Agreement, Contract and Proposal

An agreement enforceable by law is a contract [Sec 2(h)]

A proposal and its acceptance are the universally acknowledged process for making an agreement [Sec 2(a)]

Voluntary obligations

Agreements

Section 2(e): “Every promise and every set of promises, forming the consideration for each

Components of a lawful agreement [Sec 10] made with some consideration [Sec 2(d) & 25], between parties who are
competent [Sec 11&12], with their free consent [Sec 13-22] and a lawful object [Sec 23-30].

The communication and acceptance can be done by words of mouth, or by writing or even by conduct (buying & selling).
[Sec 3] (as the section states the term any act) Offer expressed by conduct = implied offer; offer expressed by words or in
writing = expressed offer.

1 Implied promise or acceptance [Sec 9] e.g. Bid at an auction; Consuming eatables at a buffet. Both have implied
promises to enjoy benefits. Upton-on-Severn RDC v Powell (1942) Claimed for free services from the fire brigade as the
plaintiff thought that his farm came under the free services zone. Held, that the plaintiff wanted to avail services irrespective
of the zone and hence an implied promise to pay was on the plaintiff.

2 Communication when complete [Sec 3] Talks about communication, acceptance and revocation of an offer and that it
can be conveyed by any modes of communication. [Sec 4] communication is completed when it comes to the knowledge of
the person to whom it was made. There can be no acceptance without the knowledge of the offer Lalman Shukla v Gauri
Datt (1913)

3 Intention to create legal relationship. Here what matters is not what the parties had in mind, but what a reasonable
person would think in the circumstances. (No provision in Indian Contract Act, but in British Law it is a mentioned
principle)

Family and Social Matters: Balfour v Balfour (1919) Lord Atkin: “They are not contracts because parties did not intend that
they shall be attended by legal consequences.” Domestic arrangements between family members doesn’t result to a contract.
Jones v Padavatton (1969) Held, that there was a domestic between the mother and daughter, but the duration of 5 years was
more than enough for the daughter to finish her studies. Hence, when the mother decided to stop supporting the daughter,
she (mother) was not bounded by any terms of a contract. The arrangement was made on the good faith of a promise and
hence the terms are not intended to be rigid, binding agreements.

Business Matters: Rose & Frank Co v J.R. Crompton & Bros. Ltd. (1923) Held by Lord Atkin LJ “… I have never seen such
a clause before (stated that the agreement should not be subjected to legal jurisdiction), but I see nothing necessarily absurd
in businessmen seeking to regulate their business relations by mutual promises which fall short of legal obligations and rest
on the obligations of either honour or self-interest or perhaps both.”

*If asked in the hypothetical then use the cases of Balfour v Balfour (1919) and Lucy v Zehmer (1954) of the English law
and derive the intention to create legal relations by using [Sec 2(a)] of the ICA the use of the words like willingness*

4 General Offer [Sec 4] An offer need not be made to an ascertained person, but no contract can arise until it has been
accepted by an ascertained person. Lalman Shukla v Gauri Datt (1913) and Carlill v Carbolic Smoke Ball Co (1893) In this
case the plaintiff was held entitled to recover the promised reward. In the same case another issue was raised that the
plaintiff had not conveyed her acceptance. Here, the proposal was accepted by conduct and the communication was held
not necessary (Only in such cases). [Sec 8] Acceptance by performing conditions, or receiving consideration. Har Bhajan
Lal v Har Charan Lal (1925) The father being liable for paying the plaintiff for finding his son due to a general offer made
by the father.
General Offer like Smoke Ball = will be open for acceptance to any number of people until it is retracted; Missing person =
it closes as soon as the first information comes in.

5 Offer and Invitation to Offer [Sec 2 (a)] advertisements are not offers, rather they are invitation to offers. Harvey v
Facey (1893) where it was held that through the telegram the defendant had merely stated the lowest price in response to the
previous telegram sent by the plaintiff. There was no mention of the willingness to sell, nor was there any form of
acceptance of the lowest offered price. McPherson v M.N. Appanna AIR 1951 SC same principle was used for making an
invitation to sell the land for not less than Rs. 10,000 by the agent. *Same principle will apply to the transactions made
through machines*

6 Catalogues and Display of Goods / Announcement to hold Auction are not offers, rather they are an invitation to the
intending customers to make an offer at the intended price or the highest bidders to make an offer, which requires to be
accepted by the auctioneer. EXCEPTION in case of an auction ‘without reserve’ then the sale of goods is a direct offer by
the auctioneer to sell the goods to the highest bidder e.g. Barry v Davies (2000) 1 WLR 1962.

