6. MISTAKE...............................................................................................................................

64

LEGALITYOFOBJECT................................................................................................................69

A. Ifit is forbidden by law........................................................................................................69

B. Ifitdefeatstheprovisionsofany law .......................................................................................69

C. Ifit is fraudulent...................................................................................................................70

D. Ifit involves or implies injury totheperson orproperty ofanother........................................70

E. Immoral...............................................................................................................................70

F. Opposedto PublicPolicy......................................................................................................70

G. HeadsofPublicPolicy...........................................................................................................71

2. VOIDAGREEMENTS............................................................................................................72

CONTINGENTCONTRACTS ......................................................................................................84

A. Essentialfeaturesofacontingentcontract...............................................................................84

B. RulesRegardingEnforcementofContingent Contracts.........................................................84

C. DifferencebetweenaContingentContractandaWageringAgreement....................................85

UNIT-III

DISCHARGEOFCONTRACTS....................................................................................................87

1. DISCHARGEOFCONTRACTBYPERFORMANCE............................................................87

2. DISCHARGEOFCONTRACTBYIMPOSSIBILITYOFPERFORMANCE/

3. APPROPRIATIONOFPAYMENTS.......................................................................................

4. DISCHARGEBY ASSIGNMENT .........................................................................................96

5. DISCHARGEBY AGREEMENT ..........................................................................................97

6. DISCHARGEBYBREACH....................................................................................................99

UNIT-IV......................................................................................................................................104

REMEDIESFORBREACHOFCONTRACT...............................................................................104

1. INTRODUCTION ................................................................................................................104
2. MEANINGOFREMEDY......................................................................................................104

3. Meaningof“BreachofContract”.............................................................................................105

4. REMEDIESAVAILABLEFORTHEBREACHOFCONTRACT.........................................105

5. REMEDIESANDDAMAGESUNDERTHE INDIANCONTRACTACT,1872...................108

6. SUITFORQUANTUMMERUIT..........................................................................................116

7. SUITFORSPECIFICPERFORMANCE...............................................................................118

8. SUITFORINJUNCTION......................................................................................................119

9. CONCLUSION.....................................................................................................................119

QUASICONTRACT....................................................................................................................121

A. Introduction.......................................................................................................................121

B. WhatisQuasiContract?.......................................................................................................121

Enjoymentofbenefitsby the defendantisnecessary .......................................................................125

Conclusion....................................................................................................................................130

UNIT-V

SPECIFICRELIEFACT,1963......................................................................................................132

1. Introduction...........................................................................................................................132

2. RecoveryofPossessionof Property ........................................................................................132

3. SpecificPerformanceof Contracts .........................................................................................139

4. RESCISSION(Section27-30)................................................................................................151

5. RECTIFICATIONOFINSTRUMENT(Section26)...............................................................153

6. CANCELLATIONOFINSTRUMENTS(Section31-33) ......................................................154

7. DeclaratoryDecrees...............................................................................................................156

8. PREVENTIVERELIEF........................................................................................................163

References....................................................................................................................................171
 UNITI

Introduction

The Law of Contract constitutes the most important branch of mercantile or commercial law.
It affects everybody, more so, trade, commerce and industry. It may be said that the contract is the
foundation of the civilized world. The law relating to contract is governed by the Indian Contract
Act, 1872 .The preamble to the Act says that it is an Act "to define and amend certain parts of the
law relating to contract". It extends to the whole of India except the State of Jammu and Kashmir.

DefinitionandEssentialsofCONTRACT

A Contract is an agreement enforceable by law. An agreement is enforceable by law, if it

is made by the free consent of the parties who are competent to contract and the agreement
is made with a lawful object and is for a lawful consideration, and is not hereby expressly
declared to be void. The agreement which is not enforceable by law is not called contract.
Eg. An agreement to sell a radio set may be a contract, but an agreement to go to see a movie
may be a mere agreement not enforceable by law.
Agreement +Enforceabilityatlaw=Contract
“Allagreementsarenotcontractsbutallcontractsare agreements”

DefinitionofAGREEMENT

According to S. 2 (e) “Every promise and every set of promises, forming the consideration
for each other, is an agreement”. In an agreement there is a promise from both sides. Eg. A
promises to deliver his watch to B and in return B Promises to pay a sum of Rs. 2,000 to A.
There is said to be an agreement between A and B. A promise is the result of an offer by one
person and its acceptance by the other. Section 2(b) of the Act,defines “promise” as “When
the person to whom the proposal ismadesignifies his assentthereto, the proposal is said to be
accepted. A proposal, when accepted, becomes a promise.”
S.10Whatagreementsarecontracts?

