CONTRACT I – Key Points to develop answer

Key points to develop answer for Contract I QP. Write introduction and conclusion, necessary
explanation to following points with cases and examples also refer to illustrations under the respective
provisions

Reference Notes Prepared by Ms. Safalya Wagle

Unit – 1

1. What are the essentials of a valid contract?

When does an agreement become a contract?
“All contracts are agreements, but all agreements are not necessarily contracts”- Explain
Ans:
 Section 2(h) – an agreement enforceable by law.
 “Every contract is an agreement, but every agreement is not necessarily a contract”.
 Section-10 of I.C. Act- What agreements are contracts- “All agreements are contracts if they are
made by the free consent of parties competent to contract, for a lawful consideration and with a
lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall
affect any law in force in India, and not hereby expressly repealed, by which any contract is
required to be made in writing or in the presence of witnesses or any law relating to the
registration of documents”.
 An agreement to become a contract it must have the following Essentials: 1. Offer and
Acceptance (Carlill v. Carbolic Smoke Ball Co); 2. Intention to create Legal relationship (Balfour
v. Balfour); 3. Lawful Consideration; 4. Capacity of Parties (Mohiri bibi v. Dharmodas ghose); 5.
Free Consent; 6. Lawful Object; 7.Agreement not declared void; 8. Legal Formalities.

2. Define contract. Explain classification of contracts.

 Contract definition- section 2(h) I. C. Act- agreement enforceable by law.
 Classifications:
 On the basis of validity
 Valid contract Section 2(h): An agreement enforceable by law is a contract
 Void contract Section 2 (j): A contract ceases to be enforceable by law becomes void when it
ceases to be enforceable It is a valid contract which subsequently becomes void
 Void agreement Section 2(g): An agreement not enforceable by law is said to be void
 Illegal/ unlawful agreement – it is type of void contract. An agreement in violation of law /
forbidden and is punishable by law E.g. Section 23 says agreement with unlawful object and
consideration are void .every illegal agreement is void agreement, but every void agreement need
not be illegal
 Voidable contract Section 2(i): An agreement which is enforceable by law at the option of one or
more of the parties thereto, but not at the option of the other or others, is a voidable contract.
o Only one of the party is bound by the contractual terms
o Only that party can chose to validate / invalidate the contract.
o E.g. no free consent – A defrauds B to enter into contract with him to buy a chair stating it
is antique. It is a case for fraud.
 On the basis of creation
 Express contract: Terms of a contract are expressly agreed upon, whether by words spoken or
written, at the time of the formation of the contract. Where the offer or acceptance of any promise
is made in words, the promise is said to be express (section 9).
 Implied contract: a contract which is created by action or conduct of the parties. It is one which
is inferred from the acts or conduct of the parties or course of dealings between them. Proposal or
acceptance is made otherwise than in words, the promise is said to be implied (section 9). E.g.
obtaining a ticket from an automatic weighing machine or getting into a public bus / order food in
hotel etc.
 Quasi Contracts: a contract created by law. Though there is no contract, law recognises that there
exists contractual relationship between the parties involved. Sometimes parties are put in the same
position as if there were contracts (Sections 68 to 72 of I.C. Act). It is based on rule of unjust
enrichment. eg., finder of lost goods , supply of necessaries etc.
 On the basis of performance
 Executed contract: A contract where both the parties have performed their respective obligations
E.g. A agrees to paint B‟s house for 10,000/-. When a paints and B pays for painting the contract
is said to be executed
 executory contract: A contract where both the parties are yet to perform their respective
obligations E.g. if in above given example, A has not yet painted and B has not yet paid the
charges then it is an executory contract

3. Define Offer. Explain the rules relating to valid offer.

 Offer (Proposal): Section 2 (a) of I.C. Act – “When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, he is said to make a proposal”.
 An offer is a proposal by one party to another to enter into a legally binding agreement with him.
E.g. A says to B “Will you purchase my car for Rs.1,50,000/-.
 Kinds of Offer: An offer may be –
 1. Specific Offer and General Offer. When an offer is made to a definite person or group of
persons, it is called as a „Specific Offer‟. When an offer is made to the world at large, it is called
as a „General Offer‟. Case: Carlill v. Carbolic Smoke Ball Co.
 2. Express Offer and Implied Offer: When an offer is made by express words, spoken or written,
this is known as „Express Offer‟. Sometimes an offer may be implied from the conduct of the
parties or the circumstances of the case. This is known as „Implied Offer‟. Case: Upton Rural
District Council V. Powell
 3. Cross Offer: When two parties make an identical offer to each other in ignorance to each
other‟s offer. There is no contract. E.g. Tinn v. Hoffmann,
 4. Counter Offer. Where the offeree makes a qualified acceptance of the offer subject to
modifications and variations in terms of the original offer E.g. Hyde v. Wrench,
 5. Standing Offer. An Offer which remains open for acceptance over an agreed period of time
E.g., Tender
 Legal Rules as to or essentials of a valid Offer:
 1. Offer must give rise to Legal relationship or Legal intention: There is no provision in the Indian
Contract Act requiring that an offer or its acceptance should be made with the intention of creating
legal relation. But in English law it is a settled principal that “to create a contract there must be a
common intention of the parties to enter into legal obligation”. Case: Balfour v. Balfour
 2. Offer must be definite, certain and unambiguous;
 3.Offer must be communicated: An offer must be communicated to the person to whom it is made
by the offeror or his duly authorized agent. Acceptance of an offer, in ignorance of it, is no
acceptance. Case: Lalman v. Gouri Dutt. Section 4: Communication when complete. Section 5:
Revocation of proposals and acceptances.
 4. Offer must be made with a view to obtaining the assent and not merely with a view to
disclosing the intention of making an offer.
 5. Offer can be conditional but they must be notified to the offeree Case: Olley v. Marlborough
ltd, 1
 6. Offer should not contain a term the non-compliance of which may be assumed to amount to
acceptance. E.g. A writes to B “I will sell you my horse for Rupees. 20,000/- and if you do not
reply within eight days, I shall assume that you have accepted the offer.” There is no contract even
if B does not reply.
 7. Offer and Invitation to Offer (or Treat): Where a party, without expressing his final
willingness, proposes certain terms on which he is willing to negotiate, he does not make an offer,
only he invites the other party to make an offer on those terms. But he is not bound to accept the
offer made by the other party. Invitation to offer is offer to negotiate or offer to receive offer or
offer to chaffer. Eg, auction, catalogues, window display, prospectus, adds for employment.
Where a party proposes certain terms on which he is willing to negotiate, he does not make an
offer Case: Harvey v. Facie, Case: Pharmaceutical Society of Great Britain V. Boots Cash
Chemists Ltd.

4. Explain the „Proposal‟ and state the circumstances under which it lapses.
 Offer (Proposal): Section 2 (a) of I.C. Act – “When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, he is said to make a proposal”
 An offer is a proposal by one party to another to enter into a legally binding agreement with him.
E.g. A says to B “Will you purchase my car for Rs.1,50,000/-.
 Mention Kinds of Offer
 Mention Legal Rules as to or essentials of a valid Offer
 Explain in detail lapse of offer: Under following circumstances an offer or proposal lapses:
[under section 6]
 1. Notice of Revocation: Section 6 (1) , (section 5). Case: Henthorn V. Fraser, Case: Byrne V.
Van Tienhoven
 2. Lapse of time: Section 6 (2) Case: Ramsgate Victoria Hotel Co. v. Montefoire
 3. By non-fulfillment of condition precedent: Section 6 (3)
 4. By the death or insanity of the proposer or the offeror, provided offeree comes to know of it
before acceptance: Section 6 (4)
 Other circumstances:
 5. Legislative Intervention- After making an offer, if that offer becomes inoperative due to any
law, it lapses.
 6. Rejection- Once offeree rejects the offer, it lapses.
 7. Counter Offer or proposal- A counter offer puts an end to the original offer and it cannot be
revived by subsequent acceptance. Case: Hyde v. Wrench , Case: Nihal Chand v. Amarnat

5. Explain the rules relating to a valid acceptance

 Section 2 (b)-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. According to
Anson, “Acceptance is to an offer what a lighted match is to a train of gunpowder”.
 Legal rules as to valid acceptance:
 1. It must be absolute and unqualified, [Section 7];
 Partial acceptance , provisional and acceptance of counter proposal Case:Ramanbhai v.
Ghasiram, Case: Hargopal Vs. People‟s Bank of Northern India
 2. It must be communicated to the offeror- Case: Felthouse v. Bindley
 3. It must be given by the party or parties to whom offer is made: Powell v. Lee
 4. Acceptance may be Express or Implied. Sec 3 and 9
 5. It must be according to the mode prescribed or usual or reasonable mode: (section 7(2).
 6. It must be given within a reasonable time: Case:Ramsgate Victoria Hotel Co. v. Montefoire
 7. Other: It cannot precede an offer, It must be given before offer lapses and It must show an
intention on the part of the acceptor to fulfil terms of the promise

