LAST DAY REVISION NOTES

The Indian Contract Act, 1872

It came in existence w.e.f. 1-7-1872.

It is applicable to whole of India except State of Jammu & Kashmir

MEANING OF CERTAIN TERMS

Proposal When one person signifies to another his willingness to do or to abstain from doing
(i.e, offer) anything,
(sec.2 (a)) with a view to obtaining the assent of that offeree either to-
- Such act : or - Abstinence, he is said to make a proposal (i.e., offer)
Promise When the person to whom the proposal is made, signifies his assent thereto.
(Sec. 2(b)) The proposal is said to be accepted. A proposal, when accepted, becomes a promise.
Agreement 2(e) Every promise and every set of promises forming consideration for each other, is an
agreement.
Contract (Sec. An agreement enforceable by law is a contract. In other words,
2(h)) Contract = agreement + enforceability of agreement.
Promisor and When the proposal is accepted –
Promise • The person making the proposal is called as ‘promisor’ and
(Sec.2 (c) ) • The person accepting the proposal is called as ‘promisee’.
Consideration When, at the desire of the promisor, The promisee or any other person
(Sec. 2(d) ) Has - Done or abstained from doing something: or
- Does or abstains form doing something : or
- Promises to do or abstains from doing something,
Such act, abstinence or promise is called a consideration for the promise.

SCOPE OF LAW CONTRACT

Not whole law of It is concerned with contracts & not agreements. All contracts are agreements but all
Agreement agreements are not contracts.
Not whole Low It is concerned with only those obligation which arise out of agreements and is not
of contracts concerned with those obligation (e.g. obligation to maintain wife& children ) which do
not arise out of agreements.

ESSENTIAL ELEMENTS OF CONTRACT

Essential elements Description
1. Proper offer & Offer – Certain & unambiguous . Terms – communicated
acceptance Acceptance – absolute & unqualified
Agreement = Offer + acceptance .
 2. Intention to Commercial/business agreement – intention to create legal relationship is
create presumed.
legal relationship Social/Domestic agreement – No intention to create legal relationship is
presumed.
Contract = Agreement + Enforceability
3. Capacity of parties Every person is competent to contract who is
1) Of the age of majority, 2) of sound mind &
2) Not disqualified from contracting by any law.
4. Lawful “The consideration is considered lawful unless it is forbidden by law or is
consideration fraudulent or involves or implies injury to the person or property of another or is
immoral or is opposed to public policy.”
5. Free consent “Consent is said to be free when it is not caused by (i) coercion, (ii) undue
influence, (iii) fraud, (iv) misrepresentation, or (v) mistake.”
6. Lawful object “The object is considered lawful unless it is forbidden by law or is fraudulent or
involves or implies injury to the person or property of another or is immoral or is
opposed to public policy.”
7. Agreements not As per Sec. 24 to 30, agreement in restraint of marriage, agreement in restraint of
expressly legal proceedings, agreement in restraint of trade & agreement by way of wager
declared void. have been expressly declared void.
8. Certainty of “Agreements the meaning of which is not certain or capable of being made certain
meaning are void.”
9. Possibility of “An agreement to do an impossible act is void.”
performance
10.Legal Formalities The legal formalities for entering into such a contract are completed.

CLASSIFICATION OF CONTRACTS
1.On the Express contract A contract made by words spoken or written.
basis of Implied contract One which is made otherwise than by words spoken or written.
Creation Tacit contract A contract inferred by –
- The conduct of a person : or - The circumstances of the case.
2.On the Executed contract A contract in which both the parties have fulfilled their obligations under the
basis of contract.
Executio Executory A contract in which both the parties have still to fulfill their obligations.
n contract
Partly executed A contract in which one of the parties has fulfilled its obligations but the other
and partly party is yet to fulfill its obligation.
executory
Unilateral A contract in which only one party has to perform his promise or obligation to do
contract forebear.

Bilateral contract A contract in which both parties have to perform their respective obligations.
3. On the Valid contract An agreement which satisfies all the requirements prescribed by law.
basis of
Enforce- Void contract A contract which ceases to be enforceable by law becomes void when it ceases
ability (Sec 2 (i) ) to be enforceable.
Void agreement An agreement not enforceable by law is said to be void. It is void ab initio.
 (Sec. 2(g) )
Voidable contract An agreement is a voidable contract if –
- It is enforceable by law at the option of one or more of the parties
thereto.
- It is not enforceable by law at the option of the other or others.
Illegal agreement An agreement the object of which is unlawful.
Unenforceable A contract which is actually valid but cannot be enforced because of some
contract technical defect. Such contract can be enforced if the technical defect is
removed

DISTINCTION BETWEEN VOID AGREEMENT AND ILLEGAL AGREEMENT

Basis of Distinction Void Agreement Illegal Agreement
1. Void/illegal All void agreements need not All illegal agreement are always void.
necessarily be illegal.
2. Effect on collateral The collateral agreements do not The collateral agreements also become
agreements become void. void.
3. Restoration of If a contract becomes void The money advanced or thing given
benefit received subsequently, the benefit received cannot be claimed back.
must be restored to the other party.

MEANING, MODE AND RULES FOR A VALID OFFER

Meaning of offer A person is said to have made the proposal when he signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining
the assent of that offeree, to such act or abstinence.
Meaning of “offeror” The person making the proposal is called the “offerer or proposer”.
Meaning of “offeree” The person to whom the proposal is made is called the ‘offeree or proposee’.
How to make an offer?
(a) Express offer One which is made by words spoken or written.
It is inferred from the conduct of the person or the circumstances of the
(b) Implied offer particular case.
To whom offer can be
Made It means an offer made to – (a) A particular person : or (b) A particular
(a) specific offer group of person
It means an offer which is made to the public in general.
(b)General offer
Legal Rules for a valid 1. Intention to create legal relations.
offer 2. Certain and unambiguous
3. Different from a mere declaration of intention
4. Different from an invitation to offer
5. Proper communication
6. No term the non-compliance of which amount to acceptance
7. Communication of special terms
 Meaning of cross offer Two offers which are similar in all respects made by two parties to each other,
in ignorance of each other’s offer . Cross offer do not amount to acceptance of
one’s offer by the other. Hence, no contract is entered into on cross offers.
Meaning of standing An offer of a continuous nature is knows as standing offer. A standing offer is
offer in the nature of a tender. It is the same thing as invitions to an offer. A
contract is said to have been entered into only when an order is placed on the
basis of the tender.

MEANING MODE AND RULES FOR A VALID ACCEPTANCE

Meaning of acceptance “A proposal is said to be accepted when the person to whom to whom the
proposal is made signifies his assent thereto. A proposal when accepted
becomes a promise.”
Who can Accept offer?
(a) in case of specific Only that particular person or group of persons to whom the specific offer has
offer been made and none else.
Any person if – He has the knowledge of the offer, and he fulfills the terms and
(b) in case of General conditions of the offer.
offer
How to make an
Acceptance One which is made by words spoken or written.
(a) Express Acceptance One which is made otherwise than in words. It is inferred from the conduct of
the person or the circumstances of the particular case.
(b) Implied Acceptance
Legal Rules for a valid 1. It must be absolute & unqualified.
Acceptance 2. The offer must be accepted in the prescribed manner (if any) or in same
usual and
reasonable manner (if not prescribed)
3. It must be communicated.
4. It must be communicated to the offeror.
5. It must be communicated by the offeree or his authorized agent.
6. It must be communicated within the time prescribed time or within a
reasonable time.
7. It must be made before the offer lapses or is withdrawn.

