CAFC - CSEETThe Indian Contract Act 1872

Prof Farheen Ansari
B.com, CS, LLB, PGDIPR Indian Contract Act 1872
TOPIC: INDIAN CONTRACT ACT 1872
INTRODUCTION:
This act came into force on 1st September 1872
It extends to the whole of India.
The Act is divided into 2 parts;
Section 1-75 Section 124-238

General Contract Special Contract
It is commonly called as “Law of Contract”
 Section 2(h) defines contract as, “an agreement enforceable by law”
What is Contract?
Agreement Law Offer to sell his car

Agreement
=
Rs.2 lacs Promise
Acceptance to buy car
Offer Acceptance
 Thus, “all contracts are agreement; but all agreements may not be contract”
 Section 2(e) defines Agreement as, “every promise and every set of promises,
forming the consideration for each other”
 Section 2(b) defines promise, “when a person to whom the proposal is made,
signifies his assent thereto, the proposals is said to be accepted. A proposal when
accepted becomes a promise.”
Disclaimer: That the Professor is the holder of Copyrights of this given notes. Unless expressly provided in
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Further the Professor herein does not accept any liability, intended or unintended in respect of this report
Prof Farheen Ansari
There are 2 kinds of rights of a person;
Right in Rem Right in Personam

(right against (right against a Contract creates “Right in Personam”
the whole world) person)
 Contract creates contractual obligation upon the party:
Ex. A agrees to sell B his flat at Rs.10 lacs. B accepted to buy

the flat at Rs. 10 lacs.
Here, both parties are now under contractual obligation to

perform their part of promises
Q. Which Agreements are not Contract?
 When the intention is “not to create any legal relation”
 Agreement relating to social matters:
Case law: Kalai Halder v/s Sheikh: Invitation for dinner
A invited B to his house for dinner. B accepted the invitation to come to A’s house. A
made all the preparation of food to welcome B. However, B did not turn up. The
entire food and efforts were in vain.
Can A file a suit for breach of promise against B?

No, because accepting invitation for dinner creates a social relation, not legal
relation.
Prof Farheen Ansari
 Domestic arrangement between husband and wife:
Case law: Balfour v/s Balfour
A husband agreed to pay to his wife certain amount as maintenance every month
while he was abroad. Husband failed to pay the promised amount.
Wife sued him for the recovery of the amount.
Can the wife recover the amount by filing a case? No, because it was a social
agreement between the Husband and Wife and not legal relation.
Prof Farheen Ansari
Q. ESSENTIALS OF VALID CONTRACT: [Section 10]
1. Two Parties
Natural Person Artificial Person
2. Offer & Acceptance
Offeror Acceptor
Agreement = Promise
3. Must create Legal relation
Social Relation
does not create
contract
Case law: Balfour v/s Balfour
A husband agreed to pay to his wife certain amount as maintenance every month
while he was abroad. Husband failed to pay the promised amount.
Wife sued him for the recovery of the amount.
Can the wife recover the amount by filing a case? No, because it was a social
agreement between the Husband and Wife and not legal relation.
Prof Farheen Ansari
4. Agreement should be certain
No certainty
between the parties
I offer to sell you my car at Rs. 70000/-
5. Free consent
Coercion, Undue Influence, Fraud, Misrepresentation, Mistake
6. Competent Parties
Major person Sound mind Not disqualified by law
Prof Farheen Ansari
7. Consideration ‘quid pro quo’ = something in return
Section 25: No consideration, No contract
8. Agreement must have legal object
Section 23: Consideration or Object shall be unlawful, if prohibited by law
Ex. A agrees to give B Rs.1 lac, if B burns the house of C. B

accepts the offer. The object of the Agreement is unlawful,
hence the agreement is VOID.
9. Agreement must not be void
Illegal agreement Void Agreement
Prohibited by law Does not have legal effect
-Threat to commit murder -Agreement in restraint of marriage

-Robbery -Agreement in restraint to trade
-Defamation -Agreement in restraint to legal
-Dealing in drugs etc proceedings etc
10. Writing & Registration
Prof Farheen Ansari
Q. TYPES OF CONTRACT & AGREEMENT
1. Valid Contract all essentials of valid contract must be present
2.VoidAgreement Agreement which has null/no effect in the eyes of law, not
[Section 2(j)] enforceable
3. Voidable Agreement when there are 2 parties, out of which 1 party breaches
[Section 2(i)] the contract then the contract becomes voidable
(avoidable) on the party of other party.
1st slab: 30% payment
2nd slab: 30% payment
3rd slab: 40% payment
Ex. Here, Ram told the constructor to construct his house, and he will pay him in slab wise. It was
agreed that first Ram will have to pay to start the work of each slab.After completing the 2 nd slab, when
the constructor asked for 3rd slab amount, Ram didn’t pay, meaning he breached the contract.
Will the constructor construct the 3rd slab as per the contract?
No, because the contract has become Voidable on the part of constructor.
4. Illegal Agreement Agreement which is against public policy, morality or

is criminal
Agreement to Kidnap Agreement to murder dealing in drugs
 Thus, Illegal Agreements are not only unenforceable, but also punishable by law.
Prof Farheen Ansari
5. Expressed Agreement 6. Implied Agreement
when the agreement is entered when the agreement is entered without any word,
eitherorally or in writing but by conduct or act of parties
Ex. Ordering a coffee Ex. picking a newspaper

in a restaurant from vendor’s stall
this is not real contract but alike/resemble like a contract.

7. Quasi Contract
Here the parties don’t intend to enter into contract, but by
fiction of law they are entered into contract by law.
Ex. If a patient who was in the state of Ex. If a parcel has been wrongly delivered to the
unconsciousness was taken to the hospital, and neighbor. It shall be the duty of the neighbor to
the doctor treated him (without the consent of the return the good to the true owner, and if it doesn’t
patient). The patient shall be liable to pay the fee of then true owner can take action, as there has been
doctor as there has been Quasi contractbetween Quasi contract between the true owner and
the doctor and patient. neighbor.
Prof Farheen Ansari
8. Executed Contract 9. Executory Contract
when both parties have when parties are yet to perform

performed their respective obligation under the contract
obligations under contract
When contract is entered by two or more parties

10. E-contracts using electronic means, such as email is known as
e-commerce contracts.
There EDI contracts or Cyber contract or Mouse

click contracts
11. Unilateral Contract 12. Bilateral Contract
When in a contract one party When both parties exchange

makes an express promise of mutual promises. These types of
performance without a reciprocal contracts are commonly used in
agreement from other party business transactions.
Ex. You placed an advertisement

offering Rs.500/- reward to the
person who returns your missing
dog.
Prof Farheen Ansari
AGREEMENT CONTRACT
Every promise and every set of An agreement which is enforceable

promises forming consideration for by law is a contract.
each other is an agreement
Agreement= Offer + Acceptance Contract= Agreement + law
It may not create legal obligation. It creates legal obligation
All agreements are not contracts. All contracts are agreements.
It is not final and binding on the It is final, concluding and binding on

parties. the parties.
Prof Farheen Ansari
Q. DEFINE PROPOSAL/OFFER AND ESSENTIALS OF VALID PROPOSAL.
I] MEANING OF PROPOSAL:
 Section 2(a) of the act defines proposal as;
When one personsignifies to another,

his willingness to do or 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.
 Proposal is same as “Offer” under English law of contract.
 It is the first step in formation of contract.
 The person making the proposal is called “offeror”
Ex. When Aoffers to sell his watch to B for Rs.1000/-
Offeror Offeree
II] ESSENTIALS OF VALID PROPOSAL:
1. Offer must be in the form of request
2. It must create legal relations (not social relation):
Case law: Kalai Halder v/s Sheikh: [Invitation for dinner]
A invited B to his house for dinner. B accepted the invitation to come to A’s
house. A made all the preparation of food to welcome B. However, B did not
turn up.The entire food and efforts were in vain.
Can A file a suit for breach of promise against B?