6. Write short note on General offer:

 Offer (Proposal): Section 2 (a) of I.C. Act – “When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, he is said to make a proposal”.
 Kinds of Offer: An offer may be -1. Specific Offer, 2. General Offer. When an offer is made to a
definite person or group of persons, it is called as a „ Specific Offer‟. When an offer is made to
the world at large, it is called as a „General Offer‟. When an offer is made to the public, any
person can accept it. A leading case for the general offer is - Carlill v. Carbolic Smoke Ball Co.
(1893). There will be a contract with the person who accepts the offer. When an offer is made to
the public, any person can accept it. General offer can be revoked. Revocation will be effective
even if a particular person, subsequently to the revocation, performs its terms in ignorance of the
revocation.
 In conclusion mention Rules of making and accepting general offer and examples and Mention
Other kinds of offer

7. Define offer and acceptance and explain the rules regarding their revocation.
 Offer (Proposal): Section 2 (a) of I.C. Act – “When one person signifies to another his
willingness to do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, he is said to make a proposal”. An offer is a proposal by one party
 to another to enter into a legally binding agreement with him. E.g. A says to B “Will you
purchase my car for Rs.1,50,000/-.
 Mention the Kinds of offer 1. Specific Offer and General Offer [Carlill V. Carbolic Smoke Ball
Co.]; 2. Express Offer and Implied Offer.
 Mention the Legal Rules as to or essentials of a valid Offer: Balfour v. Balfour, Lalman V. Gouri
Dutt
 Acceptance: Section 2 (b)-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.
According to Anson, “Acceptance is to an offer what a lighted match is to a train of gunpowder”.
 Mention rules and kinds of acceptance [Felthouse V. Bindley]
 Explain in detail Revocation of offer and acceptance:
 Section 5. Revocation of proposals and acceptances.- A proposal may be revoked at any time
before the communication of its acceptance is complete as against the proposer, but not
afterwards. An acceptance may be revoked at any time before the communication of the
acceptance is complete as against the acceptor, but not afterwards.
 Illustrations:
 1.A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter
sent by post. A may revoke his proposal at any time before or at the moment when B posts his
letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the
moment when the letter communicating it reaches A, but not afterwards.
 2. A revokes his proposal by telegram. The revocation is complete as against A when the
telegram is despatched. It is complete as against B when B receives it. B revokes his acceptance
by telegram. B's revocation is complete as against B when the telegram is despatched, and as
against A when it reaches him.
 Section 4- The communication of a revocation is complete – as against the person who makes it,
when it is put into a course of transmission to the person to whom it is made, so as to be out of
the power of the person who makes it; as against the person to whom it is made, when it comes to
his knowledge.
 Illustrations: A revokes his proposal by telegram. The revocation is complete as against A when
the telegram is despatched. It is complete as against B when B receives it. B revokes his
acceptance by telegram. B's revocation is complete as against B when the telegram is despatched,
and as against A when it reaches him.

8. What are the essentials of valid consideration? Explain.

 Meaning and maxims of Consideration
  definition Section 2(d) When, at the desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from doing, or promises to do or to abstain
from doing, something, such act or abstinence or promise is called a consideration for the
promise.
 Essentials:
 1. It must move at the desire of the promisor or his request: Case: Durga Prasad V. Baldeo
 2. It may move from the promisee or any other person: Case: Chinnayya v. Ramayya
 3. Consideration may be past, present or future
 4. It may be an act, abstinence or forbearance or a return promise
 5. It need not be adequate: Case: De La Bere V. Pearson
 6. It must be real and not illusory
 7. It must be something which the promisee is not already bound to do either by general law or
under an existing contract. Case: R. Sashannah Chetti V. P. Ramaswami Chetti, Ramachandra
Chintaman vs. Kalu Raju
 8 Consideration must not be illegal, immoral or opposed to public policy. Section 23

9. “An agreement without consideration is void”. Comment and state exceptions.

Define Consideration. State the exceptions to the rule that the promise without consideration is
void.
 Explain meaning and Definition of Consideration Section 2(d)
 Section 25 The general rule is „ex nudo pacto non oritur actio‟, i.e. an agreement made without
consideration is void
 Exceptions:
 1. Natural love and affection: [Section 25 (1)] Case: Rajlukhy Dabee V. Bhootnath Mookerjee,
Case: Bhiwa V. Shivaram-(1899)
 2. Compensation for past voluntary services: [Sec. 25 (2)]- E.g. A finds B‟s purse and gives it to
him. B promises to A to give Rs. 50/-. This is a contract.
 3. Promise to pay a Time-barred debt: [Sec. 25 (3)]- Case: Daulat Ram V. Som Nath
 4. Completed Gift: (Explanation 1 to section 25),
 5. Agency: [section 185 of I.C. Act)- No consideration is necessary to create an agency.

10. Doctrine of „Privity of contract‟./ „A stranger to the contract cannot sue and be sued.‟-
Discuss
 Doctrine of Privity of Contract: Stranger to contract cannot sue- The general rule is that „Contract
is a contract between the parties to the contract‟. It means only parties to the contract may sue or be
sued on that contract. This rule is known as the „Doctrine of Privity of contract‟.
 “Privity of contract‟ means relationship subsisting between the parties who have entered into
contractual obligations.
 Case: Tweddle V. Atkinson, Case: Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge and Co. Ltd
 But there is no provision in the Indian Contract Act either for or against the rule.
 Case: Jamna Das V. Ram Autar , Case: M. C. Chacko V. State Bank of Travancore
 exceptions:
 1. A Trust or Charge- Case: Gregory & Parker V. Williams: (1817), Case: Khwaja Mohm. Khan v.
Hussani Begum
 2. Marriage Settlement, Partition or other family arrangements- Case: Shuppu Ammal V.
Subramaniyan
 3. Acknowledge & Estoppel: Case: Devaraja Urs V. Ram Krishanaiah
 4. Covenants running with the land: Case: Smith & Snipes Hall Farm Ltd. V. River Douglas
Catchment Board

Unit 2

11. Who are competent to contract?

 According to section 11 of I.C. Act, 1872- Every person is competent to contract who is of the age
of majority according to the law to which he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he is subject.
 Thus, the following persons are incompetent to contract. 1. Minors, 2. Persons of Unsound mind
and 3. Persons disqualified by any law to which they are subject
 Minor- mohiri bibee v. dharmodas ghose and Effects of minor‟s agreement- [see next ans].
 Person of unsound mind:
 A person of unsound mind is not competent to enter into a contract. Soundness of mind of a person
depends on two facts: (i) his capacity to understand the contract, and (ii) his ability to form the
rational judgement as to its effects upon his interests.
 Section 12 of I.C. Act. -What is a sound mind for the purposes of contracting- “A person is said to
be of sound mind for the propose of making a contract, if, at the time when he makes it, he
 is capable of understanding it and of forming a rational judgement as to its effect upon his interest.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract
when he is of sound mind.
 Kinds: 1. Lunatics; 2. Idiots; 3. Intoxicated persons. Case: Inder Singh Vs. Parameshwaradhari
Singh
 Persons disqualified by any law: 1. Alien Enemies; 2. Ultra- vires act of the company; 3.
Insolvents; 4. Convicts

12. “Minor‟s agreement is void ab initio” explain with the help of decided cases (explain the
legal effects of minor‟s agreements) (explain the principles laid down in the case of mohri
beebee v. dharmodas Ghose)
 As per sec 10 not all agreements become valid contract and certain contracts are expressly declared
to be void like an agreement by a minor is void ab initito because he has no capacity to consent.
 According to section 11 of I.C. Act, 1872- Every person is competent to contract who is of the age
of majority according to the law to which he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he is subject.
 Thus a minor is incompetent to contract.
 Explain Who is a minor? Section 3 of the Majority Act, 1875
 Effects of Minor‟s agreement: not explained in the Act it was first laid down and is till date
followed as in Mohiri Bibi V. Dharmadas Ghose-(1903)
 1 .An agreement with or by a minor is „void ab initio‟ Case: Mohiri Bibi V. Dharmadas Ghose-
(1903)
 2. He can be a Promisee or a Beneficiary: Case: Raghavachariah V. Shrinivas
 3. His agreement cannot be ratified by him on attaining majority- Case: Suraj Narain Vs. Sukhu
Ahir
 4. He can always plead minority: Doctrine of Restitution.
 5. No liability in contract or in Tort arising out of contract- Case: Johnson Vs. Pye
 6. He cannot enter into a contract of partnership:[ section 30 Partnership Act].
 7. He cannot be adjudged as Insolvent:
 8. He is liable for necessaries, but no personal liability [section 68 I. C. Act]
 9. Minor can be an agent in certain circumstances [section 184]
 10. Minor may draw, indorse, deliver and negotiate negotiable instruments so as to bind all parties
except himself [section 26 of Negotiable Instrument Act, 1881].