Examples of - Display of Goods: Pharmaceutical Society of Great Britain v Boots Cash Chemists Southern Ltd. (1952);
Goods in a Catalogue/ Advertisement: Leonard v Pepsico Inc. 88 F. Supp. 2d 116 (SYND 1999); Auction: Harris v
Nickerson (1873) LR 8 QB 286.

7 Free Distribution of articles cannot amount to a contract, it is merely a gift. Esso Petroleum Co Ltd v Commrs of
Customs & Excise (1976) Held that the distribution of the coins was not a contract of sale so as to attract the provisions of
Purchase Tax Act, but only a gift.

Acceptance

[Sec 2(b)] The acceptance of a proposal, when conveyed to the offeror makes the proposal into a promise.

Communication of Acceptance: The principle is that there is supposed to be an act done to assert acceptance, just the mere
mental determination without any act is not sufficient. Brogden v Metropolitan Railway Co. (1877) Lord Cairns LC said that
since the company commenced the dealing of the coal with respect to the new terms of the contract, it implied that the
proposal had been acted upon by B when he started supplying them the coal.

*All General Offers [Sec 8] are unilateral contracts through which the acceptor has to perform an act in return to get
payment from the offeror (Here in some cases like the Smoke Ball case the communication of acceptance is not necessary.)
The communication of acceptance is complete once the acceptor is done completing the prescribed act* Hindustan Coop
Insurance Society v Shyam Surender AIR 1952 Cal 691. Held that the mere silence from the company after receipt and
retention of premium cannot be amounted to acceptance.

Communication to Offeror by the Acceptor himself. Felthouse v Bindley (1863) It was held that though the nephew
wanted to sell his horse to his uncle in his mind, but he failed to convey it to his uncle himself. Secondly, the offeror cannot
impose the burden of refusal on the offeree by stating conditions like if I don’t hear from you in a certain period of time, I
would consider the horse to be mine. Hence, there is no contract due to the lack of communication of acceptance. Powell v
Lee (1908) Held that as the acceptance was not directly communicated by the manager to the headmaster candidate, the
contract had not been formed. The acceptance was conveyed by a third person in his own capacity.

Mental or Internal acceptance (Signature) is not enough to convey acceptance, if it doesn’t reach the proposer.

Mode of Communication

1 Acceptance should be made in prescribed manner [Sec 7] in order for the acceptance to be valid, it should be conveyed
by reasonable means or in the prescribed manner to the offeror, within a reasonable amount of time and if the acceptor
conveys the acceptance in a different manner within the prescribed amount of time, unless the offeror says otherwise (in a
reasonable amount of time) the acceptance leads to a valid contract. Eliason v Henshaw, 17 U.S. 225 (1819) Held that there
was no valid contract as the acceptor didn’t convey acceptance through the prescribed means i.e. through the wagon.
Surendra Nath Roy v Kedar Nath Bose, AIR 1936 Cal 87 It was held that there was a valid contract when the acceptance
was conveyed to the prescribed person orally rather than conveying it in writing.

*There is an advantage to convey the acceptance in the prescribed manned as it shows that the acceptor has done all that the
offeror had required him to do and this makes him entitled to contract, even if the acceptance does not reach the offeror*
2 When does the Contract get Concluded through Postal Communication? [Sec 4] (This doesn’t just apply to post.)
When a letter of acceptance is posted and is out of power of the acceptor, the proposer becomes bound. But the acceptor will
become bound only when the letter is received by the proposer. Ram Das Chakarbharti v Cotton Ginning Co Ltd. IRL
(1887) 9 AII 366. Held that the proposer was bound by the contract as soon as the acceptor had posted his letter of
acceptance. The only difference between the English Law and the Indian law is that- in English law once the acceptance is
posted both the parties become bound to the contract, while in Indian Law the acceptor only becomes bound once the
acceptance comes to the knowledge of the proposer.

