Law of Contract-I

Syllabus

UNIT – I Definition and Classification of Contracts

1.1. Meaning elements and characteristics of Contract
1.2. Formation and Classification of Contract: Deeds and Simple Contracts, Bilateral and Unilateral Contracts,
Express and Implied Contracts, Valid, Void, Voidable and Illegal Contracts, Executed and Executory Contract
1.3. Offer and Invitation to Offer, Communication of Offer and Revocation of Offer
1.4. Acceptance, Communication of Acceptance and Revocation of Acceptance
1.5. Standard form of Contract and e-Contracts

UNIT - II Consideration
2.1. Consideration: Meaning, Definition and Elements of Consideration; Significance and Adequacy of
consideration; Privity to Contract; Kinds and Exceptions of Consideration.
2.2. Capacity to Contract: Minors, Lunatics, Idiots, Nature and Effects of an Agreement with a person under
legal disability.
2.3. Free Consent: Factors vitiating free consent; Coercion; Undue Influence; Fraud; Misrepresentation;
Mistake of Law and Fact.
2.4. Limitation on freedom of Contract: Unlawful Agreements, Public Policy, Agreements and Unlawful
Consideration in Part and Objects.
2.5. Agreement without Consideration, Agreement in Restraint of Marriage, Agreement in Restraint of Trade,
Agreement in Restrain of Legal Proceeding, Wagering Agreement

UNIT – III Contingent Contract

3.1. Contingent Contract: Performance of Contingent Contract, Conditional Contract, when enforcement
depends upon happening or non-happening of an Event, Event linked with Human Conduct.
3.2. Performance of Contract: Parties to perform the contract, Joint rights and joint liability and performance
of reciprocal promises; Time, Place and Manner of Performance;
3.3. Discharge of a Contract: Discharge by Performance, Discharge by Agreement, doctrine of impossibility;
Discharge by Operation of Law, Discharge by Breach and Novation.
3.4. Quasi Contracts: Obligations Resembling those Created by Contract, Concept and Classification.
3.5. Remedies for Breach of Contract: Damages, Remoteness of Damages, Mitigation of Damages, Penalty
and Liquidated Damages

UNIT – IV Specific Relief Act, 1963

4.1. Meaning of Specific Relief, Specific Performance of Contracts,
4.2. Contracts which cannot be specifically enforced, against whom contracts may be specifically enforced,
4.3. Injunction and its kinds
4.4. Declaratory Suits
4.5. Rescission and Cancellation of Contract; Discretion of Court.

UNIT – I
Definition and Classification of Contracts
1.1. Meaning elements and characteristics of Contract
1.2. Formation and Classification of Contract: Deeds and Simple Contracts, Bilateral and Unilateral Contracts,
Express and Implied Contracts, Valid, Void, Voidable and Illegal Contracts, Executed and Executory Contract
1.3. Offer and Invitation to Offer, Communication of Offer and Revocation of Offer
1.4. Acceptance, Communication of Acceptance and Revocation of Acceptance
1.5. Standard form of Contract and e-Contracts

Qs. Meaning elements and Characteristics of Contract.

Ans. Indian Contract Act, 1872 was enacted on 25 April,1872. It lays down all the provisions relating to
contracts and governs all the disputes related contracts in India. This Act is based on the principles of English
Common Law. It is applicable throughout India. Contract is basically an agreement oral or written between
two or more parties which defines rights, duties and obligations which each party has to perform.

Meaning of contract:
The term contract is derived from the Latin word 'contractum' which means drawn together. Contract is an
agreement to do or not to do an act. In case of contract, the right and obligations of two or more parties are
established, made clear, and governed by a legally enforceable agreement. According to Section 2 (f) the
Indian Contract Act, 1872, contract is an agreement which is enforceable by law.
Formation of contract. Contract is formed in three steps which is given below:
• Offer + Acceptance = promise, •Promise + consideration =agreement
• Agreement + enforceable by law =contract.

Definitions Of Contract
Sir Fredrik Pollock– ‘’Every agreement and promise enforceable by law is a contract’’.
Salmond– ‘’A contract is an agreement creating and defining an obligation between two or more persons by
which rights are acquired by one or more to acts or forbearances on the part of others’’.
Anson- ‘’The law of contract is that branch of law which determines the circumstances in which a promise
shall be legally binding on the person making it’’.
Illustration: A enters into a contract with B to sell his house for Rs.2,50,000. Here, X has to sell his house
and Z has to pay 2,50,000. This is an example of a valid contract.

Objective of Contract:
The main objective of the contract is to bind the members and bring their actions under the legal umbrella
where the relationship between individuals becomes more formalized and legal and any breach of the rules
laid down by the contract has legal implications for which the affected party can knock the doors of judiciary.

Essential Elements: An agreement has to follow certain essential conditions to be enforceable at law, and all
those important conditions are called as an essential of a valid contract. According to section 10 of the Indian
Contract Act, 1872, all agreements are contract if they are made by the free consent of the parties, competent
to contract for a lawful consideration within a lawful object and are not expressly declared as void. Therefore,
there are 10 essential conditions which are required for the creation of valid contract, which are mentioned
below:

1. Offer and Acceptance

The foundation of any contract is an offer by one party and the acceptance by the other. According to Section
2(a), an offer is a proposal made by one party to another, and once it is accepted (Section 2(b)), it becomes an
agreement. Carlill v. Carbolic Smoke Ball Co. (1893) In this case, the defendant company made an offer to
the public that they would pay £100 to anyone who contracted the flu after using their product. When Mrs.
Carlill accepted the offer by purchasing and using the product as instructed, the court held that a valid contract
existed upon her acceptance.
Illustration: A offers to sell his bike to B for ₹30,000. B agrees to buy it at that price. The offer and acceptance
are clear, thus forming an agreement.

2. Intention to Create Legal Relations

For a contract to be enforceable, both parties must have the intention to create legal relations. This element is
often missing in social and domestic agreements. Balfour v. Balfour (1919) In this case, a husband promised
to pay his wife an allowance while he was abroad. The court ruled that there was no intention to create legal
relations, as the agreement was domestic in nature. This concept is embedded in the general principles of
contract law but not explicitly stated in the Indian Contract Act.
Illustration: A father promises to give his daughter ₹5,000 every month, but later stops. This agreement lacks
legal intent and thus cannot be enforced.
3. Lawful Consideration
Section 2(d) defines consideration as something in return (quid pro quo). A contract is valid only if it involves
lawful consideration. Currie v. Misa (1875) In this case, it was held that consideration could include a benefit
to the promisor or a detriment to the promise. Without consideration, a contract is invalid unless it falls under
specific exceptions (like natural love and affection). Section 10 of the Indian Contract Act stipulates that an
agreement is valid if it is made for lawful consideration.
Illustration: A agrees to sell his laptop to B for ₹20,000. B’s payment of ₹20,000 is the consideration for A’s
promise to transfer the laptop.

4. Capacity to Contract
As per Section 11 of the Indian Contract Act, the parties to a contract must be competent, meaning they should
be of sound mind, of the age of majority (18 years or older), and not disqualified by law. Mohori Bibee v.
Dharmodas Ghose (1903) In this case, a minor entered into a mortgage agreement, and the Privy Council
held that the contract was void because the minor lacked the capacity to contract. Section 11 explicitly lays
down the rules regarding competency.
Illustration: A 16-year-old boy agrees to sell his bike to B for ₹15,000. Since A is a minor, the contract is
void.

5. Free Consent
For an agreement to be valid, it must be entered into with the free consent of the parties, as per Section 13.
Consent is said to be free when it is not caused by coercion (Section 15), undue influence (Section 16), fraud
(Section 17), misrepresentation (Section 18), or mistake (Section 20-22). Ranganayakamma v. Alwar Setti
(1889) In this case, a widow was forced to adopt a child under threat, and the court held that the consent was
obtained under coercion, making the agreement voidable. Section 14 states that consent is free when it is not
caused by coercion, undue influence, fraud, misrepresentation, or mistake.
Illustration: A threatens to harm B unless B agrees to sell his house to A. Here, B’s consent is not free, and
the contract is voidable.

6. Lawful Object
The object of the contract must be lawful. Section 23 of the Indian Contract Act specifies that a contract will
be void if its object is illegal, immoral, or opposed to public policy. Gherulal Parakh v. Mahadeodas Maiya
(1959) The court held that an agreement to share profits from illegal betting activities was void, as its object
was unlawful. Section 23 deals with the lawfulness of the object and consideration.
Illustration: A agrees to sell weapons to B for use in a robbery. This agreement is void as its object is unlawful.

7. Certainty of Terms
The terms of the contract must be clear and certain. Section 29 of the Indian Contract Act states that agreements
that are vague and uncertain cannot be enforced. Scammell v. Ouston (1941) In this case, the court held that
an agreement to purchase a lorry on “hire-purchase terms” was too vague, as the terms were never clarified.
Relevant Section: Section 29 declares that agreements whose terms are uncertain are void.
Illustration: A agrees to sell B “a car” without specifying which one. This agreement is void for uncertainty.

8. Possibility of Performance
The act agreed upon must be possible to perform. Section 56 of the Indian Contract Act renders agreements
to do impossible acts void. Satyabrata Ghose v. Mugneeram Bangur (1954) In this case, the Supreme Court
ruled that if the performance of a contract becomes impossible due to unforeseen circumstances, the contract
is void. Section 56 covers the doctrine of frustration and impossibility of performance.
Illustration: A agrees to sell his house to B, but before the sale is complete, the house is destroyed by an
earthquake. The contract is void as the performance has become impossible.

9. Not Expressly Declared Void

An agreement must not be one that is expressly declared void by law. Sections 24-30 list specific agreements
that are void, such as agreements in restraint of trade (Section 27), marriage (Section 26), or legal proceedings
(Section 28). Madhub Chander v. Raj Kumar (1874) In this case, the court ruled that an agreement
restraining one party from carrying out a lawful profession or business was void under Section 27. Sections
24-30 declare certain types of agreements as void.
Illustration: A promises not to open a business in his city for five years in exchange for ₹50,000 from B. This
agreement is void as it is a restraint of trade under Section 27.

Qs. Formation and Classification of Contract: Deeds and Simple Contracts, Bilateral and Unilateral
Contracts, Express and Implied Contracts, Valid, Void, Voidable and Illegal Contracts, Executed and
Executory Contract.
Ans. Indian Contract Act classifies Contracts into various types on the basis of mode of creation, extent of
execution, enforcement.

Types of Contracts on the basis of Mode of Creation

1. Express Contract
According to Section 9 of Indian Contract Act If any proposal or acceptance of any promise is made in words,
the promise is said to be expressed. Hence, if any offer or acceptance is made in words either orally or in
writing, it will be considered as Expressed Contract.
Illustration: X texts his friend Y and offers him to sell his watch. Y communicates his acceptance to buy the
said watch on a phone call. This is an example of expressed contract as the terms of contract are in words
(orally).

2. Implied Contract
According to section 9 of Indian Contract Act when any proposal or acceptance of any promise is made
otherwise than in words, the promise is said to be implied. Hence, if any offer or acceptance is made in any
manner other than in words like signs, gesture, actions, circumstances or conduct of the parties, it will be
considered as Implied Contract.
Illustration: A person enters a restaurant and orders food for himself or A person orders a TV set from an
online shopping website on cash on delivery payment option. These are implied contracts.

3. Quasi Contract
Quasi Contract is a contract which is created by a court or conduct of parties. In a Quasi Contract, there is no
formal agreement between parties but their conduct gives rise to a contract. It is basically created to rectify
circumstances where one party benefits at the expense of the other party.
Illustration: Mr B gets some chocolates delivered to Mrs C (his wife). The delivery boy delivers the
chocolates to Mrs. D (wrong address). Mrs. D consumes the chocolates assuming it to be a gift. This is a quasi-
Contract and Mrs. D is liable to either return the chocolates or pay equivalent amounts to Mr. B.

Types of Contracts on the basis of extent of execution

1. Executed Contract
When both the parties to a contract have performed their obligations under the contract, it is said to be an
executed contract.
Illustration: A person goes to a shop to buy vegetables. He buys the vegetables, pays the money to the
shopkeeper then and there. Both the parties have performed their duties (the shopkeeper sold the veggies and
the person paid the money). This is an example of an executed contract as the act of offer and acceptance are
done instantly.

2.Executory Contract
Executory Contract is a contract that has not been fully performed or fully executed. When one or both the
parties to the contract have not fulfilled their obligation, it is an executory contract.
Illustration: contracts entered with online shopping sites are generally executory as delivery of goods takes
some time.
3. Unilateral Contracts
Unilateral contracts are one- sided contracts. In unilateral contracts, only one party makes a promise. It is a
contract in which the offeror promises to perform its obligations after occurrence of a specified act/event.
Illustration: Fire insurance for houses is an example of partially unilateral contract. Insurance companies will
pay the insurance amount only if the house is destroyed by fire.

3. Bilateral Contracts

Bilateral Contract is a contract in which both the parties to contract promises to perform its obligations.
Illustration: contract between buyer and seller is an example of bilateral contract.

Types of Contracts on the basis of Enforcement

1. Valid Contract
Valid Contract is a contract which has satisfied all essential elements of a valid contract. Valid Contracts are
enforceable in the Court of Law. An agreement which has fulfilled all the essentials elements like free consent,
competent parties, lawful consideration and object etc provided under section 10 of Indian Contract Act,1872
is a valid contract.
Illustration: A and B, both majors entered into a contract to sell a bike for Rs.20,000/- wherein A offers to
sell his bike to B and B accepts to buy the bike. This is a valid contract since both the parties are major and
the object and consideration of contract is legal.

2. Voidable Contract
According to section 2(i) An agreement is a voidable contract if it is enforceable by Law at the option of one
or more of the parties there to (i.e. the aggrieved party), and it is not enforceable by Law at the option of the
other or others. Parties to the contract have the option to either affirm or reject it.
Illustration: X enters into an agreement with Y who is a minor to buy a laptop. Agreement made by A is valid
but agreement made by Y is voidable because a contract can be valid only when parties are competent to
contract. So, this is a voidable contract.

3. Void Contract
According to section 2(j) of Indian Contract Act “A contract becomes void when it ceases to be enforceable
by law’’ It does not give rise to any mutual rights and obligation between the parties to contract.
Illustration: A enters into an agreement with B to traffic children from one kolkata to mumbai. This is a void
contract.

4.Unenforceable Contract
Unenforceable Contracts are contracts which cannot be enforced in a court of law. A contract can become
unenforceable for a number of reasons like ambiguous terms in a contract, natural calamities, expiry of
limitation period etc.
Illustration: Mr B entered into a contract with a wholesaler to supply him 100 tins of jam. Jamas were stored
in the warehouse at the time of execution of contract. Goods stored in the warehouse got destroyed by fire.
This contract will become unenforceable.

5.Unlawful/Illegal Contracts
When subject matter of any contract is illegal. Unlawful or Illegal contracts have illegal/unlawful objects and
consideration.
Illustration: A enters into a Contract with B to kill C. This is an unlawful/ illegal Contract.

Qs. Offer and Invitation to Offer, Communication of Offer and Revocation of Offer
Ans. A proposal is defined as an offer made by one party to another party with the intention of entering into a
legally binding agreement. It is an expression of willingness to do or not to do something, forming the basis
of a contract.

The proposal under Indian Contract Act

According to Section 2(a) of the Indian Contract Act, 1872, “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”.
A proposal must be definite and specific in its terms, and it should be communicated to the other party with
the intention of obtaining their acceptance. Once the other party accepts the proposal, it becomes a promise,
and the terms of the contract bind the parties. If the proposal is not accepted, it will be considered a mere
invitation to offer, and it will not create any legal obligation between the parties.
Examples
1. A company (A) offers to sell its products to another company (B) for a certain price. The offer is made
in writing and sent via email to company B. This offer is a proposal, and if company B accepts the
offer, it becomes a binding contract.
2. A person (A) offers to sell their car to another person (B) for a certain amount. The offer is made orally
during a conversation between the two parties. This offer is also a proposal, and if person B accepts
the offer, it becomes a binding contract.
3. A construction company (A) submits a proposal to a government agency (B) for building a new bridge.
The proposal includes the details of the project, such as the cost, timeline, and specifications. This
proposal is an offer to enter into a contract with the government agency (B), and if the agency accepts
the proposal, it becomes a binding contract.

Essentials of a valid offer

1. Two parties
The first essential to constitute a valid offer is that there must be two or more parties involved in the process.
There must exist a promisor and a promisee. The promisee is the one making the offer/promise and the
promisor is the acceptor of the offer/promise. For instance – ‘a’ offers to buy ‘b’s’ car and ‘b’ accepts the offer
proposed by ‘a’ and hence an agreement is made. In this case, ‘a’ is the promiser and ‘b’ is the promisee.

2. Offer must be communicated: -

Communication of offer is the most primary thing which is to be done for a valid offer. The offeror must
communicate offer to the offeree. The communication can be either in oral or written form. The offer can
directly communicate to the person specific to whom it is offered or it can be in general in nature.
For example: “A” wants to sell his car and he has published an advertisement in newspaper which is a form
to communicate the offer to general public. Hence it is a valid offer.
In case of Lalman Shukla v. Gauri Dutt (1913) 11 ALJ 489 The High Court of Allahabad that knowledge
and acceptance of a proposal must be communicated to people are the basic essentials in order to constitute a
valid contract. The person can claim reward if he gives his consent and perform the terms of the proposal.

3. Must create legal relationship: -

A valid offer creates a legal relationship which means there must be an intention of the offeror to work under
legal obligation or to be legally bounded by law not under social obligation.
For example: “X” (Father of Y) says to “Y”, if he passes the exam, he will get a new video game. “Y” passed
the exam asked his father to give him video game as he had promised to Y. Here X is not legally bound as the
offer doesn’t create any legal obligation against X.
In case of Balfour v. Balfour (1919) 2 KB 571. They were married couple. Husband promised to his wife to
send £30 per month. But husband failed to do so. Then wife filed the case against him and it was held that
there was no intention to create legal relation. Thus, the agreement was not valid.

4. Definite, unambiguous and certain in nature:

Offer must be certain as specified in [Section 29], it must be unambiguous means that the thing offered must
clearly specified.
For example: Mitesh offered to sell his car to Tanmay. Mitesh is owned two cars one is of Ford & other is of
BMW and Mitesh offered his Ford car to Tanmay but Tanmay thought Mitesh if offering him his BMW one.
As in the offer it was not definite which car Mitesh wants to sell, thus this is not a valid offer.

5. It must be distinguished from invitation to offer: -

The offer makes a person to enter into a legally binding contract whereas invitation to offer invites the person
to enter into contract.
For example: A suit was displayed with a price tag in a shop. This is not a offer it is invitation to offer.

6. It may be general or specific in nature: -

The offer can be given to public at large in general by advertisement in newspaper etc. or it can be given
specific person too.
Types of Offers
General offer: -
When an offer made at large or in public or in general this offer is known as General Offer. It can be accepted
by any individual or public at large whoever is interested in the offer offered. When a person accepts the offer
given then offeror and offeree enter into contract. The reward will be given to that person who completed the
task given or fulfilled the given condition. Carlill v. carbolic smoke balls co. (1893) [3] This is the landmark
judgment of general offer. In this case it held by the Court of Appeal that whosoever fulfils the terms and
condition of the offer will be eligible for the reward of the offer.
Specific Offer: -
The offer which is made to an individual or to a specific group of individuals is said to be Specific offer. It
can be accepted by that individual or that group of individuals.
Example: Sandhya offers to buy a car from Sona for Rs. 10 lakhs. Thus, a specific offer is made to a specific
person, and only Sona can accept the offer.