13. Define consent. Discuss when consent is said to be free.

What is free consent? Explain in brief when the consent is said to be free according to the Indian
Contract Act, 1872.
 Section 13 defines „Consent‟ as “Two or more persons are said to consent when they agree upon
the same thing in the same sense”.
 According to section 14, consent is said to be free when it is not caused by –
 (1) Coercion, as defined in section 15, or
 (2) Undue influence, as defined in section 16, or
 (3) Fraud, as defined in section 17, or
 (4) Misrepresentation, as defined in section 18, or
 (5) Mistake, subject to the provisions of section 20,21 & 22
 Explain the above points with their effect on validity of contract with cases

14. What is coercion? Explain its effect on consent to contract with the help of decided cases.
 Explain meaning and definition of Coercion: Section 15- "Coercion" is the committing, or
threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful
detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the
intention of causing any person to enter into an agreement. Explanation: It is immaterial whether
the Indian Penal Code is or is not in force in the place where the coercion is employed
 Explain Essentials:
 1. The committing or threatening to commit any act forbidden by Indian Penal Code;
 2. The unlawful detaining or threatening to detain any property;
 3. Such act should be to the prejudice of any person whatsoever;
 4. The act of coercion may be directed to any person;
 5. The act of coercion need not be from the parties to the contract.
 Effect: When consent to an agreement is caused by coercion, it becomes a voidable contract at the
option of the party whose consent was so caused (section 19).
 Case: Chikham Amiraju V. Seshamma,
 Astley V. Reynolds,

15. Define undue influence. Point out distinctions between coercion and undue influence.
 Explain meaning and definition of Undue influence: section 16
 A contract is said to be induced by "undue influence" where the relations subsisting between the
parties are such that one of the parties is in a position to dominate the will of the other and uses
that position to obtain an unfair advantage over the other.
 A person is deemed to be in a position to dominate the will of another –
 (a) where he holds a real or apparent authority over the other. E.g. The relationship between
master and servant, doctor and patient, police officer and accused, Income Tax Officer and
Assessee, etc. or
 (b) where he stands in a fiduciary relation (relation of trust and confidence) to the other. E.g.
Father and son, solicitor and client, trustee and beneficiary, spiritual adviser and devotee, etc. Or
 (c) where he makes a contract with a person whose mental capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily distress. E.g. Medical attendant and his
patient. It is also called „Moral Coercion‟. Case: Mannu Singh V. Umadat Pandey-
 Burden of proof: In an action to avoid contract on the ground of undue influence the plaintiff has
to establish that – 1. the other party was in a position to dominate his will; 2. the other party
actually used his influence to obtain the plaintiff‟s consent and took undue advantage.
 Where a person who is in a position to dominate the will of another, enters into a contract with
him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue influence lies
upon the person in a position to dominate the will of the other [section 16(3)]. Because, under
these circumstances it is presumed that there is undue influence.
 Unconscionable bargains, inequality of bargaining power or economic duress. Case: Wajid Khan
V. Raja Ewaz Ali Khan, Chunni Kuar V. Rup Singh

16. Difference between coercion and undue influence:

 Define Coercion- section 15
 Coercion: The consent is given under the threat of an offence, i.e. committing or threatening to
commit an act forbidden by the I.P.C. or detaining or threatening to detain property unlawfully.
Undue Influence: The consent is given by a person who is so situated in relation to another that
the other person in a position to dominate his will.
 Coercion: Coercion is mainly of a physical character. It involves mostly use of physical or violent
force. Undue Influence: It is of moral character. It involves use of moral force or mental pressure.
 Coercion: There must be intention of causing any person to enter into an agreement. Undue
Influence: Here the influencing party uses its position to obtain an unfair advantage over the other
party
 Coercion: It involves a criminal act. Undue Influence: No criminal act is allowed.
 Effect of coercion s. 19, effect undue influence s.19 A

17. Define „Fraud‟ and distinguish it from „Misrepresentation‟.

 Explain meaning and definition of fraud under Section 17- Fraud
 Essential elements of fraud:
  1. There must be a representation or assertion and it must be false. Mere opinion is not sufficient
 2. The representation must relate to a material fact;
 3. Representation must have been made before the conclusion of the contract with the intention
of inducing the other party to act upon it;
 4. The other party must have relied upon the representation and must have been deceived.
 Explain meaning and definition of Misrepresentation [section 18]:
 Distinction between Fraud and Misrepresentation:
 a) Intention: In case of fraud, there is intention to deceive the other party. But in case of
misrepresentation, no intention to deceive;
 b) Belief: In case of misrepresentation, person making the representation believes it to be true.
But in case of fraud, he does not believe it to be true.
 c) Remedy: In case of misrepresentation, aggrieved party can rescind the contract or sue for
restitution. In case of fraud, in addition to the rescission of contract, aggrieved party can also
claim damages.
 d) Discovery of truth: In case of misrepresentation, the aggrieved party cannot avoid the
contract if he had the means to discover the truth with ordinary diligence [Section 19- If such
consent was caused by misrepresentation or by silence, fraudulent within the meaning of section
17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the
means of discovering the truth with ordinary diligence]. But in case of fraud, where there is active
concealment, the contract is voidable even though the aggrieved party had the means of
discovering the truth with ordinary diligence.
.
18. Write note on misrepresentation.
 Define meaning and definition of Misrepresentation [section 18]:
 Requirements of misrepresentation:
 1. It must be a representation of a material fact;
 2. It must be made before the conclusion of the contract with a view to inducing the other party to
enter into the contract;
 3. It must be made with the intention that it should be acted upon by the person to whom it is
addressed;
 4.It must have been actually acted upon by the other party;
 5. It must be wrong but the person who made it honestly believed it to be true;
 6. It must be made without any intention to deceive the other party. Case: Derry v. Peek
 Section 18 includes following types of misrepresentations:
  1.Unwarranted statements; Oceanic Steam Navigation Co. v. Soonderdas Dharamsey, Alessio V.
Jovica
 2. Breach of duty; Khandu Charan Polley v. Chanchala Bhuinya
 3. Inducing mistake about the subject-matter- R. v. Kylsant

19. What is fraud? Explain the essential elements of fraud. Does silence amount to fraud?
 Explain the meaning and definition of Section 17- Fraud
 Essential elements of fraud:
 1. There must be a representation or assertion and it must be false. Mere opinion is not sufficient.
 2. Active concealment of fact
o Mere silence is not fraud: According to the explanation given to the section, mere silence
as to facts likely to affect the willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard being had to them, it is the duty of
the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
Case: Krishna Vs. Kurukshetra University
o Exceptions:
o 1. Duty to speak; Haji Ahmad Yarkhan v. Abdul Gani Khan
o 2. Silence is equivalent to speech
o 3. Change of Circumstances: Case: With v. O‟Flanagan / Rajagopal Iyer v. South Indian
Rubber Works
o 4. half-truth: Junius Construction Corporation v. Cohen
 3. Representation must have been made before the conclusion of the contract with the intention of
inducing the other party to act upon it; Delhi Development Authority Vs. Skipper Construction Co,
(P) Ltd.
 4. The other party must have relied upon the representation and must have been deceived.
 5. Any act or omission specially declared by law to be fraudulent.

