the person to whom it is made, so as to be out of the power
of the person who makes it; & as against the person to whom it is made, when it comes to his
knowledge.

Facts of Case:

In given case Ramaswami wants to sell his house to Ramanathan and Ramananthan also sent his
acceptance by post. But afterwards the next day Ramananthan changed his mind and sends a
telegram for withdrawing his acceptance. Answer:

a. Yes, the revocation of acceptance by Ramanathan (the acceptor) is valid.

b. If Ramaswami opens the telegram first (and this would be normally so in case of a rational
person) and reads it, the acceptance stands revoked. If he opens the letter first and reads it,
revocation of acceptance is not possible as the contract has already been concluded.

Q.2. “An anticipatory breach of contract is a breach of contract occurring before the time
fixed for performance has arrived”. Discuss stating also the effect of anticipatory breach on
contracts.

Ans:-Provision: [Section 4 of Indian Contract Act, 1872]

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1. An anticipatory breach of contract is a breach of contract occurring before the time

fixed for performance has arrived. When the promisor refuses altogether to perform his
promise and signifies his unwillingness even before the time for performance has arrived, it is
called Anticipatory Breach.
2. Section 39 of the Indian Contract Act, 1872 deals with anticipatory breach of contract
and provides that, "When a party to a contract has refused to perform or disable himself from
performing, his promise in its entirety, the promisee may put an end to the contract, unless he
has signified, but words or conduct, his acquiescence in its continuance."
3. Effect of anticipatory breach: The promisee is excused from performance or from
further performance. Further he gets an option:
a) To either treat the contract as “rescinded and sue the other party for damages from
breach of contract immediately without waiting until the due date of performance; or
b) He may elect not to rescind but to treat the contract as still operative, and wait for the
time of performance and then hold the other party responsible for the consequences of non-
performance.
c) In this case, he will keep the contract alive for the benefit of the other party as well as his
own, and the guilty party, if he so decides on re-consideration, may still perform his part of
the contract and can take advantage of any supervening impossibility, which may have the
effect of discharging the contract.

Q.3. Mr. Balwant, an old man, by a registered deed of gift, granted certain landed property to
Ms. Reema, his daughter. By the terms of the deed, it was stipulated that an annuity of Rs
20, 000 should be paid every year to Mr. Sawant, who was the brother of Mr. Balwant. On
the same day Ms. Reema made a promise to Mr. Sawant and executed in his favour an
agreement to give effect to the stipulation. Ms. Reema failed to pay the stipulated sum. In
an action against her by Mr. Sawant, she contended that since Mr. Sawant had not
furnished any consideration, he has no right of action. Examining the provisions of the Indian
Contract Act, 1872, decide, whether the contention of Ms. Reema is valid?

Ans:-Provision: [Section 2(d) of Indian Contract Act, 1872]

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1. The definition of consideration as given in section 2(d) makes that proposition clear.
According to the definition, when at the desire of the promisor, the promisee or any other
person does something such an act is consideration.
2. Consideration can be offered by the promisee or a third-party only at the request or desire of
the promisor. If an action is initiated at the desire of the third-party, it is not a consideration
3. If you look at the definition of consideration according to section 2 (d) of the Indian Contract
Act. 1872, it explicitly states the phrase ‘promisee or any other person…’ This essentially
means that in India, consideration may move from the promise to any other person. However, it
is important to note that there can be a stranger to consideration but not a stranger to the
contract.

Facts of Case:

1. In the given problem, Mr. Balwant has entered into a contract with Ms. Reema, but Mr. Sawant
has not given any consideration to Ms. Reema but the consideration did flow from Mr. Balwant
to Ms. Reema and such consideration from third party is sufficient to the enforce the promise
of Ms. Reema, the daughter, to pay an annuity to Mr. Sawant.
2. Further, the deed of gift and the promise made by Ms. Reema to Mr. Sawant to pay the annuity
were executed simultaneously, therefore they should be regarded as one transaction, and there
was sufficient consideration for it.

Answer:

Thus, a stranger to the contract cannot enforce the contract but a stranger to the consideration
may enforce it. Hence, the contention of Ms. Reema is not valid.

Q.4. A coolie in uniform picks up the luggage of R to be carried out of the railway station
without being asked by R And R Allows him to do so. Examine whether the coolie is entitled
to receive money from R under the Indian Contact Act, 1872?

Ans:-Provision: [Indian Contract Act, 1872]

Implied contracts come into existence by implication. Most often the implication is by law and or
by action. Section 9 of the Indian Contract Act, 1872 contemplates such implied contracts when
it lays down that in so far as such proposal or acceptance is made otherwise than in words, the
promise is said to be implied.

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Going by the definition we can say that a contract in which the terms of the agreement are not
expressed in written or oral form is an implied contract.
Facts of Case:
In given case a coolie without being asked picks up the luggage of R to be carried out of the
railway station and R allows him to do so.
Answer:
In the present case, it is an implied contract and R must pay for the services of the coolie.

Q.5. Point out with reason whether the following agreements are valid or void:
a. Kamala promises Ramesh to lend Rs 500,000 in lieu of consideration that Ramesh gets
Kamala’s marriage dissolved and he himself marries her
b. Sohan Agrees with Mohan to sell his black horse. Unknown to both the parties, the horse
was dead at the time of Agreement.
c. Ram sells the goodwill of his shop to Shyam for Rs 4, 00,000 and promises not to carry
on such business forever And Anywhere in India.
d. In An Agreement between Prakash and Girish, there is A Condition that they will not
institute legal proceedings against each other without consent.
e. Ramamurthy, who is A Citizen of India, enters into An Agreement with An Alien friend.

Ans:-Provision: [Indian Contract Act, 1872]

1. Valid Contract: A valid contract is enforceable by law and if a contract is not valid it may lead
to obstruction of businesses and unlawful and insincere dealings.
2. Void Agreement: An agreement not enforceable by law is said to be void.
3. Voidable contract: An agreement, which is enforceable by law at the option of one or more of
the parties thereto, but not at the option of the others, is a voidable contract.
4. Void Contract: A contract, which ceases to be enforceable by law, becomes void when it ceases
to be enforceable.
5. Illegal Contract: An agreement that leads to one or all the parties breaking a law or not
conforming to the norms of the society is deemed illegal by the court. A contract opposed to
public policy is also illegal.

Answer:
a. Void Agreement: As per Section 23 of the Indian Contract Act, 1872, an agreement is void if
the object or consideration is against the public policy.
b. Void Agreement: As per Section 20 of the Indian Contract Act, 1872 the contracts caused by
mistake of fact are void. There is mistake of fact as to the existence of subject matter.

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c. Void Agreement: As per Section 27 of the Indian Contract Act, 1872 an agreement in
restraint of trade is void. However, a buyer can put such a condition on the seller of good will,
not to carry on same business. However, the conditions must be reasonable regarding the
duration and the place of the business.
d. Void Agreement: An agreement in restraint of legal proceedings is void as per Section 28 of
the Indian Contract Act, 1872.
e. Valid Agreement: An agreement with alien friend is valid, but an agreement with alien enemy is
void.

Q.6. Ajay, Vijay and Sanjay are partners of software business and jointly promises to pay Rs 6,
00, 000 to Kartik. Over a period, Vijay became insolvent, but his assets are sufficient to
pay one-fourth of his debts. Sanjay is compelled to pay the whole. Decide whether Sanjay
is required to pay whole amount himself to Kartik in discharging joint promise under the
Indian Contract Act, 1872.

Ans:-Provision: [Section 43 Indian Contract Act, 1872]

1. When two or more persons make a joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any 1[one or more] of such joint promisors to perform the
whole of the promise.
2. Each of two or more joint promisors may compel every other joint promisor to contribute
equally with himself to the performance of the promise, unless a contrary intention appears
from the contract
3. If any one of two or more joint promisors makes default in such contribution, the remaining
joint promisors must bear the loss arising from such default in equal shares.

Facts of Case:
1. Ajay, Vijay, and Sanjay were partners of a software business. They jointly promises to pay 6,
00,000 to Kartik.
2. Afterwards Vijay became insolvent and can only pay one-fourth of his debts and due to which
Sanjay is compelled to pay the whole amount to Kartik.

Answer:
Therefore, by considering the above provisions and facts of the case here Sanjay paid the whole
amount 6, 00,000 to Kartik. He will receive 50,000 from Vijay ( 1/4th of 2,00,000) and 2,75,000

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from Ajay ( 2,00,000 of his part of debt and 75,000 of the debt of 1,50,000 from Vijay’s part
which shall be paid by Sanjay & Ajay due to insolvency of Vijay.)

Q.7. X, Y and Z are partners in a firm. They jointly promised to pay Rs 3, 00,000 to D. Y
become insolvent and his private assets are sufficient to pay 1/5 of his share of debts. X
is compelled to pay the whole amount to D. Examining the provisions of the Indian Contract
Act, 1872, decide the extent to which X can recover the amount from Z.

Ans:-Provision: [Section 43 Indian Contract Act, 1872]

1. When two or more persons make a joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any 1[one or more] of such joint promisors to perform the
whole of the promise.
2. Each of two or more joint promisors may compel every other joint promisor to contribute
equally with himself to the performance of the promise, unless a contrary intention appears
from the contract
3. If any one of two or more joint promisors makes default in such contribution, the remaining
joint promisors must bear the loss arising from such default in equal shares.