Allagreementsarecontractsif theyaremade
 BetweenTwopersons
  Freeconsentof parties
Two or more persons are said to consent when they agree upon the same thing in thesame
sense. Consent is free when it is not caused by mistake, misrepresentation, undue influence,
fraud or coercion. When consent is caused by any of above said elements, the contract is
voidable at the option of the party whose consent was so caused.
 Competentto contract
Competent to contract means the legal ability of a person to enter into a valid contract.
Every person is competent to contract who (a) is of the age of majority according to the
law to which he is subject and (b) is of sound mind and (c) is not otherwise disqualified
from contracting by any law to which he is subject.
 Lawfulconsiderationandlawfulobject
An agreement where the object or the consideration is unlawful is void. Object or
consideration is unlawful if it is forbidden by law, it defeats the provisions of law; or is
fraudulent, or involves injury to the person or property of another; or is immoral; or is
opposed to public policy. Besides the above said agreements, certain agreements have been
expressly declared to be void by the Contract Act such as – wagering agreements,
agreement with uncertain meaning, agreements where consideration is unlawful in part etc.
 Arenotherebyexpresslydeclaredtobevoid.
The agreement entered into must not be which the law declares to be either illegal orvoid.
An illegal agreement is an agreement expressly or impliedly prohibited by law. A void
agreement is one without any legal effects.

Differenttypesof agreements

Void Agreements

An agreement not enforceable by law is said to be void. For eg. an agreement by a minor has
been held to be void. Section 24 to 30 of the Indian Contract Act, 1872, makes
specificmentionof agreementswhicharevoid.Those agreementsinclude anagreement
 withoutconsideration,anagreement,inrestraintofmarriage,andanagreementin restraint of
trade.
Voidable Contracts

An agreement which is enforceable by law at the option of one or more of the parties thereto,
but not at the option of the other, is a voidable contract. Thus, a voidable contract is one
which could be avoided by one of the parties to the contract at hisoption. For eg, when
the consent of the party to a contract has been obtained by coercion, undue influence,
fraud and misrepresentation, the contract is voidable at the option of the party whose
consent has been so obtained.
Differencebetween VoidAgreementandVoidableContract
1. A voidable contract is voidable at the option of one of the parties thereto. But a void agreement
cannot be enforced by any one of the parties thereto.

2. The defect in the case of voidable contract is curable and may be condoned, whereas a void
agreement is void ab initio, and its defects are not curable.

3. A voidable contract does not become void unless the party at whose option it is voidable
repudiates it. But a void agreement is void ab initio.

4. A voidable contract implies a contract, in which the consent of one of the parties to contract is
not free, whereas a void agreement denotes an agreement, which does not fulfill the essentials of
a valid contract.

5. In case of a voidable contract, a person is entitled to compensation for loss or damages suffered
by him on account of the non-performance of contract. But in a void agreement, as it is
unenforceable at law there does not arise any question of compensation due to the non-
performance of the agreement.

Unlawful Agreements

There are certain agreements which are “unlawful” in the sense that the law forbid the very
act, the doing of which is contemplated by the agreement. For eg, an agreement to commit a crime
or a tort.To distinguish an unlawful agreement from other void agreement, it is
statedthatwhileincaseofvoidagreementacollateraltransactionmaynotalsobeavoid,butincaseof
an unlawful agreement, the collateral transaction is held to be void. For eg, A gives money to B
toenablehimto payhis wageringdebt.Thewageristhemain transaction whichisvoid,butloan given by
A is subsidiary to it, which is not void and A can recover his money from B. On the other hand,
where A gives loan to B to smuggle goods. Smuggling is the main transaction and loanis subsidiary
to it. But, loantransaction is also said to betainted with thesameillegality and A will not be able to
recover his money.

ProposalorOffer

The term “proposal” has been defined in Section 2(a) of the act, as “when one person signifies
to another his willingness to do or to abstain from doing anything, with a view to obtaining the
assent of that other to such act or abstinence, he is said to make a proposal”.For eg. A’s willingness
to sell his radio set to B for Rs. 500 with intention to consent of B. But if a statement is made
without any intention to obtain the assent of the other party thereto, thatcannot be termed as
proposal.

Elementsof proposal

•Expressionofwillingnesstodo orabstainfrom doing something

•Madewith theobject of obtaining assentof the other

Thus the person making the proposal is called the ‘proposer’, or ‘offeror’ or ‘promisor’ and the
person to whom the proposal is made is called as the ‘proposee’, or ‘offeree’, or ‘promisee’.
Offersmustbe communicated

Section 2(a) of the Act explains that a person is said to make a proposal “when he signifies to
another person his willingness to do or to abstain from doing something”. The emphasis, here, is
upon the requirement that the willingness to make a proposal should be “signified”. The terms
signify means to or communicate to make known. It thus requires that the offer must be
communicated to the other person.

