Pre Exam Marathon

UNIT 1

NATURE OF CONTRACT
WHAT IS A CONTRACT ?
 POSITIVE NEGATIVE Section 2(a)
OFFER OFFER

1. When one person signifies to another person

2. his willingness to do or to abstain from doing

anything

3. with a view to obtaining assent of that other

4. to such act or abstinence

5. he is said to make a proposal

 Section 2(b)

1. When the person to whom the proposal is made

2. signifies his assent thereto,

3. the proposal is said to be accepted.

4. The proposal when accepted,

5. Becomes a Promise
Once ACCEPTED ??? – Can be Revoked ??
 Section 2(b)

1. When the person to whom the proposal is made

2. Signifies his assent there to,

3. The proposal is said to be accepted.

Section 2(d)
 Section 2(e)

1. Every promise and every set of promises

2. Forming the consideration for each other

 An agreement to become a contract

Must give rise to a legal obligation

Which means a duly enforceable by law.

 Section 2(h)

The contract consists of two essential elements:

1. An agreement, and

2. Its enforceability by law

• CONTRACT
• AGREEMENT & ENFORCEABLE BY LAW
• PROMISE OR SET OF RECIPROCAL PROMISES

• CONSIDERATION

• OFFER OR PROPOSAL

• ACCEPTANCE

ONCE A CONTRACT IS IN PLACE - Binding contract – PARTIES

HAVE created rights and obligations between themselves.
Next Topic
ESSENTIAL OF A
VALID CONTRACT
Covered & Not covered
Under SECTION 10
ESSENTIALS OF A VALID CONTRACT

As given by Section 10 of Not given by Section 10 but are

Indian Contract Act, 1872 also considered essential
1 Agreement 1 Two parties
Intention to create legal
2 Free consent 2
relationship
Competency of the
3 3 Fulfilments of legal formalities
parties
4 Lawful consideration 4 Certainty of meaning
5 Legal object 5 Possibility of performance
Not expressly declared to
6 be void [as per Section 24
to 30 and 56]
Elements (5)
Not covered
Under
SECTION 10
1 Two Parties
• One cannot contract with himself.

• A contract involves at least two parties- one party

making the offer and the other party accepting it.

• A contract may be made by natural persons and

• by other persons having legal existence

• e.g., companies, universities etc.

2 Intention to create legal obligation

• There must be an intention on the part of the

parties to create a legal relationship between
them.

• Social or domestic types of agreements are not

enforceable in court of law and hence they do not
result in contracts.
3 Legal Formalities -
• In case of certain contracts, the contracts must be
in writing – e.g., Contract of Insurance is not valid
except as a written contract.

• Further, in case of certain contracts, registration of

contract under the laws which was in force at the
time, is essential for it to be valid, e.g., in the case of
immovable property.
4 Certainty of Meaning
The agreement must be certain and not vague or indefinite.

Example

1. A agrees to sell to B a hundred tons of oil. There is nothing

certain to show what kind of oil was intended for.

2. XYZ Ltd. agreed to lease the land to Mr. A for indefinite years.
The contract is not valid as the period of lease is not
mentioned.
5 Possibility of Performance -
• The terms of agreement should be capable of
performance.

• An agreement to do an act impossible cannot be

enforced.

Example
A agrees with B to discover treasure by magic. The
agreement cannot be enforced as it is not
possible to be performed.
Elements (6)
Covered under
SECTION 10
Section 10
All agreements are contracts if –

➔ they are made by the free consent of the parties

➔ competent to contract,
➔ for a lawful consideration and
➔ with a lawful object and
➔ are not expressly declared to be void.

• Since section 10 is not complete and exhaustive, there are

certain other sections which also contain requirements for
an agreement to be enforceable.
1 Offer and Acceptance or an agreement

• An agreement is the first essential element of a valid

contract.

• According to Section 2(e) - Every promise and every set

of promises, forming consideration for each other, is an
agreement”

• According to Section 2(b) - A proposal when accepted,

becomes a promise”. An agreement is an outcome of
offer and acceptance.
2 Free Consent
• Two or more persons are said to consent when they agree
upon the same thing in the same sense.

• This can also be understood as the identity of minds in

understanding the terms viz consensus ad idem.