Facts of Case:
In the instant case, X, Y and Z jointly promised to pay Rs 3, 00,000. Y become insolvent and his
private assets are sufficient to pay 1/5 of his share of debts. X is compelled to pay the whole
amount
Answer:
Therefore, by considering the above provisions and facts of the case here X paid the whole
amount 3, 00,000 to D. He will receive 20,000 from Y ( 1/5th of 1,00,000) and 1,40,000 from Z (
1,00,000 of his part of debt and 40,000 of the debt of 80,000 from Vijay’s part which shall be
paid by Sanjay & Ajay due to insolvency of Vijay.)

Q.8. M Ltd., contract with Shanti Traders to make and deliver certain machinery to them by
30.6.2017 for Rs 11.50 lakhs. Due to labour strike, M Ltd. could not manufacture and
deliver the machinery to Shanti Traders. Later, Shanti Traders procured the machinery
from another manufacturer for Rs 12.75 lakhs. Due to this Shanti Traders was also
prevented from performing a contract, which it had made with Zenith Traders at the time
of their contract with M Ltd. and were compelled to pay compensation for breach of
contract. Advise Shanti Traders the amount of compensation, which it can claim from M
Ltd., referring to the legal provisions of the Indian Contract Act, 1872.

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Ans:-Provision: [Section 73 Indian Contract Act, 1872]

1. When a contract has been broken, the party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation for any loss or damage caused to
him thereby, which naturally arose in the usual course of things from such breach, or which the
parties knew, when they made the contract, to be likely to result from the breach of it.
2. Such compensation is not to be given for any remote and indirect loss or damage sustained
because of the breach.
3. When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had contracted to discharge it and
had broken his contract.
4. It is further provided in the explanation to the section that in estimating the loss or damage
from a breach of contract, the means which existed of remedying the inconvenience caused by
the non - performance of the contract must be taken into account.

Facts of Case:

1. In given case M ltd contracted to make & deliver certain machinery for Rs. 11.50 lakhs to Shanti
Traders but due to labour strike, M ltd could not manufacture the machinery.
2. Later Shanti Traders procured the machinery from another manufacture for Rs. 12.75 lakhs
3. Due to failure to provide machinery by M ltd, Shanti Traders were unable to perform contract,
which it had made with Zenith Traders and were compelled to pay compensation for breach of
contract.

Answer:
1. Applying the above principle of law to the given case, M Ltd. is obliged to compensate for the
loss of Rs. 1.25 lakh (i.e. Rs 12.75 minus Rs 11.50 = Rs 1.25 lakh) which had naturally arisen due
to default in performing the contract by the specified date.
2. Regarding the amount of compensation which Shanti Traders were compelled to make to Zenith
Traders, it depends upon the fact whether M Ltd., knew about the contract of Shanti Traders
for supply of the contracted machinery to Zenith Traders on the specified date. If so, M Ltd is
also obliged to reimburse the compensation which Shanti Traders had to pay to Zenith Traders
for breach of contract. Otherwise M Ltd is not liable.

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Q.9. X agreed to become an assistant for 2 years to 'Y' who was practicing Chartered
Accountant at Jodhpur. It was also agreed that during the term of agreement 'X' will not
practice as a Chartered Accountant on his own account within 20 kms of the office of 'Y'
at Jodhpur. At the end of one year, 'X' left the assistantship of 'Y' and started practice
on his own account within the said area of 20 kms. Referring to the provisions of the Indian
Contract Act, 1872, decide whether 'X' could be restrained from doing so?

Ans:-Provision: [Section 27 Indian Contract Act, 1872]

1. Section 27 of the Indian Contract Act, 1872 deals with agreements in restraint of trade.
According to the said section, every agreement by which any person is restrained from
exercising a lawful profession, trade or business of any kind, is to that extent void.
2. However, in the case of the service agreements restraint of trade is valid. In an agreement of
service by which a person binds himself during the term of agreement not to take service with
anyone else directly or indirectly to promote any business in direct competition with that of his
employer is not in restraint of trade, so it is a valid contract.

Facts of Case:
1. An agreement made between X & Y in which X will work as assistant to Y who is Chartered
Accountant at Jodhpur for 2 years and agreed not to work / practice as a chartered accountant
on his own account within 20 kms of the office of Y at jodhpur.
2. At the end of one year X left the assistantship and started practice on his own account within
the said area of 20 kms

Answer:
Therefore, referring to above provisions and facts in the instant case, agreement entered by ‘X’
with ‘Y’ is reasonable, and do not amount to restraint of trade and hence enforceable.

Therefore, ‘X’ can be restrained by an injunction from practicing on his own account in within the
said area of 20 Kms for another one year.

Q.10. PM Ltd., contracts with Gupta Traders to make and deliver certain machinery to them by
30 June 2017 for Rs 21.50 Lakhs. Due to labour strike, PM Ltd. could not manufacture and
deliver the machinery to Gupta Traders. Later Gupta Traders procured the machinery from
another manufacturer for Rs 22.75 lakhs. Gupta Traders was also prevented from
performing a contract, which it had made with Zenith Traders at the time of their contract
with PM Ltd. and were compelled to pay compensation for breach of contract. Calculate the

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amount of compensation, which Gupta Traders can claim from PM Ltd., referring to the
legal provisions of the Indian Contract Act, 1872.

Ans:-Provision: [Section 73 Indian Contract Act, 1872]

1. When a contract has been broken, the party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation for any loss or damage caused to him
thereby, which naturally arose in the usual course of things from such breach, or which the
parties knew, when they made the contract, to be likely to result from the breach of it.
2. Such compensation is not to be given for any remote and indirect loss or damage sustained
because of the breach.
3. When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had contracted to discharge it and
had broken his contract.
4. It is further provided in the explanation to the section that in estimating the loss or damage
from a breach of contract, the means which existed of remedying the inconvenience caused by
the non - performance of the contract must be taken into account.

Facts of Case:
1. In given case PM ltd contracted to make & deliver certain machinery for Rs. 21.50 lakhs to
Gupta Traders but due to labour strike, PM ltd could not manufacture the machinery.
2. Later Gupta Traders procured the machinery from another manufacture for Rs. 22.75 lakhs
3. Due to failure to provide machinery by PM ltd, Gupta Traders were unable to perform contract,
which it had made with Zenith Traders and were compelled to pay compensation for breach of
contract.

Answer:
Applying the above principle of law to the given case, PM Ltd. is obliged to compensate for the loss
of Rs 1.25 lakhs (i.e. Rs 22.75 lakhs – Rs 21.50 lakhs) which had naturally arisen due to default in
performing the contract by the specified date.
Regarding the amount of compensation which Gupta Traders were compelled to make to Zenith
Traders, it depends upon the fact whether PM Ltd. knew about the contract of Gupta Traders for
supply of the contracted machinery to Zenith Traders on the specified date. If so, PM Ltd. is also
Obliged to reimburse the compensation, which Gupta Traders had to pay to Zenith Traders for
breach of contract. Otherwise PM Ltd. is not liable for that.

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Q.11. A student was induced by his teacher to sell his brand new car to the latter at less than
the purchase price to secure more marks in the examination. Accordingly, the car was sold.
However, the father of the student persuaded him to sue his teacher. State on what
ground the student can sue the teacher?

Ans:-Provision: [Indian Contract Act, 1872]

1. A contract is said to be induced by ‘undue influence’ 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.
2. In particular and without prejudice to the generality of the foregoing principle, a person is
deemed to be in a position to dominate the will of another—
a. Where he holds a real or apparent authority over the other, or where he stands in a
fiduciary relation to the other; or
b. Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected because of age, illness, or mental or bodily distress.

Answer:
Yes, the student can sue his teacher on the ground of undue influence under the provisions of
Indian Contract Act, 1872. A contract brought because of coercion, undue influence, fraud or
misrepresentation would be voidable at the option of the person whose consent was caused.

Q.12. Though a minor is not competent to contract, nothing in the Contract Act prevents him
from making the other party bound to the minor”. Discuss.

Ans:-Provision: [Indian Contract Act, 1872]

Though a minor is not competent to contract, nothing in the Contract Act prevents him from
making the other party bound to the minor. Thus, a promissory note duly executed in favour of a
minor is not void and can be sued upon by him. A minor cannot become a partner in a partnership
firm. However, he may, with the consent of all partners, be admitted to the benefits of
partnership.

For example: A promissory note duly executed in favour of a minor is not void and can be sued
upon by him, because he though incompetent to contract, may yet accept a benefit.

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Q.13. A received certain goods from B promising to pay Rs 1, 00,000. Later on, A expressed
his inability to make payment. C, who is known to A, pays Rs 60,000 to B on behalf of A.
However, A was not aware of the payment. Now B is intending to sue A for Rs 1, 00,000.
Discuss whether the contention of B is right?

Ans:-Provision: [Indian Contract Act, 1872]

As per Section 41 of the Indian Contract Act, 1872, when a promisee accepts performance of
the promise from a third person, he cannot afterwards enforce it against the promisor. That is,
performance by a stranger, accepted by the promise e, produces the result of discharging the
promisor, although the latter has neither authorized nor ratified the act of the third party
Facts of Case:
In given case A received certain goods from B promising to pay Rs. 1,00,000. Afterwards A is
unable to make the payment ton B. C who is known to A make payment of Rs. 60,000 to B on A’s
behalf. A was not aware of the transaction between B & C.
Answer:

As C made the payment of Rs. 60,000 to B on behalf of A, now B can sue A only for the balance
amount i.e. Rs. 40,000.

Q.14. Decide with reasons whether the following Agreements Are Valid or void under the
provisions of the Indian Contract Act, 1872:
a. Vijay Agrees with Saini to sell his black horse for Rs 3,00,000. Unknown to both the
Parties, the horse was dead at the time of the Agreement.
b. Sarvesh sells the goodwill of his shop to Vikas for Rs 10, 00,000 and promises not to
carry on such business forever and Anywhere in India.
c. Mr. X Agrees to write A book with A publisher. After few days, X dies in An Accident.