20. What is Mistake? Explain the kinds of mistakes.

 Meaning of Mistake
 It may be mistake of law or mistake of fact.
 Mistake of law may be divided into-
 1. Mistake of law of the country- Here no excuse, because ignorance of law is no excuse
(Ignorantia juris non excusat). Section 21- Effect of mistakes as to law- Illustration: A and B make
a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of
Limitation; the contract is not voidable.
 2. Mistake of law of a foreign country: It is treated as mistake of fact and excusable.
 Mistake of Fact: It may be – (1) a Bilateral mistake, or (2) a Unilateral mistake.
 Bilateral Mistake: section 20
 Essentials of section 20:
 1. Both the parties to an agreement are under mistake;
 2. Their mistake is as to a matter of fact; and
 3. The fact about which they are mistaken is essential to the agreement.
 Instances of Bilateral mistake
o A. Mistake as to the subject-matter- It covers the following cases
o a) Mistake as to the existence of subject-matter. Couturier Vs. Hastie
o b) Mistake as to the identity of subject-matter or different subject-matters in mind- Raffles
v. Wichelhaus
o c) Mistake as to the title or rights: Case: Cooper Vs. Phibbs
o d.Mistake as to substance of subject-matter: There maybe mistake as to the substance,
nature of subject-matter. Seikh Bros Ltd, Vs. Ochener
o e) Mistake as to the quantity of subject-matter; Cox v. Prentice
o B. Mistake as to the possibility of performing the contract : The consent is nullified if both
the parties believe that an agreement is capable of being performed when in fact this is not
the case.
 Unilateral Mistake: section 22, Case: AA singh v. Union of India
 Exceptions: In the following cases, even though there is a unilateral mistake, the agreement is void:
 1. Mistake as to the identity of the person contracted with: Case: Cundy V. Lindsay
 2. Mistake as to the nature of promise or contract: Raja Singh Vs. Chaichoo Singh

21. When does an object or consideration become unlawful?

 Contract must have lawful object. According to section 23 of the I. C. Act, if the object or

consideration of an agreement is unlawful, that agreement becomes void .

 The object or consideration of an agreement is unlawful under the following circumstances.
[Section 23 ]
 1. If it is forbidden by law: Bhikanbhai V. Hiralal/ Boistrub Charan v. Wooma Charan/ Nandlal v.
Thomas J. William
 2. If it is of such a nature that, if permitted, it would defeat the provisions of any law. Fateh Singh
V. Sanwal Singh
  3. Fraudulent: Example: A, B and C enter into an agreement for the division among them of gains
acquired or to be acquired by them by fraud. The agreement is void, as its object is unlawful;
 4. If it involves or implies injury to the person or property of another: Example: A agrees to pay
Rs.10,000/- to B, if B sets fire to C‟s house. Agreement is void;
 5. If the court regards it as immoral: following acts have been regarded as immoral: Interference
with marital relations, Dealing with prostitutes and illegal cohabitation
 6. If the court regards it as opposed to public policy: Following are some of the agreements which
are against to public policy.
 a) Agreements of trading with alien enemy;
 b) Trafficking in public offices and titles;
 c) Agreements which interfere with administration of justice: It may take any of the following
forms: i) Interference with the course of justice; ii) Stifling prosecution; iii) Maintenance and
Champerty;
 d) Marriage brokerage agreements;
 e) Unfair or unreasonable dealings- Case: Central Inland Water Transport Corporation v. B. N.
Ganguly- AIR 1986 SC
(Section 24). When the part of the consideration or object is lawful and if it can be separated from the
unlawful part, then, to that extent the agreement is valid

22. Discuss the doctrine of „Public policy‟.

 If the object or consideration of an agreement is unlawful, it is void agreement [section 23]. But
the expression „Public policy‟ is not defined in the Act. Courts may refuse to enforce the
agreements which are against to public interest. Some of the agreements which have been held to
be opposed to public policy. The term „Public policy‟ in its broadest sense means that sometimes
the courts will, on consideration of public interest, refuse to enforce a contract. About the term
„Public policy‟ it is said: “It is a very unruly horse, and when once you get astride it, you never
know where it will carry you”
 Following are some of the agreements which are against to public policy.
 a) Agreements of trading with alien enemy;
 b) Trafficking in public offices and titles;
 c) Agreements which interfere with administration of justice:
 It includes- i) Interference with the course of justice, ii) Stifling prosecution, iii) Maintenance
and Champerty,
 d) Marriage brokerage agreements
 e) Unfair or unreasonable dealings:
23. What agreements are said to be void? Explain with illustrations.
Explain different types of agreements which are void ab initio.
 Section 2(g)- An agreement not enforceable by law is said to be void
 Thus, void agreement is not enforceable by law. It does not give rise to any legal consequences.
The Contract Act specifically declares certain agreements as void agreements
 Void agreements are as follows:
 1. Agreement by incompetent parties (Section 11)- E.g.- Agreement with minor is void ab initio,
Case: Mohiri Bibi V. Dharmadas Ghose-(1903).
 2. Agreements made under a mutual mistake of fact (Section 20)- E.g. A agrees to buy from B a
certain horse. It turns out that the horse was dead at the time of the bargain, neither party was
aware of the fact. The agreement is void.
 3. Agreements consideration or object of which is unlawful (Sections 23 & 24)- e.g. A promises
B to drop a prosecution which he has instituted against B for robbery, and B promises to restore
the value of the things taken. The agreement is void, as its object is unlawful.
 4. Agreement made without consideration (Section 25)- E.g. A promises, for no consideration, to
give to B Rs. 1,000. This is a void agreement.
 5. Agreement in restraint of marriage (Section 26)-E.g.- A gives promise to B that he would not
marry C. It is void.
 6. Agreement in restraint of trade (Section 27)- E.g- P and D are the rival shopkeepers in a
locality.. D agreed to pay a sum of money to P, if he would close his business in that locality. The
plaintiff accordingly did so, but the defendant refused to pay the money. Agreement is void.
 7. Agreement in restraint of legal proceedings (Section 28)- E.g.- A and B enter into a contract
with a condition that it is only subject to bengaluru Jurisdiction. But Bengaluru court has no
jurisdiction. That condition is void.
 8. Agreement the meaning of which is uncertain - (Section 29)- E.g.- A agrees to sell to B " one
hundred tons of oil ". There is nothing whatever to show what kind of oil was intended. The
agreement is void for uncertainty.
 9. Agreements by way of wager (Section 30)-Example: E.g.- A and B enter into an agreement
that A shall pay B Rs. 1,000/- if it rains on next Monday, and that B shall pay A the same amount
if it does not rain. This is wagering agreement.
 10. Agreements contingent on impossible events (Section 36)- E.g.- A agrees to pay B Rs. 1,000
if two straight lines should enclose a space. The agreement is void.
 11. Agreements to do impossible acts (Section 56)- E.g.-A agrees with B to discover treasure by
magic. The agreement is void,
 12. Reciprocal promises to do things legal and also other things illegal, the second part is a void
agreement (Section 57)-E.g- A and B agree that A shall sell B a house for Rs.3,00,000, but that, if
B uses it as a gambling house, he shall pay A Rs.8,00,000 for it. The first set of reciprocal
promises is a contract. The second set is for an unlawful object, namely, that B may use the house
as a gambling house, and is a void agreement.

24. „Agreements by way of wager are void‟. Explain.

 Explain meaning and definition of wager under Section -30. Agreements by way of wager
void.-
 A wager is an agreement between two parties by which one promises to pay money or money‟s
worth on the happening of some uncertain event in consideration of the other party‟s promise to
pay if the event does not happen.
 Example: A and B enter into an agreement that A shall pay B Rs. 1,000/- if it rains on next
Monday, and that B shall pay A the same amount if it does not rain. This is wagering agreement.
 Essentials:
 1. Promise to pay money or money‟s worth;
 2. Uncertain event;
 3. Mutual chances of gaining or losing, i.e. each party must stand to win or lose Babasaheb v.
Rajaram
 4. No control over the events;
 5. No other interest in the event.
 Exceptions: Following transactions are not wagers:
 1. Certain prizes for horse-racing-(section 30)- A subscription or contribution, or agreement to
subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of
the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of
any horse-race.
 2.Games of skill, E.g. picture puzzles, athletic competitions, etc.;
 3. A Crossword competition involving a good measure of skill for its successful solution;
 4.Share market transactions in which delivery of stocks and shares is intended to be given and
taken;
 5. A contract of insurance, though it resembles wagering agreement to some extent.
 Effects of wagering transactions:
 1. Wagering agreement is void: Section-30;
 2.Collateral transactions are valid- Gherulal Parekh Vs. Mahadeo Das