• Further such a consent must be free.

• Consent would be considered as free consent if it is not

caused by coercion, undue influence, fraud or,
misrepresentation or mistake.

• The language of the contract should be clearly drafted.

Examples –

1. A, who owns two cars is selling red car to B. B thinks he is

purchasing the black car. There is no consensus ad idem and
hence no contract.

2. A threatened to shoot B if he (B) does not lend him Rs. 2,00,000

and B agreed to it. Here the agreement is entered into under
coercion and hence not a valid contract

3. A says B “Will you buy my red car for Rs. 3,00,000?“. B says “yes”
to it. There is said to be consensus ad idem i.e. the meaning is
taken in same sense by both the parties
3 Capacity of the Parties -
Capacity to contract means the legal ability of a person to
enter a valid contract.

Section
Section 1111 of the Indian Contract Act specifies that every
person is competent to contract who –
1. Age of majority
2. Sound mind and
3. Not otherwise disqualified from contracting by any
law to which he is subject.
A person competent to contract must fulfil all the above
three qualifications.
Not illegal but Void ab Initio

Permanent
or
Temporary
Question
Question

RTP JAN 25
4 Consideration

Example
A agrees to sell his books to B for Rs. 100. B’s promise to pay Rs. 100
is the consideration for A’s promise to sell his books. A’s promise to
sell the books is the consideration for B’s promise to pay Rs. 100.
5 Lawful Consideration and Object

The consideration and object of the agreement must be

lawful.

Section 23
• When prohibited by law, or
• It is such as would defeat the provisions of law,
• It is fraudulent or
• involves injury to the person or property of another or
• court regards it as immoral or opposed to public
policy.
Question

RTP SEPT 24
6 Not expressly declared to be void

• The agreement entered must not be which

• The law declares to be either illegal or void.

• An illegal agreement is an agreement expressly or

impliedly prohibited by law.

• A void agreement is one without any legal effects.

Next Topic
TYPES OF
CONTRACTS
1 VALID CONTRACT

2 VOID CONTRACT

3 VOIDABLE CONTRACT

4 ILLEGAL CONTRACT AND AGREEMENT

5 UNENFORCEABLE CONTRACT
• An agreement which is binding and enforceable is a
valid contract.

• It contains all the essential elements of a valid

contract.
• 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.
 Contract WAS valid
and
then ceases to be enforceable
VOID Ab Initio
शु#वात से ग़लत
Ex. – Subsequent
impossibility –
Change in Law,
SM destroys,
death etc.
• An agreement which is enforceable by law
• at the option of one or more parties thereto,
• but not at the option of the other or others
• Is a voidable contract

• Means where one of the parties to the agreement is

in a position or
• is legally entitled or authorized to
• avoid performing his part,
• then the agreement is treated and becomes
voidable.
 PK was forced
At gunpoint
To sell his radio

A agreed to sell his car to

B on 31st March. But on
due date – A Denies

To build the
house by 31st
March 2024 but
fails
• It is a contract which the law forbids to be made.

• The court will not enforce such a contract but also

the connected contracts.

• An agreement not enforceable by law is void”

• One of the factors is –

• Unlawfulness of object and consideration of the
contract i.e. illegality of the contract which makes
it void.
 All illegal agreements are void But
All void agreements are not necessarily illegal.

VOID AGREEMENT
WIDER TERM
ILLEGAL
AGREEMENT
NARROW TERM

AGREEMENT TO
DO IMPOSSIBLE
ACTS
 Main If you make the
agreement rain happen, I will
pay

AGREEMENT TO DO IMPOSSIBLE ACTS –Hence VOID

Collateral A told C – Deliver

agreement an umbrella to B
when it rains

Separate Agreement – Valid and Enforceable

 Main Smuggle
agreement weapons across
the border

AGREEMENT TO DO ILLEGAL ACTS –Hence VOID

Collateral C will arrange for

agreement the TRUCK to
smuggle

Separate Agreement – Invalid – ILLEGAL - Unenforceable

Question
• Where a contract is good in substance but

• because of some technical defect

• i.e. absence in writing, barred by limitation etc.