Ans:-Provision: [Indian Contract Act, 1872]

1. Where both the parties to an agreement are under a mistake as to a matter of fact essential to
the agreement the agreement is void.
2. Section 27 of the Indian Contract Act, 1872 deals with agreements in restraint of trade.
According to the said section, every agreement by which any person is restrained from
exercising a lawful profession, trade or business of any kind, is to that extent void. However, in
the case of the service agreements restraint of trade is valid.
3. As per section 2(j) of the Contract Act, “A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable”.

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Answer:
1. In this case, there is mistake of fact as to the existence of the subject - matter, i.e., with
respect to the selling of horse which was dead at the time of the agreement. It is unknown to
both the parties. Therefore, it is a void agreement.
2. Since in the given case, restraint to carry on business was forever and anywhere in India, so the
agreement in question is void.
3. In the present case, Mr. X Agrees to write A book with A publisher. After few days, X dies in
An Accident. Here the contract becomes void due to the impossibility of performance of the
contract.

Q.15. Ishaan, aged 16 years, was studying in an engineering college. On 1st March, 2016 he
took a loan of Rs 2 lakhs from Vishal for the payment of his college fee and agreed to pay
by 30th May, 2017. Ishaan possesses assets worth Rs 15 lakhs. On due date Ishaan fails
to pay back the loan to Vishal. Vishal now wants to recover the loan from Ishaan out of his
assets. Decide whether Vishal would succeed referring to the provisions of the Indian
Contract Act, 1872

Ans:-Provision: [Indian Contract Act, 1872]

1. According to Section 11 of the Indian Contract Act, 1872, every person is competent to
contract who is of the age of majority according to the law to which he is subject, and who is of
sound mind and is not disqualified from contracting by any law to which he is subject.
2. A person who has completed the age of 18 years is a major and otherwise he will be treated as
minor. Thus, Ishaan who is a minor is incompetent to contract and any agreement with him is
void [Mohori Bibi Vs Dharmo Das Ghose 1903].
3. Section 68 of the Indian Contract Act, 1872 however, prescribes the liability of a minor for the
supply of the things which are the necessaries of life to him. It says that though minor is not
personally liable to pay the price of necessaries supplied to him or money lent for the purpose,
the supplier or lender will be entitled to claim the money/price of goods or services which are
necessaries suited to his condition of life provided that the minor has a property.
4. The liability of minor is only to the extent of the minor’s property.

Facts of Case:
1. Ishaan aged 16 years was studying in an engineering college took loan from Vishal of Rs. 2 lakhs
for payment of his college fee and agreed to pay the same by 30th may, 2017.
2. Ishaan possesses assets value of which is worth Rs. 15 lakhs.

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3. On due date ishaan fails to pay the sum to Vishal. Now Vishal wants to recover the amount of
loan from Ishaan out of his assets.

Answer:
Thus, according to the above provision, Vishal will be entitled to recover the amount of loan given
to Ishaan for payment of the college fees from the property of the minor.

Q.16. X’ entered into a contract with ‘Y’ to supply him 1,000 water bottles @ Rs 5.00 per
water bottle, to be delivered at a specified time. Thereafter, ‘X’ contracts with ‘Z’ for
the purchase of 1,000 water bottles @ Rs 4.50 per water bottle, and at the same time
told ‘Z’ that he did so for the purpose of performing his contract entered into with ‘Y’. ‘Z’
failed to perform his contract in due course and market price of each water bottle on that
day was Rs 5.25 per water bottle. Consequently, ‘X’ could not procure any water bottle and
‘Y’ rescinded the contract. Calculate the amount of damages which ‘X’ could claim from ‘Z’
in the circumstances? What would be your answer if ‘Z’ had not informed about the ‘Y’s
contract? Explain with reference to the provisions of the Indian Contract Act, 1872

Ans:-Provision: [Indian Contract Act, 1872]

1. When a contract has been broken, the party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation for any loss or damage caused to
him thereby, which naturally arose in the usual course of things from such breach, or which the
parties knew, when they made the contract, to be likely to result from the breach of it.
2. Such compensation is not to be given for any remote and indirect loss or damage sustained
because of the breach.
3. When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had contracted to discharge it and
had broken his contract.
4. t is further provided in the explanation to the section that in estimating the loss or damage
from a breach of contract, the means which existed of remedying the inconvenience caused by
the non - performance of the contract must be taken into account.

Facts of Case:

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The problem asked in this question is based on the provisions of Section 73 of the Indian Contract
Act, 1872. In the instant case ‘X’ had intimated to ‘Z’ that he was purchasing water bottles from
him for performing his contract with ‘Y’. Thus, ‘Z’ had the knowledge of the special circumstances.
Answer:
1. Therefore, ‘X’ is entitled to claim from ‘Z’ Rs 500/- At the rate of 0.50 paise i.e. 1000 Water
bottles x 0.50 paise (difference between the procuring price of water bottles And contracted
selling price to ‘Y’) being the Amount of profit ‘X’ would have made by the performance of his
contract with ‘Y’.
2. If ‘X’ had not informed ‘Z’ of ‘Y’s contract, then the Amount of damages would have been the
difference between the contract price And the market price on the day of default. In other
words, the Amount of damages would be Rs 750/- (i.e. 1000 Water bottles x 0.75 paise).

Q.17. Liquidated damage is a genuine pre-estimate of compensation of damages for certain

anticipated breach of contract whereas Penalty on the other hand is an extravagant amount
stipulated and is clearly unconscionable and has no comparison to the loss suffered by the
parties”. Explain.

Ans:-Provision: [Indian Contract Act, 1872]

1. Liquidated damage is a genuine pre-estimate of compensation of damages for certain

anticipated breach of contract. This estimate is agreed to between parties to avoid at a later
date detailed calculations and the necessity to convince outside parties.
2. Penalty on the other hand is an extravagant amount stipulated and is clearly unconscionable and
has no comparison to the loss suffered by the parties.
3. n terms of Section 74 of the Act “where a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, or if the contract contains any other
stipulation by way of penalty, the party complaining of the breach is entitled, whether or not
actual damages or loss is proved to have been caused thereby, to receive from the other party
who has broken the contract, a reasonable compensation not exceeding the amount so named, or
as the case may be the penalty stipulated for.
4. Explanation to Section 74:
A stipulation for increased interest from the date of default may be a stipulation by way of
penalty.
In terms of Section 74, courts are empowered to reduce the sum payable on breach whether it
is ‘penalty’ or “liquidated damages” provided the sum appears to be unreasonably high.

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5.Sri ChunniLal vs. Mehta & Sons Ltd (Supreme Court): Supreme Court laid down the ratio that the
aggrieved party should not be allowed to claim a sum greater than what is specific in the written
agreement. But even then the court has powers to reduce the amount if it considers it
reasonable to reduce.

Q.18. Explain the meaning of ‘Contingent Contracts’ and state the rules relating to such
contracts

Ans:-Provision: [Indian Contract Act, 1872]

1. Essential characteristics of a contingent contract: A contract may be absolute or contingent. A

contract is said to be absolute when the promisor undertakes to perform the contract in all
events.
2. A contingent contract, on the other hand “is a contract to do or not to do something, if some
event, collateral to such contract does or does not happening (Section 31). It is a contract in
which the performance becomes due only upon the happening of some event which may or may
not happen. For example, A contracts to pay B Rs10, 000 if he is elected President of a
particular association. This is a contingent contract.
3. The essential characteristics of a contingent contract may be listed as follows:
a) There must be a contract to do or not to do something,
b) The performance of the contract must depend upon the happening or non-happening of some
event.
c) The happening of the event is uncertain.
d) The even on which the performance is made to depend upon is an event collateral to the
contract. i.e. it does not form part of the reciprocal promises which constitute the contract.
The even should neither be a performance promised, nor the consideration for the promise.
e) The contingent even should not be the mere will of the promisor. However, where the event
is within the promisor’s will, but not merely his will, it may be a contingent contract.

4. The rules regarding the contingent contract are as follows”

a) Contingent contract dependent on the happening of an uncertain future cannot be enforced
until the even has happened. If the even becomes impossible, such contracts become void.
(Sec.32).

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b) Where a contingent contract is to be performed if a particular event does not happening

performance can be enforced only when happening of that even becomes impossible (Sec.
33).
c) If a contract is contingent upon, how a person will act at an unspecified time the even 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. (Section 34,35).
d) The contingent contracts to do or not to do anything if an impossible event happens, are void
whether or not the fact is known to the parties (Section 36).

Q.19. Explain the-term ‘Quasi Contracts’ and state their characteristics.

Ans:-Provision: [Indian Contract Act, 1872]

1. Under certain special circumstances obligation resembling those created by a contract are
imposed by law although the parties have never entered into a contract. Such obligations
imposed by law are referred to as ‘Quasi-contracts’.
2. Such a contract resembles with a contract so far as result or effect is concerned but it has
little or no affinity with a contract in respect of mode of creation. These contracts are based
on the doctrine that a person shall not be allowed to enrich himself unjustly at the expense of
another.
3. The salient features of a quasi-contract are :
a) It does not arise from any agreement of the parties concerned but is imposed by law.
b) Duty and not promise is the basis of such contract.
c) The right under it is always a right to money and generally though not always to a
liquidated sum of money.
d) Such a right is available against specific person(s) and not against the whole world.
e) A suit for its breach may be filed in the same way as in case of a complete contract

Q.20. Distinction between Void and Illegal Agreements.