*But the law is same with respect to direct (telephonic or in front of each other) communication/ instantaneous modes of
communication. Both the parties get bound by the contract as soon as the acceptance gets conveyed and it reaches the
proposer. The same point can be implied that the contract takes place in the same place where the acceptance is received e.g.
Entores Ltd v Miles Far East Corporation (1955) 3 WLR 48. Same case was preceded in this Indian case Bhagwandas
Goverdhandas Kedia v Girdharilal Parshottamdas & Co. AIR 1966 SC 543. Use of [Sec 4 & 7]. Through a letter the
contract takes place where the acceptance has been posted.

Counter Proposal [Sec7] in the case of such proposals, the original proposer has to give his acceptance to the counter offer
made by the other party, for there to be a contract. As soon as the counter proposal is sent the original or the previous offer
gets rejected. Once the counter offer gets accepted the original offer cannot be revised by subsequent acceptance. The
acceptance provided should be absolute and unqualified. Hyde v Wrench (1840) 3 Beav 334. it was held that as soon as the
plaintiff posted a counter offer, it was implied that he had rejected the original offer. Therefore, there exists no obligation of
any sort between the two parties.

Partial acceptance to the terms of a proposal doesn’t result to a valid contract, as only agreeing to a part of the contract
results in the party giving a counter offer and rejecting the original proposal e.g. Mutual Bank of India Ltd v Sohan Singh,
AIR 1936 Lah 790.

Acceptance with Subsequent Condition [Sec 7] doesn’t result to a counter offer. A valid contract can be formed even if
the acceptance is given based on particular conditions e.g. S.D. Katherine Stiffles v M.P. Carr Mackertich, 164 IC 732.

Acceptance of Counter Proposal (The Last Shot Approach) [Sec 7] gives rise to a contract based on the terms prescribed
in the counter proposal. Butler Machine Tool Co Ltd v Ex-Cell-O Corpn (England) Ltd, (1979) 1 WLR 401 (CA)

Provisional Acceptance [Sec 7] is the acceptance that is subjected to final approval. Punjab High Court in Union of India v
S. Narian Singh AIR 1953 Punj 274. The conditions of the auction were such that the final sale of the goods to the highest
bidder will be decided based on the approval of Chief Commissioner. Here, the person who’s bid has been provisionally
accepted is entitled to withdraw his bid before the acceptance frpm the Chief Commissioner has been conveyed.

Revocation

[Sec 6] The offer is revoked by either conveying it to the other party or by the lapse of the prescribed time for its
acceptance; after a reasonable amount of time , without communicating the acceptance; if the acceptor fails to fulfil the
conditions prescribed after the acceptance; by the death or insanity of the proposer or the fact of death or insanity comes to
the knowledge of the acceptor before acceptance.

1 Notice of Revocation [Sec 5] states that a proposal can be revoked before the acceptance can be conveyed to the proposer
and for the proposer the revocation should be conveyed by him before the acceptor posts his acceptance. Henthorn v Fraser
(1892) 2 Ch 27 It was held that the revocation was ineffective as the offeror had failed to convey his revocation before the
acceptor had posted his acceptance. In such cases [Sec 4 &5] are used.

A) Withdrawal before expiry of fixed period is applicable once the notice of withdrawal reaches the address of the
person to be notified e.g. Alfred Schonlank v Muthunyna Chetti (1892) 2 MLJ 57.
B) Revocation of a unilateral offer cannot occur once the acceptor has started performed the ascribed task, but a legal
contract is formed once the task has been fulfilled e.g. Errington v Errington and Woods (1951) CA here it was held
that the offer could not be revoked as the acceptor (daughter-in -law) had already started paying back the
instalments.
C) Agreement to keep offer open for specific period, this provision can only be applied if there is some consideration
offered in return e.g. Mountford v Scott (1975) 2 WLR 114 (CA)
D) Communication of revocation should be from offeror himself or from his duly authorised agent. There is a
distinction between the English Law and the Indian Law as according to the English Law the offer can be revoked
 anytime before the acceptance has been conveyed, it can be informed by any third party to the acceptor e.g.
Dickinson v Dodds (1876) LR 2 Ch D 463. But the ICA [Sec 6(1)] states explicitly that the revocation should be
conveyed by the proposer to the party.
E) Revocation of general offers can be done by using the same media that was done to make the offer, even if it doesn’t
come to the knowledge of the other party e.g. Shuey v United States (1875) 92 US 73.
F) Superseding proposal by fresh proposal results in invalidating the previous offer once it gets conveyed to the other
party e.g. Banque Paribas v Citibank NA, (1989) 1 Malaysian LJ 329 (CA) (Singapore).
G) Cancellation of allotment of land cannot be done once a legal agreement has been signed between both the parties
e.g. Rochees Hotel (P) Ltd v Jaipur Development Authority, AIR 2002 Raj 316.
H) Revocation of bid can be done by the bidder as he has the liberty to withdraw as the contract is concluded only when
the bid is confirmed and a formal communication of it is given to the bidder e.g. Haridwar Singh v Bagun Sumbrui
AIR 1973 SC 1242 It was held that no contract has been made on the bid as the acceptance had taken place within
the department and it had not been communicated to the bidder.