ExpressorImplied offer
 Offer is either express or implied. When the offer is made by express communication then the
offer is said to be an express offer. The express offer can be either in words or in written format.
Whereas when the offer is not communicated expressly but communicated by conduct or by
the circumstances of the case, the offer is called an implied offer. For eg. A says to B that he
will sell his bike to B for Rs.30, 000, it is an express offer.For eg, a bid at an auction is an
implied offer.

Completion ofCommunication

S. 4 The communication of a proposal is complete when it comes to the knowledge of the

person to whom it is made. An offer cannot be accepted unless and until it has been brought to the
knowledge of the person to whom it is made. For eg. A cannot be said to make an offer to B unless
A brings the offer to the knowledge of B. Thus, acting in ignorance of an offer does not amount to
acceptance of the offer. In Lalman Shukla v. Gauri Dutt, The plaintiff was in defendantsservice
asaservant.The defendant’s nephewabsconded andtheplaintiffwenttofind the missing boy. In the
plaintiff’s absence, the defendant issued handbills, offering a reward ofRs 501 to anyone who
might find the boy. The plaintiff traced him and claimed the reward. The plaintiff did not know of
the handbills when he found the boy. The court held that the plaintiff was not entitled to a reward.
If the person has the knowledge of the offer, his acting in accordance with the terms thereof
amounts to the acceptance of the same. In such a case, it is immaterial that at the time of accepting
the offer, the acceptor does not intend to claim thereward mentioned in the offer.

IntentiontoContract

In order that an offer, after acceptance, can result in valid contract, it is necessary that the offer
should be made with an intention to create legal relationship. Promise in case of social
engagements is generally without an intention to create legal relationships. Such an agreement,
therefore, cannot be considered to be a contract. For eg. An agreement to go for movies, for a walk,
to play some game, cannot be enforced in a court of law. The test to know the intention of the
parties is objective and subjective, merely because the promisor contends that there was no
intention to crate legal obligation would not exempt him from theliability. In Balfour
vBalfour,Mr.BalflourwhowasemployedonagovernmentjobinCeylon,wenttoEnglandwithhiswife
onleave. Forhealthreasonsthewifewasunabletoaccompanythehusbandagainto Ceylon. The husband
promised to pay 30 euros per month to his wife until she rejoined him in Ceylon. The husband
failed to pay her the said amount hence the wife sued him for the amount. The courtheld that the
husband was not liable as there was no intention to create a legal relationship. Intention of the
parties to be gathered from the terms of the contract and surrounding circumstances. Generally in
all social matters it is presumed there is no intention to create legal relation.But in business matters
it is presumed to intend such relation. In Jones v. Padavatton,A divorced daughterlived in
Washington with her son who employed on attractive terms andher mother living in Trinidad, who
wished to live near the lady as she was attached to grandson so she persuaded the daughter much
against her will to leave the job, take legal education in England & finally come back to Trinidad
as practicing lawyer and mother agreed to pay all expenses, purchased a house in England, part of
it was rented out & a part was allowed to her daughterand for 5 long years daughter could not
complete law, in the meantime she got
remarriedanddifferencesarosebetweenmother&daughterandmotherstoppedpayments&also
commenced eviction proceedings. It was held that there was no intention to create a legal
relationship and gave possession to the mother.

Offermay begeneral orspecific

When the offer is made to a specific or ascertained person, it is known as specific offer. Itcan
be only accepted by the person to whom the offer is made or to the person duly authorized by
him. When the same is made to any particular person but to the public at large, it is known as
general offer. A general offer can be accepted by any person. Illustration ‘A’ advertises in the
newspaper that whosoever finds his missing son would be rewarded with 2 lakh.‘B’reads it
and afterfinding theboy, hecalls ‘A’to inform about hismissing son. Now ‘A’ is entitled to pay
2 lakh to ‘B’ for his reward. In Carlill v. Carbolic Smoke ball Co., The smoke ball company
offered by advertisement a reward of $100 as reward to anyone who contacted influenza after
having used the Smoke Ball with the printed directions. Mrs.Carlill (plaintiff) relying on the
advertisement purchased a smoke ball from a chemist, used thesame in accordance with the
directions of the defendants, but still caught influenza. She sued
thedefendanttoclaimtherewardof$100advertisedbythem.Theremaybegeneraloffer