Ans:-Provision: [Indian Contract Act, 1872]

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1. Void and Illegal Agreements: According to Section 2(g) of the Indian Contract Act, an
agreement not enforceable by law is void. The Act has specified various factors due to which an
agreement may be considered as void agreement.
2. One of these factors is unlawfulness of object and consideration of the contract i.e. illegality
of the contract which makes it void.
3. Despite the similarity between an illegal and a void agreement that in either case the agreement
is void and cannot be enforced by law, the two differ from each other in the following respects:
a) Scope: An illegal agreement is always void while a void agreement may not be illegal being
void due to some other factors e.g. an agreement the terms of which are uncertain is void
but not illegal.
b) Effect on collateral transaction: If an agreement is merely void and not illegal, the
collateral transactions to the agreement may be enforced for execution but collateral
transaction to an illegal agreement also becomes illegal and hence cannot be enforced.
c) Punishment: Unlike illegal agreements, there is no punishment to the parties to a void
agreement.
d) Void ab-initio: Illegal agreements are void from the very beginning but sometimes-valid
contracts may subsequently become void.

Q.21. Explain the type of contracts in the following agreements under the Indian Contract Act,
1872:
(i) A coolie in uniform picks up the luggage of A to be carried out of the railway station
without being asked by A and A allows him to do so.
(ii) Obligation of finder of lost goods to return them to the true owner
(iii) A contracts with B (owner of the factory) for the supply of 10 tons of sugar, but
before the supply is effected, the fire caught in the factory and everything was
destroyed.
Ans:-

Answer: [Indian Contract Act, 1872]

(i) It is an implied contract and A must pay for the services of the coolie.
Implied Contracts: Implied contracts come into existence by implication. Most often the
implication is by law and or by action. Section 9 of the Indian Contract Act, 1872 contemplates
such implied contracts when it lays down that in so far as such proposal or acceptance is made
otherwise than in words, the promise is said to be implied.

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(ii) Obligation of finder of lost goods to return them to the true owner cannot be said to arise
out of a contract even in its remotest sense, as there is neither offer and acceptance nor
consent. These are said to be quasi-contracts.
Quasi-Contract: A quasi-contract is not an actual contract but it resembles a contract. It is
created by law under certain circumstances. The law creates and enforces legal rights and
obligations when no real contract exists. Such obligations are known as quasi-contracts. In other
words, it is a contract in which there is no intention on part of either party to make a contract
but law imposes a contract upon the parties.
(iii) The above contract is a void contract.
Void Contract: Section 2 (j) of the Act states as follows: “A contract which ceases to be
enforceable by law becomes void when it ceases to be enforceable”. Thus, a void contract is one
which cannot be enforced by a court of law.

Q.22. “Only a person who is party to a contract can sue on it”. Explain this statement and
describe its exceptions, if any.

Ans:-Provision: [Indian Contract Act, 1872]

1. Though under the Indian Contract Act, 1872, the consideration for an agreement may proceed
from a third party, the third party cannot sue on contract. Only a person who is party to a
contract can sue on it.
2. Thus, the concept of stranger to consideration is valid and is different from stranger to a
contract.
3. The previously mentioned rule, that stranger to a contract cannot sue is known as a “doctrine of
privity of contract”, is however, subject to certain exceptions. In other words, even a stranger
to a contract may enforce a claim in the following cases:
a) In the case of trust, a beneficiary can enforce his right under the trust, though he was
not a party to the contract between the settler and the trustee.
b) In the case of a family settlement, if the terms of the settlement are reduced into
writing, the members of family who originally had not been parties to the settlement may
enforce the agreement.
c) In the case of certain marriage contracts, a female member can enforce a provision for
marriage expenses made on the partition of the Hindu Undivided Family.
d) In the case of assignment of a contract, when the benefit under a contract has been
assigned, the assignee can enforce the contract.

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e) Acknowledgement or estoppel – where the promisor by his conduct acknowledges himself as

an agent of the third party, it would result into a binding obligation towards third party.
f) In the case of covenant running with the land, the person who purchases land with notice
that the owner of land is bound by certain duties affecting land, the covenant affecting the
land may be enforced by the successor of the seller.
g) Contracts entered into through an agent: The principal can enforce the contracts entered
by his agent where the agent has acted within the scope of his authority and in the name of
the principal.

Answer:
Therefore even though stranger to a contract cannot sue but in some cases it can do the same
which are known to be the exception to the Doctrine of privity of contract as mentioned above.

Q.23. Explain the circumstances in which the person is deemed to be in a position to dominate
the will of the other person under the Indian Contract Act, 1872.

Ans:-Provision: [Indian Contract Act, 1872]

A person is deemed to be in such position in the following circumstances:

1. Real and apparent authority: Where a person holds a real authority over the other as in the
case of master and servant, doctor and patient and etc.
2. Fiduciary relationship: where relation of trust and confidence exists between the parties to a
contract. Such type of relationship exists between father and son, solicitor and client, husband
and wife, creditor and debtor, etc.
3. Mental distress: An undue influence can be used against a person to get his consent on a
contract where the mental capacity of the person is temporarily or permanently affected by
the reason of mental or bodily distress, illness or of old age.
4. Unconscionable bargains: Where one of the parties to a contract is in a position to dominate
the will of the other and the contract is apparently unconscionable i.e., unfair, it is presumed by
law that consent must have been obtained by undue influence. Unconscionable bargains are
witnessed mostly in money-lending transactions and in gifts.

Answer:
Above are circumstances in which person is deemed to be in position to dominate will of the other
person under the Indian Contract Act, 1872.

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Q.24. What is a wagering agreement? Describe the transactions which resembles with wagering
transactions but are not void.

Ans:-An agreement by way of a wager is void. It is an agreement involving payment of a sum of money
upon the determination of an uncertain event. The essence of a wager is that each side should
stand to win or lose, depending on the way an uncertain event takes place in reference to which
the chance is taken and in the occurrence of which neither of the parties has legitimate interest.

For example, A agrees to pay ` 50,000 to B if it rains, and B promises to pay a like amount to A if
it does not rain, the agreement will be by way of wager. But if one of the parties has control over
the event, agreement is not a wager.
2. Transactions resembling with wagering transaction but are not void
a) Chit fund: Chit fund does not come within the scope of wager (Section 30). In case of a chit
fund, a certain number of persons decide to contribute a fixed sum for a specified period and at
the end of a month, the amount so contributed is paid to the lucky winner of the lucky draw.
b) Commercial transactions or share market transactions: In these transactions in which
delivery of goods or shares is intended to be given or taken, do not amount to wagers.
c) Games of skill and Athletic Competition: Crossword puzzles, picture competitions and athletic
competitions where prizes are awarded on the basis of skill and intelligence are the games of skill
and hence such competition are valid. According to the Prize Competition Act, 1955 prize
competition in games of skill are not wagers provided the prize money does not exceed ` 1,000.
d) A contract of insurance: A contract of insurance is a type of contingent contract and is valid
under law and these contracts are different from wagering agreements

Q.25. “The basic rule is that the promisor must perform exactly what he has promised to
perform.” Explain stating the obligation of parties to contracts.

Ans:-Provision: [Section 37 of Indian Contract Act, 1872]

1. The parties to a contract must either perform, or offer to perform, their respective promises
unless such performance is dispensed with or excused under the provisions of the Contract Act or
of any other law.
2. Promises bind the representatives of the promisor in case of death of such promisor before
performance, unless a contrary intention appears from the contract.
Example 1: A promises to deliver goods to B on a certain day on payment of ` 1,00,000. A dies
before that day. A’s representatives are bound to deliver the goods to B, and B is bound to pay `
1,00,000 to A’s representatives.

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Example 2
A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The
contract cannot be enforced either by A’s representatives or by B because it involves use of
personal skill.
3. Analysis of Section 37
a) A contract being an agreement enforceable by law, creates a legal obligation, which subsists
until discharged. Performance of the promise or promises remaining to be performed is the
principal and most usual mode of discharge.
b) The basic rule is that the promisor must perform exactly what he has promised to perform.
The obligation to perform is absolute. Thus, it may be noted that it is necessary for a party who
wants to enforce the promise made to him, to perform his promise for himself or offer to
perform his promise.
c) Only after that he can ask the other party to carry out his promise. This is the principle which
is enshrined in Section 37. Thus, it is the primary duty of each party to a contract to either
perform or offer to perform his promise.
d) He is absolved from such a responsibility only when under a provision of law or an act of the
other party to the contract, the performance can be dispensed with or excused.
Answer:
Thus, from above it can be drawn that performance may be actual or offer to perform.

Q.26. What do you mean by Quantum Meruit and state the cases where the claim for Quantum
Meruit arises?

Ans:-Provision: [Indian Contract Act, 1872]

1. Where one person has rendered service to another in circumstances which indicate an
understanding between them that it is to be paid for although no particular remuneration has been
fixed, the law will infer a promise to pay. Quantum Meruit i.e. as much as the party doing the
service has deserved.
2. It covers a case where the party injured by the breach had at time of breach done part but
not all of the work which he is bound to do under the contract and seeks to be compensated for
the value of the work done.
3. For the application of this doctrine, two conditions must be fulfill ed:
a) It is only available if the original contract has been discharged.
b) The claim must be brought by a party not in default.
4. The object of allowing a claim on quantum meruit is to recompensate the party or person for
value of work which he has done. Damages are compensatory in nature while quantum meruit is

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restitutory. It is but reasonable compensation awarded on implication of a contract to

remunerate.
5. The claim for quantum meruit arises in the following cases:
a) when an agreement is discovered to be void or when a contract becomes void.
b) When something is done without any intention to do so gratuitously.
c) Where there is an express or implied contract to render services but there is no agreement as
to remuneration.
d) When one party abandons or refuses to perform the contract.
e) Where a contract is divisible and the party not in default has enjoyed the benefit of part
performance.
f) When an indivisible contract for a lump sum is completely performed but badly the person who
has performed the contract can claim the lump sum, but the other party can make a deduction for
bad work.