25. Explain „an agreement in restraint of trade is void „

 Provision: Section 27- “Every agreement by which anyone is restrained from exercising a lawful
profession, trade or business of any kind, is to that extent void”.
 Freedom of trade is a fundamental right guaranteed by the Constitution.
 The main aim is to strengthen the healthy competition trade and to prevent the creation of
monopoly.
 Profession, Trade or Business: Case: Pothi Ram v. Islam Fatima
 This section covers all restraints, whether partial or total- Case: Madhub Chander V. Raj Coomar
 Effect on agreement: In this section, the words “to that extent” mean that the whole agreement is
not void, but only that part of the agreement which violates section 27, is void.
 Exceptions:
 I. Statutory Exceptions:
 1. Sale of Goodwill [section 27]; Vancouver Malt & Sake Brewing Co. Vs. Vancouver Breweries
Ltd.
 2. Partners‟ agreements: [Partnership Act, 1932]
o Section- 11: not to carry on any business other than that of the firm.
o Section- 36: restraint on outgoing partner
o Section- 54: upon or in anticipation of the dissolution of the firm-agreement not to carry
on a business similar to that of the firm Section- 55: Sale of goodwill after dissolution
 II. Judicial Interpretations:
 1. Trade combinations: S. B. Fraser & Co. v. Bombay Ice Mfg. Co.
 2. Solus or Exclusive dealings agreements; Gujarat Bottling Co. Ltd. Vs. Coca Cola Co.
 3. Service Contracts – Restraints upon employees: case: Chrlesworth v.MacDonald/ Fitch Vs.
Dewes
26. Write short on Contingent contract
 Explain the meaning and definition of contingent contract according to section 31
 Essentials:
 1. Its performance depends upon the happening or non-happening of some event in future;
 2. The event must be uncertain;
 3. The event must be collateral, i.e. incidental contract. Example: A contracts to pay B Rs.
10,000, if B's house is burnt. This is a contingent contract.
 Explain the Rules: sections 32 to 36.
 Unit 3
27. What are the modes of discharge of contract?
State briefly the various ways of discharge of contract.
 „Discharge of contract‟ means termination of contractual relationship between the parties. So
when rights and obligations created by contract come to an end, then contract is said to be
discharged.
 Modes of discharge: 1. By Performance (sections 31 to 67- discharge of contingent contract,
offer of performance (Tender), by whom contact must be performed, who can claim performance,
joint promisors and promisees, time and place of performance, performance of reciprocal
promises, time for performance, etc.);
 2. By Impossibility of performance (section 56- Supervening impossibility );
 3. By Agreement (sections 62- novation, rescission, and alteration of contract & section 63
Promisee may dispense with or remit performance of promise);
 4. By Breach (sections 39- Actual breach and anticipatory breach);
 5. By Operation of law- E.g. Death- Contracts involving personal skill or ability , Insolvency.
 6. By Lapse of time- expiry of limitation period- promisee loses the remedy.

28. Explain the discharge of contract by impossibility of performance. State the exceptions.
Explain the grounds of impossibility of performance of contract.
Explain the doctrine of „Frustration‟ with reference to decided cases.
 Meaning of „Discharge of contract‟ means termination of contractual relationship between the
parties. So when rights and obligations created by contract come sto an end, then contract is said
to be discharged.
 Mention the Modes of discharge By Performance, By Impossibility of performance, .By
Agreement; By Breach; By Operation of law; By Lapse of time
 One of the modes of discharge of contract is impossibility of performance governed by s. 56 .
 If an agreement contains an undertaking to perform an impossible act, it is void ab initio. This law
is based on two maxims:
o Lex non cogit ad impossibilia- the law does not compel the doing of impossibilities or law
does not recognize what is impossible.
o Impossibilium nulla obligatio est- there is no obligation to perform impossible things or
what is impossible does not create an obligation.
 Illustration: A agrees with B to discover treasure by magic. The agreement is void;
 Here explain the Doctrine of Impossibility of performance of contracts provision[ Section 56]
 There are two types
 1. Initial impossibility and,
 2. Supervening impossibility (also known as Doctrine of frustration )
 Grounds of Frustration
 1. Destruction of subject-matter of contract- Case: Taylor V. Caldwell
 2. Change of Circumstances; P.D. Mehra & Sons v. Ram Chand Om Prakash
 3. Non-occurrence of contemplated event- Krell V. Henry;
 4. Death or Incapacity of party- Robinson v. Davison
 5. Change of law or Legislative or Government intervention-Case: Satyabrata Ghose V.
Mugneeram Bangur & Co
 6. Outbreak or intervention of war; Twentsche Overseas Trading Co. Ltd. V. Uganda Sugar
Factory Ltd
 Effects of „Supervening Impossibility‟ or „Doctrine of Frustration‟:
 1. Contract becomes void;
 2.Frustration operates automatically;
 3. Frustration should not be self-induced-Case: Maritime National Fish Ltd. V. Ocean Trawlers
Ltd.
 4. Adjustment of Rights- section 65.
 Exceptions: Under following circumstances impossibility of performance is not an excuse:
 1. Difficulty in Performance;
 2. Commercial impossibility
 3. Impossibility due to failure of a third person
 4. Strikes, lockouts etc. unless parties have specifically agreed in this regard at the time of
formation of the contract
 5. Failure of one of the objects does not discharge the whole contract.

29. Write a note on Novation:

 One of the method of discharge of contract is discharge of contract by agreement between
the parties which includes novation as a sub method.
 Meaning of Novation:- When the parties to a contract agree to substitute the existing contract
with a new contract, that is called „Novation‟
 Provision : Section -62, I. C. Act- Effect of novation, rescission, and alteration of contract.- 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.
 Write illustration to s 62
 Effect of novation: Original contract need not be performed. It takes place when- (i) a new
contract is substituted for an existing one between the same parties, or (ii) a new contract is
entered into on the same terms between one of the parties and a third party
 Case: Nagendra Kumar Brijraj Singh V. Hindustan Salt Ltd

30. Explain the rules relating to appropriation of payment between debtor and creditor.
 Discharge of contract by performance includes rules as to appropriation of payment for
discharging the contract of borrowing and lending .
 When a debtor owes several distinct debts to a creditor and makes a payment insufficient to
satisfy the whole indebtedness, the question arises „To which debt should the payment be
appropriated? Section 59 to 61 lay down the following three rules in this regard.
 1. Appropriation by the debtor – [Section 59] Clayton‟s rule
 2. Appropriation by creditor – [Section 60
 3. Apportionment by Law – [Section 61]
 Explain with examples discussed in class

31. What are Reciprocal Promises? Explain the order of performance of reciprocal promise.
 Explain the meaning and Definition of reciprocal promise : Sec.2(f)- Promises which form the
consideration or part of the consideration for each other, are called „Reciprocal Promises‟.
 Performance of Reciprocal promises is governed by (Sections 51 to 54 & 57)
 Rules applicable to Reciprocal Promises:
 Section 51 - Promisor not bound to perform, unless reciprocal promisee ready and willing to
perform; eg., A and B contract that A shall deliver goods to B to be paid for by B on delivery. A
need not deliver the good , unless B is ready and willing to pay for he goods on delivery. B need
not pay for the goods, unless A is ready and willing to deliver the goods on payment.
 Section 52- Order of performance of reciprocal promises- Case: Hashman V. Lucknow
Improvement Trust, Eg A and B contract that A shall build a house for B at a fixed price. A'

promise to build the house must be performed before B's promise to pay for it .
 Section 53 - Liability of party preventing event on which the contract is to take effect. Eg, A and
B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to
execute the work accordingly, but A prevents him from doing so. The contract is voidable at the
 option of B; and, if he elects to rescind it, he is entitled to recover from A compensation for any
loss which he has incurred by its non-performance
 Section 54 - Effect of default as to that promise which should be first performed, in contract
consisting of reciprocal promises; A contracts with B to execute certain builder's work for a fixed
price, B supplying the scaffolding and timber necessary for the work. B refuses to furnish any
scaffolding or timber, and the work cannot be executed. A need not execute the work, and B is
bound to make compensation to A for any loss caused to him by the non-performance of the
contract.
 Section 57- Reciprocal promise to do things legal, and also other things illegal;
 Example: A and B agree that A shall sell B a house for Rs.1,00,000, but that, if B uses it as a
gambling house, he shall pay A Rs.5,00,000 for it. The first set of reciprocal promises, namely, to
sell the house and to pay Rs.1,00,000 for it, is a contract. The second set is for an unlawful object,
namely, that B may use the house as a gambling house, and is a void agreement.

 Section- 58-Alternative promise, one branch being illegal.

 Illustration: A and B agree that A shall pay B 1,000 rupees for which B shall afterwards deliver to
A either rice or smuggled opium. This is a valid contract to deliver rice, and a void agreement as
to the opium.

32. Explain the law relating to devolution of joint rights and liabilities under the Act.
 Explain what performance of contract is and who can perform the contract to discharge it
highlight on performance of joint promises.
 Explain meaning of joint promise and examples
 Rules of devolution of joint rights and liabilities:
 Joint promisors: When a promise is given by two or more persons jointly, they are called as
„Joint Promisors‟.
o Section 42- Devolution of joint liabilities;
o Section -43- Liability of the joint promisors is joint and several- Each promisor may
compel contribution-Sharing of loss by default in contribution;
o Section 44 - Effect of release of one joint promisor;
 Joint Promisees: When a promise is given to two or more persons jointly, they are called as
„Joint Promisees‟. Section 45 - Devolution of joint rights.