No, because accepting invitation for dinner creates a social relation, not legal
relation.
Prof Farheen Ansari
3. Terms of offer must be definite and certain:
Ex. A agrees to sell 10 kg potatoes at some price: Here the offer is uncertain
4. Offer may be specific or general:
Case law: Carlil v/s Carbolic Smoke Ball co. (1893)
Carbolic smoke Ball Co. advertised in many newspapers that 100 pound shall
be given to any person who contracted influenza after using the smoke ball
produced by the Co.
Mrs. Carlil used the smoke balls as per direction of the company and
contracted influenza.
Was the company liable to Mrs. Carlil?Yes, because it was a General Offer
Case law: Lalman Shukla v/s Gauri Dutt
Gauri Dutt’s nephew was found missing. His sevantLalman Shuka went in
search of the lost nephew. Later, Gauri Dutt announced a reward, that if
anyone traced the boy, would get some reward.
Lalman Shukla found the nephew. Later he got to know about the reward and
went to Gauri Dutt to claim.
Is Gauri Dutt liable to pay Lalman his reward for finding the newphew?
Held that, Lalman was not aware of the offer, hence there could be no
acceptance. Thus, he is not entitled to any reward.
Prof Farheen Ansari
5. Offer can be expressed or implied
By act or conduct of parties
Oral Writing
6. Offer must be communicated
7. Offer may be conditional
8. Offer must be ready to be accepted
Prof Farheen Ansari
IV] INVITATION TO OFFER/ STANDING OFFER/ OPEN OFFER
 These are not offer but an invitation to make offer. A mere statement of price is not
an offer.
 Ex. Window displays, Tenders, Auction sales are all invitation to offer.
Case Law: Harvey v/s Facie [1893]
The plaintiffs through telegram asked 2 questions from defendant;

i) will you sell us Bumper Hall pen? And
ii) Telegraph lowest cash price
The defendants replied through telegram, “lowest price for Bumper Hall pen is 900
euro. The plaintiff sent another telegram stating “we agree to buy the Bumper Hall pen
at 900 euro”. However, the defendant refused to sell.
Are the defendants liable? Privy council held that the defendant are not liable to sell
because out of 2 question they answered only one and neither have they indicated
their willingness to sell. Thus, no offer was made. Mere statement of price is not an
offer.
V] COUNTER OFFER:
 A rejection to the original offer is counter offer. It is a new

offer.
 Ex. A offers to sell the painting at Rs.2000/- to B. B says he

will buy at Rs.1200/-. Here is has rejected A’s offer and
made his counter offer.
Prof Farheen Ansari
Q. DEFINE ACCEPTANCE AND ESSENTIALS OF VALID ACCEPTANCE
I] MEANING:
 Section 2(b) defines acceptance,
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”.
 The person making the proposal is called “Promisor” and the person accepting is
called “promisee”
Sir William Anson, “Acceptance is to offer what a lighted match is to

a train of gun powder”
II] ESSENTIALS OF VALID ACCEPTANCE:
1. Acceptance must be absolute and unconditional
2. Manner of acceptance: Usual and Reasonable mode
Prof Farheen Ansari
3. Acceptance must be communicated
Case Law: Brogden vs. Metropolitan Railway Co. (1877)
B a supplier, sent a draft agreement relating to the supply of coal to the manager of
railway Co. viz, Metropolitian railway for his acceptance. The manager wrote the word
“Approved” on the same and put the draft agreement in the drawer of the table.
By an over sight the draft agreement remained in drawer.
Will it amount to communication? Held, that there was no contract as the manager
had not communicated his acceptance to the supplier, B.
4. Silence does not amount to acceptance
Case Law: Felthouse vs. Bindley (1862)
F (Uncle) ordered to buy his nephew’s horse for £30 saying “If I hear no more
about it I shall consider the horse mine at £30.” The nephew did not reply to F at
all.
Will that amount to nephew’s acceptance? No, as mere silence does not amount
to acceptance
5. Acceptance of proposal is acceptance of all terms of offer
6. Acceptance must be made within specified time
7. Person accepting the offer must not be ignorant

[Case Law: Lalman Shukla v/s Gauri Dutt]
Prof Farheen Ansari
Q. EXPLAIN COMMUNICATION, ACCEPTANCE AND REVOCATION OF OFFER AND

ACCEPTANCES [SECTION 3-6]
SECTION 3: COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSAL AND

ACCEPTANCES.
 communication of proposals Shall be deemed to be made by any

act or omission of part proposing,
 acceptances of proposals accepting or revoking which intends
to communicate such proposal,
 revocation of proposals and acceptances acceptance or revocation
SECTION 4: WHEN COMMUNICATION OF PROPOSAL AND ACCEPTANCE COMPLETE?
When communication When communication of

of Proposal is complete Acceptance is complete
As against the proposer As against the acceptor

When it comes to the
knowledge of the
person to whom it is When it is put in the When comes to the
made course of transmission knowledge of the
to him, so as to be out proposer
of power of the
acceptor
Nice deal! I
Ex. will buy it..
A proposes to sell his house to B for Rs.20 lacs
By sending a letter to B
B accepts the offer by sending a letter by post

A B
Q. When is the communication of proposal of A complete?

 When B receives the letter
Q. When is the communication of acceptance of B complete?

 On the part of A- when the letter is posted by B
 On the part of B- when the letter is received by A
Prof Farheen Ansari
WHEN COMMUNICATION OF REVOCATION IS COMPLETE?
As against the person As against the person to

who makes it whom it is made
When it is put in the When comes to the

course of transmission knowledge of the
to him, so as to be out person against whom it
of power of the person is made
who makes it
Ex. I don’t want to buy, let

me send him a
A want to revoke his offer of selling house telegram to revoke my
acceptance
He sends a telegram to B
A B
Q. When is the revocation of proposal of A complete?

 When B receives the telegram
Q. When is the revocation of acceptance of B complete?

 On the part of A- when the telegram is sent by B
 On the part of B- when the telegram is received by A
SECTION 5: WHEN REVOCATION OF PROPOSAL & ACCEPTANCE CAN BE MADE?
A Proposal may be revoked at any time An Acceptance may be revoked any time
before the communication of acceptance before the communication of acceptance
is completed, not afterwards is complete, not afterwards
Since the acceptance

is received by A, now
B’s acceptance B B cannot revoke
A received, now A
cannot revoke.
Prof Farheen Ansari
SECTION 6: HOW REVOCATION CAN BE MADE?
A proposal is revoked-
By communication of notice of revocation
By lapse of time
By failure of acceptor to fulfill a condition
By death/insanity of proposer
By Counter-offer
By subsequent illegality
Prof Farheen Ansari
Q. STATE BRIEFLY THE LAW RELATING TO COMPETENCE OF PARTIES TO A CONTRACT
I] MEANING:
 Section 11 of the act defines competent party as;
Every Person who is

a) at the age of majority,
b) of a sound mind,
c) must not be disqualified by law
 It means a minor, unsound mind person and a person disqualified by law are
incompetent to enter into contracts.
II] MINOR’S AGREEMENT:
a) Meaning:
 A minor is a person who has not completed the age of 18 years.
 A minor is incompetent to enter into any contracts.
 Any agreement entered by a minor is void-ab-initio (wrong from the

beginning)
Case Law: MohoriBibee v/s Dharmodas Ghosh
A minor took a loan by mortgage, for a sum of Rs.20000/-, the money gave the minor
Rs.8000/-.Later the minor filed a suit for setting aside the mortgage. The money lender
claimed a refund of Rs.8000/- from the minor.
Court held that the agreement with a minor is void.
Prof Farheen Ansari
b) Law relating to Minor’s agreement:
1. A minor is incompetent to enter into contract
2. No Specific performance of Minor’s agreement
3. No Ratification of Minor’s agreement
4. Law of Estoppel- not applicable to a minor
5. Surety of minor is liable
6. Minor cannot be declared insolvent
c) Exceptions (what a minor can do?)
1. Promisee or Transferee
2. Agent
3. Partner in a partnership
4. Quasi contract : the property of minor is liable under Quasi contract
III] CONTRACT BY PERSON OF UNSOUND MIND:
 Section 12 defines a person of unsound mind. It is a state of mind where a person is

incapable to take a rational decision. He is incapable to understand the terms of
contract in its real sense.
 A person may be of sound mind, but sometimes become unsound mind when;
i) under the influence of alcohol or drugs
ii) suffering from high fever
iii) suffering from epilepsy
 So, when a person of sound mind, is in the unsound state of mind, he becomes
incompetent to enter any contract.
Prof Farheen Ansari
IV] CONTRACTS BY PARDA-NISHIN WOMEN:
A Parda-nishin woman is separated from society due to

custom or religion.
She is not allowed to mix freely in the society.
So, while entering into a contract with a Parda-nishin

lady, the terms of contract should be explained to her and she must have
understood such term in the same sense. Else the agreement shall not stand valid.
V] CONTRACTS BY CORPORATION:
Company is an artificial person and can enter into contracts.
However, there are 2 limitations on the corporate:
Natural Limitation Legal Limitation
Since company is an Companies cannot enter

artificial person, it cannot contract beyond its MOA
sign on its own. Directors and AOA, else it shall be
and officers enter contracts ultra-vires (beyond the
on behalf of the company powers)
VI] CONTRACTS BY INSOLVENT:
An insolvent/bankrupt person isdisqualified bylaw from contracting during his

insolvency.
Prof Farheen Ansari
Q. EXPLAIN CONSIDERATION AND ITS ESSENTIAL REQUIREMENTS
I] Meaning:
 Section 2(d) defines consideration,