7. Offer must be made with a view to obtain the assent: -

The offeror must obtain consent which should be “free” in nature as define under Section 14 as it defines it
should not be taken under coercion [section 15], undue influence [Section 16], fraud [Section 17],
misrepresentation [Section 18] & Mistake [Section 20, 21 and 22].

Different Types of Offers

1. General Offer: -
When an offer made at large or in public or in general this offer is known as General Offer. It can be accepted
by any individual or public at large whoever is interested in the offer offered. When a person accepts the offer
given then offeror and offeree enter into contract. The reward will be given to that person who completed the
task given or fulfilled the given condition.
Case: Carlill V. Carbolic Smoke Balls Co. (1893)
This is the landmark judgment of general offer. In this case it held by the Court of Appeal that whosoever
fulfils the terms and condition of the offer will be eligible for the reward of the offer.

2. Specific Offer: -
The offer which is made to an individual or to a specific group of individuals is said to be Specific offer. It
can be accepted by those individuals or that group of individuals.
Example: Sandhya offers to buy a car from Sona for Rs. 10 lakhs. Thus, a specific offer is made to a specific
person, and only Sona can accept the offer.

3. Counter Offer: -
When an offeror makes an offer to offeree and offeree with some modification in it makes converse offer
which makes initial offer void and the other comes in existence, which reverse the party from offeror and
offeree to offeree and offeror respectively this type of offer is known as counter offer.
Case: Hyde V. Wrench (1840)
Defendant(offeror) offered to sell his farm for £1000 but the Plaintiff(offeree) offered him £950 and
subsequently rejected the offer. So, the offeree filed the case as the offeror was bind by the contract but it was
held that as soon as offeree put the condition the first offer becomes void which means that the offeror is not
bounded by the contract as the original offer was rejected by the offeree.

4. Cross Offer: -
When the offeror and offeree make the same offer to one another having same terms out of knowledge of each
other is known as cross offer. In this case there will be no contract due to acceptance of the offer offered.
Case: Tinn V. Hoffman (1873)
In this case Hoffman wrote a letter to Tinn with a offer to sell 800 tons of iron for the price of 69s per ton. On
the same day without any knowledge Tinn wrote a letter to buy the iron with the price and with same condition
as written by Hoffman. It was held by the court that it was cross offer and no contract exist & no parties are
bound by the contract.

5. Implied Offer: -
When an offer is given by body posture, gesture or by action or by the conduct of the offeror is known as
implied offer. The offeree can accept the offer by understanding the action of the offeror.

6. Expressed Offer: -
When an offer is express in written or in verbal form then this offer is known as expressed offer. For example:
“C” writes a letter to “D” to buy his earphone for Rs.500. This is an expressed offer.

7. Standing Offer: -
When tender is submitted to supply certain goods or any quantity as and when required it will amount to
standing offer. In such a case contract does not come into existence merely when tender is accepted, but a
contract takes place only after the order is placed. Each order in such a case is acceptance and as soon as the
offer is accepted the contract comes into existence.

Invitation to offer
An invitation to offer is a preliminary communication that invites or encourages someone to make an offer or
proposal, rather than being an actual offer itself. It is an invitation to negotiate or make an offer, which may
or may not result in the formation of a contract. In simple terms, an invitation to offer is an invitation to
commence negotiations or discussions, and it does not create a legal obligation to accept any resulting offer.
Examples of an invitation to offer include advertisements, price lists, catalogues, and displays of goods in a
shop window or online store. These do not constitute a binding offer, but rather an invitation to customers to
make an offer to purchase.
For example, a shop owner displaying goods in their store window is an invitation to customers to make an
offer to purchase those goods. The customer’s offer to purchase the goods at a certain price would constitute
a proposal, and the shop owner’s acceptance of the proposal would form a binding contract.

Landmark cases dealing with invitations to treat/offer

Pharmaceutical Products of India Ltd. v. Gwalior Chemical Works Ltd. (1960)
In this case, the court held that a price list is an invitation to treat and not an offer or proposal. The court held
that a contract is only formed when an offer is made by one party and accepted by the other.
Fisher v. Bell (1961)
This case established the principle that a display of goods in a shop window or on a shelf is generally an
invitation to treat and not an offer. The customer’s offer to purchase the goods at a certain price would
constitute a proposal, and the shop owner’s acceptance of the proposal would form a binding contract.

Difference Between Offer and Invitation to Offer

The difference between an offer and an invitation to treat is as follows:
1. Definition
Invitation to offer: An invitation to offer is not an offer but a statement showing a willingness to negotiate a
contract. Offer: An offer is when someone expresses their willingness to perform or refrain from acting to
obtain the other party’s agreement.
2. Purpose
Invitation to offer: An invitation to offer elicits an offer from the other party. Offer: An offer is made to
obtain acceptance from the other party.
3. Defined In
Invitation to offer: The concept of invitation to offer is not explicitly defined in the Indian Contract Act 1872.
Offer: The definition of an offer is provided in section 2(a) of the Indian Contract Act 1872.
4. Acceptance
Invitation to offer: An invitation to offer can turn into an offer if accepted by the other party. Offer: An offer
becomes a binding agreement upon acceptance by the other party.
5. Legal Consequences
Invitation to offer: An invitation does not result in legal consequences. Offer: An offer leads to legal
consequences and can form the basis of a contract.
6. Made To
Invitation to offer: An offer can be extended to a group. Offer: An offer is typically made to a specific party.

Communication of Offer and Revocation of Offer

Communication of Offer
Section 4 of the Indian Contract Act 1872 says that the communication of the offer is complete when it comes
to the knowledge of the person it has been made to. So, when the offeree (in case of a specific offer) or any
member of the public (in case of a general offer) becomes aware of the offer, the communication of the offer
is said to be complete.

So, when two people are talking, face-to-face or via telephone, etc the communication will be complete as
soon as the offer is made. Example if A tells B he will fix his roof for five thousand rupees, the communication
is complete as soon as the words are spoken.

Let us take the same example. A write to B offering to fix his roof for five thousand rupees. He posts the letter
on 2nd July. The letter reaches B on 4th July. So, the communication is said to complete on 4th July.

Revocation of Offer
The Indian Contract Act lays out the rules of revocation of an offer in Section 5. It says the offer may be
revoked any time before the communication of the acceptance is complete against the proposer/offeror. Once
the acceptance is communicated to the proposer, revocation of the offer is now not possible.

Let us take the same example of before. A accepts the offer and posts the letter on 10th July. B gets the letter
on 14th July. But for B (the proposer) the acceptance has been communicated on 10th July itself. So the
revocation of offer can only happen before the 10th of July.

Modes of Revocation of an Offer

Section 6 of the Indian Contract Act, 1872 deals with the revocation of an offer. It lays down the various modes
of revocation of an offer, which are as follows:
1. Revocation by communication from the offeror to the offeree before acceptance
An offer can be revoked by the offeror at any time before it is accepted by the offeree. The revocation must
be communicated by the offeror to the offeree. If the offeror fails to communicate the revocation, the offer
remains valid and can be accepted by the offeree.
2. Revocation by lapse of time
An offer lapses if it is not accepted within the time specified in the offer or, if no time is specified, within a
reasonable time. The determination of a reasonable time depends on the facts and circumstances of each case.
Once the offer has lapsed, it cannot be accepted.
3. Revocation by the failure of a condition precedent
An offer can be revoked if it is subject to a condition precedent, and the condition precedent does not occur.
For example, if an offer is made on the condition that the offeree obtains a license, and the offeree fails to
obtain the license, the offer is revoked.
4. Revocation by death or insanity of the offeror
An offer is automatically revoked if the offeror dies or becomes insane before the offer is accepted. In such
cases, the offeree cannot accept the offer.
It is important to note that the revocation of an offer must be communicated to the offeree before acceptance.
If the offeree accepts the offer before receiving the revocation, the contract is formed, and the offeror cannot
revoke the offer.
Furthermore, an offer cannot be revoked if it has been accepted by the offeree and the parties have entered
into a contract. Once a contract is formed, it can only be terminated by the methods provided for in the contract
or by the Indian Contract Act, of 1872.

Qs. Acceptance, Communication of Acceptance and Revocation of Acceptance.

Ans. Acceptance plays a crucial role in the formation of a valid contract under the Indian Contract Act, 1872.
It is important to ensure that the acceptance is given in the proper manner and within the specified time to
avoid any disputes in the future.
Acceptance under Indian Contract Act 1872
According to the Indian Contract Act 1872, acceptance is the final and unqualified expression of assent to the
terms of a proposal. The acceptance must be given in the manner and within the time specified in the proposal
or, if no time is specified, within a reasonable time.
The Act defines acceptance in Section 2(b) as follows:
“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.
A proposal, when accepted, becomes a promise.”
Example -A offers to pay B 50 lakh to purchase his house. B accepts this proposal. We refer to this as accepting
the offer.
An acceptance is considered valid when:
• It must be given by the person to whom the proposal is made.
• It must be given in the manner prescribed by the proposer.
• It must be given within the time prescribed by the proposer or within a reasonable time.
• It must be absolute and unqualified.
If the acceptance is not given in the prescribed manner or within the prescribed time, it is considered invalid,
and the proposer is no longer bound by the proposal.
Additionally, acceptance may be expressed or implied. An express acceptance is given in words or writing,
while an implied acceptance is given through the conduct of the offeree.

Essentials of Valid Acceptance

Here, we have discussed some essentials of valid acceptance and legal rules of acceptance in contract law;
1. Acceptance must be given by the party to whom the offer was made
The acceptance can be given only by the party to whom the offer is made. No other person can give that
acceptance to an offer to whom it is not made. In case of a specific offer, the persons to whom the offer is
made only he can accept that offer. In the case of a general offer, who performs all the terms and conditions
prescribed in the offer is considered as the acceptance of the offer.
Example: One charitable trust announces publicly that only handicapped students will be provided with
educational laptops less than 80% of the market value. Therefore, only handicapped students may accept the
offer and buy the laptop.
2. The acceptance must be communicated with the offeree
When the offer is made to enter into a contract, the offeree’s acceptance must be communicated with the
offeror to constitute a valid contract. Without fulfilling conditions prescribed by the offeror, there will not be
a valid contract. And, mere acceptance without communicating with the offeror does not constitute a valid
contract. According to section 3, the communication of acceptance of the proposal must be communicated
with the offeror.
Example: A makes an offer to buy B's car for Rs. 5,00,000/-. B in his mind thinks and accepts the offer but
does not communicate with the offeree. Does this amount to valid acceptance.ee
3. Acceptance must be absolute and unconditional
According to section 7 (a), to constitute an offer into a valid promise, the acceptance must be absolute and
unconditional. This means the acceptance given to the offer must be without imposing any condition which
leads to a counter-offer to the original offer. In simple words, to constitute a valid contract, the acceptance of
the offer is being given without making any conditions. To convert an offer into a promise, the acceptance
must be absolute, unqualified and unconditional. Example: A makes an offer to sell his old house for Rs. 50
Lacs. B accepts the offer but with the condition that he will pay 50% of the amount now and the other 50%
next year. This amounts to a conditional acceptance and also a counteroffer.
4. Acceptance must be in the prescribed mode and prescribed time
According to section 7 (b), the acceptance must be given in the prescribed mode and within the offeree's
prescribed period. And, if the offer does not prescribe any manner of acceptance or prescribed time limit, then
the acceptance of the offer must be given in a reasonable manner and within a reasonable time period.
Example: A buys a Rolex watch at a watch shop with the condition that the watch should be in the gift-
wrapped box and shall be delivered the next evening. But the shop boy delivers the watch without gift
wrapping. It amounts to a failure of the prescribed manner of acceptance.
5. No Acceptance Prior to the Offer
Acceptance cannot occur before the offer is presented. An offer must be made before acceptance can take
place. A person unaware of the offer cannot accept it solely based on their actions aligning with the offer.
Case Example: Laksham Shukla v. Gauri Dutt, 1913
In this case, the respondent’s nephew was missing, and he asked his servant (complainant) to search for the
boy. While the complainant was searching for the boy, the respondent announced that a reward of Rs. 500
would be given to anyone who safely brings the boy back home. The complainant found the boy and brought
him home. Upon learning about the announcement, the complainant requested the reward from the respondent.
However, the respondent refused to provide the money, leading the complainant to file a case against him.
The Court ruled that since the complainant was unaware of the offer when he performed the act, there was no
contract between them. For a contract to exist, the offeree must know about the offer.

Silence is Not Acceptance

Mere silence cannot be considered as valid acceptance. The offeror cannot state that silence will be deemed
as acceptance.
For instance, if Mr. Y offers to rent his apartment to Mr. X and mentions that if Mr. X does not respond within
one week, it will be assumed as acceptance. If Mr. X does not reply within the specified timeframe, it is not
considered as acceptance because silence is not a valid mode of communication for acceptance.
Case: Felthouse v. Bindley, 1862
In Felthouse v Bindley, Felthouse, the complainant, discussed the sale of a horse with his nephew, Mr. Bindley.
Later, Felthouse sent a letter to Mr Bindley stating that if he did not respond, it would be presumed that he
had accepted the offer, and the horse would belong to Felthouse. Mr Bindley did not reply to the letter because
he was occupied. Subsequently, Mr. Bindley sold the horse to someone else, which upset Felthouse. As a
result, Felthouse filed a lawsuit for the tort of conversion against Mr. Bindley.
The Court ruled that there was no contract between Felthouse and Mr Bindley because silence cannot be
considered acceptable. The Court emphasised that the acceptance of an offer must be clearly communicated.
In this case, Mr. Bindley’s failure to respond to the letter did not imply acceptance through silence. Thus, there
was no valid contract between Felthouse and Mr. Bindley.

Types of Acceptance
1. Express Acceptance
2. Implied Acceptance
3. Conditional Acceptance
1. Express Acceptance
Express acceptance is an acceptance of the offer which is given in writing or verbal words. In this type of
acceptance, the offeree gives his acceptance to the offeror in writing a document duly signed or in verbal
words like acceptance given through phone call or video call.
Example: X makes a phone call to Y and makes an offer to sell his computer for Rs. 25,000/-. Y accepts the
offer. This is an example of express acceptance.
2. Implied Acceptance
Implied acceptance is an acceptance of the offer which is given by the conduct or behaviour of the persons.
Example: In the auction when the purchaser wants to bid, he/she will raise their hand up for the next bid.
Similarly, when the auctioneer strikes the hammer thrice, means impliedly accepting the bid.
3. Conditional Acceptance
In this, the promisor gives acceptance to the offer but requests the offeror to make some conditional changes
or changes in the terms and conditions of the offer. Here, it will be treated as a counter-offer.
Example: A makes an offer to sell his old house for Rs. 50 Lacs. B accepts the offer but with the condition
that he will pay 50% of the amount now and the other 50% next year. This amounts to a conditional
acceptance and also a counteroffer.

Communication of Acceptance and Revocation of Acceptance.

Communication of Acceptance
Mode of Acceptance
In this case of communication of acceptance, there are two factors to consider, the mode of acceptance and
then the timing of it. Let us first talk about the mode of acceptance. Acceptance can be done in two ways,
namely
A. Communication of Acceptance by an Act: This would include communication via words, whether
oral or written. So this will include communication via telephone calls, letters, e-mails, telegraphs, etc.
B. Communication of Acceptance by Conduct: The offeree can also convey his acceptance of the offer
through some action of his, or by his conduct. So, say when you board a bus, you are accepting to pay
the bus fare via your conduct.
Timing of Acceptance
The communication of acceptance has two parts. Let us take a look
A. As against the Offeror: For the proposer, the communication of the acceptance is complete when he
puts such acceptance in the course of transmission. After this it is out of his hand to revoke such
acceptance, so his communication will be completed then. So, for example, A accepts the offer of B
via a letter. He posts the letter on 10th July and the letter reaches B on 14th For B (the proposer) the
communication of the acceptance is completed on 10 th July itself.
B. As against the Acceptor: The communication in case of the acceptor is complete when the proposer
acquires knowledge of such acceptance. So, in the above example, A’s communication will be complete
on 14th July, when B learns of the acceptance.
Revocation of Acceptance
Section 5 also states that acceptance can be revoked until the communication of the acceptance is completed
against the acceptor. No revocation of acceptance can happen after such date.
Again, from the above example, the communication of the acceptance is complete against A (acceptor) on
14th July. So, till that date, A can revoke his/her acceptance, but not after such date. So technically between
10th and 14th July, A can decide to revoke the acceptance.

Qs. Standard form of Contract and e-Contracts

Ans. Standard form of contracts and online contracts are integral components of modern commerce, shaping
the landscape of transactions in the digital age. Standard form of contracts, characterized by predetermined
terms set by one party, are prevalent across various industries, including e-commerce, telecommunications,
insurance, and banking. They are designed for mass distribution and often feature unequal bargaining power,
where one party, typically the more powerful or experienced entity, dictates the terms to the other party on a
“take it or leave it” basis. In contrast, online contracts, also known as electronic contracts or e-contracts,
facilitate transactions conducted over the internet. They adhere to traditional contract principles but are
executed digitally, offering convenience and efficiency.
What is standard-form contract?
Standard form contract is a pre-written contract where the terms and conditions are non-negotiable and are
usually drafted by one party and presented to the other party for signature. Standard form contracts are also
known as adhesion contracts or boilerplate contracts. In India, standard form contracts are recognised under
the Indian Contract Act, 1872.
Trimex International FZE Ltd. v. Vedanta Aluminium Ltd 2010
The Bombay High Court upheld the validity of contracts formed through email exchanges, emphasizing that
electronic communications could constitute valid contracts if they satisfy the requirements of offer,
acceptance, and intention to create legal relations.
LIC of India v. Consumer Education and Research Centre 1996
The Supreme Court while dealing with the contract law held that standard form contracts must be reasonable
and conscionable. Unfair terms in such contracts can be declared void.