33. Write note on – Time for Performance

 Time for performance: Sometimes the parties to a contract specify the time for its performance.
Ordinarily it is expected that either party will perform his obligation at the stipulated time. But if
one of them fails to do so, the question arises what is the effect upon the contract. Section 55 gives
the answer to it.
 State sections 46, 47 and 48
 Explain Section 55 - Effect of failure to perform at fixed time, a contract in which time is
essential.- When a party to a contract promises to do a certain thing at or before a specified time, or
certain things at or before specified times, and fails to do any such thing at or before the specified
time, the contract, or so much of it as has not been performed, becomes voidable at the option of
the promisee, if the intention of the parties was that time should be of the essence of the contract.
 Effect of such failure when time is not essential
 Effect of acceptance of performance at time other than that agreed upon
 Case: Bhudra Chand Vs. Betts
 In business matters time generally of essence.

34. Write short note on – Assignment of contract:

 Explain meaning of Assignment of Contract:
 Assignment of a contract means transfer of contractual rights and liabilities under the contract to
third a party, who is not a party to the contract, with or without the concurrence of the other party
to the contract. It may take by – 1. Act of parties, 2. Operation of law.
 1. Act of parties- Assignment of contractual obligation is subject to following rules:
 a) Contractual obligations involving personal skill or ability cannot be assigned;
 b) A promisor cannot assign his liabilities or obligations under a contract
 Assignment of contractual rights: It is subject to following rules:
 a) The rights and benefits under a contract not involving personal skill may be assigned, subject to
the all equities between the original parties.
 b) An actionable claim can always be assigned, but the assignment to be complete and effectual
must be effected by an instrument in writing. Notice of such assignment must also be given to the
debtor.
 2. Operation of law: Assignment by operation of law takes place by intervention of law. This
takes place in the following cases:
 a) Death-
 b) Insolvency
 Unit 4
35. Define Quasi-contract. Explain Lord Mansfield‟s dictum that law as well as justice should
try to prevent unjust enrichment./ Explain the relations resembling those created by
contract and refer to relevant provisions in the Indian Contract Act- Quasi- contracts./
What is meant by Quasi-contract? Explain different kinds of quasi-contracts.
 Meaning Under certain circumstances, the parties are required to discharge their obligations as
if there were contracts. „Quasi‟ means „as if ‟. Strictly speaking it is not a contract, because it is a
contract created by law and not by act of parties.
 Principle: „Quasi-contract‟ rests on the on the ground of equity that “a person shall not be
allowed to enrich himself unjustly at the expense of another”
 Types: as created by ICA,1872 – sec 68- 72
 1. Supply of necessaries- section 68
 2. Payment by an interested person- section 69 : Port Trust, Madras V. Bombay Company
 3. Obligation to pay for non-gratuitous acts- section- 70: Neha Bhasin v. Anand Raj
 4. Responsibility of finder of goods- section 71
 5. Money paid or anything delivered by Mistake or Coercion- section 72- Case: Sales Tax
Officer, Banaras V. Kanhaiya Lal Mukund Lal Saraf.

36. What is anticipatory breach of contract? State the consequences of the same
 Explain breach and breach of contract and that breach is a mode of discharge of contract
 When a party to a contract without lawful excuse does not fulfil his contractual obligation, there
will be breach of contract. A breach of contract occurs when a party thereto renounces his
liability under it, or by his own act makes performance of obligation impossible, or totally or
partially fails to perform such obligation.
 Kinds: Breach of contract may be – 1. Actual Breach, or 2. Anticipatory Breach.
 1. Actual Breach may take place-
 (i) when a performance is due, one party fails or refuses to perform his obligation under the
contract. E.g. A agrees to deliver to B 50 bags of wheat on 1st April. If he does not deliver the
wheat on that day, there is a breach of contract;
 (ii) during the performance of the contract- one party fails to perform his obligation under the
contract.
 2. Anticipatory Breach: It occurs when a party to a contract declares his intention of not
performing the contract before the performance is due. In other words, an anticipatory breach
occurs when, prior to the promised date of performance, the promisor absolutely repudiates the
contract. E.g. X agreed to supply certain goods to Y on 1st July. Before this date, X informed Y
that he was not going to supply the goods. This amounted to anticipatory breach of contract.
 In case of anticipatory breach, the rights of the promisee (the party not in breach or the
aggrieved party) are as follows: (consequences)
 1. He can treat the contract as discharged, Case: Hochster V. De La Tour/ Case: Frost Vs.
Knight
 2. He can treat the contract as alive which has following consequences:
 a) The promisor may perform his promise on due date, then, the promisee will be bound to accept
the performance.
 b) If an event happens which discharges the contract legally, the promisor may take the
advantage of such discharge. In such a case, the promisee loses his right to sue for damages.
 Avery v. bowden

37. „Damages are compensatory and not penal‟ explain the principles that govern assessment of
damages in an action of breach of contract.
 Explain meaning of breach of contract, damages, compensation and penalty.
 Sections 73 & 74, I.C.Act - Damages- Damages are monetary compensation allowed to the
aggrieved party by the court for the loss suffered by him because of the breach of a contract.
 Leading case- Hadley V. Baxendale- (1854).
 Principles based on ss. 73 and 74
 1 explain the kinds of damages with one case each
 2. Claim for damages is not a debt;
 3. Damages are compensatory and not penal;
 4. Duty to mitigate the loss on the breach ; AKAS Jamal v. Moolla Dawod sons and co
 5. Pre-contractual expenditure may be recovered as damages if it was within the contemplation of
the parties;
  6. Damages for mental pain and suffering- in ordinary cases no damages- in special cases may be
awarded;
 7. Damages are allowed for breach of confidence;
 8 Inconvenience caused by breach maybe taken into account, etc.
 Justify the above points with appropriate cases and examples. Refer section 73 and 74 for
illustrations. Example of Cases:
o Horne v. Midland Railway co
o Simpson V. London & North Western Railway Co.
o Charter v. Sullivan ,
o East Ham Bourough Council v. Bernad Sunley & sons ltd ,
o Hobbs v. London & south westerrn Railway co ltd,
o Cellulose Acetate Silk co ltd v. widness foundry ltd,
o Dunlop Pneumatic Tyre Co. Ltd Vs. New Garage & Motor Co. Ltd.
o Kemble V. Farren
o Carl Estate (p)ltd v. Jagadish J N,

38. Explain the principle of remoteness of damage with special reference to Hadley V.
Baxendale
 Damages are monetary compensation allowed to the injured or aggrieved party by the court for the
loss suffered by him because of the breach of a contract.
 The object of awarding damages for the breach of a contract is to put the injured party in the same
position, so far as money can do it, as if he had not been injured, i.e. in the position in which he
would have been had there been performance and no breach.
 The modern law of damages, both in India and England, is based on the judgement in the case of
Hadley V. Baxendale- (1854) – explain the case in detail
 Principle of above case is drafted into Section 73- Compensation for loss or damage caused by
breach of contract.
o which naturally arose in the usual course of things from such breach, or
o Which the parties knew, when they made the contract, to be likely to result from the breach
of it.
o Remoteness of Damage : Such compensation is not to be given for any remote and indirect
loss or damage sustained by reason of the breach
 Explain Kinds of damages with cases
39. Write short note on Quantum merit.
 Meaning The phrase „quantum meruit‟ literally means „as much as earned‟. This right arises
where a contract, partly performed by one party, has become discharged by the breach of the
contract by the other party.
 Where a party has in the performance of his contract done some work or rendered some service
and the further performance has been made useless by the other party, he may recover reasonable
compensation for the work or service. Case: Craven-Ellis V. Canons Ltd.
 Principles:If work is done not according to contract, then party cannot recover the charges. In
India, claims under the well- known English law doctrine of quantum meruit have been allowed
by the courts under section 65 of the Contract Act.
 provision Explain sect 65
 Case: Plinche v. colburn, 1831/ De Bernardy v. Harding , 185

40. Explain the terms „Penalty‟ and „Liquidated damages‟.

 Explain the meaning of breach of contract, damages , liquidated and liquidated and of penalty
 In England there is a difference between the two and in India it doesn‟t exist. Rather courts adopt
principle of reasonable compensation. Which is incorporated under sec 74 of ICA
 Explain Section 74: Compensation for breach of contract where penalty stipulated for. Sometimes
the parties to a contract stipulates at the time of its formation that on the breach of the contract by
the either of them a certain specified sum will be payable as damages. Such a sum may amount to
either „Liquidated damages‟ or a „Penalty‟
 Liquidated damages represent a sum fixed or ascertained by the parties in the contract which is
fair and genuine pre-estimation of the probable loss that may arise as a result of the breach.
 Penalty is a sum which is disproportionate to the loss likely to accrue as a result of the breach.
Case: Dunlop Pneumatic Tyre Co. Ltd Vs. New Garage & Motor Co. Ltd.
 In India, courts allow only reasonable compensation. The court has to ascertain whether a sum is
in truth a penalty or liquidated damages. It is a question of fact to be decided upon the terms of a
contract and circumstances
 Rules in India
o no difference between liquidated damage and penalty
o Parties can use any word – intent matters
o fixed amount is a ceiling
o rule of reasonable compensation.
o question of fact
o extravagant and unreasonable rate of damage
 o high rate of damage than actual contract price
 Cellulose Acetate Silk co ltd v. widness foundry ltd, 1925
 Case: Dunlop Pneumatic Tyre Co. Ltd Vs. New Garage & Motor Co. Ltd.-(1914-
15) All E R 739.
 Case: Kemble V. Farren- (1824-34) All ER Rep 641
 Carl Estate (p)ltd v. Jagadish J N, 2005..