 When at the desire of the promisor,
 the promisee or any other person
has done or abstained does or abstains Promises to do or abstain

from doing or from doing or from doing something
 such act, abstinence or promise is called consideration for the promise.
 It means “quid pro quo” i.e. “something in return”
 A consideration can be Past, Present or Future.
 Consideration is an essential part of contract.
 Section 25 of the Act states, “No consideration, No contract”
 Ex. A agrees to sell his car to B for Rs.50000/-. The consideration for A shall be
Rs.50000/- and the consideration for B shall be the car.
II] ESSENTIALS OF CONSIDERATION:
1. It must move at the desire of promisor
2. Paid by promisee or any other person
3. It can be Past, Present or Future consideration
4. It need not be adequate
5. It must not be unlawful, illegal, immoral or oppose to public policy
6. It must be real and not illusory
Prof Farheen Ansari
IV] EXCEPTIONS: [WHEN AGREEMENT CAN BE VALID WITHOUT CONSIDERATION]
1. An agreement made out of love and affection
2. A Promise to compensate for past voluntary service
3. Promise to pay a time barred debt
4. No consideration is required to create an agency
5. Gift doesn’t require consideration
Prof Farheen Ansari
Q. EXPLAIN CONSENT UNDER INDIAN CONTRACT ACT [SECTION 13-22]
I] MEANING:
 General meaning of “consent” means “to agree”
 When two or more persons are said to consent, when they agree upon the “same
thing in the same sense” [Section 13]
 Consent is the essential ingredient of contract. But to make a contract valid, the
consent must be “Free Consent”
 A consent is said to be free, when it does not have below act;

1. Coercion
2. Undue influence
If any of this is present, consent is not free
3. Fraud
consent, and the contract shall not be valid
4. Misrepresentation
5. Mistake
COERCION [SECTION 15]

A) MEANING:
It means committing or threatening to commit,
any actforbidden by Indian Penal Code or
Unlawful detaining or threatening to detain any property
With an intention to cause the other person to enter into an agreement
Ex. A threatens to shoot B, if he does not let out his house to

A. B under fear agrees to let out his house to A. This
agreement is brought under by coercion. B’s consent was not
free. B can avoid the contract, even after agreeing.
Prof Farheen Ansari
 It is immaterial whether IPC is or is not in force in the place where coercion is

employed.
A, on board an English ship on the high seas, causes B to enter into an agreement by
an act amounting to criminal intimidation under the Indian Penal Code.
A afterwards sues B for breach of contract at Calcutta.
A has employed coercion, although his act is not an offence by the law of England,
B) ANALYSIS OF SECTION 15:
 Coercion may proceed from anybody, not necessary contracting party
 It includes physical compulsion, fear and even danger to goods.
 It must be obtained by unlawfully detaining or threatening to detain person or

property
 There must be an intention to cause the other enter into an agreement
C) EFFECTS OF COERCION: [SECTION 19]
It makes the agreement voidable at the option of the party coerced
Any money received or goods delivered under coercion must have

to be repaid or returned
Coerced person may rescind the contract
Case law: ChikkamAmmiraju V. ChickamSeshamma
In this case, the husband by a threat of suicide, induced his wife and son to execute a
release deed in favor of his brother in respect of a certain proprieties claimed as their
own by the wife and son.
Court held that to commit suicide amounted to coercion within the meaning of
section 15 of the Indian Contract Act and therefore release deed was voidable.
Prof Farheen Ansari
UNDUE INFLUENCE [SECTION 16]

A) MEANING:
 When the relations between the parties are such that, one party is at a dominant
position and the other at a weaker position, and the former party exercises his
position to dominate the will of the other and uses that position of obtain
undue/unfair advantage, then it is said to have applied “Undue influence”
Ex.
The only son asked his old father to execute a will and
Son and Father transfer all his property in his name, if the father wants the
son to stay and take care of him.
Q. who is the dominate party and who is at the weak position?
Dominant Position
Weaker Position
Undue Influence is caused.
B) PRESUMPTIONS AS TO UNDUE INFLUENCE [WHEN A PERSON IS DEEMED TO DOMINATE

THE WILL OF THE OTHER]:
(a) Where he holds a real or apparentauthority over the other; or
Ex. A having advanced money to his son, B, during his minority,

upon B’s coming of age obtains, by misuse of parental influence,
A bond from B for a greater amount than the sum due in respect
of the advance. A employs undue influence.
(b) Where he stands in a fiduciary relationship to the other; or
Ex. An advocate induced her client for unfair professional fee, else
would turn the case against him. The client out of fear agrees to the
unfair professional charge of the advocate. Here advocate and client
had fiduciary relation and undue influence is caused.
Prof Farheen Ansari
(c) Where he makes a contract with a person whose mental capacityis temporarily or
permanently affectedby reason of age, illness or mental or bodilydistress for example,
an old illiterate person
Ex. A, a man enfeebled by disease or age, is induced by B’s

influence over him as his medical attendant, to agree to pay B an
unreasonable sum for his professional services. B employs undue
influence
C) ANALYSIS OF SECTION 16:
1. One party shall be at a dominant position and the other at a weaker position
2. The dominating party uses that position to obtain unfair advantage
3. Burden of proof lies on the party on whom undue influence has been exercised
4. Undue Influence may exist between:

 Father & Son
 Husband & wife
 Doctor & Patient
 Advocate & Client
D) EFFECTS OF UNDUE INFLUENCE:
It makes the agreement voidable at the option of the party on whom

undue influence is caused
Any money received or goods delivered by undue influence must

have to be repaid or returned
Party may rescind the contract
Case study: A student was induced by his teacher to sell his brand new car to the latter at
less than the purchase price to secure more marks in the examination. Accordingly the car
was sold. However, the father of the student persuaded him to sue his teacher. State on
what ground the student can sue the teacher?
Yes, the student can sue his teacher on the ground of undue influence under the provisions
of Indian Contract Act, 1872.
Prof Farheen Ansari
FRAUD [SECTION 17]

A) MEANING:
 Fraud means and include any of the following acts committed by;
 A party to a contract
 with his connivance or
 by his agent,
 with an intent to deceive another party or to induce him to enter into contract
 Fraud is an active concealment of facts. It is a false promise to cheat other.
Ex. I have a car and I know that the condition of the car is very poor. But
I did little expense on the coloring and exterior of the car so that it
looks perfectly fine. B is interested to buy my car, however I
intentionally did not mentioned the real facts and condition of the
car to B.
Will it amount to fraud?
If B got induced and

purchased the car, it will
amount to Fraud
Q. WILL SILENCE AMOUNTS TO FRAUD?
Mere silence without a duty to However, when it was your duty to speak and
speak does not amount to inform the other person of some material fact
Fraud and you remained silent, then your silence
would be FRAUD
Ex 1. A sells by auction, to B, a horse, which A knows to be of unsound mind. But A says

nothing about the horse’s unsoundness to B. This is not Fraud by A.
Ex 2. B says to A –“If you do not deny it, I shall assume that the horse is sound”. A says
nothing. Here A’s silence is equivalent to speech. This is Fraud.
Prof Farheen Ansari
B) ANALYSIS OF SECTION 17:
1. There must be a representation or assertion which must be FALSE
2. The representation must be related to FACT (not law)
3. The representation is so made, to enter the other party into contract
4. The other party must be induced by the representation
5. The other party must have consequently suffered loss
C) EFFECTS OF FRAUD:
Party may rescind the contract
Party may sue for damages
Party may insist the performance of contract and to put him in the
position in which h would have been, if the representation made had
been true
Contract becomes voidable at the option of the party who has

been induced by fraud
Case law: Word v/s Hobbs
In this case, H sold to W some pigs which were to his knowledge suffering from fever. The pigs were
sold ‘subject to all faults’ and H did not disclose the fact of fever of pigs to W.
Applying the rule of Caveat Emptor (Buyer be aware) it was held that the seller was not bound to
disclose that the pigs were healthy. Thusthere was no fraud.
Prof Farheen Ansari
Q. WHEN SILENCE AMOUNTS TO FRAUD?

Duty of the person to speak
In Fiduciary relation
Contract of Insurance
Contract of Marriage
Share Allotment contract
MISREPRESENTATION [SECTION 18]

A) MEANING:
 Representation means and includes:
 The positive assertion of what is not true, even though the person might believe it to
be true
 It is an untrue statement made innocently
 There is no intention to deceive or do fraud with other party.
Ex. A says to B that the horse is very good and runs 20miles at a stretch (which A
himself believed). B purchased the horse and later found that the horse runs only
2miles at stretch. This is misrepresentation.
There are 2 kinds of misrepresentation;
Misrepresentation of Misrepresentation of
FACTS LAW
Contract becomes Contract cannot be

voidable avoided
Ignorance of fact is Ignorance of law is

allowed not allowed
Prof Farheen Ansari
B) ANAYSIS OF SECTION 18:
1. A false statement made with a believe that it is true
2. There is no intention to deceive
3. The representation is made innocently
C) EFFECTS OF MISREPRESENTATION:
Party may rescind the contract within a reasonable time
Party can avoid the contract
Party may insist the performance of contract and to put him in the
position in which h would have been, if the representation made had
been true
Party may sue for damages
 WHEN MISPRESENTATION DOES NOT INVALIDATE A CONTRACT?
(i) If the party whose consent was caused (ii) If misrepresentation did not cause the
by misrepresentation has all the means to consent to the contract
discover the truth with ordinary diligence
Ex. A, by misrepresentation told B that his factory produces 500 quintals of wheat every month. B
examined A’s account which showed that 400 quintals of wheat was produced every month. B still
purchased A’s factory.
Can B later on hold A liable for misrepresentation?