2 Lapse of Time [Sec 5] an offer is revoked if it hasn’t been accepted by the party in the prescribed period or within the
span of reasonable time. But it is acceptable if the acceptor has posted the acceptance before the stipulated time, even if it
reaches the offeror after the stipulated date e.g. Dhondu Undru Choudhary v Ganpat Lal Shankar Lal Agarwal AIR 1991 SC
1037. An exception to this is when the modes of communicating the acceptance has been prescribed by the offeror, then a
delay in the reaching of the acceptance is not considered valid to give rise to a contract R. Vinoth Kumar v Secretary,
Kilpauk Medical College, Madras (1995) 1 LW 351.

3 By Failure to Accept Condition Precedent [Sec 5] when the offer is subject to a condition precedent, it lapses if it is
accepted without fulfilling the condition e.g. State of W.B. v Mahendra Chandra Das (1990) 2 Cal LJ 1.

4 By Death or Insanity of Offeror [Sec 5] leads to revocation of offer, provided if the fact comes to the knowledge of the
offeree before the conveys his acceptance. As an offer can only be accepted by the offeror and the offeree, it should not be
capable of being accepted by the offeror’s executor also e.g. Barbury v Morgan (1862) 1 H&C 249 here it was held as no
notice had been provided about the death of the offeror, the contract will cease to exist until the acceptor gets notified of it.

Revocation of Acceptance According to the English Law acceptance cannot be revoked as both the parties get bound by the
agreement once the acceptance has been posted. But, in Indian law [Sec 5] acceptance can generally be revoked if the notice
of revocation reaches the proposer before or at the same time the notice of acceptance reaches the proposer. [Sec 4] s also
considered in terms determining when the communication of acceptance is complete.

Consideration

[Sec 25] states that an agreement made without consideration is void. The Calcutta High Court has observed in a case that
“consideration is the price of a promise, a return or quid pro quo, something of value received by the promise as inducement
of the promise.” [Sec 2(d)] defines that consideration is an act done at the desire of the promisor.

“At the desire of the promisor” (Promissory Estoppel) Durga Prasad v Baldeo ILR (1881) 3 All 221. Here it was held
that there was no contract as the establishment of the market was not done at the desire of the promisor, rather it was done as
a result of the orders from the Collector. But in the case of Kedarnath Bhattacharji v Gorie Mohemed ILR (1886) 14 Cal 64
it was held that the plaintiff was liable to pay the contractor as he had accepted the proposal in which the promisor had
mentioned that the contract was formed for the raise of funds to be paid by the subscribers to the contractor for building the
townhall. Central London Property Trust Ltd v High Trees House Ltd, [1947] KB 130 held, that action to recover the full
rent for the last two quarters was valid. Had the claimant sued for the full rent between 1940 and 1945, it would have been
estopped by its promise from asserting its legal right to demand payment in full. The promise to accept less rent while
wartime conditions prevailed was binding despite the absence of consideration*It is not compulsory that the act done at the
desire of the promisor has to be of some benefit to the promisor*

A. Promise of charitable nature: In Doraswami Iyer v Arunachala Ayyar AIR 1936 Mad 135 it was held that the same
principle of Kedarnath case could not be applicable as the act of the repair of the temple had already been started,
when the party entered into a contract and hence the nature of the promise turned into a bare one i.e. without
consideration.
B. Unilateral promise is a promise from one side and in return it induces to some action from the other party for e.g. in
Abdul Aziz v Masum Ali AIR 1941 All 22 it was held that the promisor was not liable to pay as the reconstruction of
the mosque (the act desired by promiser) had not been started for him to pay the promised amount. If the revocation
 of a unilateral promise is done then the promisor will be held liable to pay for the damages if the promisee has
already started to perform the act that has been desired by the promisor.
C. With respect to Government agencies, a promise which is against public policy or in violation of statutory
prohibition cannot be foundation of an estoppel. In Pournami Oil Mills v State of Kerala AIR 1987 SC 2414. It was
held that the government was liable to provide tax exemptions as the plaintiff has acted upon the promise and
established his factory based on the demands of the promise made by the state government.