• one or both the parties cannot sue upon it,

• it is described as an unenforceable contract

1 EXPRESS

2 IMPLIED

3 QUASI CONTRACT

4 E-CONTRACT
TACIT – A TYPE OF IMPLIED CONTRACT
 FINDER OF
LOST GOODS

PAID UNDER
MISTAKE

DELIVERED THE
OFFER - NO
GOODS BY
MISTAKE ACCEPTANCE - NO
CONSENT - NO
CONTRACT - NO
1 EXCECUTED

2 EXECUTORY
 CASE TUITION PAYMENT SITUATION
PAYMENT BOTH PARTIES
EXECUTED STARTED FROM TODAY MADE TODAY COMPLETED THEIR
IN CASH PROMISES
EXECUTORY - ONE OR BOTH PARTIES HAS NOT COMPLETED THEIR
PROMISE
BOTH ARE YET TO
COMPLETE THEIR
• BILATERAL NEXT MONTH NEXT MONTH
PROMISE IN THE
FUTURE
PAYMENT ONE HAS COMPLETED
• UNILATERAL NEXT MONTH MADE TODAY AND THE OTHER WILL
IN CASH DO IN THE FUTURE
Question
Question
Question

Sept 24
Question
Next Topic
ESSENTIALS OF A
VALID OFFER
 Section 2(a)

• When one person signifies to another person

• his willingness to do or to abstain from doing

anything

• with a view to obtaining assent of that other

• to such act or abstinence

• he is said to make a proposal

MUST 1 Capable of creating LEGAL RELATIONSHIP (B vs B)

MUST 2 Certain, definite and not vague

MUST 3 Communicated to the offeree (Shukla vs Dutt)

MUST 4 Be made with a view to obtaining the assent of

the other party
MAY 5 Conditional
Offer should not contain a term the non-compliance
6 of which would amount to acceptance
Next Topic
CLASSIFICATION
OF OFFER
GENERAL OFFER
• It is an offer made to the public at large and
• hence anyone can accept and do the desired act
• Section 8 of the Act –

• Anyone performing the conditions of the offer can be considered to

have accepted the offer.

• Until the general offer is retracted or withdrawn,

• it can be accepted by anyone at any time

• as it is a continuing offer.
 Carlill v. Carbolic Smoke Ball Co

If used as Mrs. Carlill

instructed it will did use and
cure influenza still got the
and if not, then flu. She
co. will pay 100 claimed and
pounds Co. refused
SPECIAL / SPECIFIC OFFER
• When the offer is made to a specific or

• An ascertained person

• Specific offer can be accepted only by that

specified person

• to whom the offer has been made

CROSS OFFER
• When two parties exchange identical offers

• in ignorance at the time of each other’s offer

• There is no binding contract in such a case

because

• An offer made by a person cannot be construed

as acceptance of the other's offer
CROSS OFFER IS NOT A MUTUAL ACCEPTANCE

I WANT TO SELL I WANT TO BUY

BOTH OF THEM ARE NOT AWARE OF EACH

OTHER’S PROPOSAL

JOEY’S PROPOSAL – NOT AN ACCEPTANCE TO

CHANDLER’S OFFER AND VICE VERSA
COUNTER OFFER
• When the offeree offers qualified acceptance of the offer

• Subject to modifications and variations in the terms of

original offer,

• he is said to have made a counter offer.

• Counter-offer amounts to rejection of the original offer.

• It is also called Conditional Acceptance.

 Conditional / Qualified
acceptance

Will you buy

the Yes, but I want
telephone your chashma also
for Rs. 100 ?
Yes, but I will pay Rs. 10
STANDING / CONTINUING / OPEN OFFER
• An offer which is allowed to remain open for
acceptance

• over a period is known as

• standing or continuing or open offer.

• Tenders that are invited for supply of goods is a kind

of standing offer.
Next Topic 9
OFFER
Vs
INVITATION TO OFFER
INVITATION
TO OFFER
OFFER
Next Topic
COMMUNICATION
OF OFFER
 Through POST

Offer / Proposal 05th June

Letter posted on 10th June

Letter reaches 15th June

Read / Knowledge 20th June

 Letter reaches 15th June

Read / Knowledge 20th June

If this info is
not given,
then 15th June
Question
Answer
Next Topic
ACCEPTANCE
 Section 2(b)

1. When the person to whom the proposal is made

2. signifies his assent thereto,

3. the proposal is said to be accepted.