Q.27. What Explain the meaning of ‘Contingent Contracts’ and state the rules relating to such
contracts.
Ans:-Provision: [Indian Contract Act, 1872]

1. A contract may be absolute or contingent. A contract is said to be absolute when the promisor
undertakes to perform the contract in all events. A contingent contract, on the other hand "is a
contract to do or not to do something, if some event, collateral to such contract does or does not
happening (Section 31).
2. It is a contract in which the performance becomes due only upon the happening of some event
which may or may not happen.
For example, A contracts to pay B ` 10,000 if he is elected President of a particular association.
This is a contingent contract.
3. The essential characteristics of a contingent contract may be listed as follows:
a) There must be a contract to do or not to do something,
b) The performance of the contract must depend upon the happening or non- happening of some
event.
c) The happening of the event is uncertain.
d) The event on which the performance is made to depend upon is an event collateral to the
contract i.e. it does not form part of the reciprocal promises which constitute the contract. The
event should neither be a performance promised, nor the consideration for the promise.
e) The contingent event should not be the mere will of the promisor. However, where the event is
within the promisor’s will, but not merely his will, it may be a contingent contract.
4. The rules regarding the contingent contract are as follows:

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a) Contingent contract dependent on the happening of an uncertain future cannot be enforced

until the event has happened. If the event becomes impossible, such contracts become void.
(Section 32).
b) Where a contingent contract is to be performed if a particular event does not happening
performance can be enforced only when happening of that event becomes impossible (Section 33).
c) If a 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.
(Section 34 and 35).
d) The contingent contracts to do or not to do anything if an impossible event happens, are void
whether the fact is known to the parties (Section 36).

Q.28. Explain the concept of ‘misrepresentation’ in matters of contract. Sohan induced Suraj to
buy his motorcycle saying that it was in a very good condition. After taking the motorcycle,
Suraj complained that there were many defects in the motorcycle. Sohan proposed to get it
repaired and promised to pay 40% cost of repairs After a few days, the motorcycle did not
work at all. Now Suraj wants to rescind the contract. Decide giving reasons whether Suraj
can rescind the contract?

Ans:-Provision: [Section 18 & 19 Indian Contract Act, 1872]

1. According to Section 18 of the Indian Contract Act, 1872, misrepresentation is:

a) When a person positively asserts that a fact is true when his information does not warrant it to
be so, though he believes it to be true.
b) When there is any breach of duty by a person, which brings an advantage to the person
committing it by misleading another to his prejudice.
c) When a party causes, however, innocently, the other party to the agreement to make a mistake
as to the substance of the thing, which is the subject of the agreement.
2. The aggrieved party, in case of misrepresentation by the other party, can avoid or rescind the
contract. The aggrieved party loses the right to rescind the contract if he, after becoming aware
of the misrepresentation, takes a benefit under the contract or in some way affirms it.
Answer:
Accordingly, in the given case Suraj could not rescind the contract, as his acceptance to the offer
of Sohan to bear 40% of the cost of repairs impliedly amount to final acceptance of the sale.

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Q.29. X, a minor was studying in M.Com. in a college. On 1st July, 2019 he took a loan of`
1,00,000 from B for payment of his college fees and to purchase books and agreed to
repay by 31st December, 2019. X possesses assets worth ` 9 lakhs. On due date, X fails
to pay back the loan to B. B now wants to recover the loan from X out of his (X’s) assets.
Referring to the provisions of Indian Contract Act, 1872 decide whether B would succeed.

Ans:- Provision: [Indian Contract Act, 1872]

1. According to Section 11 of the Indian Contract Act, 1872, every person is competent to
contract who is of the age of majority according to the law to which he is subject, and who is of
sound mind and is not disqualified from contracting by any law to which he is subject.
2. A person who has completed the age of 18 years is a major and otherwise he will be treated
as minor. Thus, Ishaan who is a minor is incompetent to contract and any agreement with him is
void [Mohori Bibi Vs Dharmo Das Ghose 1903].
3. Section 68 of the Indian Contract Act, 1872 however, prescribes the liability of a minor for
the supply of the things which are the necessaries of life to him. It says that though minor is
not personally liable to pay the price of necessaries supplied to him or money lent for the
purpose, the
supplier or lender will be entitled to claim the money/price of goods or services which are
necessaries suited to his condition of life provided that the minor has a property.
4. The liability of minor is only to the extent of the minor’s property.
Facts of case:
In given question X, a minor was studying in M.Com. in a college. he took a loan of` 1,00,000 from
B for payment of his college fees and to purchase books and agreed to repay by 31st December,
2019. X possesses assets worth ` 9 lakhs. On due date, X fails to pay back the loan to B. B now
wants to recover the loan from X out of his (X’s) assets.
Answer:
Yes, B can proceed against the assets of X. According to section 68 of Indian Contract Act,
1872, if a person, incapable of entering into a contract, or any one whom he is legally bound to
support, is supplied by another person with necessaries suited to his condition in life, the person
who has furnished such supplies is entitled to be reimbursed from the property of such
incapable person. Since the loan given to X is for the necessaries suited to the conditions in life
of the minor, his assets can be sued to reimburse B.

Q.30. P sells by auction to Q a horse which P knows to be unsound. The horse appears to be
sound but P knows about the unsoundness of the horse. Is this contract valid in the
following circumstances:

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a) If P says nothing about the unsoundness of the horse to Q.

b) If P says nothing about it to Q who is P’s daughter who has just come of age.
c) If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P says
nothing.

Ans:-Provision: [Indian Contract Act, 1872]

According to section 17 of the Indian Contract Act, 1872, mere silence as to facts likely to affect
the willingness of a person to enter into a contract is not fraud, unless the circumstances of the
case are such that, regard being had to them, it is the duty of the person keeping silence to speak,
or unless his silence is, in itself, equivalent to speech.
Answer:
Hence, in the instant case,
a) This contract is valid since as per section 17 mere silence as to the facts likely to affect the
willingness of a person to enter into a contract is not fraud. Here, it is not the duty of the seller to
disclose defects.
b) This contract is not valid since as per section 17 it becomes P’s duty to tell Q about the
unsoundness of the horse because a fiduciary relationship exists between P and his daughter Q.
Here, P’s silence is equivalent to speech and hence amounts to fraud.
c) This contract is not valid since as per section 17, P’s silence is equivalent to speech and hence
amounts to fraud.

Q.31. P Comment on the following statements:

a) Acceptance must be absolute and unqualified.
b) Acceptance must be in the prescribed mode.

Ans:-[Indian Contract Act, 1872]

a) Acceptance must be absolute and unqualified: As per section 7 of the Indian Contract Act,
1872 acceptance is valid only when it is absolute and unqualified and is also expressed in some
usual and reasonable manner unless the proposal prescribes the manner in which it must be
accepted. If the proposal prescribes the manner in which it must be accepted, then it must be
accepted accordingly.
Example: ‘A’ enquires from ‘B’, “Will you purchase my car for ` 2 lakhs?” If ‘B’ replies “I shall
purchase your car for ` 2 lakhs, if you buy my motorcycle for ` 50000/-, here ‘B’ cannot be
considered to have accepted the proposal. If on the other hand ‘B’ agrees to purchase the car
from ‘A’ as per his proposal subject to availability of valid Registration Certificate / book for the

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car, then the acceptance is in place though the offer contained no mention of R.C. book. This is
because expecting a valid title for the car is not a condition. Therefore, the acceptance in this
case is unconditional.
b) Acceptance must be in the prescribed mode:Where the mode of acceptance is prescribed in
the proposal, it must be accepted in that manner. But if the proposer does not insist on the
proposal being accepted in the manner prescribed after it has been accepted otherwise, i.e., not
in the prescribed manner, the proposer is presumed to have consented to the acceptance.
Example: If the offeror prescribes acceptance through messenger and offeree sends
acceptance by email, there is no acceptance of the offer if the offeror informs the offeree that
the acceptance is not according to the mode prescribed. But if the offeror fails to do so, it will
be presumed that he has accepted the acceptance and a valid contract will arise.

Q.32. Explain the concept of ‘misrepresentation’ in matters of contract. & Sohan induced Suraj
to buy his motorcycle saying that it was in a very good condition. After taking the
motorcycle, Suraj complained that there were many defects in the motorcycle. Sohan
proposed to get it repaired and promised to pay 40% cost of repairs. After a few days, the
motorcycle did not work at all. Now Suraj wants to rescind the contract. Decide giving
reasons.

Ans:-Provision: [Section 18 of Indian Contract Act, 1872]

According to Section 18 of the Indian Contract Act, 1872, misrepresentation means and includes-
a) the positive assertion, in a manner not warranted by the information of the person making it, of
that which is not true, though he believes it to be true;
b) any breach of duty which, without an intent to deceive, gains an advantage to the person
committing it, or any one claiming under him; by misleading another to his prejudice or to the
prejudice of any one claiming under him;
c) causing, however, innocently, a party to an agreement to make a mistake as to the substance of
the thing which is the subject of the agreement.
Facts of case:
In given case sohan induced suraj to buy his motorcycle by saying that it is in very good condition
but afterwards suraj complained that there were many defects in motorcycle.
Sohan promised to pay 40 % cost of repairs. After some days the motorcycle did not work well
and now suraj wants to rescind the contract.
Answer:
In the instant case, the aggrieved party, in case of misrepresentation by the other party, can
avoid or rescind the contract. The aggrieved party loses the right to rescind the contract if he,

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after becoming aware of the misrepresentation, takes a benefit under the contract or in some way
affirms it. Accordingly, in the given case, Suraj could not rescind the contract, as his acceptance
to the offer of Sohan to bear 40% of the cost of repairs impliedly amount to final acceptance of
the sale.