Privity of Contract a contract is a contract between the parties only and no third person can sue upon it even if it was made
for his benefit.

“Promisee or any other person” [Sec 2(d)] The act of consideration can be done by the promisee or if the promisor has no
objection, then it can be done by any other person as well. The basic requirement of there being consideration is needed, it is
immaterial who has furbished it. In Dutton v Poole (1677) 83 ER 523 it was held that the brother was liable to pay the sister
as the consideration of selling the wood had been performed by the father. But this judgment was refused to be preceded on
the grounds that ‘no stranger to the consideration can take advantage of the contract, although they may benefit from it’ in
the case Tweddle v Atkinson 123 ER 762 (The contract was between the plaintiff’s father and his father-in law). Same
principal was followed in Dunlop Pneumatic Tyre Co v Selfridge & Co Ltd. 1915 AC 847.

Position of the English Law: 1) Consideration munt only move from the promisee and 2) that a contract cannot be enforced
by a person who is not party to the contract.

Privity of Consideration, the Indian standpoint states that no third party to the contract can enforce the contract, there are
no such provisions in [Sec 2] that refute the mentioned claim. *But the party who is a bound to the contract can sue for the
benefit of the third party* e.g. M.C. Chacko v State of Travancore, 1969 Indlaw SC 514 it was held that as the State Bank of
Travancore was not party to the deed, they were in no position to enforce the contract.

EXCEPTIONS:1) Beneficiary under trust or change or other arrangements e.g. Rana Uma Nath Bakhsh Singh v Jagan
Bhadur AIR 1938 PC 245. 2) Marriage Settlement, partition or other family arrangements e.g. Rose Fernandez v Joseph
Gonsalves ILR 1924 Bom 97. 3) Acknowledgment or estoppel where by the terms of a contract a party is required to make a
payment to a third person, the acknowledgment can be expressed or implied e.g. N. Devaraja Urs v Ramakrishnah AIR
1952 Mys 109 it was held that though originally there was no privity of contract between the defendant and the plaintiff,
plaintiff having subsequently acknowledged his liability, the plaintiff was then entitled to sue him for recovery. 4)
Covenants running with land (transfer of immovable property) e.g. Smith & Snipe Hall Farm Ltd. V River Douglas
Catchment Board (1949) 2 KB 500 (CA).

“… has done or abstained from doing…” (Past Consideration)

English Law: an act done in the past cannot form the basis for consideration for a promise e.g. Re McArdle Deceased (1951)
CA. EXCEPT when the act has been done at the request of the promisor, without mentioning a promise at that point of time
e.g. Lampleigh v Brathwit (1616) 80 ER 255 and Re Casey’s Patents: Stewart v Casey (1891) CA.

Indian Law [Sec 25(2)] an act done in the past forms the basis for good consideration for a promise. The two types are 1)
Past voluntary service e.g. returning someone’s purse e.g. 2) Past services at request e.g. Re Casey’s Patents: Stewart v
Casey (1891) CA.

Executed Consideration an act which has been done in response to a promise e.g. Union of India v Chaman Lal Loona &
Co. AIR 1957 SCR 1039 where the Supreme Court said “An executed consideration consists of an act for a promise. It is an
act which forms the consideration…. E.g. the payment of a railway ticket…”

In short consideration under [Sec 2(d)] consists of past, present and future act.

“such act, abstinence or promise is called consideration” (Consideration must be of some value)

English Law: Consideration must have some value in the eyes of the law e.g. White v Bluett (1853) 23 LJ Ex 36

Indian Law: [Sec 25] Explanation 2 states that an agreement to which the consent of the promisor is freely given merely
because the consideration is adequate. But the consideration should have some value in the eyes of the law e.g. De La Bere
v Pearson Ltd (1908) 1 KB 280 (CA).
Valuable con: White v Bluett (1853) (illusionary consideration: son’s promise to not bother father against debt, not
good/valuable, defendant still liable to pay) Bainbridge v Firmstone (1838) (returning boilers as given is a valid consi. even
if there is little benefit or disadv. from it, not necessary to have objective ‘value’) Ward v Byham (1956) (payment of
maintenance in return of wellbeing and happiness of daughter is a good consideration, broad view of benefit) Thomas v
Thomas (1842) (husband pay money and for repairs in return wife stays with him, not valuable cons.) Thus, it depends on
the court to decide if the consideration is valuable/adequate.