Types Of Standard Form Contracts

The standard form of contracts and online contracts come in various types, to meet the needs of different
industries and transactions. The below mentioned are the types of standard form of contracts and online
contracts.
Types of standard form of contracts
1. Insurance Policies
Insurance companies often use standard-form contracts to provide coverage for various risks, such as life,
health, property, and auto insurance. Policyholders typically have limited ability to negotiate terms.
2. Banking Agreements
Contracts for banking services, including checking and savings accounts, loans, and credit cards, are often
standardized. Customers accept these terms upon opening an account or applying for a financial product.
3. Telecommunications Contracts
Service providers in the telecommunications industry use standard contracts for mobile phone plans, internet
services, and cable television subscriptions. These contracts outline pricing, service terms, and usage limits.
4. Software Licenses
Software companies distribute licenses through standard form contracts, specifying the terms of use, licensing
fees, and limitations on software usage. Users agree to these terms when installing or accessing the software.
5. Rental Agreements
Landlords commonly use standard-form contracts for residential and commercial leases. These contracts detail
rent payments, lease duration, maintenance responsibilities, and terms for lease termination.
Types of Online Contracts
1. E-commerce Purchase Agreements
Online retailers use standard form contracts for e-commerce transactions. These contracts outline the terms of
sale, including product descriptions, pricing, shipping details, return policies, and dispute resolution
mechanisms.
2. Terms of Service (ToS) and End-User License Agreements (EULAs)
Websites and online platforms present users with ToS and EULAs, governing the use of their services or
software. Users agree to these terms when creating an account or accessing the platform.
3. Software as a Service (SaaS) Agreements
SaaS providers offer online services through subscription-based agreements. These contracts specify the scope
of services, subscription fees, data privacy policies, and service-level agreements (SLAs).
4. Online Membership Agreements
Websites offering membership-based services, such as streaming platforms, social media networks, and online
forums, often require users to accept standard form contracts outlining membership terms, privacy policies,
and community guidelines.
5. Clickwrap and Browse wrap Agreements
Clickwrap agreements require users to actively indicate their acceptance of terms by clicking a checkbox or
button. Browse wrap agreements, on the other hand, assert that continued use of the website constitutes
acceptance of the terms.
Legal Status of Standard Form of Contracts and Online Contracts
In India, both standard form of contracts and online contracts are legally recognized, subject to compliance
with applicable laws and regulations.
Standard Form of Contracts
1. Legality: Standard form contracts are legally valid in India, provided they meet the essential elements of a
valid contract under the Indian Contract Act, 1872. These include offer, acceptance, consideration, intention
to create legal relations, capacity to contract, and lawful object and consideration.
2. Consumer Protection Laws: The Consumer Protection Act, 2019, governs standard form contracts in
consumer transactions, providing safeguards against unfair contract terms and practices. The act empowers
consumers to seek redressal for unfair trade practices, including unfair contract terms, deceptive
advertisements, and deficiency in services.
3. Unfair Contract Terms: Indian courts may invalidate unfair contract terms that are deemed
unconscionable, oppressive, or against public policy. Courts assess the fairness of contract terms based on
principles of reasonableness, equity, and good faith.
4. Regulation of Specific Industries: Certain industries in India, such as insurance, banking,
telecommunications, and e-commerce, are regulated by sector-specific laws and regulatory authorities.
Standard form contracts used in these industries must comply with relevant regulations, including guidelines
issued by regulatory bodies.
Online Contracts
1. Legal Recognition: Online contracts, also known as electronic contracts or e-contracts, are legally
recognized in India under the Information Technology Act, 2000 and the Indian Contract Act, 1872.
2. Electronic Signatures: The IT Act provides legal recognition to electronic signatures, including digital
signatures, facilitating the execution of online contracts. Electronic signatures must comply with the
requirements prescribed under the IT Act and related rules.
3. Validity of Online Contracts: Online contracts are valid and enforceable if they meet the requirements of
a valid contract under the Indian Contract Act, 1872. These include offer, acceptance, consideration, intention
to create legal relations, capacity to contract, and lawful object and consideration.
4. Data Protection Laws: Online contracts involving the collection and processing of personal data are
subject to the provisions of the Personal Data Protection Bill, 2019 and other applicable data protection laws
and regulations. Parties must ensure compliance with data protection requirements when entering into online
contracts involving personal data.
5. Consumer Protection: Online contracts in consumer transactions are governed by the Consumer
Protection Act, 2019, which provides protection against unfair contract terms, deceptive practices, and
deficiency in services in the online marketplace.
Therefore, both standard form of contracts and online contracts enjoy legal recognition in India, subject to
compliance with relevant laws, regulations, and judicial principles. It’s essential for parties entering into such
contracts to understand their rights, obligations, and potential remedies under Indian law.

Challenges with Standard Form Contracts

1. Lack of Negotiation: Standard form contracts typically offer little to no room for negotiation,
disadvantaging parties with less bargaining power.
2. Unequal Bargaining Power: One party, often the drafter of the contract, may possess significantly more
bargaining power than the other, leading to unfair terms and conditions.
3. Complex Legal Language: Standard form contracts may contain dense legal language and clauses that are
difficult for laypersons to understand, potentially leading to misunderstandings or unintended consequences.
4. Inadequate Customization: These contracts may not adequately address the specific needs or
circumstances of individual parties, leading to gaps or ambiguities in the agreement.
5. Limited Redress Options: Disputes arising from standard form contracts may be challenging to resolve,
as recourse options for aggrieved parties are often limited.
Challenges with Online Contracts
1. Consent Issues: Users may not fully understand or knowingly consent to the terms of online contracts,
especially if they are presented in a lengthy or convoluted manner.
2. Digital Signature Security: Ensuring the security and authenticity of digital signatures in online contracts
is crucial but can be challenging due to the risk of forgery or unauthorized access.
3. Cross-border Legal Compliance: Online contracts may involve parties from different jurisdictions, raising
complexities related to legal compliance, jurisdictional issues, and the enforcement of contractual rights.
4. Data Privacy Concerns: Online contracts often involve the collection and processing of personal data,
necessitating compliance with data protection regulations such as the GDPR or CCPA.
5. Accessibility Barriers: Users with disabilities may encounter accessibility barriers when accessing and
understanding online contracts, potentially leading to discrimination or exclusion.
Despite these challenges, both standard form of contracts and online contracts are legally recognized in India,
subject to compliance with relevant laws and regulations. Initiatives to address challenges include enhancing
transparency in contract terms, improving user education, and ensuring compliance with data protection
regulations. Understanding the legal status and challenges associated with standard form of contracts and
online contracts is essential for fostering fair and equitable contractual practices in the digital age.

Unit-II

Consideration
2.1. Consideration: Meaning, Definition and Elements of Consideration; Significance and Adequacy of
consideration; Privity to Contract; Kinds and Exceptions of Consideration.
2.2. Capacity to Contract: Minors, Lunatics, Idiots, Nature and Effects of an Agreement with a person under
legal disability.
2.3. Free Consent: Factors vitiating free consent; Coercion; Undue Influence; Fraud; Misrepresentation;
Mistake of Law and Fact.
2.4. Limitation on freedom of Contract: Unlawful Agreements, Public Policy, Agreements and Unlawful
Consideration in Part and Objects.
2.5. Agreement without Consideration, Agreement in Restraint of Marriage, Agreement in Restraint of Trade,
Agreement in Restrain of Legal Proceeding, Wagering Agreement

Qs. Consideration: Meaning, Definition and Elements of Consideration; Significance and Adequacy of
consideration; Privity to Contract; Kinds and Exceptions of Consideration.
Ans. The term "consideration" is one of the vital elements to uphold a contract. Subject to some exceptions,
an agreement made without consideration is a null and void contract, Consideration is a legal term used in the
sense of quid pro quo, which means 'something in return. When a party to an agreement promises to do
something, he must get something' in return. This 'something' is called consideration. Consideration is the
price agreed to be paid by the promisee for the obligation of the promisor.
Section 10 of the Indian Contract Act distinctly states that a "lawful consideration" is necessary for the
recognition of an agreement as a valid contract. Sections 23, 24 and 25 further lay stress on the nature of the
lawful consideration and thus play an important role in regulating the contractual relation for their legal
validity and enforcement through a court of law.

Meaning of Consideration under Indian Contract Act, 1872

Section 2(d) of the Indian Contract Act, 1872 follow as-
"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 to abstain from doing, something, such net or abstinence or
promise is called a consideration for the promise".
That is to say.
1. Consideration is the doing or not doing of something which the promisor desires to be done or not
done.
2. Consideration must be at the desire of the promisor.
3. Consideration may move from one person to any other person.
4. Consideration may past, present or future.
5. Consideration need not adequate, but should be real.
For example, X Promises to deliver his good to Y and Y promises to pay ₹1,000 on delivery. In this case, the
consideration for each of these promises is as under:

Promise Consideration
For X's promise Y's promise to pay Rs.1000 in delivery.
For Y's promise X's promise to deliver his goods.

Tweddle v. Atkinson (1861) In this case the Court of Queen’s Bench ruled that a Promisee cannot bring an
action unless the consideration of the Promisee moved to him.
Chinnaya v. Rammaya (1882):
In this case an old lady, by a deed of gift made over certain property to her daughter D under the direction that
she should pay her aunt, P (sister of the old lady), a certain sum of money annually.
The same day D entered into an agreement with P to pay her the agreed amount. Later, D refused to pay the
amount on the plea that no consideration had moved from P to D. Madras High Court held, P was entitled to
maintain the suit as consideration had moved from old lady, sister of P, to the daughter D. It was ruled that
consideration need not be moved from the Promisee personally.

Essentials of the Consideration under the Indian Contract Act

1. Consideration should move at the desire of the promisor: It should be made at the desire of the promisor
and the parties involved in the agreement. It should not be formed at the desire of the third party.
2. Consideration should move from the promisee or any other person: The contract should move from the
promisee in English law but here, in Indian law, it can move from promisee or any other person. In Chinnayya
v. Ramayya4, A by gift deed transferred some property to her daughter B whereas she also asked B to pay
annuity to A’s brother C. B made in writing in favour of C giving an annuity. B denied to fulfil her promise
and sued C. As there was no consideration for the C’s words, the court held that C should maintain the suit.
3. Consideration should be real consideration not an illusionary consideration: The consideration of
contract should be real not any illusionary consideration should be accepted. It should have some value in the
eye of the law and should be legally possible, physically possible and should be certain consideration.
4. Consideration must be either past or present or future:
o Past consideration – The consideration of a contract should be given in past that is before the
date of promise. For ex. A gave some goods to B on the latter’s desire. After a month, B
promised to compensate A for the goods given to him. This is a past consideration.
o Present consideration – The consideration of a contract should be given at the same point in
time while making the promise. For ex. When a person buys the product and pays at the same
time, it will be considered as present consideration.
o Future Consideration – The consideration of a contract is to pass subsequently for the making
of a contract. For ex. A promised B to deliver his car after a week and B promised to pay A
after 2 days. Both promises are subsequent here. This will be considered as Future
consideration.
5. Consideration of the agreement must be a lawful consideration– Section 23 of The Indian Contract
Act,1872 talks about the consideration and objects which are lawful and not lawful. It says that consideration
or object of an agreement is lawful unless it is:
Forbidden by law: This implies that people have been refrained from doing it or abstaining from doing it by
the rule of law.
Of such a nature that if permitted it would defeat the provisions of any law: Any such act which if
permitted can cause a break in any provision of the rule of law followed in the country.
Fraudulent: Consideration for any act which involves fraud will be considered unlawful and the contract will
be void for the same.
Involving or implying injury to the person or property of another: Any act which involves or implies
injury to any person or the property of any person will be considered unlawful.
Immoral as per courts or opposed to public policy: An act which is regarded by the court as an immoral
act and is opposed by public policy is also considered unlawful.
This section has given the conditions for consideration to be unlawful. Other than these, every other condition
will be taken as lawful ground for consideration and object of an agreement.
6. Consideration is not necessary to be adequate– Adequacy of consideration refers to a fair price which is
given by an offeree to the offeror as a return price which is either equal in measure or reasonably proportional
to each other for making a lawful agreement between the two parties. In simple words, it may be referred to
as the mutual exchange of a fair price in comparison to the promise which is taking place. But in Indian law,
it is not necessary for an agreement because it will not be possible for courts to decide on a specific reasonable
and fair price. As a matter of principle, it is obvious that the court should not interfere in such issues which
are already pre-decided.
7. It Must be Real and Not Illusory:
Although consideration need not be adequate, it must be real, competent and of some value in the eyes of the
law. There is no real consideration in the following cases:
A. Physical impossibility
B. Legal impossibility
C. Uncertain consideration
D. Illusory consideration
For example, A in consideration of some money from B promises to bring gold for him from sun or convert
copper into gold with the help of magic. This consideration is illusionary and fictitious on account of
Impossibility and uncertainly.
8. It must not be Illegal, Immoral or Opposed to Public Policy [Section 23]:
The consideration given for an agreement must not be unlawful. Where it is unlawful, the Courts do not allow
an action on the agreement.

The Doctrine of Privity to Contract

The doctrine of privity is a common law doctrine which prevents a stranger to the contract which means a
person who is not involved as a party to the contract to sue or to be sued or from enforcing a term of that
contract. For ex. A has borrowed some money from B and A owns a car which he sold to C and asked C to
pay to A. Here A cannot sue C if he does not pay B because he is no party to the contract or a stranger to the
contract. The leading case of Tweddle v. Atkinson immediately got the doctrine of privity into effect and
showed it by defying the intent of the parties. But there are some common law principles which acted as
exceptions for the doctrine such as agency, negligence etc.
Exceptions to Doctrine of Privity to Contract
A Stranger can sue in the following cases –
• Trust: Contract made between the trustee of a trust and another party, then the beneficiary of the trust
can sue to enforce his right under the trust.
• Family Settlement: Contract between a family, then any member of the family can sue provided he/she
should be a member of the family.
• Contract through an agent: If an agent has done a contract under his authority or his principal, he
can be sued under the contract.
• Assignment of a contract: If a contract is made for the benefit of a third person, then the third person
can sue the parties even being a stranger.
• Acknowledgement or Estoppel: If in the contract it is needed for a party to pay a certain amount to a
third party then it becomes an obligation to do so. Then the third party can sue to be a stranger. The
acknowledgement can also be applied.
• A Covenant running with the land: If a contract of land is made in which a person buys land with a
notice that the owner is responsible for all the duties and liabilities of the land, then he can sue the
previous land owner and settler even if they are strangers to the contract.

Exception to the Rule 'No Consideration, No Contract'

The general rule is that an agreement made without consideration is void (Section 25). In every valid contract
consideration is very important. A contract may only be enforceable when there is adequate consideration.
However, the Indian Contract Act contains certain exceptions to this rule. Following are the exceptions to the
general rule 'No Consideration, No Contract':
1) Agreements Made on Account of Natural Love and Affection [Section 25(1)]:
Such agreement made without consideration is valid if:
• It is expressed in writing.
• It is registered under the law.
• It is made on account of love and affection.
• It is between parties standing in a near relation to each other.
For example, a Hindu husband by a registered document promised to pay his wife Rs.2,000 per month as her
pin-pocket money. This agreement is valid.
2) Promise to Compensate [Section 25(2)]:
Such promise made without consideration is valid if:
• It is a promise to compensate (wholly or in part).
• The person who is to be compensated has already done something voluntarily or has done something
which the promisor was legally bound to do.
For example, X finds Y's purse and gives it to him. Y promises to give ₹500 to X. This is a valid contract
even though the consideration did not move at the desire of Y, the promiser.
3) Promise to Pay Time Barred Debt [Section 25(3)]:
Such promise without consideration is valid if:
• It is made in writing.
• It is signed by the debtor or his agent.
• It relates to a debt which could not be enforced by a creditor because of limitation.
For example, A has borrowed sum of 10,000 from B for the period of 2 years. Till the expiration of that period
neither A served notice of demand to B nor B repaid the debt. Debt become time barred which A cannot legally
recover. B makes promise to repay 5000 after a month. This promise is valid without consideration provided
B makes it in writing and signs on it with a clear intention of making partial payment.
4) Completed Gifts [Explanation to Section 25):
The gifts actually made by a donor and accepted by the dance are valid even without consideration. Thus, a
completed gift needs no consideration. For example, X transferred some property to Y by a duly written and
registered deed as a gift. This is a valid contract even though no consideration moved.
5) Contract of an Agency [Section 185]:
The contract made for creating relationship of agency between parties does not require any consideration.
Without consideration such contracts are invalid. Thus, a promise made by the person to act as an agent of
another person is enforceable without consideration. Similarly, if person makes an agreement with another to
appoint him as his agent for particular period of time. It is also a valid agreement.
6) Bailment [Section 148]:
Consideration is not necessary to affect a valid bailment of goods. It is Called Gratuitous Bailment.
7) Remission [Section 63]:
For compromising due debt, i.e., agreeing to accept less than what is due, no consideration is necessary. In
other words, a creditor can agree to give up a part of his claim and. there need be no consideration for such an
agreement. Similarly, an agreement to extend time for performances of a contract need not be supported by
consideration.
8) Charity: A promise to contribute to charity, though gratuitous, would be enforceable, if on the faith of the
promised subscription, the promisee takes definite stops in furtherance of the object and undertakes a liability,
to the extent of liability incurred, not exceeding the promised amount of subscription.

Qs. Capacity to Contract: Minors, Lunatics, Idiots, Nature and Effects of an Agreement with a person
under legal disability.
Ans. One of the most essential elements of a valid contract is the competence of the parties to make a contract.
Section 11 of the Indian Contract Act, 1872, defines the capacity to contract of a person to be dependent on
three aspects; attaining the age of majority, being of sound mind, and not disqualified from entering into a
contract by any law that he is subject to.
Capacity to Contract
According to Section 11, “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.”
Who are competent to Contract?
According to Sections 11 and 12 Indian Contract Act, the following persons are competent to contract:
1. Every person who has attained the age of majority: According to Section 11, any person who has
attained the age of 18 years is competent to contract.
2. Persons who are of sound mind: According to Section 12, a person who is of sound mind is
competent to contract. A person who is of unsound mind at the time of making the contract is not
competent to contract.
3. Persons who are not disqualified by law: According to Section 11, any person who is not disqualified
by law is competent to contract.

Agreement with a Minor

Who is a minor?
According to Section 3 of the Indian Majority Act, 1875, a person below 18 years of age is a minor. However,
a person to whom a guardian has been appointed by the court for their person or property remains a minor
until the age of 21 years.
Nature of agreement with minor
Neither Section 10 nor 11 makes it clear whether the agreement entered by the minor is voidable at his option
or altogether void. This led to a controversy about the nature of the minor’s agreement, which was resolved in
the Privy Council decision in Mohiri Bibi v. Dharmodas Ghosh. The Privy Council decision in Mohiri Bibi
v. Dharmodas Ghosh held that a minor’s agreement is totally null and void from the beginning, and the minor
is not considered competent to contract or give any consideration.

The court’s decision, in this case, can be summarized as follows:

• The minor’s agreement is void ab initio, meaning it is null and void and the minor is not competent to
contract or give consideration.
• The court did not address the applicability of the doctrine of estoppel against minors but stated that it
would not apply in this case as the plaintiff was aware of the minor’s minority.
• Section 64 does not apply as it applies to voidable contracts and the minor’s agreement is void ab
initio. Section 65 is also inapplicable as it deals with subsequent voidness or agreements discovered to
be void, while the minor is not competent to contract.
• Under Section 41 of the Specific Relief Act, the court has the discretion to order compensation if justice
requires it. However, in this case, the court did not order compensation as the plaintiff was aware of
the minor’s minority.

Effect of a Minor’s Agreement

The effect of a minor’s agreement is void ab into. This means that a minor’s agreement is considered void;
thus it does not impose any obligations upon the parties to fulfil their promise.
Additionally, any property transferred to the minor under the contract must be returned to the party who
transferred it. However, if the minor has already received a benefit under the contract, they may be required
to compensate the other party for the benefit received.

1. No estoppel against a minor

The principle of estoppel doesn’t apply to minors. As per this principle, when one person intentionally causes
or permits another person to believe a thing to be true and to act upon such belief, neither he nor his
representatives can deny the truth of that thing in any suit or proceeding between himself and such person or
representative.
However, the question arises as to whether the law of estoppel can be invoked against minors. In the case of
Jagar Nath Singh v. Lalta Prasad, the court held that the law of estoppel cannot be used to validate a void
agreement.
2. Doctrine of Restitution
The principle of restitution holds that if a minor obtains property or goods by misrepresenting their age, then
the property or goods can be returned if they are still in the minor’s possession. However, if the minor has
already sold or converted the property or goods into cash, they cannot be asked to refund the same. This
principle was established in the case of Leslie (R) Ltd v. Sheill.
3. No liability in contract or in tort arising out of the contract
When a minor enters into an agreement, it is void from the beginning and does not create any legal obligations
for the parties involved. As a result, a minor cannot be held responsible for breaching their promises or for
any tortuous acts arising from the agreement. It has been established in Harimohan v. Dulu Miya that The
Calcutta High Court further explained that if the tort is directly connected to the contract and is a part of the
same transaction, the minor cannot be held liable in tort.
However, if the tort is unrelated to the contract, the minor can be held liable for it, as observed in Burnard v.
Haggis. In this case, a minor had hired a horse for a ride and had agreed not to use it for jumping. But later,
the minor lent the horse to a friend who used it for jumping and the horse got injured. The minor was held
liable for the injury caused to the horse, as the tort committed was not part of the contract.
4. No Ratification • A person cannot on attaining majority ratify an agreement made by him during his
minority. Ratification relates back to the date of making the contract and therefore a contract which was then
void cannot be made valid by subsequent ratification.