Q.33. No consideration, no contract” Comment.

Or
State the exceptions to the rule "An agreement without consideration is void".

Ans:-Provision: [Indian Contract Act, 1872]

1. Every agreement, to be enforceable by law must be supported by valid consideration. An

agreement made without any consideration is void. A gratuitous promise may form a subject of a
moral obligation and may be binding in honour but it does not cause a legal responsibility.
2. No consideration, no contract is a general rule. However, Section 25 of the Indian Contract
Act, 1872 provides some exceptions to this rule, where an agreement without consideration will
be valid and binding. These exceptions are as follows:
a) Agreement made on account of natural love and affection : Section 25 (1) provides that if
an agreement is (i) in writing (ii) registered under the law and made on account of natural love and
affection (iv) between the parties standing in a near relation to each other, it will be enforceable
at law even if there is no consideration. Thus, where A, for natural love and affection, promises
to give his son, B, ` 10,000 in writing and registers it. This is a valid contract.
b) Compensation for services voluntarily rendered: Section 25(2) provides that something
which the promisor was legally compelled to do; (iii) and the promisor was in existence at the time
when the act was done whether he was competent to contract or not (iv) the promisor must agree
now to compensate the promise. Thus when A finds B's purse and gives it to him and B promises
to give A ` 50, this is a valid contract.
c) Promise to pay time-barred debts [Section 25 (3)]: Where there is an agreement, made in
writing and signed by the debtor or by his agent, to pay wholly or in part a time barred debt, the
agreement is valid and binding even though there is no consideration. If A owes B ` 1,000 but the
debt is lapsed due to time-bar and A further makes a written promise to pay ` 500 on account of
this debt, it constitutes a valid contract.
d) Contract of agency (Section 185): No consideration is necessary to create an agency.
e) Completed gift (Explanation 1 to Section 25): A completed gift needs no consideration.
Thus, if a person transfers some property by a duly written and registered deed as a gift he
cannot claim back the properly subsequently on the ground of lack of consideration.

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 ICA QUESTION BANK BY CA INDRESH GANDHI

Q.34. Explain the meaning of ‘Contingent Contracts’ and state the rules relating to such
contracts.
Ans:-Provision: [Indian Contract Act, 1872]
1. A contract may be absolute or contingent. A contract is said to be absolute when the promisor
undertakes to perform the contract in all events. A contingent contract, on the other hand "is a
contract to do or not to do something, if some event, collateral to such contract does or does not
happened (Section 31). It is a contract in which the performance becomes due only upon the
happening of some event which may or may not happen. For example, A contracts to pay B `10,000
if he is elected President of a particular association. This is a contingent contract.
2. The essential characteristics of a contingent contract may be listed as follows:
a) There must be a contract to do or not to do something,
b) The performance of the contract must depend upon the happening or non- happening of some
event.
c) The happening of the event is uncertain.
d) The event on which the performance is made to depend upon is an event collateral to the
contract i.e. it does not form part of the reciproc al promises which constitute the contract. The
event should neither be a performance promised, nor the consideration for the promise.
e) The contingent event should not be the mere will of the promisor. However, where the event is
within the promisor’s will, but not merely his will, it may be a contingent contract.
3. The rules regarding the contingent contract are as follows:
a) Contingent contract dependent on the happening of an uncertain future cannot be enforced
until the event has happened. If the event becomes impossible, such contracts become void.
(Section 32).
b) Where a contingent contract is to be performed if a particular event does not happening
performance can be enforced only when happening of that event becomes impossible (Section 33).
c) If a 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. (Section
34, 35).
d) The contingent contracts to do or not to do anything if an impossible event happens, are void
whether or not the fact is known to the parties (Section 36).

Q.35. Define an offer. Explain the essentials of a valid offer. How an offer is different from
an invitation to offer?
Ans:-Provision: [Indian Contract Act, 1872]
1. The word Proposal and offer are used interchangeably and it is defined under Section 2(a) of
the Indian Contract Act, 1872 as when one person signifies to another his willingness to do or to

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 ICA QUESTION BANK BY CA INDRESH GANDHI

abstain from doing anything with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal.
2. The following are important essentials of an offer: -
a) Must be capable of creating legal relation.
b) Must be certain, definite and not vague.
c) Must be communicated.
d) Must be made with a view to obtaining the assent of the other party
e) May be conditional
f) Offer should not contain a term the non-compliance of which would amount to acceptance
g) May be general or specific
h) May be expressed or implied
i) A statement of price is not an offer
3. Offer and an Invitation to an offer:
a) In terms of Section 2(a) of the Act, an offer is the final expression of willingness by the offer
or to be bound by the offer should the other party chooses to accept it.
b) On the other hand, offers made with the intention to negotiate or offers to receive offers are
known as invitation to offer. Thus, where a party without expressing his final willingness proposes
certain terms on which he is willing to negotiate he does not make an offer, but only invites the
other party to make an offer on those terms. Hence, the only thing that is required is the
willingness of the offeree to abide by the terms of offer.

Q.36. A sends an offer to B to sell his second-car for ` 1,40,000 with a condition that if B
does not reply within a week, he (A) shall treat the offer as accepted. Is A correct in his
proposition? What shall be the position if B communicates his acceptance after one week?
Ans:-Provision: [Indian Contract Act, 1872]
Acceptance to an offer cannot be implied merely from the silence of the offeree, even if it is
expressly stated in the offer itself.
The acceptance must be made within the time limit prescribed by the offer. The acceptance of an
offer after the time prescribed by the offer or has elapsed will not avail to turn the offer into a
contract.
Answer:
Unless the offeree has by his previous conduct indicated that his silence amount to acceptance, it
cannot be taken as valid acceptance. So in the given problem, if B remains silent, it does not
amount to acceptance.

Q.37. X, Y and Z jointly borrowed ` 50,000 from A. The whole amount was repaid to A by Y.
Decide in the light of the Indian Contract Act, 1872 whether:

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 ICA QUESTION BANK BY CA INDRESH GANDHI

(i) Y can recover the contribution from X and Z,

(ii) Legal representatives of X are liable in case of death of X,
(iii) Y can recover the contribution from the assets, in case Z becomes insolvent.
Ans:-Provision: [Indian Contract Act, 1872]
1. Section 42 of the Indian Contract Act, 1872 requires that when two or more persons have
made a joint promise, then, unless a contrary intention appears from the contract, all such
persons jointly must fulfill the promise.
2. In the event of the death of any of them, his representative jointly with the survivors and in
case of the death of all promisors, the representatives of all jointly must fulfill the promise.
3. Section 43 allows the promisee to seek performance from any of the joint promisors. The
liability of the joint promisors has thus been made not only joint but "joint and several".
4. Section 43 provides that in the absence of express agreement to the contrary, the promisee
may compel any one or more of the joint promisors to perform the whole of the promise.
5. Section 43 deals with the contribution among joint promisors. The promisors, may compel
every joint promisor to contribute equally to the performance of the promise (unless a contrary
intention appears from the contract). If any one of the joint promisors makes default in such
contribution the remaining joint promisors must bear the loss arising from such default in equal
shares.
Answer:
As per the provisions of above sections,
(i) Y can recover the contribution from X and Z because X,Y and Z are joint promisors.
(ii) Legal representative of X are liable to pay the contribution to Y. However, a legal
representative is liable only to the extent of property of the deceased received by him.
(iii) Y also can recover the contribution from Z's assets.

Q.38. Explain the meaning of ‘Quasi-Contracts’. State the circumstances which are identified as
quasi contracts by the Indian Contract Act, 1872.
Ans:-Provision: [Indian Contract Act, 1872]
1. Even in the absence of a contract, certain social relationships give rise to certain specific
obligations to be performed by certain persons. These are known as “quasi-contracts” as they
create some obligations as in the case of regular contracts.
2. Quasi-contracts are based on the principles of equity, justice and good conscience.
3. The salient features of quasi-contracts are:
a) such a right is always a right to money and generally, though not always, to a liquidated sum of
money;

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b) does not arise from any agreement between the parties concerned but the obligation is
imposed by law and;
c) The rights available are not against all the world but against a particular person or persons
only, so in this respect it resembles to a contractual right.
4. Circumstances Identified as Quasi-Contracts:
a) Claim for necessaries supplied to persons incapable of contracting: Any person supplying
necessaries of life to persons who are incapable of contracting is entitled to claim the price from
the other person’s property. Similarly, where money is paid to such persons for purchase of
necessaries, reimbursement can be claimed.
b) Payment by an interested person: A person who has paid a sum of money, which another
person is obliged to pay, is entitled to be reimbursed by that other person if the payment has
been made by him to protect his own interest.
c) Obligation of person enjoying benefits of non-gratuitous act: Where a person lawfully does
anything for another person, or delivers anything to him not intending to do so gratuitously and
such other person enjoys the benefit thereof, the latter is bound to pay compensation to the
former in respect of, or to restore, the thing so done or delivered.
d) Responsibility of finder of goods: A person who finds goods belonging to another person and
takes them into his custody is subject to same responsibility as if he were a Bailee.
e) Liability for money paid or thing delivered by mistake or by coercion : A person to whom
money has been paid or anything delivered by mistake or under coercion, must repay or return it.
5. In all the above cases contractual liability arises without any agreement between the parties.