Performing of Existing Duties (Performance of Legal Obligation)

This principle of the English law has been adapted in the Indian Law which states that “Performance of a legal duty is no
consideration for a promise.” E.g. Collins v Godefroy (1831) CKB.

An exception to this principle is that if the performance of the act falls outside the scope of the legal obligation e.g.
Glasbrook Bro Ltd v Glamorgan County Council 1925 AC 270 (HL) held that though it is the legal duty of the police to
protect the life and property of people without payment, the circumstances were different in this case as the defendant had
requested a special form of protection which was outside the scope of their duty. Hence, it was legally binding for them to
ask for the promised payment.

Duty owned to the Promiser under Contract e.g. Stilk v Myrick (1809) The plaintiff could recover what was due under
the original contract. Extra payment of the deserted sailors was not reciprocated with a fresh consideration and hence could
not be reovered. Ramchandra Chintaman v Kalu Raju (1878) ILR 2 Bom 362 Promise was not enforceable as the plaintiff
was already contractually bound under the terms of the vakalatnama to represent the defendant. Williams v Roffey Bros &
Nicholls (Contractors) Ltd The court held that the promise of extra pay was enforceable as R &N had offered the extra pay
out of their own desire to get the work finished on time and to also avoid the penalty clause in the main contract.

Performance of Existing Duties to Third Party (Contractual Obligation) e.g. Scotson and Others v Pegg (1861) The
court held the defendant liable, stating ‘If a person chooses to promise to pay a sum of money in order to induce another to
perform that which he has already contracted with a third person to do, we cannot see why such a promise should not be
binding’.

Exceptions to Consideration [Sec 25 (1, 2 & 3)] Explanation 1 and 2.

[Sec 25 (1)] states that an agreement is valid without consideration if it has been written and registered under the law and is
made on the account of natural love and affection between parties standing in near relation to each other. [Sec 25 (2)] states
that an agreement is valid without consideration if it is a promise made to compensate for something. [Sec 25 (3)] states that
an agreement is valid without consideration if it is a promise to pay a debt barred by limitation law. [Sec 25 (Expln.I)] A gift
of movables which has been completed by delivery and gift of immovables which has been perfected by registration cannot
be questioned as to their validity only on the ground of lack of consideration. [Sec 25 ([Link])] The inadequacy of
consideration is a fact which the Court should take into account whether or not the party’s consent was freely given.

Capacity to Contract

[Sec 11] states the people who are competent to contract, the competence of a person is based on three categories 1) if the
person is of the age of majority, 2) if he is of a sound mind and 3) if he is not disqualified from entering into a contract by
any law.

1 Minor (Age of minority is generally 18 or if a guardian has been appointed by the court, then in that case it is 21)

[Sec 10] states that a contract can only be formed between competent parties and [Sec 11] declares minors not competent
e.g. Mohori Bibee v Dhurniondas Ghose ILR (1903) 30 Cal 539 (PC). This decision has resulted in making an agreement
with a minor is absolutely void. The same standpoint is followed in the English Law about the specific categories 1) contract
on repayment of money lent 2) contract for goods supplied or to be supplied (other than necessary) 3) contracts for accounts
stated by the infant.

The effects of a minor entering into an agreement are: 1) No estoppel against minor as the contract is void since the
beginning. 2) No liability in contract or in tort arising directly from the scope of the contract. 3) Doctrine of restitution i.e. if
an infant obtains property or goods by misrepresentation his age, he can be compelled to restore it, but only so long as the
same is traceable in his possession. But when the infant has sold the goods or converted them, he cannot be made to repay
the value of the goods because then it would amount to enforcing a void contract. This doctrine cannot be applied if the
infant has obtained cash instead of goods.

The Specific Relief Act of 1963 [Sec 31 and 33] state that the doctrine of restitution that has been mentioned above e.g.
Ajudhia Prasad v Chandan Lal AIR 1937 All 610 (FB) *[Sec 33 (1)]The only alteration to this provision is that if a minor
approach the court as a plaintiff then, he can be compelled to repay his gains from the agreement.[Sec 33(2)] But if the
minor is brought before the court as a defendant, then he can be compelled for the portion of money or anything else
received by him (education, training) that has resulted in an increase to his estate*

[Sec 64] states that the party to a voidable contract may be required to restore the benefits that they have received from the
other party of the contract.