Minor’s Liability for Necessaries [Section 68]

Under Section 68 of the Indian Contract Act, reimbursement is permitted to the person who supplies
necessaries to a minor. This is because it is deemed to be a quasi-contractual obligation.
Reimbursement is allowed if the following conditions are satisfied:
• Necessaries are supplied
• To a person who is incapable of making a contract, or
• To the dependants of such a person
• Reimbursement is permitted from the estate of such a person.
The goods supplied must be necessary for the minor’s station in life, and the minor must not already have a
sufficient supply of such necessities.
The term ‘necessaries’ is not defined in the Indian Contract Act. It is therefore necessary to turn to judicial
decisions for guidance. In Chappell v Cooper [(1844) 13 M and W 252] (Alderson B), it was held that “things
necessary are those without which an individual can’t reasonably exist.
In the first place, it comprises food, clothes, and shelter. Then, since the proper cultivation of the mind is as
expedient as the support needed for the growth of the body, education and instruction in art and trade, etc.,
may be necessary also.” Thus, what constitutes ‘necessaries’ is a relative thing and depends on the
circumstances of the minor’s life.
To render a minor’s estate liable for necessaries, two conditions must be satisfied:
1. The contract must be for goods reasonably necessary for the minor’s support in his or her station in
life, and
2. The minor must not already have a sufficient supply of these necessities.
Person of Unsound Mind
• Idiots– An idiot, in medical terms, is a condition of mental retardation where a person has a mental
age of less than a 3-year-old child. Hence, idiots are incapable of understanding the nature of the
contract and it will be void from the very beginning.
• Lunatic– A person who is of sound mind for a certain duration of time and unsound for the remaining
duration is known as a lunatic. When a lunatic enters into a contract while he is of sound mind, i.e.
capable of understanding the nature of the contract, it is a valid contract. Otherwise, it is void.
• People under the influence of the drug- A contract signed under the influence of alcohol/drug may
or may not be valid. If a person is so drunk at the time of entering into a contract so that he is not in a
position to understand the nature and consequences, the contract is void. However, if he is capable of
understanding the nature of the contract, it will be enforceable.
• Intoxication
It is a mental disorder if there is the incompetence of intoxication. The person who alleges it can only prove
the intoxication. A person drinking or consuming any intoxicants cannot enter into a contract in such an
unsound mind state.

Persons disqualified by law

According to Section 11, any person who is not disqualified by law is competent to contract.
Alien enemy
Under the Indian Contract Act, an alien enemy is a citizen of a country that India is at war with. Any contracts
made during the war period with an alien enemy are void. An Indian citizen residing in an alien enemy’s
territory is also treated as an alien enemy under contract law. Contracts made before the war period either get
dissolved if they are against public policy or remain suspended and are revived after the war is over, provided
they are not barred by limitation.
Illustration: A citizen of country X orders goods from a citizen of country Y. The goods are shipped, but before
they could reach Y, country X declares war on country Y. The contract between A and B becomes void.
Convicts
A convict cannot enter into a contract while serving their sentence. However, they regain their capacity to
enter into a contract upon completion of their sentence.
Illustration: A is serving their sentence in jail. Any contract signed by them during this period is void.
Insolvent
An insolvent is a person who has been declared bankrupt or against whom insolvency proceedings have been
filed in court. Since the person does not have any power over their assets, they cannot enter into contracts
concerning their property.
Illustration: A enters into a contract for the sale of goods with B. Before the sale takes place, an insolvency
suit is filed against A. A sell the goods to B during the pendency of the insolvency proceedings. The contract
is void.
Foreign sovereign
Diplomats and ambassadors of foreign countries enjoy contractual immunity in India. One cannot sue them in
Indian courts unless they submit themselves to the jurisdiction of Indian courts. Additionally, sanction from
the central government is also required in such cases. However, the foreign sovereign has the authority to
enforce contracts against the third person in Indian courts.

Qs. Free Consent: Factors vitiating free consent; Coercion; Undue Influence; Fraud;
Misrepresentation; Mistake of Law and Fact.
Ans. In contract law, free consent is a fundamental principle that ensures the validity and enforceability of
agreements between parties. It is essential for both parties to willingly and knowingly enter into a contract
without any external influences or misrepresentations. The Indian Contract Act, 1872, defines free consent
and identifies various factors that can vitiate consent, rendering the contract voidable or void.

Free Consent Under Indian Contract Act

Section 13 of the Indian Contract Act 1872, deal with Consent, that states “when two or more person agree
upon the same thing and in the same sense”. So that two persons who are willing to enter into an agreement
must agree to something in same sense.

Example: - A entered into contract with B to sell car. A owns 4 cars and is willing to sell Honda, whereas B
in under fact of buying Maruti. In this case there is no consensus-ed-idem that is meeting of mind. Both the
parties have agreed upon different things in the different sense. Hence there is no Consent as well as contract.

Under Section 14 of India Contract Act, 1872 the definition of Free Consent has been mentioned which states
“that Consent is considered free Consent when it is not caused or affected by the following,
1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

Each of these elements can compromise the validity of a contract, making it crucial to understand its
implications.
1. Coercion (Section 15)
Coercion occurs when one party uses threats or force to compel the other into entering a contract.
Under Section 15, coercion involves:
• Committing or threatening to commit any act forbidden by the Indian Penal Code.
• Unlawfully detaining or threatening to detain any property to influence the agreement.
Example: If A threatens B with physical harm unless B sells his property at an unfair price, B’s consent is
obtained through coercion. B can choose to void the contract.
Impact: Contracts formed under coercion are voidable at the option of the coerced party. This means the party
under duress can either affirm the contract or choose to rescind it, thereby nullifying any obligations.

2. Undue Influence (Section 16)

Undue influence refers to situations where one party, due to their position or relationship, exerts excessive
pressure on the other party to enter into a contract. Section 16 outlines that undue influence involves:
• Real or apparent authority over the other party.
• Fiduciary relationships (such as trustee and beneficiary).
• Contracts with persons whose mental capacity is compromised (due to age, illness, etc.).
Example: A, a senior executive, uses his position to persuade B, a subordinate, to sign a contract that heavily
favours A. If B signs under this influence, B can later claim the contract was formed under undue influence.
Impact: The influenced party can void the contract if undue influence is proven. The dominant party bears
the burden of proof to show that there was no undue influence involved.

3. Fraud (Section 17)

Fraud involves intentional deceit by one party to induce another into a contract. Section 17 defines fraud as:
• Suggesting a fact that is not true, knowing it is not true.
• Active concealment of facts.
• Promises made without any intention of performing them.
• Any act fitted to deceive.
Example: B sells A a car, claiming it is in perfect condition while knowing it has a serious defect. If A buys
the car based on this false statement, A can void the contract due to fraud.
Impact: Fraudulent contracts are voidable by the party misled by the false representation. Additionally, the
party deceived can seek damages if they have suffered a loss.

4. Misrepresentation (Section 18)

Misrepresentation occurs when false statements are made innocently without intent to deceive. Section
18 categorizes misrepresentation into:
• Positive assertions not in accordance with facts believed to be true.
• Breach of duty leading to misleading another party.
• Causing a party to make a mistake regarding the subject matter of the contract.
Example: A sells B a piece of land, believing it to be fertile, but it turns out to be barren. If A genuinely
believed the land was fertile, this constitutes misrepresentation.
Impact: Contracts formed under misrepresentation are voidable. The misled party can cancel the contract and
potentially recover any losses incurred.

5. Mistake (Sections 20, 21, 22)

Mistake involves errors by one or both parties regarding a fact fundamental to the contract. Mistakes can be
of two types:
• Mutual Mistake (Section 20): Both parties misunderstand a fundamental fact. The contract is void.
• Unilateral Mistake (Section 22): One party is mistaken about a fact. Generally, the contract is still valid
unless the non-mistaken party knew or ought to have known about the mistake.
 • Mistake of Law (Section 21): A mistake regarding a legal provision, generally not voidable unless it
pertains to foreign law.
Example: A and B enter into a contract to sell a specific batch of goods, both believing the goods are in a
warehouse. Unknown to both, the goods were destroyed by fire before the contract. This mutual mistake makes
the contract void.
Impact: Mistakes, particularly mutual mistakes, can make a contract void as they prevent the formation of a
consensus ad idem (agreement to the same thing in the same sense).

Difference Between Coercion and Undue Influence

Meaning
Coercion involves using force or threats to compel a party who is generally unwilling to enter into a contract.
On the other hand, undue influence refers to influencing a person’s will by another party, often through
psychological pressure or taking advantage of an existing relationship.
Nature of Offence
Coercion is regarded as a criminal offence as it involves the use of force or physical violence to extract consent
for a contract. Undue influence is not considered a criminal offence in itself but rather a legal concept that
renders the contract voidable if proven.
Legal Provisions
Coercion is covered under Section 15 of the Indian Contract Act 1872. Undue influence, on the other hand, is
addressed under Section 16 of the Indian Contract Act 1872.
Relationship of Contracting Parties
In cases of coercion, there is no established relationship between the contracting parties. The coercion is
exerted externally, typically by someone with no pre-existing relationship with the coerced party. In contrast,
undue influence requires an already established relationship between the contracting parties, such as a
fiduciary relationship or a relationship based on trust and confidence.
Actions
Coercion involves actions like threats, physical violence, or the use of force to extract consent. Undue
influence revolves around psychological pressure or subjecting a person to social dilemmas, taking advantage
of their emotional vulnerability or dependence on the influencing party.
Aim
The aim of coercion is to force a person into a contract, typically for the benefit of the party using coercion.
On the other hand, undue influence is used when one party intends to take advantage of the other party’s
position of weakness or vulnerability.
Burden of Proof
In cases of coercion, the burden of proof lies with the aggrieved party to demonstrate that force or threats were
used to obtain their consent. For undue influence, the burden of proof rests with the party who holds a
dominating position in the relationship, as they need to show that their influence was not improper or unfair.

Between Fraud and Misrepresentation

Fraud and misrepresentation are two distinct legal concepts in contract law, both involving false statements or
omissions of information. While they share some similarities, they have crucial differences in terms of intent,
consequences and legal remedies. Here is a comprehensive difference Between fraud and misrepresentation

Aspect Fraud Misrepresentation

Deliberate, intentional act involving May involve innocently false statements

Definition
dishonesty or omissions

Intent Requires the intent to deceive and harm May occur without the intent to deceive
 – False representation of facts – Intent to – False statement or omission – Reliance
Elements deceive – Harm to deceived party – on false representation – Connection to
Reliance on false representation the contract

– Contract voidable – Damages – Legal – Contract voidable – Rescission –

Remedies action – May lead to criminal penalties Restitution – Civil remedies, not criminal
and imprisonment penalties

Degrees of May involve varying degrees of

Involves a high degree of deception
Deception deception, from innocent to negligent

Impact on
Can render a contract voidable Can also make a contract voidable
Contract Validity

Actively conceals the truth or knowingly May result from negligence or genuine
Disclosure
makes false statements belief in a statement

Legal Considered a more serious offense and Primarily a civil matter with limited legal
Consequences may lead to criminal charges consequences

Seller knowingly conceals severe Seller innocently states that the roof is in
Examples property damage and sells it as in good condition, unaware of a small yet
excellent condition significant leak

Qs. Limitation on freedom of Contract: Unlawful Agreements, Public Policy, Agreements and Unlawful
Consideration in Part and Objects.
Ans. A contract or arrangement that violates the law, public policy, or moral standards is considered unlawful.
Such an agreement is null and void, meaning it is unenforceable in court from the outset. Unlawful agreements
often involve actions that are illegal but not necessarily crimes, unlike illegal agreements, which typically
involve criminal activity.
>Agreements with Unlawful Object and consideration
Section 23 of the Indian Contract Act states that the consideration or object of an agreement is lawful unless
it is:
• Forbidden by law.
• Of such a nature that it would defeat the provisions of any law.
• Fraudulent.
• Involving or implying injury to a person or property.
• Immoral or opposed to public policy.

1. Forbidden by law
An agreement is considered unlawful if its object is forbidden by law. For instance, if someone borrows money
from person A to arrange a marriage for their minor daughter, it would violate the Child Marriage Restraint
Act, which prohibits marriages involving minors. As a result, the agreement becomes void due to its illegal
object.
2. Defeats the provisions of any law
In certain cases, the object or consideration of an agreement may not be explicitly prohibited by law. However,
it can still defeat any law’s provisions which affect the legality of the object of the agreement. In such
situations, these agreements are considered void.
Example- A enters into a contract with B whereby B promises to not pursue legal proceedings against A if A
commits a robbery in B’s house. This contract is against the provisions of IPC law.
3. Fraudulent
An agreement made for a fraudulent purpose is considered void. The fraudulent object of the agreement goes
against the principles of honesty and fair dealing. Therefore, such an agreement is void due to its unlawful
purpose.
Example - A enters a contract with B where he agrees to pay B if he embezzles money from C. This is
considered a fraudulent object, and the contract is not valid.
4. Injuries to person or property
An agreement between two individuals to cause harm to the person or property of another is considered
unlawful as the object of the contract is illegal. These types of agreements lack the legality of the object and
are void. Examples:
• Publishing a book on the life of a person without his consent.
• Destruction of property.
• Violation of licenses.
• Violation of copyrights.
e.g. - A enters into a contract with B whereby he agrees to pay a sum of money to B if he destroys a city
landmark. This contract does not have a lawful consideration and lawful object and it is not deemed legal.
5. Immoral
The law does not enforce agreements that involve immorality. Any agreement that goes against morality is
considered unlawful and void. Determining what is considered immoral depends on the prevailing standards
of morality within society, as approved by the courts.
Here are some examples of agreements that are considered immoral:
• Agreements that interfere with marital relations: For instance, if a married woman is given money
to facilitate her divorce from her husband so that the lender and the woman can get married, such
agreements are void. The money given in such agreements cannot be recovered.
• Agreements involving prostitutes: Agreements that involve the sale of articles or the rental of a house
to enable a person to carry on their profession as a prostitute are considered immoral. Such agreements
are void, and any money involved cannot be recovered.
• Agreements where the consideration is an act of sexual immorality: Agreements that involve
illegal cohabitation or any act of sexual immorality as the consideration are also considered immoral.
Such agreements are void.
6. Against public policy
An agreement can be deemed unlawful if the court determines it to be contrary to public policy. Public policy
refers to the principles and interests that serve the welfare and well-being of the general public. When an
agreement has the potential to harm or directly conflicts with public interest or public welfare, it is considered
against public policy, lacks legality of the object and is therefore void.
Here are some examples of agreements that are considered contrary to public policy:
• Trading with the enemy during times of war: Engaging in business or trade activities with an enemy
nation during the war is against public interest and is considered void.
• Stifling the prosecution: Agreements that prevent or obstruct someone from reporting or filing a case,
such as when a witness agrees not to report a crime they witnessed, are against public policy and are
void.
• Maintenance and champerty: Maintenance refers to providing financial support to someone to file a
lawsuit, even if that person has no legitimate interest in the case. Champerty involves an agreement
where a third party provides financial assistance for litigation to gain a share of the proceeds. Such
agreements are considered against public policy and are void.
• Agreements that restrain personal liberty: Agreements that restrict personal freedom or liberty,
such as agreements that involve slavery or indentured servitude, are contrary to public policy and are
void.
• Agreements that restrain parental rights: Agreements that limit or restrict the rights of parents,
particularly in matters concerning the welfare and upbringing of their children, are against public
policy and are void.
• Agreements to create a monopoly: Agreements that aim to establish a monopoly or restrain fair
competition in a market are considered against public policy and are void.
 • Agreements to interfere with the course of justice: Agreements that involve threats, coercion, or
any other actions aimed at interfering with the proper administration of justice, such as influencing or
threatening witnesses, are against public policy and are void.
• Brokerage contracts: Certain brokerage agreements deemed unfair, exploitative, or against public
interest may be considered void.

>Agreements Without Consideration

According to Section 25 of the Indian Contract Act, agreements made without consideration are generally
void. However, there are exceptions:
• Natural love and affection: Agreements made out of natural love and affection between close relatives,
provided they are in writing and registered.
• Past voluntary services: Agreements to compensate for past voluntary services rendered to the
promisor.
• Promise to pay a time-barred debt: An agreement to pay a debt barred by the statute of limitations.
Case Law: Rajlukhy Dabee v. Bhootnath Mookerjee The court upheld that a written and registered
agreement based on natural love and affection between close relatives is enforceable without consideration.

> Agreements in Restraint of Marriage

Section 26 of the Act voids any agreement that restrains a person from marrying, except in the case of minors.
For example, if a father pays someone to prevent their daughter from marrying, this agreement is void unless
the daughter is a minor.
Case Law: Shrawan Kumar v. Nirmala
The Allahabad High Court dismissed a petition to restrain a woman’s marriage, emphasizing that agreements
in restraint of marriage are void.

>Agreements in Restraint of Trade

Section 27 states that any agreement restraining trade or business is void. However, exceptions include:
• Sale of goodwill: Reasonable restrictions protecting the buyer of business goodwill.
• Partnership agreements: Restrictions on partners’ business activities as stipulated in the Indian
Partnership Act. Conditions that make restraint of trade valid
There are certain conditions that make a restraint on trade during a sale of goodwill valid, these are:
• The seller can be restrained only from carrying out a similar business.
• The restraint can be applied only to certain local limits.
• The limits/restraint should appear to be reasonable.
Case Law: Madhub Chander v. Raj Coomar
The court held that an agreement to close a shop for money was void as it restrained trade.
Case Law: Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co Ltd
Under common law, the court upheld a reasonable restraint on trade, considering it valid if it protected
legitimate business interests.

>Agreements in Restraint of Legal Proceedings

Section 28 declares that agreements restricting the parties from enforcing their legal rights through judicial
proceedings are void. This ensures individuals can freely access the legal system to resolve disputes.
Exceptions-
A contract states that the party would forfeit the right to seek relief under arbitration if the arbitration is not
claimed within the prescribed time.
In an insurance plan, the agreement stipulates that the insurance claim must be made within the time stated
therein. Otherwise, the advantages resulting from the strategy would have been removed. The time defined is
less than the limitation period for a suit under the contract provided for in the Limitation Act.
Case Law: Firm Daulat Ram vs. Firm Dharm Chand
The court held that any agreement preventing a party from enforcing legal rights through judicial proceedings
is void.
>Ambiguous and Uncertain Agreements section 29
Agreements with terms that are ambiguous or uncertain cannot be enforced, as there is no clarity on the
obligations and expectations of the parties involved. Clarity in contractual terms is essential for enforceability.
Case Law: Scammell and Nephew Ltd v. Ouston
The House of Lords held that an agreement was void due to uncertainty as the terms were too vague to be
enforceable.