Q.39. What is the law relating to determination of compensation, on breach of contract,

contained in section 73 of the Indian Contract Act, 1872?
Ans:-Provision: [Indian Contract Act, 1872]
1. Section 73 of the Indian Contract Act, 1872 provides that when a contract has been broken,
the party who suffers by such breach is entitled to receive from the party who has broken the
contract,
compensation for any loss or damage caused to him thereby which naturally arose in the usual
course of things from such breach or which the parties knew when they made the contract, to
be likely to result from the breach of it.
2. Such compensation is not given for any remote and indirect loss or damage sustained because
of the breach.
3. The explanation to the section further provides that in estimating the loss or damage from a
breach of contract, the means, which existed of remedying the inconvenience caused by the non-
performance of the contract, must be taken into account.

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Q.40. X found a wallet in a restaurant. He enquired of all the customers present there but the
true owner could not be found. He handed over the same to the manager of the restaurant
to keep until the true owner is found. After a week, he went back to the restaurant to
enquire about the wallet. The manager refused to return it back to X, saying that it did not
belong to him. In the light of the Indian Contract Act, 1872, can X recover it from the
Manager?
Ans:-Provision: [Indian Contract Act, 1872]
1. Finder may claim compensation for the trouble and expenses incurred by him to preserve the
goods and to find out the true owner.
2. If the owner refuses to pay compensation then may retain the goods until he receives it.
However, he cannot make a suit for this.
3. If any reward has been announced by the owner he has a right to claim such reward. He can
even sue for the reward.
4. Normally he cannot sale the goods but when real owner is not found out with reasonable
diligence, or if owner refuses to pay lawful charges then he can sale in the market if it normally
sold in the market.
5. He can sale goods when the article is in danger of being perished or losing the greater part of
its value. He can sale goods when the lawful charges of the finder amounts to two-thirds or more
of the value of the article found.
Answer:
In the light of the above provisions, the manager must return the wallet to X, since X is entitled
to retain the wallet found against everybody except the true owner.

Q.41. Define consideration. What are the legal rules regarding consideration under the Indian
Contract Act, 1872?
Ans:-Provision: [Indian Contract Act, 1872]
Consideration [Section 2(d) of the Indian Contract Act, 1872]: When at the desire of the
promisor, the promisee or any other person has done or abstained from doing, or does or abstains
from doing or promises to do or abstain from doing something, such an act or abstinence or
promise is called consideration for the promise.
Legal Rules Regarding Consideration
a) Consideration must move at the desire of the promisor: Consideration must be offered by
the promisee or the third party at the desire or request of the promisor. This implies “return”
element of consideration.

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b) Consideration may move from promisee or any other person: In India, consideration may
proceed from the promisee or any other person who is not a party to the contract. In other words,
there can be a stranger to a consideration but not stranger to a contract.
c) Executed and executory consideration: A consideration which consists in the performance of
an act is said to be executed. When it consists in a promise, it is said to be executory. The
promise by one party may be the consideration for an act by some other party, and vice versa.
d) Consideration may be past, present or future: It is a general principle that consideration is
given and accepted in exchange for the promise. The consideration, if past, may be the motive but
cannot be the real consideration of a subsequent promise. But in the event of the services being
rendered in the past at the request or the desire of the promisor, the subsequent promise is
regarded as an admission that the past consideration was not gratuitous.
e) Consideration need not be adequate: Consideration need not to be of any particular value. It
need not be approximately of equal value with the promise for which it is exchanged but it must
be something which the law would regard as having some value.
f) Performance of what one is legally bound to perform: The performance of an act by a
person who is legally bound to perform the same cannot be consideration for a contract. Hence, a
promise to pay money to a witness is void, for it is without consideration. Hence such a contract is
void for want of consideration.
However, where a person promises to do more that he is legally bound to do, such a promise
provided it is not opposed to public policy, is a good consideration. It should not be vague or
uncertain.
g) Consideration must be real and not illusory: Consideration must be real and must not be
illusory. It must be something to which the law attaches some value. If it is legally or physically
impossible it is not considered valid consideration.
h) Consideration must not be unlawful, immoral, or opposed to public policy. Only presence of
consideration is not sufficient it must be lawful. Anything, which is immoral or opposed to public
policy, also cannot be valued as valid consideration.

Q.42. Mr. Sonumal a wealthy individual provided a loan of ` 80,000 to Mr. Datumal on
26.02.2019. The borrower Mr. Datumal asked for a further loan of ` 1,50,000. Mr.
Sonumal agreed but provided the loan in parts at different dates. He provided` 1,00,000
on 28.02.2019 and remaining ` 50,000 on 03.03.2019.
On 10.03.2019 Mr. Datumal while paying off part ` 75,000 to Mr. Sonumal insisted that
the lender should adjusted ` 50,000 towards the loan taken on·03.03.2019 and balance as
against the loan on 26.02.2019.
Mr. Sonumal objected to this arrangement and asked the borrower to adjust in the order
of date of borrowal of funds.
Now you decide:

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(i) Whether the contention of Mr. Datumal correct or otherwise as per the provisions of
the Indian Contract Act, 1872?
(ii) What would be the answer in case the borrower does not insist on such order of
adjustment of repayment?
(iii) What would the mode of adjustment/appropriation of such part payment in case neither
Mr. Sonumal nor Mr. Datumal insist any order of adjustment on their part?
Ans:-Provision: [Indian Contract Act, 1872]
1. In case where a debtor owes several debts to the same creditor and makes payment which is
not sufficient to discharge all the debts, the payment shall be appropriated (i.e. adjusted against
the debts) as per the provisions of Section 59 to 61 of the Indian Contract Act, 1872.
2. As per the provisions of 59 of the Act, where a debtor owing several distinct debts to one
person, makes a payment to him either with express intimation or under circumstances implying
that the payment is to be applied to the discharge of some particular debt, the payment, if
accepted, must be applied accordingly.
3. As per the provisions of 60 of the Act, where the debtor has omitted to intimate and there
are no other circumstances indicating to which debt the payment is to be applied, the creditor
may apply it at his discretion to any lawful debt actually due and payable to him from the debtor,
where its recovery is or is not barred by the law in force for the time being as to the limitation
of suits.
4. As per the provisions of 61 of the Act, where neither party makes any appropriation, the
payment shall be applied in discharge of the debts in order of time, whether they are or are not
barred by the law in force for the time being as to the limitation of suits.
5. If the debts are of equal standing, the payments shall be applied in discharge of each
proportionately.
Answer:
(i) Therefore, the contention of Mr. Datumal is correct and he can specify the manner of
appropriation of repayment of debt.
(ii) Hence in case where Mr. Datumal fails to specify the manner of appropriation of debt on
part repayment, Mr. Sonumal the creditor, can appropriate the payment as per his choice.
(iii) Hence in case where neither Mr. Datumal nor Mr. Sonumal specifies the manner of
appropriation of debt on part repayment, the appropriation can be made in proportion of debts.

Q.43. Explain the term 'Coercion" and what are the effects of coercion under Indian Contract
Act, 1872.
Ans:-Provision: [Indian Contract Act, 1872]

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1. Coercion’ is 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.”
2. Effects of coercion under section 19 of Indian Contract Act, 1872:
a) Contract induced by coercion is voidable at the option of the party whose consent was so
obtained.
b) As to the consequences of the rescission of voidable contract, the party rescinding a void
contract should, if he has received any benefit, thereunder from the other party to the contract,
restore such benefit so far as may be applicable, to the person from whom it was received.
c) A person to whom money has been paid or anything delivered under coercion must repay or
return it.

Q.44. Mr. Ramesh promised to pay ` 50,000 to his wife Mrs. Lali so that she can spend the
sum on her 30th birthday. Mrs. Lali insisted her husband to make a written agreement if he
really loved her. Mr. Ramesh made a written agreement and the agreement was registered
under the law. Mr. Ramesh failed to pay the specified amount to his wife Mrs. Lali. Mrs.
Lali wants to file a suit against Mr. Ramesh and recover the promised amount. Referring to
the applicable provisions of the Contract Act, 1872, advise whether Mrs. Lali will succeed.
Ans:-Provision: [Indian Contract Act, 1872]
1. Intention to create legal relations is part of elements in contract. Intention to create legal
relations is defined as an intention to enter a legally binding agreement or contract. Intention to
create legal relations is one of the necessary elements in formation of a contract.
2. In addition, with no intention to create legal relations, it will make any contract to become a
mere promise. Mere promises simply like a simple promise arise when there is no intention to
create legal relation
3. There must be an intention on the part of the parties to create legal relationship between
them. Social or domestic type of agreements are not enforceable in court of law and hence they
do not result into contracts.
4. Domestic and social agreements of intention to create legal relations can be broken down into
three groups, which are firstly commercial, or business relations, secondly social friend’s relations
and thirdly family or domestic relations.
Facts of case:
In above case Mr. Ramesh promised his wife to pay Rs.50,000. So Mrs.Lali can spend this on her
birthday. Mrs. Lali insisted her husband to make a written agreement if he really loved her. Mr.
Ramesh did same and written agreement was registered under law but he fails to pay specified
amount and Mrs. Lali wants to file a suit against Mr. Ramesh.
Answer:

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Here, in the given circumstance wife will not be able to recover the amount as it was a social
agreement and the parties did not intend to create any legal relations.