No, because B’s consent was not due to misrepresentation of A. Hence the contract would not be
voidable
Prof Farheen Ansari
MISTAKE [SECTION 20,21 & 22]

A) MEANING:
 Mistake may be defined as innocent belief which leads to misunderstand the others.
 It is an unintentional act, omission, error, ignorance or forgetfulness.
Mistake can be of;
Mistake of Fact Mistake of Law
Unilateral Bilateral Mistake of Indian Law Mistake of Foreign Law
When one party to the When both parties to the

contract is under mistake contract is under mistake
Ex. A offers to sell B his Red watch, B who Ex. A crossed the signal at Redlight, when
believes that A has blue watch, agrees to buy caught by the traffic police, he pleaded that
the watch. Here both parties are thinking about he was not aware of the law to stop at Red
different subject matter and hence the consent Light? Will he be excused? No, because
is not real and the agreement is void Mistake of Law is not excused.
 “Ignorantiafacitexcusat; ignorantia juris not excusat [Latin maxim]
Ignorance of fact is an excuse Ignorance of law is not an excuse
Prof Farheen Ansari
B) EFFECTS OF MISTAKE:
Agreement is VOID.
Person whom money has been paid or anything delivered under

mistake, must repay or return it
Q. EXPLAIN LEGALITY OF OBJECT & CONSIDERATION [SECTION 23]
 Section 23: Every agreement of which the object or consideration is UNLAWFUL is

VOID
 So, the object and consideration are lawful, unless; Act which is
prohibited by law
1. It is forbidden by law; or
2. Is of such a nature that, if permitted, it would defeat the provisions of any law; or
3. Is fraudulent; or
4. Involves injury to the person or property of another; or
5. The court regards it as immoral; or
6. Opposed to public policy.
Ex. If A enters into agreement with a farmer, offering

him Rs.10 lac for growing indigo(drug) on his field and
the farmer accepts the offer.
Is it s valid contract? No, because the object and

consideration is unlawful
Prof Farheen Ansari
Q. Which agreements are against public policy?
1. TRADING WITH ENEMY:
Ex. If our country is at war with some other country and we enter into a
contract with the citizen on that other country it will be considered as
trading with enemy and is against public policy and the agreement would
be unlawful.
2. STIFLING PROSECUTION:[when one party agrees to drop criminal proceedings in the

court for a consideration amount]
Ex. A told B, that he shall transfer his 4000 sqft plot in him name, only if he
abstains from taking criminal proceedings for the wrong committed. B
agrees. This is an agreement to stifle prosecution and is against public policy
and the agreement between A & B would be unlawful
3. MAINTENANCE & CHAMPERTY
It is an agreement when a stranger It is an agreement, whereby a

promises to help another person by person agrees to assist another in a
money or otherwise in a suit, in suit, in exchange promise to hand
which that 3rd person himself has over a proceeds of the action
not interest.
Ex. A & B are husband and wife Ex. If A, an Advocate helps the litigant B in filing a
having stringent relation. C , a friend civil suit for a big property. And there is an
of B asks her to file a suit against agreement between A and B, that B shall pay a
the husband and that whatever legal certain amount to A, if the decision is in his favor.
cost would incur C shall bear it. This agreement is Champerty
Husband & Wife Stranger

Client and Advocate
Prof Farheen Ansari
4. TRAFFIC RELATING TO PUBLIC OFFICES[to pay bribe to get position in government

office]
Ex. An agreement to pay money to a public servant in order to induce him to

retire from his office sothat another person may secure the appointment is void.
Ex. An agreement to procure a public recognition like Padma Vibhushan for

reward is void.
5. AGREEMENTS TENDING TO CREATE MONOPOLIES
Ex. X and Y are big competitors in the market and enters into an agreement to
divide the market and rule solely, to create their monopolies in respective market,
such is against public policy and would be treated as void.
6. MARRIAGE BROKERAGE AGREEMENT
Ex. A promised to B (Hindu by religion) for a consideration of Rs.10000/-, to

procure a second wife for B. Subsequently A filed a suit against B, to recover the
consideration amount. Held that the agreement is a marriage brokerage
agreement and is VOID. The suit was dismissed.
7. INTERFERENCE WITH THE COURSE OF JUSTICE

Ex. A promised B, a reward, who is an intended witness in a suit against A, to
absent himself from the trail. This agreement interferes the course of justice and
hence against public policy and will be treated as VOID.
8. INTEREST AGAINST OBLIGATION
Ex. A, who is the manager of a firm, agrees to pass a contract to X if X pays to A

Rs.200,000 privately; the agreement is void.
9. CONSIDERATION UNLAWFUL IN PART
Ex. A asked a farmer to grow wheat on one half of his field and indigo (drug) on
the other half for a consideration. Here the part consideration of growing wheat
on the field is valid. But the other part to grow indigo is unlawful. Hence the
agreement becomes VOID.
Prof Farheen Ansari
Q EXPLAIN VOID AGREEMENTS [SECTION 26-30]
1. AGREEMENT IN RETRAINT OF MARRIAGE [SECTION 26]
 Every agreement in restraint of marriage of anyperson, is void.

 Except for a minor.
I will give you

Okay I accept your
Rs.10 lacs, for not
offer!
marrying my sister
2. AGREEMENT IN RETRAINT OF TRADE [SECTION 27]
 An agreement by which any person is restrained from exercising a lawful profession,

trade or business of any kind, is to that extent void
Laxman is planning to set up

a hotel next to Ram’s hotel
Ram Laxman
Now, not to face the competitive advantage, Ram offers an amount of

Rs.50 lacs to Laxman to not open a hotel in his nearby vicinity so that
it doesn’t hamper his own 10 years old business. Laxman accepts the
offer.
 However, there are few exceptions [ when the agreement to restraint trade would
not be void]
i) when a person sells the goodwill of a business and agrees to the buyer for carrying
similar business within a specified local limit, would be VALID
ii) In Indian Partnership Act, if an outgoing partner makes an agreement with the
continuing partner that he will not carry on any similar business within a specified local
limit, such agreement would be VALID
Prof Farheen Ansari
iii) Similarly, the partners agreeing with eachother to not carry competitive business to
the firm, during the continuation of partnership, would be VALID
iv) If during a service, the employer binds the employee during the term of employment
not to carry on any competitive business as that of employer, such agreement would
be VALID
3. AGREEMENT IN RETRAINT OF LEGAL PROCEEDINGS [SECTION 28]
 When a party is restricted absolutely to enforce his legal rights under a contract,
within the time limit specified by law, is said to be VOID
Every individual has a right to sue in any Court and enforce his rights within the
time allowed by the limitation Act. Any restriction or restraint limiting the time
shorter than the period of limitation prescribed by law is void to that extent.
Ex. an action for dishonored cheque can be brought in

within a period of 3 years by law. If the parties agree that
the action shall be brought within 2 years, such
agreement shall be VOID
4. AGREEMENT WHO’S MEANING IS UNCERTAIN [SECTION 29]
 An agreement where the meaning of the agreement is vague, unclear or uncertain,

then that agreement becomes VOID.
 However, if the uncertainty is removed, the agreement can become valid.
Ex. If A agrees to buy some 100 kg fruit at low price. This

is very uncertain agreement as the name of the fruit nor is
the price specified.
Prof Farheen Ansari
5. AGREEMENT BY WAY OF WAGER [SECTION 30]
BET
Ex. If Virat hits a six, I shall give

your Rs.100 and if doesn’t you WAGER AGREEMENT= VOID
have to pay me
WHAT IS WAGER AGREEMENT?
 It is an agreement between 2 parties
 Based on uncertain events happening or non-happening
 And that one party shall pay a certain sum of money to other on either happening or
non-happening of such uncertain event
 There is a mutual chance of profit and loss to both parties
 Neither party should have a control on the uncertain event
Is winning in Lottery a wager?
Yes, because lottery is game of chance not of skill or knowledge.
Prof Farheen Ansari
 EXCEPTIONS (WHAT IS NOT A WAGER AGREEMENT)
A) WINNING IN A HORSE RACING
Ex. A and B enter into an agreement in which A promises to pay `Rs.2,00,000 provided ‘Chetak’
winsthe horse race competition. This is a wageringtransaction.
But A entered into an agreement with the Race Course Authority who was
permitted to conduct the race course competition, to contribute Rs. 600
towards the money which was to be paid to the winner of the horse race to
be held on a particular day. This is not a wager.
(Note: contribution/subscription value should be Rs.500 and above)
B) INSURANCE CONTRACT
If the insurance company assures the insured to safe him against