[Sec 65] states that when the agreement is discovered to be void or when it becomes void, any person who has received any
advantage from the other party is bound to restore or compensate for the person from whom he received i

Claim for necessaries: Sec. 68

Claim for necessaries supplied to person incapable of contracting – reimbursed from his property. Chapple v cooper
(essential to existence and of reasonable advantage and comfort of infant contractor even tho mere luxury articles are utility
in some cases allowed) also depends on the circumstances. Peters v Flaming (undergrad college should have watch – purely
ornamental to be rejected. Burden lies upon the supplier to prove that ornamental thing is necessary.) Ryder v woombell
(jwells solitaires couldn’t prove held liable) Nash v Inman (supplied were sutiable to condition in life but also not
sufficiently supplied with good) (11 fancy waistcoats) liability doesn’t depend on minor’s consent ‘cause necessities
supplied to him = quasi-contractual in nature. By law imply an obligation to repay the services so rendered.

In the Mohori Bibi case neither [Sec 64] nor [Sec 65] are applicable as these sections are only applicable to voidable
contracts, while the case in a minor’s contract is that they are void from the beginning (void ab initio). The only legal
remedy is under [Sec 68] but there too it states that the liability of damages cannot be enforced on the minor, the
compensation can only be attached to his property.

Beneficial Contracts: This states that though contractual obligations cannot be enforced on a minor, but a minor can
enforce a contract which is of some benefit to him and under which he requires to bear no obligations. Such beneficial
contracts proceed on the principle that the minor has already given full consideration to be supplied to him and there is
nothing that remains to be done by him under the contract.

Ratification: A person cannot on attaining majority ratify an agreement made by him during minority. There is nothing to
be ratified as the original agreement is void ab initio. On the other hand, a new promise of exact same terms can be made
after attaining majority, but the new agreement must be supported by new/ fresh consideration e.g. Suraj Narain Dube v
Sukhu Aheer AIR 1928 All 440 it was held that the second bond made was not maintainable as it was based on the old
consideration, which was not applicable and did not cone under [Sec 25 (2)].

Exceptions: 1) Raghava Chariar v Srinivasa here it was held that the aim of the provisions of the act is to defend the minor
against fraud by not enforcing contractual obligations on him. In this case as the minor is the money lender, declaring the
agreement void ab initio will result in a loss to the minor, which defeats the purpose of this provision. Hence, the contract
could be enforced in this case.

2) Raj Rani v Prem Adib here it was held that there was a clear breach of contract. Though the contract was between the
employer and the guardian of the minor, the consideration was performed by the minor 3rs party, which is legal in India. But
as the consideration was performed by a minor it resulted in making it bad consideration. The court ruled in the favor of the
defendant.

3) Mathai Mathai v Joseph Mary held that as the deed was set up in the name of minor, it could not be held valid. The deed
was neither signed by the legal guardian of the minor who had been appointed by the court. Hence, the deed could not be
validated by law simply because it was in favor of the minor.

2 Person of Unsound Mind [Sec 12] states that A person is said to be of sound mind, if at the time when he makes the
agreement, he is capable of understanding it and of forming a rationale judgment as to its effect upon his interests. A person
who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of a sound mind. A
person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound
mind.

A “person of unsound mind” need not necessarily be a lunatic or suffer from totally deprivation of reason. It is sufficient if
the person suffers from an inability, which prevents him from understanding and of forming a rationale judgment as to the
contract’s effect upon his interests. Therefore, mere weakness of mind, loss of memory, etc. do not necessarily convey that
the person contracting was of an unsound mind. There cannot be a fixed standard of sanity for all transactions. The
soundness of mind may be established by medical evidence. It may also be proved by showing uncharacteristic conduct
which cannot be explained on any reasonable basis

Where a person is usually of sound mind, the burden of proving that he was of unsound mind at the time of execution of a
document lies on him who challenges the validity of the contract. Where a person is usually of unsound mind, the burden of
proving that at the time of contracting he was of sound mind, lies on the person who affirms it.