4. The proposal when accepted,

5. Becomes a Promise
Once ACCEPTED ??? – Can be Revoked ??
 Silence does not
amount to
ACCEPTANCE

Mere Silence is not an acceptance

Next Topic
LEGAL RULES
OF A VALID
ACCEPTANCE
 Acceptance can be given only by the person
1
to whom offer is made (Boulton vs Jones)

2 Acceptance must be absolute and unqualified

3 The acceptance must be communicated

4 Acceptance must be in the prescribed mode

5 Time

6 Mere silence is not acceptance

7 Acceptance by conduct/Implied Acceptance

Acceptance can be given only by the person
to whom offer is made
Will you buy my Yes, but If you buy
car for 1 Cr ? my Bike with this

Conditional / Qualified acceptance

Yes, but subject to availability of Valid RC

VALID / Unqualified acceptance as expecting a

valid title is not a condition
 The acceptance must be communicated
• Communication must be in perceptible form (Which can be seen or felt)

• Conditional acceptance = NO ACCEPTANCE

• a counter proposal and must be accepted by the proposer, if the original

proposal has to materialize into a contract.

• when a proposal is accepted, the offeree must have the knowledge of the
offer made to him
Draft agreement in the drawer
Prescribed Mode
If not, then Reasonable

Prescribed Time
If not, then Reasonable
Next Topic
COMMUNICATION
OF ACCEPTANCE
Compulsory except in case of
General offer
Carlill v. Carbolic Smoke Ball Co

Advertisements are Invitation to Offer

But
If attached with REWARDS
Then GENERAL OFFER
 COMMUNICATION OF ACCEPTANCE
Through POST

भाई - Bike ख़रीदते है ना

अपून ?

Offeror / Offeree /
Proposer Acceptor

Sends - 05th June Receives - 06th June

Letter of Acceptance
15th June Letter of Acceptance
reaches posted on
Read / Knowledge SAME DATE 10th June
 Completion of COMMUNICATION OF
ACCEPTANCE kab hoga ?

Complete as Complete as
against the against the
Proposer Acceptor

Letter of Acceptance posted on Letter reaches

10th June 15th June
Why it is important ? Because –
After these dates they can’t change or take back their
Offer or acceptance
Question
Next Topic
REVOCATION OF
OFFER &
ACCEPTANCE
 Revocation REVOKE kab tak kar sakte hai ?
of PROPOSAL
Letter of Offer
/ Proposal

05th June

11th June THIS

RE
BEFO
Letter of Acceptance
8th June posted on
10th June
Letter of
Revocation
OF OFFER
Revocation of REVOKE kab tak kar sakte hai ?
ACCEPTANCE
Letter of Offer
/ Proposal

05th June

TH IS
FO RE 11th June
B E
Letter reaches
15th June 16th June

Letter of
Revocation OF
ACCEPTANCE
Next Topic
MODE OF
REVOCATION OF
OFFER
1 By notice of revocation

2 By lapse of time

3 By non fulfilment of condition precedent

4 By Death or Insanity

5 By Counter Offer
By the non acceptance of the offer according to the
6 prescribed or usual mode

7 By subsequent illegality
COMMUNICATION OF SPECIAL
CONDITIONS
Next Topic
KEY DIFFERENCES
 Basis Agreement Contract
Agreement enforceable by
Every promise and every set
law.
of promises, forming the
Meaning
consideration for each other.
(Agreement + Legal
(Promise + Consideration)
enforceability)
It is used in a narrow sense
It's a wider term including
with the specification that
Scope both legal and social
contract is only legally
agreement.
enforceable agreement.
It may not create legal
Necessarily creates a legal
obligation.
obligation.
Legal obligation
An agreement does not
A contract always grants
always grant rights to the
certain rights to every party.
parties
All agreement are not
Nature All contracts are agreements.
contracts
Pre Exam Marathon

UNIT 2

CONSIDERATION
WHAT IS CONSIDERATION?
A very popular English case of Misa v. Currie as -

• A valuable consideration in the sense of law may consist

• either in some right, interest, profit or

• benefit accruing to one party (i.e., promisor) or

• forbearance, detriment, loss or responsibility given,

• suffered or undertaken by the other (i.e., the promisee).”