the loss of the house fire, against his fire insurance cover, would
not be wager agreement.
C) SHARE MARKET TRANSACTION
Transactions for the purchase and sale of shares and stocks,

with an intention to take and give delivery of shares, is not a
wager.
D) WINNING IN GAMES OF SKILLS OR CROSSWORDS OR LITERARY COMPETITION
Any reward or winning based on skills , intelligence or knowledge

would not constitute wager
E) WINNING IN SPORTS COMPETITION
Any reward or winning based on sports, athletics, wrestling, indoor

games, boxing, football, cricket, are not game of chance, rather depended on your
skill. Hence not a wager.
Prof Farheen Ansari
 EFFECTS OF WAGER:
Agreement becomes VOID and hence no suit/action can be brought against the
breaching party.
Wager is unenforceablenot forbidden by law i.e. wager agreements are not unlawful
Any agreements collateral to wagering agreement shall be valid.
Prof Farheen Ansari
Q EXPLAIN CONTINGENTCONTRACT [SECTION 31-36]
I] INTRODUCTION:
CONTRACT
Absolute Contract Conditional Contract
Contract without any Contract with some

conditions conditions
Contingent Contract
II] MEANING:
 Section 31 defines Contingent Contract,

 as a contract
 to do or not to do something,
 if some event collateral to such contract,
 does or does not happen.
Ex. A contracts to pay B Rs.10,000/-, if
B’s house is burnt. This is contingent
 The word “contingent” means “conditional” contract
 Thus, contingent contract is “enforceable” depending on happening or non-

happening of an event
 Ex. Contract of Insurance, Indemnity and Guarantee are some examples of

Contingent Contract
III] ESSENTIALS OF CONTINGENT CONTRACT:
1. Contingent Contracts are conditional.
2. Contingent Contracts depend on happening or non-happening of some future event.
3. The event must be collateral (connected/incidental) to the main contract.
Prof Farheen Ansari
IV] RULES REGARDING CONTINGENT CONTRACTS:

(1) SECTION 32: CONTRACT CONTINGENT ONHAPPENING OF AN EVENT
Ex. If A contracts with B, that A shall pay

Rs.10000/- if the Ship returns to India.
This is Contingent Contract depending on

happening of an event
When will the Contract become enforceable?

When the ship returns to India, the contract
becomes enforceable and A will have to pay
B Rs. 10000/- for happening of event.
(2) SECTION 33: CONTRACT CONTINGENT ONNON-HAPPENING OF AN EVENT

Rs.10000/- if the Ship does not return to
India.
This is Contingent Contract depending on

non-happening of an event
When will the Contract become enforceable?

If the Ship, by misfortune, sunk and doesn’t
return to India-then A will have to pay B
Rs.10000/- for non-happening of event.
Prof Farheen Ansari
(3) SECTION 34: CONTINGENT CONTRACT IS IMPOSSIBLE, IF DEPENDED ON THE FUTURE

CONDUCT OF LIVING PERSSON
A agrees to pay B a sum of Rs.1 lac, if B But C is already married to D.

marries C.
Now this Contingent Contract Is Impossible in nature as it depends on the

future conduct of living person
(4) SECTION 35: CONTINGENT CONTRACT DEPENDING ON HAPPENING OF SPECIFIED

EVENT ONFIXED TIME

Rs.10000/- if the Ship returns to India before
30th June.
If the Ship returned If the Ship does not return before

before 30th June? 30th June?
Contract becomes Contract becomes

enforceable. Void.
Prof Farheen Ansari
(5) SECTION 36: CONTINGENT AGREEMENT ONIMPOSSIBLE EVENTIS VOID.
Ex. If X agrees to pay Y, Rs. 1000/-, when two parallel lines intersect each
other. Here, it the event is impossible. Hence the agreement is VOID.
Prof Farheen Ansari
Q EXPLAIN PERFORMANCE OF CONTRACT
I] OBLIGATIONS OF PARTIES TO PERFORM UNDER CONTRACT [SECTION 37]
Performance can be;
Actual Performance Offer to perform
Ex. X borrows Rs.5 lacs from Y, Ex. P promised to deliver the goods to R. P
with a promise that X shall pay takes the goods to R’s place to be delivered,
within 1 month. X repays the during business hours, but R refuses to take
amount on due date. the delivery.
This is Actual Performance. This is Offer to Perform or Attempted
Performances or Tender Performance.
PERFORM
PARTIES UNDER RESPECTIVE PROMISES
CONTRACT MUST
OFFER TO PERFORM
Unless such performance is
dispensed or excused under
the law.
In case of death of promisors-

the Legal Representatives are
bound to perform the promises.
Ex. A promises to deliver goods to B on a certain day on

payment of Rs.1,000. A dies before that day. A’s
representatives are bound to deliver the goods to B, and B is
bound to pay the Rs. 1,000 to A’s representatives.
Prof Farheen Ansari
II] EFFECT OF REFUSAL TO ACCEPT OFFER OF PERFORMANCE [SECTION 38]
When the promisor has AND the offer has not THEN the promisor is not
made an offer of been accepted by the responsible for non-performance nor
performance to promisee Promisee will he will lose his rights under
contract
On satisfying below conditions:

1. Performance must be unconditional
2. Must be made at reasonable time and
place
3. Promisee must have reasonable
opportunity to see the things offered
III] EFFECT OF REFUSAL OF PARTY TO PERFORM PROMISE [SECTION 39]
When a party to a contract has THEN, the promisee may put an end to
refused to perform or disable the contract, UNLESS he has signified,
himself from performing a words or conduct, his acquiescence in
promise in its entirety it continuance
Ex.
A, a singer enters into a contract with B, a Manager of a theatre, to sign in his theatre two nights in a
week, for 2 months. B engages the singer for Rs.1,00,000/- for each night’s performance. On 6th
night, A willfully remains absent from the theatre. Now B is it at liberty to terminate the contract.
Prof Farheen Ansari
IV] BY WHOM THE CONTRACT MAY BE PERFORMED [SECTION 40-45]
In case of Personal contract:Promiser personally

Who must perform the
OR
contract?
In case of Non-Personal contract
 By the promisors jointly or
 By the promisor’s agent or
 In case of death, the legal representatives of
deceased promisor
 By the third person on behalf of promiser
NOTE 1: If the promisee accepts the performance of promise from 3 rd person- THEN
the promisee cannot afterwards enforce it against the promisor.[Section 41]
Ex. A received goods from B and A promised to pay Rs.1 lac to B. Later, A expressed
his inability to make the payment. C (friend of A) pays B, Rs.60000/- and B accepts of
which A is not aware. Now, B is intending to file a suit against A for an amount of Rs.1
lac? Can B file a suit against A for Rs.1 lac?No, as B accepted Rs.60,000/- from C, now
B can only file suit for Rs.40,000/- against A.
BC
A B
Prof Farheen Ansari
NOTE 2: When 2 or more person have jointly made a promise, THEN all people must jointly fulfill
the promise. If any or all of them dies-his/their legal representatives shall fulfill the promise.
Ex. If “A”, “B, “C” jointly promised to pay Rs.6 lac to “D”. Here, if “A” dies, then A’s
legal representative must jointly with “B” and “C” performs the promise. [Section 42]
A, B, C D
NOTE 3: When 2 or more person makes joint promise, THEN the promise may, in absence of
express agreement, compel any one or more joint promisors to perform the whole promise.
Ex. If “A”, “B, “C” jointly promised to pay Rs.5 lac to “D”. Here, D may compel either A
or B or C to pay Rs.5 lacs. [Section 43]
Can compel any joint promiser to

pay the amount
A, B, C D
Prof Farheen Ansari
NOTE 4: When 2 or more person makes joint promise, THEN the release of one such joint
promisors by the promise-does not discharge the other joint promisors, neither does it free the
joint promisor from their responsibility to other joint promisor(s)
Ex. If “A”, “B, “C” jointly promised to pay Rs.10 lac to “D”. Here, D released A from
liability. In this case, the release of A, does not discharge B and C from their liability. B
and C shall remain liable to pay the entire Rs.10 lacs. [Section 44]
I release A from liability. So, B and

C shall be now liable.
A, B, C D
NOTE 5: When a person has made a promise to 2 or more persons jointly, THEN, the right to claim
performances rests between HIM and THEM, until their lives, and by their legal representatives
after their death.
Ex. If “A”, in consideration of Rs.10,000/- lent from B and C, promises B and C jointly
to repay them that sum with interest on specified date. Now B died before the
specified date. Here, the right to claim performance shall rest with C and B’s legal
representative. [Section 45]
If B dies. B’s representative shall

be entitled along with C.
A B&C
Prof Farheen Ansari
V] TIME AND PLACE OF PERFORMACE OF THE PROMISE [SECTION 46-50]
(i) What shall be the time of performance-when “no application is to be made

by promisee”and“no time is specified”? [Section 46]
When the contract is to be performed THEN the promisor must perform

without application of promisee and the promise “within reasonable
no time is specified time”
What is reasonable time?
-Depends on case to case basis.