COMMUNICATION WHEN COMPLETE

Communication Communication when complete?
of
Offer When the offer comes to the knowledge of the offeree, i.e., when the letter of offer is
received by the offeree.
Acceptance Communication is complete against When acceptance is put in a course of
the offeror (i.e, offeror is bound by transmission so as to be out of the power of
acceptance, i.e offer cannot be the offeree (i.e., when letter of acceptance is
withdrawn) duly posted by the offeree).
 Communication is complete against When acceptance comes to the knowledge of
the offeree- the offeror.
Revocation Communication is complete against When revocation is put in a course of
the person who makes it (i.e. the transmission so as to be out of the power of
person making revocation cannot the person who makes it.
further revoke it).
Communication is complete against When revocation comes to the knowledge of
the person to whom it is made- the person to whom it is made.

TIME LIMIT FOR REVOCATION

Revocation of…. Time limit for revocation
Offer Before communication of acceptance is complete against the offeror.
Acceptance Before communication of acceptance is complete against the offeree.

RULES OF OFFER AND ACCEPTANCE

Meaning of Revocation The term ‘revocation’ means ‘taking back’ or withdrawal.’
Important Notes 1. Revocation must always be expressed.
2. Revocation must move from the offerer himself or a duly authorized agent.
3. Notice of revocation of a general offer must be given through the same
channel by which the original offer was made.
4. offer cannot be revoked even if the letter of acceptance is lost or delayed in
transit.
No Revocation in case In case of contract over telephone or telex or fax, the question or revocation
of contract over does not arise because there is instantaneous communication of the offer and its
Telephone or Telex of acceptance (i.e. the offer is made and accepted at the same time).
Fax
When does An offer 1. By Revocation
come to end? (or lapse 2. By lapse of time
of An offer) 3. By Death or insanity of the offerer/offeree
4. By Failure to accept condition precedent
5. By Counter offer
6. By Not accepting in the prescribed mode or usual mode.
7. By Rejection of offer by offeree
8. By subsequent illegality of destruction of subject matter of the offer
WHO IS COMPENTENT TO CONTRACT?
Major Person who is of the age of majority according to the law to which he is subject.
Sound Mind Person who is of sound mind.
Not disqualified Person who is not disqualified from contracting by any law to which he is
subject.

EFFECTS OF MINOR’S AGREEMENT

Who is a “Minor” • A minor whose property has passed under superintendence of the court of
wards where a guardian has been appointed under The Guardian and
Wards Act, 1890, attains majority on competition of 21 years and in other
case minor attains majority on completion 18 years.
Agreement is “void- ab- A Minor is incompetent to enter into any contract. Therefore, any agreement
initio” made by a minor is void ab initio, i.e., it is without any legal effect. Mohiri Bibi v
Dharamodas Ghose.
No estoppel • A minor can anytime claim minority(infancy) and no one can stop him from
doing that.
In case of fraudulent • The principle of Restitution is applicable but with following changes.
misrepresentation of • The court may award compensation to the other party if the money or
age by minor property supplied to minor could be traced.
• The court shall not grant relief if the other party had the knowledge of the
fact that it was entering into an agreement with a minor
No specific • The other party cannot demand that minor should perform the obligation
which he had agreed to perform under the agreement.
No ratification by a • Ratification means acceptance of a transaction already done.
minor • An agreement entered into by a minor cannot be ratified by him after he
has attained majority.
• If, on attaining majority a minor agrees to pay for the goods supplied to him
during minority such agreement is void for want of consideration.
An agreement for the • Where, an agreement is for the benefit of a minor, the agreement is not
benefit of minor is void and therefore the minor can enforce such agreement.
enforceable by minor • If the other party to the agreement fails to perform his part of obligation,
the minor can claims restitution.
• A minor can be a beneficiary/ promisee under a contract.
No liability of guardian The guardian of a minor shall not be liable for acts of a minor.
contracts by a guardian the contract by a guardian on behalf of a minor shall be valid if _
–valid (a) the contract is for the benefit of minor: and
(b) The guardian has the authority to enter into such a contract.
Minor’s liability for Nature of As per Sec. 68, a minor is liable for necessities supplied to-
necessities liability ( a) him:or
(b) any other person who is dependent on the minor.
Conditions (a) the liability is only for necessities of life.’ The term ‘necessities’
means necessities of life as per the social status and conditions of
life of the minor.
(b) the minor is not already in possession of such necessities.
(c ) the minor shall not be personally liable.(only his property is
liable).
Position of minor (a) Minor cannot be a guarantor.
(b) Minor may be admitted as a member where the shares are fully paid up.
(c ) Minor can be an apprentice provided he is of at least 14 years of age.
(d) Minor cannot become a partner in a firm. However, he may be admitted to
the benefits of partnership.
(e) Minor may be held liable for Tort (civil wrong).

PERSONS OF UNSOUND MIND

Meaning of A person is said to be of sound mind if he is able to –
sound mind (a) understand the terms of the contract: and
(b) Form a rational judgment of its effect on his interest.
Requirements At the time of entering into a contract a person must be of sound mind. A person can
of law enter into a contract in accordance with the following principles:
Nature of person When can he enter into a contract ?
A person of sound mind • He can enter into a contract at all the times
• He cannot enter into a contract when he is of
unsound mind.
A person of unsound mind • He can enter into a contract only at such intervals of
time, if any, when he is of sound mind.
Burden of proof Case Burden of proving otherwise
A person who is usually of The burden of proving that he was of unsound mind at
sound mind the time of entering into the contract lies on the person
who challenges the validity of the contract.
A person who is usually of The burden of proving that he was of sound mind at the
unsound mind time of entering into the contract lies on the person who
affirms the contract.
Position of The position of contract with persons of unsound mind is identical with that of contracts
contracts with with a minor. Thus, (a) He may enforce a contract for his benefit:
person of (b) His properties shall be attachable for realization of money due against him for the
unsound Mind supply of necessaries to him or to any of his dependents.

PERSONS DISQUALIFIED UNDER LAW

1. Company • However a company is disqualified to enter into any contract which falls outside the
object clause of memorandum. Such contracts are called as “Ultra Vires”
2. Alien enemy • Existing contract – is suspended until the war is over,
• Fresh contract – cannot be entered into until the war is over.
• Permission of CG(Central Government) – an existing contract can be enforced.
– A Fresh contract can be entered into.
3. Foreign • They can enter into a valid contract.
diplomats • Rights to sue others – Available.
• Can be sued – only in the following cases: (a) Where he submits himself
to the court.
OR (b) Where approval of Central Government is obtained.
4. Convict • Existing contract – Is suspended until his conviction is completed.
• Fresh contract – Cannot be entered into until completion of his sentence.
• On Parole or on completion of his sentence – a fresh contract can be entered into.
5. Insolvents • Cannot enter into contracts relating to his property,
• Cannot sue,
• Cannot be sued.
• Such restrictions are removed when his insolvency is discharged.

MEANING OF CONSIDERATION
Meaning Consideration in single term means something in return(quid pro quo).
Result Consideration must result either result into :
 (a) a benefit to the promisor and detriment or loss to the promise,
(b) a detriment to both promisor or promisee.