>Wagering Agreements section 30

When two parties agree and enter into a condition that one party will receive money from the other party on
the happening of a future uncertain events, the other party will receive the money from the first party on the
non-happening of a future uncertain events. This kind of agreement is a wagering agreement. In a wagering
agreement, there should be shared chances of profit and loss. Wagering deals are usually void.
Wager means bet. It’s a chance game where the chance to win or lose is unknown. The probability of winning
or losing depends solely on an unpredictable occurrence.
Example: B and C agree with each other of it will rain on Saturday. B will pay C Rs 200 if it rains on Saturday
and c will pay B if it does not rain on Saturday. This agreement between B and C is a wagering agreement and
it is void.
Exceptions of a wagering agreement
An insurance policy is not an investment
Contracts for insurance are reimbursement contracts. They are signed in order to secure one party’s interest in
the deal. The insured is insurable in the property or life in this contract; hence, it is not a settlement.
Competitions for skills are not competitive
Skill plays a significant role in overcoming these competitions successfully. For eg, competitions for
crosswords, pictures, puzzles, etc. The awards are awarded here in conjunction with the merits of the solution.
These are not wagering competitions. If prizes are contingent upon an opportunity, however, that’s a lottery
and a gamble.
For example: – A crossword in a newspaper was provided that the crossword solution would correlate to the
solution held with the publisher. It was also specified in the newspaper that the first prize would be awarded.
It’s a luck game and therefore a lottery. And then, it’s a bet.
The market for horse races is not a wager
State governments can, if allowed by local law, award horse race competitions. Any subscription or donation
to any reward or amount of money to be awarded to a winner of a horse race of Rs. 500 or higher is, in these
cases, not unlawful. In short, agreements are also binding and enforceable to subscribe for or contribute to
certain prizes or numbers.
The transaction of the share market is not a wager
The purchase and selling transactions of shares and securities are not wagered in order to receive and distribute
stocks. Nevertheless, the contract will only be wagered if the goal is to overcome the price gap.
Sports competitions are not wager
Sports events like athletics, wrestling, indoor games, football, boxing, cricketing, hockey and so on are not
fortunate games. It is measured by competence. They’re not wagers, therefore.
Case Law: Carlill v. Carbolic Smoke Ball Co
Although not directly a wagering agreement case, this case established principles about the enforceability of
contracts involving betting or uncertain outcomes.

Unit-III

Contingent Contract
3.1. Contingent Contract: Performance of Contingent Contract, Conditional Contract, when enforcement
depends upon happening or non-happening of an Event, Event linked with Human Conduct.
3.2. Performance of Contract: Parties to perform the contract, Joint rights and joint liability and performance
of reciprocal promises; Time, Place and Manner of Performance;
3.3. Discharge of a Contract: Discharge by Performance, Discharge by Agreement, doctrine of impossibility;
Discharge by Operation of Law, Discharge by Breach and Novation.
3.4. Quasi Contracts: Obligations Resembling those Created by Contract, Concept and Classification.
3.5. Remedies for Breach of Contract: Damages, Remoteness of Damages, Mitigation of Damages, Penalty
and Liquidated Damages

Qs. Contingent Contract: Performance of Contingent Contract, Conditional Contract, when

enforcement depends upon happening or non-happening of an Event, Event linked with Human
Conduct.
Ans. Contingent Contract means the enforceability of that particular contract directly depends upon the
happening or non-happening of an event. Contracts are of different types Absolute and Contingent. An
absolute contract is one where the promisor performs the contract without any condition. Contingent contracts,
on the other hand, are the ones where the promisor performs his obligation only when certain conditions are
met.
If you look at the contracts of insurance, indemnity or guarantee, they have one thing in common – they create
an obligation on the promisor if an event which is collateral to the contract does or does not happen. For
example, in a life insurance contract, the insurer pays a certain amount if the insured dies under certain
conditions. The in Contingent Contract under Indian Contract Act
Definition
The expression “Contingent Contracts” is defined under Section 31 of the Indian Contract Act, 1872 as: A
‘contingent contract’ is a contract to do or not to do something, if some event, collateral to such contract, does
or does not happen.
Illustration: Lily contracts to pay Riya Rs.50,000 if Riya’s house is burnt and get destroyed by the same. In
this case it is called as a contingent contract.

Essential Elements of a Contingent Contract

1. Performance of the Contract
The performance of the contract must be conditional i.e. condition for which the contract has been entered
into must be a future event, and it should be uncertain.
2. Contingency Relate to Collateral Matters
This highlights that the contingency has contemplated by the contract must be collateral to the contract. It
means that a contract already arisen or a subsisting contract is there, but its performance cannot be demanded
unless the contemplated event happens or does not happen.
Exemple-Peter enters into a contract with John and promises to deliver 5 television sets to him. John promises
to pay him Rs 75,000 upon delivery. This is NOT a contingent contract since John’s obligation depends on the
event which is a part of the contract (delivery of TV sets) and not a collateral event.
Peter enters into a contract with John and promises to deliver 5 television sets to him if Brazil wins the FIFA
World Cup provided John pays him Rs 25,000 before the World Cup kicks-off. This is a contingent contract
since Peter’s obligation arises only when Brazil wins the Cup which is a collateral event.
In Gian Chand v. York Exports, 2015 SC it was held that non happening of an anticipated event leads to
failure of a contingent contract whereas happening of an unanticipated event leads to impossibility.
3. Will of the Party
The particular event so considered as for contingency must depend on the act of the party but it does not
depend on the will of the party.
A contract for sale of goods enjoins the condition that the goods would be inspected before despatch was held
to be a firm contract. The import of materials agreeable to such a contract was valid.
4. Uncertain Event
If the event is sure to happen, then the contract is due to be This is not a contingent contract. The event should
be uncertain.

Enforcement of Contingent Contract

The six rules for the enforcement of contingent contract are defined under section 32 to 36 of the Indian
Contract Act, 1872 are listed below:
1. Where enforcement depends upon happening of an event
Section 32 lays down two basic principles. First, an act on the happening of a future uncertain condition related
contract cannot be enforced unless and until that event happens and second is that, the contracts become void,
if the happening of that event has become impossible.
Illustration: A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced by
law unless and until C dies in A’s lifetime.
In N. Peddanna Ogeti Balayya v. Kotta V. Srinivasayya Setti Sons AIR 1954 SC 26 , it was held that once
the event has happened the contingent contract ripens into an absolute one.
2. Where performance depends upon non- happening of an event
In this, naturally the respective parties have to wait till the happening of that particular event becomes
impossible and if that event takes place, then in such case the contingent contract is void. This is specified in
Section 33 of the Indian Contract Act, 1872.
Illustration: A agrees to pay B a sum of money if certain shops not return. The ship is sunk. The contract can
be enforced when the ship sinks.
3. Events linked with human conduct
According to Section 34 of the Indian Contract Act, 1872, when the event for which the parties are waiting is
linked with the future conduct of a person, then the event is considered impossible if that person does anything
which makes it impossible that he should act in that way in any definite time.
Example-Peter promises to pay John Rs 5,000 if he marries Julia. However, Julia marries Oliver. Julia’s act
thus renders the event of John marrying her impossible. (A divorce is still possible though but the happening
of the event is considered impossible.
In Pym v. Compbe (1856) the plaintiff’s invention was not approved by the engineer, so it was held that there
was no concluded contract.
4. Contract contingent on an event happening within the fixed time
If the event does not happen within the fixed time and accordingly the allotted time lapses or if the happening
of the event becomes impossible before the fixed time, then in such cases a contract is void as specified in
Section 35 of the Indian Contract Act, 1872.
Example-Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous mission
returns before June 01, 2019. This contract is enforceable by law if the ship returns within the fixed time. On
the other hand, if the ship sinks, then the contract is void.
5. Contracts contingent on an event not happening within the fixed time
Where the contract is enforceable if the event has not happened before the expired fixed time and also where
it becomes certain that before the time has expired the particular event is not going to be happen. The same is
also specified in Section 35 of the Indian Contract Act, 1872.
Example- Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous mission
does not return before June 01, 2019. This contract is enforceable by law if the ship does not return within the
fixed time. Also, if the ship sinks or is burnt, the contract is enforced by law since the return is not possible.
6. Contract contingent of impossible event void
As per Section 36 of the Indian Contract Act, whether the impossibility of the particular event is known or not
to the respective parties to the agreement at the time when it is made, if a contingent contract is based on the
happening or non-happening of an impossible event, then such a contract is void.
Example-Peter promises to pay John Rs 50,000 if the sun rises in the west the next morning. This contract is
void since the happening of the event is impossible.
Difference between Contingent Contract and Wager Contract
Contingent Contract Wager Contract
1. All contingent contract are not All Wager contracts have the
wager. Elements of contingent contract.
2. The interest of parties is vested in The interest of parties is vested upon
the happening or non-happening of Winning or losing sum of money.
event.
3. The future event is collateral to the The future event is the main base of
contract. decision.
4. Only one party shall give promise. Parties give reciprocal promises.
 5. Win or loss of parties is not important. One party is required to win and other has
to be lose.
6. Contingent contracts are valid. wager contracts are void with few
exceptions.

Qs. Performance of Contract: Parties to perform the contract, Joint rights and joint liability and
performance of reciprocal promises; Time, Place and Manner of Performance.
Ans. Chapter IV of Indian Contract Act (Section 37-67) deals with the performance of the
Contract. Performance of the contract is one of the various modes of discharge of the contract. A contract is
said to have been performed when the parties to a contract either perform or offer to perform their respective
promises.
Performance of Contract Meaning:
The term "Performance of Contract" refers to the fulfilment of obligation outlined in a contract. According to
Section 37 of the Indian Contract Act, a party to a contract must either perform or offer to perform their
respective promise unless such performance is excused or dispensed with under the provisions of the Contract
Act or any other law.
Types: Based on Section 37,"Performance of Contract" can be classified as actual attempted.
(a) Actual Performance: This occurs when a party to a contract fulfils their obligations per the terms of the
agreement, within the specified time and manner Example 1: For instance, if X borrows ₹5,00,000 from Y at
an interest rate of X% with a promise to repay the total amount after one month, and X repays the amount on
the due date, this constitutes actual performance.
(b) Offer to Perform or Attempted Performance: This situation arises when the promisor offers to perform
their obligation, but the promisee refuses to accept the performance. For example, if A promises to deliver
certain goods to B, and A takes the goods to the designated place during business hours, but B refuses to accept
the delivery, this is an attempted performance as A has fulfilled their part of the contract
Conditions to be met for a Valid Tender or Attempted Performance
(1. The tender or attempted performance must be unconditional. Example-For instance, if A offers to repay B
only the principal amount of a loan, this would not constitute a valid tender, as it does not include the entire
amount of principal and interest.
2. The offer to perform must be made at a reasonable time and place. Example- If A offers to deliver goods to
B at an unreasonable hour or in an inconvenient location, the tender may be considered invalid.
3. The performance must be made in a manner that is consistent with the terms of the contract. Example-If A
is required to deliver goods in a specific manner, such as by a certain method of transportation, failure to do
so may render the tender invalid.
4. The offer to perform must be communicated to the other party in a clear and unambiguous manner. Example
5. If A offers to perform but the terms are unclear, such as by using vague language, the tender may not be
valid.
6. The performance must be made with the intention of fulfilling the contractual obligation. Example-If A
offers to perform but does not intend to follow through, the tender may be considered invalid.
7. The offer to perform should not be subject to any conditions or qualification Example-If A offers to perform
but adds conditions that were not part of the original contract, the tender may be invalid.
8. The offer to perform should be made in good faith and without any intention to deceive or mislead the other
party. Example: If A offers to perform with the intention of misleading B, the tender may be invalid.
9. The offer to perform should be made with the capacity to fulfil the terms of t contract. Example- If A offers
to perform but lacks the ability to do so, the tender may be invalid.

By Whom a Contract May be Performed

1. Promisor Himself: A promise must be performed by the promisor himself if the contract indicates that it
was the parties' intention for the promise to be fulfil personally. This is Applicable in contracts involving
personal skill, diligence, or trust. For example, if A promises to paint a picture for B, A must do it himself.
2. Agent: If personal consideration is not essential to the contract, the promisor or his representative can hire
a competent person to perform it.
3. Legal Representatives: Contracts requiring personal skill or based on personal consideration end with the
promisor's death. Other contracts bind the legal representatives of the deceased promisor to perform unless
the contract states otherwise. Their liability is limited to the value of the inherited property.

Joint Promisors in Contracts

Definition: Joint promisors are individuals who make a joint promise to fulfil the terms contract.
Example: If A, B, and C jointly promise to pay D ₹600,000, they must fulfil the promise together. If A dies
before the promise is fulfilled, his legal representatives must fulfil promise with B and C. If all three die, their
legal representatives must fulfil the promise together.

Liability of Joint Promisors and Promisees

1. Devolution of Joint Liabilities (Section 42) When two or more people make a joint promise, they are all
responsible for fulfilling it together during their lifetime. If one of them dies, their legal representative must
fulfil the promise along with the surviving promisor(s). After the last survivor dies, the legal representatives
of all the original promisers must fulfil the promise.
Example: If X, Y, and Z borrow money together, they must repay it together while they are alive. If X dies,
his representative S, along with Y and Z, should repay the debt. If all three die in an accident, their legal
representatives must fulfil the promise This rule applies only if the contract does not state otherwise.
2. Compulsion of Joint Promisors to Perform (Section 43) When two or more people make a joint promise,
the promisee can compel any one or more of the joint promisors to fulfil the entire promise, unless there is an
express agreement stating otherwise. Each promisor has the right to demand contribution from the other joint
promisors for their share in the performance of the promise, unless the contract indicates a different intention.
If one of the joint promisors is compelled to perform the entire contract, they can seek contribution from the
others. If any joint promisor fails to contribute, the remaining joint promisors must share the loss resulting
from that default equally.
Example: If A, B, and C jointly promise to pay D ₹3,00,000, D can compel any one of them to pay the full
amount.
Example: If A, B, and C are promised to pay D ₹3,00,000, and C cannot pay anything, A can be compelled
to pay the entire amount and is entitled to receive ₹1,50,000 from B.
3. Effect of Release of One Joint Promisor: Section 44 deals with the effect of releasing one joint promisor
in a joint promise. When two or more persons make a joint promise, if the promisee releases one of the joint
promisors, it does not discharge the other joint promisor or promisors from their obligations. The released
joint promisor is still responsible to the other joint promissor or promissors.
Example-
Where A, B, and C jointly promised to pay ₹9,00,000 to D. If D releases A from liability, it does not relieve B
and C of their obligations. B and C remain liable to pay the entire amount of ₹9,00,000 to D. Although A is
not liable to pay D, he is still liable to pay B and C, as he must contribute to the other joint promisors.
4. Devolution of Joint Rights: Section 45 of the Indian Contract Act deals with the devolution of joint rights
when a promise is made to two or more persons jointly. Unless stated otherwise in the contract, the right to
claim performance rests with the joint promisees during their joint lives. After the death of any joint promisee,
the right to claim performance rests with the legal representative of the deceased joint promisee, jointly with
the surviving joint promisees. After the death of the last surviving joint promisee, the right to claim
performance rests with the legal representatives of all joint promisees jointly.
Example- Where A promises to repay ₹5,00,000 with interest to B and C jointly. If B dies before the
repayment, the right to demand payment rests with B's legal representatives, jointly with C during C's lifetime.
After C's death, the right to demand payment rests with the legal representatives of B and C jointly.

Time and Place for Performance of the Promise

1. Time for Performance of Promise - Section 46: When a promisor is required to perform a promise without
any request from the promisee and no specific time mentioned for the performance, it must be done within a
reasonable time. The term "reasonable time" should be understood based on the specific facts and
circumstance of each case.
2. Time and Place for Performance of Promise - Section 47: When a promise is to be performed on a specific
day without a request from the promisee, the promisor can fulfil it at any time during regular business hours
on that day, at the appropriate place performance.
3. Application for Performance on a Specific Day - Section 48: When a promise is to be performed on a
specific day and the promisor is not required to perform it without a request from the promisee, the promisee
must request performance at a suitable time and place during regular business hours, as per the contract terms.
4. Place for Performance of Promise - Section 49: When a promise is to be performed without a request
from the promisee and no specific place is designated for performance, it is the responsibility of the promisor
to ask the promisee to specify a reasonable place for performance and to carry out the promise at that location.
5. Performance in Prescribed Manner or Time - Section 50: A promise can be fulfilled in any manner or at
any time specified or approved by the promise.

Performance of Reciprocal Promises

The law regarding the performance of reciprocal promises is outlined in Sections 51 to 58 of the Indian
Contract Act. Meaning of Reciprocal Promise: As per Sec. 2 (f), “Promises which form the consideration or
part of consideration for each other as called reciprocal promises.”
1. Section 51: Performance of Reciprocal Promises
When two parties make reciprocal promises, they must perform their respective promises simultaneously
unless the circumstances indicate otherwise. If one party is ready and willing to perform their promise but the
other party is not, the first party can sue for breach of contract.
Example- A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver
the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for the goods, unless
A is ready and willing to deliver them on payment.
52. Order of performance of reciprocal promises.
Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall
be performed in that order, and where the orders is not expressly fixed by the contract, they shall be performed
in that order which the nature of transaction requires.
Illustrations-
(a) A and B contract that A shall build a house for B at a fixed price. A’s promise to build the house must be
performed before B’ s promise to pay for it.
53. Liability of party preventing event on which contract is to take effect.
When a contract contains reciprocal promises and one party to the contract prevents the other from performing
his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to
compensation from the other party for any loss which he may sustain in consequence of the non-performance
of the contract.
Illustration-
A and B contract that B shall execute some work for A for a thousand rupees. B is ready and willing to execute
the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he
elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its
non-performance.
54. Effect of default as to the promise which should be performed, in contract consisting or reciprocal
promises.
When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its
performance cannot be claimed till the other has been performed, and the promisor of the promise last
mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must
make compensation to the other party to the contract for any loss which such other party may sustain by the
non-performance of the contract.
Example-A promises B to sell him one hundred bales of merchandise, to be delivered next day and B promises
A to pay for them within a month. A does not deliver according to promise. B’s promises to pay need not be
performed, and A must make compensation.
Section 55: Effect of failure to perform a fixed time, in contract in which time is essential.
Time constrained contracts are often of the essence of time and are very important to be completed within a
given frame of time. Any delay to the performance of such contract leads it to become voidable at the option
of an aggrieved party.
Section 56. Agreement to do impossible act.
“An agreement to do an act impossible in itself is void.”
The simple rationale behind it is those agreements are irrelevant and must not be considered by any sensible
person at all.
For example:
X promised Y to bring stars for her after their marriage. This agreement is void due to the impossibility of its
performance in normal circumstances.
Section 57 Reciprocal promise to do things legal, and also other things illegal.
Where persons reciprocally promise, firstly to do certain things which are legal, and, secondly under specified
circumstances, to do certain other things which are illegal, the first set of promise is a contract, but the second
is a void agreement.
For example:
X lends Y his house for living. He uses it to make a Casino forbidden in that state. Here X lending Y the land
is relevant but the part of Y using it for gambling is illegal and hence subject to omission.
Section 58 lternative promise, one branch being illegal
In the case of an alternative promise, one branch of which is legal and other other illegal, the legal branch
alone can be enforced.
Illustration- A and B agree that A shall pay B 1,000 rupees, for which B shall afterwards deliver to A either
rice or smuggled opium. This is a valid contract to deliver rice, and a void agreement as to the opium.

Qs. Discharge of a Contract: Discharge by Performance, Discharge by Agreement, doctrine of

impossibility; Discharge by Operation of Law, Discharge by Breach and Novation.
Ans. Discharge of contract means terminating the contractual relationship between the two or more parties
who entered into the contract previously. When the rights, obligations and duties of the parties come to an end
it is known as the discharge of contract. Discharge of contract also ceases the legally binding power of the
contract. Therefore, once a contract has been discharged the parties are no more obligated to each other and
the contract becomes void.