-Generally, it should during thenormal
working hours of business.
Ex. Abdul promises to pay Ram Rs 5,000 in cash at his

house, within 6 months, as a repayment of the loan he had
taken from Ram. Abdul leaves for work at six in the
morning which is when Ram returns home from his night
shift job. As per the circumstances, the only time when
Abdul and Ram can meet is at six in the morning. Hence,
the reasonable time and place for the performance of
contract is 6 a.m. at Ram’s house.
Abdul Ram
Prof Farheen Ansari
(ii) What shall be the time of performance-when“no application is to be

made”and“time is specified”? [Section 47]
When the contract is to be Promise must be performed during the

performed, without application of usual hours of business on such day and
promisee, on a certain day time as specified.
Ex. P promises to deliver certain goods to J on payment of an advance of

Rs 5,000. J makes the payment and asks P to deliver the goods on a
Sunday. Since the day is specified but the time is not specified, P should
deliver it between 9 am and 6 pm, assuming those are the regular
business hours in the place they live.
But if P delivers after business hours, then J will have right to refuse the
delivery and ask P to deliver during business hours again.
(iii) What shall be the time of performance-when application is to be made and

day and place is specified? [Section 48]
THEN the promisor may undertake to

When the contract is to be
perform after application by the promise, at
performed on a certain day and
proper time and place during usual
application of promise is required
business hours
Ex. If Ramu (car washer) enters into contract with car owner to wash
his car on every Sunday for an amount of Rs.3000/- per month. Now
here, Ramu can only wash the if the car owner allots his car. And if
the car is parked, the washing will be done during business hours.
Prof Farheen Ansari
(iv) What shall be the time of performance-when application is not to be made

and place of performance not specified? [Section 49]
When the contract is to be performed THEN it shall be the duty of the

without application by the promisee promisor to appoint reasonable
and no place if fixed for performance place for performance.
Ex. Peter promises to deliver 5 television sets to John on a

fixed day and time. However, the contract does not mention an
address. It is Peter’s responsibility to apply to John and ask
him to appoint a reasonable place where he can safely accept
the delivery of the goods.
(v) Performance as prescribed by the Promisee [Section 50]
There can also be a contract where the promisor agrees to perform the promise
in a manner and at a place and time prescribed or sanctioned by the promisee.
Ex. John’s son is in the hospital. He needs money for his

son’s operation. Peter owes money to John and agrees to repay him
in cash/cheque at any place or time decided by John. In this case,
John has the liberty to ask for the performance of the promise in any
manner and at any place or time suited to him.
Prof Farheen Ansari
V] PERFORMANCES OF RECIPROCAL PROMISE [SECTION 51-58]
1. Promisor not bound to perform, unless reciprocal promise ready and willing to
perform [Section 51]
When contract consists of THEN promisor need not perform his

reciprocal promises to be promise unless promisee is ready and
simultaneously performed willing to perform his reciprocal promise
Ex. A and B contracts that A shall deliver the goods

and B shall pay on delivery of goods. Here, A will not
deliver the goods, if B is not ready or willing to pay for
the goods on delivery.
2. Order of performance of reciprocal promise [Section 52]
When the order of performance When the order of performance

of reciprocal promise is already of reciprocal promise is not fixed
fixed by contract by contract
THEN the promises shall be THEN the promises shall be performed in

performed in that order as that order which the nature of transaction
mentioned in the contract. requires.
Ex. A and B contracts that A shall build a Ex. A and B agrees that A shall build a house and B
house first and then B shall pay the will provide the material to build the house. Now if
consideration. Now as the order of the contract does not mention the order of
performance is fixed, it will be followed. performance, it will be obvious that B will first
provide material, then A will build the house.
Prof Farheen Ansari
3. When one party preventing the other to perform [Section 53]
When a contract contains reciprocal promises, and
one party to the contract prevents the other fromperforming his promise,
the contract becomes voidable at the option of the party so prevented;
andhe is entitled to compensation from the other party for any loss he may sustain in
consequence of thenon- performance of the contract
Ex. Priya is willing to supply coats to Shruti. But on the date of

delivery Shruti does not show up or locks her house and move
away or locks Priya in her shop;
THEN Priya can avoid the contract and claim compensation from
Shruti for any loss suffered.
4. Reciprocal and Dependent promises[Section 54]
When the promises are reciprocal and dependent,
Then, the either of the party cannot ask the other party to perform their promises, if
they don’t perform first
And if any party faces damages due to non-performances of either party, then they
can ask for compensation
Ex. Aaryan is a carpenter and Sara provides wood. They have a

contract that Sara will provide wood to Aaryan and then he will
make a table for her. If Sara refuses to provide the wood, then she
cannot expect Aaryan to make the table. If Aaryan faces any loss
due to the fact Sara failed to provide wood, then he can ask for
compensation.
Prof Farheen Ansari
5. Failure to Perform at a Time Fixed in a Contract [Section 55]
A. When Time was the essence B. When Time was not the C. What is the effect of
to the contract and promise essence of the contract and acceptance of performance at
not performed on that promise not performed time other than agreed upon
specified time
Contract becomes VOIDABLE Contract does not become If the promisee agrees
at the option of the promise Voidable, but the promisee is voluntarily to accept the
entitled to claim performance at time other
compensation from promisor than agreed upon, THEN
for the loss occasioned the promisee cannot claim
compensation for any loss
caused by such
delayed/non-performance
on fixed time
6. Agreement to do impossible/Unlawful Act [Section 56]
If the promisor promises to do

something which is IMPOSSIBLE THEN the contract is itself VOID
or UNLAWFUL to do,
Ex. A agrees with B to discover treasure by magic. The agreement is VOID.
Prof Farheen Ansari
IMPOSSIBILITY OF PERFORMANCES
(b) Initial Impossibility (a) Subsequent Impossibility

[Impossibility at the time of contract] [Impossibility after entering contract]
When parties agree upon doing something If the performance of contract was possible when it
which is obviously impossible/unlawful in was made- but subsequently, some event happens
itself – THEN the Agreement is VOID and now the performance is impossible/unlawful,
THEN the contract becomes void and the parties are
discharged from contract.
Ex. A, a married Hindu, agrees to marry B Ex. X agreed to supply tobacco to Y. At the time of
during the subsistence of his 1st marriage. entering the contract the supply of tobacco was
This agreement is in itself VOID. lawful. But later the govt announced that selling of
tobacco would be illegal. Now the agreement will
become VOID.
I] If impossibility was II] If impossibility was III] If impossibility was

known to both the parties: unknown to both the parties: known by promisor only:
Agreement is VOID and no Agreement is VOID and no Agreement is VOID and

compensation. compensation. promisee can claim
compensation
7. Reciprocal promise to do legal andillegal acts- [Section 57]
When a person reciprocally promise, 1stto do certain things which are legal and
secondly, underspecified circumstances, to do certain other things which are illegal,
the 1st set of promises is a validcontract, but the second is a void agreement.
Ex: A and B agree that A will sell a house to B for Rs.5 lac, but If B uses that house as
“gambling house”, then the consideration shall be Rs.10 lac.
Now, the 1st set of promise to sell house is a valid and legal contract.
But the 2nd set of promise, has unlawful object, hence this part would be
a Void Agreement
Prof Farheen Ansari
8. Alternative promises of legal and illegal acts [Section 58]
Parties may promise to do legal acts that branch off to illegal acts.
Example: Simran promises to pay back her loan to Raj. But this loan shall be paid with black
money.
Now, Simran’s promise to pay back loan to Raj is valid, but the promise to pay with black
money is invalid.
Prof Farheen Ansari
APPROPRIATION OF PAYMENTS [SECTION 59-61]
To be adjusted against the debts

Against which loan
should I adjust this
10,000/-
Has taken several loan
1-Rs.20000/-
2-Rs.30000/-
3-Rs.15000/-
Now he makes part payment of Rs.10,000/-
Debtor Creditor
Clayton’s Case:
In England it has been considered a basic rule since the case of Devaynes vs Noble, also known
as Clayton’s case. In this, it was held that the debtor can request the creditor to appropriate the
amount to any of the debt in case he owes to the creditor several and distinct debts, if the
creditor agrees to it, then he is bound by it.
1. Section 59: Debtors Appropriation:
WHEN a debtor, having several