ESSENTIALS OF A VALID CONSIDERATION

It must move at the • An act or abstinence shall constitute a good consideration only if it is done
desire of the promisor at the desire of the promisor. Durga Prasad v Baldeo
It may move from • As long as there is consideration in a contract it is immaterial as to who
promisee or any other has given this consideration. This rule is generally stated as ‘privity of
person consideration is not required.’
Chinnaya v Rammaya
No adequacy of • The law requires that there must be consideration in every contract.
consideration required • However, adequacy of consideration is not required. Even If is proved that
such consideration is inadequate, the contract is not void.
• The fact of inadequate of consideration shall be given due weightage
while determining whether the consent is free or not.
It must be different from • Consideration received by a party must be something more than the other
promisee’s existing party’s contractual and legal obligation. Ramachandra Chintaman v
obligation Kaluraju
It must be lawful • An agreement is void if the consideration furnished by any of the parties is
unlawful.
It must be real, and not • Consideration received by a party must be of some value.
illusory • Consideration must not be illusionary (i.e. existing only in name).
It may be past, present or • Consideration may be past, present or future but still it is a valid
future consideration.

EXCEPTIONS TO THE RULE NO CONSIDERATION –NO CONTRACT

Agreement made on (a) In writing , (b) Registered, (c) Between parties standing in near relation
account of natural love to each other.
and affection (d) Out of natural love and affection.
conditions However, mere nearness of relationship does not imply natural love and
affection.
Compensation for past (a) A party renders some service to or performs the legal obligation of the other
voluntary service- party .
condition (b) The services are rendered without any desire of the other party i.e.
voluntarily.
(c )The other party afterwards promises to compensate for the services rendered
to him.
Promise to pay a time- Meaning of If the creditor fails to institute the suit for recovery of his debt
barred debt time within 3 years of debt becoming due for payment the debt is said
barred to be time barred debt, i.e., the creditors cannot institute the suit
debt after the expiry of said period of 3 years.
General The general rule is that an agreement to pay a time barred debt is
rule void.
 Exception An agreement to pay a time barred debt (Law of Limitation) is
enforceable if the following condition are satisfied :
(a) The debtor promises to pay time barred debt .
(c ) The promise is made in writing.
(d) The promise is signed by the debtors or his agent.
Completed gift • Agreement to give a gift is not enforceable.
• However, once a gift has actually been given, the donor cannot demand it
back on the ground that there was no consideration.
Remission No consideration is necessary for an agreement to receive less than what is due.
Guarantee In a contract of guarantee, consideration received by the principle debtor shall
be sufficient consideration for the surety.
Bailment No consideration is necessary for bailment (such bailment is called as gratuitous
bailment)
Agency No consideration is necessary to create an agency. (sec. 185)

PRIVITY OF CONTRACT
Privity of • Privity of consideration is not required. A party to contract may be a stranger to consideration.
consideratio • Consideration may move from promisee or other person.
n • So long as there is consideration for promise, it is immaterial who has furnished it.
• Stranger to consideration can sue.
Privity of • The general rule is that only the parties to a contract can sue.
contract • In other words, if a person is not a party to the contract (i.e. a stranger to contract) he cannot
sue.
Example Dunlop pneumatic tyre co. v selfridge and co.
Privity of Creation of Beneficiary is not a party to the agreement creating a trust.
contract- a trust However, the beneficiary is allowed to sue the trustee for enforcement of trustee’s
Exception duties.
Family Where a marriage of family settlement is made the person who is a beneficiary
settlement under such settlement is entitled to sue even though he may not be a party to such
settlement.
Acknowled- The person, who becomes an agent of a third party by acknowledgement can be
gement sued by such settlement.
Assignment An assignee is entitled to exercise all the rights of the assignor even though the
of a assignee was not a party to the contract as originally made.
contract
Agency A principal may enforce the contract entered into by his agent.

CONSENT AND FREE CONSENT

Meaning of According to section 13, “two or more persons are said to consent when they agree
consent upon the same thing in the same sense.” This is called consensus-ad-idem.’
Effects of Absence When there is no consent at all, the agreement is void-ab-initio,i.e. it is not
of contract enforceable at the option of either partly.
Meaning of Free Consent is said to be free when it is not caused by (a) coercion, or (b) undue
consent influence, or (c) fraud, or (d) misrepresentation, or (e) mistake.
Effect of Absence When there is consent but it is not free the contract is usually voidable at the option
of Free consent of the partly whose consent was so caused (except for mistake).

COERCION
Meaning of Contract under a physical pressure or a threat. According to section 15, a contract is
coercion said to be caused by coercion when consent is obtained by –
(a) committing any act which is forbidden by the Indian Penal Code (IPC) : or
(b) threatening to commit any act which is forbidden by the Indian penal code: or
(c) unlawful detaining of any property: or
(d) threatening to detain any property.
Intention Causing any person to enter into an agreement.
By whom Coercion may proceed from : – A party to the contract: or - A Stranger to
contract.
Against whom Coercion may be directed against : - A party to the contract: or - A Stranger to
contract.
Applicability of IPC It is irrelevant as to whether or not IPC is in force :
is not relevant • At the time when coercion is employed: or
• At the place where coercion is employed.
Threat to file a suit A threat to file a suit (whether civil or criminal) does not amount to coercion unless
the suit is on false charge. Threat to file a suit on false charge is an act of coercion.
Effects of coercion 1. Right of aggrieved party to Rescind the contract.(Voidable Contract).
2. Obligation of aggrieved party to restore benefit.(Principle of Restitution).
3. Obligation of other party to repay or return.

UNDUE INFLUENCE
Meaning Section 16(1). Dominating the will of the other person. It is using moral
pressure.
Relations between the parties One party is In a position to dominate the will of the other (such party is
called as the dominant party)
Dominant Position The dominant party uses his dominant position.
Unfair advantage The dominant party obtains as unfair advantage by entering into the
contract.
Examples
Presumption of domination of
will Cirumstances: Master and servant, parent and child, Income Tax officer and Assessee,
(a) Where he holds a real or principal and a Temporary Teacher.
apparent authority over
other Trustee and beneficiary, spiritual adviser and his disciples, solicitors and
client, Guardian and Ward.
(b) Where he stands in a
fiduciary relation to the Medical Attendant and patient (a person whose mental capacity is
other temporally or permanently affected by reason of age, illness or mental
or bodily distress.)
(c) Other parties
No presumption of domination Husband and wife(other than pardanashin) , Landlord and tenant ,
of will? Creditors and debtors.
Effect of Undue Influence Contract is voidable at the option of the party whose consent was so
caused.

UNDER INFLUENCE WAS EMPLOYED OR NOT EMPLOYED –BURDEN OF PROOF

Unconscionable • The burden of proof is on the dominant party
transaction • The dominant party has to prove that undue influence was not employed.
Any other transaction • The burden of proof is on the weaker party
• The weaker party has to prove that undue influence was employed.