Various Modes of Discharge of a Contract

According to the provisions of the Indian Contract Act 1872, there are various modes of discharge of contract,
which are mentioned below:
1. Discharge of Contract by Performance: Once the parties to the contract fulfil their respective obligations
as agreed in the contract within the specific time and the manner as may be agreed, the contract is considered
discharged. This is also the general mode of discharge. Discharge of performance can be done by:
• Actual Performance: When all parties to the contract fulfil their agreed-upon responsibilities, it is
referred to as an Actual Performance. For example, A and B enter a contract, where B will sell his
iPhone to A at an agreed price of ₹15,000. B delivers the phone to A, and A pays the agreed price,
hence contract comes to an end by actual performance by both the parties to the contract.
• Attempted Performance (Tender or Offer of Performance): In cases where the promisor performs
his obligation but the promisee refuses to accept it, this is known as Tender or Attempted
Performance. For example, A and B enter a contract, where B will sell his iPhone to A at an agreed
price of ₹15,000. B dispatched the phone to A; however, A refused to accept the delivery. Here contract
comes to an end as B attempted the performance but A refused it.
2. Discharge by Mutual Agreement: According to Section 62 of the Indian Contract Act 1872, when parties
in a contract mutually decide to substitute the old contract with a new agreement or they agree to modify or
rescind the existing contract, in such a case the act states that there is no requirement for the original contract
to be performed. There are six ways by which a contract can be discharged by a mutual agreement, which are:
• Novation: When parties to a contract agree to substitute a new contract for the older one, this will be
a case of novation. This involves replacing the old contract with a new one, either between the same
parties or including a third party. For instance, if Company A owes money to Company B, and all
 parties agree that Company C will take over the debt, the original contract is discharged by novation.
In the case of innovation, the old contract comes to an end, and there is no need for the old contract to
be performed as parties have agreed to enter into a new contract in place of the old. In the supreme
court case of Lata Construction v Dr Rameshchandra Ramniklal Shah 1999 it was held that “there
should be a complete substitution of a new contract. It is in this situation that the original contract need
not be performed”.
• Alteration: Alteration of a contract takes place when one or more of the terms of the contract are
changed. In a case when the parties to a contract agree to alter it, the old contract will be rescinded, it
will not be required to be performed, and also the contract will be discharged by alteration. The terms
of the contract can also be altered by mutual agreement, and the alteration will have the effect of
substituting a new contract for the old one. An alteration may be a change in the amount of money, the
rate of interest, or the names of the parties. In other words, there is a very slight distinction between
novation and alteration. For example, Aramco contracted with Reliance to supply them with 10,000L
of crude oil for one year; however, after considering the increase in demand, Reliance asked Aramco
to increase its supply to 20,000L crude oil, and Aramco agreed to the same. Hence, this is termed as
an Alteration.
The difference between “novation and “alteration” is that in case of novation there may be a change
of parties but in case of alteration parties remain the same and only the terms of the contract are
changed.
• Recession
Recession which means cancellation of contract by mutual consent. A contract may be cancelled by
agreement between the parties at any time before it is discharged by performance. The cancellation of
agreement releases the parties form their obligation arising out of the contract.
Example: A promised to deliver certain goods to B on a certain date. Before the date of performance,
A and B mutually agree that the contract will not be performed. The parties have cancelled the contract.
• Remission
Remission means the acceptance of lesser sum than what was due from promisor. According to the
section 63, a person who has a right to demand the performance of a contract may:
I. Remit or give up the whole or part of a debt.
II. Extend the time for performance.
Example: A owes B Rs.5,000. A pays to B and B accepts in full satisfaction Rs.2000. The whole debt
is discharged. Where a promise remits a part of the debt and gives a discharge for the whole debt on
receiving a smaller amount, such discharge is valid.
• Merger: A merger happens when a party with lesser rights under a contract obtains superior rights by
the same party under a new contract. As inferior and superior rights may coincide in the same party, in
such a case both the rights combined lead to the discharge of the contract governing the inferior
rights. For example, Zudio rents DLF Ltd.'s building for a tenure of 20 years. 5 years after the contract,
DLF Ltd. offered Zudio to buy the building, and Zudio agreed to it. Here, Zudio has two rights; i.e.,
one accorded by the rent agreement, making them the renter, and the second by the sale agreement,
making them the owner. The former being an inferior right merges with the superior one and discharges
the rent contract.
• Waiver: Waiver means abandonment of rights. When one party to the contract deliberately abandons
their right under the contract, the other party is released from his part of obligations, else binding upon
it. Under the waiver, either a few or all the rights can be abandoned. For example, PNB Bank advanced
₹3 lakhs to Nirav Modi. On the due date, Nirav made a default on the payment of the loan amount and
only paid ₹2 lakhs instead of 3 lakhs. However, PNB accepted ₹2 lakhs in full as the final settlement
and also, waived their right to recover the loan amount.

3. Discharge of contract by Impossibility of Performance:

Impossibility of Performance is yet another ground on which the parties are discharged from their
obligations under the contract.
 • Initial Impossibility – According to Sec.56, “An agreement to do impossible act is void ab-initio.” It
means agreement which is obviously impossible cannot be binding, e.g., an agreement to discover
treasure by magic is void agreement.
• Subsequent Impossibility – Sometimes, a contract capable to be performed after formation becomes
impossible or unlawful and as a result void.
Doctrine of Frustration:
When performance of the contract becomes impossible the purpose is said to be frustrated. The Indian Contract
Act, of 1872 does not explicitly define the Doctrine of Frustration, however, Section 56 of the Act addresses
scenarios where a contract becomes impossible to fulfil or is rendered unlawful due to circumstances beyond
the promisor’s control. Sec. 56 of the Indian Contract Act, 1872 deals with different situations when it becomes
impossible to perform the contract. Impossibility may be at the time of making of agreement or may be
supervening impossibility or illegality.
Satyabrata Ghose v. Mugneeram Bangur & Co. (1954):
This seminal case established the principle that for frustration to occur, the event must fundamentally alter the
contract's nature, rendering it impossible to perform. The court emphasized that mere inconvenience or
financial loss does not constitute frustration.
• Destruction of subject-matter –When the parties make a contract for a particular subject matter, the
contract is discharged if the subject matter is destroyed without the fault of the promisor or
promise.Example: A, let out a banquet hall to B for a party on a certain day. The hall was destroyed by
fire before the date of the party. The plaintiff sued the defendant for damages. It was held that the
contract has become void and the defendant was not liable. Taylor v. Caldwell (1863): Though a
British case, its principles have significantly influenced Indian contract law. In this case, the court held
that contracts may be frustrated when the subject matter, essential for performance, is destroyed or
becomes unavailable due to unforeseen events.
• Death or Personal Incapacity –Where the performance of a contract depends upon the personal skill,
or qualification or the existence of a given person, the contract is discharged on the illness or incapacity
or the death of that person. In other words the death or illness of a particular person whose action is
necessary for the promised performance discharges the duty to render that performance. Example: A
and B contract to marry each other. Before the time fixed for the marriage, A dies. The contract
becomes void. This has been well-established in the case of Robinson v. Davison (1863) 3 B & S
826 where there was a contract between the plaintiff and the defendant’s wife who agreed to perform
piano at a concert of the plaintiff on a stipulated date. But due to sudden illness she was unable to
perform at the concert and this was informed to the plaintiffs on the morning of the date of
performance. This caused the concert to be postponed and caused losses to the plaintiff. The plaintiffs
filed for breach of contract. The court quashed their claim and said that the contract was frustrated as
she became ill without there being any mistake or negligence on her part.
• Change of Law –Contracts, which are lawful when made but become unlawful later due to change in
law, become impossible to be performed. A subsequent change in law may render the contract illegal
and in such cases the contract is deemed discharged. Impossibility created by law is valid excuse for
non-performance.Example: A sold to B 100 bags of sugar at Rs.150 per bag. But before delivery the
government banned the sale and purchase of sugar by private traders. The contract was discharged by
subsequent change in law.
• Declaration of War –A contract entered into with an alien enemy during war is illegal and void ab
initio. Contract entered into before the commencement of war is suspended during the war. However,
such contracts may be revived after the war is over if the nature of the contract so permits. Example:
A contracts to take in cargo for B at a foreign port. A’s government afterwards declared war against the
country in which the port is situated. The contract becomes void. Murlidhar Chiranjilal v.
Harishchandra Dwarkadas & Ors. (1962): In this case, the Supreme Court of India reiterated that
frustration requires a fundamental change in circumstances, making performance impossible. The
court held that when government requisitions property under wartime regulations, rendering a contract
for its sale impossible to perform, frustration applies.
• Discharge of Contract by Lapse of Time: A contract is discharged by lapse of time. The Limitation
Act, 1908 laws down that a contract should be performed within a specified period. If the contract is
 not performed and no legal action is taken by the promise within the period of limitation, he is deprived
of his remedy at law, the contract is terminated in such a case. Example: A owes Rs.10,000 to B. The
last date for the repayment of the loan has expired and B does not file a suit against A for three years.
B loses the rights to recover the money back.

4. Discharge of Contract by Operation of Law:

A contract terminates by operation of law in the following cases:
• Insolvency – The Insolvency Act provides for discharge of contracts under particular circumstances.
Where the court declares a person as insolvent, the rights and duties of such person are transferred to
the officer of court, known as Official Receiver. After the order of the court such person is discharge
from his liabilities incurred before his insolvency. Example: A promises to sell his house to B for Rs.10
lacs. Before the performance of the contract A is declared insolvent by court. The contract between A,
& B is discharged.
• Merger takes place when an inferior right available to a party merges into a superior right available to
the same party under, some other contract. As a result of merger, the former contract stands discharged
automatically. Example: A was a part-time lecturer at Mumbai University. After some time, he was
made a full-time lecturer. Hence, when A, a part-lime lecturer was made full-time lecturer, the contract
of part-time lectureship is discharged by merger.
• Unauthorised Material Alteration – Where a party to the contract makes any material alteration in
the contract, without the consent of the other party, the contract can be avoided by the other Party. A
material alteration is one, which changes the legal identity or character of the contract or the rights and
duties of the parties to the contract. An alteration which is not material or which is authorized will not
affect the validity of the contract. An alteration even by a stranger will entitle the other party to avoid
the contract, but where the alteration is unintentional, contract cannot be avoided. Example: A executes
a promissory note in favour of B for Rs.3,000. B by alteration exceeds the amount from Rs.3,000 to
30,000. A may refuse to pay Rs.3,000.

5. Discharge of Contract by Breach:

A breach of contract occurs when a party renounces his/her liability under the contract, or by his/her own act
makes it impossible that he/she should perform his/her obligations under the contract or totally or partially
fails to perform his/her part of the contract. Breach of contract may be of two kinds-
• Actual Breach takes place in course of or at the time of performance. Example: A degrees to deliver
10 bags of rice on 10th September. He does not deliver the wheat on the day. This is an actual breach
of contract.
• Anticipatory Breach occurs when promise expressly or implicitly refuses to perform his/her party of
obligation, before due date of performance has arrived. This type of breach may happen in two ways:
Express Breach is in which a party to the contract communicates to the other party, his intention not
to perform the contract, before the due date of performance has arrived. Example: A contracts with B
to supply 50 bags to wheat for Rs.10,000 on 1stMarch. On 15th February, A informs B that he will not
be able to supply the wheat. This is express rejection of contract.
Implied Breach is when a party to the contract does an act, which makes the performance of the
contract impossible. Example: A promises to sell his horse to B on 1st Mrach and before that date he
sells the same horse to C.

Qs. Quasi Contracts: Obligations Resembling those Created by Contract, Concept and Classification.
Ans. Quasi-contracts are not real contracts but seem like real contracts, as obligations on the parties are not
created by the parties themselves but put upon by the courts on the parties. It is called semi and Constructive
Contract as all the essential elements are not present in this Contract. It is based on the principle of Equity it
ensures that no one should be deprived of justice and injustice should not be done only because there are
missing elements of the valid contract.
In the Indian Contract Act, quasi-contracts are not mentioned expressly but Chapter 5 impliedly mentions the
provisions related to quasi-contracts. Sections 68 to 72 explain the nature of the Quasi contract.
What Are Quasi-Contracts?
A quasi-contract is a legal remedy developed by courts to address situations where one party is unjustly
enriched at the expense of another. Despite the absence of a formal agreement or mutual consent, quasi-
contracts impose obligations on the benefiting party to rectify the imbalance.
The term “quasi” originates from the Latin word meaning “as if.” Thus, a quasi-contract is treated as if it were
a contract, even though it lacks the defining elements of one, such as offer, acceptance, and consideration.
Features of Quasi-Contracts
A quasi-contract is a legal construct designed to prevent unjust enrichment, ensuring fairness when one party
benefits at the expense of another without a formal agreement. Despite the absence of mutual consent, quasi-
contracts impose obligations that resemble those of an actual contract. Below are the key features of quasi-
contracts:
1. Absence of Agreement
Quasi-contracts arise in situations where there is no prior agreement or understanding between the parties.
Unlike traditional contracts, they do not depend on offer, acceptance, or consideration. The obligations are
imposed by law to address specific circumstances.
2. Imposed by Law
Quasi-contracts are created by the courts to ensure fairness. These obligations are not based on the parties’
intention but are imposed by law to rectify instances of unjust enrichment, ensuring that no individual gains
at another’s expense. Remedy of Restitution
The primary objective of a quasi-contract is to restore the aggrieved party to the position they were in before
the unjust enrichment occurred. This is achieved through restitution, which requires the benefiting party to
compensate the aggrieved party for the value of the benefit received.
3. Prevention of Unjust Enrichment
The essence of a quasi-contract is to prevent unjust enrichment. It ensures that no party unfairly benefits
from a situation while the other incurs a loss or is deprived of their rightful dues.
4. Involuntary Nature
Quasi-contractual obligations are involuntary, meaning they are imposed by the court regardless of the consent
or intention of the benefiting party. The focus is solely on achieving equity and justice.
5. Non-Gratuitous Nature
The benefits conferred under a quasi-contract must not be gratuitous. The court intervenes only when goods
or services are provided with an expectation of compensation, even if not explicitly agreed upon.
6. Applicable to Specific Situations
Quasi-contracts are applicable in narrowly defined scenarios, such as the supply of necessities to individuals
incapable of contracting, payment by mistake, or benefits derived from non-gratuitous acts. These are codified
under Sections 68 to 72 of the Indian Contract Act, 1872.
7. Right Against a Specific Person
A quasi-contract creates an obligation enforceable against a specific individual or entity who has received an
undue benefit. Unlike torts, the remedy is not against the world but is limited to the benefiting party.

Types of Quasi-Contracts
Under Indian law, quasi-contracts are specifically outlined in Sections 68 to 72 of the Indian Contract Act,
1872. These provisions highlight situations where quasi-contractual obligations may arise:
1. Section 68: Necessaries Supplied to a Person Incapable of Contracting
If a person supplies necessities to someone who cannot enter into a contract (e.g., a minor or a mentally
incapacitated individual), they are entitled to reimbursement from the incapacitated person’s property.
Illustration: A supplies food and clothing to B, a minor without guardians. A can claim reimbursement from
B’s estate.
2. Section 69: Payment by an Interested Person
When a person pays money on behalf of another to protect their interests, they are entitled to reimbursement.
Illustration: A tenant pays the property tax on the landlord’s behalf to prevent eviction. The landlord is
obligated to reimburse the tenant.
3. Section 70: Obligation of the Person Enjoying Non-Gratuitous Benefits
If a person lawfully provides goods or services without the intention of doing so gratuitously, and the recipient
benefits, the recipient must compensate for the benefit.
Illustration: A supplies goods to B, believing B had ordered them. B uses the goods. B must pay A for the
value of the goods.
4. Section 71: Responsibility of Finder of Goods
A person who finds someone else’s goods and takes them into their custody has a responsibility to return them
to the rightful owner or compensate for any loss or damage.
Illustration: A finds a lost wallet belonging to B. A must take reasonable care of the wallet and return it to B.
5. Section 72: Money Paid by Mistake or Under Coercion
If money is paid under a mistake or coercion, the recipient is obligated to return it.
Illustration: A accidentally transfers ₹5,000 to B’s account. B is legally required to return the amount.

Landmark Casers on Quasi-Contracts

Moses v. MacFarlane (1760)
This case laid the foundation for the concept of quasi-contracts. The court held that the defendant must repay
money received under a mistake of fact to prevent unjust enrichment.
State of Madhya Pradesh v. Bhailal Bhai (1964)
The Supreme Court of India ruled that the government must refund taxes paid under a mistake of law,
reinforcing the quasi-contractual obligation to return money paid by mistake.
Spolka Anonyme v. Fairbairn Lawson Combe Barbour Ltd. (1942)
The court clarified that obligations arising from unjust enrichment should be treated separately under the
concept of restitution or quasi-contracts, not under tort law.
Hari Ram Sheth Khandsari v. Commissioner of Sales Tax (1958)
The court recognised the excess payment of taxes due to a mistake as a situation warranting restitution under
quasi-contractual principles.
Limitations of Quasi-Contracts
While quasi-contracts provide a fair remedy in many cases, they have certain limitations:
1. Lack of Mutual Intent: The absence of consent can lead to disputes over the scope of obligations.
2. Complexity in Proving Unjust Enrichment: Claimants must demonstrate that the enrichment was
unjust, which can be challenging.
3. Restricted Applicability: Quasi-contracts do not cover all scenarios of unfair benefit, such as those
involving fraud or criminal acts.
Difference Between Quasi-Contracts and Express Contracts
Aspect Express Contract Quasi-Contract

Based on offer, acceptance, and mutual Imposed by law without mutual

Formation
consent. consent.

Requires mutual intention to create a

Intent of Parties Intention of parties is irrelevant.
contract.

Enforceable through restitution

Enforcement Enforceable through established terms.
principles.

Limited to preventing unjust

Scope Covers a wide range of agreements.
enrichment.

Qs. Remedies for Breach of Contract: Damages, Remoteness of Damages, Mitigation of Damages,
Penalty and Liquidated Damages.
Ans. In a general sense, breach is a failure to act in a way that is expected or promised. Failure to enforce the
conditions of a contract, written or oral, without a legal justification, is a breach of contract. This may include
not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or
significantly different goods, not providing a bond when required, being late without excuse, or any act which
shows the party will not complete the work. Remedies for breach of a contract are based on the Latin theory
that ‘Ubi jus, ibi remedium‘ signifies ‘where there is a right, there is a remedy.’

Remedies for Breach of a Contract

1. Suit for Damages
The term ‘damages’ may be defined as the monetary compensation payable by the defaulting party to the
aggrieved party for the loss suffered by him. The aggrieved party, may therefore bring an action for damages
against the party who is guilty of the breach of the contract. And the party, guilty of the breach, liable to pay
damages to the aggrieved party. The primary purpose of damages is to compensate the complainant and, if the
breach of contract did not occur, put him in the same position he would have held. Accordingly, it should be
noted that the damages are awarded by way of compensation for the injury suffered by the complainant and
not for the penalty of the default party.
In Common Cause v. Union of India 1999 SC, Supreme Court held that Damages are the pecuniary
compensation, obtainable by success in an action, for a wrong which is either a tort or a breach of contract,
the compensation being in the form of a lump sum which is awarded unconditionally.