Unit– 5
41. Explain the provisions relating to recovery of moveable and immoveable property.
 Explain what is property and kinds with example
 Explain the Rules of Recovery of possession of property with examples and cases [sections 5-8 of
Specific Relief Act]:
 Section 5- Recovery of specific immovable property; Ismail Ariff v. Mohd. Gouse
 Section 6 . Suit by person dispossessed of immovable property;
 Section 7. Recovery of specific movable property;
 Section 8. Liability of person in possession, not as owner, to deliver to persons entitled to
immediate possession.; Falcke v. Gray/ Wood v. Rawcliffe

42. What is specific performance? When contracts are specifically enforceable?

 ( Position before the Specific Relief (Amendment ) Act 2018 came in to force ) -Specific
performance is the direction by the court to the party in breach to carry out his promise according
to the terms of the contract. Specific performance is a relief given by a court in case of breach of
contract in the form of a judgement that the defendant is to actually perform the contract
according to its terms and stipulations. This is the direction by the court to the party in breach to
carry out his promise according to the terms of the contract.
 Section 10- Cases in which specific performance of contract enforceable .- (a) when there exists
no standard for ascertaining the actual damage caused by the non-performance of the act agreed
to be done; or (b) when the act agreed to be done is such that compensation in money for its non-
performance would not afford adequate relief.
 Example: A agrees to buy and B agrees to sell a picture by a dead painter. A may compel B
specifically to perform this contract, because there is no standard for ascertaining the actual
damage which would be caused by non-performance.
 Contract is also specifically enforceable under following circumstances: [Section 14 clause (1)
deals with those circumstances in which contract is not specifically enforceable. But clause (3) of
 section 14 is an exception to clause (1) of the same section.] -Section 14 (3)- The court may
enforce specific performance in the following cases:-
 (a) where the suit is for the enforcement of a contract,- (i) to execute a mortgage or furnish any
other security for securing the repayment of any loan which the borrower is not willing to repay
at once: Provided that where only a part of the loan has been advanced the lender is willing to
advance the remaining part of the loan in terms of the contract; or (ii) to take up and pay for any
debentures of a company;
 (b) where the suit is for,- (i) the execution of a formal deed of partnership, the parties having
commenced to carry on the business of the partnership; or (ii) the purchase of a share of a partner
in a firm, (c) where the suit is for enforcement of a contract for the construction of any building
or the execution of any other work on land: But (i) the building or other work is described in the
contract in terms sufficiently precise to enable the court to determine the exact nature of the
building or work; (ii) the plaintiff has a substantial interest in the performance of the contract and
the interest is of such a nature that compensation in money for non-performance of the contract is
not an adequate relief; and (iii) the defendant has, in pursuance of the contract, obtained
possession of the whole or any part of the land on which the building is to be constructed or other
work is to be executed.
 After amendment- section -10-The specific performance of a contract shall be enforced by the
court subject to the provisions contained in section 11(2), section 14 and section 16.”

43. Write note on Injunction:

 It is an order of the court by which a party to an action is required to do or refrain from doing a
particular thing.
 According to Lord Halsbury, „An injunction is a judicial process whereby a party is ordered to
refrain from doing or to do a particular act or thing‟. The grant of an injunction by the court is
normally discretionary-
 Provisions applicable- Section 36 to 42- Specific Relief Act.
 Mention the Characteristics:
 1. It is a judicial process;
 2. The relief obtained thereby is restraint or prevention or sometimes doing something, e.g.
mandatory injunction;
 3. The act prevented or restrained is wrongful.
 Mention when Injunctions will not be issued-
 (i) where damages are the appropriate remedy;
 (ii) where injunction is not the appropriate relief;
  (iii) where the plaintiff is not entitled to an injunction on account of his conduct;
 (iv) where the contract cannot be specifically enforced;
 (v) where the injunction would operate inequitably.
 Explain Kinds of Injunctions:
 1. Permanent or Perpetual Injunction
 2. Temporary Injunction
 3. Mandatory Injunction
 4. Prohibitory Injunction

44. State the grounds on which specific performance of contract may be denied. / Briefly explain
the contracts which cannot be specifically enforced.
 Explain what is specific performance of contract and that it is a remedy for breach of contract
under SRA 1963
 Position before the Specific Relief (Amendment ) Act 2018 came in to force -Under the
following circumstances specific performance of contract may be denied:
 Section- 14- Contract is not specifically enforceable in the following cases :
o 1. Where money compensation is adequate
o 2. Contracts involving personal skills
o 3. Contracts of determinable nature
o 4. Contract requiring constant supervision
 After amendment- section -14-The following contracts cannot be specifically enforced,
namely:
o (a) where a party to the contract has obtained substituted performance of contract in
accordance with the provisions of section 20;
o (b) a contract, the performance of which involves the performance of a continuous duty
which the court cannot supervise;
o (c) a contract which is so dependent on the personal qualifications of the parties that the
court cannot enforce specific performance of its material terms; and
o (d) a contract which is in its nature determinable.

45. What is meant by specific performance? Who can claim it and against whom it can be
claimed?
 Meaning of Specific performance is the direction by the court to the party in breach to carry
out his promise according to the terms of the contract. Specific performance is equitable relief
 given by a court in case of breach of contract in the form of a judgement that the defendant is to
actually perform the contract according to its terms and stipulations.
 Provisions : sections 9- 25
 Relief for : breach of contract when damages are not adequate relief
 Who can claim it? – section 15- (a) Any party thereto; (b) The representative-in-interest or the
principal, of any party thereto; (c) Where the contract is a settlement on marriage, or a
compromise of doubtful rights between members of the same family, any person beneficially
entitled thereunder; (d) Where the contract has been entered into by a tenant for life in due
exercise of a power, the remainderman; (e) A reversioner in possession, where the agreement is a
covenant entered into with his predecessor-in-title and the reversioner is entitled to the benefit of
such covenant; (f) A reversioner in remainder, where the agreement is such a covenant, and the
reversioner is entitled to the benefit thereof and will sustain material injury by reason of its
breach;
 After 2018 amendment - “(g) when a limited liability partnership has entered into a contract and
subsequently becomes amalgamated with another limited liability partnership, the new limited
liability partnership which arises out of the amalgamation.”. (h) When a company has entered
into a contract and subsequently becomes amalgamated with another company, the new company
which arises out of the amalgamation; (i) When the promoters of a company have, before its
incorporation, entered into a contract for the purposes of the company, and such contract is
warranted by the terms of the incorporation, the company: Provided that the company has
accepted the contract and has communicated such acceptance to the other party to the contract.
 Against whom it can be claimed :Section 19- Relief against parties and persons claiming under
them by subsequent title.- specific performance of a contract may be enforced against
 (a) either party thereto; (b) any other person claiming under him by a title arising subsequently to
the contract, except a transferee for value who has paid his money in good faith and without
notice of the original contract; (c) any person claiming under a title which, though prior to the
contract and known to the plaintiff, might have been displaced by the defendant; (d) when a
company has entered into a contract and subsequently becomes amalgamated with another
company, the new company which arises out of the amalgamation; (e) when the promoters of a
company have, before its incorporation, entered into a contract for the purpose of the company
and such contract is warranted by the terms of the incorporation, the company: Provided that the
company has accepted the contract and communicated such acceptance to the other party to the
contract
 Explain each point with examples
46. What are the principles the court should consider while granting temporary injunction?
 Meaning of injunction: Lord Halsbury, „An injunction is a judicial process whereby a party is
ordered to refrain from doing or to do a particular act or thing‟.
 Kinds of injunctions
 What is temporary injunction
 provision Section-37, S.R.Act - Temporary injunctions are such as are to continue until a
specified time, or until the further order of the court, and they may be granted at any stage of a
suit, and are regulated by the Code of Civil Procedure, 1908 [Order XXXIX Rules 1 and 2].
 Simple meaning: It is an order of the court and it continues until a specified time or until the
further order of the court. It is interim in nature and granted on an interim application.
 Objective: Its object is to preserve matter in status quo until the case is disposed of or the hearing
of the case on its merits. It is granted at any stage of a suit and is regulated by the Code of Civil
Procedure
 Principles governing the issue of temporary injunction:
 1. Prima facie case
 2. Balance of inconvenience
 3. Irreparable loss and injury.