FRAUD
By a party to the It must be proved that fraud was committed by –
contract (a) a party to the contract: or
(b) Anyone with the connivance of a party to the contract.
The party makes a • The party has made a representation of a fact.
representation • An opinion, a statement of expression or a statement of intention does not
constitute a fraud.
Amounts to Fraud • The representation is false.
when • The misrepresentation was made willfully.
• The misrepresentation was made with a view to deceive the other party.
• The other party is actually deceived.
• The other party has suffered a loss.
Fraud Includes • Where the person makes a representation of a fact knowing that such fact is
following acts or not true.
omissions • Where the person conceals a fact even though he has knowledge of such fact.
• Where a person makes a promise without any intention of performing it.
• Any act or omission declared without any intention of performing it.
• Any other act fitted to deceive also amounts to fraud.
Effects of Fraud 1. Right to Rescind the contract (Voidable)
2. Right to Insist Upon performance.
3. Right to claim Damages.
SILENCE AS FRAUD:
General Rule Mere silence, which is likely to affect the willingness of the other party, is not a
fraud.
Exceptions to General (a) where the parties stand in fiduciary relationship ( i.e. relationship of faith and
Rule trust)
(b) when silence is equivalent to speech.
(c ) partial disclosure of truth which deceives the other party is a fraud.

MISREPRESENTATION
Meaning A false representation of fact made by a party to a contract, made innocently or non-
disclosure of a material fact without any intention to deceive the other party who has acted
on the basis of such representation.
Essential • By a party to the contract. (i.e. not by a stranger to a contract)
Elements • The party makes a representation.
• The representation is false.
• The misrepresentation was made innocently. (i.e. without knowledge of its falsehood)
• The misrepresentation was not made with a view to deceive the other party.
• The other party has actually acted.
Effects 1. Right to Rescind the contract. (Voidable contract)
2. Right to Insist Upon performance

MISTAKE
Mistake of Indian The contract is not voidable (is Valid).
law
Mistake of foreign The contract is void.
law
Bilateral mistake The agreement is void if –
(Sec 20) (a) the mistake relates to a fact:
(b) such fact is material to the agreement: and
(c) both the parties are at mistake bilateral mistake ,may be –
(i) mistake as to the subject matter
(ii) mistake as to the possibility of performance
Unilateral mistake The contract is neither void nor voidable except in following two cases where the
(Sec 22) contract is void :
(1) Unilateral mistake as to the identity of the person contracted with.
(2) Unilateral mistake as to the nature of contract.

UNLAWFUL OBJECT OR CONSIDERATION – MEANING AND EFFECTS

Circumstances in 1. if it is Forbidden by Law.
which object or 2. if it Defeats the provision of any Law.
consideration is 3. if it if Fraudulent.
unlawful 4. if it Involves or Implies Injury to person or property of another.
(section 23) 5. if the Court Regards it as Immoral or Opposed to public policy.
Legal effect Every agreement, of which the object or consideration is unlawful is Void.
AGREEMENTS 1) Agreement for trading with enemy.
AGAINST PUBLIC 2) Agreement interfering with personal liberty.
POLICY 3) Agreement interference with parental rights.
4) Agreement for sale of public offices and titles.
5) Agreement interfering with course of justice.
6) Agreement for stifling (i.e. suppressing ) prosecution.
7) Agreement tending to create monopolies or to eliminate or reduce
competition.
8) Agreement in restraint of legal proceedings.
9) Agreement in restraint of marriage (otherwise than of a minor) (section 26).
10) Agreement in restraint of trade or business or profession which is lawful.
(section 27).
11) Marriage brokerage agreement.
12) Maintenance agreement
13) Champerty agreement

MAINTENANCE AND CHAMPERTY AGREEMENT

Meaning of - A party agrees to provide assistance (financial or otherwise) to another party
Maintenance to institute (file) or defend a suit (case).
agreement - The person providing such assistance has no interest in such suit.
- The party who receives such assistance agrees to pay something in return to
the person who provides such assistance.
Legal effect The maintenance agreement is valid, if it is bonafide and the payment made to the
person providing such, assistance is reasonable.
Meaning of - A party agrees to provide assistance (financial or otherwise) to another party
Champerty to institute (file) or defend a suit (case).
agreement - The person providing such assistance has no interest in such suit.
- The party who receives such assistance agrees to share the proceeds from the
suit received by him in return to the person who provides such assistance.
legal effect The Champerty agreement is valid, if it is bonfaide and the share of proceeds paid
to the person providing such assistance is reasonable

ILLEGAL AGREEMENTS & AGREEMENTS UNLAWFUL IN PART

Illegal Agreements Illegal agreement are those agreements which are-
Meaning (a) Void-ab-initio. i.e. void from the very beginning, and
(b) Punishable by the criminal law of the country or by any special legislation /
regulation.
Illegal Agreements Effects (a) Collateral transactions - also become illegal and void.
 (b) No action can be taken for the recovery of money paid or property
transferred under an illegal agreement and for the breach of an illegal
agreement.
An agreement containing whether lawful promise can be separated from unlawful: promise –
legal and illegal promises • If ‘Yes’ - Lawful promise can be enforced: or - Unlawful promise
cannot be enforced
• If ‘no’ - The whole agreement is void.
A Reciprocal agreement the reciprocal promise to do –
containing legal and • Legal things - can be enforced
illegal promises • Illegal things - cannot be enforced.
An agreement containing the alternate promise to do –
alternate promises, one • Legal things - can be enforced
legal and other illegal • Illegal things - cannot be enforced.

MEANING AND EXAMPLES OF VOID AGREEMENTS

Meaning A void agreement is an agreement which is not enforceable by law. The agreements
which are not enforceable by law right from the time when they are made are void- ab -
initio.
Examples Agreements which have expressly been declared void:
1. Agreements by or with persons incompetent to contract (section 10 & 11)
2. Agreements entered into through a mutual mistake of fact between the parties
(section 20).
3. Agreement, the object or consideration of which is unlawful (section 23)
4. Agreement, the consideration or object of which is partly unlawful (section 24).
5. Agreement made without consideration (section 25)
6. Agreement in Restraint of Marriage of any person other than minor (section 26).
7. Agreements in Restraint of Trade (section 27).
8. Agreements in Restraint of legal Proceedings (section 28).
9. Wagering Agreement (section 30)
10. Impossible Agreement (section 56).
11. An agreement to enter into an Agreement in the future.

AGREEMENTS IN RESTRAINT OF MARRIAGE

agreements in Every agreement in restraint of the marriage of any person other than a minor is
restraint of marriage void.
(Section 26)

AGREEMENTS IN RESTRAINT OF TRADE

Agreements in Every agreement by which anyone is restrained from exercising a lawful profession
restraint of trade or trade or business of any kind is void to that extent.
(Section 27)
Meaning of Only that portion of such agreement is void which is considered either as
expression unreasonable or as opposed to public being in restraint of trade. The rest of the
‘that extent’ agreement will be valid.
Burden of proof • Party supporting the contract – must show that the restraint is reasonably
necessary to protect his interests.
• Party challenging the contract - must show that the restraint is injurious to
the public.
Exceptions Under statutory provisions Under Judicial
Interpretations
1. Agreement with seller of Goodwill to carry 1. Trade combinations to
similar business within specified period or local regulate the business or to fix
limits if restrictions are reasonable. prices (but not to create
2. Agreement with partners monopoly)
(a) Restriction on Existing partner to carry on any
business other than that of firm while he is a 2. Sole Dealing Agreement on
partner. reasonable terms.
(b) Restrictions on Outgoing partner to carry on
similar business within specified period or local 3. Service Agreements (must
limits if restrictions are reasonable. show that the restraint is
(c) Restriction on partners on dissolution of firm reasonably necessary to
to carry on similar business within specified protect employers interests.)
period or local limits if restrictions are
reasonable.
(d) Restriction on partners in case of sale of firm’s
goodwill, to carry on similar business within
specified period or local limits if restrictions are
reasonable.

AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS

Agreement of • An agreement by which any party is restricted absolutely from enforcing his
restricting legal rights under any contract is void to that extent.
enforcement of • A partial restraint is not void, e.g. a clause in a contract that any dispute arising
rights between the parties shall be subject to jurisdiction of a court at a particular
place only, is valid.
Agreements limiting An agreement which limits the time within which an action may be brought is void
period of limitation as it defeats the provision of law
Exceptions (a) An agreement to refer any dispute which may arise to arbitration is not void.
(b) An agreement in writing to refer any dispute which has already arisen to
arbitration is not void.

WAGERING AGREEMENTS
Meaning • An agreement between two persons under which money or money’s worth is
payable, by one person to another on the happening or non-happening of a
future uncertain event is called a wagering agreement.
 • If at the time of entering into the agreement the parties intend to merely settle
the difference in prices without taking or giving actual delivery of goods, it is a
wagering agreement.
Effects of wagering (a) The agreement is void.
agreement (b) The agreement is illegal in the states of Maharashtra and Gujarat.
(c) No suit can be filed to recover the amount won on any wager.
(d) Collateral agreements to wagering agreements are illegal in Maharashtra and
Gujarat.
(e) Collateral agreements to wagering agreements are not void in rest of India.
Agreements not (a) Agreement to pay prize money not-exceeding Rs.1,000.(Prize Competition Act,
held as wagers 1955)
(b) An agreement to pay a prize exceeding Rs. 500 to the winner of a horse race is
not a wager.

CONTINGENT CONTRACTS
Meaning of A contingent contract is a contract to do or not to do something, if some event
contingent contract collateral to such contract, does or does not happen.
essential features of (a) it is a contract to do or not to do something.
a contingent (b) this contract is dependent on happening or non-happening of an event.
contract (c) such an event is a collateral event i.e. it is collateral to the contract.
(d) the event must not depend upon the mere will of a party.
(e) the event is uncertain.

RULES REGARDING CONTINGENT CONTRACTS

contract contingent When can it be enforced? When does it become void ?
upon
happening of an When such event has happened. when, the happening of such event becomes
event impossible
non-happening of a When the happening of such event When such event has happened.
future event becomes impossible.
happening of an When such event has happened • When the happening of such event
event within a within the specified time. becomes impossible before the expiry of
specified time specified time.
• When such event has not happened
within the specified time.
non-happening of • When the happening of such When such event has happened within the
an event within a event becomes impossible specified time.
fixed time before the expiry of specified
time.
• When such event has not
happened within the specified
time.
future conduct of a When such person acts in the when such person does anything which
living person manner as desired in the contract. makes the desired future conduct of such
person –
(a) impossible : or
(b) dependent upon certain contingency.
impossible events Such an agreement cannot be enforced since it is void. Whether the impossibility of
the event was known to the parties or not is immaterial.

PRINCIPLE OF RESTITUTION
Meaning Restitution means “Return of or Restoration of Benefit.”
Applicability 1. Void Contract. 2. Voidable Contract, if rescinded by the aggrieved party.
Non - Contracts which are void-ab-initio (Void/ Illegal Agreements)
Applicability Exception where the minor has entered into agreement by misrepresenting his age.
MEANING AND TYPES OF PERFORMANCE
Meaning of A contract is said to have been performed when the parties to a contract either
performance or offer to perform their respective promises.
Actual performance If - the promisor makes an offer of performance to the promisee: and
-Meaning - the offer to perform is accepted by the promisee.
Then - it is called as actual performance.
Attempted If – the promisor makes an offer of performance to the promisee: but
performance The offer to perform is not accepted by the promisee:
(Tender) Meaning Then – it is called as attempted performance or offer to perform or tender.

TYPES OF TENDERS AND THEIR EFFECTS

Tender of goods and • The goods or services need not be offered again.
services – Effects • The promisor is – (a) discharged:
(b) not responsible for non-performance:
(c) entitled to sue the other party.
Tender of money – • The debtor remains liable to pay the debt.
Effects • The debtor is not required to pay interest from the date of tender.
Essentials of a valid 1. Unconditional 2. At proper time 3. At proper place
Tender 4. For Whole Obligation 5. To proper person
6. Reasonable Opportunity to Promisee for inspection.
7. Must be made for the exact amount of money.

PERSONS LIABLE FOR AND ENTITLED TO, PERFORMANCE

Who may perform the contract Who may demand performance
(a) Promisor (a) Promisee
(b) Agent of promisor (b) Agent of promisee
(c) Any of the several joint promisors (c ) All the joint promisees together
(d) Legal representative of a promisor (d) Legal representative of a promisee
(e) Third party

DEVOLUTION OF JOINT LIABILITIES AND RIGHTS

Meaning of Devolution means passing over from one person to another.
devolution
Meaning of The liabilities of joint promisor pass to their legal representatives (in case of death).
devolution of joint
liabilities
Rules Regarding the (a) Joint and Several Liability of Joint promisors.
performance of (b) Joint promisor’s Right to claim contribution.
Joint promises ( c) Joint promisor’s Duty to share loss from default in contribution by an insolvent
promisor.
(d) Release of One Joint promisor does not release other joint promisors.
Meaning of 1. All the joint promisees together.
devolution of joint 2. In case of death, the survivors together with dead promisees legal
Right representative.
3. In case of death of all the joint promisees, legal representatives of all jointly.

RULES AS TO TIME AND PLACE OF PERFORMANCE OF A CONTRACT

Case where… Rule as to performance
1. Time not specified Within a reasonable time.
2. Time specified but promise is to be During the usual business hours on that particular day.
performed without promisee’s
application
3. Time specified but promise is to be The promisee must apply for performance at a proper place
performed on promisee’s application and within usual business hours.
4. Place not specified The promisor must apply to the promi-see to appoint a
reasonable place for the performance and to perform the
promise at such place.
5. Manner for performance prescribed The promise must be performed in the manner and at the
time prescribed by the promisee.

IS TIME AN ESSENCE OF CONTRACT?

Meaning It is essential for the parties to perform their respective promises within the
specified time.
When Time Essence? In the following cases, time is usually considered to be the essence of contract :
(a) Where the parties have expressly agreed to treat the time as the essence of
the contract
(b) Where the non-performance at the specified time operates as an injury to
the party.
(c) Where the nature and necessity of the contract requires the performance of
the contract within the specified time.
In Commercial Contracts Time of delivery of goods is essence of contract and not the time for payment
of price.
Where Time is essence Where Time is not essence
1. contract becomes voidable 1. contract does not become voidable
Consequences of Non- 2. promisee cannot claim 2. promisee can claim compensation
performance of contract compensation
within specified Time

RECIPROCAL PROMISES
Meaning Promises which form the consideration or part of the consideration for each other are called
‘reciprocal promises’.
Types Lord Mansfield Jones v. Barkley case have classified the reciprocal promises as under:
Types of reciprocal Meaning
promises
(a) Mutual and When the promises are to be performed by each party
Independent independently, without waiting for the other party to perform
his promise.
(b) Mutual and When the performance of one party depends on the prior
dependent performance of the other party.
(c) Mutual and When the promises are to be performed simultaneously.
Concurrent

MEANING OF APPROPRIATION OF PAYMENT

Meaning It means application of payment to a particular debt. The rules are
applicable only when the debtor owes several distinct debts to the
creditor.
Case Rule
I. Where debt to be discharged is The payment, if accepted must be applied accordingly.
Indicated.
II. Where debt to be discharged is The creditor has option to apply the payment to any lawful debt due
not indicated from the debtor even if It is a time barred debt. But he cannot apply
to a disputed debt.
III. Where neither party makes The payment shall be applied in discharge of the debts in order of
any Appropriation time, even if any of the debts is barred by limitation.