THEN the payment must be applied
debts, makes payment-with an
express intimation that the debt be accordingly.
discharged against a particular debt
2. Section 60: Creditors Appropriation:
WHEN a debtor, having several THEN the creditor may apply his
debts, makes payment-with discretion to any lawful debt due and
noexpress intimation to apply the payable to him, where its recovery is not
debts against particular debt barred by law
Prof Farheen Ansari
3. Section 61: Appropriation in order of Time
WHENneither party makes an THENthe payment shall be discharge

appropriation of payment in accordance with order of time,
whether they are or are not barred by
law
NOVATION, RESCISSION AND ALTERATION OF CONTRACT

[SECTION 62-67]
1.Effect of novation, rescission, and alteration of contract [Section 62]
Novation means substitution Rescission means Alteration means change in the

of an existing contract with a cancellation of contract original agreement
new one
Effect: If the parties to a contract agree to substitute a new contract for it, or to rescind
or alter it, the original contract need not be performed.
Yeah! Okay and cancel

Let’s make a new our old contract..
agreement with new
clauses….
Lata Construction v/s Ramesh Chandra Ramniklal Shah
Supreme Court in the case of the basic requirement of Section 62 novation requires a complete
substitution of a new contract in place of the old one and only in that condition the original contract does
not have to be performed. The new substituted contract should rescind or completely alter the terms of
the original contract.
Prof Farheen Ansari
2.Promisee may waive or remit performance of promise [Section 63]
Promisee may dispense with or remit, wholly or in part, the performance of the promise
made to him or he may extend the time of such performance or may accept instead of
it any satisfaction which he thinks fit.
No problem, my friend.. I understand

I have only Rs.50000/- to
your situation. You pay me only
pay against your loan
Rs.50000/-
provided to me of Rs.1 lac
Here, the promisee waived the

performance of promisor by
accepting lesser amount as
satisfaction of debt
3.Restoration of benefit under Voidable contract [Section 64]
When a person, at whose option the contract has become voidable, rescinds the
contract, then the other party need not perform any promise therein contained as the
promisor. Also, the party rescinding the voidable contract shall, if he has received any
benefit under the contract- must restore such benefit from whom he has received it.
Ex. If there was an agreement between the owner and contractor that the owner will supply the raw material
and pay advance payment for the constructor to start constructing the house.
Here, the owner supplied the material but failed to pay the advance payment. Now the contract has become
voidable at the option of contractor. The constructor rescinds the contract.
Thus, whatever material is lying with him has to be restored (returned) to the owner.
Prof Farheen Ansari
4.Obligation of Person who has received Advantage under Void agreement or

Contract that becomes void [Section 65]
If the agreement or contract has become VOID
THEN the person who has received an advantage must restore

back or should pay a sufficient compensation to put the person in
the position prior to the contract.
Ex. A hired a godown from B for 12 months and paid advance rent for
entire 12 months. After about 7 months the godown was destroyed by
fire, without any faultor negligence on the part of the A. A claimed a
refund of a proportionate amountof the rent.
Held, the plaintiff was entitled to recover the rent for the unexpired
term, of the contract.
5.Communication of rescission [Section 66]
Rescission means “cancellation”. Contract voidable at the option of one of the parties
can be rescinded; but rescission must be communicated to the other party in the same
manner as a proposal is communicated. Similarly, a rescission may be revoked in the
same manner as a proposal is revoked.
As the contract has become

voidable, I am cancelling this
contract..
Prof Farheen Ansari
6.Promisee fail to afford reasonable facilities for performance to the promisor

[Section 67]
IFpromisee neglects or refuses to THEN, the promisor is executed by

afford the promisor reasonable such neglect or refusal as to any
facilities for performance of his non-performances caused thereby.
promise
Ex. A contract with B to repair B’s house. B neglects A to

point out the places in which the house requires repairs.
Here, A is discharged from non-performances of the contract.
Prof Farheen Ansari
QUASI CONTRACT [SECTION 68-72]

I] MEANING:
It is not a real contract but resembles contractual relation.
It is a fictional contract created by law and recognized by the court.
The obligations of party under quasi contract are created by fiction of law.
Thus, it is also called as “Resembling contract”
It is based on the maxim “No man must grow rich out of another person’s loss”
II] TYPES OF QUASI CONTRACT:
1. Section 68: Claim for necessaries supplied to person incapable of contracting
 If a person is incapable of entering into contract, like minor or lunatic
 And if some person supplied necessaries suited to his life
 THEN he can get reimbursementfrom the property of that incapable person.
Supplied necessaries Food, Clothing, Medicine, Education
Can claim reimbursement from property of that person
Prof Farheen Ansari
2. Section 69: Payment by an interested person
 If a person pays the money on someone’s behalf which the other person is
bound to pay by law,
 Then he is entitled to reimbursement by the other person.
Ex. A rented his house to B. A received the municipal tax for his house, but he had no money to
pay. And if A doesn’t pay, as a consequence of the same the house will be sealed.
Here, B, the tenant paid the municipal tax on behalf of A to the tax authority.
Now, by fiction of law there has been a quasi-contract between A and B, and B is entitled for
reimbursement from A.
3. Section 70: Liability to pay for Non-Gratuitous Act
 When a person lawfully does anything for another person or delivers anything to
him,
 With an intention of doing so non-gratuitously (for consideration),
 Then the other person is liable to pay compensation for the act done or goods
delivered.
Ex. A, a tradesman, leaves goods at B’s house by mistake. B treats

the goods at his own. He is bound to pay A for them
Prof Farheen Ansari
4. Section 71: Finder of Goods
 If a person finds goods belonging to someone else
 And takes them in his custody,
 Then he has the same responsibility as a “bailee”
Responsibility to take care of goods
Responsibility to return the goods to owner
Ex.“H”, picked up a diamond on the floor near a diamond shop. Here, H is the
“finder” of the goods. He told the shop owner that H is keeping the diamond in
his custody, until the true owner appears.
Here, a quasi-contract has been created between H and the true owner of the
diamond.
5. Section 72: Money paid by Mistake or under Coercion
 If any person received any money or goods, by mistake or under Coercion,
 Then he is liable to repay or return.
Ex.If a parcel has been wrongly delivered to the neighbor. It shall

be the duty of the neighbor to return the good to the true owner,
and if it doesn’t then true owner can take action, as there has
been Quasi contract between the true owner and neighbor.
Contract Quasi Contract

It is an agreement enforceable by law. It is an obligation resembling contractual
obligation.
There is an agreement. There is no agreement at all.
It is full-fledged and binding on the parties. It is implied by law.
Prof Farheen Ansari
MODES OF DISCHARGE OF CONTRACT

I] Meaning:
Discharge mean “termination of contractual relation between the parties”
Upon discharge, the rights and obligations created by the contract comes to an
end.
When a contract is discharged, it is no longer binding upon the parties.
II] Modes of Discharge:
By Performance
By Agreement
By Impossibility of Performance
By Lapse of Time
By Operation of law
By Breach of contract
(a) By Performance:
When both the parties to the contract, fulfill their obligations arising under contract,
within specified time and in prescribed manner, the contract is discharged by
performance.
Ex: A contracts to sell his car to B on the agreed price. As soon

as the car is delivered to B and B pays the agreed price for it, the
contract comes to an end by performance.
Prof Farheen Ansari
(b) By Mutual Agreement:
If the parties to contract agree to substitute, rescind, alter, or remit the original contract
with new contract, then the parties are discharged from the old contract.
(c) By Impossibility of Performance: [Section 56]
 Impossibility can either be
-at the time of agreement -arising subsequent to the formation of

contract
Known to the parties Unknown to the parties
Agreement is void-ab-initio Agreement becomes void
Ex. A agrees B to discover treasure by Ex. A contracts with B to marry her. But
magic. This agreement is void ab initio before marriage A goes mad. The
due to impossibility of performance. contract becomes void
 Impossibility may arise due to following reasons:
(a) an unforeseen change in law;
(b) the destruction of the subject-matter essential to that performance;
(c) the non-existence or non-occurrence of particular state of things, which was

naturally contemplatedfor performing the contract, as a result of some personal
incapacity like dangerous problem;
(d) the declaration of a war.
(d) By Lapse of time
A contract must be performed within a specified period as prescribed by the Law of

Limitation. If the contract is not performed and no action is taken within specified time,
the parties under contract are discharged by Lapse of time.
Ex. If a creditor does not file a suit against the buyer for recovery of the
price within 3 years, the debt becomes time-barred and hence
irrecoverable.
Prof Farheen Ansari
(e) By Operation of Law
A contract may be discharged by the operation of law by;
i) On death of either party [In case of personal contract]
ii) On Merger
iii) On Insolvency
iv)By unauthorized alteration of terms of agreement
(f) By Breach of contract
Actual Breach of contract
Breach of contract may be