● When at the desire of the promisor,
● the promisee or any other person

● has done or abstained from doing, or (PAST)

● does or abstains from doing or (PRESENT)
● promises to do or abstain from doing something (FUTURE)
● such an act or abstinence or promise
=
Consideration for the promise
Analysis of Definition of Consideration
1 Consideration is an act doing something

Consideration is abstinence- abstain from

2 doing something
Consideration must be at the desire of the
3 promisor
Consideration may move from promisee or
4 any other person (Chinayya vs Ramayya)
Consideration may be past, present or
5 future
Next Topic
LEGAL RULES
REGARDING
CONSIDERATION
 Consideration must move at the
1 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 the “return” element of consideration.

• Contract of marriage in consideration of the promise of

settlement is enforceable.

• An act done at the desire of a third party is not a

consideration.
 Durga Prasad vs. Baldeo

Municipal Board Durga Prasad

(Collector of the Town) (Contractor)

Please Promisee
construct shops
in the market Promised to pay
for us commission on
the goods sold in
these shops as a
Baldeo form of
One of the shopkeepers consideration for
building the shops
Promisor
 Consideration may move from promisee
2 or any other person
• In India, consideration may proceed from the
promisee or any other person

• who is not a party to the contract.

• When at the desire of the promisor,

• the promisee or any other person does something

• such an act is consideration.

 Chinnayya Vs. Ramayya

Chinnayya (Daughter) Pay Annuity

and Old Mother (Every month)

Signed the document and started paying

but stopped after mother died
3 Executed and executory consideration

Paid 5000 Will deliver in a

month
Executory
Executed
 Consideration may be past, present or
4 future
● Has done or abstained from doing, or (PAST)
● does or abstains from doing or (PRESENT)
● promises to do or abstain from doing something (FUTURE)

● In order to support a promise, a past consideration

must move by a previous request
5 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
 Performance of what one is legally
6 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.

• But where a person promises to do more that
• he is legally bound to do or such a promise
•
• provided it is not opposed to public policy,

• is a good consideration.

• It should not be vague or uncertain.

 Consideration must be real and not
7 illusory
 Consideration must not be unlawful,
8 immoral, or opposed to public policy

• Only the 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.

Example - ABC Ltd. promises to give job to Mr. X in a

Government bank against payment of 50,000 is void as the
promise is opposed to public policy.
Questions On
SUIT by a
THIRD PARTY
To the Contract
 A Stranger to Contract
Cannot Sue
Doctrine of Privity of Contract
Question
 The person who purchases land with notice that the owner of
land is bound by certain duties affecting land,
the covenant (CONDITION) affecting the land may be enforced
by the successor of the seller
Sold this

To protect With the condition that can’t

this be used for industrial purpose

Son can also sue

even though he is
not the party
Exceptions to this Rule
Privity of Contract
Question
Answer
 Chinnayya Vs. Ramayya

Gift Deed

But can sue Chinnayya

As he is the beneficiary
under the TRUST

Chinnayya Old Mother

(Daughter)
Exception Case

Ramayya
Ramayya Stranger to the original Normal Case
Pay Annuity contract – So cannot sue
(Every month)
Contract between the brothers to pay allowance
of 2,00,000 per month to the mother. If not paid
she can sue as she is the beneficiary

Karan Arjun

Durga MAA

Stranger to
the contract
 I will take
care of
Simran Simran
can sue If not, then
the I will give
promisor her
even monthly
though allowance
she is not
a party to
the
contract
 When the benefit under a contract has been assigned,
the assignee can enforce the contract,
but such assignment should not involve any personal skill

Assignee
can sue as
he is the
beneficiary

Assignor Assignee

Insurance Policy
 Where the promisor by his conduct acknowledges himself
as an agent of the third party,
it would result in a binding obligation towards the third party.