DISTINCTION BETWEEN SUCCESSION AND ASSIGNMENT

Basic of Succession Assignment
distinction
1.Meaning The transfer of rights and liabilities of The transfer of rights by a person to
deceased person to his legal another person .
representative.
2. Time It takes place on the death of person It takes place during the lifetime of a
person.
3.Volunary act Succession is not a voluntary act. Assignment is a voluntary act of the
paraties.
4. Written Successsion may take place even without Assignment requires execution of an
document any written document. assignment deed.
5. Scope All the rights and liabilities of a person Only rights can be assigned.
are transferred.
6. Notice No notice of succession is required to be Notice of assignment must be given to the
given to any person. creditor.
7. Consideration No consideration is necessary for Consideration is a must for assignment.
succession

MEANING AND MODES OF DISCHARGE OF A CONTRACT

Meaning Discharge of a contract means termination of the contractual relations between the
parties to a contract.
Mode • Discharge by performance.
• Discharge by Mutual Agreement
• Discharge by Operation of Law
• Discharge by Impossibility of performance
• Discharge by lapse of Time as per the Limitation Act, 1963
• Discharge by Breach of contract

DISCHARGE BY PERFORMANCE
Actual performance When both the parties perform their respective obligations in accordance with
the terms of the contract, the contract is discharged.
Attempted performance Where a valid tender is not accepted by the other party, the promisor is
or tender discharged.

DISCHARGE BY MUTUAL AGREEMENT

Novation ( Sec .62) • Novation means substitution of a new contract in place of the original contract.
• The new contract may be – (a) between the same parties: or (b) between
different parties.
The consideration for the new contract is the discharge of the original contract.
Alteration ( • Alteration means a change in the terms of a contract with mutual consent of
Sec.62) parties.
• The parties to the new contract remain the same.
Rescission (Sec 62) It means cancellation of a contract by one or all the parties to the contract. All the
parties may mutually agree to bring the contract to an end. This is called as discharge
of contract by rescission by mutual consent.
Remission (Sec. • A contract is discharged by remission, i.e. where a promisee agrees to –
63) (a ) accept a lesser fulfillment instead of the complete fulfillment under the
contract : or
(b) extend the time for performance due by the promisor: or
(c) accept any other consideration than agreed to in the contract.
 * No consideration is necessary for remission.
Waiver • Waiver is complete remission. It is leaving all the rights under the contract.

DISCHARGE BY OPERATION OF LAW

Death Contracts involving personal skill, knowledge or ability of the deceased party are
discharged automatically on the death of the promisor.
Insolvency The insolvent is discharged from liability on all contract entered into upto the date
of insolvency.
Unauthorised An alteration which changes the substance (i.e. legal effect or basic character) of a
material alteration contract is called as material alteration. Unauthorised material alteration results in
discharge of a contract.
Merger of rights If the rights and liabilities arising under a contract vest in the same person, the
contract is discharged.

DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE

Meaning of If - impossibility existed at the time of formation of the contract:
Initial Then - it is called as Initial impossibility.
impossibility Such agreement is void-ab-initio.
Meaning of If - no impossibility existed at the time of formation of the contract: but
supervening the impossibility arises subsequent to the formation of the contract and
impossibility the impossibility is of such a nature that it makes the performance of
the contract impossible or illegal;
Then - it is called as supervening impossibility.
Reasons for change in law Supervening impossibility may arise because of change in law.
supervening Change in Supervening impossibility may arise because of change in
impossibility circumstances circumstance beyond the contemplation of parties.
Effects of contract becomes • The contract is discharged i.e. the contract becomes void.
supervening void • All the parties are discharged from their respective
impossibility obligations.
Restitution Restitution is allowed. Any benefit received under the contract
must be restored.
Promisor alone knows Such promisor must compensate the promisee for any loss
of impossibility which such promisee sustains due to non performance of
promise.
Example of Destruction of subject If the subject matter of the contract is accidentally destroyed,
supervening matter without any fault of any party, it amounts to supervening
impossibility impossibility.
Incapacity to perform a Where a contract has to be personally performed by a party,
contract of personal disability or incapacity to perform caused due to circumstance
service beyond the control of such party (e.g. illness or death) amounts
to supervening impossibility.
outbreak of war If one of the parties becomes an alien enemy due to outbreak of
war, it amounts to supervening impossibility.
 Non- existence or non- If particular state of things, which forms the basis of a contract,
occurrence of particular cease to exist or occur, the contract is discharged by
state of things supervening impossibility.
Krell v Henry
What is not commercial Where performance becomes difficult or burdensome or
supervening impossibility expensive or less profitable, availability of transport at
impossibility exorbitant rates. etc., it does not amount to supervening
– impossibility.
Examples Default by third party Default by a third party on whose work or conduct the promisor
relied does not amount to supervening impossibility.
Strikes, riots or civil strike by the workers or outbreak of riots or some civil
disturbances disturbances interrupting the performance do not amount to
supervening possibility
Self induced Impossibility arising due to a party’s own conduct or act (i.e. a
impossibility deliberate or negligent act,) is not supervening impossibility.
partial failure of objects If a contract is made for fulfillment of several objects, the failure
or partial impossibility of one or more of them does not amount to supervening
possibility.
H.B.Stamboat Co. v Hulton

DISCHARGE BY LAPSE OF TIME

Meaning A contract is discharged if it is not performed or enforced within period of
limitation.
Period of Limitation The Limitation Act, 1963 prescribes:- For debt relating to immovable property - 12
years.
For any other debt - 3 years.
Consequences The contracting parties cannot exercise their rights after the expiry of the period of
limitation.

DISCHARGE BY BREACH OF CONTRACT

Meaning of breach Failure or Refusal of a party to perform his part of contract is called as breach.
Consequences of • The aggrieved party is relieved (discharged) from performing its part of
breach obligation.
• The aggrieved party is entitled to proceed against the party at fault (file a suit).
Types • Anticipatory Breach.
• Actual Breach.

ACTUAL BREACH OF CONTRACT

Time when actual • On the due date of performance
breach take place • During performance
Manner in which • Where a party fails to perform
actual breach may • Where a party refuses to perform
take place • Where a party act in such a manner that it becomes impossible for him to
perform.
Consequences of Actual Breach of contract Where time is the Where time is not the
essence of a contract essence of a contract
1. Whether the contract becomes voidable at the Yes No
option of the promisee.
2. Whether promisee is entitled to claim
compensation Yes Yes
(a) Where performance beyond the stipulated
time is not accepted No, unless the promisee No, unless the promisee
(b) Where performance beyond the stipulated gives notice to the gives notice to the
time is accepted promisor of his intention to promisor of his intention
do so. to do so.