Types Of Damages for Breach Of Contract

• Ordinary/ General Damages: Section 73 of the Indian Contract Act deals with general/direct
damages; that is, damages which, inevitably, occurred in the ordinary course of the proceedings as a
consequence of the violation, or which the parties realised (when they entered into the contract) were
likely to result from the breach thereof.
• Special Damages: The remedy for the special damages inflicted to the aggrieved party by the special
conditions attached to the contract will be special damages. At the time of making the contract, a party
may put some details about the special circumstances affecting it before the other party and warn him
that if the contract is not properly executed, due to those special circumstances, he will incur certain
specific types of losses. If the other party continues to sign the contract, it would mean that it has
agreed to be liable for special damages which could be incurred by the poor performance of its
obligations. Compensation for certain special components. Losses are considered special losses.
In Govind Rao v. Madras Railway Company, 1898 Govind Rao was a tailor and some sewing
machines were sent by rail to a place in Tamil Nadu. He decided to participate in a fair in the village
where he wanted to stitch clothes and make money. The train, however, reached after the fair ended.
Govind Rao was therefore unable to participate in the fair. For the loss of income, he sued the railway
company. It was held that he was unable to recover, as the special circumstances were not brought to
the attention of the railway company at the outset.
• Vindictive Damages: At time breach of contract by one party not only results in monetary loss to the
injured party but also subjects him to disappointment and mental agony. In such cases monetary
compensation alone cannot provide an appropriate remedy to the sufferings of the injured party. Thus
there is a need for vindictive damages. Vindictive damages do not form part of the contractual laws.
The idea is borrowed from English legislation. There are two forms of contracts where Indian courts
consider vindictive damages to be awarded:
Breach of a marital contract. In this situation, the amount of damage would depend on the degree of
the feeling of the party’s injury. One would be ruined, the other might not worry so much.
If a banker refuses to honour a customer’s cheque while keeping his money in his hands, the customer
experiences a loss of prestige.
• Nominal Damages: Often, an individual brings a case for breach of contract and proves that a breach
has actually happened but does not prove that any real damage has been sustained. These damages are
awarded purely in order to recognise the injured party’s right to seek damages and are of a very limited
sum.
• Liquidated Damages and Penalty: In the event the contract is violated by either party, the contracting
party will stipulate in the contract an amount of money to be paid. Depending on the intent of setting
the amount, it can be called ‘liquidated damages’ or ‘penalty’. The goal of setting a sum as ‘liquidated
damages’ is to compensate the injured party for the loss caused by the other’s infringement. It is
 therefore a rational pre-estimation of the loss due to non-performance of the contract. The object of
providing a ‘penalty’ in a contract is to prevent a party from violating it and if the contract is broken
anyway, to provide a special punishment. It is also an amount that has no relation to the probable loss,
and is usually disproportionate to the damages that are likely to accrue as a consequence of the
violation.

2. Specific Performance
Specific performance is an equitable remedy where the court orders the breaching party to fulfill their
contractual obligations as agreed.
When Applicable:
Unique Goods or Property: Specific performance is commonly used in cases involving the sale of unique
goods or immovable property, where damages alone are insufficient to compensate the aggrieved party.
Contractual Obligation: The remedy is available if the contract is still enforceable and not void or voidable.
Legal Basis:
Specific performance is governed by Section 14 of the Specific Relief Act, 1963, which outlines the
circumstances under which this remedy can be granted.

3. Rescission of Contract
Rescission is the cancellation of the contract, which effectively nullifies the agreement and releases both
parties from their obligations.
When Applicable:
Misrepresentation or Fraud: Rescission can be sought if the contract was entered into based on fraudulent
misrepresentation or undue influence.
Mutual Mistake: If both parties made a fundamental mistake about a fact essential to the contract, rescission
may be appropriate.
Legal Basis:
Rescission is governed by Sections 19 and 20 of the Indian Contract Act, 1872, which deal with contracts
entered into under misrepresentation, fraud, or mistake.

4. Injunction
An injunction is a court order that directs a party to refrain from performing a specific act or to cease an
ongoing activity.
Types of Injunctions:
Permanent Injunction: Issued after a trial, it provides a long-term solution to prevent future breaches or
harm.
Temporary Injunction: Granted before the trial to preserve the status quo and prevent irreparable damage.
Legal Basis:
Injunctions are governed by the Specific Relief Act, 1963, particularly Sections 36 to 42, which outline the
conditions and procedures for obtaining injunctive relief.

5. Quantum Meruit
Quantum meruit, meaning “as much as he has earned,” is a remedy where a party is compensated for the value
of work done or services rendered when a contract is partially performed or terminated.
When Applicable:
Incomplete Contracts: If a contract is terminated before full performance, quantum meruit allows recovery
for the work completed up to that point.
Unjust Enrichment: This remedy prevents the breaching party from benefiting unjustly at the expense of the
non-breaching party.
Legal Basis:
The principle of quantum meruit is recognized under Indian contract law and applied based on the specific
facts and circumstances of the case.

Remoteness of damage
The principle of remoteness of damage in contract law plays a critical role in determining the extent to which
a party is liable for damages arising from a breach of contract. It helps distinguish between losses that are
recoverable and those that are too remote or unforeseeable to give compensation. The doctrine ensures that a
defendant is only liable for the consequences that are reasonably foreseeable at the time of contract formation,
thereby preventing disproportionate and unfair liability.

Historical Development of Remoteness of Damage

The concept of remoteness has evolved over time to address the practical and legal complexities associated
with assessing damages in breach of contract cases. Historically, parties were often held accountable for any
harm arising from their failure to perform contractual obligations. However, as commerce expanded and
contracts became more complex, courts began to recognise the need for a more nuanced approach to the
assessment of damages.
The landmark case of Hadley v. Baxendale (1854) is often cited as the starting point for modern remoteness
doctrine in contract law. The case involved a mill owner (Hadley) who contracted with a carrier (Baxendale)
to deliver a broken crankshaft to a manufacturer for repairs. Baxendale delayed the delivery, which in turn
delayed the reopening of Hadley’s mill. Hadley sought to recover lost profits caused by the delay, but the court
ruled that these damages were too remote, as Baxendale could not have reasonably foreseen the specific
financial losses resulting from the delay.
In its judgement, the court established the two-part rule for assessing remoteness of damages:
1. Natural Consequences: Damages that arise naturally from the breach of contract in the usual course
of things are recoverable.
2. Special Circumstances: Damages that arise from special circumstances must be within the reasonable
contemplation of both parties at the time the contract was made.
In Hadley v. Baxendale, the carrier was not aware that the delay in delivering the crankshaft would cause the
mill to remain idle and result in significant financial losses. Therefore, the court ruled that these damages were
too remote and could not be recovered.

Tests for Determining Remoteness of Damage

In determining whether damages are too remote, courts generally apply two main tests:
1. The “But For” Test: This test asks whether the harm would have occurred “but for” the defendant’s breach
of contract. It establishes a factual connection between the breach and the resulting harm. If the damage would
not have occurred without the defendant’s breach, it passes the “but for” test. However, this test is insufficient
on its own because it does not address the issue of foreseeability.
2. The Foreseeability Test: The foreseeability test evaluates whether the damages were a foreseeable
consequence of the breach. The court considers whether a reasonable person in the position of the breaching
party would have anticipated the likelihood of the harm at the time the contract was made. If the harm was
foreseeable, the damages are not too remote.

Limitations on Recoverability of Damages

The principle of remoteness of damage in contract law imposes clear limitations on the types of damages that
can be recovered. Some of the key limitations include:
1. Direct vs. Indirect Damages
Damages that directly result from a breach of contract are generally recoverable, while indirect or
consequential damages may not be. Indirect damages are those that arise from intervening events or are not
an immediate result of the breach.
2. Mitigation of Damages
The non-breaching party is under a legal obligation to mitigate their losses. This means they must take
reasonable steps to reduce the damages they suffer as a result of the breach. If the claimant fails to mitigate
their losses, they may not be entitled to recover damages for losses that could have been avoided.
3. Liquidated and Unliquidated Damages
Some contracts include liquidated damages clauses, where the parties agree in advance on the amount of
damages to be paid in case of a breach. These clauses are enforceable as long as they represent a genuine pre-
estimate of the losses. If the amount is disproportionate to the actual harm suffered, the clause may be
considered a penalty and deemed unenforceable. In contrast, unliquidated damages are determined by the
court based on the actual losses suffered.

Case Laws on Remoteness of Damage

A number of landmark cases have shaped the doctrine of remoteness of damage in contract law. Below are a
few notable examples:
1. Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949)
In this case, the plaintiff ordered a boiler from the defendant, which was delivered late. As a result, the plaintiff
suffered lost profits. The court distinguished between ordinary business losses, which were recoverable, and
special profits from a highly lucrative government contract, which were deemed too remote because they were
not foreseeable by the defendant.
2. Koufos v C Czarnikow Ltd (The Heron II) (1969)
In this case, the defendant’s ship was delayed, resulting in the plaintiff missing a market to sell sugar. The
court held that the damages were not too remote, as the defendant could have reasonably foreseen that market
fluctuations might result in financial loss due to the delay.
3. Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) (2008)
In this case, a ship charterer was late in returning a vessel, which caused the owner to miss out on a more
lucrative charter. The court ruled that the loss was too remote, as the financial consequences of the missed
charter were outside the contemplation of the parties when the contract was made.

Distinction Between Contract and Tort Law

While the concept of foreseeability applies to both contract and tort law, the standard for remoteness of damage
differs in these two areas of law. In tort law, the test for remoteness is generally less stringent than in contract
law. This is because tort law aims to protect individuals from harm caused by the wrongful actions of others,
whereas contract law is concerned with enforcing the promises made between parties.
In contract law, parties are generally held to a higher standard of foreseeability because they have had the
opportunity to negotiate the terms of their agreement and allocate the risks accordingly. As a result, damages
in contract law are more restricted, particularly when it comes to indirect or consequential losses.
In H. Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978), the defendant supplied faulty feed bins
that led to the death of the plaintiff’s pigs. The court held that the defendant could foresee the possibility of
illness or death of the pigs due to the faulty bins, even though the exact nature of the harm was not foreseeable.
The ruling reaffirmed that foreseeability in contract law requires a higher threshold than in tort cases.

UNIT – IV
Specific Relief Act, 1963
4.1. Meaning of Specific Relief, Specific Performance of Contracts,
4.2. Contracts which cannot be specifically enforced, against whom contracts may be specifically enforced,
4.3. Injunction and its kinds
4.4. Declaratory Suits
4.5. Rescission and Cancellation of Contract; Discretion of Court.

Qs. Meaning of Specific Relief, Specific Performance of Contracts.

Ans. Specific relief refers to a legal remedy provided by courts to enforce a specific obligation or obtain a
specific performance from a party in a civil dispute. It is a discretionary remedy granted by the court and is
aimed at ensuring justice in cases where monetary compensation is not an adequate solution. The Specific
Relief Act, 1963 is an Indian legislation that governs the principles and procedures for granting specific relief.
It defines the various forms of specific relief and lays down the conditions under which such relief can be
granted.
Meaning of Specific Relief
Specific relief is a remedy that is specific to the subject matter of the dispute. It aims to restore the party to
the position he or she would have been in if the contract or agreement had been performed as agreed. It may
involve compelling a party to carry out their contractual obligations or restraining them from committing a
wrongful act.
Specific relief is an equitable remedy, which means it is based on principles of fairness and justice rather than
strict legal rules. It is discretionary in nature, and the court considers various factors, such as the nature of the
contract, the conduct of the parties, and the practicality of enforcing the relief, before granting specific relief.
Nature of Specific relief
A. Specific Performance: Specific relief may involve the court ordering the performance of a specific act as
required by a contract or legal obligation.
B. Injunctions: Specific relief can also include the issuance of injunctions, which are court orders that prohibit
a person from doing a particular act.
C. Discretionary Remedy: Specific relief is a discretionary remedy, meaning that the court has the discretion
to grant or deny it based on the circumstances of each case.
D. Alternative to Damages: Specific relief is an alternative to monetary damages and aims to restore the
parties to their original positions.
Scope of Specific Relief
The scope of specific relief is broad and covers a wide range of contractual and civil disputes. It applies to
cases involving contracts for the sale or lease of property, partnerships, intellectual property rights, specific
performance of trusts, and breach of contract, among others.
A. Contracts: Specific relief can be sought in cases involving breach of contract, where the court may order
the defaulting party to perform their contractual obligations.
B. Property Disputes: Specific relief can be granted in cases concerning the ownership or possession of
property, where the court may order the restoration of possession or specific acts related to the property.
C. Trusts and Trustees: Specific relief is available in cases involving trusts and trustees, allowing the court
to enforce the duties and obligations of trustees.
D. Tortious Acts: Specific relief can be sought in cases involving tortious acts, where the court may grant
injunctions to prevent or restrain the wrongful actions of individuals.
E. Intellectual Property: Specific relief is available in cases of infringement of intellectual property rights,
where the court may order the cessation of the infringing activity.
F. Other Circumstances: The court has the power to grant specific relief in other cases as well, depending
on the circumstances and the relief sought.

Specific performance of contract under section 10

Section 10 of the Specific Relief Act, 1963, states “Cases in which specific performance of contract
enforceable.
Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion
of the court, be enforced—
(a) when there exists no standard for ascertaining actual damage caused by the non-
performance of the act agreed to be done; or
(b) when the act agreed to be done is such that compensation in money for its non-performance would not
afford adequate relief.
I. No standard for ascertaining damages
Specific performance of a contract is permitted when there exist no standard of ascertaining actual damages
caused by the breach of contract. If the damage caused by the breach of contract is ascertainable, the remedy
available is a claim for damages rather than specific performance of the contract.
Example where A agree to buy, and B agrees to sell, a picture by a dead painter and two rare China vases, A
may compel B specifically to perform this contract, for, there is no standard for ascertaining the actual damage
which would be caused by its non-performance.
For instance, if the article sold is such that it is available in the market, the loss is ascertainable on the basis
of the difference between the contract price and the market price on the date of breach of contract. In such a
situation, specific performance is not permitted.
II. When money compensation would not provide adequate relief
Specific performance of a contract is also permitted when the act agreed to be done in such that compensation
in money for its non-performance would not afford adequate relief.
Ram Karan v. Govind Lal AIR 1999 Raj There was an agreement for the sale of agricultural land. The buyer
had paid full sale consideration to the seller, but the seller even then avoided executing the sale deed as per
the agreement. The buyer brought an action for the specific performance of the contract, viz., he prayed for a
direction to the seller to execute the sale deed.
It was held that the case was covered by section 10(b) of the Specific Relief Act therefore, the seller was
directed to specifically performs the contract by executing sale deed in favour of the buyer.

Qs. Which cannot be specifically enforced, against whom contracts may be specifically enforced.
Ans. The concept of specific enforcement of contracts is covered under the Specific Relief Act, 1963, and
not directly under the Indian Contract Act, 1872. However, the principles governing contracts that cannot
be specifically enforced are rooted in contractual obligations as outlined in the Indian Contract Act, 1872.
Section 14 of the Specific Relief Act, 1963 explicitly provides a list of contracts that cannot be specifically
enforced. The rationale behind these exclusions is to avoid compelling parties into agreements that require
constant supervision or involve personal volition.
Contracts That Cannot Be Specifically Enforced Under Section 14
Section 14 of the Specific Relief Act, 1963, specifies that certain contracts cannot be specifically enforced.
These include:
1. Contracts for Non-Performance of Continuous Duty
Contracts that require ongoing supervision by the court are not enforceable through specific performance.
Courts are not equipped to monitor the continuous execution of such contracts.
Example: A contract to construct a building requiring continuous monitoring over several years.
Case Law: Rudrappa v. Shivappa (AIR 2004 SC 4143) – The court held that contracts involving continuous
duties requiring supervision cannot be specifically enforced.
2. Contracts That Are Too Vague to Be Enforced
If a contract is uncertain and cannot be precisely defined or enforced without further agreements, it cannot be
specifically performed.
Example: A contract where A agrees to sell "a reasonable portion of his land" to B without specifying the
exact area or boundaries.
Case Law: Karuppan Chettiar v. Ramasami Chettiar (AIR 1963 SC 224) – The Supreme Court ruled that
uncertain and vague contracts cannot be specifically enforced.
3. Contracts Where Compensation is an Adequate Remedy
Contracts where monetary compensation can adequately compensate for the non-performance are not
specifically enforced.
Example: A contract for the supply of generic goods available in the market, where the injured party can buy
similar goods elsewhere and claim damages instead.
Case Law: Damodar v. Secretary of State for India (1904 ILR 28 Bom 160) – The court refused specific
performance, stating that damages were a sufficient remedy.
4. Contracts Dependent on Personal Skills or Volition
Contracts that require personal qualifications, artistic skills, or volition cannot be specifically enforced, as they
involve individual discretion and subjective performance.
Example: A contract between a film producer and an actor where the actor is required to perform in a movie.
Case Law: Lumley v. Wagner (1852 EWHC Ch J96) – A contract requiring personal performance was held
unenforceable through specific performance.
5. Contracts for Determinable Relationships
If a contract is terminable at will, it cannot be specifically enforced since its continuation is at the discretion
of either party.
Example: An employment contract where an employer has the right to terminate the employee at any time.
Case Law: Nandganj Sihori Sugar Co. Ltd. v. Badri Nath Dixit (AIR 1991 SC 1525) – The Supreme Court
ruled that a contract of personal service is determinable and cannot be specifically enforced.
6. Contracts Opposed to Public Policy or Involving Illegal Acts
Contracts that are against public policy, illegal, or immoral cannot be specifically enforced.
Example: A contract between two businesses to fix prices and create a monopoly.
Case Law: Gherulal Parakh v. Mahadeodas Maiya (1959 AIR SC 781) – The Supreme Court ruled that a
contract opposed to public policy is void and unenforceable.
7. Contracts Requiring Court Supervision
Contracts requiring prolonged court oversight are not specifically enforced since courts do not have the
machinery to monitor execution over time.
Example: A contract to operate a joint venture indefinitely under court supervision.
Case Law: Co-operative Insurance Society Ltd. v. Argyll Stores (Holdings) Ltd. (1997) – The House of Lords
held that specific performance should not be granted where constant supervision by the court is required.
Conclusion
Specific performance is an exceptional remedy, and courts exercise discretion while granting it. The Specific
Relief Act, 1963, under Section 14, provides clear guidelines on contracts that cannot be specifically enforced.
The underlying principle is that contracts involving continuous obligations, vagueness, reliance on personal
volition, or alternative remedies through compensation are better suited for damages rather than specific
performance. Judicial precedents further reinforce these principles, ensuring fairness and practicality in
contract enforcement.
Understanding these limitations is crucial for parties entering into contracts to determine the appropriate
remedies available in case of breach.

Person for or against whom contracts may be specifically enforced (sections 15-19)
The Specific Relief Act, 1963, provides remedies to enforce contractual obligations through specific
performance when monetary compensation is inadequate. Sections 15-19 of the Act deal with persons for or
against whom contracts may be specifically enforced.
Section 15: Who May Obtain Specific Performance
This section specifies the persons who are entitled to seek specific performance of a contract. The following
persons may enforce specific performance:
1. Party to the Contract
A party to the contract can enforce its specific performance. This ensures that contracting parties can claim
legal remedies if the other party defaults.
Case Law: A.K. Lakshmipathy v. Rai Saheb Pannalal Hiralal (2003) The Supreme Court held that a person
who is a party to the contract has the right to seek specific performance if all conditions are met.
2. Representative-in-Interest or Principal
Legal representatives or assignees of the contracting parties can enforce specific performance unless the
contract was of a personal nature.
Example: If A contracts to sell a piece of land to B but dies before execution, B can enforce the contract
against A’s legal heir.
Case Law: Ardeshir Mama v. Flora Sassoon (1928) The Privy Council ruled that an assignee could enforce
the contract if the assignment was valid.
3. Beneficiary under Family Arrangement
A person entitled under a family settlement can enforce the contract.
Example: If members of a family agree to distribute ancestral property and one-party reneges, the aggrieved
party can seek specific performance.

Section 16: Personal Bars to Relief

This section lists conditions under which a person is barred from seeking specific performance.
1. Lack of Readiness and Willingness
The plaintiff must prove that they were ready and willing to perform their part of the contract.
Case Law: His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar (1996) The Supreme Court
held that failure to prove readiness and willingness disentitles the plaintiff from relief.
2. Unlawful Consideration
A contract based on unlawful consideration cannot be specifically enforced.
Example: If a contract is entered into for an illegal purpose, no party can enforce it.
3. Lack of Mutuality
If one party cannot be compelled to perform, the other cannot enforce specific performance.
Case Law: Sushila Devi v. Rama Prasad (1976) The court held that mutual obligations must exist for
specific performance to be granted.