Free Consent

[Sec 14] Consent is said to be free, when it is not caused by: 1) coercion [Sec 15], 2) undue influence [Sec 16], 3) fraud [Sec
17], misrepresentation [Sec 18], mistake [Sec 20, 21 &22]

1 Coercion [Sec 15] an agreement caused by coercion is voidable at the potion of the party whose consent was coerced in
causing it. Coercion is committing or threatening to commit an act which has been forbidden by the IPC (XLV of 1860) or
the unlawful detaining or threatening to detain any property or to the prejudice of any person whatsoever (it should cause a
legal injury). *It is immaterial if the IPC is in force in the place where the coercion is employed.

e.g. 1) Askari Mirza v Bibi Jai Kishor (1912) 16 IC 344 it was held that filing a criminal case did not amount to coercion as
the act of filing a criminal case was not forbidden by the IPC. Such an act can only be forbidden by the IPC if the threat
constituted to filing a false charge.

2) Chikham Amiruja v Chikham Seshamma ILR (1918) 41 Mad 33, 36 it was held by a majority that the threat to suicide
amounted to coercion within [Sec 15] and the release deed was, therefore, voidable. In this case there was a difference of
opinion between the judges to determine, whether suicide is an act forbidden by the IPC. An attempt to commit suicide is
punishable under the IPC, but there is no punishment provided for suicide. The majorities opinion (Wallis J & Seshagiri J)
was that a man who commits suicide goes unpunished by law, not because the act is not forbidden, but because there is
nobody left to punish. The minority opinion (Oldfield J) was on the ground that unless an act is made punishable it cannot
be said to be forbidden.

Comparison with English Law: In English Law coercion is called Duress or Menace. The English law defines duress as
something that will cause immediate threat or violence to the person getting coerced or the imprisonment of the contracting
party.

In ICA [Sec 15] the definition of coercion is much wider and also includes the unlawful detention of property, further the act
of coercion is not restricted to be committed by the parties to the contract, it can be committed by any person and that the
coercion need not be done in direct relation to the party.

2 Undue Influence [Sec 16] a contract is said to be induced by undue influence when the relations subsisting between the
parties are such that some 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. In simple words, one party having an asymmetrical advantage over the other. The advantage
should be recognized legally, for the involvement of undue influence to be proven.

e.g. 1) Subhash Chandra v Ganga Prasad (the case about gift, but follows the same law as of contracts) the court
held that merely the parties being related to each other cannot be presumed to amount as undue influence.

The presumption of UI is raised in the following conditions- Unconscionable bargains, Inequality of bargaining power,
economic duress

Unconscionable- When one party is in a position to dominate the will of another and the contract is apparently unfair then
law presumes that consent is obtained from undue influence. This is supported by Wajid Khan v Raja Awaz Ali khan .

The fact that in the contract the bargain is hard and that it may seem unfair doesn’t mean the contract in under UI. Ths was
held in the case Raghunath Prasad Sahu vs Sarju Prasad Sahu . Here the parties were of the same level there wasn’t
anyone who was in a dominating position though it may seem the contract was of hard bargain or unfair. To establish UI not
necessary that the parties are related by blood but the relationship per se should be the one where one person is in a
dominating position, this was held in Subhas Chandra Das Mushib vs Ganga Prasad Das Mushib.

Inequality of Bargaining power doctrine- presumption of UI may arise from the fact that inequality of bargaining power
is there between the parties. Case Lloyds Bank vs Bundy- Held the doctrine of inequality of bargaining power, here the
bank exploited the he vulnerability of father, caused by his desire to help his son, to such an extent that he charged his house
to his ruin for a very short moratorium (stoppage).

Unconscionability- describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has
the superior bargaining power, that they are contrary to good conscience

Central Inland Water Transportation Ltd. v. Brojo Nath Ganguly, AIR 1986 SC 157-

Economic Duress - Universe Tankships Inc of Monrovia v International Transport Workers’ Federation [1982] 2 All
ER 67- The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port. They made several demands in
relation to pay and conditions and also demanded the ship owners pay a large sum of money to the Seafarers International
Welfare Fund. The ship owners agreed in order that the ship could leave port and then sought to recover the sum paid to the
welfare fund.

Held: The money had been extracted under economic duress and could be recovered. The House of Lords held that earlier
case law had been wrong to look at coercion of the will so as to vitiate consent. During an analogy with the defence in
criminal law where it is recognised that a defendant acting under duress has the intention to commit the offence but is
excused from the crime because they had no choice but to submit.