ANTICIPATORY BREACH OF CONTRACT

Meaning of Anticipatory breach occurs when the party declares his intention of not performing
the contract before the performance is due.
Modes of (a) Express repudiation: When a party to a contract has refused to perform his
anticipatory promise.
breach (b) Party disables himself: When a party to a contract has disabled himself from
performing his promise in its entirety (i.e. the party acts in such a manner that it
becomes impossible for him to perform the contract).
Two option (a) He can rescind the contract and claim demages for breach of contract without
waiting until the
due date for performance, or
(b) He may treat the contract as operative and wait till the due date for
performance and claim
damages if the promise still remains unperformed.
Consequences of (a) The promisor may perform his promise on or before the due date of
Treating contract performance and the
as operative promisee will be bound to accept the performance.
(b) The promisor may take advantage of the discharged by supervening
impossibility arising
between the date of breach and the due date of the performance and in such a
case the
promisee shall lose his right to sue for damages.
Amount of Option exercised Amount of damages
Damages I. When the aggrieved party rescinds Difference between the price prevailing on
the contract at the date of breach the date of breach and the contract price.
II. When the aggrieved party does not Difference between the price prevailing on
rescind the contract at the date of the due date of performance and the
breach contract price.

REMEDIES FOR BREACH OF CONTRACT

Meaning of Remedy A remedy is the course of action available to an aggrieved party (i.e. the party not
at default) for the enforcement of a right under a contract.
Remedies for Breach 1. Rescission of contract (Section 39)
of contract 2. Suit for Damages
3. Suit for specific performance
4. Suit for Injunction
5. Suit for Quantum Meruit

RESCISSION (Section 39)

Meaning Rescission means a right available to an aggrieved party to terminate a contract.
Effects • The aggrieved party is not required to perform his part of obligation.
• The aggrieved party can claim compensation for any loss caused to him.

SUIT FOR DAMAGES (Section 73)

Meaning Monetary compensation allowed for loss suffered by aggrieved party due to breach
of contract.
Object of awarding • Not to punish the party at fault
damages • To make good the financial loss suffered by the aggrieved party due to breach
of contract

KIND OF DAMAGES
(a) Ordinary • These damages are awarded for such loss suffered by a party which is a
Damages natural, direct or proximate consequence of breach.
• Damages are not awarded if they have resulted because of an indirect
consequence.
(b) Special Damages Aggrieved party may claim the special damages if the special circumstances
resulting in a special loss are communicated to the promisor.
(c) Exemplary or These in the nature of punishment .These damages are awarded only in the
punitive or vindictive following 2 cases :
Damages. Breach of a contract The damages shall be calculated on the basis of mental
to Marry injury sustained by the aggrieved party.
Wrong dishonor of a the damages shall be calculated on the basis “lower the
cheque by Bank amount of cheque greater will be the damages”
(d) Nominal Where no loss is suffered by the aggrieved party, the Court generally awards
Damages nominal damages.
(e) Damages for Where a party has suffered physical inconvenience, discomfort or mental agony as
inconvenience a result of breach the court may be awarded damages for the same.
(f) Liquidated • Where the parties to a contract specify a certain sum in the contract which will
Damages and become payable as a result of breach such specified sum is called as liquidated
penalty damages or penalty.’
 • If the specified sum represents a fair and genuine pre-estimate of the damages
likely to result due to breach such specified sum is called as ‘liquidated
damages’.
• If the specified sum is disproportionate (unreasonably high) to the damages
which are likely to result as a result of breach, such specified sum is called as
‘penalty’.
• In India damages shall be restricted to a reasonable compensation not
exceeding the sum specified in the contract ( whether by way of liquidated
damages or penalty)
(g) Forfeiture of • Any clause in contract entitling the aggrieved party to forfeit the security
security deposit deposit is not valid.
• In such case court may award reasonable compensation only for the loss
suffered by him.
(h) Payment of • Payment of interest is permissible.
interest • If no rate of interest is mentioned in the contract, the party shall be liable to
pay interest –
(a) as per any law for the time being in force:
(b) as per the custom or usage of trade.
However, if interest is in nature of penalty, the Court may award reasonable
compensation only.

SUIT FOR SPECIFICE PERFORMANCE

Meaning Specific performance means seeking an order from the Court that the promise
specified in the contract shall be carried out.
When is specific (a) Actual damages arising from breach are not measurable.
performance (b) Monetary compensation is not an adequate remedy.
allowed ?
When is specific (a) Where damages are an adequate remedy.
performance not (b) Where the Court cannot supervise the performance of the contract.
allowed (c) Where contract is of personal nature. Eg. Contract to marry.
(d) Where the contract is inequitable to any of the parties.
(e) Where the contract is made by a company beyond its power as laid down in the
object clause of memorandum of association.
(f) Where specific performance is demanded against a minor.
(g) Where the contract is dependent upon personal volition of the parties.

SUIT FOR INJUNCTION

Meaning Injunction means an Order of the Court prohibiting the other party from carrying
out a particular act.
When is this remedy • The Court has the discretion whether or not to grant injunction.
available? • Where a party to the contract promise to do an act but refuses to perform such
act resulting in breach of contract, the Court may restrain the defaulting party
from performing such act in future.
SUIT FOR QUANTUM MERUiT
Meaning The term quantum meruit means “as much as merited or as much as is earned”.
In other words, it means payment in proportion to the amount of work done.
The right to claim on quantum meruit does not arise out of a contract as the
right to damages does. It is a claim on the quasi contractual obligation which is
implied by the circumstances. The claim for quantum meruit arises only when
the original contract is discharged.
Cases 1. In case of void agreement or contract that becomes void.
2. In case of non-gratuitous act.
3. In case of one party preventing the completion of contract.
4. In case of divisible contract.
5. In case of indivisible contract performed completely but badly.
Divisible contract A party at fault may sue on quantum meriut if -
partly performed (a) the contract is divisible;
(b) the contract is partly performed ; and
(c) the party not at fault has enjoyed the benefits of the part performance.
Indivisible contract A party at fault may sue on quantum meriut If –
performed completely (a) the contract is indivisible;
but badly (b) the contract is for a lump sum consideration;
(c) the contract is completely performed; and
(d) the contract is performed badly.

INTRODUCTION TO QUASI CONTRACTS

Meaning of a quasi It means a contract which lacks one or more of the essentials of a contract.
contract
Basis of quasi contract Quasi contracts are declared by law as valid contracts on the basis of principle
of equity, i.e. no person shall be allowed to enrich himself at the expenses of
another.
Legal effect of a quasi The legal obligations of parties remain same in case of a quasi contract as that
contract of normal contract. Obligations are imposed by Law & does not arise from
agreement.

SUPPLY OF NECESSARIES TO PERSONS INCOMPENTENT TO CONTRACT

who is made liable u/s A person who is incompetent to contract is made liable u/s 68
68
conditions of Sec. 68 The liability of an incompetent person arises if necessities are supplied to such
person (i.e. incompetent person ) or any other person who is dependent on such
incompetent person.
Liability of • The person who supplies necessities to the incompetent person is entitled to
incompetent person be reimbursed from the property of such incompetent person.
(Quasi Contract) • However, the incompetent person is not personally liable.
Meaning of necessities Necessities suitable to the condition in life of the person to whom such
necessities are supplied

PAYMENT BY A PERSON WHO IS INTERESTED IN A TRANSACTION

condition of Sec. 69 A person who is interested in the payment of money for which another person in
legally bound to pay & who therefore pays it.
Legal effect of Sec. 69 Consequently the person who pays such amount shall be entitled to recover the
(Quasi Contract) payment made by him.