Anticipatory Breach of contract
 Actual Breach: It occurs when during the performance of contract; either party fails
to perform or refuses to perform
Ex. A agrees to deliver to B 5 bags of sugar on 1st January. A fails to deliver on 1st January. This
is Actual Breach of contract by A.
 Anticipatory Breach: When the party to the contract refuses to perform his part of
contract, before the actual time of the performance is due, it is called “Anticipatory
Breach”
Ex. A promises to sell his car to B on or before 1st May. Now, A sells the car to C before 1st May.
This is anticipatory breach.
 Consequences of Anticipatory breach:
The aggrieved party has following remedies;

1. He may elect to rescind the contract and put an end to the contract
OR
2. He may treat the contract as still operative and wait till the actual time of
performance and then hold the party responsible for non-performance
AND
3. The aggrieved party may seek for damages for breach of performance.
Prof Farheen Ansari
BREACH OF CONTRACT- CONSEQUENCES & REMEDIES

I] Meaning:
-Breach of contract is violation of any terms of contract which was binding upon the
parties. It is when one party breaks the terms of an agreement.
Actual Breach of contract

-Breach of contract may be
Anticipatory Breach of contract
 Actual Breach: It occurs when during the performance of contract; either party fails
to perform or refuses to perform
Ex. A agrees to deliver to B 5 bags of sugar on 1st January. A fails to

deliver on 1st January. This is Actual Breach of contract by A.
 Anticipatory Breach: When the party to the contract refuses to perform his part of
contract, before the actual time of the performance is due, it is called “Anticipatory
Breach”
Ex. A promises to sell his car to B on or before 1 st May. Now, A sells

the car to C before 1st May. This is anticipatory breach.
II] Remedies for breach of contract to the aggrieved party:
1. Suit for Damages: [Section 73]
 Damages means “compensation”
 An aggrieved party can seek damages for breach of

contract, as a compensation for the loss suffered, due to non-
performance by the other party.
 The object of awarding damages is to put the party back in the position where it was
before the contract.
 Compensation is paid for actual loss suffered. No Compensation shall be paid for
indirect or remote loss.
Prof Farheen Ansari
Kinds of Damages:
a) Ordinary damages
-On breach of contract, the party suffering the loss may claim ordinary damages for the
loss caused.
Ex. A agrees to sell B, bags of rice at Rs.5000/- per bag, delivery to

be given after 2 months. On the date of delivery, the price of the rice
bags goes up to Rs.5,500/-. Now A refuses to deliver the rice bags to
B.
B can claim from A Rs.500/- as ordinary damages arising due to
breach of contract.
b) Special damages
A party to a contract might receive a notice of special circumstances affecting the

contract. In such cases, if he breaches the contract, then he is not only liable for the
ordinary damages but also the special damages.
Ex. Peter hired the services of John, a goods transporter, to deliver a machine to his factory urgently.
He also informed John that his business has stopped for want of the machine. However, John delayed
the delivery of the machine by an unreasonable amount of time. Peter missed out on a huge order
since he didn’t have the machine with him.
Now Peter can claim special damage as compensation which will include the amount of profit he
could have made by running the factory, if the machine would have got delivered on time.
c) Vindictive or Exemplary Damages
These damages are awarded in 2 cases;
 Breach of a promise to marry because it causes injury to his/her feelings
 Wrongful dishonour of cheque by a banker because it causes loss of reputation

and credibility.
Prof Farheen Ansari
Note:In case of a wrongful dishonour of cheque from a businessman, the compensation

will include exemplary damages even if he has not suffered any financial loss.
However, a non-trader is not awarded heavy compensation unless the damages are
alleged and proved as special damages.
Example: Peter is a farmer. He issues a cheque for procuring seeds for his next crop. He has
sufficient funds in his account but the bank erroneously dishonors the cheque. Peter files a suit
claiming compensation for damages to his reputation. The Court awards a nominal amount as
damages since Peter is not a trader.
d) Nominal Damages:
It is awarded where the plaintiff has proved that there has been a breach of contract
but he has not suffered any real damage. It is awarded just to establish the right to
decree for the breach of contract. The amount may be one rupee or even one paisa.
e) Damages for deterioration caused by delay:
In case if deterioration (physical damage) is caused to goods by delay, damage can

be recovered.
f) Pre-fixed damage/Liquidated damage:
When the parties to the contract have already specified in the contract the amount of
damages to be paid on breach of contract, then the aggrieved party is entitled to
receive that amount of compensation.
Ex. If the penalty clause in the agreement provides for Rs.1 lac of damage on breach of contract,
whereas the actual damage cause was Rs.70,000/- or Rs.1,50,000/-. The liquated damages shall be
Rs.1 lac.
Prof Farheen Ansari
 Penalty & Liquidated damages [Section 74]
The parties to a contract may provide before hand, the amount of compensation
payable in case of failure to perform the contract.
Now the question is, whether court will accept this figure as a measure of damage?
As per English Law: As per Indian Law:
The sum so fixed in the contract can either Indian Law does not make any distinction
be treated as Liquidated damages or as between “penalty” and “liquidated
Penalty. damages”.
If the sum fixed in the contract represents a If the parties have fixed what the damages
genuine pre-estimate by the parties for the will be, the courts in India will never allow
loss, which would be caused by future more that what is mentioned in contract.
breach of contract it is liquidated damages.
EXCEPTIONS
But where the sum fixed is unreasonable

Where any person givens any bond to the
and is used to force the other party to
perform the contract, and then it would be Central or State government for the
treated as penalty. performance of any public duty or act in
which the public are interested, on breach of
the condition of any such instrument, he
Such shall be disregarded by the court and shall be liable to pay the whole sum
the injured party cannot claim more than mentioned therein.
the actual loss.
2. Suit for Specific Performance:
Where the damages are not an adequate remedy in the case of breach of contract,
the court may at its discretion direct the party who has committed the breach of
contract, to perform the promise according to the terms.
3. Suit for Injunction:
Where a party to a contract is negating the terms of a contract, the court may by
issuing an “injunction order” order the person to do or not to do a particular thing.
Prof Farheen Ansari
4. Quantum Meruit:
It means “as much as deserved” or “as much as is merited” or “as much as the work
done”. It can be awarded only if the contracts do not provided fixed price or
consideration for the work done.
************************************************************************************************
For Notes on Law topics, Sample question papers, you can find me on:
AdvocateFarheen Ansari
advfarheenansari
Advocate Farheen Ansari
Farheen Ansari
https://t.me/lawnotesss

CAFC - CSEETThe Indian Contract Act 1872

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Prof Farheen Ansari

B.com, CS, LLB, PGDIPR Indian Contract Act 1872

TOPIC: INDIAN CONTRACT ACT 1872

This act came into force on 1st September 1872

It extends to the whole of India.

The Act is divided into 2 parts;

Section 1-75 Section 124-238

It is commonly called as “Law of Contract”

 Section 2(h) defines contract as, “an agreement enforceable by law”

Agreement Law Offer to sell his car

There are 2 kinds of rights of a person;

Right in Rem Right in Personam

 Contract creates contractual obligation upon the party:

Ex. A agrees to sell B his flat at Rs.10 lacs. B accepted to buy

Here, both parties are now under contractual obligation to

Q. Which Agreements are not Contract?

 When the intention is “not to create any legal relation”

 Agreement relating to social matters:

Case law: Kalai Halder v/s Sheikh: Invitation for dinner

Can A file a suit for breach of promise against B?

 Domestic arrangement between husband and wife:

Case law: Balfour v/s Balfour

Wife sued him for the recovery of the amount.

Q. ESSENTIALS OF VALID CONTRACT: [Section 10]

Natural Person Artificial Person

2. Offer & Acceptance

3. Must create Legal relation

Case law: Balfour v/s Balfour

Wife sued him for the recovery of the amount.

4. Agreement should be certain

I offer to sell you my car at Rs. 70000/-

Coercion, Undue Influence, Fraud, Misrepresentation, Mistake

Major person Sound mind Not disqualified by law

7. Consideration ‘quid pro quo’ = something in return

Section 25: No consideration, No contract

8. Agreement must have legal object

Section 23: Consideration or Object shall be unlawful, if prohibited by law

Ex. A agrees to give B Rs.1 lac, if B burns the house of C. B

9. Agreement must not be void

Illegal agreement Void Agreement

Prohibited by law Does not have legal effect

-Threat to commit murder -Agreement in restraint of marriage

10. Writing & Registration

Q. TYPES OF CONTRACT & AGREEMENT

1. Valid Contract all essentials of valid contract must be present

1st slab: 30% payment

2nd slab: 30% payment

3rd slab: 40% payment

4. Illegal Agreement Agreement which is against public policy, morality or

Agreement to Kidnap Agreement to murder dealing in drugs

5. Expressed Agreement 6. Implied Agreement

Ex. Ordering a coffee Ex. picking a newspaper

this is not real contract but alike/resemble like a contract.

8. Executed Contract 9. Executory Contract

when both parties have when parties are yet to perform

When contract is entered by two or more parties

There EDI contracts or Cyber contract or Mouse

11. Unilateral Contract 12. Bilateral Contract