A Owes B
money
B has to pay
Mr. Sharma
for supplied
goods
A acknowledges
by his conduct Mr.
and now can’t Sharma
be estopped (Supplier)
(Refuse to pay)
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

Principal Agent III party

Questions On
Agreements
without
Consideration
Question
Answer
Question
Answer
 Fulfill all the four conditions

Remember ! Registration is compulsory

Question 16
Answer
Answer
 Principal Agent III party

THERE WILL BE CONTRACT BETWEEN PRINCIPAL AND AGENT WITHOUT THE CONSIDERAION AS WELL

COMPLETED – Written and Registered

Gratuitous
and
Non
gratuitous
bailment
 Pre Exam Marathon

UNIT 3

ESSENTIAL ELEMENTS OF
A VALID CONTRACT
Section 10
All agreements are contracts if –

➔ they are made by the free consent of the parties

➔ competent to contract,
➔ for a lawful consideration and
➔ with a lawful object and
➔ are not expressly declared to be void.

• Since section 10 is not complete and exhaustive, there are

certain other sections which also contain requirements for
an agreement to be enforceable.
 CAPACITY TO CONTRACT

A person competent to contract must fulfil all the above three qualifications.
Not illegal but Void ab Initio

Permanent
or
Temporary
Next Topic 11

LAWS RELATING TO
MINOR
1 VOID AB INITIO

NO Ratification of contract (entered when minor) after

2 attaining majority

Beneficiary – YES. May accept a benefit. He can

3 make other parties bound

Minor can always plead minority (Falsely represent)

4 Estoppel not applicable

Necessaries supplied can be recovered only from his

5 property / estate not PERSONALLY liable
6 Guardian can make a valid contract

7 No Question of specific performance

8 No insolvency

9 Minor can be an Agent but not liable to Principal

10 Minor cannot bind parents or guardian (Unless Agent)

11 Joint promise by both - Adult will be liable and not Minor

12 Surety to a minor is liable if the minor defaults

Minor cannot be a shareholder but as through legal

13 guardian – YES (transfer & Transmission of Fully paid -
up shares)

14 Liability for TORTS – YES (Civil wrongs)

Question
Question
Question
Question
Next Topic 12

PERSON OF
UNSOUND MIND
At the time of entering the contract
B PERSON OF UNSOUND MIND

A person is said to be of sound mind for purpose of

making a contract if -
At the time when he makes it -

• is capable of understanding it and

• of forming a rational judgement as to its effect
upon his interests.
WHEN IS A PERSON OF UNSOUND MIND ?
C CONTRACT BY DISQUALIFIED PERSONS -

Except when on bail (Court permits)

Next Topic
FREE - 14
CONSENT - 13
What is the meaning of Free and Consent
• Two or more persons are said to consent when they agree
upon the same thing in the same sense.

• This can also be understood as the identity of minds in

understanding the terms viz consensus ad idem.

• Further such a consent must be free.

• Consent would be considered as free consent if it is not

caused by coercion, undue influence, fraud or,
misrepresentation or mistake.

• The language of the contract should be clearly drafted.

● Fundamental Errors : Na - PSM

No consent exists if parties make an error

regarding:

○ The nature of the transaction.

○ The person involved.

○ The subject matter of the agreement.

CONSENT IS FREE WHEN NOT CAUSED BY
15 1. Coercion VOIDABLE
@
16 2. Undue Influence
17 3. Fraud The Option of
ONE Party
18 4. Misrepresentation (Aggrieved)

5. Mistake 20, 21, 22 VOID

15

Section 19
16

Unreasonable
1
2
3
4
ESSENTIALS OF UNDUE INFLUENCE
Question
Question
17
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

 E
S REPRESENTATION MUST BE FALSE
S
E
N MUST BE ABOUT A FACT
T
I
A MUST BE MADE BEFORE CONCLUSION OF THE
L CONTRACT
S INTENTION - TO INDUCE THE PARTY

OF
MUST KNOW IT IS FALSE OR RECKLESS
(PARWAH NAHI)
FRAUD
 E FALSE REPRESENTATION INDUCED
S THE PARTY TO ACT
S
E
N PARTY RELIED ON IT
T
I
A SUFFERED A LOSS BECAUSE OF THE
L STATEMENT
S