OBLIGATION OF PERSON ENJOYING BENEFIT OF NON-GRATUITOUS ACT.

conditions of Sec 70 A person has lawfully done something for or delivered something to another
person voluntarily and non-gratuitously ; and the other person has enjoyed the
benefit of the act done for or the things delivered to him.
Legal effect of Sec 70 Consequently the party who has done something or delivered a thing shall be
(Quasi Contract) entitled to recover its value from the person who obtained the benefit of the
same.

FINDER OF GOODS
Condition of Sec. 71 A person who finds goods belonging to another and takes them into his custody.
Legal effect of Sec 71 It is the duty of the finder of the goods to find the real owner and return it back to
(Quasi Contract) him. The owner must reimburse reasonable expenses incurred by finder. If the
owner cannot be traced the finder of the goods can retain the goods as a bailee.

MONEY PAID UNDER A MISTAKE OR COERCION

Condition of Sec. 72 A person to whom money has been paid or anything has been delivered by
mistake or under coercion.
Legal effect of Sec 72 Consequently the party who has paid money of delivered a thing shall be entitled
(Quasi Contract) to recover its value from the person who obtained the benefit of the same.
IMPORTANT SECTIONS
Sec 2(a) Proposal (Offer)
Sec 2(b) Promise
Sec 2(c) Promisor & Promisee
Sec 2(d) Consideration
Sec 2(e) Agreement
Sec 2(h) Contract
Sec 2(i) Voidable Contract
Sec 2(j) Void Contract
Sec 4 & 5 Communication of an offer, acceptance & revocation
Sec 6 Revocation or lapse of offer
Sec 7 Acceptance should be absolute & unqualified
Sec 7(2) Manner of acceptance
Sec 8 Genera Offer
Sec10 Essential of Valid Contract
Sec 11 Capacities of Parties
Sec 12 Sound mind
Sec 13 Free consent
Sec 15 Coercion (Acts Forbidden by IPC,
1860)
Sec 16 Undue Influence
Sec 17 Fraud
Sec 18 Misrepresentation
Sec 20 Mistake
Sec23 Unlawful objects & consideration
Sec 24 Where consideration is unlawful in part (Agreement expressly declared to be void)
Sec 26 Agreement in restraint of marriage (Void
Agreement)
Sec 27 Agreement in restraint of trade (Void
Agreement)
Sec 28 Agreement in restraint of Legal proceeding (Void
Agreement)
Sec 29 Agreement the meaning of which is uncertain (Agreement expressly declared to be
void)
Sec 30 Wagering Agreement (Agreement expressly declared to be
void)
Sec 31 Contingent Contract
Sec 41 Performance of promise from a third person
Sec 42 Liability of Joint Promisors & Joint Promises
Sec 43 Ina absence of express agreement to the contrary the Promisee may compel any one or
more of the joint promisors to perform the whole of the promise
Sec 51 Simultaneous Performances
Sec 56 Supervening impossibility
Sec 57 Reciprocal promises has 2 parts first legal & other illegal, then the legal part is valid & illegal
is void
Sec 59 to Appropriation of Payments
61
Sec 62 Novation, Alteration, Rescission
Sec 65 Obligation of a person who has received advantage under void agreement
 Sec 68 Minors or unsound mind person liability for necessities
Sec 68 Claims for necessaries/ necessities supplied to a person incapable of contracting (Types of
Quasi Contracts)
Sec 69 Right to cover money for another (Types of
Quasi Contracts)
Sec 70 Person enjoying the benefits of non-gratuitous acts (Types of
Quasi Contracts)
Sec71 Finder of goods (Types of
Quasi Contracts)
Sec 72 Money paid under mistake or coercion (Types of
Quasi Contracts)
Sec 124 Contract of Indemnity
Sec 126 Contract of Guarantee
Sec 145 Indemnity (right of surety against the
principal debtor)
Sec 148 Bailment
Sec 168- Rights to finder of goods
169
Sec 172 Pledge
Sec 182 Agency (meaning & Features)
Sec 185 No Consideration is required to create an agency

IMPORTANT CASE LAWS

1 Intention to create legal obligation Balfour Vs Balfour
2 General offer Carlill Vs Carbolic Smoke Ball Co.
3 Offer shall be communicated & complete communication Lalman Shukla Vs Gauri Dutt
4 Reasonable time for Acceptance Ramsgate Victoria Hotels Vs Montefiore
5 Invitation to offer Fisher Vs Bell
6 Offer is revoked if counter offer is made U.P State Electricity Board Vs Goel Electric
Stores
7 Acceptance should be absolute & unqualified Neal Vs Merret
8 Consideration must move at the desire of the promisor Durga Prasad Vs Baldev
9 Consideration can flow from Promisee or any other Chinya Vs Ramya
person
10 Written & Registered agreement out of natural love & Rajlukhi Dabee Vs Bhootnath Mookerjee
affection
11 Exception to suit by a third party to an agreement Khwaja Mohammed Vs Hussain Begum
12 Coercion Chikham Amiraju Vs Chikham Seshamma
13 Minors agreement is void-ab-initio Mohiri Bibee Vs Dharmodas Ghose
14 Consideration Curie Vs Misa
15 Family Settlement (suit by third party) Shuppu Vs Subramanian
16 The aggrieved party loses the power to rescind the contract if
he after becoming aware of the misrepresentation takes a
benefit under the contract or in some way affirms it Long Vs Loyd
17 Bilateral Mistake regarding matter of facts Couturiers Vs Hasite
18 Cases of supervening Impossibility (nonexistence of a Paul Krell Vs C.S. Henry
particular state or a thing)
 19 Restoration of a benefit under a Voidable Contract Murlidhar Chatterjee Vs International Film
Co.
20 Right to recover money for another (quasi contract) Muni Bibi Vs Triloknath
21 Person enjoying benefit of non-gratuitous acts Shyam Lal Vs. State of U.P
(quasicontract)
22 Duties of the bailee to return the goods Shaw & Co. Vs Symmons & Sons

IMPORTANT LATIN WORDS / PHRASES

1 Ignorantia juris non excusat Ignorance of law is not an excuse
2 Jus in rem Rights on the goods
3 Jus in personam Rights against a person
4 Namo dat quod non habet No one can give what he does not have
5 Ultra Vires Beyond power
6 Consensus ad idem Meeting of minds in the same sense
7 Void ab initio Not enforceable from beginning.
8 Quantum Meruit As much as is earned
9 Quid pro quo Something in return
10 Ubi jus , ibi remedium Where there is a right there is a remedy
11 Quicquid solvitur, solvitur secundum Whatever is paid, is paid according to the intention or manner of
modum solventis the party paying.
12 Status Quo Ante Position before the contract
13 Part delicto, polio rest condition In case of equal guilty the defendant is in a better position
detendentis
14 Prima Facia On the first view
15 Ipso Facto/ De facto By the very fact
16 Pacta sunt servanda Promises must be kept
17 Ex nudo pacto actio non oritur no action arises on a contract without consideration
18 Numdum Pactum No consideration no contract
19 Ex gratia Out of kindness, voluntary
20 Delegata potestas non potest delegart A delegated authority cannot be again delegated
21 De novo Starting afresh
22 De minimis lex non curat The law does not notice trifling/ small matters
23 De jure Rightful, by right
24 Compos Mentis Of sound mind
25 Bona fide Sincere , in good faith
26 Actiones legis Law suits
27 Ubmerrimae Fidae Utmost good faith