47. What are the cases in which the court can grant perpetual injunction?
 Meaning, definition and kind of injunction with examples
 Meaning of Perpetual or Permanent Injunction: By this injunction a defendant is perpetually
restrained or forbidden from committing any act which would violate the right of the plaintiff
established at the hearing. It is based on a final determination of the rights of the parties. Before
any injunction may be granted there must be an invasion or a threatened invasion of the plaintiff‟s
right to or enjoyment of his property.
 Provision : Section- 38. Perpetual injunction when granted.-
 1. Where the defendant is a trustee of the property for the plaintiff
 2. Where there exists no standard for ascertaining the actual damage
 3. Where compensation in money is not adequate relief
 4. To prevent a multiplicity of judicial proceedings
 Shamboo Nath Tikoo V. Gain Singh
 See slide for examples

48. Explain the jurisdiction of the court to grant relief by way of rectification of instruments.
 What is rectification
 What is instrument
 Provision: Section - 26. When instrument may be rectified.
 Essentials:
 1. There was a mutual mistake or fraud;
 2. The instrument did not truly express the intention of the parties. Court has to find it;
 3. Rectification will done without prejudice to rights acquired by third persons in good faith and
for value. A contract in writing may first be rectified, and then if the party claiming rectification
has so prayed in his pleading and the court thinks fit, may be specifically enforced. No relief for
the rectification of an instrument shall be granted to any party under this section unless it has been
specifically claimed.
 Cases: Abdul Rahman A v. Bombay & persian navigation co, 1892/ subhadra v. Thankam, 2010,/
Joseph john v. Veronica Thomas, 2013

49. Under what circumstances court may not grant injunction?

 Explain meaning an definition of
 State when it is issued
 Explain when it is not issued with examples: The grant of an injunction by the court is
normally discretionary.
 Injunctions will not be issued-(i) where damages are the appropriate remedy; (ii) where injunction
is not the appropriate relief; (iii) where the plaintiff is not entitled to an injunction on account of
his conduct; (iv) where the contract cannot be specifically enforced; (v) where the injunction
would operate inequitably.
 Section-41 . Injunction when refused .-An injunction cannot be granted-
 (a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the
suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity
of proceedings;
 (b) to re - strain any person from instituting or prosecuting any proceeding in a court not
subordinate to that from which the injunction is sought;
 (c) to restrain any person from applying to any legislative body;
 (d) to restrain any person from instituting or prosecuting any proceeding in a criminal matter;
 (e) to prevent the breach of a contract the performance of which would not be specifically
enforced;
 (f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be
a nuisance;
 (g) to prevent a continuing breach in which the plaintiff has acquiesced;
  (h) when equally efficacious relief can certainly be obtained by any other usual mode of
proceeding except in case of breach of trust;
 After 2018 amendment (i) if it would impede or delay the progress or completion of any
infrastructure project or interfere with the continued provision of relevant facility related thereto
or services being the subject matter of such project.
 (j) when the conduct of the plaintiff or his agents has been such as to disentitle him to the
assistance of the court;
 (k) when the plaintiff has no personal interest in the matter.

50. Write a note on Mandatory injunction:

 Meaning of injunction
 Mention the Kinds
 Explain mandatory injunction
 Mention the Provision : Section-39. -When, to prevent the breach of an obligation, it is necessary
to compel the performance of certain acts which the court is capable of enforcing, the court may in
its discretion grant an injunction to prevent the breach complained of, and also to compel
performance of the requisite acts. The injunction which commands the defendant to do something
is termed as „Mandatory Injunction‟.
 When a mandatory injunction is granted under this section, two elements have to be taken into
consideration. They are-
 (i) the court has to determine what acts are necessary in order to prevent the breach of the
obligation;
 (ii) the requisite acts must be such as the court is capable of enforcing.
 Mandatory injunction will not be granted in the following cases: 1. Where compensation in terms
of money would be an adequate relief to the plaintiff; 2. Where the balance of convenience in
favour of the defendant; 3. Where the plaintiff is guilty of allowing the obstructions to be
completed before coming to the court, i.e. where plaintiff has shown acquiescence in the acts of the
defendant- Case: Dhaniya V. Bai V. Jiwan,

51. Write a note on declaratory decrees.

 Explain the meaning of Declaratory decree : A declaratory decree is a decree declaratory of
right which is doubtful or which requires to be cleared.
 Provision [sections 34 & 35]
 The object of declaratory decrees is to prevent future litigation by removing the existing cause of
the controversy.
 Mention Section- 34. Discretion of court as to declaration of status or right.- Requirements of a
declaratory suit: 1. The plaintiff must, at the time of the suit, be entitled to some legal character or
to any right to any property. „Legal character‟ is a position recognized by law; 2. There must be
some danger or detriment to such interest, i.e. defendant has denied plaintiff‟s character or right
to any property or he is interested in denying that character or right of the plaintiff; 3. The
plaintiff is entitled to any further relief than a mere declaration of title, and if is so entitled, he
does not omit to seek such further relief. 4. The court comes to the conclusion that it is a fit case
in which it should exercise its discretion to grant the relief.
 Mention Section- 35. Effect of declaration.- A declaration made is binding only on the parties to
the suit, persons claiming through them respectively, and, where any of the parties are trustees, on
the persons for whom, if in existence at the date of the declaration, such parties would be trustees.
 Refer slide for examples

52. Explain the provisions relating to cancellation of instruments.

 Meaning of Cancellation of instruments (sections 31-33)
 Section - 31. When cancellation may be ordered
o Conditions for this relief:
o 1. The instrument should be void or voidable against the plaintiff;
o 2. There is a reasonable apprehension of a serious injury from the instrument, if left
outstanding;
o 3. That the case is fit for the exercise of the court‟s discretion to grant the prayer.
 Discretionary relief: Since the relief is discretionary the court has the power to put the plaintiff
on terms and impose conditions on the maxim that “He who seeks equity must do equity”. The
court may require the party whom such relief is granted to make any compensation to the other
which justice may require.
 Jagdish tiwari v, Lalita Kuer , 2011
 Section-32. What instruments may be partially cancelled.
 Section-33. Power to require benefit to be restored or compensation to be made when instrument
is cancelled or is successfully resisted as being void or voidable.
 Explain the provisions with examples

53. Write short not on Rescission of contract.

 Meaning Recession is the mode by which contract maybe discharged. The court by ordering
rescission discharges the party from the obligation under the agreement.
 Provision : sections 27-30
 Section 27- When rescission may be adjudged or refused. Court may allow rescission in the
following cases: 1. Where the contract is voidable or terminable by the plaintiff; 2. Where the
contract is unlawful for causes not apparent on its face and the defendant is more to blame.
 But it is subject to following limitations.
 1. Affirmation; 2. Where restitution is not possible; 3. Intervention of third parties; 4. Severance.
 Section 28- Rescission in certain circumstances of contracts for the sale or lease of immovable
property, the specific performance of which has been decreed.
 Section 29- Alternative prayer for rescission in suit for specific performance.
 Section 30- Court may require parties rescinding to do equity.- The maxim “He who seeks equity
must do equity” may be applied.

54. Explain preventive reliefs provided under the Specific Relief Act./ Preventive reliefs
[Injunctions] [sections 36-42]:
 „Preventive relief‟ means that kind of relief which prevents a party from committing that which is
under legal obligation not to do. Specific relief afforded by means of injunction, temporary or
perpetual, is called preventive relief.
 Injunction is a form of specific relief which the courts grant when pecuniary compensation would
be inadequate or altogether void.
 According to Lord Halsbury, „An injunction is a judicial process whereby a party is ordered to
refrain from doing or to do a particular act or thing‟.
 Characteristics: 1. It is a judicial process; 2. The relief obtained thereby is restraint or prevention
or sometimes doing something, e.g. mandatory injunction; 3. The act prevented or restrained is
wrongful
 Explain section 36 – 42

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