OF

FRAUD
Mere Silence does not
amount to FRAUD
Exceptions - Means silence will be fraud when -
 Exceptions
Means silence will be fraud when

WHEN THERE IS A WHEN SILENCE CREATES A

FIDUCIARY RELATIONSHIP
OF MISLEADING
TRUST AND
FALSE
DUTY TO SPEAK IMPRESSION

LAWYER – CLIENT
कुछ गड़बड़ है तो बोलो
PARENT – CHILD
और
BUSINESS PARTNERS
कुछ नह/ बोला

SILENT ABOUT MATERIAL मतलब 2बना कहे कह 4दया 2क

FACTS सब ठीक है

SILENCE = FRAUD SILENCE = SPEECH

REMEDIES FOR DEFRAUDED PARTY -

ü RESCIND THE CONTRACT

ü SUE FOR DAMAGES
ü INSIST ON PERFORMANCE
Question
Question
Question
18
False statement of Fact

BUT

UNINTENTIONAL

WITHOUT INTENT TO DECIEVE

INNOCENT MISTAKE
False but ख़ुद को ऐसा लगा क7 सही है

Breach of duty 8आ but :बना :कसी मक़सद के

Innocent mistake
 INTENTIONALLY
V UN-INTENTIONALLY

INTENTION TO DECEIVE
O NO SUCH INTENTION

WITH KNOWLEDGE
I WITHOUT KNOWLEDGE

BELIEVES TO BE
UNTRUE D BELIEVES TO BE TRUE

DAMAGES - YES A DAMAGES -NO

REPUDIATE - YES B REPUDIATE - YES

PROTECT – NO
INJURED PARTY HAD
L PLEAD – YES
INJURED PARTY HAD
MEANS TO DISCOVER
THE TRUTH
E MEANS TO DISCOVER
THE TRUTH
Innocent or erroneous belief which leads
the party to misunderstand the others
Normally valid but voidable if
fraud or misrepresentation
Question
Next Topic
LEGALITY OF
OBJECT &
CONSIDERATION
23
1. When consideration or object is forbidden by law

2. When consideration or object defeats the provision

of law

3. When it is fraudulent

4. When consideration involves injury to the person or

property of another:

5. When consideration is immoral

6. When consideration is opposed to public policy

 IF
CONSIDERATION (SOMETHING IN RETURN)

AND

OBJECT (PURPOSE)

IS
UNLAWFUL

MEANS
AGREEMENT IS

ILLEGAL AND VOID

1 When Consideration or Object is Forbidden by law

2 When consideration or object defeats the provision of law

3 When it is fraudulent

4 Injury to the person or property of another

5 When consideration is immoral

6 When consideration is opposed to public policy

1 When Consideration or Object is Forbidden by law

Child Marriage

Dowry
 When consideration or object defeats the provision
2 of law

ARTICLE 21
CONSTITUTION OF INDIA
FREEDOM TO MARRY THE PERSON OF
ONE’S CHOICE AND NOBODY CAN
TAKE THIS PRIVILAGE AWAY
WEALTHY
FAMILY SUCH CONTRACT IS VOID
BUSINESSMAN
3 When it is fraudulent

VOID AS OBJECT IS
UNLAWFUL BASED ON
FRAUD
CONTRACT TO SHARE GAINS BY
SELLING FAKE PAINTING OF PICASSO
 When consideration involves injury to the person
4 or property of another
 A Person promises to
do manual labour to
repay his debt and
pay high interest also

Injury to
this
person

Consideration - Manual labor for LOAN – ILLEGAL

Object – Impose Slavery - ILLEGAL
5 When consideration is immoral

Divorce and Says Okay.

leave her. But do not
Paid 5 crores divorce her
6 When consideration is opposed to public policy
Next Topic
AGREEMENTS
OPPPOSED TO
PUBLIC POLICY
Broader term. Anything can be called void.
It depends on various factors. So it is restricted by law
for the good of the society. Here’s a list -
 Compoundable
Compromise
Valid