Section 17: Contract to Sell Immovable Property Not Enforceable in Certain Cases
This section deals with contracts for the sale of immovable property where the seller has no title.
1. Seller Lacking Ownership
If the seller does not have ownership of the property at the time of contract, specific performance cannot be
enforced.
Example: If A sells land to B but does not own it, B cannot enforce specific performance.
Case Law: K.K. Verma v. Union of India (1954) The court ruled that specific performance cannot be granted
if the seller lacks a valid title.

Section 18: Effect of Declaration of Title in Favor of Plaintiff

This section provides that if the defendant subsequently acquires ownership, the contract may be enforced
against them.
1. Acquiring Interest Post-Contract
If the seller acquires title after entering into the contract, the buyer can enforce specific performance.
Example: A contracts to sell a property to B but does not own it at the time. Later, A acquires ownership. B
can enforce specific performance.
Case Law: Abdul Kader Rowther v. P.K. Sarada Ammal (1970) The court held that specific performance
could be enforced if the seller later acquires ownership.

Section 19: Against Whom Contracts May Be Specifically Enforced

This section identifies persons against whom specific performance may be enforced:
1. Parties to the Contract
Specific performance can be enforced against the contracting party.
Example: If A enters into a contract with B and refuses to perform, B can seek enforcement against A.
Case Law: Kalyanpur Lime Works Ltd. v. State of Bihar (1954) The court upheld the enforcement of a
contract against the original contracting party.
2. Legal Representatives
If the original party dies, specific performance can be sought against their legal representatives.
Example: If A contracts with B to sell property and dies, B can enforce the contract against A’s heirs.
Case Law: Nathulal v. Phoolchand (1970) The Supreme Court held that a contract can be enforced against
legal heirs if the obligation is not personal.
3. Transferees with Notice
If a third party purchases the property with notice of the contract, they can be compelled to perform.
Example: If A agrees to sell land to B but later sells it to C, B can enforce the contract if C was aware of it.
Case Law: Durga Prasad v. Deep Chand (1954) The Supreme Court ruled that a transferee with notice of
the prior contract must comply with it.
4. Government
In certain cases, contracts involving government properties may be enforced.
Case Law: Motilal Padampat Sugar Mills v. State of Uttar Pradesh (1979) The Supreme Court held that
the government can be held accountable for contractual obligations.

Conclusion
Sections 15-19 of the Specific Relief Act, 1963, outline the persons for or against whom contracts may be
specifically enforced. These provisions ensure that contractual obligations are honored while balancing the
rights and liabilities of parties involved. Courts have consistently interpreted these sections to uphold the
principles of fairness and justice in contractual enforcement.

Qs. Injunction and its kinds

Ans. Normally, the case lasts for a very long time and if the case is related with the property, then it becomes
necessary to keep the property intact till the final disposal of the suit. If the conditions are charged by either
of the parties, then it may cause irreparable loss to other party. Under this situation, the court passes an order
to maintain the status quo. This order is injunction.

What is an injunction?
Injunction is an order or decree by which a party to an action is required to do or refrain from doing a particular
act or thing.
Different definitions of injunction have been given by different jurists:
According to Halsbury: Injunction is such judicial proceedings whereby the order is passed and given to any
party for doing or not doing any act.
According to Barmi Dictionary: Injunction is such order by which any person is prevented from interfering
in the right of another or prevented from threatening to interfere in the right of another.
In State of Rajasthan Vs Randheer Singh (A.I.R. 1972, the High Court of Rajasthan while defining
injunction has said that the injunction is such specific order of the court which is issued to prevent such
wrongful act which has been commenced or to prevent the threatening to commence such act.

An injunction has 3 characteristics-

a) It is a judicial process
b) The object attained thereby is restraint or prevention and in some cases of doing certain acts
c) The thing restrained or prevented is a wrongful act.
Thus, injunction is such order of the court which is issued by it, at any stage of the case, to maintain the status
quo of the disputed property till the final disposal of the case or till further orders.
Specific Relief Act, 1963 makes provision for Perpetual injunction (Sec 38) and Mandatory injunctions (Sec.
39), while temporary injunction is granted under the Civil Procedure Code, 1908.

Type of Injunction
1.Temporary injunction-
Temporary injunctions are those which remain in force until specified time or till date of next hearing of the
case, or until further orders of the court. Such injunctions can be granted at any stage of the suit and are
governed by Order 39 of the Code of Civil Procedure, 1908 and not by Specific Relief Act, 1963. Gujarat
Bottling Co. Ltd. vs. Coca Cola Company 1995 SC The object of the interlocutory injunction is to protect
the plaintiff against injury by violation of his right for which he could not be adequately compensated in
damages recoverable in the action if the uncertainty were resolved in his favour at the trial.
Essentials to Avail Temporary Injunction
▪ The plaintiff must establish a prima facie case in their favor.
▪ The plaintiff must demonstrate that they will suffer irreparable injury or harm if the injunction is not
granted.
▪ The court will weigh the balance of convenience.
o This means considering whether it is more just and convenient to grant the injunction or to
deny it.
o The court takes into account the interests of both parties and the public interest in making this
determination.
▪ The plaintiff must show that there is no other adequate remedy available. If monetary damages can
adequately compensate the plaintiff, the court may be less inclined to grant an injunction.

2. Permanent injunction-
Section 37(2) of the Specific Relief Act, 1963 lays down that a permanent injunction can only be granted by
a decree at the hearing and upon the merits of the case. Thus, for obtaining a permanent injunction, a regular
suit is to be filed in which the right claimed is examined upon merits and finally, the injunction is granted by
means of judgement. A permanent injunction therefore finally decides the rights of a person whereas a
temporary injunction does not do so. A permanent injunction completely forbids the defendant to assert a right
which would be contrary to the rights of the plaintiff. Section 38 of the Specific Relief Act, 1963 specifies
certain circumstances under which permanent injunction may be granted by the court:
a. where the defendant is trustee of the property for the plaintiff.
b. where there exist no standard for ascertaining the actual damage caused, or likely to be caused,
by the invasion,
c. where the invasion is such that compensation in money would not afford adequate relief,
d. where the injunction is necessary to prevent a multiplicity of judicial proceedings.
Illustrations-
• A ‘let’s certain land to B and B contracts not to dig sand and gravel. A’ may sue for an injunction to refrain
B from digging in violation of the contract.
• Where the directors of the company are about to pay a dividend out of capital. Any of the shareholders may
sue for an injunction to restrain them.
Saraswathi Ammal v. Viveka Primary AIR 2001: The tenant filed a suit to obtain permanent injunction to
a restrain the landlord from evicting him permanently. It was held that such an action was not maintainable as
it was aimed at casting embargo on landlord's right to enjoy legal right in respect of his property.
Kanahiyalal v. Babu Ram, AIR 2000 SC: The Supreme Court has been held that in a suit for permanent
injunction regarding partition of property, the partition deed contemplated giving use of gallery to one of the
co-owners. It was held that condition in the partition deed binds not only the two co-owners but their successor-
in-interest also. Hence issue of permanent injunction restraining successor in interest of the other co-owner
was valid.

3. Mandatory Injunction-
When, to prevent the breach of an obligation, it is necessary to compel the performance of certain acts which
the court is capable of enforcing, the court may in its discretion grant an injunction to prevent the breach
complained of, and also to compel performance of the requisite acts.
Section 39 of the Specific Relief Act, 1963 prescribes that, ―When to prevent breach of an obligation it is
necessary to compel the performance of certain acts which the court is capable of enforcing, the court may in
its discretion grant an injunction to prevent the breach complained of, and also compel the performance of
requisite acts.”
Illustrations
1. A, by new building obstructs lights to the access and use of which B has acquired a right under the Indian
Limitation Act. B may obtain an injunction, not only to restrain A from doing on with the Buildings but also
to pull down so much of them as obstruct B's lights.
2. A, being B's medical advisor, threatens to publish B's written communication with him, showing that B has
led an immoral life. B may obtain an injunction to restrain the publication.
The guidelines for interim mandatory injunctions are laid down –
1. The plaintiff has a strong case for trial. That is, it shall be of a higher standard than a prima facie case that
is normally required for a prohibitory injunction.
2. It is necessary to prevent irreparable or serious injury which normally cannot be compensated in terms of
money.
3. The balance of convenience is in favour of the one seeking such relief.
In a suit for mandatory injunction, the burden of proof lies on the plaintiff. If he fails to discharge the burden,
he will not be entitled to the relief of injunction. He cannot get the relief of injunction on the ground that the
defendant has failed to prove his case.
S. Narayana Rao v. R. Narsinga Rao AIR 1995: Where in a permanent suit for injunction, restraining the
defendants from causing nuisance to plaintiff by construction of septic latrines, the injury was actionable per
se, the damages could be presumed.

Qs. Declaratory Suits

Ans. Declaratory relief is a form of equitable relief. This has been incorporated in the statue under chapter 6
of the Specific Relief Act, 1963. The declaratory decree is a means to provide relief to someone who is being
denied rights or titles to which he/she is entitled. The Specific Relief Act, 1963 (SRA) provides such relief
under Sections 34 and 35.

Section 34 - Discretion of Court as to Declaration of Status or Right

A declaratory suit is a legal action filed in a civil court to establish or clarify a person's legal rights or status.
It does not involve enforcement through damages or specific performance but simply seeks a declaration from
the court on a legal matter. The purpose is to remove uncertainty or doubt regarding the rights, obligations, or
legal character of the plaintiff.

Under Section 34 of the Specific Relief Act, 1963, a declaratory suit can be filed when a person is entitled
to a legal right or any legal character but is denied or challenged by another party.

Illustrations-A is lawfully in possession of certain land. The inhabitants of a neighbouring village claim a
right of way across the land. A may sue for declaration that they are not entitled to the right so claimed.
S. Madaswamy v. A.M. Arjuna Raja AIR 2000 Mad: It has been held that in a suit for declaration of title
and consequential injunction, the burden is on the plaintiff to prove his right and possession over property. If
the plaintiff fails to prove his clear title to property he is not entitled to such declaration and the consequential
injunction.
Indian Navigation Co. v. Haryana State Industrial Development Corporation, AIR 2006 : The use of
expression "any right as to any property" is very wide because it shows that it is not necessary for the plaintiff
to claim any right in the property and it would be enough if the right he claimed is related to the property in
question. It includes any right relating to any property which may also be contingent right.

Essentials of a Declaratory Suit

For a suit to be considered under Section 34, the following conditions must be met:
1. The plaintiff must be entitled to any legal right or legal character
o A person can approach the court when their legal rights (such as ownership of property) or
legal character (such as status as a legal heir) are in dispute.
2. The defendant must deny or challenge this legal right or character
o If there is no denial or challenge, there is no need for a declaration. The suit is only valid if
another party questions or disputes the right.
3. The plaintiff must have an interest in seeking the declaration
o The person filing the suit must have a real and substantial interest in the issue. A person cannot
file a declaratory suit for someone else’s rights.
4. No further relief should be available
o If the plaintiff has other legal remedies, such as damages or injunctions, they cannot rely solely
on a declaratory suit. However, if the plaintiff needs only a declaration to clear the legal
uncertainty, then this suit is appropriate.
Examples of Declaratory Suits
1. Declaration of Property Ownership
Suppose A buys a piece of land and holds the title deed. Later, B falsely claims ownership of the same property.
To resolve this dispute, A can file a declaratory suit asking the court to declare him as the rightful owner.
2. Legal Heirship
After the death of a father, a son claims to be the only legal heir. However, another person, C, also claims to
be the legal heir. The son can file a declaratory suit to obtain a court declaration that he is the sole heir.
3. Membership in a Society or Club
If a person is removed from the membership of a club or an organization without valid reasons, they may file
a declaratory suit to establish that they are still a rightful member.
4. Marital Status
If a person is falsely claimed to be married to someone, they can file a declaratory suit seeking a declaration
from the court that they are not married.
Case Laws on Declaratory Suits
1. K.K. Verma v. Union of India (1954 AIR 1092)
Facts: A tenant was evicted from a property, and the landlord claimed that the tenant had no right to continue
occupancy.
Ruling: The Supreme Court held that the tenant could file a declaratory suit to establish his tenancy rights.
2. Sunder Dass v. Ram Prakash (1977 AIR 1201)
Facts: The plaintiff claimed ownership of certain land and sought a declaration against the defendant, who
disputed the claim.
Ruling: The Supreme Court ruled that a person could file a suit under Section 34 to establish ownership,
provided they had a genuine legal interest in the subject matter.
3. Krishna Prasad v. Allahabad Bank (1984 AIR 1164)
Facts: A person claimed to be the legal heir of a deceased bank account holder but was denied access to the
account by the bank.
Ruling: The court declared the plaintiff as the rightful heir and directed the bank to recognize his claim.
Jurisdiction for Filing a Declaratory Suit
A declaratory suit should be filed in a civil court that has jurisdiction over the subject matter. Generally, it is
filed in the district court where:
• The defendant resides, or
• The property (if the suit is about property rights) is located.
When a Declaratory Suit Cannot Be Filed?
1. If the plaintiff has no real interest
o A person cannot seek a declaration simply out of curiosity or for academic purposes.
2. If there is no denial or challenge of rights
o If no one disputes the plaintiff’s rights, there is no need for a declaratory suit.
3. If the declaration alone is not sufficient
o If the plaintiff also requires damages or specific performance, they must seek those remedies
instead.
Relief Granted by the Court
If the court finds that the plaintiff has a valid legal right, it issues a declaration affirming the plaintiff’s
entitlement. This declaration acts as a legal record and prevents the defendant from challenging the plaintiff’s
rights in the future.
However, a declaratory suit does not grant compensation, injunctions, or enforcement orders—it only
confirms legal status or rights.
Advantages of a Declaratory Suit
1. Removes uncertainty – Helps resolve legal doubts before they escalate into bigger disputes.
2. Prevents future litigation – A declaration from the court acts as a permanent record.
3. Protects legal rights – Ensures a person’s rights are not denied due to false claims by others.
Conclusion
A declaratory suit under Section 34 of the Specific Relief Act, 1963, is a powerful legal tool for individuals
seeking to establish or clarify their legal rights or status. While it does not provide direct enforcement, it offers
legal certainty and prevents future disputes. The court's declaration serves as a binding decision that protects
the plaintiff’s rights and prevents wrongful claims by others.

Qs. Rescission and Cancellation of Contract; Discretion of Court.

Ans. Rescission of Contract
Rescission is typically sought when a contract has been formed based on misrepresentation, fraud, mistake,
or undue influence. The effect of rescission is to restore the parties to their original position, as though the
contract had never been made. It can be initiated either by the parties involved (mutual consent) or by a court
of law, depending on the circumstances.
Meaning of Rescission of Contract
The term “rescission” is derived from the Latin word “rescinder,” which means to cut off or cancel. In the
context of contracts, rescission refers to the process by which a contract is cancelled or terminated, returning
the parties to the position they were in before the contract was made. Sections 27 to 30 of the Act provide the
framework for rescission of contracts in India.
Section 27: Where Rescission May Be Adjudged or Refused
Section 27 of the Specific Relief Act, 1963, lays down the circumstances under which a court may adjudicate
rescission or refuse to grant it. This section offers both the grounds for rescission and the defences that can be
raised against it.
Grounds for Rescission
• Voidable Contracts: Rescission can be granted where the contract is voidable or terminable by the
plaintiff. For example, if the contract was entered into based on fraudulent misrepresentation, the
aggrieved party has the right to have the contract rescinded.
• Unlawful Contracts: If the contract is unlawful for reasons not immediately apparent and the
defendant is more at fault than the plaintiff, the court may order rescission.
When Rescission May Be Refused
• Ratification:
• Change of Circumstances:
• Third-Party Rights:
• Indivisibility of the Contract:
Illustrations:
Example 1: A sells land to B but conceals a right of way over the land. B is entitled to have the contract
rescinded due to A’s misrepresentation.
Section 28: Rescission in Certain Circumstances of Contracts for Sale or Lease of Immovable Property
Section 28 specifically addresses contracts related to the sale or lease of immovable property. It lays out the
conditions under which a decree for the specific performance of a contract can be rescinded. This section is
important in real estate transactions, where buyers or lessees may fail to comply with the terms of the decree.
• Grounds for Rescission: If a purchaser or lessee fails to pay the purchase price or any other sum
within the time allowed by the decree, the vendor or lessor can apply for rescission of the contract.
The court can then rescind the contract, either entirely or partially, depending on the justice of the case.
• Consequences of Rescission: If the contract is rescinded, the purchaser or lessee must restore
possession of the property to the vendor or lessor. The court may also order the lessee to pay any
accrued rents or profits from the property during the period of possession.
• Further Relief: If the purchaser or lessee pays the required sum within the time allowed, the court
may award further relief, such as execution of the proper conveyance or lease.
• No Separate Suit: Section 28 prohibits any separate suit for relief related to rescission. All relief must
be sought within the same suit where the decree for specific performance was made.
Section 29: Alternative Prayer for Rescission in Suit for Specific Performance
Section 29 provides that in a suit for specific performance, a plaintiff can alternatively pray for rescission of
the contract. This allows flexibility in cases where the court may refuse specific performance but still grant
rescission.
1. Dual Relief: The plaintiff may ask the court to enforce the contract, and if it cannot be enforced, to
rescind it.
2. Case Law: Roopchand Chaudhari v. Ranjit Kumar: A plaintiff suing for specific performance may
also sue for rescission of the contract. However, a plaintiff suing for rescission cannot ask for specific
performance as an alternative.
Section 30: Court May Require Parties Rescinding to Do Equity
Section 30 emphasises the principle of equity in rescission. The court, while adjudicating rescission, may
require the party seeking rescission to restore any benefit received from the other party and to compensate for
any loss.
1. Restoration of Benefits: The court may order the rescinding party to return any benefits received
under the contract or to make compensation as justice requires.
2. Equitable Doctrine: This section upholds the maxim, “he who seeks equity must do equity.” It ensures
that rescission is granted in a fair and balanced manner, without causing undue harm to the other party.
Illustration:
A moneylender induces an agriculturist to sign a bond for an unfair amount. The court may rescind the bond
but still order the agriculturist to repay the original loan amount with fair interest.

Cancellation ((sections 31-33)

Section 31 of the Specific Relief Act, 1963 deals with the circumstances in which cancellation of a written
instrument may be ordered. The section provides the following provisions:
o Grounds for Cancellation: Any person against whom a written instrument is void or voidable,
and who has reasonable apprehension that the instrument, if left outstanding, may cause serious
injury, may file a lawsuit seeking to have the instrument declared void or voidable. The court
has the discretion to adjudicate the instrument as void or voidable and order its delivery and
cancellation.
o Effect on Registered Instruments: If the instrument has been registered under the Indian
Registration Act, 1908, the court must send a copy of its decree to the officer in whose office
the instrument has been registered. The officer will then note the cancellation of the instrument
in their records.
Section 32 states that in cases where an instrument is evidence of different rights or obligations, the court
may, in an appropriate situation, partially cancel the instrument and allow it to remain valid for the remaining
parts.
Section 33 deals with the power of the court to require the restoration of benefits or compensation when an
instrument is cancelled or successfully resisted as void or voidable.
o Cancellation of Instrument: When an instrument is cancelled by the court, the court may require
the party receiving relief to restore any benefit received from the other party and make any
compensation as deemed just by the court.
o Successful Resistance: If a defendant successfully resists a suit on the ground that the
instrument sought to be enforced against them is voidable or that the agreement sought to be
enforced is void due to their incapacity to contract, the court may require the defendant to
restore any benefit received under the instrument or agreement to the other party, to the extent
that they have benefited from it.
These sections provide the legal framework for the cancellation of written instruments. They allow individuals
to seek the cancellation of void or voidable instruments that may cause them harm, and provide the court with
the power to order the delivery, cancellation, and restoration of benefits or compensation.