Q.45. A shop-keeper displayed a pair of dress in the show-room and a price tag of` 2,000 was
attached to the dress. Ms. Lovely looked to the tag and rushed to the cash counter. Then
she asked the shop-keeper to receive the payment and pack up the dress. The shop-keeper
refused to hand-over the dress to Ms. Lovely in consideration of the price stated in the
price tag attached to the Ms. Lovely seeks your advice whether she can sue the shop-
keeper for the above cause under the Indian Contract Act, 1872.
Ans:-Provision: [Indian Contract Act, 1872]
1. The offer should be distinguished from an invitation to offer. An offer is definite and
capable of converting an intention in to a contract.
2. Whereas an invitation to an offer is only a circulation of an offer, it is an attempt to induce
offers and precedes a definite offer.
3. Where a party, without expressing his final willingness, proposes certain terms on which he is
willing to negotiate, he does not make an offer, but invites only the other party to make an offer
on those terms. This is the basic distinction between offer and invitation to offer.
Facts of case:
In above case Ms. Lovely looked at a price tag of 2000 for a pair of dress after a shop. She
rushed to shop-keeper for purchase the same but the shop-keeper refused to hand over the
dress to Ms. Lovely
Answer:
The display of articles with a price in it in a self-service shop is merely an invitation to offer. It
is in no sense an offer for sale, the acceptance of which constitutes a contract.
In this case, Ms. Lovely by selecting the dress and approaching the shopkeeper for payment
simply made an offer to buy the dress selected by her. If the shopkeeper does not accept the
price, the interested buyer cannot compel him to sell.

Q.46. Explain the modes of revocation of an offer as per the Indian Contract Act, 1872.
Ans:-Provision: [Indian Contract Act, 1872]
Modes of revocation of Offer can be explained as follow:
1. By notice of revocation
2. By lapse of time: The time for acceptance can lapse if the acceptance is not given within
the specified time and where no time is specified, then within a reasonable time.
3. By non-fulfillment of condition precedent: Where the acceptor fails to fulfill a condition
precedent to acceptance the proposal gets revoked.
4. By death or insanity: Death or insanity of the proposer would result in automatic revocation
of the proposal but only if the fact of death or insanity comes to the knowledge of the acceptor.

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5. By counter offer
6. By the non- acceptance of the offer according to the prescribed or usual mode
7. By subsequent illegality

Q.47. Distinguish between wagering agreement and contract of insurance.

Ans:-Provision: [Indian Contract Act, 1872]
Basis Wagering Agreement Contracts of Insurance
1. Meaning It is a promise to pay money or It is a contract to
money’s worth on the happening indemnify the loss.
or non happening of an uncertain
event.
2. Consideration There is no consideration The crux of insurance
between the contract is the
two parties. There is just mutual consideration
gambling for (premium an
money. compensation amount).
3. Insurable There is no property in case of Insured party has
Interest wagering agreement. insurable interest in
There is betting on other’s the life or property
life and properties. sought to be
insured.
4. Contract Loser has to pay the fixed Except life insurance, the
of Indemnity amount on contract of
the happening of uncertain insurance indemnifies the
event. insured
person against loss
5. Enforceability It is void and unenforceable It is valid and enforceable
agreement.
6. Premium No such logical calculations are Calculation of premium is
required in case of wagering based on
agreement. scientific and actuarial
calculation of
risks.
7. Public Welfare They have been regarded as They are beneficial to the
against society.
the public welfare.

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Q.48. Define Fraud. Whether "mere silence will amount to fraud" as per the Indian Contract
Act, 1872?
Ans:-Provision: [Indian Contract Act, 1872]
Definition of Fraud under Section 17: '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 an intent to
deceive another party thereto or his agent, or to induce him to enter into the contract:
a) the suggestion, as 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.

Mere silence will amount to fraud: This statement is incorrect as per the Indian Contract Act,
1872. A party to the contract is under no obligation to disclose the whole truth to the other
party. ‘Caveat Emptor’ i.e. let the purchaser beware is the rule applicable to contracts. There is
no duty to speak in such cases and silence does not amount to fraud. Similarly, there is no duty to
disclose facts which are within the knowledge of both the parties.

Q.49. Mr. Sohanlal sold 10 acres of his agricultural land to Mr. Mohanlal on 25th September
2018 for ` 25 Lakhs. The Property papers mentioned a condition, amongst other details,
that whosoever purchases the land is free to use 9 acres as per his choice but the
remaining 1 acre has to be allowed to be used by Mr. Chotelal, son of the seller for
carrying out farming or other activity of his choice. On 12th October, 2018, Mr. Sohanlal
died leaving behind his son and life. On 15th October, 2018 purchaser started construction
of an auditorium on the whole 10 acres of land and denied any land to the son.
Now Mr. Chotelal wants to file a case against the purchaser and get a suitable redressed.
Discuss the above in light of provisions of Indian Contract Act, 1872 and decide upon Mr.
Chotelal's plan of action?
Ans:-Provision: [Indian Contract Act, 1872]
1. Problem as asked in the question is based on the provisions of the Indian Contract Act, 1872
as contained in section 2(d) and on the principle ‘privity of consideration’. Consideration is one of
the essential elements to make a contract valid and it can flow from the promisee or any other
person.
2. In view of the clear language used in definition of ‘consideration’ in Section 2(d), it is not
necessary that consideration should be furnished by the promisee only.
3. A promise is enforceable if there is some consideration for it and it is quite immaterial
whether it moves from the promisee or any other person.

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4. The leading authority in the decision of the Chinnaya Vs. Ramayya, held that the consideration
can legitimately move from a third party and it is an accepted principle of law in India.
Facts of case:
1. In the given problem, Mr. Sohanlal has entered into a contract with Mr. Mohanlal, but Mr.
Chotelal has not given any consideration to Mr. Mohanlal but the consideration did flow from Mr.
Sohanlal to Mr. Mohanlal on the behalf of Mr. Chotelal and such consideration from third party is
sufficient to enforce the promise of Mr. Mohanlal to allow Mr. Chotelal to use 1 acre of land.
2. Further the deed of sale and the promise made by Mr. Mohanlal to Mr. Chotelal to allow the
use of 1 acre of land were executed simultaneously and therefore they should be regarded as one
transaction and there was sufficient consideration for it.
3. Moreover, it is provided in the law that “in case covenant running with the land, where a person
purchases land with notice that the owner of the land is bound by certain duties affecting land,
the covenant affecting the land may be enforced by the successor of the seller.”
Answer:
In such a case, third party to a contract can file the suit although it has not moved the
consideration. Hence, Mr. Chotelal is entitled to file a petition against Mr. Mohanlal for execution
of contract.

Q.50. "Mere silence is not fraud" but there are some circumstances where the "silence is
fraud". Explain the circumstances as per the provision of Indian Contract Act, 1872?
Ans:-Provision: [Indian Contract Act, 1872]
1. Mere silence as to facts likely to affect the willingness of a person to enter into a contract is
not fraud, unless the circumstances of the case are such that, regard being had to them, it is the
duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
2. It is a rule of law that mere silence does not amount to fraud. A contracting party is not duty
bound to disclose the whole truth to the other party or to give him the whole information in his
possession affecting the subject matter of the contract.
3. The rule is contained in explanation to Section 17 of the Indian Contract Act which clearly
states the position that mere silence as to facts likely to affect the willingness of a person to
enter into a contract is not fraud.
4. Under the following circumstances silence is treated as fraud they are as follow:
a) Duty of person to speak: Where the circumstances of the case are such that it is the duty of
the person observing silence to speak. Following contracts come within this category:
i. Fiduciary Relationship: Here, the person in whom confidence is reposed is under a duty to act
with utmost good faith and make full disclosure of all material facts concerning the agreement,
known to him.

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ii. Contracts of Insurance: In contracts of marine, fire and life insurance, there is an implied
condition that full disclosure of material facts shall be made, otherwise the insurer is entitled to
avoid the contract.
iii. Contracts of marriage: Every material fact must be disclosed by the parties to a contract of
marriage.
iv. Contracts of family settlement: These contracts also require full disclosure of material facts
within the knowledge of the parties.
v. Share Allotment contracts: Persons issuing ‘Prospectus’ at the time of public issue of
shares/debentures by a joint stock company have to disclose all material facts within their
knowledge.
b) Where the silence itself is equivalent to speech: For example, A says to B “If you do not deny
it, I shall assume that the horse is sound.” A says nothing. His silence amounts to speech.

Q.51. Discuss the essentials of Undue Influence as per the Indian Contract Act, 1872.
Ans:-Provision: [Section 16 of Indian Contract Act, 1872]
The essentials of Undue Influence as per the Indian Contract Act, 1872 are the following:
1. Relation between the parties: A person can be influenced by the other when a near relation
between the two exists.
2. Position to dominate the will: Relation between the parties exist in such a manner that one of
them is in a position to dominate the will of the other. A person is deemed to be in such position in
the following circumstances:
a) Real and apparent authority: Where a person holds a real authority over the other as in the
case of master and servant, doctor and patient and etc.
b) Fiduciary relationship: Where relation of trust and confidence exists between the parties to a
contract. Such type of relationship exists between father and son, solicitor and client, husband and
wife, creditor and debtor, etc.
c) Mental distress: An undue influence can be used against a person to get his consent on a
contract where the mental capacity of the person is temporarily or permanently affected by the
reason of mental or bodily distress, illness or of old age.
d) Unconscionable bargains: Where one of the parties to a contract is in a position to dominate
the will of the other and the contract is apparently unconscionable i.e., unfair, it is presumed by law
that consent must have been obtained by undue influence. Unconscionable bargains are witnessed
mostly in money lending transactions and in gifts.
3. The object must be to take undue advantage: Where the person is in a position to influence
the will of the other in getting consent, must have the object to take advantage of the other.

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4. Burden of proof: The burden of proving the absence of the use of the dominant position to
obtain the unfair advantage will lie on the party who is in a position to dominate the will of the
other.

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