Non-Compoundable
No Compo (Crime)
Void
Normally valid but when –
ü Unjust to the other party
ü Unreasonable
ü Malicious motive
ü Gambling in litigation
ü No Bonafide object
VOID
Question
Next Topic
NOT EXPRESSLY
DECLARED TO BE
VOID
26 Agreement in restraint of marriage
● Every agreement in restraint of marriage of any person
● other than a minor, is void.
● So, if a person, being a major,
● agrees for good consideration not to marry,
● the promise is not binding and considered as void agreement

27 Agreement in restraint of Trade

General Rule:
Agreements in Restraint of Trade are Void

Any agreement that restrains a person from practicing a lawful

profession, trade, or business is void.
Reasonable conditions + Similar business + Local Limits
+ As long as continue the business
Question
Subject to the agreement between the partners
28 Agreement in restraint of Legal Proceedings
General Rule: Contracts Restricting Legal Rights are Void
Invalid Contracts:
Any contract that completely prevents a party from enforcing their
rights through the court or shortens the usual time to start legal action
is void.
Can’t sue – Never (VOID)
Forbearance – Patient for some time for consideration- VALID
Question
29 Agreement the meaning of which is uncertain

● An agreement,
● the meaning of which is not certain,
● is void,
● but where the meaning thereof is capable of being made
certain,
● the agreement is valid.
30 Wagering Agreement

● An agreement by way of a wager is void.

● It is an agreement involving payment of a sum of money upon
the determination (HAPPENING OR NON-HAPPENING) 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.
Essentials of a Wager
 Transactions similar to Wager (Gambling)

Transaction Type Description Nature & Legality

Considered a wager.
A game of chance
where participants Even if sanctioned by the
Lottery gamble by Government – it is a
Transactions purchasing tickets wagering agreement,
with a chance to lotteries are illegal under
win a prize. Section 294A of the Indian
Penal Code.
If sanctioned by the government – VOID (Cannot fight in the court of law)
If not sanctioned by the Government, then – Void and Illegal
 Transactions similar to Wager (Gambling)

Transaction Type Description Nature & Legality

Prizes are awarded
Crossword Puzzles based on the match Considered lottery as
between a wagering transaction, as it
&
participant's solution relies on chance rather than
Competitions and a pre-prepared skill.
solution.
Based on luck and chance – Wager
Based on Skill – Not a Wager (Prize Rs. up to 1000)
Transaction Type Description Nature & Legality
Agreements to settle
differences between Gambling in nature.
the contract price
Speculative and market price of These speculative transactions
Transactions goods or shares are void because they are
without actual based on price differences
delivery of goods or rather than real trade.
shares.
If wants to settle the difference only
Means wants to play with the prices and make profit
No actual delivery
Then WAGER

If taken actual delivery = Not a wager

Transaction Type Description Nature & Legality
Betting on horse
races, with a prize Example 48:
awarded to the A and B enter into an
winner based on agreement in which A
Horse Race
the race outcome. promises to pay Rs. 2,00,000
Transactions
provided ‘Chetak’ wins the
Considered a horse race competition. This is
wager if the prize is not a wagering transaction.
less than ₹500.
If prize is less than Rs. 500 = Wager
Rs. 500 or more = Not a Wager
 Transactions resembling with wagering
transaction but are not void

Transaction Description Why it is not a Wager

A group of individuals
contribute a fixed sum Chit funds are not wagers
for a specified period,
and the collected because they involve mutual
Chit Fund
amount is awarded to contributions for savings and
the lucky winner of a do not depend solely on
draw at the end of each chance.
cycle.
These are not wagers as
Commercial Transactions involving
they involve real
or Share the purchase or sale of
transactions and the actual
Market goods or shares, where
transfer of goods or shares,
Transactions delivery is intended.
rather than gambling.
 Competitions like
These involve skill rather than
crossword puzzles or
Games of Skill chance, and are valid under
athletic events where
and Athletic the Prize Competition Act,
prizes are awarded based
Competitions 1955, as long as prize money
on skill, intelligence, or
≤ ₹1,000.
ability.
Insurance contracts
Insurance contracts are
provide financial
considered contingent
protection against
contracts,
contingencies (e.g., life,
Contract of
health, property) and
Insurance not wagers,
involve the payment of
premiums in exchange
as they protect against risk
for compensation upon
rather than depend on luck.
certain events.
Distinction - Contract of Insurance and Wagering Agreement